Executives: Rick Muscha - Senior Director, IR Moshe Gavrielov - President and CEO Jon Olson - EVP and

CFO
Analysts: Ross Seymore - Deutsche Bank William Stein - SunTrust Robinson Humphrey Alex Gauna - JMP Securities Ian Ing - MKM Partners Christopher Rolland - FBR Capital Markets Chris Danely - JPMorgan Vivek Arya - Bank of America Merrill Lynch Ryan Carver - Credit Suisse Tristan Gerra - Robert W. Baird Ambrish Srivastava - BMO Capital Markets Gabriela Borges - Goldman Sachs Blayne Curtis - Barclays Capital Srini Pajjuri - CLSA Securities Ruben Roy - Piper Jaffray Suji De Silva - Topeka Capital Markets Hans Mosesmann - Raymond James Sanjay Chaurasia - Nomura Securities David Wu - Indaba Global Parker Paulin - Wells Fargo

Securities
Operator: Good afternoon. My name is John, and I will be your conference operator. I would like to welcome everyone to the Xilinx Third 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’ll provide a financial and business review of the December 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 that is currently available and that actual results may differ materially. We refer you to the 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 can be accessed from our Xilinx Investor Relations Web site.

Let me now turn the call over to Jon Olson.

Jon Olson: Thank you, Rick. Profitability remained strong during the quarter, but sales were lower than anticipated declining 2% during the December quarter. The primary weakness was driven by broadcast and wireless communications end-markets. 28-nanometer sales represented one of the bright spots of the quarter with sales increasing nearly 20% sequentially.

All members of this product family grew with Zynq, Virtex and Artix all posting double-digit growth rates. From an end-market perspective, sales to communications customers declined 3% sequentially with flat wired sales and a decline in wireless sales. Wireless sales were impacted by weaker sales from non-China regions, while our China wireless business increased in line with expectations. Industrial and aerospace and defense sales increased as expected with strong defense sales offsetting declines in industrial, scientific and medical. Broadcast, consumer and automotive sales declined due to weaker broadcast sales, which were driven by weak purchasing activity from a couple of large customers.

Automotive sales were better than expected as several new advanced driver assistance programs began to ramp. In terms of linearity, the month of October and November were in line with our expectations and the month of December progressively weakened. Turns were 44% for the quarter. Gross margin of 69.7% was better than expected as a result of customer and product mix. Total operating expenses were $224 million, including $2 million of amortization related expenses.

This was $6 million lower than guided resulting in operating income of 32%. Other income and expense was a net expense of $4 million better than forecasted, mainly due to higher interest income from our investment portfolio. Net income for the quarter was $168 million or $0.62 per share including a $0.02 per diluted share benefit primarily related to the reinstatement of the R&D tax credit. Operating cash flow for the September quarter -- excuse me the December quarter was $291 million before $6 million in CapEx. Strong cash flow during the quarter was positively impacted by a net improvement in working capital led by the timing impact of accounts receivable.

Diluted shares for the quarter were 274 million shares. This was a bit higher than forecasted as a result of the higher stock price. There was a 7.8 million share dilutive effect from our convertible note. We are committed to returning cash to shareholders. During the quarter, we continued to aggressively buyback stock through purchasing 4 million shares for $175 million.

We also paid $76 million in quarterly dividends. For the fiscal year thus far, we have returned over $700 million to shareholders in the form of repurchase and dividend, $80 million more than we generated in operating cash flow. Let me now comment on the balance sheet. Cash and investments increased $28 million to approximately 3.6 billion. We have $600 million in convertible debt and $1 billion in fixed rate debt resulting in the net cash position of approximately $2 billion.

Inventory dollars decreased by $16 million during the quarter, we plan to continue to reduce inventory dollars in the March quarter. Let me now turn to a discussion of guidance for the March quarter of fiscal year '15. Our backlog heading into the quarter is down sequentially. Although we are forecasting another strong quarter for our 28-nanometer products, we will be facing headwinds from aerospace and defense due to a normal seasonality and program-related timing. We expect both wired and wireless communications to be flat sequentially.

