Good day, everyone, and welcome to the QuickLogic Corporation third quarter 2008 earnings conference call. Today's call is being recorded and will be available for playback beginning one hour after the completion of the call. To access the replay please dial 719-457-0820 with the passcode 4545787. At this time for opening remarks and introductions I’d like to turn the conference over to Mr. E. Thomas Hart , Chairman, President, and CEO for QuickLogic.

Thank you, Jamie. Good afternoon ladies and gentlemen and thank you for joining us today for the QuickLogic third quarter 2008 earnings conference call. Joining Carl and me today is our new VP of Finance and incoming CFO, Ralph Marimon. Carl is wrapping up on the Q3 2008 SEC reporting requirements and after the 10-Q is filed, Ralph will assume the duties of our Chief Financial Officer. Welcome aboard, Ralph. At this point let me extend our thanks and gratitude to Carl Mills, our departing CFO. Carl served admirably as our CFO for over 6 years and being the true professional he is, he’s made this transition go very smoothly, even beyond expectations. Thank you, Carl, for all of our efforts on our behalf. Our best wishes to you on your new adventures. Carl will take you through our 2008 third quarter financial results and then I’ll share my perspective on our business. Finally Carl will detail our guidance for the fourth quarter of 2008 and then we’ll take questions.

Thank you, Tom. Before we get started, I’d like to read a short Safe Harbor statement. During this call we will make statements that are forward-looking. These forward-looking statements involve risks and uncertainties including but not limited to stated expectations relating to revenue growth from our new products, statements pertaining to our design activity, and our ability to convert new design opportunities into customer activity, market acceptance of our customers’ products, the effects of our customer specific standard products or CSSPs, our expected results, and our financial expectations for revenue, gross margin, operating expenses, profitability, and cash. QuickLogic’s future results could differ materially from the results described in these forward-looking statements. We refer you to the risk factors listed in our annual report on Form 10-K, quarterly reports on Form 10-Q, and prior press releases for a description of these and other risk factors. QuickLogic assumes no obligation to update any such forward-looking statements. For your information, this conference call is open to all and is being webcast live. It can be accessed from the Investor Relations area of the QuickLogic website located at www.QuickLogic.com. We had a very solid third quarter compared with our non-GAAP guidance especially in terms of total revenue, gross margin, operating expenses, and cash flow. Our favorable operating expenses and cash position protect the value of our recent operational realignment. Our revenue of $6.2 million was near the high end of our guidance and included new product revenue of $1.4 million which was at the midpoint of guidance for the quarter. Our non-GAAP gross margin of 56.7% of revenue was at the high end of guidance for the quarter in the period with 55.7% in Q2. The sale of previously reserved inventory improved our gross margin by 0.9% of revenue in the third quarter. Our…

Thank you, Carl. We’ve talked in the past about the transformation that our customer-specific standard product, CSSP model, brings to QuickLogic and now it seems some of the financial impact this model has had on expenses for Q3. Now the fun part. We get to talk about how the offense is doing. The proof will be the posting of significant new product revenue which we believe is on the way. I will share with you how we’re measuring the progress that supports our belief. While most companies are guiding down in Q4, customers are carefully targeted markets are recognizing the inherent best that we can provide with CSSPs and embracing them as design solutions. Carl will detail Q4 guidance later in the call but I will tell you that it’s up slightly both in total and for new product revenue. Before we examine the metrics of our sales funnel, let’s address the elephant in the room that demands to be acknowledged. How is the current global economic situation impacting QuickLogic? There’s no doubt, absolutely no doubt, that lower end user demands in almost every sector have rippled through the supply chain, leaving some of our significant suppliers to forecast significant declines in revenue. There’s also no doubt that this global economic turmoil has slowed the rate at which some of our opportunities move through the funnel to revenue. But we’ve seen few opportunities canceled. We do see uncertainty in production start dates. We do believe Q3 will prove to have been, by the way, our new product revenue low point in spite of this. Last quarter I introduced you to our custom implementation of salesforce.com, a Web 2.0 system we use to track our progress and focus our resources. Leveraging this system has helped us address a broader spectrum of…

