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 or furnishes 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.

Overview of Business

Maxim Integrated Products, Inc. ("Maxim" or "the Company" and also referred to as "we," "our" or "us") is incorporated in the state of Delaware. Maxim 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. 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 wafer 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.

RECLASSIFICATION

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                          Six Months Ended
                ----------------------------------------   ----------------------------------------
                December                                   December
                   29,                     December 29,       29,                     December 29,
                2007 (as                                   2007 (as
                reported)   Adjustments   2007 (revised)   reported)   Adjustments   2007 (revised)
                ---------   -----------   --------------   ---------   -----------   --------------
                         (Amounts in thousands)                     (Amounts in thousands)

Cost of goods           $        $ (89)       $ 204,320            $     $ (3,069)       $ 407,855
sold             204,409    -----------   --------------    410,924    -----------   --------------
                ---------                                  ---------
   Gross         335,616            89          335,705     653,182         3,069          656,251
margin

   Research and  138,579          (232)         138,347     289,412         8,920          298,332
development
   Selling,       56,460       (14,824)          41,636     113,654       (28,556)          85,098
general and
administrative
   Severance          -             -                 -          -          2,350            2,350
and restructing
expenses
   Other              -         15,145           15,145          -         20,355           20,355
operating       ---------   -----------   --------------   ---------   -----------   --------------
expenses, net
      Total             $         $ 89        $ 195,128            $      $ 3,069        $ 406,135
operating        195,039    -----------   --------------    403,066    -----------   --------------
expenses        ---------                                  ---------

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 does 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 $410.7 million and $540.0 million for the three months ended December 27, 2008 and December 29, 2007, respectively, a decrease of 23.96%. Net revenues for the six months ended December 27, 2008 and December 29, 2007, were $911.9 million and $1,064.1 million, respectively, a decrease of 14.3%. We classify our net revenue by four major end market categories: Computing, Consumer, Industrial and Communications. In the three and six months ended December 27, 2008 and December 29, 2007, net revenues for all four end markets decreased due to a decline in shipments. Net shipments from Communications, Computing, Consumer and Industrial markets decreased by approximately 12%, 34%, 29% and 13% for three months ended December 27, 2008 as compared to December 29, 2007, respectively. Net shipments from Communications, Computing, Consumer and Industrial markets decreased by approximately 3%, 23%, 13% and 6% for six months ended December 27, 2008 as compared to December 29, 2007, respectively. The Company expects that its consumer and computing end markets will continue to decline due to the normal seasonal declines compounded by the current macro economic conditions. The Company expects industrial and communications end markets to decline less than its overall corporate average due to the quarter ending March 28, 2009 being a strong seasonal quarter for the industrial market and by government stimulus packages placing emphasis on infrastructure build outs.

During the three months ended December 27, 2008 and December 29, 2007, approximately 76% and 81%, respectively, of net revenues were derived from customers outside of the United States. During the six months ended December 27, 2008 and December 29, 2007, approximately 77% and 81%, 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 December 27, 2008 and December 29, 2007 was immaterial.

Our gross margin percentage was 48.5% and 62.2% for the three months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the three months ended December 27, 2008, as compared to the three months ended December 29, 2007, decreased primarily due to an increase of $19.2 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options that expired in October 2008 recorded for the three months ended December 27, 2008. Inventory write downs increased by $4.0 million during the three months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $12.2 million and $8.2 million for the three months ended December 27, 2008 and December 29, 2007, respectively. In addition, $12.0 million of accelerated depreciation expense was recorded for the three months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas during the third fiscal quarter of 2008, $1.9 million in expense associated with the under utilization of the Company's wafer fabrication facilities, and $1.9 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the three months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.

Our gross margin percentage was 53.8% and 61.7% for the six months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the six months ended December 27, 2008, as compared to the six months ended December 29, 2007, decreased primarily due to an increase of $15.4 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the six months ended December 27, 2008. Inventory write downs increased by $3.8 million during the six months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $20.6 million and $16.8 million for the six months ended December 27, 2008 and December 29, 2007, respectively. In addition, $23.4 million of accelerated depreciation expense was recorded for the six months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas, $1.9 million expense associated with the under utilization of the Company's fabrication facilities, and $2.7 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the six months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.

