UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Analog Devices, Inc.

Massachusetts		04-2348234
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Technology Way, Norwood, MA (Address of principal executive offices)		02062-9106 (Zip Code)

(781) 329-4700
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ   NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o   NO þ

     As of January 31, 2009 there were 291,228,618 shares of Common Stock, $0.16 2/3 par value per share, outstanding.

 

 

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands, except per share amounts)

		Three Months Ended
		January 31, 2009				February 2, 2008
Revenue		$	476,569			$	613,909
Cost of sales (1)			207,567				238,106
Gross margin			269,002				375,803
Operating expenses:
Research and development (1)			119,828				129,539
Selling, marketing, general and administrative (1)			87,846				100,351
Special charges			41,737				—
			249,411				229,890
Operating income			19,591				145,913
Nonoperating (income) expense:
Interest income			(7,796	)			(12,526	)
Other, net			(571	)			173
			(8,367	)			(12,353	)
Income from continuing operations before income taxes			27,958				158,266
Provision for income taxes			3,373				36,418
Income from continuing operations, net of tax			24,585				121,848
Discontinued operations, net of tax:
Income from discontinued operations			364				1,888
Gain on sale of discontinued operations			—				246,983
Total income from discontinued operations, net of tax			364				248,871
Net income		$	24,949			$	370,719
Shares used to compute earnings per share — basic			291,187				299,141
Shares used to compute earnings per share — diluted			291,248				304,260
Basic earnings per share from continuing operations		$	0.08			$	0.41
Basic earnings per share		$	0.09			$	1.24
Diluted earnings per share from continuing operations		$	0.08			$	0.40
Diluted earnings per share		$	0.09			$	1.22
Dividends declared and paid per share		$	0.20			$	0.18
(1) Includes stock-based compensation expense as follows:
Cost of sales		$	1,580			$	1,953
Research and development		$	5,321			$	5,524
Selling, marketing, general and administrative		$	4,510			$	5,415

See accompanying notes.

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands)

Assets		January 31, 2009				November 1, 2008
Cash and cash equivalents		$	769,713			$	593,599
Short-term investments			513,418				716,087
Accounts receivable, net			235,352				315,290
Inventory (1):
Raw materials			15,494				15,350
Work in process			213,648				200,436
Finished goods			91,825				98,843
			320,967				314,629
Deferred tax assets			91,676				102,676
Deferred compensation plan investments			8,493				942
Prepaid expenses and other current assets			34,723				40,460
Current assets of discontinued operations			—				5,894
Total current assets			1,974,342				2,089,577
Property, plant and equipment, at cost:
Land and buildings			382,821				378,187
Machinery and equipment			1,523,092				1,512,984
Office equipment			63,380				63,071
Leasehold improvements			66,499				65,247
			2,035,792				2,019,489
Less accumulated depreciation and amortization			1,498,594				1,452,050
Net property, plant and equipment			537,198				567,439
Deferred compensation plan investments			6,817				31,099
Other investments			761				955
Goodwill			233,454				235,175
Intangible assets, net			11,258				12,300
Deferred tax assets			65,713				65,949
Other assets			27,610				26,461
Non-current assets of discontinued operations			62,037				62,037
Total other assets			407,650				433,976
		$	2,919,190			$	3,090,992

See accompanying notes.

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands, except share amounts)

Liabilities and Shareholders’ Equity		January 31, 2009				November 1, 2008
Accounts payable		$	82,601			$	130,451
Deferred income on shipments to distributors, net			151,147				175,358
Income taxes payable			37,616				52,546
Deferred compensation plan liability			8,493				942
Accrued liabilities			153,721				191,307
Current liabilities of discontinued operations			6,676				18,454
Total current liabilities			440,254				569,058
Deferred income taxes			11,134				14,310
Deferred compensation plan liability			6,934				31,800
Other non-current liabilities			58,803				55,561
Total non-current liabilities			76,871				101,671
Commitments and contingencies
Shareholders’ Equity
Preferred stock, $1.00 par value, 471,934 shares authorized, none outstanding			—				—
Common stock, $0.16 2/3 par value, 1,200,000,000 shares authorized, 291,228,618 shares issued and outstanding (291,193,451 on November 1, 2008)			48,539				48,533
Capital in excess of par value			—				—
Retained earnings			2,397,779				2,419,908
Accumulated other comprehensive loss			(44,253	)			(48,178	)
Total shareholders’ equity			2,402,065				2,420,263
		$	2,919,190			$	3,090,992

See accompanying notes.

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(thousands)

		Three Months Ended
		January 31, 2009				February 2, 2008
Cash flows from operating activities:
Net income		$	24,949			$	370,719
Adjustments to reconcile net income to net cash provided by operations:
Depreciation			38,755				35,551
Amortization of intangibles			1,957				2,423
Stock-based compensation expense			11,411				10,595
Gain on sale of business			—				(246,983	)
Deferred income taxes			(15,925	)			18
Excess tax benefit-stock options			—				(6,710	)
Non-cash portion of special charge			13,693				—
Other non-cash activity			207				(73	)
Changes in operating assets and liabilities			(15,137	)			11,880
Total adjustments			34,961				(193,299	)
Net cash provided by operating activities			59,910				177,420
Cash flows from investing activities:
Purchases of short-term available-for-sale investments			(263,906	)			(351,221	)
Maturities of short-term available-for-sale investments			464,197				371,396
Net proceeds from sales of businesses (See Note 13)			—				406,665
Additions to property, plant and equipment			(22,235	)			(40,115	)
(Increase) decrease in other assets			(2,063	)			2,795
Net cash provided by investing activities			175,993				389,520
Cash flows from financing activities:
Repurchase of common stock			(489	)			(359,376	)
Increase in liability from common stock repurchases			—				24,879
Net proceeds from employee stock plans			768				24,497
Excess tax benefit-stock options			—				6,710
Dividend payments to shareholders			(58,238	)			(53,836	)
Net cash used for financing activities			(57,959	)			(357,126	)
Effect of exchange rate changes on cash			(1,830	)			(1,697	)
Net increase in cash and cash equivalents			176,114				208,117
Cash and cash equivalents at beginning of period			593,599				424,972
Cash and cash equivalents at end of period		$	769,713			$	633,089

See accompanying notes.

ANALOG DEVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2009
(all tabular amounts in thousands except per share amounts and percentages)

Note 1 — Basis of Presentation

In the opinion of management, the information furnished in the accompanying condensed consolidated financial statements reflects all normal recurring adjustments that are necessary to fairly state the results for these interim periods and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended November 1, 2008 and related notes. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2009 or any future period.

