Welcome everyone to the quarter one 2008 earnings conference call. (Operator instructions) Mr. Newman, you may begin your conference.

Welcome to our discussion of Teradyne’s most recent financial results. I’m joined this morning by our Chief Executive Officer, Mike Bradley; and our Chief Financial Officer, Greg Beecher. Following our opening remarks, we’ll provide you details of our performance for the first quarter 2008 as well as our outlook for the second quarter. First however I’d like to address some administrative issues. The press release containing our most recent financial results was sent out by a business wire yesterday evening. Copies are available on our website or by calling Teradyne’s corporate relations office at 978-370-2221. This call is being simultaneously webcast over our website at www.teradyne.com. Note that during this call, we will be providing some slides on our website that will summarize and reinforce some of the highlights. They may be helpful to you in following the discussion. To view them simply access the investor portion of our site and click on live webcast followed by click here for webcast. In addition replays of this call will be available starting around noon today eastern time. The phone replay number in the US and Canada is 800-642-1687. Outside the US and Canada, the number is 706-645-9291. The passcode for both numbers is 43456405. A web replay is also will also be available you’ll find it by going to www.teradyne.com and clicking on investors. The replays will be available along with the slides through May 7. The matters that we discuss today may include forward looking statements about events or the future financial performance of the company. Such statements involve risks and uncertainties. Actual results can differ materially from such forward-looking statements. Some of those risks and certainties are detailed in our press release and our filings with the SEC. Additionally those forward-looking statements including guidance are made as of today…

I’d like to cover three topics as we kick off the discussion today. First, a description of what’s behind our increased revenue guidance in Q2, second what’s the status of the new product penetration in the market and third how much headway we have made on the drive to model profitability that we outlined in our January Call. On the revenue guidance we’re off to a very promising start to the year lead by strength in SOC tests where total bookings were up 9% sequentially, with SOC system orders up 14% over the fourth quarter. Our memory test business also posted solid results in its first quarter as part of Teradyne. And despite continued slowness in commercial board test and automotive test, we’re raising our revenue guidance in Q2 to the $310 million to $330 million range. We’re very please with our momentum and the SOC test this past quarter, despite a cautious buying environment, led by exceptional demand and wireless applications coupled with strong microcontroller and power management buying we posted flex orders in excess of 120 units as well as our highest J750 demand in the last year and a half. So both of those products are in full stride as we move into this second quarter. This year will cross the 2000-unit mark in flex systems and also break through 3000 units on the J750. So we got a very strong one-two punch going. I’d add that we had some important competitive wins in the quarter in addition to socket wins and image sensors motor controllers and consumer storage applications we had 2 platform decisions in our favor from customers in the automotive and Asics spaces. There’s no top line impact from those two platform selections today, but they should make a contribution to our revenues later…

I would like to start off by providing an update about products acheiveing model profitability by year-end which we outlined in our last call. I’ll then discuss first quarter results and highlights which include next tests from January 24 to the end of the quarter. Lastly I’ll provide some details on our second quarter guidance. In our last conference call, we discussed a major element of our plan to achieve 15% operating profit by year-end. For quick clarification, this 15% target excludes the next test purchase accounting amortization and any special items such as restructuring costs. It is also mid cycle versus trying to call the cycle at the end of 2008. So what’s the progress report in getting to this average 15% model by year-end as we enter the second quarter? The short answer is that we are on our plan. First on lowering our break-even level by about $20 a quarter to get us back to the same break-even level of about $250 million a quarter before the addition of next test. We’re about half way there. As you will recall, there are further break-even reductions from moving the flex family to our outsource manufacturing partner in China that come in largely in the second half of the year of 2008. It’s important to highlight that we will be unique in having board assembly through [fund integration] test all in one site for the flex family giving us advantages in logistics and oversight costs responsiveness and less in transit inventory. Last year we completed the move of flex on schedule while maintaining the same high quality through some very good work by our operations team. The final leg of moving ultra flex to China should be completed by the end of the third quarter. On our overall break-even…

We’d like to open the call to questions

(Operator instructions). Our first question comes from Timothy Arcuri - Citi.

First of all with respect to the longer-term model, have you fixed on what a revenue level might look like for that 15% out margin by the end of the year? I think you were talking about $340 million is that still the right number that you’re thinking about?

I would use $245 million for that model.

$245. And then there was kind of been some discussion about there being a fall off in the business that next test later on this year do you think that this is kind of a quarter while business is good out of the gate do you think that it then becomes a head wind as you move into the back half of the year?

