Good morning. My name is Dorothy, and I will be your conference operator today. At this time, I would like to welcome everyone to the CEVA Q3 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to turn the conference over to Richard Kingston, Director of Marketing and Investor Relations. Mr. Kingston, you may begin.

Thank you and good morning, everyone. Welcome to CEVA’s third quarter 2010 earnings conference call. This conference call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA; Yaniv Arieli, Chief Financial Officer of CEVA, and I, Richard Kingston, Director of Marketing and Investor Relations. Gideon will cover the business aspects and the highlights from the quarter, followed by Yaniv, who will cover the financial results for the third quarter and provide financial guidance for the fourth quarter of fiscal 2010. I will start with the forward-looking statements. Today’s conference call contains forward-looking statements that involve risks and uncertainties, as well as assumptions, that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include financial guidance for the fourth quarter of fiscal 2010; general outlook for remainder of 2010 and 2011; optimism about our customer’s product pipelines and market penetrations and such impact on our future revenues, including our customers in the Chinese local OEM market, the positive impact of two existing customers fully utilizing their prepaid arrangements in the fourth quarter; optimism about the growth in the handset markets including LTE and 2-G spaces, and networking and machine-to-machine products, and our ability to generate revenue from these new products and technologies, and the positive impact of Intel’s acquisition of the wireless division of Infineon, and Broadcom acquisition of Beceem Communications. The risks, uncertainties and assumptions include the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our success in penetrating new markets and maintaining our market position in existing markets; the ability of products incorporating our technologies to achieve market acceptance; the effect of intense industry competition and consolidation; the possibility that markets for our technologies may not develop as expected, or that products incorporating our technology do not achieve market acceptance; our ability to timely and successfully develop and introduce new technologies; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time-to-time in our SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I would now like to turn the call over to Gideon.

Good morning everyone and thank you for joining us today. I hope you had the opportunity to review our press release with the financial results for the third quarter of 2010. Our revenue for the quarter was $10.7 million, representing 11% increase compared to the third quarter of 2009. Royalty revenue for the third quarter of 2010 was $5.2 million, representing a noteworthy 42% increase over the third quarter of last year, and 11% sequential increase after excluding approximately $444,000 associated with the royalty catch up amount recorded in the second quarter of 2010. Our third-quarter operating margin reached 21% and 26% on a US GAAP and non-GAAP basis respectively, which represents all time record highs. Our non-GAAP EPS increased 17% on a year-over-year basis for the third quarter, and reached a record high of $0.14. During the third quarter we concluded 6 new license agreements, five of the agreements were for our CEVA DSP cores, platforms and software, and one agreement was for our Bluetooth technology. Geographically, two of the license agreements were in the US, three in Asia and one was in Europe. Target application for the licenses concluding during the quarter are primarily 3G and 4G, based on processors [ph] for mobile handset and broadband, Android-based application processors for smart phones, tablets, ereaders, and smart meter. The third quarter was a good quarter with two important agreements, which I will elaborate on in a few minutes. We also signed a software service agreement with a tier 1 OEM during the quarter, supplementing a core licensing agreement with the same OEM that concluded at the end of last year. This OEM made substantial progress with the in-house developed LTE product, based on our DSP, and sort out [ph] our software offering to expedite its development efforts. On the…

Thank you, Gideon. Good morning. I would now like to review the results of operations for the third quarter of 2010. Revenue for the third quarter was $10.7 million, slightly below the mid-range of our guidance and 11% higher than the third quarter of last year. The revenue breakdown is as follows; licensing revenue was $4.5 million, reflecting 42% of total revenue, 15% lower than the third quarter of 2009. Royalty revenue was $5.2 million, fourth sequential record high, reflecting 49% of our total revenues and 42% higher than the third quarter of last year. Royalty revenue for the third quarter increased 11% sequentially, after excluding approximately $440,000 of catch up royalty on past shipments in Q2 2010. Service revenue was $1 million, which accounted for 9% of total revenues, up 35% compared to the third quarter of ’09. Quarterly gross margin was 91% on both US GAAP and non-GAAP basis, similar to the third quarter last year. As for the operating quarterly expenses, R&D costs were $4.1 million for the quarter, including approximately $180,000 of equity-based compensation expenses. Our sales and marketing costs were $1.7 million, excluding approximately $100,000 of equity-based compensation expenses and our G&A costs were $1.6 million, including approximately $240,000 of equity-based compensation expenses. Our total operating expenses for the quarter were $7.4 million, which included an aggregate equity-based compensation expense of approximately $520,000, approximately 2% higher than the operating expense levels for the third quarter of last year. Our total operating expenses for the third quarter, excluding equity based compensation expense, were $6.9 million, reflecting the lower range of our guidance and approximately 5% higher than the operating expense levels for the third quarter of last year. The lower than expected OpEx is associated mainly with timing of certain R&D grand payments, and particularly due…

