Maria Quillard - Public Relations Jon Olson - SVP, Finance and CFO Moshe Gavrielov - CEO

Glen Yeung - Citigroup James Schneider - Goldman Sachs Chris Danely - JPMorgan John Dryden - Charter Equity Research Tristan Gerra - Robert W. Baird David Wu - Global Crown Capital David Wong - Wachovia Capital Markets Uche Orji - UBS Sumit Dhanda - Banc of America Securities Ruben Roy - Pacific Crest Securities Tim Luke - Lehman Brothers Sidney Ho - Merrill Lynch John Dryden - Charter Equity Research Tristan Gerra - Robert W.

Baird & Co. Inc.

Uche Orji - UBS Tim Luke - Lehman Brothers

Thank you and good afternoon. With me today are Moshe Gavrielov, CEO; and Jon Olson, CFO.

We will provide a financial and business review of the March quarter, as well as the fiscal year end. Then we will open for questions.

I also want to take this opportunity to inform you that Xilinx will be having an analyst meeting on Thursday, June 26th, here at our headquarter in San Jose. We will be sending out invitations shortly.

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 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 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's Investor Relations' website.

Now let me turn the call over to Jon Olson.

Thank you, Maria. During today's commentary I will review our business results for the March quarter as well as for the recently ended fiscal year.

I will conclude my remarks providing guidance for the June quarter. Revenues in the March quarter were $475.8 million, flat sequentially from the prior quarter and up 7% from the same quarter of the prior year.

Fiscal year 2008 revenues were $1.8 billion flat with the prior fiscal year, but lower than we had anticipated entering the year. Gross margin of 63.4% was better than our guidance of 63% and the highest we have reported in nearly four years, as we have downsided from proactive cost reduction efforts and continued yield improvement on 90 and 65 nanometer process technologies.

Fiscal year gross margin was 62.7%, up from 61% in the prior fiscal year and the highest fiscal year gross margin reported since fiscal 2005. Q4 operating expenses were flat sequentially as guided, and down 6% on a year-over-year basis which is better than we guided at last year's analyst meeting.

Included in the Q4 number are one time charges of $3 million associated with executive transition at the company. March quarter operating margin continued its upward trend reaching 24.6% of sales, up from 24.3% in the prior quarter and up from 17.9% in the same quarter of the previous year.

This is the highest operating margin we have reported since the enactment of stock based expensing and compares favorably with the operating margins reported in the quarters prior to the implementation of stock-based compensation expensing. Fiscal year operating income was 23%, up from 18.9% in the prior year.

Driving increased operating efficiencies remains a top priority of the company. (Inaudible) shortly to enable greater focus, prioritization and allocation of resources, resulting in a more operationally efficient ROI focused organization going forward.

Other income in the March quarter was $5.3 million, lower than our guidance of $10 million due to a pre-tax $4.7 million capital loss on the sale of UMC stock. In addition, we realized a $2.9 million impairment loss on investments during the quarter.

March quarter net income was $96.5 million or $0.34 per diluted share, included a $0.02 impact from the capital loss and impairment on the equity investments previously mentioned, this was down 7% from a $103.6 million reported in the prior quarter, and up 10% from the $87.6 million reported in the same quarter a year ago. Fiscal year net income was up 7% versus the prior year and fiscal year, earnings per share were up 23% from the prior year.

Free cash flow for the March quarter was $95.6 million after $6 million in capital expense. We repurchased 9.3 million shares for $200 million during the quarter, and paid $34 million in dividends.

During the fiscal year we generated $535 million in free cash flow up 21% from the $441 million in the prior fiscal year. We repurchased 23.5 million shares of stock for $550 million during the fiscal year and paid $140 million of dividends.

Finally, in February our Board authorized an additional $800 million stock repurchase authorization, and raised our quarterly dividend from $0.12 per share to $0.14 per share per quarter. Based on the new dividend, our yield is currently 2.4% higher than that of the S&P 500 average.

Lastly, the tax rate for the March quarter was inline with our guidance of approximately 20%. Let me now comment on the balance sheet.

Cash and investments decreased $30 million during the quarter to $1.9 billion, factoring in the $1 billion convertible our net cash position remains approximately $900 million. Day sales outstanding increased 4 days in the March quarter to 48 days.

Inventory dollars of Xilinx decreased by nearly $2 million sequentially in the March quarter representing 68 days. This is down from 69 days in the prior quarter and down from 95 days in the same quarter a year ago.

Worldwide distributors held 24 days in the March quarter, which is up from 22 days in the prior quarter and down from 25 days held in the same quarter a year ago. Combined inventory days in March were 92, well within the target of our 90 to 100 days.

