Executives: Rick Muscha - Director of Finance Moshe Gavrielov - CEO Jon Olson -

CFO
Analysts: James Covello - Goldman Sachs Ambrish Srivastava - BMO Chris Hemmelgarn - Barclays Tristan Gerra - Robert W. Baird & Co. Anil Doradla - William Blair William Stein - SunTrust Robinson Humphrey John Pitzer - Credit Suisse Ian Ing - MKM Partners Vivek Arya - Bank of America Merrill Lynch Ryan Goodman - CLSA Americas LLC Joe Moore - Morgan Stanley Romit Shah -

Nomura
Operator: Good afternoon. My name is Lyann and I'll be your conference operator. I would like to welcome everyone to the Xilinx First Quarter Fiscal Year 2015 Earnings Release 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) Please limit your questions to one to ensure that management has adequate time to speak to everyone. I would now like to turn the call over to Rick Muscha. Thank you.

Mr. Muscha, you may begin your conference.

Rick Muscha: Thank you, and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We will provide a financial and business review of the June quarter and then we'll open the call for questions.

Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information as currently available and actual results may differ materially. We refer you to documents the company files with the SEC including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live.

It could be accessed from our Xilinx Investor Relations website. Let me now turn the call over to Jon Olson.

Jon Olson: Thank you, Rick. The quarter was characterized by strong profitability, although revenue was slightly below our guidance. Xilinx sales were $613 million, down 1% sequentially.

The two primary end markets contributing to the shortfall versus our expectation were China LTE and aerospace and defense. Total wireless revenue was significantly down -- excuse me -- was slightly down primarily due to a lower than anticipated 28-nanometer sales to China LTE base station manufacturers. Sales from these customers were below our expectations due to some balancing of component inventory. LTE deployment outside of China remained healthy, and as a result we had better than expected shipment of our 40-nanometer and 65-nanometer technology. Aerospace and defense was weaker primarily due to the timing of certain key programs moving into the September quarter.

We are confident that this segment will see a very significant rebound in the September quarter. Wired communications sales were up and better than anticipated driven by enterprise networking OTN and access business. The Industrial, Scientific and Medical segment rebounded nicely as expected. New products increased 6% sequentially driven by both Virtex 6, Spartan 6 growth. Turns were 47% for the quarter.

Gross margin was 69.1% for the quarter, higher than forecasted due primarily to product mix. We also continue to make good progress in cost improvement across our new product families, particularly in yield and backend expenses. Operating expenses were $217 million including amortization of $2.4 million, slightly below lower than forecasted due to variable expenses related to lower revenue and lower stock-based compensation expense. Other income and expense was a net expense of $6 million better than forecasted mainly due to the higher -- to higher interest income on our investment portfolio. Net income for the quarter was $173.6 million or $0.62 per diluted share.

Operating cash flow for the March quarter was $130 million before $9 million in CapEx during the quarter. Operating cash flow was impacted by higher working capital requirement due to the timing of receivables and payables along with higher inventory level. Diluted shares for the quarter were 282 million shares. This was 4 million less than the forecasted due to the impact of a lower stock price and increased buyback activity during the quarter. There was a 9 million share dilutive effect from the convertible note.

We continue to be committed to returning cash to shareholders and during the quarter we stepped up our buyback activity repurchasing 2.1 million shares for $100 million. We also paid a record $77 million in quarterly dividend. Let me now comment on the balance sheet. Cash and investments decreased $53 million to approximately $3.6 billion. We have $600 million in convertible debt and $1 billion in fixed rate debt resulting in a net cash position of approximately $2.0 billion.

Combined inventory days at Xilinx and distribution increased as we forecasted. The total inventory days are 135, up from 115 days in the prior quarter. As you recall earlier this year, we have got safety stock particularly in 28-nanometer to ensure sufficient supply to meet our demand outlook. We expect inventories to remains at these elevated levels through December and then begin to decline. Let me now turn to a discussion of guidance for the September quarter fiscal year 2015.

Our backlog heading into the quarter is slightly down sequentially. We expect wired and wireless communications to be down in the September quarter. The leading factors driving the decrease in wireless sales are a delay in our expectations for the next phase of China LTE deployment and absorption of inventory at key customers. We currently anticipate wireless sales to increase meaningfully into December and March quarters. After posting its highest sales level in nearly two years, wired communication is expected to decline sequentially in the September quarter.

We expect industrial and aerospace and defense segment to be up significantly driven by aerospace and defense. Broadcast, Consumer and Others expected to be flat sequentially. As a result, we are expecting total sales for the September quarter to be flat to down 4%. The midpoint of this guidance is predicated on a turns ratio of approximately 48%. Gross margin is expected to be approximately 70% as we benefit from customer mix during the quarter.

