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's reclassification of 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. These expenses were previously included in cost of goods sold, research and development and selling, general and administrative expenses.

The impact of the reclassifications for the three and nine months ended March 29, 2008 was as follows:

                           Three Months Ended                         Nine Months Ended
                ----------------------------------------   ----------------------------------------
                March 29,                   March 29,      March 29,                   March 29,
                2008 (as                                   2008 (as
                reported)   Adjustments   2008 (revised)   reported)   Adjustments   2008 (revised)
                ---------   -----------   --------------   ---------   -----------   --------------
                         (Amounts in thousands)                     (Amounts in thousands)

Cost of goods           $     $ (4,590)       $ 198,024            $     $ (7,659)       $ 605,879
sold             202,614    -----------   --------------    613,538    -----------   --------------
                ---------                                  ---------
      Gross      284,796         4,590          289,386     937,978         7,659          945,637
margin

   Research and  143,289        (4,553)         138,736     432,701         4,367          437,068
development
   Selling,       60,449       (21,365)          39,084     174,103       (49,921)         124,182
general and
administrative
   Severance          -          8,145            8,145          -         10,495           10,495
and restructing
expenses
   Other              -         22,363           22,363          -         42,718           42,718
operating       ---------   -----------   --------------   ---------   -----------   --------------
expenses, net
      Total             $      $ 4,590        $ 208,328            $      $ 7,659        $ 614,463
operating        203,738    -----------   --------------    606,804    -----------   --------------
expenses        ---------                                  ---------

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 are less likely to have a material impact on our reported results of operations for a given period.

RESULTS OF OPERATIONS

Net Revenues

Net revenues were $339.7 million and $487.4 million for the three months ended March 28, 2009 and March 29, 2008, respectively, a decrease of 30.3%. Net revenues for the nine months ended March 28, 2009 and March 29, 2008, were $1,251.5 million and $1,551.5 million, respectively, a decrease of 19.3%. We classify our net revenue by four major end market categories: Communications, Computing, Consumer, and Industrial. In the three and nine months ended March 28, 2009 and March 29, 2008, 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 28%, 45%, 29% and 19% for three months ended March 28, 2009 as compared to March 29, 2008, respectively. Net shipments from Communications, Computing, Consumer and Industrial markets decreased by approximately 11%, 30%, 18% and 10% for nine months ended March 28, 2009 as compared to March 29, 2008, respectively. The continued decline in all end markets is attributable to current overall macro economic conditions. The Computing end market declined at a greater rate compared with other end markets during the three and nine months ended March 28, 2009 primarily due to reduced demand for our notebook products.

The Company expects that revenue from its Consumer and Computing end markets will increase during the fourth quarter of fiscal year 2009 due to an increase in bookings in these markets. We expect a greater increase in the Consumer market attributable to anticipated increases in cell phone market share. Industrial markets are expected to continue to decline due to declines in overall demand from end customers through the distribution channel.

During the three months ended March 28, 2009 and March 29, 2008, approximately 73% and 78%, respectively, of net revenues were derived from customers outside of the United States. During the nine months ended March 28, 2009 and March 29, 2008, approximately 76% 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 March 28, 2009 and March 29, 2008 was immaterial.

Gross Margin

Our gross margin percentage was 49.4% and 59.3% for the three months ended March 28, 2009 and March 29, 2008, respectively. The gross margin percentage for the three months ended March 28, 2009, as compared to the three months ended March 29, 2008, decreased primarily due to a decline in utilization associated with our manufacturing facilities attributable to a decline in overall demand caused by a slowdown in the global economy. During the three months ended March 28, 2009 we recorded $6.2 million in underutilization charges as a result of

Our gross margin percentage was 52.6% and 60.9% for the nine months ended March 28, 2009 and March 29, 2008, respectively. The gross margin percentage for the nine months ended March 28, 2009, as compared to the nine months ended March 29, 2008, decreased primarily due to an increase of $12.5 million in stock-based compensation expense related primarily to the Company's purchase of underwater stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded during the nine months ended March 28, 2009. Inventory write downs increased by $6.1 million from $28.5 million during the nine months ended March 29, 2008 to $34.6 million during the nine months ended March 28, 2009. An additional $28.1 million of accelerated depreciation expense was recorded for the nine months ended March 28, 2009 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas, $8.1 million in expense associated with the under utilization of the Company's fabrication facilities and $3.9 million in increased amortization expenses associated with our acquisitions of the Storage products division of Vitesse Semiconductor, and the secure and remote control products of Zilog, as well as the acquisition of Mobilygen and Innova Card also contributed to the gross margin decrease for the nine months ended March 28, 2009. As a result of the recent decline in our revenues, we expect our factories will continue to be underutilized until we complete the closure of our wafer fabrication facility in Dallas and demand associated with our products increases to levels consistent with amounts prior to the global economic slowdown.