(Operator instructions) Your first question comes from the line of Anil Doradla from William Blair. Anil Doradla – William Blair: Hi, guys, thanks a lot. Congratulations and great job on the guidance. A couple of questions, this deal with Rockchip – can you help us understand the impact on the overall royalties from an ASP point of view as we get into 2011? And I have some follow-ups.

Sure, Anil. We cannot be specific with any customer because these deals are very confidential. I think what we have explained and talked about in the past, that the overall consumer electronic-related device revenue market, they have higher royalty ASPs than some of the high-volume type of 2G (inaudible) – that is from the ASP perspective. I will let Gideon reply more from a business perspective, which I think has a much greater magnitude and can affect us going forward.

Okay. The Rockchip product and strategy is aiming for the low cost, I would say, emerging markets smart phone technology, smart phone tablets as well. In this case, we’re going to have a discrete solution where we have a very low-cost baseband like MediaTek, (inaudible) and a bunch of other companies, most of them by the way working with us, and then there is the application processor. And I suggest the investor not to underestimate the technology that these application process. This is an android-based platform. It supports high-definition video, it supports 3-D video. And this will be in smart phones or tablets that together with the baseband processor. So that is – for us it is really a very, I would say, substantial foothold in the application processor into this specific market. The volume in these markets is very big. It is fabulous. It looks like iPad, it is not an iPad. It is not a clone of iPad, but it is a product that will be sold into the emerging market, mainly in China. Anil Doradla – William Blair: Great. And you – stepping back, you know, if I look at the next couple of years from a team point of view, clearly, you guys have done very well on the baseband front. Can you walk us through your success and ability to succeed on the application processor? I know that you guys have seen some success. But how should we be looking at that side of the business, maybe a couple of years from now? How do you guys anticipate your success out there?

Well, unfortunately we cannot too much come public about customer, but our major customers that are going to use us. Keep in mind the success that we have today with the multimedia is more power the emerging markets. And this market is going to develop – in process of developing to become a big market. And this is our foothold in this space. Beyond that, there are other consumer products that use our multimedia platform that we spoke about game consoles and these all I think that we will see more and more the impact on our royalties in the next, I would say in the next year and the year after. Anil Doradla – William Blair: Okay, very good. And finally, on the Nokia front, can you give us a sense – you know, how much is Nokia contributing in the third quarter and maybe fourth quarter? How much came from Nokia?

I think we saw for the first time a significant ramp up coming from Nokia. That is something that we did not have – similar numbers and quantities in the past. I think hearing what TI had to say in their earnings call, I think it is still the tip of the iceberg, in a sense that they still have north of $450 million of revenue coming from this business line, and say that it is going to fall in a straight line plus or minus and down to zero, until the end of 2012, that I believe happened yesterday folks. I think we are on track to gain market share, additional market share there, and Samsung, these OEM that you already know, I think a exciting opportunity for us that we recognize that it may happen, but we did not know when and the magnitude has really got to start from our next core shipments, Q3 shipments, and that is for the local Chinese market, not necessarily Nokia, but the local OEMs and that is where we get our strong confidence to come up with close to approximately 40% growth in sequential royalty revenues next quarter. Anil Doradla – William Blair: Great, thank you very much, and good job on the execution.

Thanks Anil.

