The Company disclaims any duty to and undertakes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events except as required by federal securities laws. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should carefully review future reports and documents that the Company files from time to time with the SEC, such as its annual reports on Form 10-K (particularly Management's Discussion and Analysis of Financial Condition and Results of Operations), its quarterly reports on 10-Q (particularly Management's Discussion and Analysis of Financial Condition and Results of Operations), and any current reports on Form 8-K.

Overview

Maxim Integrated Products, Inc. ("Maxim" or "the Company" and also referred to as "we," "our" or "us") designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for a large number of geographically diverse customers and is incorporated in the state of Delaware. The Company also provides a range of high-frequency process technologies and capabilities that can be used in custom designs. The analog market is fragmented and characterized by many diverse applications, a great number of product variations and, with respect to many circuit types, relatively long product life cycles. The Company is a global company with manufacturing facilities in the United States, testing facilities in the Philippines and Thailand, and sales and circuit design offices throughout the world. The major end-markets the Company's products are sold in are the communications, computing, consumer and industrial markets.

CRITICAL ACCOUNTING POLICIES

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations, and that require us to make our most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include revenue recognition and accounts receivable allowances, which impact the recording of revenues, valuation of inventories, which impacts costs of goods sold and gross margins, the assessment of recoverability of long-lived assets, which impacts write-offs of fixed assets, accounting for stock-based compensation, which impacts cost of goods sold, gross margins and operating expenses, accounting for income taxes, which impacts the income tax provision, and assessment of contingencies, which impacts charges recorded in cost of goods sold and selling, general and administrative expenses. We have other significant accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or it is less likely that such accounting policies would have a material impact on our reported results of operations for a given period. The accounting policy below represents an addition to the Company's significant accounting policies as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2007.

Intangible Assets and Goodwill

We account for intangible assets, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets or ("SFAS 144"), which requires impairment losses to be recorded on intangible assets used in operations when indicators of impairment, such as reductions in demand or significant economic slowdowns in the semiconductor industry, are present. Reviews are performed to determine whether the carrying value of an asset is impaired, based on comparisons to undiscounted expected future cash flows. If this comparison indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices or (ii) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements or ("Concepts Statement 7"). Impairment is based on the excess of the carrying amount over the fair value of those assets.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), we test goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis in the fourth quarter or more frequently if we believe indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill.

RESULTS OF OPERATIONS

Net Revenues

Net revenues were $487.4 million and $476.6 million for the three months ended March 29, 2008 and March 24, 2007, respectively, an increase of 2.3%. Net revenues for the nine months ended March 29, 2008 and March 24, 2007, were $1,551.5 million and $1,476.8 million, respectively, an increase of 5.1%. The increase in net revenues for the three and nine months ended March 29, 2008 as compared to the three and nine months ended March 24, 2007 was primarily due to increased unit shipments of approximately 5% and 9%, respectively. The increases in unit shipments was offset somewhat by a change in product mix related to increased sales of products with lower average selling prices.

During the three months ended March 29, 2008 and March 24, 2007, approximately 78% and 76%, respectively, of net revenues were derived from customers outside of the United States. During the nine months ended March 29, 2008 and March 24, 2007, approximately 80% and 77%, respectively, of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on revenue and our results of operations for the three months and nine months ended March 29, 2008 and March 24, 2007 was immaterial.

Gross Margin

Our gross margin as a percentage of net revenues was 58.4% and 60.1% for the three months ended March 29, 2008 and March 24, 2007, respectively. The gross margin percentage decreased for the three months ended March 29, 2008 as compared to the three months ended March 24, 2007 primarily due to $11.3 million of accelerated depreciation expense recorded due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas and $3.8 million recorded for severance charges related to the Dallas fab closure and headcount reductions at other manufacturing locations. Our inventory write downs for inventories in excess of demand increased by $0.6 million during the three months ended March 29, 2008 as compared to the three months ended March 24, 2007. Inventory write downs were $11.6 million and $11.0 million for the three months ended March 29, 2008 and March 24, 2007, respectively. In addition, product mix combined with decreased average unit selling prices contributed to an unfavorable impact on gross margin percentage for the three months ended March 29, 2008 as compared to the three months ended March 24, 2007. The above was offset by decreased stock-based compensation of $4.2 million for the three months ended March 29, 2008 as compared to the three months ended March 24, 2007.