Research and Development

Research and development expenses were $121.0 million and $138.7 million for the three months ended March 28, 2009 and March 29, 2008, respectively, which represented 35.6% and 28.5% of net revenues, respectively. The increase in research and development expenses as a percentage of revenue was primarily due to the decline in revenue. Salaries and benefits declined by approximately $22.8 million between the three months ended March 29, 2008 and the three months ended March 28, 2009. The decline is partially attributable to one week of mandatory unpaid time-off for all professional staff and a one week holiday shutdown during the three months ended March 28, 2009 and a decline in anticipated bonuses in response to the decline in the global economy. We expect to continue this practice of one week of mandatory unpaid time-off during the fourth quarter of 2009.

Research and development expenses were $404.2 million and $437.1 million for the nine months ended March 28, 2009 and March 29, 2008, respectively, which represented 32.3% and 28.2% of net revenues, respectively. The decrease in research and development expenses in absolute dollars was primarily due to salaries and benefits declining by $31.6 million due to one week of mandatory unpaid time-off for all professional staff during the nine months ended March 28, 2009 and a decline in anticipated bonuses in response to the decline in the global economy. Stock-based compensation expenses declined by approximately $7.7 million as we extended the terms of vested stock options expiring during the Blackout Period as a result of the expiration of the 10 year contractual term resulting in a modification charge for the nine months ended March 29, 2008. The charge was partially offset by the Company's purchase of underwater stock options from employees and the expense related to the purchase of expired stock options recorded for the nine months ended March 28, 2009.

Selling, General and Administrative

Selling, general and administrative expenses were $48.8 million and $39.1 million for the three months ended March 28, 2009 and March 29, 2008, respectively, which represented 14.4% and 8.0% of net revenues, respectively. The increase in selling, general and administrative expenses is primarily due to an increase in salaries and benefits of $5.9 million, resulting from increased selling related activities by field applications engineers and

Selling, general and administrative expenses were $153.1 million and $124.2 million for the nine months ended March 28, 2009 and March 29, 2008, respectively, which represented 12.2% and 8.0% of net revenues, respectively. The increase in selling, general and administrative expenses was primarily due to increased stock-based compensation of $6.3 million primarily to the Company's purchase of underwater stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded during the nine months ended March 28, 2009. Salary and related expenses increased by $9.5 million for the nine months ended March 28, 2009 as compared to the nine months ended March 29, 2008 primarily due to additional involvement of our field application engineers and business managers in selling and marketing of the Company's products relative to their involvement in research and development activities.

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 Operations for the three and nine months ended March 28, 2009 and
March 29, 2008:

Stock-based compensation expense by type of award
                                         Three Months Ended       Nine Months Ended
                                        ---------------------   ----------------------
                                        March 28,   March 29,   March 28,    March 29,
                                          2009        2008         2009        2008
                                        ---------   ---------   ----------   ---------
                                                        (in thousands)
Cost of goods sold
   Stock options                         $ 1,881     $ 7,728     $ 31,781    $ 26,835
   Employee stock purchase plan              114          -           114          -
   Restricted stock units                  5,579       2,807       18,433      11,030
                                        ---------   ---------   ----------   ---------
                                           7,574      10,535       50,328      37,865
                                        ---------   ---------   ----------   ---------

Research and development expense
   Stock options                           3,773      12,737       33,486      58,879
   Employee stock purchase plan              446          -           446          -
   Restricted stock units                 20,975       6,433       44,113      26,894
                                        ---------   ---------   ----------   ---------
                                          25,194      19,170       78,045      85,773
                                        ---------   ---------   ----------   ---------

Selling, general and administrative
expense
   Stock options                           1,910       4,002       19,656      18,937
   Employee stock purchase plan               36          -            36          -
   Restricted stock units                  4,899       1,982       13,047       7,483
                                        ---------   ---------   ----------   ---------
                                           6,845       5,984       32,739      26,420
                                        ---------   ---------   ----------   ---------

Total stock-based compensation expense
   Stock options                           7,564      24,467       84,923     104,651
   Employee stock purchase plan              596          -           596          -
   Restricted stock units                 31,453      11,222       75,593      45,407
                                        ---------   ---------   ----------   ---------
Pre-tax stock-based compensation          39,613      35,689      161,112     150,058
expense
Less: income tax effect                   13,052      12,424       55,026      52,571
                                        ---------   ---------   ----------   ---------
Net stock-based compensation expense    $ 26,561    $ 23,265    $ 106,086    $ 97,487
                                        ---------   ---------   ----------   ---------

Included in stock-based compensation expense for the nine months ended March 28, 2009 was $23.7 million related to the Company's purchase of underwater stock options from employees and officers and $4.3 million of expense related to the cash-settlement of options expiring in October 2008.