Wireless sales will be impacted by the timing of the FDD-LTE deployments. We expect industrial and aerospace and defense segment to decrease for the reasons I mentioned earlier, offsetting flat sales to ISM and test and measurement. Broadcast, automotive and consumer is expected to up driven by a rebound in broadcast and continued advanced driver assistance strength in automotive. As a result, we’re expecting total sales for the March quarter to be down 2% to 6% sequentially. The midpoint of this guidance is predicated on a turns rate of approximately 51%.

Gross margin is expected to be 68% to 69%. Operating expenses in the March quarter expected to be approximately $227 million including 2.5 million of amortization of acquisition related intangibles. Other income and expense for the March quarter is expected to be a net expense of approximately $7 million and the share count is expected to be approximately 270 million shares. The tax rate for the March quarter is expected to be approximately 13%. Now I’d like to turn the call over to Moshe.

Moshe Gavrielov: Thank you, Jon and good afternoon to you all. I am clearly disappointed with our top-line performance, both during the December quarter and the guidance for the March quarter. Looking forward into fiscal year 2016, we are planning for a flat to low growth environment. The renewed revenue growth from our 28-nanometer portfolio will be somewhat offset by uncertainty in global communication spending and expected declines in key aerospace and defense programs. On the positive side, Xilinx posted strong profitability in the December quarter, both gross margin and operating margin at 69.7% and 32% respectively were better than our expectation contributing to earnings per share of $0.62.

Our cash flow continues to be healthy and we are on a path to return more cash to shareholders in the form of both dividends and buybacks that we will generate in fiscal year '15. The most significant highlight for the quarter is our renewed 28-nanometer revenue growth, which exceeded $150 million sequential increase of nearly 20%. We’re anticipating 28-nanometer sales to continue to grow and exceed $160 million in the March quarter. We also achieved several important milestones for our 20-nanometer portfolio. Our Kintex UltraScale devices became the industry's first 20-nanometer FPGAs to move into volume production.

Based on customer feedback, we continue to believe that we have an estimated one-year lead over the competition. This technology leadership is complemented by our Virtex UltraScale family, which is the industry’s ASIC class 20-nanometer high-end product offering. It's a very high-end of this family, we began shipping the industry’s largest FPGA which delivers over 4x of the capacity of any competitive devices. Finally in the area of design software, we launched the SDAccel development environment. This is the second in a family of software defined development environment, which we call SDX and this will greatly expand our user base to include the broad community of systems and software engineers from both existing and new markets.

This environment combines OpenCL, C and C++ languages with an initial focus on the growing data-center acceleration market. Despite the top-line challenges, I remain confident in Xilinx’s strong technology leadership and market position. We’re still in early phases of 28-nanometer revenue growth, have already delivered the first production ASIC class 20-nanometer product, market expanding new SDX software defined programming environments and soon our 60-nanometer products that include multi-processing SOCs. At our Investor Day on March 10th, we look forward to providing you more details outlining our plans. I’d like to turn the call back to the operator for the Q&A.

Question-and:

Operator: The floor is now open for questions. (Operator Instructions) Our first question comes from the line of Ross Seymore of Deutsche Bank. Your line is open.

Ross Seymore: Moshe, I just wanted to get a little more color, if you could, on your statement about, I think you said fiscal '16 being a flat to low growth environment. Can you give us, again, a little more detail on the puts and takes that lead you to that conclusion? Thank you.

Moshe Gavrielov: Well, we’ll be giving more details in March, but fundamentally growth is driven for us by 28-nanometer and we see clouds from communications and A&D. And so when you look at the combination of both of those and we see it as being generally speaking flat to a low growth environment for fiscal year '16 that’s probably as much as we can say at this point in time.

Operator: Our next question comes from the line of William Stein of SunTrust. Your line is open.

William Stein: Also on growth, in the past, Moshe, I think you've talked about growing at some multiple, I believe it was two times the semi industry.

We're not seeing that now and you're certainly setting more moderate expectations for fiscal '16. Should we think about this is as a more sort of permanent reset to the longer-term growth potential that the Company has? Or do you think this is a sort of soft-spot that we will power through eventually and return to more meaningful growth?