The Company sold its baseband chipset business and related support operations (Baseband Chipset Business) to MediaTek Inc. and sold its CPU voltage regulation and PC thermal monitoring business to certain subsidiaries of ON Semiconductor Corporation during the first quarter of fiscal 2008. The Company has reflected the financial results of these businesses as discontinued operations in the consolidated statements of income for all periods presented. The assets and liabilities of these businesses are reflected as assets and liabilities of discontinued operations in the consolidated balance sheets as of January 31, 2009 and November 1, 2008.

The Company has a 52-53 week fiscal year that ends on the Saturday closest to the last day in October. Fiscal 2009 and fiscal 2008 are 52-week fiscal years. Certain amounts reported in previous years have been reclassified to conform to the fiscal 2009 presentation. Such reclassified amounts were immaterial.

Note 2 — Revenue Recognition

Revenue from sales to customers is generally recognized when title passes, which for shipments to certain foreign countries is subsequent to product shipment. Title for these shipments ordinarily passes within a week of shipment. A reserve for sales returns and allowances for customers is recorded based on historical experience or specific identification of an event necessitating a reserve.

In all regions of the world, the Company defers revenue and the related cost of sales on shipments to distributors until the distributors resell the products to their customers. Therefore, the Company’s revenue fully reflects end customer purchases and is not impacted by distributor inventory levels. Sales to distributors are made under agreements that allow distributors to receive price adjustment credits, as discussed below, and to return qualifying products for credit, as determined by the Company, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory. These agreements limit such returns to a certain percentage of the value of the Company’s shipments to that distributor during the prior quarter. In addition, distributors are allowed to return unsold products if the Company terminates the relationship with the distributor.

Distributors are granted price-adjustment credits related to many of their sales to their customers. Price adjustment credits are granted when the distributor’s standard cost (i.e., the Company’s sales price to the distributor) does not provide the distributor with an appropriate margin on its sales to its customers. As distributors negotiate selling prices with their customers, the final sales price agreed to with the customer will be influenced by many factors, including the particular product being sold, the quantity ordered, the particular customer, the geographic location of the distributor, and the competitive landscape. As a result, the distributor may request and receive a price adjustment credit from the Company to allow the distributor to earn an appropriate margin on the transaction.

Distributors are also granted price adjustment credits in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor. Generally, the Company will provide a credit equal to the difference between the price paid by the distributor (less any prior credits on such products) and the new price for the product multiplied by the quantity of such product in the distributor’s inventory at the time of the price decrease.

Given the uncertainties associated with the levels of price adjustment credits to be granted to distributors, the sales price to the distributor is not fixed or determinable until the distributor resells the products to their customers. Therefore, the Company defers revenue recognition from sales to distributors until the distributors have sold the products to their customers.

Title to the inventory transfers to the distributor at the time of shipment or delivery to the distributor, and payment from the distributor is due in accordance with the Company’s standard payment terms. These payment terms are not contingent upon the distributors’ sale of the products to their customers. Upon title transfer to distributors, inventory is reduced for the cost of goods shipped, the margin (sales less cost of sales) is recorded as “deferred income on shipments to distributors, net” and an account receivable is recorded.

The deferred costs of sales to distributors have historically had very little risk of impairment due to the margins the Company earns on sales of its products and the relatively long life-cycle of the Company’s products. Product returns from distributors that are ultimately scrapped have historically been immaterial. In addition, price protection and price adjustment credits granted to distributors historically have not exceeded the margins the Company earns on sales of its products. The Company continuously monitors the level and nature of product returns and is in frequent contact with the distributors to ensure reserves are established for all known material issues.

As of January 31, 2009 and November 1, 2008, the Company had gross deferred revenue of $243.5 million and $279.3 million, respectively, and gross deferred cost of sales of $92.4 million and $103.9 million, respectively. Deferred income on shipments to distributors as of January 31, 2009 was lower than the amount as of November 1, 2008 by $24.2 million, as a result of the distributors’ sales to their customers in the first quarter of fiscal 2009 exceeding the Company’s shipments to its distributors during this same time period.

Shipping costs are charged to cost of sales as incurred.

The Company generally offers a 12-month warranty for its products. The Company’s warranty policy provides for replacement of the defective product. Specific accruals are recorded for known product warranty issues. Product warranty expenses during either of the three-month periods ended January 31, 2009 and February 2, 2008 were not material.

Note 3 — Stock-Based Compensation

Grant-Date Fair Value —The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. Information pertaining to the Company’s stock option awards and the related estimated weighted-average assumptions to calculate the fair value of stock options granted during the three-month periods ended January 31, 2009 and February 2, 2008 is as follows:

		Three Months Ended
Stock Options		January 31, 2009				February 2, 2008
Options granted (in thousands)			5,420				5,550
Weighted-average exercise price per share		$	19.56			$	29.90
Weighted-average grant-date fair value per share		$	7.47			$	7.91
Assumptions:
Weighted-average expected volatility			59.5	%			32.2	%
Weighted-average expected term (in years)			5.3				5.1
Risk-free interest rate			1.7	%			3.3	%
Expected dividend yield			4.1	%			2.4	%

Expected volatility — The Company is responsible for estimating volatility and has considered a number of factors, including third-party estimates, when estimating volatility. The Company currently believes that the exclusive use of implied volatility results in the best estimate of the grant-date fair value of employee stock options because it reflects the market’s current expectations of future volatility. In evaluating the appropriateness of exclusively relying on implied volatility, the Company concluded that: (1) options in the Company’s common stock are actively traded with sufficient volume on several exchanges; (2) the market prices of both the traded options and the underlying shares are measured at a similar point in time to each other and on a date close to the grant date of the employee share options; (3) the traded options have exercise prices that are both near-the-money and close to the exercise price of the employee share options; and (4) the maturities of the traded options used to estimate volatility are at least one year.

Expected term — The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company believes that this historical data is currently the best estimate of the expected term of a new option, and that generally its employees exhibit similar exercise behavior.

Risk-free interest rate — The yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption is used as the risk-free interest rate.

Expected dividend yield — Expected dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors for the current quarter and dividing that result by the closing stock price on the date of grant. Until such time as the Company’s Board of Directors declares a cash dividend for an amount that is different from the current quarter’s cash dividend, the current dividend will be used in deriving this assumption. Cash dividends are not paid on options, restricted stock or restricted stock units.