Let me now turn to guidance for the June quarter of fiscal 2009. We entered the quarter with increased backlog and our first couple of weeks have been good.

Over the past five years, sequential sales increase for the June quarter has averaged 2% to 3%. We remain cautious about the macroeconomic environment, but optimistic about the traction we are receiving in our new products, particularly the Virtex-5 FPGA family.

As a result, we are forecasting a sequential sales increase of plus 3% to minus 1%. The midpoint of this guidance will require turns in the high 50s down from the 60% turns rate in the March quarter.

We are anticipating sales from Asia Pacific to be up sequentially, sales from North America to be flat sequentially, and sales from Europe and Japan to be down sequentially in the June quarter. From an end market perspective, we expect communications to be up sequentially and all other categories are expected to be flat to down sequentially.

Our guidance this quarter is predicated on strong direct business driven by forecasts from our largest customers. Gross margin is expected to be approximately 63% to 64% as we continue to benefit from improving yields on advanced process nodes.

Combined operating expenses, including about $1.4 million of amortization, are expected to be approximately flat at $185 million. Other income, including the impact of interest expense, is expected to be approximately $6 million.

This lower level is reflective of lower investment market rates and a modest impact from foreign exchange rate contracts. The share count is expected to be approximately 280 million shares and the tax rate is expected to be 21%.

Let me now turn the call over to Moshe.

Thank you, Jon, and good afternoon to you all. I have just completed my first 100 days at Xilinx.

The vast majority of this period was invested in meeting with customers, partners and employees in order to determine what is required to drive the company forward to take advantage of the significant opportunities ahead. My goals are to focus both on improving our operating efficiencies and reinvigorating our growth.

Following my first 100 days, I am now even more convinced of Xilinx's very positive prospects than when I joined. The PLD industry is at a positive, yet critical juncture, and is poised to realize significant opportunity.

The challenge for us at Xilinx specifically is to drive our transition from our root as the technology leader to a business leader delivering broader solutions to our customers. Based on direct inputs from customers in numerous markets, it's very clear that [bets us] another alternative the programmable technology capabilities possible at the 65-nanometer nodes and beyond augmented by their inherent flexibility have the potential to service the needs of the digital convergence era.

Up to this point, ASIC design starts have dropped significantly; programmable solutions have picked up positive slack with ASSPs enjoying a greater amount of success. However, in order for ASSPs to make economic sense and justify the skyrocketing high development cost going forward, they are focusing on fewer and fewer ultra high volume market.

Consequently, this leaves a growing number of attractive opportunities for PLD implementation given the right solutions. To capitalize on this opportunity, we have made sweeping organization changes to enable Xilinx to become a more nimble organization.

This requires the ability to prioritize and focus all our product development efforts. Customer-driven input needs to be integrated and fed directly into our development team.

Flawless product development and seamless solution introductions to our leading customers become a necessity. In order to enable all of the above, we created a centralized marketing organization in two core engineering organizations, one for silicon circuit development and the other for software solutions.

This is a change from our previous organizational structure where both engineering and marketing efforts were spread across several business units. I would like to stress that these change were not made opportunistically in response to a slower economic environment to drive lower cost.

They were made very deliberately in order to deliver better returns on our R&D investment, to facilitate projects prioritization, to eliminate to overlap and to improve operational efficiency across the company over the long-term. I firmly believe that these changes will position us to better capitalize on these future opportunities.

We'll be hosting our Annual Analyst Meeting here at our campus at the end of June. This event we will elaborate on the benefits of these changes and discuss our other priorities for this fiscal year and beyond.

Now, I'll provide some color on our vertical markets this past quarter. From an end market perspective, we had forecasted communications to be up, mostly industrial and other to be down, driven by aerospace and defense seasonality, consumer and automotive to increase, data processing to be down slightly for the March quarter.

[At the final tally], communications overall increased by 2% sequentially. Wired communications was up driven by increases in telecom and networking, while wireless was down, single digit.

On a geographic basis, North American networking customers were healthy and wired telecom customers were mixed. Asian communications customers were generally strong.

Japanese communication customers were mixed, European customers were somewhat weak. Industrial and other was flat, as aerospace and defense sales declined approximately $10 million quarter-to-quarter.

This dollar decline in aerospace and defense is actually less than what we've seen in prior years, driven by the fact that our defense programs currently have a much broader customer base. So, while some of our largest customer's revenues were down, others grew sequentially.

The aerospace and defense decline was the primary reason for North America revenue being down 7% sequentially. The positive standout is for the test and measurement, which grew double digits sequentially after many quarters of weakness.

This surprising strength has been driven by testing, for both wireline and wireless communication, and maybe a leading indicator for improvement in future infrastructure spending. Industrial, scientific, medical and test and measurement customers across all geographies showed good growth this quarter.