Your next question comes from the line of Gary Mobley with Benchmark. Gary Mobley – Benchmark: Hi, guys. Your – the midpoint of your revenue guidance for the fourth quarter is about $12.5 million, and you can really quantify the licensing revenue, but I guess implied in that overall revenue guidance, you're expecting a dip in licensing revenue. Are you guys just trying to keep the bar low there, or have you seen any deterioration in your licensing pipeline?

Gary, we don’t see deterioration in licensing. On the contrary, we have a very good and solid pipeline. The growth that we are focusing or guiding for next quarter is driven by – this is something that we would like to see going forward, this is something that you can predict. This is something that shows sustainability in our business. Licensing is pipeline related. It is timing related. So we keep the range – it is not a matter of being conservative, but we keep it at the level that we feel comfortable. But again the growth in royalties, as I said in my prepared remarks, we are expecting approximately 40% sequential growth in royalties. This is something that this company never showed in the past, never.

Gary, let me add that again if you back up the numbers like you have, you do get similar licensing revenue, I don’t think there is any deterioration whatsoever to get similar levels what we had in the last few quarters, and this is what Gideon stated as our comfort zone. It could be better, time will tell. But this is really the comfort zone and taking the business in a much more serious manner in the royalty front. Gary Mobley – Benchmark: Okay. And regarding the expiration of two prepaid agreements during the fourth quarter, just to try to quantify the impact of that that will translate into what, approximately a $500,000 step up in quarterly royalty revenue? Is that how we should think about it?

I think that is a reasonable number, at least $500,000 a quarter. We will see that – we talked about Q4 shipments, and this year we will see that starting next year, and I think that will be pretty much the end of the prepaid season or era. From thereon we will just start reporting, continue to report actually the number of the units shipped to our customers on a quarterly basis. Gary Mobley – Benchmark: All right. Thank you, guys.

Thank you.

Your next question comes from the line of Vijay Rakesh from Sterne Agee. Vijay Rakesh – Sterne Agee: Yes, hi, guys, good quarter here, and good guide, I guess. Just looking, if you will give me some more color on the 4G side, how do you see that side developing over the next year? And what are your license rates there, royalty rates?

So that comes to your question of LTEs, our pipeline is I would say very encouraging on LTE, companies are taking us not just for handsets, but for different connected devices, but also in the networking side. This is a market that we learned [ph], and now with the DSP that we have the CEVA-XC, we are ahead of competition on the technology front, versus (inaudible) and Texas Instrument. So, the LTE pipeline is looking very good. Going back to the question about royalties, of course the royalty is higher than other standards. Vijay Rakesh – Sterne Agee: And when you look at software licenses like Samsung on the 4G side, do you see more handsets coming out as you look at first half next year also, on that?

I think (inaudible) I did give strategy analytics for somebody. The LTE volume is ramping up. You will see in the 2011 deployment, it won’t be that significant in volume. It is still less than 1% of the overall market, but in Q3, we are going to get a sizeable size of 200 million, 400 million. Vijay Rakesh – Sterne Agee: Got it. And lastly, when you look at the China market, you mentioned the low end handsets, and that you are seeing some more things turn in your favor. Can you give a little bit more color? It looks like you have a good presence there with Spectrum and Infineon through Nokia that – what are you seeing as you look out in the next year in the China market?

Let me give kind of an overview how we see – this is not China market. It is basically the combination of emerging market, China, India, Indonesia, Bangladesh with huge amount of volume there now. In general, most of the development OEM’s work is done in China. In general, for the emerging market there are two types of supply of OEMs, one what we call international trend [ph] of OEM. The largest ones are Nokia and Samsung, both are working with us and then there is domestic OEMs. These are guys that do development of phones, not just for China, but the emerging market, also low-cost phones (inaudible), also working with us, and better range of companies (inaudible) that are developing 2G on the voice phone and smart phones, mainly in 2G, most of the work is 2G and not 3G. And that is the volume that we are doing. The China OEM not the international one, was dominated by MediaTek for many years. But how MediaTek becomes the dominant player, and now and they had this 85% to 90% market share. Now this (inaudible) few other companies that getting into this market specializing in market, and exciting. So on the whole, by the way it is – we are expecting, we are focusing on low cost, but on companies like (inaudible) speaking about 1.2 billion. If you add up this market, you ended up with more, and this is just for not for connected device. It is not something that is tracked accurately like the other international brands, but the market is bigger. And we are now getting there. It is not a surprise for us because we were working with this customer for a while. But timing is something that (inaudible) to control cost. But now it is essential payment. Vijay Rakesh – Sterne Agee: Got it. And one last question here, with the Intel acquisition on Infineon, have you seen any progress? Have you seen – are you seeing – are you getting more traction now that Intel is kind of a player in this space too?

