Good evening ladies and gentlemen. My name is Lattice and I will be your conference operator today. At this time, I would like to welcome everyone Lattice Semiconductor Second Quarter Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you, I will now like to turn the call over to Mr. David Pasquale. You may begin your conference sir.

Thank you, operator. Welcome everyone to Lattice Semiconductor's second quarter 2014 results conference call. Joining us today from the company are Mr. Darin Billerbeck, the company's President and CEO; and Mr. Joe Bedewi, Lattice's Chief Financial Officer. Both executives will be available for Q&A after the prepared comments. If you have not yet received a copy of today's results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the release off of the Investor Relations section of Lattice Semiconductor's website. Before we begin the formal remarks I will review the Safe Harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company's official guidance for the third quarter of fiscal 2014. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a public press release or publicly announced conference call. The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our fiscal year 2013 Form 10-K and our quarterly reports on Form 10-Q. The company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks will also be presented within the requirements of SEC Regulation G, regarding Generally Accepted Accounting Principles or GAAP. At this time, I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead, sir.

Thank you, David. And thanks to everyone for joining us on our call today. Our second quarter revenue came in at $99.3 million which was another record for Lattice; this is up over 17% from where we were in Q2 of last year and up nearly 3% of our record quarter in Q1. Gross margins for Q2 came in at 55.4% versus 53.3% in Q2 of last year and 56% last quarter. If you focus on the first half of 2014 so far, revenue was up almost 26% to $196 million compared to $156 million for the first half of 2013. EPS for the first half of 2014 was $0.20, already above the entire year EPS for 2013, the big takeaway from Q2 as we are pushing forward and making inroads into all of our focus business segments. We continue to expand opportunities in the consumer market while growing our communications and industrial business. By targeting diverse markets, we’re able to lessen the impact of the consumer market volatility, still achieving our target gross margin levels of the mid 50s. I am often asked what is our long-term goal at Lattice; is it the catch with Altera and Xilinx? No. Short-term positioning the company for a sale? No. Our goal is growth, to grow Lattice into $1 billion company over time. We believe this is the best way to drive continued shareholder value. To achieve this goal, we must have the right strategy. So what’s our strategy to get to $1 billion revenue over time? We need to go even bigger in consumer; additionally, we need to double our industrial and our communication business; and finally, we need to buy something, dig; double; buy. So what does that really means? In the consumer market, the challenge is how to get…

Thanks Darin. Revenue for the second quarter was $99.3 million an increase of 2.8% from the first quarter and an increase of 17.2% from $84.7 million in the second quarter of 2013. Gross margin for Q2 was 55.4% compared to 56% in the prior quarter and 53.3% in the second quarter of 2013. Gross margin continues to be inline with our long-term gross margin target of the mid 50% range, operating expenses for the second quarter came in at $41.9 million this is about 1.1 million above Q1 and primarily to higher variable compensation and severance expense. Variable compensation will fluctuate based on current and forecasted revenue. Severance expense is related to specific revaluation of some positions and is not part of a larger initiative. We do not expect these items to reoccur in Q3 and our OpEx will be sequentially lower. As a percentage of revenue OpEx held flat at 42% in Q2 2014 equal to the 42.1% in Q1 and was down from 45% in Q2 2013. Net income for the first quarter was $11.8 million or $0.10 per basic and diluted share as compared to net income of $12 million or $0.10 per basic and diluted share in the first quarter and net income of $5 million or $0.04 per basic and diluted share in the year ago period. For the quarter diluted share count was approximately 121 million shares. Operating cash flow was 21.1 million for Q2. We ended the quarter with a balance of cash and investments of approximately 247 million, an increase of nearly 22 million over the prior quarter. We continue to have no debt. Accounts receivable were essentially flat at the end of Q2 at 66.3 million as compared to 66.7 million at the end of last quarter. Day sales outstanding declined to 60 days compared to 62 days last quarter. Inventory at quarter end was $59.3 million compared to $58.2 million at the end of Q1. Months of inventory now stands at 4.4 months compared to 4.1 month at the end of Q1. We spent approximately $2.5 million on capital expenditures and incurred $5.8 million in depreciation and amortization expense during the quarter, compared to $2.4 million and $5.9 million respectively in Q1. There was no activity under our share repurchase program in Q2. This concludes the financial portion of the review -- of the call. I'm going to turn it things back over to Darin for the third quarter business outlook. Darin?

