This Management's Discussion and Analysis of Financial Condition and Results of Operations, including in particular the section entitled "Outlook" contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance, particularly in light of the global credit and financial market crisis; our anticipated growth and trends in our businesses, our capital needs and capital expenditures; our market position and competitive changes in the marketplace for our products; our ability to innovate new products and technologies; the effectiveness of our efforts to refocus our operations and reduce our cost structure; our ability to access credit or capital markets; our ability to pay dividends or repurchase stock; our third-party suppliers; intellectual property and litigation matters; potential acquisitions or divestitures; key personnel; the effect of new accounting pronouncements and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part I, Item 1A. Risk Factors and elsewhere in our Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

During the first quarter of fiscal 2008 we sold our baseband chipset business and related support operations, or Baseband Chipset Business, to MediaTek Inc. and sold our CPU voltage regulation and PC thermal monitoring business to certain subsidiaries of ON Semiconductor Corporation. The financial results of these businesses are presented as discontinued operations in the consolidated statements of income for all periods presented. The assets and liabilities related to these businesses are reflected as assets and liabilities of discontinued operations in the consolidated balance sheets as of November 1, 2008 and November 3, 2007. The historical results of operations of these businesses have been segregated from our consolidated financial statements and are included in income (loss) from discontinued operations, net of tax, in the consolidated statements of income. Unless otherwise noted, this Management's Discussion and Analysis relates only to financial results from continuing operations.

Results of Operations

Overview


                                                                        Fiscal Year
                                                          2008             2007             2006

Total Revenue                                          $ 2,582,931      $ 2,464,721      $ 2,250,100
Gross Margin %                                                61.1 %           61.2 %           61.9 %
Net income from Continuing Operations                  $   525,177      $   502,123      $   519,175
Net income from Continuing Operations as a % of
Total Revenue                                                 20.3 %           20.4 %           23.1 %
Diluted EPS from Continuing Operations                 $      1.77      $      1.51      $      1.40
Diluted EPS                                            $      2.65      $      1.50      $      1.48

The year-to-year revenue changes by end market and product category are more fully outlined below under Revenue Trends by End Market and Revenue Trends by Product.

In fiscal year 2008, our product revenue increased 6% from fiscal 2007 and our diluted earnings per share from continuing operations increased by 17%. We sold two businesses during the year that resulted in net cash proceeds of $403 million and a $248 million net gain in fiscal 2008. We report these two businesses below as discontinued operations. Our fiscal 2008 cash flow from operations was $669 million, or 26% of revenue, and we had $1,310 million of cash and short-term investments and no debt as of November 1, 2008.

While we achieved good operating results for fiscal 2008, the global credit crisis and deteriorating economic conditions have resulted in more cautious customer spending behavior and generally lower demand for our products. We cannot predict the severity, duration or precise impact of the economic downturn on our future financial results. Consequently, our reported results for the fourth quarter and fiscal year 2008 may not be indicative of our future results.

Order rates slowed in late September 2008, and backlog declined significantly from the prior quarter, which limits our short-term visibility. Forecasting revenue in this environment is difficult. Therefore, as more fully described in the Outlook section below, our operating plan is for revenues to decline approximately 20% in the first quarter of fiscal 2009 from the amount recorded in the fourth quarter of fiscal 2008.

Revenue Trends by End Market

The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the "sold to" customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

                                             2008                                  2007*                            2006
                                                % of                                        % of                            % of
                                                Total                                       Total                           Total
                                               Product                                     Product                         Product
                               Revenue         Revenue       Y/Y%          Revenue         Revenue         Revenue         Revenue

Industrial                   $ 1,274,924             49 %        6 %     $ 1,198,984             49 %    $ 1,117,602             50 %
Communications                   637,277             25 %       21 %         527,287             22 %        498,199             22 %
Consumer                         544,274             21 %       (2 )%        557,373             23 %        449,754             20 %
Computer                         126,456              5 %      (13 )%        146,077              6 %        184,545              8 %

Total Product Revenue        $ 2,582,931            100 %        6 %     $ 2,429,721            100 %    $ 2,250,100            100 %

Revenue from one-time IP
license                                -                                      35,000                               -

Total Revenue                $ 2,582,931                                 $ 2,464,721                     $ 2,250,100

* The year ended November 3, 2007 was a 53-week year. We follow a 52-week, or 364-day fiscal calendar that results in a 53-week year approximately every seventh year, as occurred in fiscal 2007.

