Good morning and welcome to the Silicon Laboratories’ Earnings Conference Call. At this time all participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. (Operator Instructions) Today’s conference is being recorded, if you have any objections you may disconnect at this time. I would now like to turn the meeting over to Ms. Shannon Pleasant. Ma’am you may begin.

Thank you and good morning. This is Shannon Pleasant, Director of Corporate Communications for Silicon Laboratories. Thank you for joining us today to discuss the company’s financial results. The financial press release, reconciliation of GAAP to Non-GAAP financial measures, and other financial measurement tables are now available on the investor page of our website, at www.silabs.com. Some of you may have noticed there was a typo and a cost of revenue line in our consolidate table that’s being corrected the number should be 39252. You will a correction to that release shortly. This call is being simulcast and will be archived on our website. There will also be a telephone replay available approximately one hour after the completion of the call at 866-516-0673. I’m joined today by Necip Sayiner, President and Chief Executive Officer; Bill Bock, Chief Financial Officer, and Paul Wallace, Chief Accounting Officer. We will discuss our financial results and review our business activities for the quarter. We will have a question-and-answer session following the presentation. Before we begin, let me comment regarding the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Our comments and presentation today will include forward-looking statements or projections that involve substantial risks and uncertainties. We base these forward-looking statements on information available to us, as of the day of this conference call. This information will likely change overtime. By discussing our current perception of our market and the future performance of Silicon Laboratories and our products with you today, we are not undertaking an obligation to provide updates in the future. There are a variety of factors that we may not be able to accurately predict or control that could have a material, adverse effect on our business, operating results and financial conditions. We encourage you to review our SEC filings, including the Form 10-K that we anticipate will be filed mid February, that identify important factors that could cause actual results to differ materially from these - those contained in any forward-looking statements. Also the non-GAAP financial measurements, which are discussed today, are not intended to replace the presentation of Silicon Laboratory’s GAAP financial results. We are providing this information because it may enable investors to perform meaningful comparisons of operating results, and will clearly highlight the results of core ongoing operations. I would now like to turn the call over to Silicon Laboratories Chief Executive Officer, Necip Sayiner.

Good morning everyone. Before we cover the financial results for the quarter, I’d like to review our annual performance against the goals we set this time last year. You will recall that our goals were all firmly rooted in gaining market share in both the near-term and over the longer-term horizon. For the near-term, we believe we would deliver 15% or greater annual revenue growth. 2008 revenue increased by more than 20%, to $416 million in a semiconductor market that declined over the same period. Every one of our major product lines posted double-digit growth year-over-year, in spite of the difficult environment in the second half. We expanded share in our target markets and with existing customers. We grew share in handsets and consumer audio with total units shipped growing by 60%. We grew our share in MCUs and timing with the number of customers increasing to about 14,000. We picked up additional business in fact for multi-function printers. And the acquisition of Integration Associates was a strategic step further strengthening our emerging businesses in power and short-range wireless also, which started generating meaningful revenue in 2008. For the longer-term horizon we introduced a record of number of new products in 2008 to propel future growth. We added new vectors in low power MCUs, short-range wireless, power, video, consumer audio, and mid to low-end clocks and oscillators. We also committed to deliver growth and execute on key programs, without compromising our profitability. And indeed, we delivered full year non-GAAP operating income of 24% and 45% growth in earnings per share. Finally, we’ve always maintained that we make decisions based on our long-term strategic goals to optimize shareholder value. To that end, we increased R&D investments to fund future growth while managing SG&A expense to a lower percent of revenue by…