Our industrial and other vertical market now contributes one-third of our overall revenue. Consumer and automotive was down 2%.

[Automotive] was strong but pure consumer was down and audio/video broadcast grew only modestly. We did see HD display demand ramp as expected, but handset, set-top boxes, modems and other devices were weaker than anticipated.

Data processing declined 2% as forecasted. On the product front, our new product category grew double digit sequentially.

Virtex-5 revenue is a very meaningful number over 7% of overall revenues, up from less than 5% last quarter. Our 90 and 65 nanometer products now comprise over one third of our total revenue.

Total Virtex revenues were 55% of the overall revenues. Spartan revenues were 25%, CPLD were 9% of overall revenue.

Closing, I would like to reiterate that I am focused on delivering improved results for all shareholders. Our fiscal year 2008 was a challenging year in terms of revenues.

It was a fruitful year from an execution standpoint. Virtex-5 was delivered flawlessly, we also made great strides to improve both our capital and cost structure.

There is a still a great deal to accomplish. I am delighted to be onboard and look forward to an open healthy discourse with the [Street].

Operator, please open it up to questions?

Operator?

Rachel, are you there?

Can you open up for questions now please?

Thanks. It sounds like consumer and auto was the source of the weakness in the quarter.

So I am wondering if you can go into a little bit more detail as to what you think went on in that vertical? And maybe address the linearity that you saw in that business?

Well hi Glen, this is Jon. I think that if you step back and look at what we thought was going to happen as we went into the quarter.

I think we would think that communication would have been a little bit stronger and wireless would have had a little more strength. So you kind of compartmentalize it to consumer and auto.

I would say that maybe consumer was a little slightly weaker than we had anticipated. Not a great deal because our revenues were pretty flat quarter-on-quarter and automotive was not necessarily a factor in that particular area.

I mean, those are the two things that I would look to.

How about linearity, Jon?

Linearity in the quarter, it's a pretty interesting thing. I know there have been a lot of different reports out there from distribution and other things about what happened during the quarter.

Quite frankly, the quarter turned out as we anticipated. March needed to be a typical good solid month and it turned to be that way, it wasn't exceptional.

But obviously it was exceptional; we would have been a little higher in our range. But the linearity of the quarter was as anticipated, relatively modest start in January as we were below sequential linearity, and then we picked up throughout the quarter and a solid March.

Okay, thanks.

Hi, good afternoon. Moshe, you talked about a number of organizational changes you may gain, some of which would presumably drive some operational efficiencies and cost savings.

So I was wondering if either you or Jon could maybe quantify what kind of OpEx savings you expect to achieve over the next fiscal year.

This is Jon. Let me take that one.

Moshe described the structure, the overall high level structure of the organization change. This is more about the beginning not the end of where we're going.

It would be premature for us to give you some sort of either medium-term, short-term or a long-term target on where we're going as we are continuing to work through the organization structure at the mid range and lower levels for the company. I think that would be a better thing to talk about, Jim, in the June Analyst Meeting, I believe to be much more prepared at that point to give you specifics about our OpEx leverage.

Okay, fair enough. And then just one quick thing on Europe.

It seems like there is some notable softening there and some other reports from distributors, et cetera, I noted that as well. Could you talk about what you're seeing from your European customers in particular?

In general, Europe, this last quarter was probably a little weaker on larger customers, and the channel wasn't all that bad. So, if you look at our next quarter profile on Europe, we're actually seeing strength in our larger customers and maybe a little weakness in the channel.

If you look at our overall channel served customers this last quarter, even though there have been lots of press around weakness, et cetera, it is actually flat, maybe a little up in total. That's a worldwide comment.

So, we're not seeing or being buffeted by what's going on in the channel or necessarily Europe specifically.

Great. Thanks very much.

Thanks, guys. What do you guys think is your sort of long-term or average revenue growth rate, and then how does cash usage fit into that?

Chris, this is Jon. The long-term growth rate is not something we're going to talk about.

We'll talk about our longer-term growth rate in June. At our last Analyst Meeting, we used a number like 9% to 13% obviously for a three-year kind of CAGR; obviously we're coming off a year, that's dead flat.

And so, I think we have to reexamine the future, at least, from the next couple of years. But I think I would rather talk about that in June a little bit more and give you a little more color around the markets kind of how the composition rolls up to that growth rate of what we think.

And then relative to cash, I don't see any significant change in our current cash policy initiatives to continue buyback programs and return cash through a combination of dividends and buyback. At this point, Moshe can comment on this, but at this point we're not planning any giant infusion into the company in any accelerated OpEx to gain revenue in those kinds of the thought processes.