Operating expenses in the September quarter are expected to be approximately $236 million including $2.5 million of amortization of acquisition related intangibles. The majority of this increase is related to R&D mask and tape-out expense for 20-nanomenter technology. Other income and expense for the September quarter is expected to be a net expense of approximately $7 million and share count is expected to be approximately flat. The tax rate for the September quarter is expected to be approximately 13%. Now let me comment on changes for fiscal year 2015 expectation.

We remain confident in our broad base of 28-nanometer growth opportunities and believe this family will demonstrate strong growth in fiscal year 2015. However, the ramp will be slower than previously anticipated. The key drivers for this change are the pace of China LTE deployment and a slower than expected ramp in wired communications. As a result, we expect our total revenue to be up approximately 5% for the fiscal year. This forecast is predicated on increased China wireless sales in the December and March quarters as key customer inventories are absorbed in the next phase of LTE deployment begin.

Gross margin will be mix dependent in the December and March quarters, but we remain comfortable with our fiscal year 2015 gross margin guidance of 68% to 70%. Operating expenses will be lower than anticipated as we manage the business appropriately to focus on superior next-generation product development and execution within a disciplined financial framework. R&D expense for the year is expected to be approximately $530 million and SG&A expense approximately $380 million. Other income and expense will be a net expense of approximately $28 million, down from the prior guidance of $34 million due to better returns from our investment portfolio. And the tax rate is expected to be approximately 13%.

Let me now turn the call over to Moshe.

Moshe Gavrielov: Thank you, Jon and good afternoon to you all. While we are disappointed with top line during this June quarter, our continued focus on profitability drove significant increases in both gross and operating margin to 69.1% and 33.7% respectively, resulting in earnings per share of $0.62. Following the March quarter we had 28-nanometer sales increased 40% to more than $140 million. 28-nanometer sales exceeded $130 million in the June quarter.

This slight pullback was forced by a temporary pause in China LTE activity. Despite this pause, we remain very confident that the 28-nanometer nodes will continue to be the most successful node in our history, served as the growth driver for the company for several years. We are still in the early phases of 28-nanometer revenue growth, the very large number of design wins being converted to revenue over the next several years across a very broad range of markets. Consequently, we expect 28-nanometer growth to resume in the second half of our fiscal year with meaningful contributions from new LTE orders and more rapid growth from a host of ramps and design wins in markets including wired communication and data center and industrial. Given our current disability of these ramps, we are revising our fiscal year 2015 28-nanometer sales target to be approximately $600 million.

A proven formula for successful execution established the 28-nanometer continues to yield excellent results to 20-nanometer, the UltraScale family. Kintex UltraScale, the industry’s first 20-nanometer device been in the market since November -- per our largest customer is providing us with more than six months advantage over competitive product. During the quarter, we began shipping our Virtex UltraScale All Programmable FPGA, industry's only high-end product offering in 20-nanometer. This family provides our customers with unprecedented level -- system-level performance and integration, that enables the displacement of another class of ASICs and ASSPs. Let me now turn the call back to the operator for Q&A session.

Operator: Thank you. The floor is now open for questions. (Operator Instructions) Your first question comes from the line of Romit Shah with Nomura. Your line is open. Romit Shah, your line is open.

Your next question comes from the line of Jim Covello from Goldman Sachs. Your line is open. James Covello -

Goldman Sachs: Great. Thanks so much for taking the question. I appreciate it.

On the China LTE, how do you think about how much it is the supply issue versus the demand issue? In other words, is this just a another pause in a broader built out or is the -- the demand continues to be okay, maybe they preordered some of the components ahead of what is really continue to build. Could you give us any color on that, that would be great? Thanks.

Jon Olson: Yeah. Jim, I think this past quarter, our fiscal Q1 quarter was little more on the inventory side as, I think you recall, we had a huge shipment to them in the March quarter and some of the -- the situation with supply chain overall with other suppliers certainly has challenged some of the OEMs in China. So, I think I would characterize our fiscal Q1 as being a little more on the supply side and the fiscal Q2 more -- a little more being on the delay side of when phase III is going to hit, although there is still little bit of inventory rebalancing going on in that.

So, it's probably the -- I don’t know if I can really handicap a percentage, but each of those quarters but that’s how I would describe it.
James Covello -

Goldman Sachs: And I guess for my follow-up, I'd stand on that same topic, are we seeing any of the kind of incomplete kitting dynamic that we've seen in prior cycles? In other words, I don’t think PLDs are the longest lead-time or the things where the lead-times have stretched the most. But we know things like RF have stretched quite a better. Are we seeing customers order the entire kit waiting for the longest lead-time item or is that really not part of the supply dynamic in this cycle?