Stock-Based Compensation Expense

The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment, (SFAS 123R), requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award. Based on an analysis of its historical forfeitures, the Company has applied an annual forfeiture rate of 4.3% to all unvested stock-based awards as of January 31, 2009. The rate of 4.3% represents the portion that is expected to be forfeited each year over the vesting period. This analysis will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.

Stock-Based Compensation Activity

A summary of the activity under the Company’s stock option plans as of January 31, 2009 and changes during the three-month period then ended is presented below:

										Weighted-
										Average
		Options				Weighted-				Remaining				Aggregate
		Outstanding				Average Exercise				Contractual				Intrinsic
Activity during the Three Months Ended January 31, 2009		(in thousands)				Price Per Share				Term in Years				Value
Options outstanding at November 1, 2008			70,340			$	36.63
Options granted			5,420			$	19.56
Options exercised			(43	)		$	18.84
Options forfeited			(484	)		$	34.90
Options expired			(640	)		$	39.63
Options outstanding at January 31, 2009			74,593			$	35.39				5.0			$	3,968
Options exercisable at January 31, 2009			55,634			$	37.27				3.9			$	1,245
Options vested or expected to vest at January 31, 2009 (1)			73,006			$	35.54				4.9			$	4,340

During the three months ended January 31, 2009 and February 2, 2008, the total intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $0.1 million and $55.6 million, respectively and the total amount of proceeds received from exercise of these options was $1 million and 30.8 million, respectively. Proceeds from stock option exercises pursuant to employee stock plans in the Company’s statement of cash flows during the three months ended January 31, 2009 and February 2, 2008 of $0.8 million and $24.5 million, respectively, is net of the value of shares surrendered by employees to satisfy employee tax obligations upon vesting of restricted stock or restricted stock units and in connection with the exercise of stock options granted to the Company’s employees under the Company’s equity compensation plans. The withholding amount is based on the Company’s minimum statutory withholding requirement pursuant to SFAS 123R. The total grant-date fair value of stock options that vested during the three months ended January 31, 2009 and February 2, 2008 was approximately $70.5 million and $74.3 million, respectively.

A summary of the Company’s restricted stock and restricted stock unit award activity as of January 31, 2009 and changes during the three-month period then ended is presented below:

		Restricted
		Shares and/ or				Weighted-
		Units				Average Grant
		Outstanding				Date Fair Value
Activity during the Three Months Ended January 31, 2009		(in thousands)				Per Share
Non-vested shares outstanding at November 1, 2008			92			$	31.80
Awards and/or units granted			38			$	18.94
Restrictions lapsed			(4	)		$	32.86
Forfeited			(3	)		$	36.55
Non-vested shares outstanding at January 31, 2009			123			$	27.65

As of January 31, 2009, there was $142.1 million (before tax consideration) of total unrecognized compensation cost related to unvested share-based awards, including stock options, restricted stock and restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.9 years.

Note 4 — Comprehensive Income

Components of comprehensive income include net income and certain transactions that have generally been reported in the consolidated statement of shareholders’ equity and consist of the following:

		Three Months Ended
		January 31, 2009				February 2, 2008
Income from continuing operations, net of tax		$	24,585			$	121,848
Foreign currency translation adjustments			(1,372	)			(3,596	)
Change in unrealized holding (losses) gains (net of taxes of $296 and $374, respectively) on securities classified as short-term investments			(2,082	)			2,243
Change in unrealized holding losses (net of taxes of $88 and $27, respectively) on securities classified as other investments			(163	)			(50	)
Change in unrealized gains (losses) (net of taxes of $1,042 and $196, respectively) on derivative instruments designated as cash flow hedges			8,221				(1,289	)
Pension plans
Prior service cost			1				—
Transition (obligation) asset			(4	)			1
Net actuarial (loss) gain			(676	)			241
Other comprehensive income (loss)			3,925				(2,450	)
Comprehensive income from continuing operations			28,510				119,398
Income from discontinued operations, net of tax			364				248,871
Comprehensive income		$	28,874			$	368,269

The components of accumulated other comprehensive income at January 31, 2009 and November 1, 2008 consisted of the following:

		January 31, 2009				November 1, 2008
Foreign currency translation adjustment		$	(23,688	)		$	(22,316	)
Unrealized gains on available-for-sale securities			201				2,446
Unrealized losses on derivative instruments			(12,042	)			(20,263	)
Pension plans
Prior service cost			(4	)			(5	)
Transition obligation			(19	)			(15	)
Net actuarial loss			(8,701	)			(8,025	)
Total accumulated other comprehensive loss		$	(44,253	)		$	(48,178	)

Note 5 — Earnings Per Share

Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period. In addition, under Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R), the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options. Potential shares related to certain of the Company’s outstanding stock options were excluded because they were anti-dilutive. Those potential shares, determined based on the weighted-average exercise prices during the respective periods, related to the Company’s outstanding stock options could be dilutive in the future.

		Three Months Ended
		January 31, 2009				February 2, 2008
Income from continuing operations, net of tax		$	24,585			$	121,848
Total income from discontinued operations, net of tax			364				248,871
Net income		$	24,949			$	370,719
Basic shares:
Weighted-average shares outstanding			291,187				299,141
Earnings per share-basic:
Income from continuing operations, net of tax		$	0.08			$	0.41
Total income from discontinued operations, net of tax			0.00				0.83
Net income (1)		$	0.09			$	1.24
Diluted shares:
Weighted-average shares outstanding			291,187				299,141
Assumed exercise of common stock equivalents			61				5,119
Weighted-average common and common equivalent shares			291,248				304,260
Earnings per share-diluted:
Income from continuing operations, net of tax		$	0.08			$	0.40
Total income from discontinued operations, net of tax			0.00				0.82
Net income (1)		$	0.09			$	1.22
Anti-dilutive common stock equivalents related to outstanding stock options			70,657				56,707

Note 6 — Special Charges

A summary of the Company’s special charges is as follows:

