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 Form 10-Q (particularly Management's Discussion and Analysis of Financial Condition and Results of Operations), and any Current Reports on Form 8-K.

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 in which the Company's products are sold are the communications, computing, consumer and industrial markets.

Reclassifications

Certain prior-year amounts in the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation.

The reclassifications included the following:

º The Company reclassified certain expense items from cost of goods sold, research and development and selling general and administrative expenses into other operating expenses, net. These costs include legal and accounting fees directly attributable to the Company's restatement, and cost reductions due to the reversal of accruals established in prior years for foreign payroll taxes, interest and penalties related to the misdating of option grants and exercises. These foreign payroll tax accruals were reversed due to the expiration of the statute of limitations in various foreign jurisdictions.

º The reclassification of severance and restructuring expenses incurred related to the transfer of manufacturing production from the Company's San Jose, California facility to an outsourced Japanese manufacturing facility, Epson's Sakata, Japan facility. These expenses were previously included in cost of goods sold. The Company recognized severance and restructuring expenses in accordance with the provisions of FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

                                                 Three Months Ended
                                 ---------------------------------------------------
                                  September 29,                       September 29,
                                     2007 (as
                                    reported)         Adjustments     2007 (revised)
                                 ----------------   ---------------   --------------
                                               (Amounts in thousands)

Cost of goods sold                     $ 206,515          $ (2,980)       $ 203,535
                                 ----------------   ---------------   --------------
      Gross margin                       317,566             2,980          320,546

   Research and development              150,833             9,152          159,985
   Selling, general and                   57,194           (13,732)          43,462
administrative
   Severance and restructing                  -              2,350            2,350
expenses
   Other operating expenses, net              -              5,210            5,210
                                 ----------------   ---------------   --------------
      Total operating expenses         $ 208,027           $ 2,980        $ 211,007
                                 ----------------   ---------------   --------------

These reclassifications did not result in changes to previously reported operating or net income.

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 related 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 operating 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.

RESULTS OF OPERATIONS

Net Revenues

Net revenues were $501.2 million and $524.1 million for the three months ended September 27, 2008 and September 29, 2007, respectively, a decrease of 4.4%. The decrease in net revenues for the first quarter of fiscal year 2009 as compared to the first quarter of fiscal year 2008 is primarily due to decreased unit shipments of approximately 3%, combined with a change in product mix related to increased sales of products with lower average selling prices. Average selling price decreased approximately 1% for the three months ended September 27, 2008 compared with the three months ended September 29, 2007.

We classify our net revenue by four major end market categories: Computing, Consumer, Industrial and Communications. In the three months ended September 27, 2008 and September 29, 2007, net revenues from both the Consumer and Industrial markets increased. Net revenues from the Computing market decreased significantly from the comparable prior year period mainly due to a decline in shipments of notebook motherboard power management products. Net revenues from the Communications market increased from the comparable prior year period mainly due to the growth of the Asia communication infrastructure market.

During the three months ended September 27, 2008 and September 29, 2007, approximately 78% and 80%, 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 ended September 27, 2008 and September 29, 2007 was immaterial.

Our gross margin percentage was 58.2% and 61.2% for the three months ended September 27, 2008 and September 29, 2007, respectively. The gross margin percentage for the three months ended September 27, 2008, as compared to the three months ended September 29, 2007, decreased 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 $1.4 amortization expense related to the acquisition of the Storage products division of Vitesse Semiconductor. In addition, product mix combined with approximate 1% decreased average unit selling prices contributed to an unfavorable impact on gross margin percentage for the three months ended September 27, 2008 as compared to the three months ended September 29, 2007. These were offset by a decrease of $3.7 million stock-based compensation expense primarily due to the decision to cash-settle vested stock options that expired during the Blackout Period as a result of the expiration of the 10 year contractual term and the resulting charge during the three months ended September 29, 2007.

Research and Development

Research and development expenses were $138.9 million and $160.0 million for the three months ended September 27, 2008 and September 29, 2007, respectively, which represented 27.7% and 30.5% of net revenues, respectively. The decrease in research and development expenses was primarily due to decreased stock-based compensation. Stock-based compensation decreased by $24.4 million primarily due to the decision to cash-settle vested stock options that expired during the Blackout Period as a result of the expiration of the 10 year contractual term and the resulting charge during the three months ended September 29, 2007. In addition, salary and related expenses decreased by $1.3 million primarily due to decreased bonus expense resulting from the reduced anticipated profitability and decreased headcount. These were offset by $2.1 million increase in outside services and $1.5 million increase in depreciation expenses due to increased capital equipment.