I think we're in a mode of running the company very tightly, financially moving forward with a increased shareholder value mantra, and then, as more cash would fall out of that, we would consider returning it to shareholders.

I guess I was trying to get at -- you guys said you have like $1.9 billion in cash and about $1 billion in net cash. Given your high operating margins, why wouldn't you look to reduce your cash position a little bit or pay like a microchip as a dividend?

Well, on an annual basis, we go though the announcements with the Board on what we think we want to have for a strategic reserve and what we believe is appropriate for operating cash. And at this point, particularly with management change and a re-review of our strategy of the company, it seems prudent to the Board that we keep our current position of trying to keep between $500 million and $1 billion of net cash position to maintain our flexibility.

Okay, thanks.

Hi. Thanks for taking my question.

Can you provide some additional commentary on the comm segment, particularly for wireless this year and long-term without any expected improvement in wireless CapEx? Do you primarily see any changes in the environment or are you just going to take advantage of share gains over both ASICs and ASSPs?

I think, in wireless as in other areas we see more and more opportunities coming to us. And what we are focused on doing is making sure that we have the product in the overall solution so that it enable us to exploit that.

Wireless and generally communications has been a huge consolidation between the major players, and that, we believe, has impacted the market somewhat. But there's generally a growing secular need for infrastructure and we are playing a growing role in providing the semiconductors which are at the core of that.

I think one more comment. I think the emerging technologies, the new technologies that are coming like LTE, WiMAX, etcetera, I think we believe are very well positioned in those designs going forward.

I think a lot of what you are seeing right now is cautious spending in that area and there forward, or an add-on kind of thing to existing technologies versus a lot of new big rollouts and that's how we are understanding the market, as we sit here today.

Thanks for taking my question.

Hi good afternoon. Regarding the pickup in wireline enterprise networking, do you have the visibility to say whether this is more than a one quarter trend at this point?

Yeah, I don't think we're in a position to forecast a long term secular trend. But we do believe this next quarter is going to be up.

We've certainly seen seasonality or cyclicality within a year in the wireline business. But we did see some signs this last quarter and we're not forecasting up this next quarter driven again by our large customers, who at this point in time seem to still be building relatively good supplier products.

So, I'd hesitate to make a prediction that, there is long term trend going on. Having said that, I think we do believe that the second half of our next fiscal year, through December and March, we're going to see strength and we'll continue to see strengths from industrial and other, but also on the communications part.

Great. Thank you.

Yes. I'd like to ask a question.

Moshe, when I looked at the company's performance over the last three years, I was wondering, operating efficiency is good. But how in your opinion, is the best way to boost your top line growth?

Okay. Well, it is obviously one of the two things I am focusing on and what we are doing there is I have organized the company functionally now that enables us to move the resources more quickly and deploy them to where the biggest growth opportunities are, and as we align ourselves even more closely with our key customers and come out with broader solutions in these higher growth opportunities, I believe, that will be the key to enabling us to move forward.

Generally, across the board, in all of the applications and all of the geographies that I went to visit, it was clear that programmable is or has moved into the mainstream and there is great opportunity for us to address. We need to make sure that we have all of our internal resources applied in the right places, so that we can optimize that and that's what we are doing and I believe that that will enable us both to address the top line and to make sure that our efficiency is optimized.

Thank you.

Thank you very much. Could you tell us anything about new product families that you might hope to be rolling out in the next couple of years?

We are very pleased with our position on the 65 nanometer technology and that is a major driver of our business at this point in time and as you can expect we are working diligently on future technology nodes from our perspective that both on the semiconductor circuit side, its on the IP side, and it's on the enabling software side. And what you will see is, us moving forward very rapidly from generation-to-generation providing a broader set of solutions.

With regards to specific product announcements, the one we announced this past quarter was the Virtex-5 FXT. We believe it's a great manifestation, an example of core technology that is applicable to very high-end system on the chip solutions.

And I think you can expect to see a lot more from us along those same lines moving forward.

Okay. Thanks.

Thank you very much. Can I just get a sense about two things, first on Virtex-5?

Can you give an idea, Jon, about the size of revenue or maybe the growth you experienced in Virtex-5? And also if we can drill down a little bit on the communications area; I think, when we look at the results from your competitor, (inaudible) in places like Japan, if you can walk me through by region what you are seeing within communication?

Just to get a sense of what's driving it and how much longer they will improve, before we start to see a turn in that business? So these are the two questions here.

Yes, on the first one the size of Virtex-5. Virtex-5 is greater than 7% of our total revenue and we're quite pleased with the ramp in that particular family.