						Reorganization				Consolidation												Closure of
		Closure of Wafer				of Product				of a Wafer				Reduction of								Wafer
		Fabrication				Development				Fabrication				Overhead				Reduction of				Fabrication
		Facility				and				Facility in				Infrastructure				Operating				Facility				Total Special
Income Statement		in Sunnyvale				Support Programs				Limerick				Costs				Costs				in Cambridge				Charges
Fiscal 2005 Charges:
Workforce reductions		$	20,315			$	11,165			$	—			$	—			$	—			$	—			$	31,480
Total Fiscal 2005 Charges		$	20,315			$	11,165			$	—			$	—			$	—			$	—			$	31,480
Fiscal 2006 Charges:
Facility closure costs			—				554				—				—				—				—				554
Abandonment of equipment			—				459				—				—				—				—				459
Other items			—				462				—				—				—				—				462
Change in estimate			(2,029	)			—				—				—				—				—				(2,029	)
Workforce reductions			—				2,344				—				—				—				—				2,344
Total Fiscal 2006 Charges		$	(2,029	)		$	3,819			$	—			$	—			$	—			$	—			$	1,790
Fiscal 2007 Charges:
Facility closure costs			10,288				—				—				—				—				—				10,288
Workforce reductions			—				4,165				13,748				10,711				—				—				28,624
Other items			—				859				—				1,637				—				—				2,496
Change in estimate			—				(913	)			—				—				—				—				(913	)
Total Fiscal 2007 Charges		$	10,288			$	4,111			$	13,748			$	12,348			$	—			$	—			$	40,495
Fiscal 2008 Charges:
Workforce reductions			—				—				—				—				1,627				—				1,627
Change in estimate			—				—				1,461				—				—				—				1,461
Total Fiscal 2008 Charges		$	—			$	—			$	1,461			$	—			$	1,627			$	—			$	3,088
Fiscal 2009 Charges:
Workforce reductions			—				—				—				—				15,645				9,203				24,848
Facility closure costs			—				—				550				—				2,146				—				2,696
Non-cash impairment charge			—				—				—				—				764				12,929				13,693
Other items			—				—				—				—				500				—				500
Total Fiscal 2009 Charges		$	—			$	—			$	550			$	—			$	19,055			$	22,132			$	41,737

						Reorganization				Consolidation												Closure of
						of Product				of a Wafer				Reduction of								Wafer
		Closure of Wafer				Development and				Fabrication				Overhead				Reduction of				Fabrication
		Fabrication Facility				Support				Facility in				Infrastructure				Operating				Facility in				Total Special
Accrued Restructuring		in Sunnyvale				Programs				Limerick				Costs				Costs				Cambridge				Charges
Balance at November 1, 2008		$	1,747			$	1,415			$	11,754			$	1,764			$	1,501			$	—			$	18,181
Fiscal 2009 special charges			—				—				550				—				19,055				22,132				41,737
Severance payments			—				(168	)			(9,916	)			(676	)			(6,882	)			—				(17,642	)
Facility closure costs			(392	)			(17	)			(550	)			—				(130	)			—				(1,089	)
Non-cash impairment charge			—				—				—				—				(764	)			(12,929	)			(13,693	)
Effect of foreign currency on accrual			—				(1	)			324				3				3				—				329
Balance at January 31, 2009		$	1,355			$	1,229			$	2,162			$	1,091			$	12,783			$	9,203			$	27,823

Closure of Wafer Fabrication Facility in Sunnyvale

The Company ceased production at its California wafer fabrication facility in November 2006. The Company is paying the lease obligation costs on a monthly basis over the remaining lease term, which expires in 2010. The Company completed the clean-up activity during fiscal 2007, and does not expect to incur any additional charges related to this action.

Reorganization of Product Development and Support Programs

The Company recorded special charges in fiscal years 2005, 2006 and 2007 as a result of its decision to reorganize its product development and support programs with the goal of providing greater focus on its analog and digital signal processing product programs. The Company terminated the employment of all employees associated with these programs and is paying amounts owed to employees for severance as income continuance. The Company does not expect to incur any further charges related to this reorganization action.

Consolidation of a Wafer Fabrication Facility in Limerick

During the fourth quarter of fiscal 2007, the Company recorded a special charge of $13.7 million as a result of its decision to only use eight-inch technology at its wafer fabrication facility in Limerick. Certain manufacturing processes and products produced on the Limerick facility’s six-inch production line are transitioning to the Company’s existing eight-inch production line in Limerick while others are transitioning to external foundries. The charge was for severance and fringe benefit costs recorded pursuant to SFAS 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, or SFAS 88, under the Company’s ongoing benefit plan for 150 manufacturing employees associated with this action. As of January 31, 2009, the Company still employed 14 of the 150 employees included in this action. The Company expects production to cease in the six-inch wafer fabrication facility during the second quarter of 2009, at which time the employment of the remaining affected employees will be terminated. These employees must continue to be employed by the Company until their employment is involuntarily terminated in order to receive the severance benefit. During the fourth quarter of 2008, the Company recorded an additional charge of $1.5 million related to this action, of which $1.2 million was an adjustment to the original estimate of the severance costs and $0.3 million was for clean-up and closure costs that were expensed as incurred. During the first quarter of fiscal 2009, the Company recorded an additional charge of $0.6 million for clean-up and closure costs that were expensed as incurred. The Company expects to incur additional clean-up and closure costs related to this action over the next two quarters totaling approximately $0.9 million. In accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities, or SFAS 146, the Company will expense these costs as incurred.

Reduction of Overhead Infrastructure Costs

During the fourth quarter of fiscal 2007, the Company recorded a special charge as a result of its decision to either deemphasize or exit certain businesses or products and focus investments in products and end markets where it has better opportunities for profitable growth. In September 2007, the Company entered into a definitive agreement to sell its Baseband Chipset Business. As a result, the Company decided to reduce the support infrastructure in manufacturing, engineering and SMG&A to more appropriately reflect its required overhead structure. The Company terminated the employment of all employees associated with these programs and is paying amounts owed to employees for severance as income continuance. The Company does not expect to incur any further charges related to this action.

Reduction of Operating Costs

During the fourth quarter of fiscal 2008, in order to further reduce its operating cost structure, the Company recorded a special charge of $1.6 million for severance and fringe benefit costs recorded pursuant to SFAS 88 under its ongoing benefit plan or statutory requirements at foreign locations for 19 engineering and SMG&A employees. The Company terminated the employment of all employees associated with this charge and is paying amounts owed to employees for severance as income continuance.

During the first quarter of fiscal 2009, the Company recorded an additional charge of $19.1 million related to this cost reduction action. Approximately $2.1 million of this charge was for lease obligation costs for facilities that the Company ceased using during the first quarter of fiscal 2009; approximately $0.8 million was for the write-off of property, plant and equipment; and approximately $0.6 million was for contract termination costs and for clean-up and closure costs that were expensed as incurred. The remaining $15.6 million related to the severance and fringe benefit costs recorded pursuant to SFAS 88 under the Company’s ongoing benefit plan or statutory requirements at foreign locations for 221 manufacturing

employees and 149 engineering and selling, marketing, general and administrative employees. As of January 31, 2009, the Company still employed 19 of the 370 employees included in this cost reduction action. These employees must continue to be employed by the Company until their employment is involuntarily terminated in order to receive the severance benefit.