Jon Olson: Well, I do think that they were trying to make -- generally trying to get their supply chain solidified and they have placed orders on us to make sure that we have supply and in some cases they took that. They took those parts though, if they wouldn’t get -- if they were short of some of other parts that they kept, then I would say, yes, they are -- in some cases have been ordering partial kits, if you will, to make sure that they could try to build when they got the full building materials.

James Covello -

Goldman Sachs: Very helpful. Thank you so much. Good luck.

Moshe Gavrielov: Next question?

Operator: Your next question comes from the line of Ambrish Srivastava from BMO. Your line is open.

Ambrish Srivastava - BMO: Hi, thank you. Jon in the past you have talked about your sense of how many base stations have been built. So where are we in the build from China Mobile? And I think you've also talked about your expectation for what the other carriers you will be building out?

Jon Olson: Yeah, so our best information is they are in -- have been through this June period in the neighborhood of 300,000 base stations built from the China Mobile perspective. And I think some of the differences in our thought process is when they were going to beyond the 400-500 into the next phase and that seems to have pushed out into calendar 2015 now. And so think they are in the process of getting to their 400-500 between now and the end of the calendar year.

And then with respect to FD, the FD phase is still not well understood in terms of when that will begin. We're still counting on that to have some impact for us in our December quarter as builds will happen ahead of deployment, obviously. Ambrish Srivastava - BMO: So then what gives you the confidence than that you would see a rebound in the second half of the fiscal year in the wireless business?

Jon Olson: Yeah, I think it's really talking to -- individually to each of the customers and the carriers. We've had multiple visits over the last three weeks and that -- of both the manufacturers and the carriers and this is our best sense of what's going on. I mean, as inventory is depleted the kits are fully deployed as the shortages dry up than we would expect a rebound from that and then also an impact for Phase III which is the next way from China Mobile.

So those two effects together should provide us a second half increase. Ambrish Srivastava - BMO: Thank you.

Operator: Your next question comes from the line of Blayne Curtis from Barclays. Your line is open. Chris Hemmelgarn - Barclays: Thanks very much for taking the question.

This is Chris Hemmelgarn on for Blayne. Just first of all, could you talk a little bit about where you think your share is for 28 and I guess kind of what your -- obviously, it's down a little bit in the June quarter. But do you expect that to continue to decline in the September or do you expect a rebound in the 28-nanometer revenue?

Moshe Gavrielov: If you look at the past fiscal year which ended in March, our share grew significantly over the year and actually for the whole year it was over 70%. And our prediction for this quarter is over $130 million and that should put us in the high-60s in terms of percentage. But, you know that depends, of course, on what the competition does there.

But, no, we are confident in the exceeding $130 million and remaining well ahead. And we expect it to continue to restart its accelerated growth in the December quarter. So this quarter and the next quarter 28-nanometer revenue will be relatively flattish and then we expect it to grow in the December quarter and the March quarter and to yield overall $600 million, which is the new target for the year. And, no, you couldn’t do the arithmetic on what the market share will be then based on whatever you predict as the companies will ship 28-nanometers.

Jon Olson: Yeah, Chris.

If I can add another little color to that, if you think about what's happened here in this flat spot on 28-nanometer, it's really been driven very largely by Kintex the mid-range because of China Wireless where we have very, very strong market share, which we still -- I believe we'll be maintaining throughout this particular cycle. And if you look inside some of the other product families, as well, test and measurement was down some, and so that impacted the very high end of Virtex. But the other, broad based Virtex parts grew quite nicely throughout the quarter, which is one of the reasons our wired business is up, as well. So, we’re getting really good traction across the Board in our product families in 28-nanometer. And what you're really seeing is the effect of China on the Kintex family, which takes so many parts into the radios and base bands.

Chris Hemmelgarn - Barclays: That's really helpful. Thanks so much. Then just as a quick follow-up. Obviously a strong gross margin quarter and continuing in September. Can you just talk about your expectations for the trend throughout the fiscal year? Can you continue at these high levels, or does that pull back a bit?

Jon Olson: Yes, as I said, 68% to 70% is still our full year forecast.

And I think when we talked about this a quarter ago, we did talk about the potential of having it hit 70% at some point, depending on what mix is going on there. We’re forecasting to be at the top end of the range in our fiscal Q2 and it will be mix-dependent. So, for example, if wireless ticks up, it will have some downward pressure. So, it really depends on the mix of other customers or other end markets, whether it's sustained, but, again, our forecast is to be in the 68% to 70% range. Chris Hemmelgarn - Barclays: Thanks very much.

