Greetings ladies and gentlemen, and welcome to the Kulicke & Soffa Second Fiscal Quarter Results Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. At this time, I would like to introduce Michael Sheaffer, Director of Investor Relations. Please go ahead sir.

Thanks, Brian. Good morning everyone, and welcome to Kulicke & Soffa's second quarter conference call. An audio recording will be made of the entire conference call this morning, including any questions or comments that participants may contribute. The audio recording will also be available on the internet for a limited time and may be accessed from the Kulicke & Soffa web site at www.kns.com. During today’s call we will make reference to non-GAAP financial measures. Reconciliation to those measures to the most directly comparable GAAP results will be posted on our web site after the completion of this call. To view them, go to the Investor Relations portion of our website and click on the ‘GAAP to Non-GAAP Reconciliations’ link. The content of this conference call is owned by Kulicke & Soffa Industries and is protected by U.S. copyright law and international treaties. You may not make any recordings or other copies of this conference call. You may not reproduce, distribute, adapt, transmit, play, or perform the content of this conference call in whole or in part without written permission of K&S. Today's remarks are governed by the Safe Harbor provisions of the 1995 Private Securities Litigation Reform Act. Actual results may turn out significantly better or worse than indicated by any forward-looking statements that we may make this morning. For a more complete discussion of the risks associated with the operations of Kulicke & Soffa, please refer to our SEC filings especially the 10-K for the year ended September 29, 2007, and, our other recent SEC filings. And now it is my pleasure to introduce the host for today's call, Scott Kulicke, CEO and Chairman of the Board. Scott?

Thanks, Michael. Good morning, and welcome to this call, the purpose of which is to discuss K&S's financial results for the March quarter. For those of you who may not have seen this morning’s press release those results are available on the company's website, www.kns.com, in the Investor Relations section. Before I offer my commentary on these results, I will ask Maurice Carson, our CFO, to take you through the important details of the quarter.

Thank you, Scott. Good morning everyone. This is the second earning release and conference call where we are providing non-GAAP measures as a supplement to our GAAP result. As a reminder for everyone, we are removing the gold metal pass-through from our net revenue and cost of sales so that investors have a better view of our profit margins. We are also adjusting for other non-cash items including a $9.2 million pre-tax pension termination charge which I’ve discussed with you over the last few quarters. I am going to discuss our current quarter compared to the prior quarter. All of my comments today will be about non-GAAP measures for the March quarter versus the December quarter. The gold metal pass-through component of our net revenue was $95 million compared to $91 million last quarter. We are currently planning for an increase in the price of gold bringing the pass-through components to approximately $101 million in the June quarter. Net revenue was $81 million down from $135 million last quarter. Equipment and packaging materials both declined in line with the anticipated cyclical downturn following two great strong quarters. We continue to extend our market leadership in copper wire, supplying products for the growing number of automotive power and high-performance analog devices that are now using copper wires. We are also leveraging our leadership position in copper with more than 20 customers that are currently developing advanced packages using fine pitch copper wire. Copper wire volume increased 10% quarter-on-quarter bringing current copper production up to around 7% of total wire volume. Gross profit was $36 million compared to $59 million last quarter. Gross margin was 43.8%, an improvement of 25 basis points over the prior quarter’s gross margin. Equipment AFTs and gross margins improved slightly this quarter due to a higher percentage…