Closure of a Wafer Fabrication Facility in Cambridge

During the first quarter of fiscal 2009, the Company recorded a special charge of $22.1 million as a result of its decision to consolidate its Cambridge, Massachusetts fabrication facility into its existing Wilmington, Massachusetts facility. In connection with the anticipated closure of this facility, the Company evaluated the recoverability of the facilities’ manufacturing assets and concluded that there was an impairment of approximately $12.9 million based on the revised period of intended use. The remaining $9.2 million was for severance and fringe benefit costs recorded pursuant to SFAS 88 under the Company’s ongoing benefit plan for 175 manufacturing employees and 9 selling, marketing, general and administrative employees associated with this action. As of January 31, 2009, the Company still employed all of the employees included in this action. The Company expects production to cease in the Cambridge fabrication facility during the fourth quarter of fiscal 2009, at which time the employment of the affected employees will be terminated. These employees must continue to be employed by the Company until their employment is involuntarily terminated in order to receive the severance benefit.

Note 7 — Segment Information

The Company operates and tracks its results in one reportable segment. The Company designs, develops, manufactures and markets a broad range of integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by SFAS 131, Disclosures about Segments of an Enterprise and Related Information.

Revenue Trends by End Market

The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which the Company’s product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs, the Company reclassifies revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

		Three Months Ended												Three Months Ended
		January 31, 2009												February 2, 2008
						% of												% of
		Revenue				Revenue				Y/Y%				Revenue				Revenue
Industrial		$	257,046				54	%			(22	)%		$	331,061				54	%
Communications			127,388				27	%			(3	)%			131,012				21	%
Consumer			75,940				16	%			(40	)%			126,952				21	%
Computer			16,195				3	%			(35	)%			24,884				4	%
Total revenue		$	476,569				100	%			(22	)%		$	613,909				100	%

Revenue Trends by Product Type

The following table summarizes revenue by product categories. The categorization of the Company’s products into broad categories is based on the characteristics of the individual products, the specification of the products and in some cases the specific uses that certain products have within applications. The categorization of products into categories is therefore subject to judgment in some cases and can vary over time. In instances where products move between product categories the Company reclassifies the amounts in the product categories for all prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each product category.

		Three Months Ended												Three Months Ended
		January 31, 2009												February 2, 2008
						% of												% of
		Revenue				Revenue				Y/Y%				Revenue				Revenue
Converters		$	225,823				47	%			(20	%)		$	281,081				46	%
Amplifiers			130,172				27	%			(16	%)			155,719				25	%
Other analog			51,005				11	%			(37	%)			80,843				13	%
Subtotal analog signal processing			407,000				85	%			(21	%)			517,643				84	%
Power management & reference			26,135				6	%			(22	%)			33,415				6	%
Total analog products		$	433,135				91	%			(21	%)		$	551,058				90	%
General purpose DSP			40,110				8	%			(27	%)			55,118				9	%
Other DSP			3,324				1	%			(57	%)			7,733				1	%
Total digital signal processing		$	43,434				9	%			(31	%)		$	62,851				10	%
Total revenue		$	476,569				100	%			(22	%)		$	613,909				100	%

Revenue Trends by Geographic Region

Revenue by geographic region, based upon customer location, for the three-month periods ended January 31, 2009 and February 2, 2008 was as follows:

		Three Months Ended
Region		January 31, 2009				February 2, 2008
United States		$	107,247			$	131,661
Rest of North and South America			19,383				21,103
Europe			127,745				156,706
Japan			72,733				124,236
China			89,712				81,295
Rest of Asia			59,749				98,908
Total revenue		$	476,569			$	613,909

In the first quarter of fiscal 2009 the predominant countries comprising “Rest of North and South America” are Canada and Mexico. The predominant countries comprising “Europe” are Germany, Sweden, France and Italy. The predominant countries comprising “Rest of Asia” are Taiwan and Singapore.

In the first quarter of fiscal 2008 the predominant countries comprising “Rest of North and South America” are Canada and Mexico. The predominant countries comprising “Europe” are Germany, France and the United Kingdom. The predominant countries comprising “Rest of Asia” are Taiwan and Korea.

Note 8 — Fair Value

The Company adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurements (SFAS 157), at the beginning of fiscal year 2009. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for non-financial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008, which is the Company’s fiscal year 2010. The adoption of SFAS 157 did not impact the Company’s consolidated financial position or results of operations. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement date. SFAS 157 establishes a three level hierarchy to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under SFAS 157 are described below:

Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any market activity for the asset or liability at the measurement date. As of January 31, 2009 the Company held no Level 3 assets or liabilities.

The table below sets forth by level the Company’s financial assets and liabilities that were accounted for at fair value as of January 31, 2009. The table does not include cash on hand and also does not include assets and liabilities that are measured at historical cost or any basis other than fair value.

						Fair Value measurement at
						Reporting Date using
		Portion of
		Carrying				Quoted Prices
		Value				in Active				Significant
		Measured at				Markets for				Other
		Fair Value				Identical				Observable
		January 31,				Assets				Inputs
		2009				(Level 1)				(Level 2)
Assets
Cash Equivalents:
Institutional money market funds		$	219,573			$	219,573			$	—
Corporate obligations			518,659				—				518,659
Euro time deposits			15,382				—				15,382
Short-term investments:
Corporate obligations			513,418				—				513,418
Other Assets:											—
Deferred compensation investments			15,311				15,311				—
Other investments			653				653				—
Total assets measured at fair value		$	1,282,996			$	235,537			$	1,047,459
Liabilities
Forward foreign currency exchange contracts		$	13,759				—			$	13,759
Total liabilities measured at fair value		$	13,759			$	—			$	13,759

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

     Cash equivalents and short-term investments — These investments are adjusted to fair value based on quoted market prices or are determined using a yield curve model based on current market rates.

     Deferred compensation plan investments and other investments — The fair value of these investments is based on quoted market prices.

     Forward foreign currency exchange contracts — The estimated fair value of forward foreign currency exchange contracts, which includes derivatives that are accounted for as cash flow hedges and those that are not designated as cash flow hedges, is based on the estimated amount the Company would receive to sell these agreements at the reporting date.