Operator: Your next question comes from the line of Tristan Gerra from Baird. Your line is open. Tristan Gerra - Robert W. Baird & Co.: Hi. Good afternoon.

How much room do you have to further cut operating expense if the rebound that you expect from TD-LTE starting in the December quarter does not materialize?

Jon Olson: Yes, so we've taken a position, as I said in the remarks, to be at the low end of our previous range. We're certainly looking broadly across the company for, I would say, typical kind of belt-tightening opportunities to help balance out some of the top line change and therefore, overall profitability changes in our full year outlook. However, we remain committed to developing -- to continue the 20-nanometer and 16-nanometer development programs. We will not be slowing those down and cutting those back. So, we have some other things that are under consideration and we're looking at as alternatives if we need to do something.

But we aren't going to change our fundamental approach of developing and getting new technology out as fast as possible. Tristan Gerra - Robert W. Baird & Co.: Okay. And then if I look at the mix by node from China between you and your competitor, do you expect that mix to change as orders rebound starting in the December quarter, more toward 28-nanometer? Or do you think that the mix of ordering patterns from Huawei between 65, 40, and 28 will remain the same as in the next investment wave for TD-LTE?

Jon Olson: Yes, we believe that there will be a bias towards conversion of certain sockets that are in older technologies at 28-nanometer in certain manufacturers in China, which is to our benefit. So, I think that premise is still what we believe and the same premise that we've had all along.

We do believe that as the year moves forward, we'll continue to gain a little more share there. Tristan Gerra - Robert W. Baird & Co.: Great. Thank you.

Operator: Your next question comes from the line of Anil Doradla from William Blair.

Your line is open. Anil Doradla -

William Blair: Hey guys, couple questions. Why was the inventory build-up by now -- I mean we get these things in waves and cycles. Was there anything unique about the inventory build-up this time with the Chinese customer? Or was it pretty much in line with what you've seen in the past? And then I have a follow-up.

Jon Olson: Well, I think the unique part, Anil, was a little more the shortage issue and I think, the supply chain dynamic with the Chinese manufacturers to make sure they could secure enough supply from people.

And we got caught in the -- we built a lot; they took a lot. And some of the other suppliers didn't build up to the request and so we're getting the effect of that. Is this different than the past? I don't know how to compare it to any point in time in the future -- or excuse me, in the past, relative to that. It is what it is right now. I don't know that I can compare it to the 3G wave in any way.

Anil Doradla -

William Blair: And stepping back, looking at the big picture, to a skeptic, one might say that the last time we had this 3G wave was -- Beijing Olympics was supposed to be big on 3G. Well, it took almost four years before we saw it. To a skeptic who questions the premise that the trajectory on China 4G is perhaps right here and now, or over the next six to 12 months -- it's not that, but it's more like over the next two years. How would you react to that?

Moshe Gavrielov: So, the expectation is that it will be a three-year deployment. That is in line with previous generations.

This is a massive deployment; it's a huge country and it's being deployed in several waves. The previous wave had about six cycles to it, and we wouldn't be surprised if this one has a similar multiple cycles. And the next one counts as number three, in the way we're think. And then the previous generation was one carrier, albeit the biggest one, this one has all three carriers. And the other two smaller ones are expected to start a little later and with a different -- the FD approach, largely.

And as a result, the expectation is that it will continue to be a multi-year rollout. And in terms of the peak, depending on exactly when these other two carriers go into their broader deployment, but we can't expect the peak to be in calendar 2015, but for the deployment to continue well beyond calendar 2015. And that would be very much in line with the previous facts, right, as opposed to the conjecture, which may have assumed that it happened faster. Anil Doradla -

William Blair: Thank you.

Operator: Your next question comes from the line of William Stein from SunTrust Robinson.

Your line is open. William Stein - SunTrust

Robinson Humphrey: Thanks. Thanks for taking my question. Regarding the China LTE inventory, I'm hoping you can give us some view as to where you see the inventory build. Has it been in component distribution, or at the contract manufacturers, at the OEMs themselves, or maybe even at the carrier, at China Mobile? Any visibility into that would be helpful.

Jon Olson: Yes, well, our best understanding of this is at the OEM manufacturer, whether they're doing it themselves or they're using a contract manufacturer. And the portion where they're waiting for other components, that's where that sits. Relative to how many base stations are sitting in OEMs' warehouses; I really don't have a good view of that. I think that is not as big of an issue after we work through the early part of the summer than it was before that beforehand. William Stein - SunTrust

Robinson Humphrey: Great.