Research and Development

Research and development expenses were $144.3 million and $138.3 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 35.1% and 25.6% of net revenues, respectively. The increase in research and development expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $10.6 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Depreciation expense increased by $2.6 million primarily due to the Company's decision to cease testing operations in the United States resulting in a change in classification of equipment located in the United States now being utilized solely in research and development. These were offset by $8.5 million decrease in salary and related expenses primarily due to decreased salary and bonus expenses resulting from the decreased headcount and reduced anticipated profitability.

Research and development expenses were $283.2 million and $298.3 million for the six months ended December 27, 2008 and December 29, 2007, respectively, which represented 31.1% and 28.0% of net revenues, respectively. The decrease in research and development expenses was primarily due to decreased stock-based compensation. The Company extended the terms of vested stock options that expire during the Blackout Period as a result of the expiration of the 10 year contractual term and resulted in modification charge for six months ended December 29, 2007. The charge was partially offset by the Company's purchase of under-water stock options from employees and expense related to the purchase of expired stock options recorded for the six months ended December 27, 2008. As a result, the stock-based compensation decreased by $13.8 million for the six months ended December 27, 2008 as compared to six months ended December 29, 2007. In addition, salary and related expenses decreased by $9.4 million primarily due to decreased salary and bonus expenses resulting from the decreased headcount and reduced anticipated profitability. The above decrease was offset by increased depreciation expense by $4.1 million primarily

Selling, General and Administrative

Selling, general and administrative expenses were $64.1 million and $41.6 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 15.6% and 7.7% of net revenues, respectively. The increase in selling, general, and administrative expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $12.4 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Salary and related expenses increased by $4.9 million quarter over quarter primarily due to our field application engineers' involvement in selling and marketing of the Company's products relative to their involvement in research and development activities. In addition, the Company's $1.0 million employee loan impairment and $1.2 million loss on disposal of fixed assets contributed to the increase in selling, general and administrative expenses for three months ended December 27, 2008.

Selling, general and administrative expenses were $104.4 million and $85.1 million for the six months ended December 27, 2008 and December 29, 2007, respectively, which represented 11.4% and 8.0% of net revenues, respectively. The increase in selling, general, and administrative expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $5.5 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the six months ended December 27, 2008. Salary and related expenses increased by $6.0 million for six months ended December 27, 2008 as compared to December 29, 2007 primarily due to our field application engineers' involvement in selling and marketing of the Company's products relative to their involvement in research and development activities. In addition, the Company's $1.0 million employee loan impairment and $1.2 million fixed assets loss contributed to the increase in selling, general and administrative expenses. The above increase was offset by a $1.5 million credit from value added tax the Company received during six months ended December 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 and six months ended December 27, 2008 and
December 29, 2007:

                                       26
--------------------------------------------------------------------------------
Stock-based compensation expense by type of award
                                 Three Months Ended             Six Months Ended
                             ---------------------------   ---------------------------
                             December 27,   December 29,   December 27,   December 29,
                                 2008           2007           2008           2007
                             ------------   ------------   ------------   ------------
                                                  (in thousands)
Cost of goods sold
   Stock options                $ 23,785        $ 7,960       $ 29,900       $ 19,107
   Restricted stock units          7,049          3,708         12,854          8,223
                             ------------   ------------   ------------   ------------
                                  30,834         11,668         42,754         27,330
                             ------------   ------------   ------------   ------------

Research and development
expense
   Stock options                  21,978         13,678         29,713         46,142
   Restricted stock units         11,454          9,121         23,138         20,461
                             ------------   ------------   ------------   ------------
                                  33,432         22,799         52,851         66,603
                             ------------   ------------   ------------   ------------

Selling, general and
administrative expense
   Stock options                  15,336          4,638         17,746         14,935
   Restricted stock units          4,336          2,611          8,148          5,501
                             ------------   ------------   ------------   ------------
                                  19,672          7,249         25,894         20,436
                             ------------   ------------   ------------   ------------

Total stock-based
compensation expense
   Stock options                  61,099         26,276         77,359         80,184
   Restricted stock units         22,839         15,440         44,140         34,185
                             ------------   ------------   ------------   ------------
Pre-tax stock-based
compensation expense              83,938         41,716        121,499        114,369
Less: income tax effect           29,175         14,550         41,974         40,147
                             ------------   ------------   ------------   ------------
Net stock-based compensation    $ 54,763       $ 27,166       $ 79,525       $ 74,222
expense                      ------------   ------------   ------------   ------------

Included in stock-based compensation expense for the three and six months ended December 27, 2008 was $23.7 million related to the Company's purchase of under-water stock options from employees and officers and $18.6 million of expense related to the cash-settlement of options expiring in October 2008.

