10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 27, 2011.

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                   .

Commission File Number: 1-6453

National Semiconductor Corporation

(Exact name of registrant as specified in its charter)

DELAWARE (State of Incorporation)	95-2095071 (I.R.S. Employer Identification No.)
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090 SANTA CLARA, CALIFORNIA (Address of principal executive offices)	95052-8090 (Zip Code)

(408) 721-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Non-accelerated filer o
Accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Each Class	Outstanding at February 27, 2011
Common stock, par value $0.50 per share	242,834,280

NATIONAL SEMICONDUCTOR CORPORATION

INDEX

	Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended February 27, 2011 and February 28, 2010	3
Condensed Consolidated Balance Sheets (Unaudited) as of February 27, 2011 and May 30, 2010	4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended February 27, 2011 and February 28, 2010	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6-23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24-34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	36
Part II. Other Information
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	38-44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 6. Exhibits	46
Signature	47

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Nine Months Ended
(In Millions, Except Per Share Amounts)	Feb. 27, 2011			Feb. 28, 2010			Feb. 27, 2011			Feb. 28, 2010
	(Unaudited)						(Unaudited)
Net sales	$	343.9		$	361.9		$	1,146.3		$	1,020.9
Cost of sales	115.2			118.2			356.7			360.0
Gross margin	228.7			243.7			789.6			660.9
Research and development	65.6			69.0			206.4			202.5
Selling, general and administrative	63.1			81.7			202.5			235.7
Severance and restructuring expenses, net	8.2			6.4			24.5			12.8
Other operating expense (income), net	0.4			0.6			0.5			(0.3		)
Operating expenses, net	137.3			157.7			433.9			450.7
Operating income	91.4			86.0			355.7			210.2
Interest income	0.6			0.4			1.8			1.3
Interest expense	(14.1		)	(14.8		)	(40.9		)	(45.5		)
Other non-operating income, net	1.8			0.8			2.7			6.1
Income before taxes	79.7			72.4			319.3			172.1
Income tax expense	20.3			19.2			87.6			42.1
Net income	$	59.4		$	53.2		$	231.7		$	130.0
Earnings per share:
Basic	$	0.25		$	0.22		$	0.97		$	0.55
Diluted	$	0.24		$	0.22		$	0.94		$	0.54
Weighted-average common and potential common shares outstanding:
Basic	241.5			237.3			240.1			235.8
Diluted	247.0			242.5			245.5			240.5

See accompanying Notes to Condensed Consolidated Financial Statements

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NATIONAL SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share Amounts)	Feb. 27, 2011			May 30, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	860.3		$	1,027.0
Short-term investments	40.0			—
Receivables, less allowances of $31.3 in fiscal 2011 and $30.0 in fiscal 2010	91.4			98.2
Inventories	138.2			118.6
Deferred tax assets	75.1			70.3
Other current assets	140.5			156.8
Total current assets	1,345.5			1,470.9
Property, plant and equipment, net	420.4			390.1
Goodwill	68.3			66.1
Deferred tax assets, net	239.2			245.5
Other assets	98.8			102.2
Total assets	$	2,172.2		$	2,274.8
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	276.5
Accounts payable	50.5			49.8
Accrued liabilities	104.3			204.5
Income taxes payable	6.6			17.6
Total current liabilities	161.4			548.4
Long-term debt	1,042.6			1,001.0
Long-term income taxes payable	189.0			175.3
Other non-current liabilities	129.5			124.2
Total liabilities	1,522.5			1,848.9
Commitments and contingencies
Shareholders’ equity:
Common stock of $0.50 par value. Authorized 850,000,000 shares.
Issued and outstanding:
242,834,280 in fiscal 2011 and 239,071,512 in fiscal 2010	121.4			119.5
Additional paid-in-capital	246.3			188.3
Retained earnings	414.7			250.3
Accumulated other comprehensive loss	(132.7		)	(132.2		)
Total shareholders’ equity	649.7			425.9
Total liabilities and shareholders’ equity	$	2,172.2		$	2,274.8