Industrial - The year-to-year increase from fiscal 2007 to fiscal 2008 was primarily the result of revenue growth in products sold into the instrumentation and automotive sectors and, to a lesser extent, the defense sector. These increases were partially offset by a decline in revenue from automatic test equipment. The year-to-year increase from fiscal 2006 to fiscal 2007 was primarily the result of revenue growth in products sold into the automotive area and to a lesser extent the instrumentation portion of the industrial end market. These sales increases were partially offset by a decline in sales to automatic test equipment customers.

Communications - The year-to-year increases from fiscal 2007 to fiscal 2008 and from fiscal 2006 to fiscal 2007 were primarily the result of revenue growth in sales of analog products used in basestations and wireless handsets. The increase in sales from fiscal 2006 to fiscal 2007 was partially offset by a decrease in sales to networking customers.

Consumer - The year-to-year decrease from fiscal 2007 to fiscal 2008 was primarily the result of an increase in revenue from advanced television and digital camera applications that was offset by a decline in revenue from other consumer applications, consistent with the global slowdown in consumer spending. The year-to-year increase from fiscal 2006 to fiscal 2007 was primarily the result of increased sales of our products used in video game applications, advanced television systems and digital home applications.

Computer - The year-to-year decreases from fiscal 2007 to fiscal 2008 and from fiscal 2006 to fiscal 2007 were primarily the result of broad-based declines in sales of our products into this end market.

Revenue from One-Time IP License - During the first quarter of fiscal 2007, we recorded revenue of $35 million received in exchange for licensing of certain intellectual property rights to a third party.

Revenue Trends by Product

The following table summarizes revenue by product categories. The categorization of our products into broad categories is based on the characteristics of the individual products, the specification of the products and in some cases the specific uses that certain products have within applications. The categorization of products into categories is therefore subject to judgment in some cases and can vary over time. In instances where products move between product categories we reclassify the amounts in the product categories for all prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each product category.

                                             2008                                  2007*                            2006
                                                % of                                        % of                            % of
                                                Total                                       Total                           Total
                                               Product                                     Product                         Product
                               Revenue         Revenue       Y/Y%          Revenue         Revenue         Revenue         Revenue

Converters                   $ 1,190,964             46 %        8 %     $ 1,104,842             46 %    $ 1,021,174             45 %
Amplifiers                       590,275             23 %        6 %         557,515             23 %        532,046             24 %
Other analog                     393,856             15 %       (0 )%        395,494             16 %        312,401             14 %

Subtotal analog signal
processing                     2,175,095             84 %        6 %       2,057,851             85 %      1,865,621             83 %

Power management &
reference                        143,702              6 %       16 %         124,101              5 %        126,833              6 %

Total analog products        $ 2,318,797             90 %        6 %     $ 2,181,952             90 %    $ 1,992,454             89 %

General purpose DSP              234,946              9 %       10 %         214,339              9 %        205,483              9 %
Other DSP                         29,188              1 %      (13 )%         33,430              1 %         52,163              2 %

Total DSP products           $   264,134             10 %        7 %     $   247,769             10 %    $   257,646             11 %

Total Product Revenue        $ 2,582,931            100 %        6 %     $ 2,429,721            100 %    $ 2,250,100            100 %

Revenue from one-time IP
license                                -                                      35,000                               -

Total Revenue                $ 2,582,931                                 $ 2,464,721                     $ 2,250,100

* The year ended November 3, 2007 was a 53-week year. We follow a 52-week, or 364-day fiscal calendar that results in a 53-week year approximately every seventh year, as occurred in fiscal 2007.

The increase in sales from fiscal 2007 to fiscal 2008 was the result of a broad-based increase in sales across many of our product categories. The increase in sales of converters and amplifiers was primarily attributable to an increase in demand for our products used in the industrial and communications end markets.

The significant changes in our revenue trends by product type from fiscal 2006 to fiscal 2007 were the year-to-year increases in our converters and amplifiers. In addition the other analog product category increased primarily as a result of increased sales of products used in video game applications. The year-to-year decrease from fiscal 2006 to fiscal 2007 in the other DSP product category was primarily attributable to the loss of revenue from our DSP-based DSL ASIC and network processor product line that we sold in fiscal 2006. This decrease was partially offset by an increase in revenues from our general purpose DSP products.