We had an excellent year, executing well and further fortifying what was already a strong business. In Q4, revenue was $99.3 million, bringing year-end revenue to $415.6 million, a 23% increase over the prior year. Our fourth quarter result was slightly below our expectations, but due to aggressive expense management during the quarter, we exceeded earnings guidance. Let me first cover the GAAP results. These results include approximately $10 million in non-cash stock compensation charges, and $2.6 million in other one-time charges. Fourth quarter GAAP gross margin decreased as expected, to 60.5% of revenue. This included an $800,000 charge related to the fair value markup of inventory from the acquisition of Integration Associates. We do not expect any acquisition related charges to gross margin to continue in Q1. R&D investment for the period was $27.4 million. SG&A totaled $25.6 million. Other income, principally interest income on invested cash, was just over $1 million. GAAP earnings per share therefore is $0.14. Fully diluted shares outstanding totaled $45.6 million shares, down by over $10 million shares from one year ago. Turning to our non-GAAP results, on revenue of $99.3 million, non-GAAP gross margin was 61.8%, the high end of our target range. This figure also reflects a full quarter of consolidated results with Integration Associates. This performance particularly given demand weakness at the end of the quarter demonstrates the value of our outsourced manufacturing model. Gross margin was a highlight throughout 2008, completing the full year at 62.4%. Given our relatively low level of fixed manufacturing overhead, we expect to be able to sustain margins within our target range of 60 to 62%, even with the depressed revenue expectations we have for the first quarter of 2009. We moved quickly during the quarter to contain operating expenses and in a matter of…

Thanks Bill. Starting with RF, which includes our broadcast audio, video and short-range wireless products, the business was down about 20% sequentially in Q4. This was primarily due to weakness from non-handset customers P&Ds in particular. Handset revenue also declined, but performed relatively better and we ended the quarter with about 65% of our broadcast audio product revenue from handsets. Despite the sequential decline in Q4, for the year, RF revenue grew by greater than 35%, exceeding our increased target. We grew meaningful and faster than the handset SAM or audio tuners, maintaining our strong position, despite the presence of combo solutions. Large customers continued to adopt discrete solutions to benefit from smaller form factors and lower cost, as well as the flexibility and performance advantages our devices offer. We also do well in the low-end handset markets, where Bluetooth is not a required feature. Design activity at our customers is high and we added another 100 design wins across the portfolio during the quarter. In addition to our continued traction with handset customers, we secured a number of strategic wins for the AM/FM and FM transceiver product. They included Tier 1 docking station wins with six of the major brands, and wins for our high value Weather Band Receivers at three radio manufacturers. In Q1, we expect seasonal softness, weak consumer demand, and P&D inventory to impact the business, driving a similar sequential decline to what we experienced in Q4. However, strength at several key customers, and a broadening customer base for CE devices, gives us confidence in the long-term prospects for the business. In video, we secured a significant design win with a Tier 1 TV maker for our demodulator for their entire line of European flat panel TV’s. This will not only result in new revenue in…

Thank you, Necip. We will now open the call for question-and-answer session, so that we can accommodate questions from as many people as possible before the market opens. Please limit your questions to one with one follow-up question. Operator, please review the question-and-answer instructions for our call participants.

Thank you. (Operator Instructions) And one moment please for the first question. Our first question comes from Tore Svanberg with Thomas Weisel Partners. Tore Svanberg – Thomas Weisel Partners: Yes, thank you and good morning. First of all, could you talk a little bit about current dynamics, I think you mentioned you expect some stabilization here coming up in Q2, but basically you’ve seen so far this quarter have you seen maybe a pickup in orders?

Hi, Tore, the short-term indicators on book-to-bill has shown some improvement over the last few weeks. So, we did see some strengthening in orders in the latter part of January. And as I mentioned, we do see significant contraction in inventory in the supply chain, which we think will reverse once the demand shows signs of stability and improvement. Tore Svanberg – Thomas Weisel Partners: Okay very good. And on the Access business, would you expect to be down year-over-year in ’09. How much of a decline are we looking at year-end? Is it primarily because of the inventory correction of set-top boxes here in Q1 or is it more beyond that?

Well, I think the year-over-year comparisons is tough for Access business since 2008 was a stellar year. I think, it’s primarily because of the weakness that we are going to see primarily in the first half due to macroeconomic conditions. What exacerbates this to some degree is some inventory with set-top box customers. In particular, our customer serving DirectTV are going through some product transition and going – in going through that transition they’ve built us some access inventory which we’ll take it further or slightly more to believe. Tore Svanberg – Thomas Weisel Partners: Great, and then just finally a question on the balance sheet, obviously, you did a great job to lower inventories in Q4. How should we model inventories here in the March quarter?