And then if I can ask one follow-up about the gross margin improvement in the quarter. If you were a completely vertically integrated manufacturer, I'd be highlighting the inventory build as probably a driver here, but I'm not sure it's the case with your company. Maybe you can help me understand whether the inventory build sequentially helped gross margin in the quarter.

Jon Olson: Yes, the inventory build did not help gross margin, in our case, since we do purchase wafers and have them assembled and tested. The inventory was really representing the cost of the work in process of the wafers we purchased.

So, we don't have any spending that gets built up in inventory as a result of factory expenses, if you will, because we're on our purchase price variance issue -- or variance process with the wafer purchases. So, that was not the driver. The driver on a quarter-to-quarter basis was cost reductions with lower yield. So, we were essentially purchasing units, if you will, or the cost of the unit was lower on a quarter-on-quarter basis. So that's why there was a quarter-to-quarter improvement.

And then versus our expectations for the quarter, it was really more around mix. We sold less into the wireless business than we had anticipated and more into a few other end markets that pushed gross margin up a little. William Stein - SunTrust

Robinson Humphrey: That's helpful. Thank you.

Operator: Your next question comes from the line of John Pitzer from Credit Suisse.

Your line is open. John Pitzer -

Credit Suisse: Yeah, good afternoon, Moshe and Jon. Thanks for letting me ask the question. Guys, first, just a clarification, I'm just trying to figure out what's going on in China for you guys, relative to other players. And I know these data points don't always line up exactly.

But TI, Sanima (ph), Ericsson, ZTE all relatively positive commentary around the TD-LTE base station deployment in China. You guys talking more about a pause. Do you think that this is specific to you guys? Or do you think as the earnings season goes on, we'll hear more and more about the pause in China?

Jon Olson: Yes, I don't know what others are going to say, quite frankly. And I think what we're calling a pause is from -- there's two things going on here again, John. One is there was a lot of inventory -- Xilinx inventory, purchased by the OEMs that was built up.

And there's not a total match in their supply chain for what they're doing. So, that's part of the story. The second part of the story around a pause, it was a pause for us versus our expectations. I think, as Moshe characterized a little earlier, there was a view that there was going to be a very, very rapid deployment in China. And this Phase III that we're talking about, we thought was going to happen a quarter or so sooner than it actually is happening.

Whether we were misinformed or what other companies think about that, I really can't comment on that. I really don't know that. But I do know, versus our expectations, its coming -- this Phase III is coming later than we had anticipated. John Pitzer -

Credit Suisse: Jon, that's helpful. And then, Moshe, maybe as my follow-up question, a little bit longer-term question.

You guys talked about some operating expenses ramping because of 20-nanometer. I wonder if you can give us an update on FinFET. There's clearly a lot of controversy out there on when TSMC might get there versus guys like Samsung, GLOBALFOUNDRIES. How comfortable are you still with your timeline around FinFET? And if you had to change course and go with a different foundry vendor, could you? How easily could that be done? Thank you.

Moshe Gavrielov: We are delighted with the progress of TSMC.

As best we can tell, we are on -- they're on schedule and they have numerous other users of the technology who actually, in this case, will even be ahead of us. So, there really is no issue, in our mind, on the availability of the FinFET from TSMC. And, if anything, we've heard significant delays with other players, is that we're not seeing, that, and they are hitting all of their milestones; and so far, so good. So, there is no issue there with regards to their execution. In 16, 28 and the 20; and, as best we can tell, at 16, and they're doing 16 in two cycles.

They're doing a FinFET and they're doing the FinFET Plus version, and we're going to be using the FinFET Plus version. And -- so, we're benefiting from all of their development at this point in time. John Pitzer -

Credit Suisse: Thanks, Moshe. I appreciate it.

Moshe Gavrielov: Sure.

Thank you.

Operator: Your next question comes from the line of Ian Ing from MKM Partners. Your line is open. Ian Ing -

MKM Partners: Yes, thanks for letting me ask question. So, for industrial, aerospace, and defense, it looks like its 18% below prior peak, so we're probably in the middle stages of a semiconductor recovery cycle.

So, do you think you get back to peak run rates in the coming quarters if it's really just an aerospace and defense program timing issue? Or have some sockets maybe moved on to some other activities?

Jon Olson: Yes, I don't know that I can -- I haven't really studied exactly where the peak is at what level. But I think we're going to see a very significant increase because of these key programs that we know that are on the books to spend the money this quarter in aerospace and defense. Last quarter there was a lot of trying to understand why we were an outlier on the pure industrial, scientific, and medical side. That rebounded very nicely. We do expect that to be strong again in the September quarter, with aerospace and defense on top of it growing very significantly.