Tim it’s hard to call that, the visibility on memory for us is actually a bit tougher than in SOC there are projections about softness in the second half. The thing we’re trying to do is to get some new product trials the momentum on those going so that we would have some help in the second half of the core NAND business does soften.

Is the pick up in bookings in the semi test business is program specific and does it all relate to the fact that it seems like last year there was a lot of extension of the installed based so there wasn’t a lot of upgrade activity last year so is there are customers going in and specifically upgrading their platforms because they didn’t do it last year or is it more broad based?

Tough question I don’t actually have handy here how much upgrade business there is. It doesn’t strike me that there’s a very dramatic difference between last year at this time and this year with regard to augmenting existing platforms. I think the thing that stands out a bit for us in this past quarter is we’re starting to harvest some of the individual socket efforts that have been going on and that continue to go on as we try to broaden the flex applications. But in addition to that there is some platform decision making that’s going down. Now as I said in my comments that isn’t’ contributing to the top line yet but you know I don’t think its got, there’s nothing aside from momentum around socket, grinding it out socket work.

So you think its Teradyne specific.

Well it’s hard to be totally Teradyne specific. When I think about hat I’d say there are in this total space of $2.5 to $3 billion we look at almost I think between 25 and 30 segments in any one of those segments we’ve got anywhere from 0 share or single digits of share to 60% or even 70% share so most of the segments that we’re in if those move we probably get a $1 in the market the other suppliers get a couple of dollars worth of growth. so I think you, it would be hard to say it’s totally us but we do have some pretty good market share in socket design and momentum.

Our next question comes from Gary Hsueh - Oppenheimer. Gary Hsueh - Oppenheimer & Co: First question is just a kind of high-level simple question on $150 to $200 million in new product business in 2008. Given your guidance Q2 and what you did in Q1 how much of that have we seen already?

Gary let me tell you what our plan is and then I’ll just tell you whether we’re on plan or off plan. I think you can try and get a little light on it. That $150 to $200 would be a break down between a third of that in the first half of the year and 2/3 in the second half. Okay, it isn’t linear obviously as you get new products they go in; in single units then as they move to production you get multiples. So we’re on plan for achieving that trajectory this year. Gary Hsueh - Oppenheimer & Co: Just looking at book to bill and normally kind of don’t look at ratios but can’t help but notice that in Q1 as well as Q4 we’re running meaningfully above parody book to bill and if I look historically just back in the last 2 years whenever you run above a book to bill of 1 you tend to kind of come back down to earth the next quarter. Is anything structurally changed in terms of lead times in your business where we’re running out of sustainable higher book to bill over the last 2 quarters?

Yes, these last two quarters have more service bookings in them than you’d otherwise expect. Normally we have a very large service booking in Q4 some of those booking allow ended up coming into the first quarter. So I think that is different from perhaps the other periods you might be referring to.

Our next question comes from Christopher Blansett - J.P. Morgan

Along the lines of the question of broad based demand, how did utilization rates on your SOC business trend during the quarter?

Chris they’ve been pretty steady, 80% plus over the last 2 plus years they’ve tended to be I don’t think they’ve been more than a couple of months where we’ve seen in our own installed basic kick down a little bit below that. But they’ve been very steady 80% to 90% and I think that’s indicative of how our customers are managing their capacity now is that they are able to operate with these short lead times from us and from other suppliers. So they can manage the utilization pretty well.

So do you think that just in general we’ve had such a low investment rate for such a long time we’re kind of have support level here in general?

Well let’s see the level of business right now in SOC is operating at about $600 million a quarter market so that translates into if it stays at this level it’s a 2.5 a little bit less that $2.5 billion. So I think there’s an argument that’s a little bit softer than some would be expecting so it feels like that’s a sustainable level. Certainly it is for us through this next quarter which is as far out as our visibility goes.

Now when you think about you’ve indicated there areas of strength particularly wireless you mentioned. Are there areas of weakness that were offsetting these or is it too difficult to parse that out?

Let’s see, the ups and downs the strong pieces for us in the very short term in the last quarter in RF power management, micro controllers a lot of other things were about at parody to what they were in the fourth quarter. So it’s been a case where there have been fewer weak segments base then was down a little bit for us. Going forward in this next quarter we think that wireless stays strong power management I think is going to stay pretty steady for us and we would expect a little more strength in automotive and the very short term picture is base band could be stronger for us. In terms of weakness probably micro controllers get a little bit weaker here in the, the lenses and the lead time on our visibility would say micro controllers gets short term softer than it was in Q1 because it was a very strong Q1.