We are continuing Tore, to be very aggressive in our inventory management. So, I would suggest for the March quarter to expect inventories to be flat or even down sequentially again. Tore Svanberg – Thomas Weisel Partners: Great. Thank you very much.

Thank you. The next question comes from Adam Benjamin with Jefferies Adam Benjamin – Jefferies: Yeah guys. I’m curious to talk a little bit more detail about the broadcast business. If you look at that business, going forward, how do you expect your mix to shake out as you exit 2009, with some of the video business coming into the mix as well?

Well, let me start with audio. As I mentioned in my remarks, we are continuing to hold our market share with handset customers and expanding our share with consumer audio customers as we broaden the customer base. So, our expectations on the audio business is clearly driven significantly by end-user demand profile and video, we are going to see pure incremental revenue from our demodulators. So, I would suggest that, we would see incremental revenue in the range of single-digit million of dollars this year from that product line. And a similar story on short-range wireless, again adding incremental to our top line for 2009. And we believe those increments will partially offset the decline that we expect to see in audio due to weakened user demand. Adam Benjamin – Jefferies : And is that weakened audio demand, is that more focused on the handset side or the portable side?

Well, as I mentioned we exited 2008 with 65% of our revenue coming from handsets in the audio segment. This exit rate is significantly higher than the exit rate 4Q’07, both in terms of percentage, but also in terms of dollars. So, actually we have seen growth in revenue in handsets year-over-year in 4Q in spite of the industry being down measurably. Currently we see a continuing inventory issues with P&D customers. So, I expect that segment will be weak in the first half of the year and on the consumer side, I think in fact the end-user demand globally appears to be weak. So, I don’t have a projection for you in terms of fraction of handset revenues from audios as we exit 2009, but I know that we can hang on to our market share with the top handset customers and grow it with the consumer audio base. Adam Benjamin – Jefferies: Great. Just one more followup on the video side. I’ve heard some pretty good things of about your traction there you indicated the Tier-1 TV win in Europe, as you look at that business out to 2010, can that be in the magnitude of $50 million total?

Well, it’s too far to set a target publicly yet. Obviously, we have our expirations especially as we add to our product portfolio. But as I indicated in past calls, video is going to be one of those legs under the broadcast business to continue its growth of 15 to 20% over the longer-term life. Adam Benjamin – Jefferie: Okay, great. Thanks guys.

Thank you.

The next question is from Randy Abrams with Credit Suisse. Randy Abrams – Credit Suisse: Yes. Hi, good morning. Maybe expanding on the question on the recent order pickup, do you expect second quarter to get back to growth overall and in some of your markets and then do you contraction - lagging in parts of your business into the second quarter as well?

Well if you look at the decline, we’re experiencing in the current quarters, a fraction of it is seasonal obviously, and there is a piece of that that has to do with contraction in inventory and the remaining is obviously weakness in overall demand. So, as we look at the inventory pictures, especially with our larger customers, we see that being maintained pretty tightly and improving. Therefore the piece of the decline that is attributable to inventory contraction is likely to subside in 2Q. There are a couple of notable exceptions to this that I mentioned, one is on the P&D space, and the other is on the set-top box space, but in general I think the inventories by our customers are being managed well. And then there are going to be some seasonal effects. So, the book-to-bill picture I alluded to supports the fact that we’re going to start seeing demand in Q2 more commensurate with true demand. Randy Abrams –Credit Suisse: Okay. Thanks for the color. And then on the microcontroller maybe elaborate a bit more in some of the new products you’re launching to offset the broader slowdown and what you see for pick up or big contributors over next few quarters from that segments?

We started seeing our first revenue in Q4 from our low power product family, that this is a product that we launched earlier in 2008. So that is time to see some design wins materializing in that timeframe. We have a number of design wins in that space that will start contributing in the current quarter as well. We have a long list of new products that we are developing and will be announcing in the low power space throughout 2009. We also started seeing more meaningful revenues from our low cost MCU family that we introduced 12, 18 months ago. So, these will primarily be the drivers of growth for us in the MCU space. Randy Abrams – Credit Suisse: Okay, I think a last question just on the cash, maybe talk about what the new long-term investment $52 million and for your plans on the cash balance. Do you expect continued buybacks or do you want to be more conservative to get greater visibility on the end -demand situation?

