Good morning. My name is Molly and I will be your conference operator today. At this time I would like to welcome everyone to the Q3 Teradyne Earnings Call. (Operator Instructions). Thank you. Mr. Blanchard, you may begin your conference.

’: ’: ’: ‘: ’: ‘: ’: ’: ’: ’: To view them, go to investor portion of our website and click on the GAAP to non-GAAP reconciliation link. Also, you may want to note that between now and our next conference, Teradyne will be participating in the Sidoti & Co. New York Emerging Growth Conference on November 20, the Credit Suisse First Boston Technology Conference in Phoenix on December 2 and, the Barclays Global Technology Conference in San Francisco on December 9, and Eric May luncheons in Chicago, Boston and New York on November 11, December 14 and 15 respectively. ’:

’: ’: Let me start with the semi test side of the house. Last quarter you will recall our overall semi test booking doubled from the level of Q1. In this third quarter, we topped the Q2 total with bookings of just over $230 million or about a 70% growth over the second quarter. Our IDM and fabless specifiers led the way with bookings more than double the level of Q2. The OSAT business totaled about $50 million, equal to our second quarter order rate. So, both customer segments have more than tripled since the low levels of six months ago. From a device segment perspective, we saw very strong growth in power management applications, while our wireless business was still strong it was complimented by micro controller, storage and analog segments, which posted healthy growth in the second quarter. ’: ’: ’: ’: ’: ’: ’: ’: ’: Now, turning to our revenue guidance for the fourth quarter, our semi test revenue will again grow sequentially while our systems test revenues decline due to the lumpy nature of some of their businesses. In short, we will have system test shipping at the past Q2 level while semi test will have doubled over that same time frame. I also want to mention that this rapid ramp in semi test business has in fact put strains into our supply chain. The front part of the ramp was achieved through some inventory drawdown throughout the supply chain. With that inventory consumed, we were experiencing more part shortages which is moving our lead times out of a bit. Greg, will comment more on that shortly. ’: ’: ’: ’: ’: ’: ’: ’: ’:

’: Let me first start with our third quarter results. As you know, we generated a 9.6% non-GAAP operating profit on sales of $262 million. Given our current cost structure and breakeven, this is seven points to eight points higher than we achieved at comparable sales levels during the last five years. Though much improved from prior periods, it is lower than our target model at $275 million as we had record hard disk drive sales and systems test this quarter, which has lower gross margins than the company average. ’: However, some businesses have higher gross margins and higher operating expenses than the company average, while others have lower gross margins and lower operating expenses, but they all need to get to the same 15% or better objective over a normalized cycle. ’: However, some businesses have higher gross margins and higher operating expenses than the company average, while others have lower gross margins and lower operating expenses, but they all need to get to the same 15% or better objective over a normalized cycle. ’: As you might expect, the model will be affected in two dimensions. First is the amount of revenue that we will need to achieve our model 15% profitability, will increase as we fold-in these new businesses into our model as our combined gross margins are lower than the company average. ’: As you might expect, the model will be affected in two dimensions. First is the amount of revenue that we will need to achieve our model 15% profitability, will increase as we fold-in these new businesses into our model as our combined gross margins are lower than the company average. ’: ’: ’: ’: Turning next to the continued surge in demand. Product shipments increased 78% from the second quarter to the…

Thanks, Greg. Molly, we would now like to take some questions.

(Operator Instructions). Your first question comes from the line of C.J. Muse with Barclays Capital.

I guess the first question on the high-speed memory front, in terms of the multiple orders there. Can you comment, does that mean you were named the second source vendor there or are they still looking at three different vendors?

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Just to confirm, I believe you said memory, total revenues was $7.9-million?

Yes.

Can you expand on the trajectory from here I guess including high-speed memory, what the puts and takes are and what we could expect as we enter 2010 for that line item?

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In terms of the non-GAAP pro forma, there is a line for profit sharing. Is that stock base compensation?

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Your next question comes from Jim Covello with Goldman Sachs.

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Very helpful. On the high-speed memory, congratulations on getting the recognition there, what do you think the timing could be for; A, following orders from that customer, and then; B, potentially orders from a second customer who I believe you might be engaged with now?

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Your next question comes from the line of Gary Hsueh with Oppenheimer.

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So it would seem to argue to me that you are looking at basically a base case for semi test revenue on a normalized basis in 2010 somewhere around a $1 billion, and consensus right now is at 1.1, and I think there is a lot of short-term fear about how seasonally week Q1 could be. In terms of the overall market, you guys believe for sure that if semi CapEx is growing then you revenue should grow and semi test buy rates should grow?

Did you say a billion in SOC?

Yes.

Yes, so a billion on SOC, then the market has to be over $2 billion. Do the math around $2 billion and 40 plus percent share you get 800. So, 800 to 900 is probably okay.