See accompanying Notes to Condensed Consolidated Financial Statements

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NATIONAL SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
(In Millions)	Feb. 27, 2011			Feb. 28, 2010
	(Unaudited)
Cash flows from operating activities:
Net income	$	231.7		$	130.0
Adjustments to reconcile net income with net cash provided by operating activities:
Depreciation and amortization	59.8			69.5
Share-based compensation	40.2			49.9
Excess tax benefit from share-based payment arrangements	(0.8		)	(0.2		)
Tax benefit associated with share-based awards	6.6			(6.7		)
Gain on investments	(5.5		)	(6.1		)
Non-cash restructuring recovery	(0.1		)	(5.7		)
(Gain) loss on disposal of equipment	(0.5		)	1.0
Impairment of equipment and other assets	10.0			0.1
Other, net	5.1			3.0
Changes in certain assets and liabilities, net:
Receivables	7.1			(17.4		)
Inventories	(19.5		)	20.3
Other current assets	0.9			(3.5		)
Accounts payable and accrued liabilities	(97.6		)	14.6
Current and deferred income taxes	(15.5		)	(15.5		)
Other non-current liabilities	5.1			12.9
Net cash provided by operating activities	227.0			246.2
Cash flows from investing activities:
Purchase of property, plant and equipment	(81.0		)	(25.9		)
Proceeds from sale of property, plant and equipment	4.3			2.0
Purchase of short-term investments	(40.0		)	—
Business acquisition, net of cash acquired	(4.1		)	(4.8		)
Funding of benefit plan	(3.5		)	(1.5		)
Redemption of benefit plan	8.5			7.6
Other, net	(0.5		)	(2.2		)
Net cash used in investing activities	(116.3		)	(24.8		)
Cash flows from financing activities:
Repayment of debt	(250.0		)	(46.8		)
Proceeds from liquidation of interest rate swap	13.0			—
Payment on software license obligations	(6.6		)	(6.3		)
Excess tax benefit from share-based payment arrangements	0.8			0.2
Minimum tax withholding paid on behalf of employees for net share settlements	(2.8		)	(1.7		)
Issuance of common stock	35.5			59.5
Cash payments in connection with stock option exchange program	—			(1.3		)
Cash dividends paid	(67.3		)	(56.7		)
Net cash used in financing activities	(277.4		)	(53.1		)
Net change in cash and cash equivalents	(166.7		)	168.3
Cash and cash equivalents at beginning of period	1,027.0			700.3
Cash and cash equivalents at end of period	$	860.3		$	868.6

See accompanying Notes to Condensed Consolidated Financial Statements

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NATIONAL SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Summary of Significant Accounting Policies

Operations

We design, develop, manufacture and market a wide range of semiconductor products, most of which are analog and mixed-signal integrated circuits. Our goal is to be the premier provider of high-performance energy-efficient analog and mixed-signal solutions. These solutions are marketed under our PowerWise® brand. Energy-efficiency is our overarching theme, and our PowerWise® products enable systems that consume less power, extend battery life and generate less heat. Our leading-edge products include power management circuits and sub-systems, audio and operational amplifiers, communication interface products and data conversion solutions.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the financial position and results of operations of National Semiconductor Corporation and our wholly-owned subsidiaries. You should not expect interim results of operations necessarily to be indicative of the results for the full fiscal year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the amounts reported in these unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. This report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended May 30, 2010.

Recently Adopted Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2009-13, “Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force.” In the absence of vendor-specific objective evidence (VSOE) or other third party evidence (TPE) of the selling price for the deliverables in a multiple-element arrangement, this ASU requires companies to use an estimated selling price (ESP) for the individual deliverables. Companies are to apply the relative-selling price model for allocating an arrangement’s total consideration to its individual elements. Under this model, the ESP is used for both the delivered and undelivered elements that do not have VSOE or TPE of the selling price. The FASB also issued ASU No. 2009-14, “Software (Topic 985) — Certain Revenue Arrangements That Include Software Elements,” which excludes the software from the scope of software revenue guidance if the software contained in the tangible product is essential to the tangible product’s functionality. Both ASUs are effective for us beginning in our fiscal 2012, with earlier application permitted. We elected to early adopt the accounting requirements in these ASUs during the second quarter of fiscal 2011. Their adoption did not have a material effect on our consolidated financial statements.

6

Earnings Per Share

A reconciliation of the shares used in the computation of basic and diluted earnings per share follows:

	Three Months Ended				Nine Months Ended
(In Millions, Except Weighted-Average Exercise Price)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011		Feb. 28, 2010
Numerator:
Net income	$	59.4	$	53.2	$	231.7	$	130.0
Denominator:
Weighted-average common shares outstanding used for basic earnings per share	241.5		237.3		240.1		235.8
Effect of dilutive securities:
Share-based awards	5.5		5.2		5.4		4.7
Weighted-average common and potential common shares outstanding used for diluted earnings per share	247.0		242.5		245.5		240.5
Anti-dilutive potential common shares:
Stock options:
Number of shares	15.2		29.0		17.3		37.3
Weighted-average exercise price	$	18.31	$	21.25	$	17.99	$	22.00

Anti-dilutive potential common shares are not included in the calculation of diluted earnings per share. For the third quarter and first nine months of fiscal 2011 and 2010, the effect of these shares was anti-dilutive because the exercise price of the related stock options exceeded the average market price during the period. Shares related to outstanding stock options at February 27, 2011 that were anti-dilutive could potentially dilute basic earnings per share in the future.