Thank you Joe. Executing on our strategy that takes hard work and flexibility in the everchanging tech market, this continued enhance our product strategy, reinforce our core capabilities and strengthen our teams. Comfort means complacency which installed countless companies to win and must continue to evolve. Our D&A in this creativity innovation has drive us no one else can match you, we have been selective about what products we build, what markets we serve and what further capabilities we need, while increasing our development in operational efficiencies. There are many great opportunities for Lattice, I'm confident we can get there. We have the right team, we are positioned with the right products, right strategy. And the shift in the markets towards mobility continues to give us advantages. In terms of specific expectations for third quarter 2014, we expect Q3 revenue to be 8% to 12% lower compared to Q2. Q3 gross margins are expected to be higher at approximately 56% plus or minus 2 points. Total operating expenses are expected to be lower by approximately $1 million on a sequential basis. While we do not provide guidance beyond the current quarter, as previously noted we do see softness in our communication in business in Q3 as the few of our larger OEMs work through what we believe is inventory correction. The recent 4G licensing process has given us more visibility and we currently believe we will see an Asian comms demand increase in Q4. Our consumer business, we are forecasting the demand softness we saw in Q2 to continue through Q3. We expect consumer volume pick-up in Q4 as new models are launched by our large OEM customers along with new businesses from our new China Inc. customers. As I noted earlier, our distribution channel has been at bright spot led by Europe and Asia. We expect this growth rebound continuous and move through Q3 and into Q4. In summary, Lattice remains in a great position. We continue to execute on our strategy of creating innovative solutions for our customers, very compelling opportunities in front of us and remain focused on flow less execution and of course and as always, cost. That concludes my prepared remarks. Operator, now we would be happy to take any questions.

(Operator Instructions). Your first question comes from the line of Tristan Gerra.

Hi, good afternoon. Could you talk about your new design win activity in consumer, is this mostly in tablets later this year? When do you think you can diversify your customer base in terms of Tier 1 in smartphones?

You asked two questions there. So let me answer both and then make sure that I covered them. And the growth that we're going to see in Q4 is primarily in smartphones in China, as I mentioned. So that's not going to be in tablets and smartphones in China. The growth in Q1 and Q2 were primarily in the smartphone industries and as we move forward, as you guys understand, there has been some press on the success of certain phones and that's hurt as far as the design wins not shipping in the volumes that we bought and that's okay. I mean we won the design and we won the forward-looking design in those platforms also. So as those new platforms ramp, we actually expect that Q4 will come back a little bit in consumer which is why I gave some of that guidance.

Okay. That’s useful. Given what seems to be a short-term slowdown in communication and given your cash position, what should we expect in terms of potential share buyback?

We anticipate that we’ll be buying back shares through the last half of this year.

Great. And then one quick last one for me. In the TD-LTE wireless infrastructure notably in China and given some disappointment recently this earnings around content of FPGAs in base station, could you talk a little bit about the dynamics that are taking place potentially in your favor in terms of traditional high end FPGA content in base station whether there is any ASIC conversion and also the trend in your segment where we know you’ve been [wrapping] recently in China in wireless infrastructure?

Yes. So let’s break that up. First of all, our (inaudible) product family plays from the base stations all the way through the wireless remote radio. So, you’ll see that in a control plain application throughout that infrastructure. What we’re talking about now is like an ECP3 class family that has surrogate. And we will see that in a variety of applications within the cellular base stations and also in the PTNs and other portions of the backhaul. So, what we’re starting to see is that they’re starting to replace some of the bigger FPGAs with their own ASICs putting smaller FPGAs around them for a cost reduction solution. So the technology matures. When LTE first came out there was a lot of big FPGAs in those marketplaces and we’re seeing the likes that people like high silicon and other people do more of an integrated ASIC but then still have the need for smaller FPGAs to surround that for IO expansion or some control. So we see that always happening. On the other hand when they rollout 5G or the new technologies use the big FPGA and that's always been the case. If the wireless infrastructure sits for any length of time on any given technology, then you'll see those cost reductions and the ASICs displace more FPGA.

Very useful. Thanks so much.