Moshe Gavrielov: The comparison with the rest of the semiconductor industry is a very difficult one to make, because it has so many elements and sometimes there’s fast growing applications like mobile, so that’s not ours. But definitely we do see things slowing down. I think we will shed more light on this in March and also be able to forecast the -- more accurately the period that this will continue, but this is -- I would look at it as not a global statement at this point in time and we’ll be in a better position to answer it in March.

Jon Olson: Yes, I don’t think we’re making a long-term statement on that Will and I think I’d just like to highlight the headwinds from aerospace and defense which are in some cases program related that are causing some of the headwinds for FY16 and we still have a good strong long-term view of our aerospace and defense participation.

Operator: Our next question comes from the line of Alex Gauna from JMP Securities.

Alex Gauna: I’m wondering, as you look at your aerospace and defense business, how much of this is a result of the Russian sanctions? Do you have visibility on how long these delays might last? And is there any effect from the strong dollar factoring into either this category or even in the communications segment? Thank you.

Jon Olson: Yes so from a Russia perspective, no, and aerospace and defense not really I mean we -- some of our communications business and some of our high performance compute which is in the other category in particular that latter statement, we’ve had some impact because of the Russian sanctions and that’s been difficult for us to ship certain things into Russia and to get licenses for, so that has had some impact. But I would say it’s been relatively small impact, but certainly anything helps right in this kind of environment, so we’ve had some impacts from that. Relative to the stronger dollar, since we ship everything in U.S.

dollars we don’t have an actual direct hedging effect, but obviously our customers’ customer and distributor does ship in local currencies and that while when we’ve asked those questions, we haven’t gotten any answer that says yes it’s really impacting our business. I know of other businesses that are saying that to me that they’re having some issues, because effectively relative to the euro our products have gotten 20% more expensive over the last year or so. So it undoubtedly is going to have an impact to what I would call already a weaker environment in Europe than most other places.

Operator: Our next question comes from the line of Ian Ing from MKM Partners.

Ian Ing: Yes, my one question is in the China base station business still some big targets for base station deployments this year among the carriers.

Do you expect any of the same sort of bomb kit issues you had last year supply constraints in RF power amps from other suppliers?

Jon Olson: Yes so the -- from the power amp perspective I think there are still some other shortages that are going on, but that’s really not the biggest gaining factor to our overall wireless business that’s for sure. And I think with specifically in China there’s probably two changes to what we have been thinking and saying about it. One is the phase 3 rollout, while it is, and we still believe it is beginning in the spring time and that’s progressing. The pace of that rollout seems to be a little slower than the previous two phases where in the past we’ve seen a pretty high concentration over a quarter and a half of deployment and that deployment seems to be at least best as we can tell maybe lasting a little longer to get those base stations out, so a little bit longer time period. And the second thing which is also looming on our minds is around the FD licenses.

I think I’d articulated that the FD base stations would start to ship in this March quarter and then throughout the remainder of calendar '15. Right now the licenses still are not broadly let and our modeling was essentially a one year lag from when the TD base station started shipping in volume which was similar to the 3G deployment and that really isn’t happening right now. So we’re kind of on pins and needles here waiting for those licenses to be let, so we can kind of model when that might start.

Operator: Our next question comes from the line of Christopher Rolland from FBR Capital Markets.

Christopher Rolland: So you mentioned clouds from wireless, so is that really from just Asia? How much of that is non-Asia? And then the magnitude and timing on Europe and perhaps even India, does that play into your forecast at all for next year?

Jon Olson: Yes so I -- correct me if I’m wrong here Moshe, but I think the clouds are on communications broadly not just wireless and what we see on the wireless side is weakness in the short-term and deployments going out in North America that has caused us some short-term shipment issues meaning this quarter and this past quarter and next quarter, specifically capital being diverted away from AT&T and Verizon and in other places.