So we have $75 million remaining in our current authorization. We would expect to be selective purchasers of shares during the upcoming quarters and we’ll take advantage of any substantial dips in share price, but maintain a posture in our share repurchase program, but with an appropriate recognition of this economic environment.

Thank you. (Operator Instructions) Our next question comes from Sandy Harrison with Signal Hill. Sandy Harrison – Signal Hill: Thanks. Good morning everyone.

Good morning.

Hi. Sandy Harrison – Signal Hill: Necip, you’ve done a nice job, through outlining where you think your opportunities are near term intermediate and longer term and I think what would help me is that if you could maybe prioritize, you put a lot of information out there, but just if could kind of prioritize, how you think ’09 will come in, by those products you outlined and what it is you guys are expecting most? That would be helpful.

Okay let me start with the broad-based business, which I project to be up year-over-year. Timing arguably is the product line with the strongest momentum, in our portfolio. Today we are coming up of a year with 70% growth. Many design wins that we won over the last 12, 18 months and with the design cycles in the networking industry being on the long side, we are going to start seeing revenues from those design wins in 2009. And coupled with that, are all the new product introductions that we’ve made in the second half of ’08, where we are seeing a very high success rate with design wins. However, it’s going to be an incremental revenue generator for us, both on continued traction with isolators but also with power over Ethernet devices with market leaders. So, I would suggest that both timing and power would grow meaningfully in 2009 regardless of the overall market environment. MCUs at this stage probably, too close to call, but we are comfortable in suggesting in aggregate the broad-based of the up for the year. In access, we are pointing to a declining year, but we are not pointing at all to a declining market share but contrary, we think that this type of environment will enable us to gain some market share from competitors who are not in the best financial health in that space. And finally, on the RF side, I think video and short-range wireless are going to be net increment for us in the year with the very good prospects. And we’ll continue to gain share in audio with our consumer audio customer base. So… Sandy Harrison – Signal Hill: All right, that’s helpful. And as you kind of lay that out and as we try to fill in the holes of the dollars, I mean, what are you thinking internally as to how you would like to see the business year-over-year versus, what would be sort of a disappointment? You did a – a kind of outlined that last year for us, with the 15% and then delivered good results for the year with the tough second half?

Yeah, this year, I’m not able to provide targets for the product lines, for obvious reasons visibilities created for even when we are talking about the first quarter or first half of the year level on full year, but I’m pretty confident in the stock that we are going to continue to register market share gains. And with some improvement in demand that we expect for the second half, but more importantly with product cycles that we have in all these product lines we are looking to a measurably improved second half for our revenues. Sandy Harrison – Signal Hill: And then finally Bill a quick one for you. When you look at your balance sheet and the cash, and this is a question I asked on lot of calls, at what point does some of the valuations out there, and now like some of the privately traded companies, but even some other private companies, become an attractive point, which point you all get back into the market again?

Well Sandy, I think the valuations are attractive right now. We resisted being in the market during the second half of last year as we were focused on the integration of our most recent acquisition, and we don’t have any specific target we could announce to you today or a transaction that we would expect to close eminently, but we will remain actively looking at M&A opportunities throughout 2009, and I would not be surprised, if we weren’t in the market before the year is out. Sandy Harrison – Signal Hill : Gotcha. All right, thanks for taking my questions everyone.

Thanks, Sandy.

Thank you. The next question comes from Cody Acree with Stifel Nicolaus. Cody Acree – Stifel Nicolaus: Hey guys, thanks. Following upon Sandy’s question, the broad-based business you would that - MCUs would likely decline, but do you expect the growth and timing and power to offset, kind of what you’re seeing at least today in the MCU business?

Cody, this is – is the question for 2009? Cody Acree – Stifel Nicolaus: Yes, it is.