Note 9 — Goodwill and Intangible Assets

Goodwill

The Company annually evaluates goodwill for impairment annually as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable. Because the Company has one reporting segment under Statement of Financial Accounting Standards (SFAS) 142, the Company utilizes the entity-wide approach for assessing goodwill for impairment and compares its market value to its net book value to determine if an impairment exists. No impairment of goodwill resulted from the Company’s most recent evaluation of goodwill for impairment, which occurred in the fourth quarter of fiscal 2008. No impairment of goodwill resulted in any of the fiscal years presented. The Company’s next annual impairment assessment will be made in the fourth quarter of fiscal 2009 unless indicators arise that would require the Company to reevaluate at an earlier date. The following table presents the changes in goodwill during the first three months of fiscal 2009:

		Three Months
		Ended
		January 31,
		2009
Balance at beginning of period		$	235,175
Foreign currency translation adjustment			(1,721	)
Balance at end of period		$	233,454

Intangible Assets

The Company reviews identified intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable. Recoverability of these assets is measured by comparison of their carrying value to future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

Intangible assets, which will continue to be amortized, consisted of the following:

		January 31, 2009								November 1, 2008
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Technology-based		$	37,301			$	27,432			$	36,516			$	25,731
Tradename			1,434				1,434				1,438				1,430
Customer Relationships			4,530				3,141				4,529				3,022
Other			6,529				6,529				6,534				6,534
Total		$	49,794			$	38,536			$	49,017			$	36,717

Intangible assets are amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use. The remaining amortization expense will be recognized over a weighted-average period of approximately 1.2 years.

Amortization expense from continuing operations, related to intangibles was $2.0 million and $2.4 million for the three-month periods ended January 31, 2009 and February 2, 2008, respectively.

The Company expects amortization expense for these intangible assets to be:

Fiscal		Amortization
Year		Expense
Remainder of 2009		$	4,719
2010		$	4,562
2011		$	1,849
2012		$	128

Note 10 — Pension Plans

The Company has various defined benefit pension and other retirement plans for certain non-U.S. employees that are consistent with local statutory requirements and practices. The Company’s funding policy for its foreign defined benefit pension plans is consistent with the local requirements of each country. The plans’ assets consist primarily of U.S. and non-U.S. equity securities, bonds, property and cash.

In the first quarter of fiscal 2009, the Company adopted the measurement date provision of SFAS 158, Employers’ Accounting for Defined Benefit Pension and other Postretirement Plans — an amendment of FASB Statement No. 87, 88, 106 and 132(R) (SFAS 158). This provision requires the measurement date of the plan’s funded status to be the same as the Company’s fiscal year end. In accordance with the adoption provisions of SFAS 158, the Company changed its measurement date from September 30, 2008 to November 1, 2008, the Company’s fiscal year-end, and recorded a $0.2 million adjustment to retained earnings.

Net periodic pension cost of non-U.S. plans is presented in the following table:

		Three Months Ended
		January 31, 2009				February 2, 2008
Service cost		$	1,552			$	2,389
Interest cost			2,301				2,542
Expected return on plan assets			(2,583	)			(3,056	)
Amortization of prior service cost			1				2
Amortization of initial net asset			(10	)			(10	)
Amortization of net (gain) loss			(125	)			51
Net periodic pension cost		$	1,136			$	1,918

Pension contributions of $1.8 million were made by the Company during the three months ended January 31, 2009. The Company presently anticipates contributing an additional $5.3 million to fund its defined benefit pension plans in fiscal year 2009 for a total of $7.1 million.

Note 11 — Revolving Credit Facility

As of January 31, 2009, the Company had $1,283.1 million of cash and cash equivalents and short term investments, of which $119.2 million was held in the United States. The balance of the Company’s cash and cash equivalents and short term investments was held outside the United States in various foreign subsidiaries. As the Company intends to reinvest certain of its foreign earnings indefinitely, this cash is not available to meet certain of the Company’s cash requirements in the United States, including for cash dividends and common stock repurchases. The Company entered into a five-year, $165 million unsecured revolving credit facility with certain institutional lenders in May 2008 in order to satisfy potential shortfalls of cash required in the United States. To date, the Company has not borrowed under this credit facility but the Company may borrow in the future and use the proceeds for support of commercial paper issuance, stock repurchases, dividend payments, acquisitions, capital expenditures, working capital and other lawful corporate purposes. Any advances under this credit agreement will accrue interest at rates that are equal to LIBOR plus a margin that is based on the Company’s leverage ratio. The terms of this facility also include financial covenants that require the Company to maintain a minimum interest coverage ratio and not exceed a maximum leverage ratio. The Company is currently compliant with these covenants. The terms of the

facility also impose restrictions on the Company’s ability to undertake certain transactions, to create certain liens on assets and to incur certain subsidiary indebtedness.

Note 12 — Common Stock Repurchase

The Company’s common stock repurchase program has been in place since August 2004. In the aggregate, the Board of Directors has authorized the Company to repurchase $4 billion of the Company’s common stock under the program. Under the program, the Company may repurchase outstanding shares of its common stock from time to time in the open market and through privately negotiated transactions. Unless terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized under the program. As of January 31, 2009, the Company had repurchased a total of approximately 114.5 million shares of its common stock for approximately $3,905.2 million under this program and an additional $94.9 million remains under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. The Company also from time to time repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock or restricted stock units, or the exercise of stock options. Any future common stock repurchases will be dependent upon the amount of cash available to the Company in the United States.

Note 13 — Discontinued Operations

In November 2007, the Company entered into a purchase and sale agreement with certain subsidiaries of ON Semiconductor Corporation to sell the Company’s CPU voltage regulation and PC thermal monitoring business which consists of core voltage regulator products for the central processing unit in computing and gaming applications and temperature sensors and fan-speed controllers for managing the temperature of the central processing unit. During the first quarter of fiscal 2008, the Company completed the sale of this business for net cash proceeds of $138 million, which was net of other cash payments of approximately $1.4 million. The Company made final additional cash payments of approximately $2.2 million in the second quarter of fiscal 2008. In connection with the purchase and sale agreement, $7.5 million was placed into escrow and was excluded from the gain calculations. The Company recorded a pre-tax gain in the first quarter of fiscal 2008 of $78 million, or $43 million net of tax, which was recorded as a gain on sale of discontinued operations. During the third quarter of fiscal 2008, additional proceeds were released from escrow and an additional pre-tax gain of $6.6 million, or $3.8 million net of tax, was recorded as a gain on sale of discontinued operations. Additionally, at the time of the sale, the Company entered into a one-year manufacturing supply agreement with a subsidiary of ON Semiconductor Corporation for an additional $37 million. The Company has allocated the proceeds from this arrangement based on the fair value of the two elements of this transaction: 1) the sale of a business and 2) the obligation to manufacture product for a one-year period. As a result, $85 million was recorded as a liability related to the manufacturing supply agreement, all of which has been utilized as of January 31, 2009. The liability was included in current liabilities of discontinued operations on the Company’s consolidated balance sheet. The Company recorded the revenue associated with this manufacturing supply agreement in discontinued operations. As a result, the Company classified inventory for this arrangement as a current asset of discontinued operations. The Company may receive additional proceeds of up to $1 million, currently held in escrow, upon the resolution of certain contingent items, which would be recorded as additional gain from the sale of discontinued operations.