But probably more prominent Sprint is having more issues with rollouts and so the OEMs that we ship to that supply the Sprint LTE rollout has been cutting back orders because they have not been getting orders from Sprint as best as we can understand. And so that softness in North America is some part of that I would say early in the year. And then to your kind of a follow through to the question related to Europe and India, in our mental model right now we have not modeled either one of those geographies taking significant product at this point in time and probably into next year as well, we’re still looking into that phenomena because we’ve seen no signs of that going I would say growing in a very significant way at this time yet.

Operator: Our next question comes from the line of Chris Danely of Citigroup.

Chris Danely: I guess, what gives you confidence that this is purely a demand problem versus some share loss?

Moshe Gavrielov: Well, the numbers on 28-nanometer are growing again very rapidly actually and if you look over the past three years we believe that we’ve been consistently above 60% and it sort of peaked last year probably at around 70% and it's still well into the 60s now.

So, I don’t believe that it's a result of that, the other thing we’re seeing is 28-nanometer now all elements that are growing. So, the high-end, the Virtex side, the Zynq side, and the Artix side are growing too and in the past a lot of growth came from the mid-range Kintex and now as this expands the breadth and depth of our product portfolio continues to give me confidence in that regard.

Jon Olson: And just one more thing, if we think about the way we cast the second half of this current fiscal year previously and where we think now almost all of our shortfalls are around situations that are more demand related over older products than 7 Series and that wouldn’t typically not indicate share loss because no one redesigns an older product, right. So it's really around that doesn’t seem to be around any of the leading edge.

Operator: Our next question comes from the line of Vivek Arya of Bank of America Merrill Lynch.

Vivek Arya: I actually had a clarification and a question on the clarification, maybe if you could also give us some more color on how we should think about gross margins given the weakness in the mix. Is it better to think gross margins could be, say, 67%-68% than the 69%-70%? And then Moshe for my question, if you could just give us the status of your 16-nanometer FinFET engagement with TSMC, what is the status there? And do you expect to get products out on time this year? Thank you.

Jon Olson: So, on the gross margin side obviously we told you the gross margin estimates are for Q4, so you can get that at FY15 and FY16 we’re obviously not done with our planning at this point in time. We certainly are -- we have been running the Company at 68% to 70% range that’s our goal to do that as well, and so at this point in time I wouldn’t give you a -- I certainly wouldn’t give you a lower number to plan for, for gross margins. We do think that with the strength of our hand at 28-nanometer and as good as that profile is for us from a cost perspective as well, I am feeling reasonable about providing that range at least for now.

Moshe Gavrielov: Vivek and with regards to taping out the program continues and the relationship with TSMC is excellent. We’re getting absolutely outstanding support. The design is a very challenging design and as a result we expect for it to tape out a couple of months later than we had originally expected. So, this is -- we’re probably looking at the May timeframe as opposed the March timeframe which is our latest estimate for that.

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

Ryan Carver: This is Ryan Carver in for John. I just wanted to get a clarification. You gave some color on the fiscal '16 as being driven by a strong 28-nanometer, but offset by global comms and some weakness in aero and defense. But if I look at some of your 40-nanometer and 45-nanometer business, I mean share has been declining year-on-year for the last four quarters and if I think about sort of where 28-nanometer product goes, primarily it’s been into the comms end-market. So I guess, how comfortable are you guys in thinking that 28-nanometer is going to be able to drive this outperformance in fiscal '16 given your commentary about comms and aero and defense sort of equating to probably north of half of your revenue for the year next year? And the continued 40-nanometer declines.

Moshe Gavrielov: Sure so 28-nanometer is a very broad and deep product offering and there is lots of elements to it and there are different components and different families that are targeted at specific different applications. It addresses all of the markets we’re in absolutely all of them and is an expansion play into additional areas. It would be correct to say that in the last year of production was driven by wireless comms, but it’s not that that’s the only market that it has addressed. And if you look at the early shipments they weren’t necessarily into comms at all, they were in ASIC emulation, they were actually into some consumer markets and all of these continue. What is happening is as the family of product has rolled out and has been extremely successful, more and more are moving into significant production and growth that you see now back to over 150 was actually driven by growth on the Virtex front, growth on the Zynq front and growth on the Artix front and those addressed numerous markets not only comms.