7

Share-based Compensation

Share-based compensation expense included in operating results is presented in the following table:

	Three Months Ended						Nine Months Ended
(In Millions, Except Per Share Amounts)	Feb. 27, 2011			Feb. 28, 2010			Feb. 27, 2011			Feb. 28, 2010
Cost of sales:
Gross compensation	$	1.7		$	2.3		$	5.7		$	7.6
Capitalized in inventory during the period	(1.4		)	(2.0		)	(5.2		)	(6.1		)
Realized from inventory during the period	1.7			2.1			5.3			6.7
	2.0			2.4			5.8			8.2
Research and development	3.7			4.4			12.0			13.9
Selling, general and administrative	7.2			12.4			25.2			34.3
Total share-based compensation included in income before taxes	12.9			19.2			43.0			56.4
Income tax benefit	(4.3		)	(6.3		)	(14.4		)	(17.8		)
Total share-based compensation, net of tax, included in net income	$	8.6		$	12.9		$	28.6		$	38.6
Share-based compensation effects on earnings per share:
Basic	$	0.04		$	0.05		$	0.12		$	0.16
Diluted	$	0.03		$	0.05		$	0.12		$	0.16
Share-based compensation capitalized in inventory	$	0.9		$	0.9		$	0.9		$	0.9
Total gross share-based compensation	$	12.6		$	19.1		$	42.9		$	55.8

The fair value of share-based awards to employees in connection with equity compensation plans was estimated using a Black-Scholes option pricing model that used the following weighted-average assumptions:

	Three Months Ended			Nine Months Ended
	Feb. 27, 2011	Feb. 28, 2010		Feb. 27, 2011		Feb. 28, 2010
Stock Option Plans:
Expected life (in years)	N/A	3.9		3.8		3.8
Expected volatility	N/A	38	%	41	%	45	%
Risk-free interest rate	N/A	1.8	%	1.4	%	1.9	%
Dividend yield	N/A	2.2	%	2.2	%	2.3	%
Stock Purchase Plans:
Expected life (in years)	N/A	N/A		0.8		0.8
Expected volatility	N/A	N/A		35	%	42	%
Risk-free interest rate	N/A	N/A		0.2	%	0.3	%
Dividend yield	N/A	N/A		2.3	%	2.3	%

We did not grant any stock options during the third quarter of fiscal 2011. The weighted-average fair value of stock options granted during the first nine months of fiscal 2011 was $4.01 per share. The weighted-average fair value of stock options granted during the third quarter and first nine months of fiscal 2010 was $3.82 and $4.01 per share, respectively.  There were no rights granted under the stock purchase plan in the third quarter of fiscal 2011 and 2010. The weighted-average fair value of rights granted under the stock purchase plan was $3.41 per share in the first nine months of fiscal 2011 and $4.08 per share for the first nine months of fiscal 2010.

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For all options granted after December 31, 2007, we determine expected life based on historical stock option exercise experience for the last four years, adjusted for our expectation of future exercise activity. For options granted prior to January 1, 2008, we use the simplified method specified by the Securities and Exchange Commission’s (SEC’s) Staff Accounting Bulletin (SAB) No. 107 to determine the expected life of stock options. The expected volatility is based on implied volatility, as management has determined that implied volatility better reflects the market’s expectation of future volatility than historical volatility, and is determined based on our traded options, which are actively traded on several exchanges. We derive the implied volatility using the closing prices of traded options during a period that closely matches the timing of the option grant for the stock option and stock purchase plans. The traded options selected for our measurement for the stock option and stock purchase plans are near-the-money and close to the exercise price of the option grants and have terms ranging from one to two years. The risk-free interest rate is based upon interest rates that match the expected life of the outstanding options under our employee stock option plans and the expected life of the purchase rights under our employee stock purchase plan. The dividend yield is based on recent history and our expectation of dividend payouts.