We've populated fully now all the previously announced branches of that family. Design wins have been quite brisk.

We exceeded our internal forecast this last quarter sequentially that level of growth, and it's starting to be a meaningful, measurable part of our business. And with the advanced yields work that we've been doing in that area, it certainly helped us out in the gross margin line as it becomes more significant versus our, I would say, previous generations in the past.

So, we're doing pretty well there, on the Virtex side, and we believe that will be a strength of the company going forward in coming years in terms of revenue. On the communication question, by geography, it's a little difficult for me to go geography-by-geography.

We can probably give you a little bit more in June. But I think, in general, we've talked about that we had really good North American networking piece, so the networking segment.

We kind of think about our communications business in three segments, the telecom, the networking and wireless. And so, from a networking perspective and a telecom perspective, we had good networking and kind of mixed in the telecom side in North America.

Asia was quite good for us this quarter. So strong across the communications in general, and a lot of that is telecom and networking.

In Japan, again it was up and down; it was mixed by the subcategories, wireless continuing to not be particularly strong for us at this point in time. And then, in Europe, it was relatively weak across the board in communication.

Right. And just one question for Moshe, please.

Moshe, in your opening remarks you talked about the opportunity as people move away from ASIC, but that's been split between ASSP and programmable devices. If you can elaborate a bit on that, what do you think needs to happen for programmable devices to capture more of that share away from ASSPs?

And that's my last question. Thank you.

Okay. Well, that's an excellent question and what we need to do is to make sure that we are more closely aligned with our end customer and our key end customer requirement.

So, if you think about the transition, ASICs were products that were customized to the ultimate level to one customer's requirement. Standard products try to capture a broad market and they are market-specific.

And as the costs of doing standard products continue to rise and they can only be justified for very, very large and high volume markets, so there are more and more applications that are falling into the sweet spot of programmable logic. And what we need to do is we need to make sure that all elements of our solution are aligned to enable us to capture that.

The elements of the solutions have four components to them; it's the silicon infrastructure, the silicon and circuit infrastructure, it's the IT portfolio, it's the software we provide to enable the customers to implement the designs, and it's the methodology and the support we provide to enable our customers to move forward. We need to make sure that we address all four of those areas and move them all together.

Once we do that we believe that the efficiency is both in terms of our sales teams and our technical support teams, and the customers returns will be such it will drive them in an accelerated way to programmable solutions as less and less opportunities have the right characteristics to justify standard product design.

Thanks for that. It seems that we will get more detail at the Analyst Day, but from where you can see now, do you think the elements you've listed, how prepared do you think you are and when do you think we'll start to see a shift back to programmable logic away from ASSPs from your perspective based on the level of preparation you have in respect to the elements you've listed, what is key to win that market?

I think we have all of the basic elements, but there is a lot of fine tuning that's needs to be done and a lot of those four core components that I just described need to be designed in a more holistic way than, to be quite honest, we have delivered in the past. So there is a lot of work for us.

There is also a lot of opportunity as we pursue these paths. And the good news is, by and large, these are all things that we internally control and it's a question of focus and the way we do things.

And that was one of the drivers for making this big organizational change to enable us to do that in a more focused way.

All right. Thank you very much.

Yes, hi. Couple of questions, first for you, Jon.

In the last quarter you've guided to a similar revenue growth number, although with a lesser backlog coverage, this time, the backlog coverage seems a little better. Is the anticipation here that the turns won't be as strong as they head into back half of the quarter or what sort of dictating a similar outlook better backlog coverage?

It's really the profile of the months within the quarter, so typically those are history, although it doesn't happen every year, but most of the year, June tends to be a softer month. And it certainly is softer than March.

So again, when I talked about the cautious economic environment for macroeconomic issues, we're sort of saying, okay, we can maybe anticipate an accelerated slowing that's going on into the summer and therefore June will be, maybe, a typical or even a little more typical soft relative to March. That's why it’s really the profile on months of why we're taking that position.

On the gross margin front, up modestly versus last quarter and of course you have shown some very good improvement on that metric, but I guess the question is, was that improvement not more significant, because the decline in your military business, in other words, what sort of the core underlying improvement you're seeing in your gross margins associated with improving yield?

There are a lot of factors that go into our gross margin number. It's what we're paying for, the raw material so to speak.

It's the mix of our products. It's the ASP decline that naturally happens, particularly in large customers.

So, there are a lot of things that went on and I'm quite pleased that we're able to maintain or increase our sequential gross margin number, in the face of a lower aerospace and defense number, which typically do carry a higher margin fee. You hit that on the head, so we have shown some improvement.

63 to 64 is already a pretty narrow band, but if we can maintain in that direction or continue to even inch up over the next several quarters, I feel pretty good about that as well. But there are a lot of different factors going on in the equation.