Our gross margin percentage was 60.5% and 60.5% for the nine months ended March 29, 2008 and March 24, 2007, respectively. The gross margin percentage for the nine months ended March 29, 2008 stayed flat as compared to gross margin percentage for the nine months ended March 24, 2007. Stock-based compensation decreased $29.2 million resulted from recording charges during the nine months ended March 24, 2007 related to our decision to modify all stock options expiring as a result of the expiration of the 10 year contractual term during Blackout Period. The above was offset by $11.3 million of accelerated depreciation expense recorded due to our decision to the ramp down and eventually closure our wafer fab in Dallas, Texas and $6.2 million of severance charges recorded related to the Dallas fab closure, San Jose fab transfer and headcount reductions at other manufacturing locations for

the nine months ended March 29, 2008. Our inventory write downs for inventory in excess of demand increased by $2.8 million during the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007. Inventory write downs were $28.5 million and $25.6 million for the nine months ended March 29, 2008 and March 24, 2007, respectively. In addition, product mix combined with decreased average unit selling prices contributed to an unfavorable impact on gross margin percentage for the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007.

Research and Development

Research and development expenses were $143.3 million and $159.4 million for the three months ended March 29, 2008 and March 24, 2007, respectively, which represented 29.4% and 33.5% of net revenues, respectively. The decrease in research and development expenses in absolute dollars was primarily due to an $18.8 million decrease in payroll and related withholding taxes recorded in the three months ended March 24, 2007 due to improper accounting for stock option grants and cash exercises. In addition, stock-based compensation decreased by $13.7 million for the three months ended March 29, 2008 as compared to three month ended March 24, 2007. These above decreases were offset by a $9.8 million increase in salary and related expenses from salary increases and hiring additional engineers to support our research and development and process development efforts for the three months ended March 29, 2008 as compared to the three months ended March 24, 2007. In addition, we recorded $4.6 million in severance charges related to reductions in headcount during the three months ended March 29, 2008.

Research and development expenses were $432.7 million and $511.0 million for the nine months ended March 29, 2008 and March 24, 2007 respectively, which represented 27.9% and 34.6% of net revenues, respectively. The decrease in research and development expenses was primarily due to decreased stock-based compensation and related expenses. Stock based compensation decreased by $97.0 million primarily due to charges recorded in the nine months ended March 24, 2007, due to our decision to modify all stock options expiring as a result of the expiration of the 10 year contractual term during the Blackout Period. In addition, we recorded during the nine months ended March 24, 2007, $19.1 million for payroll and related withholding tax liabilities due to improper accounting for stock option grants and cash exercises. The above decreases were offset by a $32.3 million increase in salary and related expenses primarily from salary increase and hiring additional engineers to support our research and development and process development efforts and a $4.6 million in severance charges related to reductions in headcount during the nine months ended March 29, 2008.

The level of research and development expenditures as a percentage of net revenues will vary from period to period, depending, in part, on the level of net revenues and, in part, on our success in recruiting the technical personnel needed for its new product introductions and process development, and on the level of stock-based compensation expense. We view research and development expenditures as critical to maintaining a high level of new product introductions, which in turn are critical to our plans for future growth.

Selling, General and Administrative

Selling, general and administrative expenses were $60.4 million and $40.6 million for the three months ended March 29, 2008 and March 24, 2007, respectively, which represented 12.4% and 8.5% of net revenues, respectively. The increase in selling, general, and administrative expenses for the three months ended March 29, 2008 as compared to the three months ended March 24, 2007 was primarily due to an increase of $5.5 million in legal expenses and an increase of $6.3 million in accounting fees associated with our stock option investigation, subsequent restatement of our previously filed financial statements, private litigation and other associated activities. In addition, stock-based compensation increased by $22.1 million primarily due to our decision to modify all stock options expiring as a result of the expiration of the 10 year contractual term during the Blackout Period offset by a reversal of the reversal of $12.7 million of previously recognized stock-based compensation during the three months ended March 24, 2007 due to the forfeiture of our former Chief Executive Officer's unvested stock options upon his retirement. The above increases were offset by $3.1 million recorded during the three months ended March 24, 2007 to reflect the net present value of termination benefits given our former Chief Executive Officer upon his retirement.