Thank you. And your next question comes from the line of Sundeep Bajikar. Sundeep Bajikar - Jefferies & Co.: Hi guys, thanks for taking the question. First one on the China smartphone comment that you made. What types of smartphone devices are you referring to in terms of price points, when you talked about meaningful shipments into these devices in Q4? And as a follow-up to that, what portion of sequential shipment growth in Q4 would be driven by such new Chinese phones relative to higher end models from the larger players?

So the types of ASPs we're seeing in China are somewhere between $200 and $300 per device, which is quite a bit lower than we’ve seen in some of the smartphones. And when you look at Chinese market, what we're seeing is that transition to more functionality single models, right, within integration effort that doesn't do everything that the high-end smartphones that we're used to in the United States. So they may take three or four different features. So we would almost think of the China smartphone as more of a mid-tier product, maybe a -- I'll give you an example, something like a Galaxy S4 versus an S5. So they would be looking that as an S3 and S4 version, not something that can compete with the high-end S5 or even some of the other products. Does that makes sense? Sundeep Bajikar - Jefferies & Co.: Yes, it does. Great. And if you could you just comment on sort of the relative mix in terms of growth that you expect to see potentially in Q4 from these new devices versus kind of traditional high end devices that people are expecting to be launched?

Yes, so you are going to see you will see volume growth that are high the ASPs are going to be lower because the products that we actually serve those markets with are lower at less density and lower cost. So you are going to see the volumes as they take off the revenue will material obviously not as big as one of the Tier 1 or Tier 2 guys but if you look at the combined China Inc over the next three to four years you can kind of get a vision that that’s going to be about the size of those guys. So we want to get in early, establish ourselves as really the fact of standard and then as we move through and they continue to grow share within China that we are positioned to take advantage of that ramp. So it’s early for them for sure, but the revenue that we should see in Q4 would be material. Sundeep Bajikar - Jefferies & Co.: Great, that’s very helpful. Next one along the same lines is there any change in your design win position at your largest customer on a year-over-year basis heading into the third quarter?

Yes we actually have more. Sundeep Bajikar - Jefferies & Co.: Okay, great. And then last one from me if you could give us a little more color around recovery you expect in communications in Q4 what is giving you visibility into Q4 from where we stand today?

It’s a lot easier to get visibility when you start seeing a correction because once you have correction you say should I stop all my way for start or should I adjust my inventory and so you can have a pretty meaningful discussion with your customers on what is a4c and what’s driving there the issues that they are having in the market. And so a lot times they will give you a little bit more color then when they are ramping, they just keep ramping and we don’t have control because we have VMI inventory, we don't have control to be able to manage that business. Because what will happen as we'll load up the inventory and then pull this position. So you can't give much about that, which is why in the perfect world we would have ramped Q1 maybe a little slower, Q2, a little slower and Q3 would have been even higher, instead we go Q1 record, Q2 record and now we go Q3 down. How that's been linearized we probably wouldn't see the damage to the stock as we just saw today. Sundeep Bajikar - Jefferies & Co.: Great. Thanks so much for the color.

Thank you. (Operator Instructions). Your next question comes from the Richard Shannon.

Hey guys. See a couple of questions, maybe I start with on the consumer side here, just kind of dealting into your guidance for the quarter. I think you said industrial will be kind of flattish, if comps down and I don't know exactly what that means, but it seem to suggest that consumer might be down in the order of 15% or more sequentially. How close is that to your expectations?

Consumers are not down that much, consumers actually kind of flattish down slightly. Comps is the big issue.

How much so comps are that to be down in the order of 20% then?

That's probably right.

Okay, fair enough. And then just to confirm, I think I heard you say for the last question, you don't believe you've last any sockets on your new business that your largest consumer customer there?

No.

Okay. And then I think you've talked for a few quarters about hopefully getting up to 7 to the top ten mobile OEM shipping as customers by the end of the year. What's your latest update on that on progress?

Yes, we've already done that. The issue is the 7 of the top 10 have really just become the 5 that I mentioned in the script. Which was you are talking about Lenovo and ZTE and Huawei and Coolpad and Xiaomi because those guys are all the guys that you're going to be seeing as the growth drivers for the China smartphone market. Now may be a couple of other guys in there. But I would kind of pick those guys as that I think they were going to dominate China and Chinese subsidies that are moving to the LTE phones. I think that's going to have a pretty big impact on what these guys doing in next couple of years.