Thank Maurice. Looking beyond the details of the quarter, which paint a picture of a tightly run company operating in the ugly heads of the semiconductor cycle, I think two questions ought to be in the forefront of investors’ considerations. The first question has to do with the timing and then next upswing in demand for our products. The second is about how well-positioned will K&S be to take advantage of that upswing when it occurs. The second question is easier to answer. That we are not complacent about our leading market share position is evident from this quarter’s launch of our new power series of wire bonders, the IConn and the ConnX. These two products will replace our industry leading Maxum Ultra and Maxum Elite bonders. Both machines offer improved productivity relative to their predecessors as well as better technical performances measured by indicators such as accuracy and process repeatability. They reset the state-of-the-art of wire bonding and we expect their superior performance will allow us to reset the price point of wire bonders as well. We started our first customer qualifications in the power series and expect these machines to start to make a material contribution to revenues starting in the September quarter. Product development at K&S isn’t limited to just wire bonders. As mentioned in our press release, we’ve started volume shipments of Formax a new gold wire product targeted at the stacked die applications and we’re making good progress with the development of our next generation die bonder Discovery. We expect revenue from Discovery starting in the first half of calendar 2009. Of course positioning K&S for the next upturn, isn’t just an issue of new products. Equally important is maintaining customer relationships even when customers aren’t buying very much. This is especially true in China,…

Thank you ladies and gentleman, at this time we will be conducting the question and answer session. (Operator Instructions) Our fist question comes from the line of Bill Ong with American Technology Research.

Yeah just a quick question on your packaging materials; that’s been flat at $190 million from quarter-to-quarter, and the gross margins you only have been investing 14% but looked like it declined in the March quarter, maybe some insight there.

It has been declined, probably because the gold price continued up a little bit and there was a little bit of absorption that’s consistent with this time of year. With the absorption is that volumes where down. Chinese New Year, remember affects our packaged materials more than the bonders and that caused a little bit of absorption hit.

Okay, but it’s usually been pretty steady for last of the quarters out, so it seems like, maybe a little bit each saw magnified it and caused a little bit of depression?

Yes.

Our next question comes from the line of Gary Hsueh with Oppenheimer. Gary Hsueh - Oppenheimer & Co.: You are guiding your basic business flat ex gold content and I think you’ve said in the past your business is anything but flat, so you seem to be getting a little bit more positive. Are you just sort of handicapping that a hopeful positive outlook on the second half with any kind of macro economic slow down that may still be impending? Is that the message here?

Well, I think you gave me three or four different things that I am supposed to deal with. Certainly the short-term guidance is for business to be flat. There is no question about that. Quarter-to-quarter we expect the business to be about the same. The more positive posture has to do with looking beyond the near-term guidance, beyond the June quarter guidance. Clearly this business will turn. The $64 question is, which quarter will it turn in and as I said, as we tried to indicate in the press release and in my comments, the optimists are calling for the fall, the pessimists are calling for early 2009. So take your picking between there. I think none of those forecasts take into account major macro economic disturbances and that is something that is beyond our expertise. So you’ll have to add your spin on that, but I will point out that increasingly this is -- I see consumption as a global phenomenon not a US phenomenon and I hate to see anybody overreact to certain US issues and overgeneralize from that, but that is just commentary. We had no major macro economic changes built into our forecasts one way or the other. We leave that to our customers. Gary Hsueh - Oppenheimer & Co.: You talked about I think a mix favorably helping improve your equipment gross margins despite revenue decline, does that work against you? Do you get that mix sort of reverting back to a more normalized sort ratio here in the June quarter?

Yes, we’ll have some of that in the June quarter. In quarters when business is down, the steady services and spares business has a bigger proportion of it and that is a better margin overall and then it swings wildly between the quarters where we have less sub-con business and quarters when we have more. And at this point, we are anticipating that the June quarter will have a higher proportion of sub-con sales of equipment. Gary Hsueh - Oppenheimer & Co.: Okay and finally just longer term, you talked about the product coming to bear on the P&L here in the September quarter, the IConn and the ConnX. What kind of margin expansion can we expect here on gross margin? Is it 100 basis points, 200 basis points? What kind of impact will this new product line have on gross margin?

Well, over time we have described in the past that we try and get about half of increased productivity in AFPs, but you have to mix that in with the ramp of the product. So I think you can look towards sub-100 basis points in the September quarter growing to 300 basis points probably in December and March quarters that ramps to take over 100% of the product. Gary Hsueh - Oppenheimer & Co.: Okay, and the same sort of ramp for December as well?