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

Impairment of Long-lived Assets

End of Line Sorting and Testing Facilities

During the second quarter of fiscal year 2009, the Company identified certain assets as excess as a result of reductions in demand for product tested and sorted on certain equipment. In connection with this decision, the Company incurred an asset impairment charge of $43.8 million which is included in impairment of long lived assets in the Company's consolidated statements of operations. The Company has classified these assets as held for sale based on its intention to sell the assets and has included $3.6 million in other assets in the balance sheet as of December 27, 2008.

Fabrication Facility, San Jose

During the first quarter of fiscal year 2009, the Company recorded a $7.3 million asset 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.

Dallas fab closure

In connection with the anticipated closure of the Dallas facility, the Company evaluated the recoverability of the facilities' manufacturing assets and concluded that there was no impairment. The Company also reevaluated the useful lives and salvage values of the long-lived assets used in this manufacturing facility based on the new period of intended use. As a result of this review, the Company changed its depreciable lives and salvages values and recognized additional depreciation expense of $12.0 million during the three months ended December 27, 2008 related to this change in accounting estimate.

Cost reduction of business units

In order to improve operational and selling efficiency, the Company has reviewed relative long term goals and decided to reduce development efforts in some product lines while increasing investment in others. During the three months ended December 27, 2008, the Company consolidated several product lines in our business units which resulted in the termination of approximately 128 employees and total costs of approximately $6.1 million consisting principally of severance and benefit payments.

Shutdown of Dallas fab

During the three months ended March 29, 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 originally anticipated that the Dallas wafer facility closure will result in the termination of approximately 200 employees and total costs of approximately $8.0 million consisting principally of severance and benefit payments over such 18-month period. During the second quarter of fiscal year 2009, the Company reevaluated their facility closure plan resulting in $0.8 million of additional severance and benefit expenses recorded during the second quarter of fiscal year 2009. At the same time, the Company also reevaluated their benefit cost estimates and recognized an additional charge of $1.2 million. The Company recorded approximately $3.0 million and $4.1 million, respectively, in severance and benefit expenses related to this program during the three and six months ended December 27, 2008.

Cost reduction of selling, general and administrative groups

The Company also previously announced the decision to consolidate certain selling, general and administrative functions throughout the world which resulted in the termination of approximately 31 employees and total costs of approximately $1.0 million consisting principally of severance and benefit payments for the three months ended December 27, 2008.

Lease restructuring

In addition to the Company's severance activities the Company also decided to vacate certain leased offices in Greensboro, NC, Santa Clara, CA, Irving, TX, and Swindon, United Kingdom resulted in the lease impairment of approximately $0.5 million.

Test operation cost reduction

During the fourth quarter of its fiscal year 2008, the Company implemented certain actions to cease performing further testing in the United States and have all future testing performed overseas in Thailand and 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. During the three months ended December 27, 2008, the Company continued these actions and recorded $2.4 million of restructuring charges which are primarily due to a change in the estimated severance and benefit costs related to 41 terminated employees.

Fabrication Facilty, San Jose

The Company recorded severance and benefits expenses totaling approximately $2.4 million related to the termination of 78 employees for the six months ended December 27, 2008 due primarily to reductions in demand and reduced future capacity requirements. The Company recorded severance and benefits expenses totaling approximately $2.4 million related to the termination of 96 employees for the six months ended December 29, 2007 mainly 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.

Other Operating Expenses, Net

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

                                       28
--------------------------------------------------------------------------------
The following table summarizes the activities for the three and six months ended
December 27, 2008 and December 29, 2007:

                           Three Months Ended                 Six Months Ended
                     -------------------------------   -------------------------------
                      December 27,     December 29,     December 27,     December 29,
                          2008             2007             2008             2007
                     --------------   --------------   --------------   --------------
                             (in thousands)                    (in thousands)
Restatement related
expenses                   $ 9,916         $ 15,145         $ 15,824         $ 20,355
Termination benefits        (2,402)              -            (2,402)              -
Other                        2,739               -             4,189               -
                     --------------   --------------   --------------   --------------
Total                     $ 10,253         $ 15,145         $ 17,611         $ 20,355
                     --------------   --------------   --------------   --------------

The Company incurred $9.9 million and $15.1 million restatement related expenses . . .