Selling, general and administrative expenses were $174.1 million and $153.3 million for the nine months ended March 29, 2008 and March 24, 2007, respectively, which represented 11.2% and 10.4% of net revenues, respectively. The increase in selling, general, and administrative expenses for the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007 was primarily due to an increase of $16.9 million in legal expenses and an increase of $17.2 million in accounting fees associated with our stock option investigation,

subsequent restatement of our previously filed financial statements, private litigation and other associated activities. Salary and related expenses increased by $4.7 million during the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007 due to salary increases and hiring additional headcount to support our growth. In addition, depreciation expenses increased by approximately $1.6 million and intangible asset amortization related to customer relationships purchased from Vitesse increased by $0.9 million during the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007. The above increases were offset by a decrease of $32.8 million of stock-based compensation expenses during the nine months ended March 29, 2008 as compared to the nine months ended March 24, 2007 primarily due to our decision to modify all stock options expiring as a result of the expiration of the 10 year contractual term during the Blackout Period. This decrease was offset somewhat by the reversal of $12.7 million of previously recognized stock-based compensation during the nine months ended March 24, 2007 due to the forfeiture of our former Chief Executive Officer's unvested stock options upon his retirement. In addition, during the nine months ended March 24, 2007, we recorded a $3.1 million charge to reflect the net present value of termination benefits given our former Chief Executive Officer upon his retirement.

The level of selling, general and administrative expenditures as a percentage of net revenues will vary from period to period, depending on the level of net revenues, our success in recruiting sales and administrative personnel needed to support our operations, and the level of stock-based compensation expense. We expect a significant increase in selling, general and administrative expenditures in fiscal years 2007 and 2008 for expenses associated with our restatement, related private litigation and other associated activities, particularly, for accounting, legal and other professional service fees.

Stock-based Compensation

The following table shows total stock-based compensation expense by type of
award, and resulting tax effect, included in the Condensed Consolidated
Statements of Income for the three and nine months ended March 29, 2008 and
March 24, 2007:



                                                   Three Months Ended            Nine Months Ended
                                                 March 29,     March 24,      March 29,    March 24,
                                                   2008          2007            2008         2007
                                                                   (in thousands)
Cost of goods sold
Stock options                                   $     7,728   $     9,884     $   26,835   $   51,672
Employee stock purchase plan                             -             -              -         1,431
Restricted stock units                                2,807         4,900         11,030       13,925

                                                     10,535        14,784         37,865       67,028

Research and development expense
Stock options                                        12,737        20,820         58,879      141,923
Employee stock purchase plan                             -             -              -         4,672
Restricted stock units                                6,433        12,007         26,894       36,166

                                                     19,170        32,827         85,773      182,761

Selling, general and administrative expense
Stock options                                         4,002        (6,429 )       18,937       36,391
Employee stock purchase plan                             -             -              -         1,431
Restricted stock units                                1,982         3,024          7,483        8,653

                                                      5,984        (3,405 )       26,420       46,475

Total Stock-based compensation expense
Stock options                                        24,467        24,275        104,651      229,986
Employee stock purchase plan                             -             -              -         7,534
Restricted stock units                               11,222        19,931         45,407       58,744

Pre-tax stock-based compensation expense             35,689        44,206        150,058      296,264
Less: Income tax effect                              12,424        15,337         52,571      102,538

Net stock-based compensation expense            $    23,265   $    28,869     $   97,487   $  193,726

Interest Income and Other, Net

Interest income and other, net was $11.6 million and $15.1 million for the three months ended March 29, 2008 and March 24, 2007, respectively. This decrease was mainly due to lower average interest rates combined with lower average invested cash, cash equivalents, and short-term investments balances.

Interest income and other, net was $50.9 million and $43.2 million for the nine months ended March 29, 2008 and March 24, 2007, respectively. This increase was primarily due to a $9.6 million gain on sale of land. This increase was offset slightly by decreased interest income due to lower average interest rates combined with lower invested cash, cash equivalents, and short-term investments balances.