Well, we believe this will be the case, but right now they are still yet to conclude the deal. They are not done with it. I think they believe that generally that we will start working with one company. Vijay Rakesh – Sterne Agee: Got it, great. Thanks a lot.

Thank you.

Your next question comes from the line of Matt Robison with Wunderlich Securities. Matt Robison – Wunderlich Securities: Hi, good morning, and congratulations. Nice to see this stuff we've been looking for coming in. A couple of boring questions, first, for Yaniv. Yaniv, what was the backdrop for prepaid going up so much in the quarter?

Going back – I am not sure I understand the question. It went down… Matt Robison – Wunderlich Securities: Your prepaid expenses went from $3.9 million to $5.5 million sequentially. Maybe you want to come back to me on that one.

Prepaid royalties, and not just from the (inaudible) related payment, and tax return payment that we would get from the tax authorities. Matt Robison – Wunderlich Securities: Okay. And how long are you hedged, and when do you think you'll have to be back in the market to hedge for next year's OpEx?

For this year we are fully hedged. Next year, we will have to at the beginning of the year score come up with the next guidance and you will know exactly, or set the expected rate for the budget and for our operations next year. So, it will happen early next year, I believe. Matt Robison – Wunderlich Securities: How much of that cash flow was from options exercise?

In the last quarter, 2.8 million was for option exercises, 4.6 million was from operating activities. Matt Robison – Wunderlich Securities: What was CapEx?

I don’t have it here handy. But I believe that a few hundred thousand dollars, not much material. Matt Robison – Wunderlich Securities: Similar to last quarter?

Yes, yes. Matt Robison – Wunderlich Securities: Headcount?

300,000. Matt Robison – Wunderlich Securities: Okay. Anything go on with headcount?

When was the last quarter, 184 people. Matt Robison – Wunderlich Securities: Okay. Now, the – Gideon, was your only X or XC license to the semiconductor company that you mentioned, the big deal, the big semi company?

It is a semiconductor company, yes, the big one. Matt Robison – Wunderlich Securities: Did you only have the one for the XC?

That is the only one this quarter for XC, yes. Matt Robison – Wunderlich Securities: How should we view the pipeline for the XC323? Is – you had a pretty impressive announcement about that product last week. Have you already recognized your first – or already talked about your first licensees for that? And when should we expect to see additional ones?

We don’t have yet a customer for that. By the way, Q3, we did get into the networking, the base station, the base station is not just the macro base station, it is also (inaudible) segment to get a sizeable market. We have a very good pipeline into this one. I wouldn’t rule out one (inaudible) this quarter. Matt Robison – Wunderlich Securities: Okay, so those will be the first ones to support?

Correct. Matt Robison – Wunderlich Securities: And now, this media – this market share with the indigenous manufacturer in China, clearly that's exciting news. But you also have MediaTek fighting back with new products. What is your view of the sustainability of the success from MStar [ph] and Spectrum?

Well, it is a good question. The only thing, first of all we are coming basically from zero into this market. The segment MediaTek is a new product coming, does (inaudible). It is a dynamic. There is lot of pressure on prices though, but the companies that you mentioned, they have very good products, and competitive products versus MediaTek, no doubt about it. That is the reason that they got this kind of foothold there. Matt Robison – Wunderlich Securities: Okay. I appreciate the input. I'll catch up with you later.