Revenue Trends by Geographic Region

The percentage of product sales from continuing operations by geographic region,
based upon point of sale, for the last three years is as follows:


                                                        Fiscal Year
               Region                            2008      2007      2006

               United States                        20 %      23 %      24 %
               Rest of North and South America       4 %       3 %       4 %
               Europe                               26 %      24 %      24 %
               Japan                                19 %      21 %      21 %
               China                                16 %      13 %      11 %
               Rest of Asia                         15 %      16 %      16 %

The predominant countries comprising "Rest of North and South America" are Canada and Mexico. The predominant countries comprising European operations are Germany, France and the United Kingdom. The predominant countries comprising "Rest of Asia" are Taiwan and Korea.

Revenue in the United States declined from 24% to 20% of total revenue over the past three fiscal years. This geographic shift of revenue reflects the increased manufacturing activity of our customers in locations outside the United States, primarily China and our success in markets located outside of the United States.

Gross Margin


                                                 Fiscal Year
                                    2008            2007            2006

               Gross Margin     $ 1,577,275     $ 1,508,276     $ 1,393,601
               Gross Margin %          61.1 %          61.2 %          61.9 %

Gross margin percentage in fiscal 2008 was lower by 10 basis points from the gross margin recorded in fiscal 2007. Gross margin percentage in fiscal 2007 was higher primarily as a result of recording revenue of $35 million we received in exchange for the licensing of certain intellectual property rights to a third party with no associated cost of sales.

Gross margin percentage in fiscal 2007 decreased by 70 basis points from the gross margin recorded in fiscal 2006. This decrease was primarily the result of higher sales of products used in consumer electronics in fiscal 2007, which were primarily manufactured at external foundries where we earned lower gross margins compared to our average gross margin. This gross margin percentage decrease in fiscal 2007 was partially offset by the $35 million in revenue recorded in the first quarter of fiscal 2007 in exchange for licensing of certain intellectual property rights to a third party with no associated cost of sales. Fiscal year 2006 cost of sales also included approximately $20.3 million of restructuring-related expenses, of which $18.3 million was accelerated depreciation.

Stock-based Compensation Expense

During the first quarter of fiscal 2006, on October 30, 2005, we adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, using the modified prospective transition method. We calculate compensation cost on the date of grant using the fair value of stock options as calculated using the Black-Scholes option pricing model. As of November 1, 2008, the total compensation cost related to unvested awards not yet recognized in the statement of income was approximately $116.7 million (before tax consideration), which will be recognized over a weighted average period of 1.7 years. See Note 3 in the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information regarding our adoption of SFAS 123R.

Research and Development (R&D)


                                                             Fiscal Year
                                                  2008          2007          2006

      R&D Expenses                             $ 533,480     $ 509,553     $ 459,846
      R&D Expenses as a % of Product Revenue        20.7 %        21.0 %        20.4 %

R&D expenses in fiscal 2008 increased by $23.9 million, or 5%, from the amount recorded in fiscal 2007. This increase was primarily the result of higher employee salary, benefit and bonus expenses, which were partially offset by one fewer week of operations in fiscal 2008 than in fiscal 2007 and lower employee stock option expenses.

R&D expenses in fiscal 2007 increased by $49.7 million, or 11%, from the amount recorded in fiscal 2006. The increase in R&D expenses was primarily the result of an increase in employee salary and benefit expense in fiscal 2007, primarily as a result of an increase in our employee population and to a lesser extent the impact of the extra week of operations in fiscal 2007. These increases were partially offset by lower employee bonus expenses during fiscal 2007 as compared to fiscal 2006.

R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. At any point in time we have hundreds of R&D projects underway, and we believe that none of these projects is material on an individual basis. We expect to continue the development of innovative technologies and processes for new products, and we believe that a continued commitment to R&D is essential in order to maintain product leadership with our existing products and to provide innovative new product offerings, and therefore, we expect to continue to make significant R&D investments in the future.

Selling, Marketing, General and Administrative (SMG&A)


                                                              Fiscal Year
                                                   2008          2007          2006

     SMG&A Expenses                             $ 415,682     $ 389,505     $ 384,051
     SMG&A Expenses as a % of Product Revenue        16.1 %        16.0 %        17.1 %

SMG&A expenses increased by $26.2 million, or 7%, in fiscal 2008 as compared to the amount recorded in fiscal 2007. This increase was primarily the result of higher employee salary, benefit and bonus expenses, which were partially offset by lower employee stock option expenses and one less week of operations in fiscal 2008 than in fiscal 2007. Fiscal 2007 also included $8.5 million related to the reimbursement of legal expenses we received as a result of the settlement of litigation in fiscal 2007.