And it's pretty hard to forecast a precise number with that many variables going on. So, the range is about the best we can do and the range has been pretty equivalent and it is above our currently stated operating model.

So we feel pretty good.

I understand. I guess my question was also, do you feel like you have more headroom in terms of yield improvements, which can continue to take it higher?

I mean given the significant improvement or the benefit you are already seeing in those lines?

Well until we start advancing or announcing, shipping I think in significant quantity any advanced technology nodes, we should continue to see a good cost improvement from yield improvements and yield works across the board. And so, in the next several quarters I don't see any reason why we can't operate at this level or higher.

Moshe a question for you. Approximately close to 100 days or so you spent at the company, anything in particular strike you, given your slightly different perspective in terms of where you have come from to the business, in terms of where programmable logic, could be servicing the markets better?

In other words are there markets, which are not well exploited by this particular type of device that come to mind, as you have gone through this process? And then Xilinx is particularly well positioned in any of those lines?

Well the striking thing is, it's great to be in a sector where you definitely feel the technology and economic forces are working in your favor. And I think there is a transition, which is happening, and the transition is enabling more and more applications to be served by programmable solutions.

And throughout the 100 days, as I traveled and met customers from all sorts of applications, including consumer applications, communication and test and measurement et cetera, all over the board, I kept hearing that we are moving to becoming the center of their system. We just need to have the right set of solutions.

So things are moving in our direction. The number of applications is growing.

The one which I personally was most pleased about was the potential for future growth in consumers as opposed to having delivered the product and the solutions which today would enable us to go there. But I think, across the board, this is a trend that is happening, and more and more applications, the needs, can and will be serviced by programmable solutions.

I am absolutely convinced with that.

Okay. And just one last question, sort of relates to (inaudible) Moshe or Jon, where exactly are you seeing traction in the automotive line with programmable logic respect?

Well if you think about what we ought to have in our cars today, there is a tremendous amount of electronics which is in the cabin related to infotainment. And we are seeing great opportunities in those areas.

Those are areas we focus on; they also tend to be synergistic with other things we do. That's one of the reasons that we locked them together, I think those synergies between that and the consumer business to some extent.

And I would say that that's the largest, most obvious area that we are seeing now. Now we could go beyond that, but I think there is enough opportunity if we address that market and address it well and it's a market which is growing at a very rapid rate.

And there are a lot of new [sense] or ideas that keep you awake at night or when you are driving or those kinds of things and more heads up display activity etcetera. There are a lot of related issues that we're talking with our customers about, and they think we're a pretty good fit for those kinds of things.

And also, I think you're quite aware, that there are many microcontrollers and processors on a network of an automobile, and we have a lot of capability with both our soft processing capability and in some cases hard processor that could serve as an integrator of many of the functions that already exists in vehicle today. But again, as Moshe said, we're focused much more on things that are going on inside the cars and then I'll say mission critical, as operating a vehicle.

Thank you very much.

Hi, thank you. Moshe, you mentioned a few times that in speaking with your customers, they are asking for specific solutions, I guess.

And I was wondering, if you feel that to get to the point where you have the types of solutions that you will need to perhaps grow to top line to where you want to get the top line to grow. Are they going to sweeping, to use your word, changes to the Xilinx roadmap as it stood when you arrived at Xilinx?

Well, the sweeping related to the organizations that I made is opposed to the roadmap. But I think we have opportunities to fine tune and to change the roadmap to capture more of these opportunities going forward, and those are things we are really focused on now, examining the roadmap, making sure that we are working on the right programs and absolutely making sure we mail the ones that are most critical for our success.

At the core, we will continue to exploit and buildup upon our programmable heritage we believe, that's tremendous benefit and we believe it's a benefit, which overtime continues to grow in terms of its market applicability. So we are committed to staying and driving that forward as opposed to changing that radically.

Okay. Thank you.

Thank you very much. I just wondered if you'd give some color on how you perceived the development of the timeline for 45 nanometer for you guys?

And I was also just wondering just within these segments how you are seeing the wireless opportunities develop in wireless backlog?

Okay. Maybe I will answer the question, notably below 65.

We've traditionally, at least in the past three or four generation technologies, have been the leader in introducing new technology nodes and bringing out the high end solutions ahead of everyone else and that has been key to our success in the past and is part of what we are focused on going forward. We're very pleased with where we are on the 65 nanometer node and we are working closely in terms of internal development and working with our key foundries to make sure that we have the next set of nodes at the appropriate time with the most comprehensive set of support.

And we are not making any product or schedule announcements at this point in time. But rest assured that, that is where most of our R&D effort is currently invested.