So it’s broad, it’s growing significantly, it’s the fastest growing product we’ve ever seen and we’re very confident that if you look at the numbers then it grew from 100 million to 380 million if you look at our projection of over 160 it will come in at about 580 million for the year. We expect significant growth beyond that. So that is growing rapidly and it’s going to be the most successful and broadest portfolio we have. Having said that, when you look at 40 and 45, we continue to see strength and on the 45 which is the low-end product offering the Spartan product offering whereas we believe that 40-nanometer is no more or less peaking for us at this point in time. In terms of market share on 40-45, it hasn’t necessarily shrunk, it’s sort of going up and down over the past year I would say and that’s our valuation.

Jon Olson: Yes Ryan if I could just point out a little bit, I mean it’s one of our bigger growth areas for this year and in the future is industrial -- our industrial business as well as automotive and those are both primarily driven by growth in our 45-nanometer and our Zynq product families and so as you think about the momentum in those end-markets that have been clear over the last year or so and that momentum we believe is going to continue it is transitioning from older products into these new or higher valued products at higher ASPs where we are getting a tremendous amount of benefit. And then also even within the wireless space there is a transition going on away from older products Virtex-5s and 6s into the 7 Series and to big Zynq products going into the wireless function, so we’re going to see more growth in the 28-nanometer area even in the comms thing. So don’t write off comms totally here.

Operator: Your next question comes from the line of Tristan Gerra of Robert W. Baird.

Your line is open.

Tristan Gerra: Back when the HD TVs were ramping there was demand for FPGAs into TVs and also in broadcasting which helped your consumer business. Do you expect a similar trend to happen with the rise of 4K TVs? And do you see any interest there also in OEMs and what would be the timing on that?

Jon Olson: Yes Tristan, this is Jon. Yes we have actually already shipped quite a bit at the tail-end of last fiscal year and the beginning of this fiscal year into the high -- or excuse me the 4K-2K or ultra high definition televisions. We also are beginning to ship into OLED technology based televisions as well and we do expect to be in the television business longer than some of our previous generations were in for the initial of HD and the initial [Audio Gap] and then got phased out rather quickly.

We seem to have quite a bit of activity going on across all the current manufacturers for that business, so that is a good opportunity for us, yes.

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

Ambrish Srivastava: Moshe, I just had a clarification on the FinFET comments you made. Is this an issue emanating from the difficulty, in your opinion, TSMC is having or is it coming from the Xilinx side? And just as a quick follow-up, what’s the timing from tape out to when we should expect production volume? Thank you.

Moshe Gavrielov: Okay. So there are no issues with TSMC, they have had numerous tape outs already, they are giving us full support. The design whenever you encounter a new generation of product tends to unearth problems that you did not anticipate and as a result the closing of all of these issues is taking a little longer plus the challenges related to design for FinFET transistors are more significant. So it's not a TSMC challenge or issue at all, it's just our ability to finish the design with their support. After if you look at our business typically what sort of happens is tape it out, you get it back after a few months, you go through a lengthy evaluation cycle and then you move it into production at which point in time it takes two to three years until it reaches high volume production.

So, it sort of depends if you look at 28-nanometer, we reached $100 million production I think three years after we tape out the product…

Ambrish Srivastava: Do you mean a quarterly run rate of 100?

Moshe Gavrielov: No, not a quarterly, overall 100, okay sorry, okay anyway it takes years until you reach the -- yes I am sorry, it was the quarterly that I was looking at…

Ambrish Srivastava: It’s alright, that would be too long.

Moshe Gavrielov: Sorry about that.

Ambrish Srivastava: That’s okay. We all knew what you meant, Moshe.

Operator: Our next question comes from the line of Jim Covello of Goldman Sachs.

Gabriela Borges: This is Gabriela Borges on behalf of Jim. I want to ask a longer-term question, specifics that you can comment until you have the Analyst Day that would be very helpful color. Just wonder if there is any change longer-term in how you're thinking about the OpEx profile of the Company as we transition to a server environment or on the capital allocation profile of the Company as well? Thanks very much.