Okay, fair enough and my line must be gone out but you mentioned there was some guy asked a question may be switching last question over to the comp side here following upon couple of your last questions here about the dynamic of easier replacement the larger FPGAs and putting smaller ones behind that around that. What does that mean for overall content per base station unit and when do you start to see the impact of that?

I think for us it's probably a smaller impact than others because again we're not playing in the high end of the thing where they're going to try to. Again they're focusing on cost reducing the big expense of FPK so they've always done. It's always been the challenge as they had in the communications market. And so what they will do that's like the advantage I think for us because we sale products at 150 k and below. And everybody else sale products that are much, much higher to that into these spaces. They do it go ahead and build the customer they're going to use the smaller FPGAs which is what we'll get. So I expect to get not only the MachXO business that we get today but you're going to have some high speed connectivity albeit in lower less density tomorrow. So I expect that we will actually benefit from that conversion. But they'll still drive the highest end stuff like 5G anything above that will use the FPGAs because you can't build ASICs that fast. And you can't -- you certainly can't certify I mean verify.

Okay. Fair enough I may follow that a little bit later but I'll jump in line thanks a lot guys.

Okay, thanks.

Thank you. And your next question comes from the line of (inaudible).

Hi thank you. Couple of questions, first of all, did you address why the gross margin will be going up sequentially in-spite of your lower revenues and if not would you please help us understand that?

It’s a mix issue and it’s the fact that we’ve been driving some excellent cost reductions going forward. So we’re seeing the benefit of those cost reductions and then we have a mix where (inaudible) has been going up and the industrial side has been going up and stronger and some of the comms products that we’re selling had some margin challenges and those are weaker in this quarter coming up.

I mean you would expect absorption to go up, these things just offset.

Yes, it’s offset by lower cost reduction that we’ve had.

And as time progresses when you see a rebound in the comms business are you anticipating that those products will mature to the point that they will not be margin drag. And so we not only get the benefit of the revenue increase, but also get an incremental benefit from that higher gross margin and than they were providing earlier in the year?

We’re not calling a different model we’re still hovering in the mid 50% range and that’s where we anticipate to stay in. This is a nice quarter upside. We’ve got great cost reductions coming through. We’re seeing it in all of our product lines on the cost side. So and as new products come out that helps us as we move into some different markets though we may have ASP pressures which is why we’re still holding mid 50s. I feel a whole lot more comfortable with mid 50s today than we did when we were talking about it two, three quarters ago.

That’s helpful. And then you also did mention earlier in the call a reference to inventories and trying to manage those, very specifically though your inventories were up in Q2 versus Q1. Is that a function of you were anticipating third quarter was going to be a little higher and had to pull in or help us understand that please?

No that's really a function of the fact we had the Fujitsu fab transfer last quarter where we built inventory due to that transfer for last time by purposes. That inventory sitting on the books build and but will bleed off overtime.

Got it, okay. So that is still impacting and will continue to impact for a few quarters?

Correct.

Thank you, Joe. And then finally there was a reference to buying shares back or if I would take it even one step back whereas relative to your cash and understand how you're thinking about your cash from a strategic standpoint given that it represents a quarter or more of your market value, I'm trying to lead you a particular direction, but more trying to understand how you're thinking about it?

So in terms of how we'd like to use that capital or add allocation of that?

Yes, given that it is such a high percentage of your market value.

Right. So we're at a point where we believe we're stable, much more stable now in cash generation. So we're looking very strongly at continuing the buyback program that we have and making IT potentially more aggressive as we go forward. And we're looking at other options related to acquisitions and that's been an ongoing steady process that we look at, it's been difficult to find an add force that would give us the capabilities that we want and the growth that we want, but that's continuing.

Thank you.

Thank you. Your next question comes from the line of Ruben Roy.

Hey Ruben.

Thanks. Hey thank you, hi Darin. I jumped on quite late, so I might have missed this if you mentioned it. But I just wanted to drill-in, it sounds like consumers going to be flattish in Q3. And in terms of some of these new customers that you have won design sockets with, what do you think in terms of some of the product ramp schedules; are they slated for 2014 or is that more of a 2015 event and when do you start to see some diversification of your consumer customer base?