In September 2007, the Company entered into a definitive agreement to sell its Baseband Chipset Business to MediaTek Inc. The decision to sell the Baseband Chipset Business was due to the Company’s decision to focus its resources in areas where its signal processing expertise can provide unique capabilities and earn superior returns. On January 11, 2008, the Company completed the sale of its Baseband Chipset Business for net cash proceeds of $269 million. The cash proceeds received were net of a refundable withholding tax of $62 million and other cash payments of approximately $9 million. The Company made additional cash payments of $7.8 million during fiscal 2008, primarily related to transaction fees and retention payments to employees that transferred to MediaTek Inc. The Company expects to make additional cash payments of approximately $2.5 million in the second quarter of fiscal 2009 related to retention payments to employees that transferred to MediaTek Inc. and intellectual property license fees incurred by MediaTek Inc. The Company recorded a pre-tax gain in fiscal 2008 of $278 million, or $202 million net of tax, which is recorded as a gain on sale of discontinued operations. The Company may receive additional proceeds of up to $10 million, currently held in escrow, upon the resolution of certain contingent items, which would be recorded as additional gain from the sale of discontinued operations.

The Company received additional amounts under various transition service agreements entered into in connection with these dispositions. The transition service agreements included manufacturing, engineering support and certain human resource services and information technology systems support. At the time of the disposition the Company evaluated the nature of the transition services and concluded the services would be primarily completed within the one-year assessment period, and the

Company did not have the ability to exert significant influence over the disposed businesses’ operating and financial policies. Accordingly, the Company concluded that it did not have a significant continuing involvement with the disposed businesses and has presented the disposition of these businesses as discontinued operations pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

The following amounts related to the CPU voltage regulation and PC thermal monitoring and Baseband Chipset businesses have been segregated from continuing operations and reported as discontinued operations. These amounts also include the revenue and costs of sales provided under the manufacturing supply agreement between the Company and a subsidiary of ON Semiconductor Corporation, which terminated during the first quarter of fiscal year 2009.

		Three Months Ended
		January 31, 2009				February 2, 2008
Total revenue		$	10,332			$	47,363
Cost of sales			10,847				32,983
Operating expenses			15				14,067
Gain on sale of discontinued operations			—				356,016
(Loss) income before income taxes			(530	)			356,329
(Benefit from) provision for income taxes			(894	)			107,458
Income from discontinued operations, net of tax		$	364			$	248,871

		January 31, 2009				November 1, 2008
Inventory		$	—			$	5,894
Total assets reclassified to current assets of discontinued operations		$	—			$	5,894
Refundable foreign withholding tax		$	62,037			$	62,037
Total assets reclassified to non-current assets of discontinued operations		$	62,037			$	62,037
Accounts payable		$	31			$	1,540
Income taxes payable			4,105				4,105
Accrued liabilities			2,540				12,809
Total liabilities reclassified to current liabilities of discontinued operations		$	6,676			$	18,454

Note 14 — Income Taxes

The Company has provided for potential liabilities due in the various jurisdictions in which the Company operates. Judgment is required in determining the worldwide income tax expense provision. In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of cost reimbursement arrangements among related entities. Although the Company believes its estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in the historical income tax provisions and accruals. Such differences could have a material impact on the Company’s income tax provision and operating results in the period in which such determination is made.

     Fiscal Year 2004 and 2005 IRS Examination

During the fourth quarter of fiscal 2007, the IRS completed its field examination of the Company’s fiscal years 2004 and 2005. On January 2, 2008, the IRS issued its report for fiscal 2004 and 2005, which included proposed adjustments related to these two fiscal years. The Company has provided for taxes and penalties related to certain of these proposed adjustments. There are four items with a potential total tax liability of $46 million that the Company concluded, based on discussions with its tax advisors, are not likely to result in additional tax liability. Therefore, the Company has not recorded any tax liability for these items and is appealing these proposed adjustments through the normal processes for the resolution of differences between the IRS and taxpayers. Two of the unresolved matters are one-time issues and pertain to Section 965 of the Internal Revenue Code related to the beneficial tax treatment of dividends from foreign owned companies under The American Jobs Creation Act. The

other matters pertain to the computation of research and development (R&D) tax credits and the profits earned from manufacturing activities carried on outside the United States. These latter two matters could impact taxes payable for fiscal 2004 and 2005 as well as for subsequent years.

     Fiscal Year 2006 and 2007 IRS Examination

During fiscal 2006, the IRS invited the Company to participate in the Compliance Assurance Process (CAP), which is a voluntary pilot program the IRS is conducting for a limited number of large business taxpayers. The objective of CAP is to reduce taxpayer burden associated with IRS audits while assuring the IRS of the accuracy of tax returns prior to filing. The Company participated in CAP for fiscal 2006 and 2007. Under the program, the IRS is expected to work with the Company contemporaneously to achieve federal tax compliance and resolve issues prior to the filing of a tax return. CAP is designed to eliminate or substantially reduce the need for post-filing examinations of future tax returns. The IRS and the Company have agreed on the treatment of a number of issues that have been included in an Issue Resolutions Agreement related to the 2006 and 2007 tax returns. However, no agreement was reached on the tax treatment of a number of issues, including the same R&D credit and foreign manufacturing issues mentioned above related to fiscal 2004 and 2005. The IRS has not completed its audit of the pricing of intercompany sales (transfer pricing). The Company has not provided for any additional taxes in respect of the examination of the fiscal 2006 and 2007 tax returns.

     Fiscal Year 2008 IRS Examination

The Company stopped participating in the CAP in fiscal year 2008.

Although the Company believes its estimates of income tax payable are reasonable, no assurance can be given that the Company will prevail in the matters raised and that the outcome of one or all of these matters will not be different than that which is reflected in the historical income tax provisions and accruals. The Company believes such differences would not have a material impact on the Company’s financial condition but could have a material impact on the Company’s income tax provision, operating results and operating cash flows in the period in which such matters are resolved.