Selling, General and Administrative

Selling, general and administrative expenses were $40.2 million and $43.5 million for the three months ended September 27, 2008 and September 29, 2007, respectively, which represented 8.0% and 8.3% of net revenues, respectively. The decrease in selling, general, and administrative expenses for the three months ended September 27, 2008 as compared to the three months ended September 29, 2007 was primarily due to the decrease of stock-based compensation expenses. Stock-based compensation decreased by $7.0 million primarily due to the decision to cash-settle vested stock options that expired during the Blackout Period as a result of the expiration of the 10 year contractual term and the resulting charge during the three months ended September 29, 2007. The above decrease was offset by a $1.0 million increase in salary and related expenses primarily from annual salary increases for the three months ended September 27, 2008 as compared to the three months ended September 29, 2007.

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 months ended September 27, 2008 and September
29, 2007:

                                                      Three Months Ended
                                                     ---------------------
                                                     Sept. 27,   Sept. 29,
                                                       2008        2007
                                                     ---------   ---------
                                                        (in thousands)
         Cost of goods sold
            Stock options                             $ 6,115    $ 11,147
            Restricted stock units                      5,805       4,515
                                                     ---------   ---------
                                                     $ 11,920    $ 15,662
                                                     ---------   ---------

         Research and development expense
            Stock options                             $ 7,735    $ 32,464
            Restricted stock units                     11,684      11,340
                                                     ---------   ---------
                                                     $ 19,419    $ 43,804
                                                     ---------   ---------

         Selling, general and administrative expense
            Stock options                             $ 2,410    $ 10,297
            Restricted stock units                      3,812       2,890
                                                     ---------   ---------
                                                      $ 6,222    $ 13,187
                                                     ---------   ---------

         Total Stock-based compensation expense
            Stock options                            $ 16,260    $ 53,908
            Restricted stock units                     21,301      18,745
                                                     ---------   ---------
         Pre-tax stock-based compensation expense      37,561      72,653
         Less: income tax effect                       12,799      25,597
                                                     ---------   ---------
         Net stock-based compensation expense        $ 24,762    $ 47,056
                                                     ---------   ---------

Included in stock-based compensation expense for the three months ended September 29, 2007 was $27.5 million related to the decision to cash-settle all options expired during the Blackout Period.

Impairment of Long-lived Assets

During the first quarter of fiscal year 2009, the Company recorded a $7.3 million assets impairment charge as a result of transferring certain wafer manufacturing production from its San Jose, California wafer manufacturing facility to an outsourced Japanese manufacturing facility, Epson's Sakata, Japan facility and reductions in demand and reduced future capacity requirements.

Severance and Restructuring Expenses

The Company recorded severance and benefits expenses totaling approximately $2.1 million related to the termination of 78 employees and $2.4 million related to the termination of 96 employees during the first quarter of fiscal years 2009 and 2008, respectively, as a result of the decision to transfer certain wafer manufacturing production from its San Jose, California wafer manufacturing facility to an outsourced Japanese manufacturing facility, Epson's Sakata, Japan facility and reductions in demand and reduced future capacity requirements.

During the third quarter of its fiscal year 2008, the Company announced the wind-down and eventual closure of its wafer manufacturing facility located in Dallas, Texas over an 18-month time period. The Company anticipates that the Dallas wafer facility closure will result in the termination of approximately 200 employees with total costs of approximately $6.2 million consisting principally of severance and benefit payments over such 18-month period. A substantial amount of the costs associated with this activity will be paid upon the closure of the facility which is anticipated to occur in the last quarter of fiscal year 2009. The Company recorded approximately $1.0 million in severance and benefit expenses during the three months ended September 27, 2008.

During the fourth quarter of its fiscal year 2008, the Company implemented certain actions to cease performing further in-house testing in the United States and have all future testing performed overseas in Thailand and the Philippines. These actions commenced during the fourth quarter of fiscal year 2008 and resulted in the recognition of a charge of $1.8 million in severance and benefits related to the termination of 93 employees.

In the first quarter of its fiscal year 2009, the Company continued these actions and terminated an additional 54 employees resulting in an additional charge of $1.0 million.

Other Operating Expenses, Net

Other operating expenses, net primarily consists of expense items related to the
restatement of previously reported financial statements.

