Thank you for standing by, and welcome to the second quarter 2008 financial results conference call for Power Integrations. Today’s conference is being recorded. At this time, it’s my pleasure to turn the conference over to Joe Shiffler, Director of Investor Relations and Corporate Communications. Mr. Shiffler, please go ahead.

Thank you, and good afternoon. I’m Joe Shiffler, Director of IR and Corporate Communications for Power Integrations. With me on the call today are Balu Balakrishnan, President and CEO of Power Integrations, and Bill Roeschlein, our Chief Financial Officer. Balu and Bill each have some prepared there marks. After which, we’ll take your questions. During today’s call we will make reference to certain financial metrics that are not calculated according to generally accepted accounting principles. Please refer to today’s press release for an explanation of our reasons for using such non-GAAP metrics as well as tables reconciling these measures to our GAAP results. I would also like to note that our discussion today, including the Q&A session, will include forward-looking statements reflecting management’s current forecast of certain aspects of the company’s future business. Forward-looking statements are denoted by such words as will, would, believe, should, expect, outlook, estimate, plan, anticipate, suggest, project, forecast, and similar expressions that look toward future events or performance. Forward-looking statements are based on current information that is, by its nature, dynamic and subject to even rapid and even abrupt changes. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied in our statements. Such risks and uncertainties are discussed in today's press release and under the caption Item 1A, Risk Factors, in our Form 10-K filed with the SEC on March 10th, 2008 and our form 10-Q filed on May 9th, 2008. Lastly this conference call is the property of Power Integrations, and any recording or rebroadcast of this conference call is expressly prohibited without the written consent of Power Integrations. With that I’ll turn the call over to Balu.

Thanks, Joe, and good afternoon. I’d like to begin by welcoming Bill Roeschlein to Power Integrations as our new Chief Financial Officer. Bill joined us on June 30th from Selectica, where he had been CEO since 2006. He has an outstanding background in finance in the technology sector, including public accounting and investment banking experience as well as corporate financial management experience at Ultra Clean Holdings, Asyst Technology, and Hewlett-Packard. I am delighted to have him on our team and I’m confident that he’ll make a big impact here at Power Integrations. Turning now to our second quarter results, revenues where up 3% sequentially and 24% year-over-year to a record $53.6 million. That was within our guidance despite the sudden and unexpected bankruptcy of H&T company, which had been the largest supplier of cell phone chargers to Samsung. As we reported on our Q1 call, we had expected two new designs to ramp up at H&T during the quarter in place of the competing solutions from BCD Semiconductor. Unfortunately, after taking a small pre-production order, H&T closed its doors and cancelled its outstanding orders. We estimate the shutdown cost is about $1 million dollars in revenues for Q2, which could have put us right on our mid point of our guidance. While this was obviously a disappointing development, our business with another one of Samsung’s subcontractors is on track and should contribute material revenues in the September quarter. In fact, the customer has now awarded us a second design, which should ramp up over the next couple of quarters. While it remains to be seen how Samsung reallocates its charger volumes after the shutdown of H&T because they expect these two designs to reach an annualized run rate of $8 million to $10 million once they reach full production volume.…

Thanks, Balu, and good afternoon. Let me start by saying how incredibly excited I am to join the POWI team. I think this is truly one of the premier stories and in the semiconductor industry with an abundance of secular growth drivers, addressable markets that’s expanding at the high power application and LED lighting, and a strong team in place to execute that strategy. I’m also excited by the high caliber of our investor base, and I plan to spend plenty of time on the road meeting with many of you in the months and years ahead. Turning to our second quarter results, revenues were (inaudible), up 3% sequentially. The main growth driver was the computer market, which rebounded from a weak first quarter and grew more than 30% sequentially. The strength came mainly from desktop PCs as well as marked phone chargers, which we have historically included in the computing segment. Industrial revenues grew low single-digit sequentially as is consumer revenues, with growth in consumer electronics largely offset by lower demands in major appliances. We also saw seasonally lower revenues from the air-conditioning market, which we included in the consumer (inaudible). Communication revenues were down high single-digit sequentially driven by lower revenues from the cell phone market. The main driver of the decline was an inventory overhang at Nokia’s charger suppliers, which was discussed on Q1’s call. We also saw modestly lower sales from LG charger vendors. And as Balu mentioned, we believe we missed out on roughly $1 million of Samsung revenue due to bankruptcy of H&T. Overall, despite the setback caused by the H&T bankruptcy, our second quarter revenues grew 24% year-over-year despite a $4 million decline in revenues from Samsung compared to the year-ago quarter. Looking at the revenues in a bit more detail, 62% of…

Thanks, Bill. At this point, we’re ready to take questions, and in order to make sure we get around to everyone, we’d appreciate if you’d limit yourself to one question and a follow-up. And then as time permits, we’d be happy to come back for a second round. Operator, could you give the Q&A instructions, please.