Thanks Matt. I think with regard to this particular market, because as you all know it is a significant market, and it is very dramatic and dynamic. I think that we will rely lot on what we know, what we get from my royalty inputs and future guidance. I wouldn’t take the whole market and then put in some type of analysis or assumptions of what is the market share we could gain over time, as we move from core to the other, taking into account that now we have at least two customers that are shipping into this new segment. I think that would be the right way to calculate and see how incremental that could be over the next couple of years. Matt Robison – Wunderlich Securities: Yes, what do – you've got probably the two biggest ones that were previously the 15% that MediaTek didn't serve, and so that's changing pretty rapidly, it sounds like. You just – should we think in terms of maybe splitting that market three or four ways? Instead of one company having such a vast majority?

Time will tell. That is the first quarter that we’re getting sustainable revenues, sustainable royalties coming from this market. No doubt, at this stage the momentum (inaudible) and by the way Infineon is going there, especially with a strong relationship with ZTE, and ZTE is the largest one. So, there are a lot of very – ZTE, of course, is doing very well, if you listen to their conference call, they say that 2G is now their sweet spot. And all of them are having very good products, and let us wait for a couple of more quarters, and see (inaudible). Keep in mind one thing that we are going to remain, but into this market in places where we must regain application processors. But we may end up with two cores in the chips, or one core in the application processor. Matt Robison – Wunderlich Securities: Well, since you brought it up, are you now licensing the Multimedia 3000?

No, we are not licensing the Multimedia 3000. This market is only the Multimedia 2000, which can get HD and 3-D video like Rockchip. That's what Rockchip is doing, and other people are doing it as well. And that is good enough. And in 3000, (inaudible). Matt Robison – Wunderlich Securities: Oh, yes, I understand. But I was just asking, is that now licensable, or is that a next year event still?

No, MM 3000 is next – second half of next year licensing. Matt Robison – Wunderlich Securities: Oh, that far out? Okay. All right, thanks a lot.

Thanks Matt.

Your next question comes from the line of Daniel Meron from RBC Capital Markets. Daniel Meron – RBC Capital Markets: Hey, Gideon and Yaniv, congrats on the good outlook here. A few questions, first of all, on the usage of cash, the cash pile always keeps growing. That's a very good work on that front. But anything that you guys are looking to do with this? I mean, are there any missing technologies or elements that you think you may need to acquire down the – in the foreseeable future, or you feel pretty set as far as the internal competencies that you have within the company?

In terms of technologies and technology we don’t lease [ph] technology, because if we do something, ultimately we may require it. What we are looking in terms of (inaudible) is technologies that either take us to a market that we are not there yet, or provide some new model of feature sets that I would say people don’t because the next big thing in whatever market that we are. We are evaluating a lot of technology. We are checking a lot of things, exploring different ideas. We didn’t find here the (inaudible). But the growth in the next couple of quarter, years, these markets that we’ve talked about really do not require us to do any M&A type of transaction, but manage the cash –

(inaudible)

Daniel did you get the answer? Daniel Meron – RBC Capital Markets: Yes, I did. And then my next question, if you can refer to the – you know, so right now, we should think about cash as something that you're intending for M&A, right?

Sorry, that is what? Daniel Meron – RBC Capital Markets: Towards M&A, right? The cash? That's what – how we should think about it. You're not going to distribute it to shareholders at this point in time?

We just answered. We are not going and we don’t need anything for M&A. So the cash is there because it’s a profitable company with good cash flow. We have ideas, what we could do with that and what other new applications or add-ons we could do. We announced a buyback program that has been active in the past, and will be active under certain scenarios, but the board will decide it and that’s a way to give money back to shareholders. And then I think I am happy from my role at least to be on this – to have this problem on hand of being profitable and generating cash. But pretty much nothing has changed from the last three calls on this front. Daniel Meron – RBC Capital Markets: Okay. And then, when you look at – maybe I missed it during your discussion. On the consumer front, what do you think your market share is right now, and what do you see that's connected to prices and multimedia prices, say, two, three years from now? How do you see your pipeline evolving, and some of the products that you've been selling, as far as licenses, coming to production?