The following table summarizes the activities for the three months ended
September 27, 2008 and September 29, 2007:

                                                     Three Months Ended
                                           ---------------------------------------
                                           September 27, 2008   September 29, 2007
                                           ------------------   ------------------
                                                       (in thousands)
Legal and accounting expenses                       $ 11,289             $ 13,448
Payroll tax and related adjustments                   (5,381)              (8,238)

Other                                                  1,450                   -
                                           ------------------   ------------------
Total                                             $    7,358           $    5,210
                                           ------------------   ------------------

The Company incurred $11.3 million and $13.4 million legal and accounting expenses during the three months ended September 27, 2008 and September 29, 2007, respectively, primarily associated with the restatement of the previously filed financial statements, private litigation and other associated activities, particularly, for accounting, legal and other professional service fees. Accounting expense increased by $8.1 million for the three months ended September 27, 2008 as compared to the three months ended September 29, 2007 due to the increased activities and associated costs to complete the restatement of the previously filed financial statements. This was offset by $10.3 million decrease in legal expenses due to the tentative settlement of the derivative litigation reached during the first quarter of fiscal year 2009.

Also as a result of the Company's investigation into equity awards, the Company recorded certain U.S. and foreign payroll tax, interest and penalty accruals in prior years. The Company reversed $5.4 million and $8.2 million of these accruals during the three months ended September 27, 2008 and September 29, 2007, respectively, due to the expiration of the tax statutes of limitations in various foreign jurisdictions.

Interest Income and Other, Net

Interest income and other, net was $9.1 million and $17.4 million for the three months ended September 27, 2008 and September 29, 2007, respectively. This decrease was primarily due to lower average interest rates.

Provision for Income Taxes

The effective income tax rate for the three months ended September 27, 2008 and September 29, 2007 was 34.2% and 34.1%, respectively. The effective rates were lower than the U.S. federal and state combined statutory rates primarily due to tax benefits generated by the domestic production activities deduction. On October 3, 2008, President Bush signed legislation which reinstated the federal research tax credit retroactively back to January 1, 2008. The reinstatement of this tax credit will result in a discrete tax benefit in the second quarter of fiscal year 2009 and will have a beneficial impact on the Company's fiscal year 2009 annual effective income tax rate. As a result, the Company expects that its tax rate for the second quarter of fiscal year 2009 will be significantly reduced.

The Company's federal corporate income tax returns for the fiscal years 2005 and 2006 are being examined by the Internal Revenue Service ("IRS"). As part of this examination 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, which might have a significant impact on the results of operations for the period.

Recently Issued Accounting Pronouncements

In the first quarter of the Company's fiscal year 2009, Maxim adopted Statement of Financial Accounting Standards 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. 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. The adoption of SFAS 157 did not have a significant impact on the Company's consolidated financial condition, results of operations and liquidity.

In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157 ("FSP 157-2"). FSP 157-2 delays the effective date of SFAS 157 to fiscal 2010 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company is currently evaluating the impact of the adoption of those provisions of SFAS 157 on its consolidated financial condition and results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 improves the relevance, comparability and transparency of financial statements and eliminates diversity in practice that currently exists in accounting for transactions between an entity and noncontrolling interests. This standard is effective for annual periods beginning after December 15, 2008. Earlier adoption is prohibited. The adoption of SFAS 160 is not expected to have a material effect on the Company's consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS 141(R)") which replaces SFAS No. 141, Business Combinations. SFAS 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. This standard is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact of adopting SFAS 141(R) on the Company's consolidated financial position and results of operations.

In December 2007, the FASB ratified EITF Issue No. 07-1, Accounting for Collaborative Arrangements ("EITF 07-01"). EITF 07-1 provides guidance on the classification, income statement presentation and disclosure associated with collaborative arrangements involving parties considered to be active participants to an activity and are exposed to significant risks and rewards which are dependent on the commercial success of the activity. EITF 07-1 is effective for fiscal years beginning after December 15, 2008. The adoption of EITF 07-01 is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles("SFAS 162"). SFAS 162 identifies the sources of accounting consistent with GAAP. SFAS 162 is effective sixty days following the SEC's approval of the Public Company Accounting Oversight Board's amendments to AU
Section 411 on September 16, 2008, The Meaning of `Present fairly in conformity with generally accepted accounting principles'. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 162 on its consolidated financial statements.

. . .