We haven’t forecasted that level of detail on the Discovery ramp yet. The impact will be larger initially, but we don’t think that it is going to ramp as quickly, but by the end of 2009 there will be, I think, a material impact on the equipment margins from the Discovery.

Our next question comes from the line of Tom Diffely with Merrill Lynch.

Actually, I am going to bounce along the bottom here. Can you talk a little bit about what you are seeing in terms of capacity buys just for backfill versus technology buy-ins and what technology might be driving a little bit in near term?

We think most of the buys that we are seeing right now are capacity buys. Although, as part of that we see an interesting pattern where as the years goes the memory guys were buying assembling capacity aggressively, they are right now putting their incremental unit demand into subcontractors; so we are seeing that same demand but at the subcontract level not at the memory IVM label. In terms of what the new things going on into the packaging world, we have a SKAD over seventy customer qualification/evaluations going on for copper wire that remains a very hot item as everybody struggles with $900 gold prices. So that’s one big issue, stacked die continues to be really hot and continues to evolve as people build higher stacks and more complicated stacks and try and cram more and more different pieces of silicon into a single package and stacked die applications chew up a lot of wire bonder capacity, so it’s great for us. In some ways the stacked die phenomenon causes people to underestimate the wire bonder density needed to support even modest increases in unit capacity because it counts as one unit but in fact it might be three or four or five die being bonded so it’s a lot wires in those packages. So that’s most of what’s driving us, I guess the last thing that’s evolving on that technology forefront is an intensification about discussions around pad pitch, for some years now pad pitch had stalled out in the 40-45 micron range as people went to multiple rows of bond padding. The available wiring density increases that come from multiple rows of bond padding has been exhausted and we are now seeing discussions again about pad pitch. And people were asking us when we can start to call 30-micron pad pitch for instance. This place is right into the ConnX and the IConn which are incredibly accurate machines, accuracy and process repeatability namely underlined the tools needed to support great pad pitch. So we think that the timing of those machines, the technical performance exactly fits into that market trend and we think it’ll help us continue to gain share with these products.

Okay, and when you look at it a couple of quarters to when the Discovery takes off, what type of technology requirements I think would be at that point to drive incremental demand?

The Discovery product is more than anything geared at stacked die applications. It means it can also be other applications but we thought that stacked die with real challenging process is necessary for that machine to excel in the marketplace and all our characterization work to date is around those kinds of applications. So we think that is where this real sweet spot will be.

You talked a lot about how copper is starting to take off; are we going to be talking about a copper pass-through pretty soon?

No, Copper is cheap, we will not do that yet.

Let me add something on this copper discussion. These evaluations that customers are doing on copper doesn’t manifest itself just as increased copper wire sales but copper capillaries where we have a leading product and our bonder sales will eventually come out of that also where we have a leading product there. So as you are building your model, I wouldn’t think of copper just as a wire business improvement but to all of our product lines.

Yeah, I agree copper at some point will drive a replacement cycle in bonders.

Our next question comes from the line of Andy Schopick with Nutmeg Securities.

I have got a few, I will try to make them quick. When will you reveal pricing on the new power series line?

Well, there are two answers, the wrong answer is that prices are negotiated after qualification, where we have to demonstrate productivity and then we arm wrestle with customers about who gets which share of that productivity increase. So we don’t even know pricing right now, exact pricing. We know what our budgetary quotes look like but how it actually comes out, will play out over the next couple of months as these quals wrap up. And by the way, the quals in general are going very well. The second answer is in general we try not to talk about pricing for competitive reasons, Andy. You really have to deduce it from gross margin percentages as the volumes ramp.

That’s one of the reasons I asked that question because the comment was made about the expected gross margin improvement. I just wonder at this time how much confidence you can have in any guidance about the expected impact on GPM going forward. That’s really what I was trying to get.