Our next question comes from Patrick Ho - Stifel Nicolaus. Patrick Ho - Stifel Nicolaus & Company: Your performance the past few quarter obviously have been very good and the appears very company specific what do you see in terms of the overall SOC industry trends, what are customers telling you because are you obviously some of it appears to be market share gains but what’s the overall business like in the industry as a whole?

Well, two things, one I mentioned before it’s so fast turn that the amount of conversation about trends is a lot lower than it would have been a couple of years ago. The one thing we do see as a consistent trend is utilization is just constantly reiterated as a major issue for our customers both sub counts and IDM’s. In as such, they’re trying to stretch their test platform products across as wide a portion of the landscape as they can get. Now in some subsets they go more specific for example LCD space, micro controller space, image sensor space and some automotive applications they have been willing to move to a more dedicated solutions dedicated platforms. But I think the trend of utilization just pushes everybody in the direction to try to put as many sockets onto a platform as possible. Patrick Ho - Stifel Nicolaus & Company: In terms of gross margins, is the swing factor for gross margins in the near term just some of the integration efforts you’re trying to do or is higher volume still the biggest contributing factor to gross margins over the next few quarters?

The contributors to gross margins looking forward are really two fold. One is completing the movement of ultra flex to China that will get us a little less than 1 point in gross margin. The other is this set of new products should also enable us to get healthier margins. Those are the two-principle component of getting us to our 50% gross margin target. Patrick Ho - Stifel Nicolaus & Company: Probably longer term looking out going forward over the next few years the integration of next test, you’ve done a good job transitioning your test manufacturing to China for your SOC products, what are your initial plans for Magnum and I guess the manufacturing process of that product line.

Initially we have no plans to move Magnum offshore over some period of time we’ll look at that if that makes sense. What we’re most focused on is getting the new products out to existing customers and 99% of our energy is going into growing the business and making sure the products come out on time. We’re less focused on the cost aspect of lowering manufacturing and they do have a relatively low manufacturing cost. We have though that some of the commodities they buy we also buy. And we’re able to immediately get lower prices for them and some these it’s a couple million dollars a year savings for them in terms of what goes into their cost of goods sold. So where it makes sense we are using the muscle of Teradyne but we’re not disrupting the plan they have.

Our next question comes from Steven Pelayo - HSBC.

Mike last quarter you mentioned that you though the SOC market was still was likely to grow about 10% this year. Do you still stand by them? You said more cautious demand environment and unpredictable behavior; you still think that 10% is good.

Steve I have to look back at my comments to see how much I couched but last year was a $2.4 billion market it’s running at that rate right now so obviously if it stays flat we don’t get the 10%. I think was I was trying to do was share with you that the overall movement of the CapEx rate would argue that it would notch up a little bit this year. But quite honestly we’re not making plans here that depend on that we’re trying to drive this model and our market share momentum so that we’re able to get to model profitability independent of what the market’s going to do.

I think Greg made a comment about the 15% being 1/10 of the mid cycle so you do believe you can exceed that if revenues go above $345 million or so and if that $340 million is mid cycle to you there are multiple ports out there where you can exceed that $350 in this kind of environment?

I firmly believe that is the case. We have modeled each of the businesses and it would not take significant growth to go beyond $345. We are gaining market share in our core businesses and as you know the wild card in some of this is what is the market size that we’re starting from. But if I use normal market sizes from history and haircut provide a buffer we can get there. If my haircut from history is not enough then obviously that raises another set of issues.

Greg you spoke about where you get the incremental 200 basis points or so in the gross margin line. It looks like you’re guidance is for about 10% operating margin here or so it’d be about 300 basis points coming up from the operating expenses. Do you actually need the revenue growth to get to that or the absolute dollar amount of OpEx? Where do you think that tracks over the next couple quarters? Will it go down?

On OpEx over time it’s going to go down particularly in the latter part of the year in engineering. And what what happens in OpEx is as we improve our profit rates we put more profit sharing in those lines. So we have a set of actions all teed up that will take place that will get us to I think we’ve talked in the last call operating expense is about $118 million so we want to get to that level we have a plan to do that if you looked at the numbers right now you’d say gees you guys are pretty close to that at $120 but those numbers don’t have the full profit sharing that would be in there if we were at model. So we have a bigger task than just getting 2 million out and we have plans to do that.