Thank you, Tom. Let’s continue by providing our non-GAAP guidance for the fourth quarter of 2008 and some comments on our business. Total revenue was at the high end of guidance last quarter. We are pleased with the growth of our sales funnel and we continue to engage with wireless network operators. Customers and operators have seen the value of our CSSPs. We entered Q4 with a strong new product backlog position and as a result we expect new product revenue to increase 13% sequentially to $1.6 million plus or minus $200,000. The rest of our business is expected to be essentially flat sequentially and as a result we expect the total revenue will be up to $6.3 million plus or minus $300,000. Based on the mix of products we expect to ship in the fourth quarter, and planned production variances, we expect that gross margin will be 55% plus or minus 2%. We do expect an increase in our operating expenses in the fourth quarter as we continue to drive opportunities and new product development. This will include costs for IP and outsourcing physical design, expenses that were not mature yet in Q3. We expect a sequential increase in our R&D expenses of $600,000 to $800,000. We also expect fourth quarter SG&A expenses to increase by $200,000 to $400,000. Due to expected levels of interest income and interest expense associated with debt, we expect interest income and other net will be an expense of up to $60,000 in the fourth quarter. We do not think that our tax [inaudible] will be a significant item in the fourth quarter. We conclude by saying that our stock based compensation could be up to $500,000 in Q4. We may use up to $2 million of cash in the quarter based on expected increases in operating expenses, increases in accounts receivable, and expected revenue levels. Let me mention just a few other points. End of life products only contributed $200,000 of revenue in Q3 and the end of this business really has arrived. While we expect some end of life product revenue going forward, it will be lumpy and will probably contribute less than 10% of quarterly revenue. The operational realignment we undertook provides agility, lowers our cash consumption, lowers our break even, and provides profits scalability with revenue growth. We have always seen its benefits both in lower operating costs and improved new business development. As we guided last quarter, we continue to expect our motto will provide us with break even results and $8.5 million in revenue. On a personal note I’d like to welcome Ralph to the company and wish him well. Ralph has already hit the ground running. I expect he will really enjoy QuickLogic. Now I’d like to turn the call over to Tom for his closing comments.

We’ve undergone some extraordinary changes here at QuickLogic during the last year. Through the dedication of the QuickLogic team, we’ve become a better company for it. During the last quarter we’ve accomplished more with less. This is a testimony to good people even more than it is to good systems and opportunities. Today we’re a startup company that has the benefit of a 20 year foundation, an extraordinary core of talented and dedicated team members. Thank you one and all. Ralph Mariman will be joining me at the American Electronics Association Classic Financial Conference in San Diego on November 4 and 5. We will do a live webcast from the conference, the details of which can be found on our website. Please join us. We’ll also be presenting at the Needham Growth Conference in New York City on January 6 and 7 at the New York Palace Hotel, and then later that same week we’ll have a booth and a meeting room at CES in Las Vegas. Please do come by and see our VEE demos. Our fourth quarter and fiscal year earnings conference call is scheduled for February 3, 2009 at 2:30 pm Pacific Standard Time. Jamie, now let’s open up the call for questions.

(Operator Instructions) Your first question comes from Edwin Mok with Needham and Company. Edwin Mok – Needham & Company: First let me ask you just some housekeeping questions. We got in the financials $700,000 charged relate to the Towers and investment. I was just wondering, Carl, are you going to report that as a non-GAAP or is that going to be part of the ---

That happens in Q4, that will be part of our GAAP results. Edwin Mok – Needham & Company: So it will be part of GAAP and it will count as a one time --

Exactly and it’s a non-cash charge. Edwin Mok – Needham & Company: On the OpEx line, comp base on your commentary sounds like third quarter was unusually slow because you have very little outsourcing expense there. I was wondering how do you look at that if you just average out over a longer term, how much R&D outsource expense do you guys expect per quarter?

We haven’t provided guidance on that going forward. I guess the thing I would say is that as we outsourced our R&D, one thing we expect is much lower cost per design. Whereas we had a fixed cost in Canada for R&D through the second quarter, really that fixed cost has largely gone down and the variable cost per design was much slower than the fixed cost was per design. The net effect should be, even after variable costs, lower R&D costs for the same amount of product or if we elect to do more designs, of course R&D would be more expensive. But it is a variable model as opposed to a fixed model. Edwin Mok – Needham & Company: Maybe I should ask you differently. Is it fair to say that the third quarter numbers is basically your fixed R&D costs where you would expect some other outsourcing costs along the way for example in the fourth quarter where your guidance is for higher R&D expenses, is that correct?

That’s reasonable and it’s not only just the outsource cost but we may purchase [inaudible] expense in the quarter too, so it’s really a combination of those two things and plus then prototypes will hit the project expense kind of category. Edwin Mok – Needham & Company: So it is a function of when you are going to do that is the end net result.

Yes but your interpretation of last quarter being close to the baseline is good. Edwin Mok – Needham & Company: So in your last quarter if I kind of look at your OpEx, your OpEx is around $3.7 million non-GAAP and if I kind of look back at your guidance of break even of $8.5 million [inaudible] non-GAAP OpEx is closer to high for maybe how you’re guiding for the full quarter, is that how I should visualize that in the longer term type of model?

Those longer term models I really have to leave up to you. We just provide guidance one quarter out, sorry about that. I think given the $8.5 million break even, given our margin objectives from our model, I think you’ll be able to get where you need to be. Edwin Mok – Needham & Company: Maybe you can help remind me what is your margin assumption for the break even model?

Margin assumption is 50 points plus or minus 2 points. Long term model. Edwin Mok – Needham & Company: Long term model, did you say 50?

Yes, 50 plus or minus 3. Edwin Mok – Needham & Company: Now moving onto the product side, last quarter you guys talked about the VEE and you have, I think you mentioned that you had 10 of the 21 designs engagement actually with Q1 handsets, OEM, I was wondering if you could put some color on the progress there and also since you have given the over 40 SSOs this quarter, I was wondering how much of that is Tier I customer.