Jon Olson: From a spending profile, certainly we are not going to -- we’ll update you more a lot more about what we think about FY16 there, but mostly it’s comment around next year’s positioning the Company from a flat to low growth environment we’re certainly very aware of what that means and we are working towards spending goals to match that thought process. But from a longer-term perspective, R&D intensity as we have these nodes go more rapidly closer together until maybe we get to 10-nanometer it is causing us a little bit of headwind that we’ve been able to manage it through a variety of different techniques and decisions that we made.

So I am not too worried about any sort of a bigger ramp in spending coming on. And relative to capital allocation again it is based on a lot of factors including what our plans for excess cash would be beyond returning to shareholders, but our primary situation is to continue to think about dividend first and favor that and then the share repurchase is opportunistic as what visibility I have today about the future, I don’t think we’ll be changing that policy.

Operator: Our next question comes from the line of Blayne Curtis of Barclays. Your line is open.

Blayne Curtis: I just want to go back to the wireless segment with the March guidance will be down four quarters in a row.

So you talked about some end-market issues but I am not aware of other companies seeing these declines. So I was just curious, as you look back, what’s really causing this? Did you see ASIC replacement? Is there a mix shift to the mid range in than fiscal '15 guidance, you talked about uncertain outlook, how much are you expecting this business to come back for you within that? Thanks.

Jon Olson: Yes so, Blayne the short-term issues on the wireless business really is not as much China as it is the rest of the world for us and some of the softness that’s gone on. All I can do is tell you what we believe, our customers are saying and since we have the lion share of the share among PLD companies in support of the Sprint rollout that has been something that has disappointed relative to our expectations for this quarter and we believe that leads into the forecast for Q4 as well. The China aspect, we actually had China grow as we anticipated so that wasn’t necessarily the short-term issue.

But we are -- we did also I believe signal we were a lot more bullish on wireless growth in China because of phase 3 rollout in March and while we’re not seeing decline there, we aren’t seeing the same relative acceleration of growth in China that we had originally said. So, it's not like our wireless business is going away it’s just that is not increasing to the point that we had said. With respect to FY16 I think Moshe was trying to characterize the cloud overall, with communications being a global rough spot for global spending not specifically targeting some geography in wireless. So we’re not really going to give a guidance right now and our thoughts on wireless for FY16, we’ll do that in March.

Operator: Your next question comes from the line of Srini Pajjuri of CLSA Securities.

Srini Pajjuri: Moshe, more of a philosophical question, I am just looking at the business over the last three years and based on your guidance for fiscal '16, on average there isn’t a whole lot of growth here. I think in fiscal '10 you grew I mean a couple of years ago you grew about 10% fiscal '14 but outside of that. So, my question is obviously R&D is running at fairly high OpEx is running close to 40%. As the leader, I am wondering, does it still make sense to chase the Morse Law? I mean is it part of the business that you have to continue to invest in Morse Law? And my question is, why wouldn't it make sense to kind of slow it down a little bit and kind of bringing that OpEx number down?

Moshe Gavrielov: So that’s great philosophical question which is we could spend hours debating, but let me give you my two minute response here. You’re right in pointing out, if you look back that the growth has not been sustained so for Xilinx it was -- grew to 1.8 billion it was at 1.7 billion to 1.8 billion for several years then took a jump to the 2.4ish billion level and has been at that point for more years than we believed it would stay there.

And that clearly is disappointing, having said that, we do believe that this is a business. As the semiconductor industry is maturing, being at the leading edge enables us to capture a larger SAM and in order to do that we’re investing in order to exploit that and provide those solutions. Now the first node where this was possible in a big way, we believe is 28-nanometer and we do see and we will -- we understand that it’s incumbent upon us to show the proof, we do see in quite few cases more ASICs going away and customers transitioning into FPGAs and to a lesser degree but nonetheless this is happening to some of the traditional ASSP providers can no longer keep up and that provides an opportunity for us. In order to do that, we need to have both different products and a big investment in the software enablement to enable us to capture those markets. We’re making those investments now and we believe that the return is still ahead of us and an example would be the Zynq product line which enables us to participate in a bigger way in automotive, a market where we only had a very fringe participation in the past.