Very good. (Operator instructions) We’ll pause just a moment. Our first question will come from Ross Seymore with Deutsche Bank. Ross Seymore – Deutsche Bank: Hi, guys. Can you give a little more color on the H&T bankruptcy? When did it happen in that quarter, how that impacts you? You gave us a color on the top line, but what does that do in the bottom line? Did have any impact on your inventory?

Well first of all, just to give you how it played out. When we had the conference call, we didn’t know anything this. In fact, we can actually – that small amount already, but the main production shipment that we tried to ship, we found out that the bank would not honor the LC. We’re on an LC basis, and it wasn’t until, I would say, second half of June we knew that they had actually gone bankrupt. They kept postponing the shipment until into June. And then in June, we found out that they actually closed down and was bankrupt. So we didn’t know until then. And I think, what was the next question about? Was that inventory? Ross Seymore – Deutsche Bank: Well that was about $1 million that you would have otherwise shipped. And did that not get made up for by other suppliers amongst these power supply guys that help out Samsung?

Well we had one other design at a second subcontractor. And that was – is going to production a little bit later, and that is on track. In fact, the log ins on that will be higher because of H&T going away. But in addition to that, we got a second design at this other subcontractor. And we don’t know the exact combined volume, but our estimate is to design and (inaudible) production. The yearly run rate would be between $8 million and $10 million. Ross Seymore – Deutsche Bank: And then just a follow-up question to that, Balu, is the inventory impact. Did that contribute to inventory going up sequentially since they didn’t take the product? And then is you could just – ballpark, what that meant to your EPS in the quarter?

Well I guess you could say that they’re – that they had some impact. But generally, it’s not uncommon for us to have a slightly higher inventory at the end of Q2 because the second half of the year seasonally is stronger part of the year. So we actually build inventory during the first half.

Ross, it’s Joe. On the gross margin or on the EPS impact, I think we did, obviously, (inaudible) gross margin on particular programs. But being that it be a high volume program, the (inaudible) was somewhat below average gross margins. And of course, that’s pretty much all through the bottom line. Ross Seymore – Deutsche Bank: Okay. Great. Thank you.

And our next question will come from Sumit Dhanda with Banc of America Securities. Sumit Dhanda – Banc of America: Yes. Hi, Balu. I just wanted to follow-up on your stamps on soft contractors. But first, the target that you’re suggesting now, $8 million to $10 million on an annualized basis, it seems it’s going to aggregate lower than the $10 million to $15 million that you talked about in the last call. I you could just fill in the blanks in terms of what we’re missing there. Is that the H&T bankruptcy that’s causing this?

Yes. If you remember, the last call, we said we had two designs at H&T. Basically, Samsung has two different models that pretty much (inaudible) volume. And we had design wins on both models at H&T. And H&T was the largest supplier to Samsung. They are about 40% of Samsung’s charger volume. And so we were expecting significantly business because of that. And at the same time, we had one of the design wins at the – (inaudible) of contractor. But after H&T went away, we had the second one. So when we gave you $10 to $15 million range, that was based on two designs at H&T and one design at the other subcontractor. Sumit Dhanda – Banc of America: I see. And who makes up for that lost H&T volume. I mean I’m assuming they’ll meet the supply somehow.

Yes. They have about five or six other subcontractors. And we understand from Samsung that they happen to redistribute the volume among other subcontractors. What we don’t know is exactly how it’s going to be redistributed. But based on the feedback of the sales from the second subcontractor, we place it in the $8 million to $10 million run rate at the best that we can calculate at this point. Sumit Dhanda – Banc of America: And I guess, Balu, who gets that remaining business? Does it stay with BCD? Effectively, even post the redistribution, it seems like you have a smaller piece of the pie.

Well it seems to me is they are going away from BCD. Samsung does not want to continue with BCD. But whatever we don’t get, we’ll to discrete solutions, both RCT and controller based solutions. Sumit Dhanda – Banc of America: Okay. Great. I’ll come back later if there’s time.

Okay.

Our next question then is Auguste Richard with Piper Jaffray. Auguste Richard – Piper Jaffray: Yes. Thanks for taking my question. Could you talk a little bit about slowdown you see in June and July? And you attributed to specific end-markets or new product – new product portfolio, you said more TopSwitch or Link. Any color there would be helpful.