Not sure that we'll get to a peak. But it will certainly be back on -- in that neighborhood, if you will, in that general range, in the September quarter. Ian Ing -

MKM Partners: Great. And as a follow-on to an earlier question, how much of the 4G base station opportunities still haven't switched over to 28-nanometers? And does that largely switch over with Phase III and China Mobile?

Jon Olson: It's really -- it's very different by manufacturer. I think we've said in the past, we've won about 80% of the sockets.

How long certain manufacturers -- the ones that are still using older technologies, hang onto older technologies, it's hard to -- from a China perspective -- is hard to handicap, quite frankly. I would say the lion's share of what's shipped in China is certainly 28-nanometer. Ian Ing -

MKM Partners: Okay, so it's a gradual process, still. Okay, thank you.

Moshe Gavrielov: Thank you.

Operator: Your next question comes from the line of Vivek Arya from Bank of America. Your line is open. Vivek Arya - Bank of America

Merrill Lynch: Thank you for taking my question. Jon, Moshe, is it fair to assume that for growth in your December and March quarters, that you are depending on the FD-LTE deployment to take off? And if yes, how should we think about the number of base stations that could be deployed in those two quarters for FD-LTE?

Jon Olson: Yes, I think on the -- what we're counting on and the second half is clearly the Phase III build to start happening for China Mobile, which is still TD. And we're counting on, I would say, a modest beginning of the FD cycle.

Vivek Arya - Bank of America

Merrill Lynch: I see.

Jon Olson: In terms of numbers of base stations on FD, I think we're talking about, over the cycle and the time period, to be approaching 0.5 million, but this is just going to be the beginning of that. And as Moshe talked about, later this continues on a more steady basis through 2015 and 2016. Vivek Arya - Bank of America

Merrill Lynch: So, should we then think, Jon, that by the time you get to your December and March quarters that you should be running at the same sort of normalized levels in your communications business that you were in the March or June quarter of this year? Is it a recovery back to those levels? Or do you think it could be -- by the time we get to the back half of your year, we could still be looking at year-on-year growth.

Jon Olson: Well, March was such a crescendo, and June was down from that in China, so I don't know what normalized is, Vivek.

I hesitate to make a statement and mislead you, because I'm not even sure what's normalized. The variability around the China business is continued. We do expect both the December and March quarter to be larger -- excuse me, the December to March quarter to be larger than September. Will it be larger -- and probably larger than the June quarter as well, but I don't know how to answer the normalized part of it. Vivek Arya - Bank of America

Merrill Lynch: Got it.

And one last question, if I may. Could you remind us again of the launch timing of your 16-nanometer and the 20-nanometer products? Thank you.

Moshe Gavrielov: So, the 20-nanometer, both families are now available. The initial tape out was of Kintex, that is moving into production and we're sampling the Virtex product line. We're -- and the feedback we have is that we have a minimum of a six month's lead based on any competitive product.

On the 16-nanometer -- this is FinFET, we're on schedule to tape out in Q1 of calendar year 2015. And what has happened is that we have revised our roadmap to better align with customer requirements and specifications. So, originally, we had expected to tape out by the end of the year. We're now expecting to tape out our first 16-nanometer device in the first quarter of 2015. Vivek Arya - Bank of America

Merrill Lynch: Thank you.

Operator: Your next question comes from the line of Srini Pajjuri from CLSA. Your line is open. Ryan Goodman - CLSA

Americas LLC: Hey, thanks for taking the question. This is Ryan Goodman in for Srini. So, another question on China LTE.

I understand that it sounds like the primary driver was a push-out in the second leg of the Phase III build and inventory digestion. I'm curious, though, if you saw any changes in the competitive dynamics over in China, just as your competitor is ramping up on their 28-nanometer solutions.

Jon Olson: Not really. I think there was probably some pressure around pricing from a perspective of holding onto older technologies and delaying the conversion to 28-nanometer, which would've been to our benefit. And there's been a little bit more of that activity going on.

But I wouldn’t call it so severe that it really changes our expectations that much. But, nothing really on 28-nanometer competitive front that’s different than our previous expectations.

Moshe Gavrielov: We continue to be supremely confident in our market share position on 28-nanometer, in particular on China LTE, nothing has changed in that regard, best we call tell. Ryan Goodman - CLSA

Americas LLC: Okay. Okay, great.

And then for a follow-up, you talked about the inventory levels going on in China. Can you talk just about some of the other markets like Industrial or Wireline? Are you seeing normal inventory levels at the customers out there or is there any risk of a similar dynamic playing out in couple of quarters? Just any color you could add there?