SMG&A expenses for fiscal 2007 increased by $5.5 million, or 1%, from the amount recorded in fiscal 2006. The increase in SMG&A expenses was primarily the result of higher employee salary and benefit expenses and to a lesser extent an extra week of operations in fiscal 2007. These increases were partially offset by lower employee bonus expenses and $8.5 million related to the reimbursement of legal expenses we received as a result of the settlement of litigation in fiscal 2007.

Purchased In-process Research and Development


                                                    Fiscal Year
                                                       2006

                  TTPCom Limited                   $       5,500
                  Integrant                               11,124
                  AudioAsics                               5,087

                  Total Purchased in-Process R&D   $      21,711

We incurred charges totaling $21.7 million for the write-off of in-process technology that had not yet reached technological feasibility associated with our acquisitions in fiscal 2006. There were no charges for the write-off of

in-process research and development in fiscal 2008 or 2007. See "Acquisitions" below for additional information regarding these acquisitions.

Special Charges

Closure of Wafer Fabrication Facility in Sunnyvale

During the fourth quarter of fiscal 2005, we recorded a special charge of $20.3 million as a result of a decision to close our California wafer fabrication operations and transfer virtually all of the production of products manufactured there to our facility in Wilmington, Massachusetts. The charge was for severance and fringe benefit costs that we recorded pursuant to SFAS 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, or SFAS 88, under our ongoing benefit plan for 339 manufacturing employees and 28 general and administrative employees. The severance benefit is based on the length of past service, and employees had to continue to be employed until their employment was involuntarily terminated in order to receive the severance benefit. We completed the final cleanup and closure activities associated with this action during the second quarter of fiscal 2007.

In addition we recorded additional expense during fiscal 2006 related to the Sunnyvale facility closure, which consisted of $18.3 million of non-cash cost of sales expenses for additional depreciation due to shortened useful lives of certain manufacturing equipment and $2.0 million for stay-on bonuses for certain employees critical to facilitating the closure of this facility. We reversed approximately $2.0 million of the severance accrual during fiscal 2006 because some employees voluntarily left the company and other employees found alternative employment within the company. In addition, there was an over-accrual related to fringe benefits because severance payments, normally paid as income continuance, were paid in lump sum payments, which reduced the benefit costs associated with these payments. We have terminated the employment of all of the employees included in this action.

We ceased production at the wafer fabrication facility on November 9, 2006. During the first quarter of fiscal 2007, we recorded additional expense, in accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities or, SFAS 146, which consisted of $3.2 million for clean-up and closure costs that were charged to expense as incurred and $0.4 million for lease obligation costs for a warehouse facility we ceased using during the first quarter of fiscal 2007. During the second quarter of fiscal 2007, we recorded a special charge, in accordance with SFAS 146, which included $5.0 million of expense for future lease obligation costs for the wafer fabrication facility that we ceased using during the second quarter of fiscal 2007. The lease obligation costs are being paid out on a monthly basis over the remaining lease term, which expires in 2010. Also included in this special charge was $1.7 million for facility clean-up and closure costs that were charged to expense as incurred. We completed the clean-up activity during the second quarter of fiscal 2007, and we do not expect to incur any additional charges related to this action.

The closure of this facility has resulted in annual cost savings of approximately $50 million per year beginning in fiscal 2007. These annual savings include: approximately $49 million in cost of sales, of which approximately $7 million relates to non-cash depreciation savings, and approximately $1 million in SMG&A expenses. At current demand levels, if this facility were still in operation, the capacity of the facility would be largely underutilized resulting in significant adverse manufacturing variances associated with the underutilization of our wafer fabrication facilities.

Reorganization of Product Development and Support Programs

During the fourth quarter of fiscal 2005, we recorded a special charge of $11.2 million as a result of our decision to reorganize our product development and support programs with the goal of providing greater focus on our analog and digital signal processing product programs. The charge was for severance and fringe benefit costs recorded pursuant to SFAS 88 under our ongoing benefit plan or statutory requirements at foreign locations for 60 manufacturing employees and 154 engineering and selling, marketing, general and administrative employees associated with these programs.

During fiscal 2006, we recorded an additional special charge of $3.8 million related to this reorganization action. Approximately $1.5 million of this charge was for lease obligation costs for a facility that we ceased using

during the first quarter of fiscal 2006 and the write-off of property, plant and equipment and other items at this facility. The remaining $2.3 million related to the severance and fringe benefit costs recorded in the fourth quarter of . . .