On the wireless side, I am not sure I quite followed the question.

Wireless infrastructure in the quarter and how do you see that developing going forward? And then just separately for Jon, I was just wondering, you've got a OpEx slab for the June quarter, how do you see OpEx developing as you move through the fiscal year in terms of shape of that, is it the time that you are going to have to, just in terms of the outlook for OpEx?

On the wireless question, I am not sure what you are asking for. And I think the short-term prognosis on wireless is, again, I don't see a huge pickup going on there for us over the next couple of quarters, absent some sort of initial rollout of more advanced next-generation technologies like LTE, WiMAX, et cetera, where we are well positioned.

I will say though that we have a lot of opportunities ahead of us for situations where previously on a line card where, for example, we would be on a line card with a party in addition to an ASSP. But the ASSP supplier is not bidding on the next-generation and it's really falling to us to do the work and that will be added content for us.

And those are the kind of situations and examples of what Moshe had mentioned earlier about ASSPs leaving certain market situations, technologies, volumes. And giving us opportunities it's not a God-given right.

We can pick up all those opportunities, but we'll pick up the ones that we think are consistent with our strategy and that are high growth, high return opportunities. So, short run, I'm pretty cautious about growth.

I would say as new technologies rollout, I feel really good about our position with design wins.

And if I may, just to clarity your linearity commentary, you said that quarter finished solidly as you would have expected. Would that infer just from your commentary that the January period was somewhat softer and then it picked up through the quarter or how should we interpret the linearity versus your expectation?

Most March quarters startup with a slower January. It's kind of a post-holiday, and then you get into the Chinese New Year and things like that, a slower January and it picks up throughout the quarter.

And you need a relatively strong, not real strong, but relatively strong third month of the quarter. And that, as the way it turned out, we were in the hole a little bit in out backlog going our January and we had strength throughout the quarter and it grew.

And we had a solid, not exceptional, but solid March.

And your characterization of June has been the first two weeks were?

Were good.

Okay. Thank you so much guys.

Of the June quarter, the first two weeks of June quarter, meaning April, were good. Just want to make sure that that's what you're walking away with.

Thanks. I have a couple of questions.

Going back to the wireless infrastructure question, many of these semi companies reported upside for the March quarter driven by strength in wireless infrastructure, especially in Asia. And you have about 10% exposure there and I believe you have stronger presence in China, but you don't seem particularly optimistic on that market going forward.

Can you just help us reconcile the difference or is it just the lumpiness?

Actually our Asia business was, overall, for communications was strong this last quarter. So, we also had a good Asia situation, but we didn't necessarily have a good Europe and North America situation in wireless.

And those offset and that's why it was not a remarkable change on a sequential basis because of that.

Okay. The second question is you are guiding towards margins of 63% to 64% for the next quarter and it seems like it has trend grow over the next couple of quarters.

Is this a permanent change from a 60% to 62% long-term guidance because of operating efficiency yield, and if not, what will make you more comfortable to move that longer term targets higher? Certainly people like to compare your gross margin with Altera's gross margin.

Thanks.

I have always said I need at least two data points before I can start proclaiming as a permanent change. We now have two data points there, so you're at least calling me on my previous statements, Sidney.

In June, I'll be more articulate on that topic. Obviously, we are strongly motivated by operating margin improvement in the company.

We've had a good year-on-year that we are not done working on that. Gross margin is an important element of that.

We have a variety of programs around cost reduction. We have a variety of programs around ASP management in order to manage that number to be -- as a gross margin number to be higher.

As I said, I don't see it declining from this level over the next several quarters. I'm not ready to say that we're going to permanently increase our model at this point in time.

Thanks.

Hi. Thanks for the follow-up.

A quick question for Jon, are there any constrains to the UMC filling orders to meet any uptick in demand in the second half, now that previously required equity investment is off the books?

So, the equity investment actually is not particularly tied to any agreement we have for supply guarantee, or certainly the sale of the stock does not indicate in any way our commitment from them or to them as a supplier, as the lion share of our products are produced by UMC. We've had this historic investment for a long time period before UMC was actually a corporation.

The partnerships were formed to build FAS and we were an owner in that and that got converted to shares overtime. And essentially, it's really not in our interest to own other public companies as a strategic investment necessarily.

And it was just more of a buy/sell kind of a decision of wanting to divest ourselves of that. So, to your main point is UMC and Xilinx have had a very long history of a close working relationship with positive results coming from them.

The last three years have been really, really good, execution by them. They have given us the supply that we needed.

There is no question that we have had discussions around the fact that I think we were thinking about selling our investment, there is no issue on supply. They have made their commitments.