Provision for Income Taxes

The effective income tax rate for the three months ended March 29, 2008 and March 24, 2007 was 34.1% and 24.9%, respectively. The effective income tax rate for the nine months ended March 29, 2008 and March 24, 2007 was 34.1% and 28.8%, respectively. The increase in the effective tax rate for three and nine months ended March 29, 2008 compared to the three and nine months ended March 24, 2007 was primarily due to the final phase out of the extraterritorial income exclusion by the American Jobs Creation Act of 2004, the expiration of the Federal research tax credit on December 31, 2007, and the nonrecurring tax reserve release in the third quarter of fiscal 2007 due to the expiration of the statute of limitations. The effective rates were lower than the U.S. federal and state combined statutory rate primarily due to tax benefits generated by the research and development credit and the domestic production activities deduction.

The Company's net deferred tax asset at March 29, 2008 was $318.8 million. The Company believes it is more likely than not that the net deferred tax assets will be realized based on historical earnings and expected levels of future taxable income. Levels of future taxable income are subject to the various risks and uncertainties as described in this report. An increase in the valuation allowance against net deferred tax assets may be necessary if it becomes more likely than not that all or a portion of the net deferred tax assets will not be realized. The Company periodically assesses the need for increases to the deferred tax asset valuation allowance.

On July 1, 2007, the Company adopted FASB Interpretation No. 48, or FIN 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109. The Company has historically classified unrecognized tax benefits as income taxes payable, which was included within the current liabilities section of our Condensed Consolidated Balance Sheet or as a reduction to deferred tax assets to the extent that the unrecognized tax benefits related to net operating loss or tax credit carryforwards. As a result of the adoption of FIN 48, the Company now classifies unrecognized tax benefits as a current liability to the extent that settlement is anticipated within one year; as a non current liability to the extent that settlement is anticipated beyond one year; or as a reduction to deferred tax assets to the extent that the unrecognized tax benefit relates to deferred tax assets such as operating loss or tax credit carryforwards.

The Company evaluated and assessed its tax positions under the recognition and measurement guidelines of FIN 48. The adoption of FIN 48 resulted in an increase to our contingent tax liability reserves of $28.6 million. Of this amount, approximately $9.4 million was accounted for as a reduction to beginning retained earnings and approximately $19.2 million as a reduction to additional paid-in capital. The amount of unrecognized tax benefits at the beginning of fiscal year 2008 was $123.6 million, excluding interest and penalties of $9.8 million. Of this amount, $61.3 million relates to unrecognized tax benefits that, if recognized, would impact our effective tax rate and the remaining $62.3 million relates to unrecognized tax benefits that, if recognized, would be credited to additional paid in capital.

The Company reports interest and penalties related to unrecognized tax benefits as a component of income tax expense, which is consistent with its methodology prior to the adoption of FIN 48. The amount of interest and penalties accrued as of the beginning of fiscal year 2008 was $9.8 million. The amount of interest and penalties accrued during the three and nine months ended March 29, 2008 was $1.6 million and $4.8 million, respectively.

In the third quarter of fiscal year 2008, the Internal Revenue Service ("IRS") commenced an examination of the Company's federal corporate income tax returns for the fiscal years 2005 and 2006. As part of this audit the IRS has requested information related to our stock option investigation. Management believes that it has adequately

provided for any adjustments that may result from the IRS examination. However, the outcome of tax audits cannot be predicted with certainty. Should any issues addressed in the Company's tax audits be resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

Recently Issued Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN 48"), which prescribes comprehensive guidelines for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on tax returns. FIN 48, effective for fiscal years beginning after December 15, 2006, seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company adopted the provisions of FASB Interpretation No. 48 on July 1, 2007 and applied the provisions of FIN 48 to all income tax positions. The cumulative effect of applying FIN 48 was a $9.4 million and $19.2 million decrease in retained earnings and additional-paid-in-capital, respectively, at the beginning of fiscal year 2008.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. The statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. The statement emphasizes that fair value is a market-based measurement and not an entity-specific measurement. It also establishes a fair value hierarchy used in fair value measurements and expands the required disclosures of assets and liabilities measured at fair value. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In addition, in February 2008, the FASB issued FSP No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP 157-1") and FSP No.157-2, Effective Date of FASB Statement No. 157 ("FSP 157-2"). FSP 157-1 amends SFAS 157 to remove certain leasing transactions from its scope. FSP 157-2 delays the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting SFAS 157 on the Company's consolidated financial condition, results of operations and liquidity.

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