Your 2008 expectations for depreciation and amortization in CapEx?

We may do that offline with you.

Our next question comes from Tom Diffely - Merrill Lynch.

You talked about the [onset] players leading a bunch of the upside in the first quarter, do you see some of the trends in the third quarter or what kind of visibility do you have between the OSATs and the IDM’s current business levels?

Tom I don’t have that handy my guess is that it is likely to be pretty close to that in the second quarter. I can look at that separately, I didn’t do that in anticipation of us.

But in general do you see a different level of visibility between those two customer types?

No. No our lead times go by product they span anywhere from five to 8 weeks. Obviously we talk to customers and try to move their horizon out so we can understand what their sense of the market is but they’re pretty similar between IDM’s the [fabulous] companies and the OSATs one thing does happen and that there’s always a bit more cloudiness in the OSAT side because their negotiating for business with the specifiers so you have to weed out how much double dipping, double counting that might be out there.

Would you say though that if there is an upside surprise at some point typically it comes form the OSAT players just from a policy point of view?

Probably because when this kind of spot market demand that usually and utilization is high they usually get called upon to stretch and they would come back harder and faster to us.

When you look at the wafer test potential for your Magnum, does that require new tools or is it just the higher speed into that market?

We only have in the next test memory business a magnum business I think it’s under 5% of our business is wafer tests side of things so the new product and the higher speeds there would allow us to address multi chip packages so combinations of DRAM and NAND and that would give us a entrée into this the wafer short side of the business. So it’s the higher speed capability that does that, there’s nothing other than that that holds us back that’s been a limitation in terms of breaking into that segment of the business.

Our next question comes from CJ Muse - Lehman Brothers.

Based on the commentary that you made on the SOC industry it appears that the strength you’re seeing is entirely market share gain so I was hoping you could highlight maybe what segments this is coming from and where you might be taking share from.

Let’s see CJ it’s always quite broad the segments that have been moving share for us gradually over the last few quarters there have been consumer applications Asia based consumer applications, the microcontroller business some of that coming from Japan has been segment for gains for us and in power management and base band we’ve also made some headway in those segments. There isn’t a specific, it’s not a one trick pony in terms of where we’re able to gain share and because they come socket by socket they tend to be sprinkled around. Those would be the major ones those.

Your new ultra wave product, how important was that in terms of the strength in wireless booking in Q1? And then I guess thinking out through 2008, given I would think things are a little bit more strategic investments and less torrent is your visibility here better?

I’ll answer your first one the ultra wave we as I said in the opening comments the 4th generation product there was very, very strong and that’s based upon design in work that took place during the course of ’07 so they’re really capacity wise there, so that outweighed the ultra wave the 5th generation 12 gigahertz product. But we had business from multiple unit business in the quarter it’s fanning out but it’s a high multiple between the gen 4 and the gen 5 on a unit basis over this last quarter. Give me the second question again.

I would think that perhaps that the ultra wave would be maybe a little bit more in terms of a strategic investment and that your visibility there might be better than your other products?

Yes, because we’re very hand to glove with customers who are doing the design in work there. So your question was how?

I guess the visibility there in terms of part of that $60 plus million of gains you foresee in 2008 how much of that will come from this 5th generation product?

We’re actually not going to decompose that. It’s a significant piece I should say our RF, our wireless share is very strong so a big piece of what we do with ultra wave will be to build on top of what we have with our existing customers but it will be a piece of that $45 to $60 million of new business and it’s not an inconsiderable piece of that but for competitive purposes we’re not going to break that down. We may next year at this time give some greater clarity as to how that breaks down but at this point we’re going to hold back on it.

I don’t know if you break this out but can you tell us what the semi test service revenues were in Q1?

About 20% I think but let’s see what is the exact number? Why don’t we loop back to that and insert it. Do you have it there? Here it comes; you have $45 million total services.

Our next question comes from Raj Seth - Cowen and Company.

Mike you were talking in the past about sort of socket to socket battles for share takes up a while I’m curious are there any over the next 18 months large chunks of share up for grabs and specifically I’m wondering about what’s going on in the microprocessor space. I’ve heard there’s potential shift in strategy and maybe ultimately platform at the largest I’m not sure how of all this thinking is, there but I recall last time when this particular customer shifted to an Asian supplier I don’t even think you bid on that. I’m just curious about what’s going on there and if there’s a potential opportunity for you at either of the two large microprocessor suppliers?