Jon Olson: Yeah, individual customers has always a period of where they particularly -- they take inventory to do proto builds before they go get certified. Again, this is heavy -- I'm talking about wired communications equipment that requires all those certifications. So there is always some lumpiness, if you will, in an individual customer. But we've seen a couple of really strong quarters out of wired, strong quarters out of our 28-nanometer product family, which again is a very positive sign for us in converting sockets that were previously ASICs and ASSPs to FPGAs.

All those things are on track. We really aren’t seeing in other end markets any appreciable inventory build I would say on an industry wide basis. And again, individual customers can have their particular issues from time-to-time. Ryan Goodman - CLSA

Americas LLC: Okay, great. Thank you.

Operator: Your next question comes from the line Joe Moore of Morgan Stanley. Your line is open. Joe Moore -

Morgan Stanley: Great. Thank you. I wonder if you look back over the last couple of quarters and you look at what preceded that inventory accumulation.

Did you guys have any kind of lead-time extensions or is there anything -- I'm trying to -- is there anything you can identify that would have led to an accumulation other than just the customer being a little bit too optimistic?

Moshe Gavrielov: So, no, we've -- we anticipated the potential of having this not look like a 3G rollout, meaning it was going to go a lot faster and so we had built up safety stock which is why our inventory balances are higher than we would normally have them. So we have built up in advance and we communicated to the customers that we had adequate supply to meet their forecast. And that -- in the end, they took whatever they thought they wanted to have and in some cases we believe they took more of our inventory than they actually ultimately needed. Joe Moore -

Morgan Stanley: Okay.

Moshe Gavrielov: I don’t see -- there were no signs and no -- nothing that, I think, we could have done any differently on the inventory front.

Joe Moore -

Morgan Stanley: Yeah. Okay, great. And then with regards to the industrial aerospace and defense that business has gyrated a lot. It was growing over 30% a few quarters ago and the slowed down. Now it looks like ex-defense really sort of start picking back up.

Was there any kind of inventory dynamic around that movement -- that sort of excess that you saw in the mid part of last year, the slowdown and then snap back from that?

Jon Olson: Well, clearly, part of our explanation for the March quarter was -- and industrial, scientific and medical was related to some key customers that had inventory build-up that they were bleeding off. And then those customers bought inventory this past quarter, the June quarter. And so we did experience that and that was the reason that we were different, I think, than some of our peers. It was customer -- specific customer related more than anything else. At this point in time we aren’t seeing any real build up in the ISM category.

And a Aerospace, defense is all program related really, so it's not the same kind of a business model. Joe Moore -

Morgan Stanley: Got it. Thank you very much.

Operator: Your next question comes from the line of Romit Shah from Nomura. Your line is open
Romit Shah - Nomura: Yeah.

Thanks a lot. Jon, it's my understanding that revenues have missed the midpoint of guidance two out of the last three quarters and it's been a little surprising given that we perceive you guys to be gaining share and beneficiary both LTE spending a better economy. So can you just talk a little bit about what's been the challenge in terms of forecasting on a quarter-over-quarter basis, because it doesn’t seem like this was an issue last year?

Jon Olson: Yeah, Romit, it's very interesting observation. You've kind of put a mirror right up to us here on that one. And you are right, we have missed, and it's really -- quite frankly, it's been in two areas, and the two areas we talk about this time, China LTE and aerospace and defense.

And we have certainly ridden a bit of this roller coaster on the China LTE business, pretty much everything else we have relative to our end markets and other plans that we have made for the year seem to be working out just fine, but those two end markets have been difficult for us. Aerospace and defense, while it does have a seasonal attribute to it where it’s typically lower in this summer like it is now and then accelerates in September and December. It has been a little more pronounced. And as we came off the Defense Department budget changes and before that the sequestration issue, there has been a lot of churn going on with respect to military contractors and the quality of some of the forecasts that, you know, we have been less than to our expectations. And so, I don’t think it’s really any other broad base end market issue or customer issue, but we have struggled in getting to those forecast for China LTE and aerospace and defense in the last two or three quarters.

And that pretty much explains why we've either missed or been at the low end of our range.
Romit Shah - Nomura: And I guess, sitting here today, what's the confidence level that beyond fiscal 2015, you guys can get back to that 8% to 12% growth target? Or look at that target and say, yeah, that's the right way to think about our revenue growth.

Jon Olson: Yeah, from my perspective, it’s to me -- this is -- these are the kind of things CFOs do think about a lot and try to figure out what's really going on and what's our trajectory level. And while, we can talk about design wins and how big the dollars are and all of those kinds of things, it’s really around what are the big customer drivers, the big sockets that we have that should be delivering that kind of expansion to our SAM. And these are the sockets that are not traditionally FPGAs that we have won.