Note 15 — New Accounting Standards

     Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 requires entities to provide enhanced disclosures about how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact, if any, that SFAS 161 may have on the Company’s financial condition and results of operations. The adoption of SFAS 161 will change the Company’s disclosures for derivative instruments and hedging activities beginning in the second quarter of fiscal year 2009.

     Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R requires an acquiring entity in a business combination to recognize the assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair value on the acquisition date. It further requires that acquisition-related costs and restructuring costs be recognized separately from the acquisition. SFAS 141R is effective for fiscal years beginning after December 15, 2008, which is the Company’s fiscal year 2010. The Company is currently evaluating the impact, if any, that SFAS 141R may have on the Company’s financial condition and results of operations. The adoption of SFAS 141R will change the Company’s accounting treatment for business combinations on a prospective basis beginning in the first quarter of fiscal year 2010.

Noncontrolling Interests

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 clarifies that a noncontrolling or minority interest in a subsidiary is considered an ownership interest and, accordingly, requires all entities to report such interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008, which is the Company’s fiscal year 2010. The Company is currently evaluating the impact, if any, that SFAS 160 may have on the Company’s financial condition and results of operations.

     Accounting for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of SFAS 159 in the first quarter of fiscal year 2009 did not impact the Company’s financial condition or results of operations.

Note 16 — Subsequent Event

On February 17, 2009, the Company’s Board of Directors declared a cash dividend of $0.20 per outstanding share of common stock. The dividend will be paid on March 25, 2009 to all shareholders of record at the close of business on March 6, 2009.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended November 1, 2008.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, including in particular the section entitled “Outlook,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance, particularly in light of the ongoing global credit and financial market crisis; our anticipated growth and trends in our businesses, our capital needs and capital expenditures; our market position and competitive changes in the marketplace for our products; our ability to innovate new products and technologies; the effectiveness of our efforts to refocus our operations and reduce our cost structure and the expected amounts of any cost savings related to those efforts; our ability to access credit or capital markets; our ability to pay dividends or repurchase stock; our third-party suppliers; intellectual property and litigation matters; potential acquisitions or divestitures; key personnel; the effect of new accounting pronouncements and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part II, Item 1A. Risk Factors and elsewhere in our Quarterly Report on Form 10-Q. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

During the first quarter of fiscal 2008, we sold our baseband chipset business and related support operations, or Baseband Chipset Business, to MediaTek Inc. and sold our CPU voltage regulation and PC thermal monitoring business to certain subsidiaries of ON Semiconductor Corporation. The financial results of these businesses are presented as discontinued operations in the consolidated statements of income for all periods presented. The assets and liabilities related to these businesses are reflected as assets and liabilities of discontinued operations in the consolidated balance sheets as of January 31, 2009 and November 1, 2008. Unless otherwise noted, this Management’s Discussion and Analysis relates only to financial results from continuing operations.

Results of Operations
(all tabular amounts in thousands except per share amounts and percentages)

Overview

		Three Months Ended
		January 31, 2009				February 2, 2008
Revenue		$	476,569			$	613,909
Gross margin %			56.4	%			61.2	%
Income from continuing operations, net of tax		$	24,585			$	121,848
Income from continuing operations, net of tax as a % of revenue			5.2	%			19.8	%
Diluted EPS from continuing operations		$	0.08			$	0.40
Diluted EPS		$	0.09			$	1.22

The year-to-year revenue changes by end market and product category are more fully outlined below under Revenue Trends by End Market and Revenue Trends by Product Type.

In the first quarter of fiscal 2009, our revenue decreased 22% from the first quarter of fiscal 2008 and our diluted earnings per share from continuing operations decreased by 80%. Cash flow from operations in the first quarter of fiscal 2009 was $59.9 million, or 13% of revenue, and we had $1,283.1 million of cash and short-term investments and no debt as of January 31, 2009.

The global credit crisis and deteriorating economic conditions continue to result in more cautious customer spending behavior and generally lower demand for our products. We cannot predict the severity, duration or precise impact of the economic downturn on our future financial results. Consequently, our reported results for the first quarter of fiscal 2009 may not be indicative of our future results.

Revenue Trends by End Market

The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

		Three Months Ended												Three Months Ended
		January 31, 2009												February 2, 2008
						% of												% of
		Revenue				Revenue				Y/Y%				Revenue				Revenue
Industrial		$	257,046				54	%			(22	)%		$	331,061				54	%
Communications			127,388				27	%			(3	)%			131,012				21	%
Consumer			75,940				16	%			(40	)%			126,952				21	%
Computer			16,195				3	%			(35	)%			24,884				4	%
Total revenue		$	476,569				100	%			(22	)%		$	613,909				100	%

Industrial — The year-to-year decrease in industrial end market revenue in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 was primarily the result of a broad-based decline in demand in this end market, which was most significant for products sold into the instrumentation and automotive sectors of this end market.

Communications — The year-to-year slight decrease in communications end market revenue in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 was primarily the result of a decrease in sales of analog products used in wireless handsets and networking applications, partially offset by an increase in sales of products used in basestations.

Consumer —The year-to-year decrease in consumer end market revenue in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 was primarily the result of a decrease in demand for products used in digital cameras, advanced televisions and video game applications, consistent with the global slowdown in consumer spending.

Computer — The year-to-year decrease in computer end market revenue in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 was primarily the result of a general slowdown in the PC market.

Revenue Trends by Product Type

The following table summarizes revenue by product categories. The categorization of our products into broad categories is based on the characteristics of the individual products, the specification of the products and in some cases the specific uses that certain products have within applications. The categorization of products into categories is therefore subject to judgment in some cases and can vary over time. In instances where products move between product categories, we reclassify the amounts in the product categories for all prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each product category.

		Three Months Ended												Three Months Ended
		January 31, 2009												February 2, 2008
						% of												% of
		Revenue				Revenue				Y/Y%				Revenue				Revenue
Converters		$	225,823				47	%			(20	%)		$	281,081				46	%
Amplifiers			130,172				27	%			(16	%)			155,719				25	%
Other analog			51,005				11	%			(37	%)			80,843				13	%
Subtotal analog signal processing			407,000				85	%			(21	%)			517,643				84	%
Power management & reference			26,135				6	%			(22	%)			33,415				6	%
Total analog products		$	433,135				91	%			(21	%)		$	551,058				90	%
General purpose DSP			40,110				8	%			(27	%)			55,118				9	%
Other DSP			3,324				1	%			(57	%)			7,733				1	%
Total digital signal processing		$	43,434				9	%			(31	%)		$	62,851				10	%
Total revenue		$	476,569				100	%			(22	%)		$	613,909				100	%