We will see some. Some of these guys are ramping right now. So but it’s not as meaningful in Q3 as we expected to be in Q4. So yes, we have been working on this for a while. As we stated, I think it was like almost a year ago. We were focused on really the top 7 out of 10 but the names have all changed, right, because Motorola got bought and then got sold and then all these other guys and Lenovo is now a player. But the bottom line is we have got design wins just about every place on the planet. And now we are looking at who is shipping the volume. So in China Inc. the guys shipping the volume is the ones that are listed right, there is Coolpad, ZTE, Lenovo, Xiaomi, Huawei, Opel all those guys, right. So those guys are the focus of getting that volume and they are ramping products Q3 and Q4. And they just will constantly do switch over. They’ll ramp up products for about three to six months and then they will do another product. They don’t typically do the multiple lines and the multiple platforms, they usually just do kind of a phone, and ramp it like crazy and then they will spin another phone in six. So you got to always be on top of that with whatever the new feature sets that they need which kind of makes us perfect for what they are trying to do right because they are turning it every six months, we’re in really good shape.

Right, okay. Alright. And then...

Hello?

Your next question comes from the line of David Duley.

Yes, just a clarification on your consumer handset business, Q2 and Q3 are weak because I think you mentioned you are seeing an inventory correction at your big customer and his other phones didn't sell. Could you just clarify what you said, I missed it?

I think the main reason is that you are seeing not as much success on the newest phones that some people have and then you can read a lot about it in the press. But there is not a big of an adoption. And I think there is other challenges that people are having let's say in China. The people had penetration in China that was a much greater last year than they are having today because there is more competition from the people that I mentioned. And I think that that’s some of the challenges that you have which is why you got to win everywhere, right. I mean the challenge in consumers, if you are winning everywhere, you don't care who takes share. If you don't have every line, you aren't one of the persons to get the share taken and that's the problem. But I think in this particular case, it's a product line that you’re in, it just didn't sell as well as they thought.

Okay. So, mainly the weakness for you guys on the consumer space has been one big customer, not doing what you thought they would do?

I think for Q2 and Q3, yes.

Okay. And as far as how many customers do you see really getting into a major ramp here for 2015, whenever that starts I guess Q4 starts but how many incremental customers would you guys be expecting to kind of ramp up during 2015?

For next year, our goal is to ramp a high percentage of the ones that I mentioned from China and then additionally not to lose the one that we’re currently the shipping to. I mean that's the priority, because as we talked about before on a platform, the platforms that they have within certain manufacturers, they kind have good, better and best. And as the new product comes in, the best product becomes better, right. And then they bring another best product in. And so they just kind of waterfall everything down. And using example of Samsung today, they shut the S3, the S1 and S5 all the same time, right. They didn’t EOL or end of life the S3, when they bought the S4 and S5. So the more products are in, the more diversification that you have within those platforms. And then add on to that if there is no and there is tablets and there is everything else within there that you can proliferate out depending on which platform you are on. So the key is really diversifying within the platform but then diversifying the customer base meaning really trying to when one both of the top two guys and you got to win all of these China Inc guys goes together and another couple of years they're probably going to add up to Samsung and Apple.

Yeah, no doubt. And can you talk about how do you see the sun falling or what do you think the growth trajectory of your consumer business will be over the next couple of years?

Well our expectation this year was with the number of design wins that we had we would continue to grow. And it looks like it would probably be flat to slightly up on consumer if I were to call it for the year right now. And I think a lot of that comes with it's not that we didn't get the right design wins it’s the excess of those design wins in the market. And so all we can do is continue to win every design win and we can and it is their success on the market we ship and ramp. Next year our growth is primarily going to come from China Inc which we've been spending a lot of time on consumer market. And the other new opportunities that we're having with shifting to tablets or other things that we're doing. So I think that's going to be the growth trajectory for the next year.

Okay, thank you.

Thank you. And there are no further more questions in queue. I will return the call back to the CEO for any remaining remarks.

Okay thank you. As always we appreciate your support to our team and our strategy. The progress is made to execute our growth strategy for the past year it's been solid. Our challenge now is to continue to focus in areas where we can win and defend while creating a new market opportunities that we can serve. Finally we not just sell FPGA we sell what you can do with them. So thanks again guys.

And this concludes today's conference call. We ask that you now disconnect.