And so I have gone back and I have checked on all of those businesses particularly in the wired area. Other end markets like test and measurement are going gangbusters on 28-nanometer. That's not really the issue. The growth is that communications side really, in a lot of places wireless and wired. And in every case the conversion and the SAM expansion activities that we have claimed are still on track.

It's just happening slower than anticipated. So, that's what gives me confidence. I can't -- I don’t know how to communicate that to the audience here in any different way, other than a tremendous amount of activity tracking what we think are the key differentiators that are going to result in SAM expansion for us. And we really aren’t losing shares of 28-nanometer. If anything we are accelerating and winning more in the design win particularly in the SoC-based product and in wired communications side.

Romit Shah - Nomura: All right. Thank you. I appreciate your comments.

Operator: (Operator Instructions) Your next question comes from the line of Tristan Gerra from Baird. Your line is open.

Tristan Gerra - Robert W. Baird & Co.: Hi. Just a quick follow-up from the previous question. So, you mentioned that the ramp of TD-LTE in China had been more difficult to forecast that you had expected. You also mentioned during the Q&A that you over-shipped real end demand.

So is it -- should we really assume that this is the end demand that's the problem? Or is there perhaps a discrepancy between the underlying infrastructure build and your revenue? And, if so, is it fair to assume that there is potentially a mix issue? I mean, we know that your market share is up year-over-year, so could there be something else, notably in terms of average ASPs that could be disappointing relative to the real end demand?

Jon Olson: Yes, I think I would trying -- at least, if I understand the question correctly, Tristan, I was trying to answer that earlier in the call around the inventory imbalance that drove probably more of our issues in the June quarter overall, meaning the inventory balance of other component suppliers into the OEM, and the September quarter was more about the pace and the digestion of base stations in terms of the rollout for us. So it is a combination of both. And again, I think, in the earlier part of the summer, it’s really more around the component balancing at our customers' inventory. Tristan Gerra - Robert W. Baird & Co.: Yes.

I think what I meant is that you over-shipped and yet the past few quarters were disappointing. So is the end demand that much slower that what you initially predicted? Or is there a mix shift that’s happening? Obviously, we are seeing much larger contribution from the mid-range than the high-end, and we know the ASPs are not the same? Are you seeing a big discrepancy in terms of your next shipments versus the revenues that you are posting over the last few quarters specific to TD-LTE?

Moshe Gavrielov: Okay, let me try to that. I think Jon has tried twice. Let me -- there were two separate elements here. One is in the previous cycle there was a shortage of other components and as a result because the customers got everything they needed from us they are now absorbing that.

And -- but in terms of the number, that was not a disappointment for us. So the overall number was in line with what we had expected. But the -- with regards to the third phase which is about to start that is delayed and that is delayed in our estimate by about quarter vis-à-vis what we had expected. It's not in the overall number, it's just in the timing and we do expect that help drive the business and it should drive our business starting from the December quarter and that will generate renewed growth, driven by China LTE. Now, all of the other businesses are starting to catch up and actually Jon commented about the growth we've seen in wired communication in 28-nanometer and that’s growing at a slower rate, but it is happening.

And that's more or less on track to continue over the next few quarters, right? So if you look the overall margin if you look at the overall margins, wherever there's a surge in wireless then you see a small dip in the overall margins and when there is a pause in wireless you see the margin go up at a faster rate. So that's what -- that explains that and it’s the tightest element or the thing that is the percentage of wireless business. But as Jon pointed out this is this is well beyond Kintex this point in time. We are shipping a lot all of the families this point including Virtex and that's actually growing relatively faster as opposed to Kintex which was primarily driven by wireless requirement. Does that help?
Tristan Gerra - Robert W.

Baird & Co.: It adds a lot of color. Thank you very much.

Moshe Gavrielov: Okay. Thank you.

Operator: And I have no further questions at this time.

I turn the call back over to you, Mr. Muscha.

Rick Muscha: Great. Thanks for joining us today. We have playback of this call beginning at 5 PM Pacific Time, 8 PM Eastern Time today.

For a copy of our earnings release, please visit our IR website. Our next earnings release date for the second quarter of fiscal year 2015 will be Wednesday, October 15th after the market close. This quarter we will be presenting at the Citi Global Technology Conference in New York on September 3rd and the Deutsche Bank Technology Conference on September 10th in Las Vegas. This completes our call. Thank you very much for your participation.

Operator: This concludes today's conference call. You may now disconnect.