Yes. We have looked quite a bit into it. It looks very broad-based, both in terms of locations, products, and all (inaudible) geography. It really looks like a very broad-based slowdown that started sometime late May or early June. Auguste Richard – Piper Jaffray: Okay. And so it’s across all regions and customers, and sort of into that – did order rights completely dry out? Or not completely dry out, but you’d expected the June quarter to be month-on-month 40%. Was it more – I’m sorry about 40%, you could (inaudible) it up a little bit, just flatten out? I mean so what is the shape of it? Is this accelerating in terms of slowing down, again, any color?

Well the June quarter was about 15% or so less than the – I’m sorry, June month was 15% less than May. And normally, we would expect a price increase in June in preparation for Q3. Auguste Richard – Piper Jaffray: And is this softness carried into July?

Yes. It is continued. The softness is continued to July. It’s not getting worse, but I don’t think – getting any better so far. Auguste Richard – Piper Jaffray: Okay. All right, all right. Thanks, Balu.

You’re welcome.

(Operator instructions) We’ll go to Sumit Dhanda with Banc of America. Sumit Dhanda – Banc of America: I didn’t expect to be back this soon. I just want to know, just Bill, if you could tell us, the last quarter you did 59% turns. What’s the implied turns guidance for the midpoint, implied turns number for the midpoint at the end of this quarter?

It would be in the mid 60s. Sumit Dhanda – Banc of America: The other question I have for you, Balu, on the notebook product. When can we realistically expect to see volumes of any significance there for you?

Like I said, the second half of next year because it’s a pretty established market. So penetrating that market will take some time. Sumit Dhanda – Banc of America: And you view this in stream notebook adaptors? How do think this will be positioned?

Well, our products, if ever we set up three products (inaudible), will not only (inaudible), it is also very cost effective. The regular adaptors are rather chunky adaptors. So we handle, actually, a pretty large portion of the notebook market very cost effectively, and that, I would say, anything below 75-Watts. And the biggest chunk of the volume is in the 65-Watt range. It’s roughly about the lower two-thirds of the notebook volume, so maybe about 70% of the notebook volume. And so we can address that market [Audio Gap]. Sumit Dhanda – Banc of America: – I’m a little surprised because my view or my understanding was that you could actually comprehend it, some kind of a slowdown at Nokia in terms of the impact on their communications business. So this occurred mainly in the second quarter or can you help us fill in the blanks there?

Let me answer that question. Yes. We the Nokia reduction in revenue was fully understated and included in our guidance. So this is not a surprise in the Nokia number. It is consistent with the overhang we were aware of at our customers and the run rate. Sumit Dhanda – Banc of America: And then, one housekeeping question for you, Bill. How should we think about modeling the interest income line going forward given the benefit (inaudible), or the overall other income line?

Yes. I would look at 530,000 was considered extraordinary, and (inaudible) 0.3 so that would drop that down to 1.8. And given the current interest rate environment, I would look – yes, we’re at a 1.6 to 1.7. Sumit Dhanda – Banc of America: Okay. Thank you.

We have three in the queue. And let’s go to Steve Smigie with Raymond. Steve Smigie – Raymond: Great. Thanks. I’m calling in for Steve Smigie. Did you or can you quantify your LED revenue for the quarter. And perhaps, you can give some color on the back half of 2008 for this market.

Yes. the LED revenue in Q2 was approximately flat with Q1. Steve Smigie – Raymond: Okay. So roughly you have $1 billion then?

Yes, yes. Just about $500 billion, or $500 million, not billion, million. Steve Smigie – Raymond: Yes, million. And do you still see this as roughly a half billion dollar per year market globally? Or has the macro weakness domestically, has that changed at all?

Well, we have not given any forecast on the – some information on the Led because it’s such a margin market. We don’t have much information on how quickly it’s going to grow. But in terms of the prospects of that market for us, is extremely positive. There are (inaudible) designs going on in the (inaudible) that the LED will continue to get much stronger going forward. Steve Smigie – Raymond: Oh great. Thank you very much.

You’re welcome.

Our next question is from Ross Seymore with Deutsche Bank. Ross Seymore – Deutsche Bank: Yes. A quick turnaround for the follow ups here.

Okay. Ross Seymore – Deutsche Bank: Hey, a quick question on the split of the comms business. What was it between (inaudible) –?

Thanks, Ross, just under 20% of total revenue. That’s out of the 26% that is in the common market. Ross Seymore – Deutsche Bank: And just a little bit about the Nokia overhang not being really a surprise in this quarter. What should we look for in that segment inventory wise in the third quarter? Do you still have an overhang to work here or is it all kind of normalized now?