First of all the progress as you know Tier I guys are big guys move, they measure the speed of light in weeks, and so they move at their own pace. I can’t give you the names but I can tell you that typically if anybody’s ever done any business with these guys, they know that just being certified as a vendor can wind up taking you a year, so our first revenue will not come from Tier I guys. What we’re trying to show is that VEE is being embrace by Tier I guys even though it won’t impact revenue, so whatever it points to is the value that they perceive and by the way the value is really along two axes, of course the critical one for some of them is sunlight, if you’ve ever looked at any of these LCDs in the sunlight, it’s virtually impossible to be able to see what it is. The second is really about power, how long the operating life between recharges, and VEE addresses both of those very aggressively. So the additional 40, I don’t know that we’ve picked up any new in Tier I customers during Q3 to be honest. I think it was Tier II guys for the additional SSOs but I don’t have that number off the top of my head, but that’s my sense.

And you know Edwin of course we, our [inaudible] design cycle

The design cycle is all over the map but as you know with Smart Phone guys, they’ve got FCC approval and that’s relatively straight forward. The longer term and all these things are serial, the longer term approval cycles come from the people that supply those phones to the operators and each of the operators, if they’re supplying the same phone to multiple operators, each of them have a little different wrinkle on what they want and so you come back in for kind of a minor redesign before you go to production and that alone can wind up being a 6 to 9 month kind of deal. So you’re looking at for Tier I OEMs, if you’ve never done business with them before you’re probably two years away from revenue on these Tier I guys, so obviously that’s one of the reasons that we’re driving so hard on Tier II as well, because there the turnaround time is much shorter. The time to revenue is shorter. The other reason of course is they are more aggressive about embracing new technology that might give them competitive advantage in the market. With the big guys you’ve got to convince them that what they’ve already done internally, this home brewed solution that they may have done internally, isn’t as good as VEE, and that’s what NIH is like and [inaudible] syndrome and companies, it’s some of the [inaudible] is such that it really kind of stifles the innovation and so you have to sell through that, and it just takes a long time. Edwin Mok – Needham & Company: So it’s fair to say that your fourth quarter guidance is based on the existing design of your products, right, and then in terms of [inaudible] opportunity?

Correct. Edwin Mok – Needham & Company: [inaudible] schematics, on the fourth quarter I imagine you have seasonality especially on a product that sells on the consumer side. I was wondering how much of that new product revenue do you expect in the fourth quarter, $1.6 million, I was wondering how much do you think is more subject to seasonality versus [inaudible]?

I’m sorry, how much is subject to what? Edwin Mok – Needham & Company: Seasonality, any way you can quantify would be very helpful.

I don’t think much of that $1.6 million is really driven by seasonality quite frankly. As Carl mentioned, we were coming into this quarter with a fair amount of that on the books already, and that’s why we feel pretty confident as opposed to a lot of the other [inaudible] guys which were kind of throwing up their arms about what’s going to happen in Q4. We’ve got on the books and we feel that that it’s in applications that probably are not as seasonal. I don’t think we’re going to be faced this year with Q4 seasonality. It’s like we will be maybe two years from now when we have a larger portion of our business coming from cell phone guys for example. Edwin Mok – Needham & Company: Regarding your [inaudible] recognition, it’s some sort of sell in model, it’s fair to say you guys are doing selling but you have very little of your business come from [inaudible], is that a fair way to look at it?

No, actually, we use distributors for logistics so we’re not relying on them to hold inventory anymore. They’ve got less than a day of inventory. We’re not relying on them for design wins. We use them primarily for the logistics and to carry the paper quite frankly. Dealing in China, as an example, we want somebody else to worry about the receivables there. We’ll pay a distributor some reasonable sum to manage that whole process. In Q3, do you remember what percentage of our revenue went through distribution? I think it was over half.

I’d have to check. I think it was probably close to half.

[inaudible] distribution, a significant portion, probably 60% or 65% is programmed by us, and so you’re looking at 35% or 40% blank, that’s half of our business, so it’s less than 20% of our total business that is [inaudible]. Edwin Mok – Needham & Company: One last question. For the third quarter, really your mature product [inaudible] more than the other ones, do you guys recognize [inaudible]?

We didn’t recognize any unusual relative revenue in the quarter, just kind of steady as she goes there, and we’ve been really pleased with the strength of our [inaudible] business, it’s been good.

Which is what we expected, by the way, and which is what we forecasted right along.

There appear to be no further questions at this time and I’d like to turn the conference back to you, Mr. Hart, for any additional and closing remarks.

Thank you kindly for your interest in QuickLogic. I hope you have an opportunity here in the short term to take a look at our VEE demos because they really are exciting. I can’t believe the major operators, the cellular operators, the excitement you see when you show them VEE operating on phones in bright sunlight. Seeing is believing. So we’ll look forward to hopefully seeing you at one of the conference or exhibitions and if not, we’ll be back February 3td for our year end conference call. Thank you kindly.

That does conclude today's conference. Thank you for your participation. You may disconnect at this time.