So I don't see any correlation here or any change in their behavior or our behavior as it has been over the last three years, because we filled the remainder of our investment.

Thank you.

Hi. How much of the Virtex-4 is currently prototyping versus in volume currently?

Virtex-4 or Virtex-5?

Virtex-4.

Virtex-4. Well, there are quite a few designs going into production, because that number is a pretty significant number.

Typically, the first year to two years is prototyping and we are into our third, fourth, fifth year depending on which part of the family we are talking about here. So, I would say, there is obviously still some prototyping that goes on.

But I would say the majority of what we have now are early production or long term manufacturing builds that are going on using that part, those parts.

Great. Thank you.

Thank you very much. That's been answered actually.

Thank you.

Sorry, Jon. Just wanted to get back and ask on how you think that the R&D and SG&A will develop as you proceed through the fiscal year?

Do you have any further color there?

We probably talked about the organization change, and going through the organization and realigning the teams to focus in the manner Moshe has laid out. And that process is ongoing.

We've looked at what we think this current quarter needs to be, as we go through and work through that. It really would be premature for me to cap a full year or a trend.

But I will give you this information. You know we are still operating slightly above our stated operating goal on R&D and are probably a percentage point above our SG&A.

Those are the things that we are certainly aware of and as the executive team is going through the planning for this year under the new organizational structure, quite mindful of the fact that we are still at the high end or over our operating model and we are working through those issues.

Thank you.

I'm interested in two questions, really Jon, while you are on the line, is there any reason why over the next two or three years that we can't get to a 30% pre-tax operating margin on a GAAP basis for Xilinx? And Moshe, on the subject of more complete solutions, you came from an EDA background recently, and I was wondering whether, the set of tools that the FPGA companies have provided may not be as comprehensive as it needs to, as you address a more vertical market approach.

I mean, what you offer now is at least as good as what Intel calls, platform approach, right? But to penetrate these newer markets, do you need additional software that historically you needed and (inaudible) provided?

Okay, we will do it out of order; I will answer your question. Software is the big leverage and because what we are doing is we are enabling lots and lots of customers to develop quite complex systems.

You are absolutely right in pointing out that in order to do that efficiently you need to have the right tools and not all of that necessarily comes from us. There are portions that come from EDA companies and there are companies that use the combination of other tools that come from the EDA players.

And I think that what you are highlighting is an opportunity for growth for all parties involved. Now, we're definitely going to focus on the ones which are essential to our success, the ones which we invest most heavily and other ones which are tied closely to the implementation, as you get to high levels of distraction and you move up to the system level design and lot of those tools to the extent that they exist come from independent parties.

And the opportunity for us not necessarily to compete with them, but to actually make sure that they support our solutions really well. So, it's not a black and white answer to your question, but the point that you made is an absolutely germane, one to our success and we will make sure that it is addressed really well.

It is key to our growth going forward.

Thank you

Dave, on your first question, I'm not going to use this call turnout to new long term model for the company etcetera. I know yours was a hypothetical question.

Hypothetical questions always will get me in trouble. But I will tell you that, one of the things I've been pretty vocal in the company, was given our current operating leverage that we have had is there's no reason why our operating margin can't grow two to three times on a percentage basis comparison at the rate that revenue grows.

So if revenues are going to grow 5%, we ought to deal with our operating margin year-on-year by 10% or 15%. And that kind of continued leverage will obviously have the operating margin percent line increase up to the point where we have, I would say, a mature scaled business, and we're not at that point yet.

So I think there is room for operating margin to increase overtime.

Thank you very much.

One more question operator please.

Yeah. I have just a quick housekeeping question.

The DSO expense just bumped slightly into the March quarter. Is that more related to end of your expenses or do we model that back down slightly or how should we think about the expenses in general through the course of the year and then the June quarter, in particular?

You've caught me to talk about a topic I'm not frequently excited about talking about, which is stock option expensing and all, the varied rules around what hits it and what doesn't. There really wasn't anything too remarkable in it.

But as you know, as we hire new executives and new CEO etcetera, the options that are given are part of the expense numbers. So there really was, I would say, a modest increase that was driven by a variety of things, a couple of adjustments that needed to be made, revaluation of our assumptions executives that we have hired in the last quarter, things like that.

So it's hard to put my finger on just one factor that drove each percent of it.

Okay. Thank you.

Well thank you all for joining us today. We have a playback of this call beginning at 5:00 pm Pacific, 8:00 pm Eastern.

For a copy of our earnings release, please visit our IR website. As we stated last quarter, we have discontinued the practice of mid-quarter update.

Our next earnings release date for the first quarter of fiscal '09 will be Wednesday, July 16, after the market close. This completes our call and thank you very much for your participation.