Well as far as we know, none of the customers we have, have reported any overhang like they did in Q1. So it should be – it should be normal. But we don’t know how well Nokia is going to do in Q3, and whether they continue the get the same share. So far they’re getting their fare share. Ross Seymore – Deutsche Bank: Okay. And then one last question on the H&T bankruptcy side, given how late that happened in the quarter that you said it cost you about $1 million in revenues. How should we think about how you otherwise would have expected that business to do in the third quarter even if we net out the business that you picked out at the power supply guy that helped Samsung?

Well, it’s hard to know for sure. I think, Ross, the best we can tell with the estimate is probably somewhere between $1.5 million and $2 million that we would take out of the third quarter. It’s hard to know again how much our other customer – how much of the slot they might pick up. But $1.5 million to $2 million is probably the best estimate we can come up with. Ross Seymore – Deutsche Bank: Okay. And then, to the extent we can avoid surprises like that in the future, anybody else, at our year customers, that are teetering on the edge of bankruptcy that you have to worry about?

I don’t know. This has actually come as a total surprise for us. I mean I never expected the largest supplier to Samsung to go bankrupt at all. I thought they would be in very good shape, but obviously, these things happen. No. I don’t know of anybody else. Ross Seymore – Deutsche Bank: Okay. Thank you.

You’re welcome.

Our next question is from Auguste Richard with Piper Jaffray. Auguste Richard – Piper Jaffray: Yes. (inaudible), in the past you haven’t participated in the notebook market because of thermal issues, which (inaudible) in higher participation. Is the solution you now have for the notebook market, is that a discrete fact or how did you get around that thermal issue?

Yes. That’s a very good question. I probably can explain to you more in detail in person. But at a high level, there are really two or three things that enable us to adjust this market. One is our package, we have a proprietary package, which is extremely effective in getting the heat out of the (inaudible) and keeping it cool. It is an integrated (inaudible). It is actually the HX family. And the second advantage is the energy efficiency requirements, which required that you have an average efficiency of more than 87%. And I think I have talked to you about – before that to maintain that added efficiency with a discrete solution, we have to have much higher efficiency at full load, which requires a much larger (inaudible). So in other words, our technology becomes more cost effective with the multi-mode operation of the TopSwitch-HX family. The third area where we really benefit a lot if our proprietary design of the transformer, and in some has (inaudible) coupled to the HX because HX operate at a much higher frequency so we can get away with a very simple flat transformer that is proprietary to us. So we allow our customers to use it only with our (inaudible). And what that does is it gives you a very sleek design without the cost associated with the low profile design. Usually, the low profile design costs quite a bit more than the chunky designs. But with our designs that’d be – the difference is very small. Auguste Richard – Piper Jaffray: Okay. That’s helpful. And then when I look at my model for Link in the quarter, I was thinking it was going to be about $1 million sequential. And it was down about $0.5 million. And I’m assuming that the H&T bankruptcy probably was $1 million of that, and I’m expecting your Nokia businesses probably about down 10% sequential. Is that correct?

It sticks with the double-digit decline sequentially in the Nokia business. Yes. Auguste Richard – Piper Jaffray: In or around 10%?

Well, higher than that. Actually, I think the decline in the LinkSwitch business sequentially was driven by the Nokia decline, which was expected. And then, you’re right. The H&T business was LinkSwitch business as well. Auguste Richard – Piper Jaffray: Right. Okay. And then I would assume that if you just look at everything else other than Nokia and Samsung, it would appear that the Link effectively down, or actually, technically flat, plus or minus 100,000 or so. Is that about right for Link?

That sounds roughly right, yes. Auguste Richard – Piper Jaffray: Okay. And so have you seen any indigenous Chinese cell phone guys start to come back? I know they were weak in Q1. Were they still weak in Q2? And do you expect them to sort of come back to the toss, if you will, in Q3?

I’d say we saw a slight improvement in the China pocket of the cell phone revenue, but still relatively soft.

But I must add there that our LinkSwitch-II product has been received very well by two or three major cell phone chargers manufacturer in China. So we are optimistic in getting some additional share there looking forward. Auguste Richard – Piper Jaffray: Okay. So that particular (inaudible) I can now (inaudible) a nice sequential claim, maybe normal seasonality?

That’s hard to predict, especially with macro environment and also the design in time that takes with the new LinkSwitch-II product. Auguste Richard – Piper Jaffray: Got it. Okay. Thanks. I’ll open up for somebody else.

With that, that is our last question in the queue. I’ll turn the call to Joe Shiffler for closing comments.

Okay. Thanks. That concludes the call this afternoon. A replay will be available shortly on the Investor Info section of our Web site, which is investors@powerinc.com. The telephone replay is available for 48 hours by dialing 888-203-1112 from within the US, or 719-457-0820 from outside the US. And the code for the replay is 4025946. Thanks for listening, and good afternoon.