This is the same question we were asked, the first question on the call. So I don’t want to repeat the thing that we have said, but there is no doubt we are making good and interesting progress, mainly in the application processor over the next – over the last couple of quarters and we could take it offline, but I think that was the first question that was asked and that’s very interesting market segment for us going forward, the multimedia application processor, baseband, (inaudible) a lot of these other market that… Daniel Meron – RBC Capital Markets: Okay, great. Thank you. Good luck.

Your next question comes from the line of Doug Whitman with Whitman Capital. Doug Whitman – Whitman Capital: Thank you for the outstanding quarter. I just have some quick – because Matt's already asked all the super-smart questions. I just have some very quick questions. Going to the cash, which as a shareholder, I'm very happy that you set it so carefully and continue to build, but could you comment, did you do any stock buyback last quarter? And I notice your cash is at $5.24 a share, so congratulations on the great cash growth.

Good to hear from you. Yes, we said earlier that we have 2 million share buyback program that we started off in June, and we were able to buy about 33,000 shares in average of $11.3 per share. We saw that the stock started moving upward and the buyback program was out of the range of the current guideline that we have. So we were active when we can, and will be active when we can in the market, and take it from there. Doug Whitman – Whitman Capital: And Gideon, I apologize, I know you – but if you could just clarify on Broadcom, your comments, and I heard that you're going to be a supplier to 2G and 4G. Are you also talking about being the main supplier to Broadcom in 2G to 4G?

Well, (inaudible) is Broadcom I believe, because in the call I will be selling to Broadcom. Doug Whitman – Whitman Capital: Okay, I apologize.

But Broadcom has said that – but Broadcom is in the cellular, the 4G. In 2G and 3G they use us, in the 4G (inaudible) that also use us. Overall, we will be in Broadcom in all the three generation. Doug Whitman – Whitman Capital: Okay. And then, the last question, which is, if I'm picking up correctly, because of, in part, the major unnamed semiconductor company that's making an effort in wireless, is it reasonable to expect that licensing revenues, that you'll start to see some of that coming into your licensing revenues, not just royalties, in 2011 as well, new relations, new added agreements?

You know, at the end of the day that is the goal, to increase every segment of the revenue which we can, because the more we license at the end of the day or two years down the road it will generate more royalties, so overall the answer is that would be our goal and from now on – and again in the past we have been quite comfortable to be at the 4.5 million to 5 million per quarter, and be able to maintain these types of licensing revenues if we can, because of different dynamics in the market, and activity in the markets, new market segments for us and we will be able to increase that of course would be our goal, and that is what we are trying to do.

You know, Doug, let me tell you how I see the licensing activity, the licensing business. For me it is more important to make sure that we license with the right company, the companies that generate royalties. (inaudible) companies, OEMs that we – that have these kind of capability. I am not trying [ph] broadly on any start up or any companies that are (inaudible) to get – to go for licensing. I am looking on the quality of the license and the capability of the company. Every quarter we have a major – we can only have one or two semiconductor companies that license (inaudible). This is the leading technology and the tablet market is where we want to be, LTE, consumer products. (inaudible). If you end up one quarter, it will be 5 million and size, I will not make – I will not be that excited about this. I will be more exited of the partialities of the company. Doug Whitman – Whitman Capital: Thank you. It's great to see the dream become reality, so thanks for the great execution.

Thank you, Doug.

There are no further questions at this time.

Okay. Well, thank you very much again for joining us today, and for your continued interest in CEVA. As usual, our IR department will be glad to further follow up and assist to understand the business opportunities and roadmap for CEVA. We will be attending the AeA Classic Financial Conference in San Diego on November 8, and invite you to join us there. Thank you and good bye.

Thank you for participating in today’s CEVA Q3 2010 earnings conference call. This call will be available for replay beginning at 11:30 A.M. Eastern Time today through 11:59 P.M. Eastern Time on Tuesday November 2, 2010. The conference ID number for this replay is 15781514. Again, the conference ID number for this replay is 15781514. The number to dial for the replay is 1-800-642-1687 or 1-706-645-9291. This concludes today’s conference call. You may now disconnect.