Included in stock-based compensation expense for the nine months ended March 29, 2008 was $27.5 million related to the Company's decision to cash-settle all options expired during the Blackout Period.

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 $3.5 million in other assets in the balance sheet as of March 28, 2009.

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 fabrication facility closure

In connection with the anticipated closure of the Dallas facility, the Company evaluated the recoverability of the facility's 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 the depreciable lives and salvage values of such long-lived assets and recognized additional depreciation expense of $12.4 million during the three months ended March 28, 2009 related to this change in accounting estimate.

Severance and Restructuring Expenses

Current Period Restructuring Programs:

During the third quarter of fiscal year 2009, as a result of the continued global economic weakness the Company announced restructuring programs primarily in the manufacturing and support functions in response to the economic weakness. These activities resulted in the eventual termination of approximately 382 employees (189 fab employees and 193 other employees in the United States) between March and April 2009 and total costs of approximately $11.3 million consisting principally of severance and medical benefit costs. These costs are included in restructuring expenses in the Consolidated Statements of Operations.

Prior Restructuring Activities

Cost reduction of business units

In order to improve operational and selling efficiency, we reviewed our relative long term goals and decided to reduce development efforts in some product lines while increasing investment in others. During the nine months ended March 28, 2009, we consolidated several product lines in our business units which resulted in the termination of approximately 128 employees in the United States and total costs of approximately $6.1 million consisting principally of severance and benefit payments. We terminated certain international employees in our business units during the three and nine months ended March 28, 2009 and recognized an additional $0.6 million consisting principally of severance and benefit payments.

Shutdown of Dallas fabrication plant

During the three months ended March 29, 2008, the Company announced the wind-down and eventual closure of its wafer fabrication facility located in Dallas, Texas, over an 18-month time period. The Company currently anticipates that the Dallas wafer facility closure will result in the termination of approximately 200 employees and total severance and benefit costs of approximately $6.9 million, consisting principally of severance and benefit payments over such 18-month period. During the third quarter of fiscal year 2009, the Company terminated 126

Cost reduction of selling, general and administrative groups

We 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 consisting principally of severance and benefit payments of approximately $0.2 million and $1.2 million during the three and nine months ended March 28, 2009.

Lease restructuring

In addition to the Company's severance activities the Company also decided to vacate certain leased offices in Greensboro, North Carolina, Santa Clara, California, Irving, Texas, and Swindon, United Kingdom, which resulted in a lease impairment of approximately $0.5 million during the nine months ended March 28, 2009.

Change in Estimate

During the third quarter of fiscal year 2009, the Company recognized a reversal of expense of approximately $1.9 million related to a reduction in estimated benefits costs for employees terminated during prior quarters.

In process Research and Development

We recorded $3.9 million of in-process research and development during the nine month ended March 28, 2009 related to our acquisition of Mobilygen Corporation in October 2008.

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 activities for the three and nine months ended
March 28, 2009 and March 29, 2008:

                                   Three Months Ended            Nine Months Ended
                               --------------------------   ---------------------------
                                March 28,     March 29,      March 28,      March 29,
                                  2009           2008           2009           2008
                               -----------   ------------   ------------   ------------
                                                    (in thousands)
Stock option litigation and
restatement related expenses      $ 3,969       $ 21,380       $ 19,792       $ 41,735
Termination benefits                   -              -          (2,402)            -
Other                                  -             983          4,189            983
                               -----------   ------------   ------------   ------------
Total                             $ 3,969       $ 22,363       $ 21,579       $ 42,718
                               -----------   ------------   ------------   ------------

The Company incurred $4.0 million and $21.4 million in stock option litigation and restatement related expenses during the three months ended March 28, 2009 and March 29, 2008, respectively. The decline in restatement related expenses is attributable to the completion of the restatement in September 2008 and the Delaware Court of Chancery's approval of the stipulated settlement agreement related to the derivative litigation. The Company incurred $1.0 million during the three months ended March 29, 2008 related to payroll taxes associated with goodwill payments made on expiring options. These expenditures did not recur as the amount of goodwill payments declined between March 29, 2008 and March 28, 2009.

The Company incurred $19.8 million and $41.7 million in restatement related expenses during the nine months ended March 28, 2009 and March 29, 2008, respectively. The restatement related expenses associated with the restatement of previously filed financial statements primarily include legal and accounting expenses related to