Just along these lines, did you give a number in terms of a target revenue range for HDD test next year?

You mean in estimating for different models what might you put in?

Yes, for HDD test next year, was number given out?

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Your next question comes from the line of Krish Sankar with Bank of America-Merrill Lynch.

Mike, you said about Eagle Test having record bookings in Q3. I was just trying to understand, is it fair to assume the Eagle Test business is running at its traditional peak capacity which is about mid to high $30 million run rate for revenue and maybe like a $40 million bookings run rate?

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On the HDD side of the business, I know you guys said $30 million to $50 million and it could be higher. Did you see any pull-ins this year from 2010?

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Just a final question, on the high-speed memory not to be beat a dead horse, but in terms of DDR3 specifically, can you tell like how many customers are you actually engaged with today?

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Our next question comes from the line of Satya Kumar with Credit Suisse.

This is Vis Vellore for Satya. Actually can you share what the service revenues were for semis and system tests for the September quarter?

Yes. The semi service revenues were $41 million and the system test service revenues for the third quarter were $16 million.

Okay. Then at these levels of $250 million to $270 million revenue run rate, how should we think about OpEx coming back?

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Next question comes from the line of David Duley with Steelhead Security.

Congratulations on a nice quarter. Did you mention what the book-to-bill in the flash business was and was there more than one customer ordering there or was it just one?

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In terms of revenue we did have one 10% customer during the quarter.

Will you disclose the name of that in your filings?

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We had payments from a customer and received a payment upfront. It gives them better position in our slot plan. They get a slightly better discount, but commercially, it works for both parties. So, they are securing capacity and they see some greater test demand and then they want to get ahead of it.

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Your next question comes from the line of Patrick Ho with Stifel Nicolaus.

A couple of house keeping questions first. What were your stock options this quarter and what can I assume for a tax rate in 2010?

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Tax rate for 2010 now that you are back in profitability?

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Just some broader I guess market related questions now. In terms of the SOC test business, you mentioned that you are still waiting for the emergence of some sectors like CMOS, image sensors and automotive, do you see that coming back in Q4 or do you see your current market segments being the same drivers in Q4?

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The final question is on cash usage. Now that you are starting to generate positive cash flow, you guys were active in buy backs in the previous cycles. Is that something that you are going to look into in 2010 once again?

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(Operator Instructions). Your next question comes from the line of Jagadish Iyer with Arete Research.

Two questions, one is that, one of your competitors earlier this week suggested that the memory market is basically going to be doubling in 2010 and again progressively move into 2011. I just wanted to ask you Mike, what kind of position do you expect as you exit 2010 in terms of memory market share for you guys?

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No, 2010. As you exit 2010.

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The other question is that with TI moving to 300-millimeter analog, I just wanted to find out how well are you positioned to capture that portion of the business?

I missed the question.

Texas Instruments moving towards 300-millimeter analog process starting up later this year and early next year. I just was wondering how well are you guys positioned to capture the test portion of the 300-millimeter analog business there?

There is no issue there. TI is one of our major customers and we are well positioned in a number of segments with their business. So I think we will be able to ride that transition.

Your next question comes from the line of Krish Sankar with Banc of America-Merrill Lynch.

Can you guys tell little bit more on the seasonality of the HTD side of the business?

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Then the IDM-OSAT mix was is it 79% and 29% in Q3?

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Your next question comes from the line of Robert Weaver with Forest Investments.

A number of convertible bond issuers from earlier this year have taken actions to get those bonds off your books. Is that something you guys have looked at it all in terms of doing an equity flush out of those?

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Your next question comes from the line of Raj Seth from Cowen and Company. Raj Seth - Cowen & Company: Mike, could you comment a little bit more on what you are seeing in the sort of low end J750 microcontroller test space? I thought that when we last talked that was one of the businesses that was still off. In your prepared commentary it sounded like microcontrollers picked up. Maybe you can remind me how big in normalized environment that segment of the market is relative to the total?

Yes, Raj, are you asking for how microcontrollers fits into the total test market not Teradyne, right? Raj Seth - Cowen & Company: ’: ’:

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Your next question comes from the line Atif Malik with Morgan Stanley.

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One last one, AMCO reported yesterday and they are saying that seasonality for 1Q could be single digit. Just want to get your thoughts on what kinds of seasonality we can see in 1Q?

For revenue, which is in demand in this quarter, we think there is a digestion going on so that people will watch for the sell through in the holiday season. So, our expectations are that things are tonally, demand is a bit down in this quarter so that the Q1 numbers could be lower.

There are no further questions at this time.

Great. Thank you all for joining and we look forward to talking to you next quarter.

Okay. Thank you.

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