Raj I have to decline commenting it’s so obvious who those players are. We don’t have any business to speak of in the MPU side of their business we always stay on touch on that as a valuations take place. Obviously if they are seriously looking for alternatives we’re in the game on those. Outside that space it’s pretty hard to accumulate more than fractional points on platform or socket wins. We have had a couple of platform decisions this past quarter but again those were the portions of a point of share but we hope to make those annuities for multiple years because when platform decisions are made versus tactical socket decisions you do get greater security with it but on the MPU side, I’ll just hold my comments to what I said.

Can you comment about whether or not there are platforms up for grabs on the MPU side or is that in itself too soon?

I will say that there is some evaluation activity going on but I can’t say whether that’s leading to something or not but there’s some evaluation work that is going on and ones that are truly serious evaluations we’re obviously would try to participate in those.

Our next question comes from Jeff Richards - Piper Jaffray.

On utilization rates on tech 4 and the industry how did that trend in Q1 from Q4 and how is that looking to you in Q2?

It doesn’t really look very different Q4 to Q1 for us. It’s you know if it moved it’s only moved a point or two in utilization so we’re in the age of 90 vamp.

Okay and then what’s on utiliation in Q2?

Hard to project that. The industry projections say that utilization is moving up. And we watch that as something as a leading indicator but you know we think we can catch up for that anyway with the shortness of lead times that we’ve got with the products so if it does tighten up, we’ve got the ability to expand our shipments and to meet that.

You talk about customers wanting to drive utilization on the tester and you need to add more resources more functionality onto the tester but wouldn’t be used in any given test. How do you balance the cost of tests with the need to increase the utilization of the platform with the cost of the platform? Could you talk a little bit about how you build flexibility or whatever into the system in order to accommodate a lower overall cost attached?

Well the main thing have done with this product is to make it it’s called the universal slot architecture which means you can mix and match a lot of different options in the product. Having said that customers really do take different approaches to it. Some customers for examples will take our micro flex product which is a smaller test head fewer slot configuration and they’ll pack that full and use that for a subset of their devices the same time they’ll take a portion of the higher end products with more slot count and they’ll put the more flexible mix of instruments and then they’ll go for more of a high parallel test configuration. So the architecture tries to lend itself to either of those two tastes and the customers really are the ones who are determining how those configurations take place. What you tend to see is in large install basis you tend to see a diversification where they’ll put more dedicated configs in place along with some general purpose one where as if you have a small install base they’ll tend to be more general purpose.

On you mentioned that the power management side of your business is strong is that a market share gain and can you give a little more color on what sorts of kind of management devices you’re testing?

Gradually it’s been a market share gain in the power management segments are tied into the mobile devices so they tend to be things that are obviously better management devices in the cell phone and PDA space.

So primarily low voltage low current?

Yes.

Our next question comes from Steven Pelayo - HSBC.

Just some clarification, you mentioned service was about $45 million was that a revenue or booking number in the quarter?

That was a revenue.

Now that’s down significantly quarter over quarter if that were the case then I would apply the.

Right but it was semi test I think the question was semi test.

No he asked total.

So what was total service then?

Hang on sorry to stumble on this we got it here somewhere.

That’s okay and then my other question would be if rather than exclude this next step amortization in your P&L really trying to think about a more kind of cash basis. You have some targets on operating cash flow or free cash flow with a percentage of revenue? Something like that?

You got service at $64 million

$64 million compared to last quarter.

$64 million versus $62 last quarter in service revenues so you were right we were just giving SOC.

And do you have a target there for operating cash flow or cash flow as a percentage of revenue something I can think of cash flow targets.

As a percent of revenue it would be probably 17%.

It looks like the way you’re depreciation and amortization increases here it would probably be more in the 20’s I would have though.

When you do the cash flow I’m doing it after capital additions you’re doing it before.

Our next question comes from Christopher Blansett - JP Morgan.

How should we think about the growth of the NAND flash test business if you look at the units for NAND to date for just the first two months they’re up something like 38% year over year is there some way we could look at NAND unit growth and kind of correlate that to next tests system sales?

Chris we’re working on the same thing to track, to do that, it’s very tough in this space because of the very dramatic growth rates in bit and in units and the offsetting growth that being done in parallelism and throughput and different test techniques on it. And don’t have a lot to offer you in correlation on those numbers at this point. As we do that work we’ll share that with you in subsequent calls.

And there are no further questions at this time.

We want to thank everybody for participating and we’ll see you next quarter.