Lattice Semiconductor Corporation ( LSCC)

Q3 2011 Earnings Call

October 20, 2011 6:00 PM ET

Executives

David Pasquale – Global IR Partners

Darin Billerbeck – President and CEO

Joseph Bedewi – Corporate VP and CFO

Analysts

Ruben Roy

Tristan Gerra

Nathan Johnson

Sundeep Bajikar

Sanjay Devgan

David Duley

Bill Dezellem

Richard Shannon

Presentation

Operator

Good evening. My name is Ali and I will be your conference operator today.

At this time, I would like to welcome everyone to the Lattice Semiconductor Third Quarter 2011 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the conference over to your host Mr. David Pasquale of Global IR Partners. Mr. Pasquale, you may begin your call.

David Pasquale

Thank you, Ali. Welcome, everyone to Lattice Semiconductor’s third quarter 2011 results conference call.

Joining us today from the company are Mr. Darin G. Billerbeck, the company’s President and CEO, and Mr. Joe Bedewi, Lattice’s Chief Financial Officer. Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today’s results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the release off of the Investor Relations section at Lattice Semiconductor’s website.

Before we begin the formal remarks, I’ll review the Safe Harbor Statement. It’s our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company’s official guidance for the fourth quarter of fiscal 2011. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly-announced conference call.

The matters that we discuss today, other than the historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission including our fiscal year 2010 Form 10-K filed on March 11 and our Quarterly Reports on Form 10-Q. The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP.

I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead, sir.

Darin Billerbeck

Thank you, David, and thanks to everybody for joining us on the call today. Results for the third quarter came in within our updated guidance, but below our original guidance. The revenue shortfall was a result of weaker than normal demand in many of our markets. We remain close to our customers worldwide as we continue to have open discussions throughout the quarter. The goal was and remains to support our customers however possible.

The reality is that the prolonged concerns over the worldwide financial crisis and weakness in the telecom infrastructure build out resulted in order push outs. During this period of uncertainty, we continue to streamline our company for long term efficiency. We are tightening spending across all operations, managing our inventory and making further inroads on restructuring goals.

In Q3, we established our Philippines operations in R&D office. In addition, we entered into an agreement to outsource our sort testing from the U.S. to an Asian subcontractor. We also outsourced several non-core IT support functions. They are no longer cost effective internally. And finally, we will have completed the closure of our Pennsylvania R&D office by the end of this fiscal quarter.

We expect our efforts combined with the acceleration of our new products to market. We will help minimize the impact of any prolonged slowdown. Lattice does remain committed to developing differentiated products that deliver low power, low costs, and affordable innovation. This value proposition resonates well with our customers. As an example, our mid-range Lattice ECP3 continues to perform well with some big design win communication customers. We’re also pleased to report that our low density MachXO2 continues to make progress. Our sales team does harder work to accelerate the number of design wins in markets as diverse of handsets, servers, networks, and wireless. We view MachXO2 as the right product with the features for the broad market of applications. We expect attain full production release of our remaining densities, speed, and power offerings by the end of the quarter.

In terms of specific results for the third quarter, revenue was $81.7 million, was down 2.6% from the $83.9 million in Q2 of 2011, and up 6% from the $77.1 million in Q3 of 2010. The revenue mix of new Mainstream and Mature was 48%, 27% and 25% of revenue respectively in Q3. This compares to New at 49%, Mainstream at 27% and Mature at 24% in Q2 of 2011.

New products were down 3% quarter-on-quarter following sequential growth of 11% in Q2. Mainstream products were down 5% quarter-on-quarter, following a 12% decline in Q2, primarily driven to a decline in the military segment. Mature products were up slightly from the prior quarter.

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