So I can’t argue with your numbers right, the numbers are what the numbers are, but I fervently believe that the opportunity is still ahead of us to capture these markets and we’ll give you more insights into that in the March timeframe, but excellent question and thank you for asking it.

Operator: Our next question comes from the line of Ruben Roy of Piper Jaffray. Your line is open.

Ruben Roy: Moshe, I just wanted to throw in another question on the communications discussion. In terms of that end-market, you historically haven’t provided longer-term guidance and now you're giving us a little more of an outlook from a longer-term perspective.

And I am wondering if some of that is driven by what you’re seeing in addition to these clouds around the design environment? Has anything changed in the design environment from your big customers that globally that sell into the service providers as it relates to FPGAs, would you say? Or do you think that, once you get by fiscal 2016, that you can still think about some of the CAGR growth rates that you guys have discussed historically around the various communications markets? Thank you.

Moshe Gavrielov: So we believe there is opportunities for growth in both wired communications and wireless communications. We will try to size those. Wired in particular has been frustrating for us. For several years now we’ve predicted growth, projected growth and it hasn’t happened, even the 28-nanometer on the wired side it’s taking longer for those very significant designs to translate into revenue.

Nonetheless, the opportunity is there and the wired market is not going away, but we’ll give you a deeper and more accurate response in March.

Jon Olson: I think from a design environment though I think, as Moshe said earlier that we are seeing a ASICs being replaced, we are participating in the aggregation that’s going on as there can be continued consolidation in the infrastructure business. We are still seeing lots of opportunities for us out there.

Moshe Gavrielov: And things like the SDX environments, those design environments have specifically targeted to enable us to address those market more smoothly and more efficiently than we have in the past. So, there is a need to provide somewhat of a different approach in order to expand the population of designers we have there and that includes communications, but it's not only limited to communications.

Operator: The next question comes from the line of Ian Ing from MKM Partners.

Ian Ing: You talked about a slow growth environment but you've also got the third highest gross margins in semis after Linear and PMC-Sierra. So, have you thought about going after some new volume applications, perhaps with some price elasticity?

Jon Olson: Yes we definitely have a posture here that’s about offering profit dollars with respect to that, so it's not like if a deal doesn’t look like 59.7% to us, we won’t bid on it we won’t go after it that’s not the case at all. We certainly think about this as a portfolio and a opportunity. The issue becomes what -- when are those that still make sense that an FPGAs is the right answer because obviously bidding at a negative 20% for some single function capability doesn’t really add any value to shareholders also we don’t do that, but we absolutely have looked at broadening applications within our existing markets and we’ve made certainly done some of that as well.

Operator: Your next question comes from the line of Suji De Silva from Topeka. Your line is open. Suji

De Silva: Just a couple of questions on 28-nanometer and 20-nanometer, on 28, where would you say we are in the cycle now versus where 28-nanometer peaks? And for 20-nanometer down the road, do you expect to have a similar shape of ramp versus 28, or somehow distinct? Thanks.

Moshe Gavrielov: So 28 our position has evolved and we actually think it's going to peak later than we have originally expected and to last longer than it had originally expected. Potentially with a slightly smaller peak, but actually similar area under the curve and we are still years away from that peak and we’re seeing a lot of markets that are addressed by our product just starting now to move into production and probably have another two or three years before they move into production.

So the accumulation of which generates the peak is still years away. 20-nanometer, the way we look at it is 20 and 16 together are should be equivalent to 28 in terms of their capabilities and that’s because they are coming very close together in terms of introduction. And so if you -- there was a previous question that I manage to confuse everyone with my response, but it took three years to reach $100 million on 28-nanometer and that’s a quarterly number and our expectation is if you look at the combination of 20 and 16 and if you could sort of shift them back to start at the same time then you should hopefully reach the same number in with the same level of success of that point in time. Now we’ll see if that sort of happens and it will -- but if you look at 20 alone it won’t match what 28 has done and if you look at 16 alone, it won’t match what 28 has done. The expectation is that between the two of them it should come close to what 28 has done in a more or less similar timeframe.