Well, MCU business grew in ’08 in mid to high teens. So clearly, we are continuing to gain share in a declining market. I expect those market share gains to continue into 2009. I think it’s too close to call for us right now whether the MCU product line, will be able to grow or not for the full year over 2008. But with the confidence that we have and the visibility we have on timing and power we are comfortable calling the overall aggregate broad-base up. Cody Acree – Stifel Nicolaus: All right, very good. Very good and then just on a operating basis, gross and operating margins, obviously are you taking in a conservative tact now, but as we look into the second half, shipping back toward more normal consumption levels, what are you expecting for gross and operating margin trends? And as far as spending, starting to get back to maybe some level of investment?

So, we are currently expecting to sustain gross margins in our historical target range of 60% to 62%. And we’ll see slight improvement in gross margins as volumes return to more normal levels. We will continue to be very tight on operating expenses and watch the market unfold during 2009. As I indicated in the formal remarks, we’ve taken about every action that we can identify to cut discretionary spending in the short run and we will sustain those actions until we see demand improve. Operating income therefore is going to come down in the first half of the year, from the levels that we were running during 2008, but we would hope to return back toward to our model performance, when we see revenues recover. Cody Acree – Stifel Nicolaus: How long, when - before we get into as order progressing say, theoretically, best case scenario, we are into a more shipping to consumption level in the second half. How long into that recovery, before you feel comfortable that maybe it’s time to start reinvesting and spending a bit more on R&D and getting money back to your place?

I think the key there is going to be our outlook for 2010. So, if we get into the second half of the year, we are beginning to experience resumption in demand and we can start to expect double-digit growth for 2010, it will be time to take those steps. Cody Acree – Stifel Nicolaus: Okay, great. Thanks guys.

And our final question comes from Craig Berger with FBR Capital Markets. Craig Berger – FBR Capital Market : Hi guys, thanks for taking my questions. Can you give us some inside into, you talked a little bit about new Tier 1 or more Tier 1 FM tuner wins in the handsets space. What type of magnitude are we talking about? How much of that business is new? What type of contribution?

Well the new wins that I talked about are in the consumer audio space. These are some major brands for docking stations, around iPOD type of system as well as other MP3 players. We also have very strong interest from a number of Japanese customers, for our AM/FM solutions for end of ’09 and early ‘10 models that we are engaged with. I would say, we are continuing to expand the customer base in the AM/FM space. And that’s really taking place globally with some of the Tier 1 names in Asia, Japan, and States. Craig Berger – FBR Capital Market : How should we be thinking about the impact of the combo chips on your broadcast business overtime?

Well, I think, we do very well in the low-end of the handset market, which has shown significant unit growth in 2008, where those phones really can’t afford and don’t need the Bluetooth connectivity. So, these phones will continue to be an addressable market for standalone solutions and our cost and performance do pretty well. Even in the slightly higher end of the market, we continue to see traction with our higher value parts, embedded antenna, FM tuners in particular doing well. And because of the footprint, because of the performance that we are able to provide. So, my expectation is that, over the next 12 months, we are going to be able defend our market share with top OEMs. Craig Berger – FBR Capital Market: Do those new products allow you to keep your FM, or you broadcast ASP’s flattish?

Well, we continue to have a very aggressive cost reduction product roadmap Craig, and we are continuing to be able to address the cost reduction requirements of the customer base and maintain our margins because of that roadmap. As well as provide the higher value products, so we can maintain our blended ASPs relatively flat and that’s the strategy that we are going to continue to execute to. Craig Berger – FBR Capital Market: Yeah, two last things. One can you comment on any potential benefits from better wafer pricing?

There are obviously opportunities, I think foundries in general have concluded that there is very little elasticity in the end-user demand due to price. But, we have obviously some angles that we use with our suppliers, getting some price concessions in return for higher volumes that we can provide to them.

And then just lastly how big is your legacy DAA business at this time?

Our access business is that’s what you’re referring to, is about 37% of our revenues for 2008, that’s consisting of embedded modems and the voice business. If you are asking about the matured business, which you don’t have the PC modems and antenna via cellphones and that’s now in single-digit percentages

Thank you,

All right. Thank you very much for joining us this morning. This now concludes today's call.

And thank you for participating on the conference. You may disconnect your lines.