Well, the GPM guidance issues are difficult to begin with because it’s a noisy number based on product mix and customer mix. But yeah we believe that there will be real improvement in gross margin, not tens of percentage points, mind you, but single digit percentage points, but it’s against the noisy baseline.

I understand. Also I want to ask you a little bit about the Alphasem acquisition and the whole effort in the die bonder area given that, that acquisition closed towards the end of 2006. Looking back, are you where you expected to be at this stage with the overall development and progress being made?

No, we are behind schedule. We made some changes in the direction of Discovery after the acquisition that is delayed it some but we believe that it will be a much stronger product as a result of those changes. No, we are a little bit behind our projection.

It will have a greater span. But because of the changes we made the Discovery will now serve a bigger market for a longer time.

Yeah, and will more deeply penetrate that market, absolutely.

Okay and we are looking forward to see in that play out. A few more, customer forecast versus the market research forecast that you are privy to. I am wondering at this stage how much confidence you may have in whatever market research forecast you are seeing for 2008-2009? And again, looking back over the past few years, how reliable have the market research forecasts that you have been using track to the actual customer forecasts?

There is a dichotomy of how we forecast the business, Andy. For the near-term, for the next quarter or to at any point-in-time we rely almost exclusively on customer forecasts which are built from bottom up name by name, factory by factory, product line by product line, and the business unit managers go through and they say, “I want to load this amount of inventory based on this list of customers, and this set of forecasting those customers discounted by my judgment of our likelihood to actually book those orders.” But that only reaches out a quarter or two, but that quarter or two encompasses all of our material commitments. Those are things that really drive cash flow inventory returns, all those things. For longer planning purposes, because our customers are not great at long-term forecasts then we start to rely on industry forecasts. You are asking me about the accuracy of industry forecasts?

Yes, and especially over the past few years.

Typically the forecasters tend to revise their forecasts. By the end of the period their forecasts are spot on. You know and you have seen it where people have taken down IT unit forecasts for 2007 recently. So it’s a process of successive approximation and we use it as a guide to longer-term discussions and longer-term expense plans, but we certainly don’t use it as a guide to say inventory purchases.

Yeah, okay. The last question is on the non-GAAP measure. I notice in the explanation Maurice that gold fabrication cost and gold profit are excluded from the non-GAAP. What would give rise to a gold profit, would that be FIFO type accounting on inventory or ?

No, I am sorry. If that came across we misspoke. Gold fabrication costs and profits are included in the non-GAAP P&L, and any profit on the gold is also included. There are a variety of things that lead to margin on that including the different exchanges where we have fixed the price and a variety of other technical aspects that comes out.

I am not sure if I misread the press release or not, but I could have sworn I saw something in there and I am trying to find it right now as I am speaking to you that there was a specific exclusion. So either I am wrong and I may just want to go back and look at that.

I mean it is just a phrasing, it says fabrication charges and profit on gold metal are not excluded.

Yeah, the problem with double negative.

We will make it a triple negative then.

Yeah, that’s the way the lawyers write the language. Sorry, I am quoting Dave Anderson, our General Counsel who is sitting here in the room with us.

Alright, that’s it for me guys.

Okay, Brian are there any more questions? (Operator Instructions)

Well, then I think if there are no more questions Brian, we will thank everybody for their attendance and we will talk to you next quarter.

Thanks Scott. I would like to let everyone know that we’ll be participating at Sidoti & Company Emerging Growth Conference in Boston. Our presentation will be June 3rd at 10:25 a.m. Eastern Time. We will also participate in the Oppenheimer Communications and Technology Conference in Boston on June 4th which will be webcast. This concludes today’s Kulicke & Soffa conference call. As we announced at the start of the call, an audio recording has been made of the entire conference call including any questions or comments that participants may have contributed. The audio recording and any non-GAAP reconciliations will be available on the Internet for a limited time and may be accessed on the K&S web site at www.kns.com. Thanks everyone and have a good day.

Ladies and gentlemen, this concludes today’s teleconference. Thank you for your participation.