Edwin Mok - Needham

Great. I just have two more quick ones; on microcontroller you mentioned that your target is to grow that business this calendar year. Does that growth all come from Touch or are you expecting other piece of your microcontroller business to grow as well?

Steve Laub

There are other pieces I think that will grow as well. I think the biggest growth will come from Touch, so that’s my anticipation, but I think some pieces will grow for us as well. Some of which I am not going to describe. We don’t talk about a couple of application areas because, strategically and competitively, we don’t see as much competition there so we are exploring those areas right now. But we expect those areas to grow for us as well.

Edwin Mok - Needham

Okay. A last one regarding the acquisition. It looks like you guys are trying to be a little more proactive on ZigBee. I understand, historically, you guys also manufacture ZigBee radio as well. So, just curious: are you still manufacturing that or have you guys just moved out the whole business and are just on the microcontroller side?

Steve Laub

The ZigBee radio and the ZigBee products are part of the microcontroller business unit.

Edwin Mok - Needham

I see. Great. That’s what I was looking for. Thank you.

Steve Laub

Okay.

Operator

Thank you. Our next question is from the line of Suji De Silva with Kaufman Brothers.

Suji De Silva - Kaufman Brothers

So, on the announcements Steve, can you give me a sense of what drove the timing of the ASIC announcement? And if the factor that drove the timing here would also drive further potential actions?

Steve Laub

The timing of the announcement was multivariate, I would say. There is always a preference to disclose to the extend that you can or you should, and one of the things here is, given the complexity sometimes, in working issues, with respect to Europe, specifically France, there are a lot of requirements that you need to make sure you are satisfying, and disclosing a lot of the activity is one. There is a preference, or a lot easier to do work in France with respect, to that if you do disclose.

So, there was a sense that; one, there was a preference from a legal standpoint to disclose. There was also something you can move much faster with the disclosure with respect to that, and obviously, a lot greater focus in urgency because now it’s a public event. It also expands the universe of options and alternative that is disclosed.

Now, that the kinds of disclosing which I've described in the past has the adverse, or potential adverse, impact to both employees and to customers. And one of the things that happened here is that due to uncertainty that was created with the unsolicited M&A activity from Microchip and ON that occurred, I think beginning in September of last year; sort of the anxiety of that team, actually, and uncertainty of that team was raised to that time.

So, they themselves have never completely taken a position of saying everything is back to normal. There has been more of “what’s going to be happening to us”. And so, the impact to the employee base in that context was actually already impacted and so the additional impact have actually disclosing is actually much lower. And from a customer standpoint, we’ve actually taken number of actions to minimize an impact adversely with customers.

And I think in this economic environment with respect to what’s going on, it actually reduces any potential adverse impact as well because a lot more things people are worrying about then what may or may not be happen with respect to that. So there was a lot of reasons why we thought this was the right time, and we’ve previously discussed the fact that this was the year in which we wanted to make sure we completed the major actions, or certainly all the substantive actions, with respect to the transformation of the company that we had pushed on or began approximately two years ago. And so, this is a natural step in that completion.

Suji De Silva - Kaufman Brothers

Now, Steve, if I hear you correctly, it sounds like there were factors unique to this, i.e. the European exposure that made it appropriate to announce it ahead of time versus other ones which don’t have that similar characteristic. Is that correct?

Steve Laub

I would say that certainly was one of the major characteristics that influenced our decision.

Suji De Silva - Kaufman Brothers

Great. Can you talk about the prospects of the sale and your current thought as to your ability to sell the ASIC business in this environment?

Steve Laub

Yes. So as you have highlighted at the start of this call, I am, as I said, limited in how I can discuss, but right now what we have announced is that the company is pursuing alternatives for this business, including a potential sale. Clearly we have not made the decision with respect to that. No final decision has been made. And we are working with our partners and the authorities in France, properly as we discern what is the right alternative for this business.

Suji De Silva - Kaufman Brothers

Understood. Switching over to the 32-bit microcontroller business; can you talk about what end market you’re perhaps seeing relative strength in the areas you are growing here because it’s fairly impressive growth in this environment?

Steve Laub

So the growth market will be, for example point-of-sales terminals, we are also seeing it in a number of handheld application areas, (inaudible) for example would be as simple as calculators and things like that. So, the growth is widespread, but primarily, I would say, in those two areas we saw particular growth in this last quarter.

Suji De Silva - Kaufman Brothers

Okay, lastly on pricing in the commodity areas of memory, how much is the decline versus sort of typical decline this quarter.

Steve Laub

Q4 prices decline was quite substantial relative to historical behaviors which are always, you know, this is a business where pricing decline is the norm, and it was more substantial in Q4 than before.

Right now, the sense is that, we will not be experiencing the same type of price declines in Q1 as we experienced in Q4, and so, in that respect we are a little bit more optimistic that while the business will be under pressure this quarter just because of the general economic environment, we don’t expect pricing to be quite on the same pressure it was in Q4.

Suji De Silva - Kaufman Brothers