Operator: Our next question comes from the line of Hans Mosesmann from Raymond James.

Hans Mosesmann: But, Jon, can you give us a sense, last year, what the end-of-life product sales were? Or maybe you can give us the past couple of years? Thanks.

Jon Olson: So we haven’t provided that detail information, we’ve talked about it not being particularly material. In the last couple of quarters we certainly were shipping I would say incrementally more of that into aerospace and defense and that continues to -- will continue to trail off over the next couple of quarters. I don’t, again Han that we really haven’t quantified it because it hasn’t been that significant over the last couple of quarters I would say uniformly in any given quarter.

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

Sanjay Chaurasia: Hi, this is Sanjay for Romit Shah. Moshe, one question you indicated your frustration with the wired segment and I was wondering if you could drill down a bit deeper and which specific segments in wired you think have disappointed you? And when you talk to these customers, just wondering what is the take on it, you have better products, more integration in your FPGAs, what is it that's been so disappointing? Why you are not seeing the growth from these segments?

Moshe Gavrielov: Well I think we’ll give you more context in March, but fundamentally this is a multi-year challenge we have run into and it sort of -- it’s just for several years that is the one segment that we have continuously predicted growth. We have the design wins and they’re taking longer to move into production and when they move into production they yield less than we had expected them to.

So we’ll try to break it down by category. I would say that you’re right in pointing out that it’s not fair to tower everyone with the same brush. It’s a very broad market with several sub-segments so we’ll highlight which ones are moving faster and which ones appear to be slower, but I don’t have that information with me now.

Operator: Your next question comes from the line of David Wu of Indaba Global.

David Wu: I just have one clarification.

As I listened to the Cisco call, their business in the wireline kind of segment, were surprisingly strong in the U.S. and even their European business wasn't that weak. I was wondering whether this is a phenomenon of one company doing relatively better than the other ones or is this a generalization that you can see across your customer base?

Jon Olson: Yes I don’t -- I haven’t really studied anything Cisco had said and I think in the short run here David, but I know Cisco sells in a lot of different applications not necessarily all wired communications. They are in broadcast, or in cable and equipment and as you know that we said we had lower than expected performance in that area in this last quarter and so sometimes it is application specific or sub-application specific or not. And I’m certainly not trying to pile on Cisco negatively either on wired or broadcast we had weakness in other customers as well.

We’ve had geographic weakness from a European perspective as well, so we are -- it often is not what the entire company is doing, it’s more about the industry and sometimes it’s about our specific applications in the industry. So I think all we can do is point out to where we play and where we sit, it’s hard for us -- it’s hard for me to comment on what I think about Cisco’s strength or weakness in any geography.

Operator: And your next question comes from the line of Parker Paulin of Wells Fargo Securities.

Parker Paulin: Could you speak for a moment about your 40-nanometer revenues this quarter and just provide a little bit more color in that space? Thanks.

Jon Olson: Yes so our new product category is made up of 28-nanometer and then our 40-45 so there is two generations of technologies and so our overall new products numbers were down a little bit.

And we updated that our 28-nanometer was up substantially, so that leads you to believe obviously by actual subtraction that the 40-45 was down. Within that it was a broadcast related and some communications. The low-end that Moshe talked about continues to be quite well. And that was doing well so it was really the high-end and it was related to the communications segment and broadcast so it really ties nicely to the overall disappointment if you will because of that. And that another way for us to describe that to you would be there were some older products that are either going through transition or there is slow demand by their end-markets depending on which customer and which situation that we’re driving that.

Operator: At this time, we have no additional audio questions.

Rick Muscha: Great, thanks for joining us today. We have a playback of this call beginning

at 05:00 PM Pacific Time, 08:00 PM Eastern Time today. For a copy of our earnings release, please visit our IR Web site. Our next earnings release date for the fourth quarter of fiscal year '15 will be Wednesday, April 22nd after the market close.

This quarter we will be holding our 2015 Investor Day on March 10th in New York. We do look forward to seeing you there. This completes our call. Thank you very much for your participation.

Operator: This concludes today’s conference call.

You may now disconnect.