Note 2. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which the transaction to sell the asset or transfer the liability would occur and the assumptions that market participants would use in pricing the asset or liability. We measure fair value to record our cash equivalents, derivative financial instruments and the deferred compensation plan assets. The measurement of fair value for our long-term debt is used to provide disclosure under Accounting Standards Codification (ASC) Topic 825, “Financial Instruments.” We do not measure fair value to record the carrying value of our long-term debt, except for the debt associated with our interest rate swap that was subject to hedge accounting (See Note 3 to the Condensed Consolidated Financial Statements). Our non-financial assets subject to fair value measurements include goodwill and amortizable intangible assets, which are measured and recorded at fair value in the period they are acquired or determined to be impaired, and property, plant and equipment, which is measured and recorded at fair value in the period it is determined to be impaired.

The FASB guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:

·Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Level 1 assets include our investments in institutional money-market funds that are classified as cash equivalents and the investment funds of the deferred compensation plan assets where the respective financial instruments are traded in an active market with sufficient volume and frequency of activity.

·Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 2 assets and liabilities include our investments in commercial paper that are classified as cash equivalents and our senior notes that represent long-term debt instruments that are less actively traded in the market, but where quoted market prices exist for similar instruments that are actively traded, and derivative financial instruments which are based on observable inputs or can be corroborated by observable data for substantially the full term of the derivative financial instrument.

·Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Level 3 assets include goodwill, amortizable intangible assets, and property, plant and equipment where we determine fair value based on unobservable inputs using the best information available in the circumstances and take into consideration assumptions that market participants would use in pricing the asset.

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Assets and liabilities measured at fair value on a recurring basis include the following:

(In Millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Balance at February 27, 2011
Cash equivalents:
Institutional money-market funds	$	174.1	$	—	$	174.1
Commercial paper	—		214.9		214.9
	174.1		214.9		389.0
Other current assets:
Derivative assets — Purchased options	—		0.1		0.1
Other assets:
Investment funds — Deferred compensation plan assets:
Institutional money-market funds	6.9		—		6.9
Mutual funds	33.3		—		33.3
Marketable equity securities	0.6		—		0.6
	40.8		—		40.8
Total assets measured at fair value	$	214.9	$	215.0	$	429.9
Accrued liabilities:
Derivative liabilities — Forward contracts	$	—	$	0.2	$	0.2
Derivative liabilities — Purchased options	—		0.2		0.2
Total liabilities measured at fair value	$	—	$	0.4	$	0.4
Balance at May 30, 2010
Cash equivalents:
Institutional money-market funds	$	216.6	$	—	$	216.6
Commercial paper	—		79.9		79.9
	216.6		79.9		296.5
Other current assets:
Derivative assets — Forward contracts	—		0.6		0.6
Other assets:
Investment funds — Deferred compensation plan assets:
Institutional money-market funds	6.9		—		6.9
Mutual funds	32.6		—		32.6
Marketable equity securities	0.8		—		0.8
	40.3		—		40.3
Derivative assets — Interest rate swap	—		1.6		1.6
Total assets measured at fair value	$	256.9	$	82.1	$	339.0

There were no transfers between level 1 and level 2 financial assets and liabilities in fiscal 2011 and 2010.

The institutional money-market funds and the various investment funds within our deferred compensation plan assets are traded in an active market and the net asset value of each fund on the last day of the quarter is used to determine its fair value. We determine fair value of our commercial paper by obtaining non-binding market prices from our broker on the last day of the quarter. We then corroborate these market prices by comparison to quoted market prices for similar

10

instruments. The fair value of foreign currency forward contracts represents the present value difference between the stated forward contract rate and the current market forward rate at settlement. The fair value of foreign currency options contracts represents the probable weighted net amount we would expect to receive at maturity. The fair value of the interest rate swap was based on a commonly used valuation model that included significant observable inputs, such as interest rate yield curves and discount rates commensurate with the six-month LIBOR interest rates, as well as the creditworthiness of the counterparties and our own nonperformance risk.

Assets measured at fair value on a non-recurring basis include the following:

(In Millions)	Significant Other Observable Inputs (Level 2)
Balance at February 27, 2011
Other assets:
Property, plant and equipment held for sale	$	17.6

During the third quarter of fiscal 2011, a portion of our assets held for sale was written down to its fair value of $17.6 million less cost to sell of $0.7 million. As a result we recorded an impairment charge of $6.0 million, which is further discussed in Note 6 to the Condensed Consolidated Financial Statements. The fair value of those assets held for sale is based on market prices of similar assets using a market approach that includes observable inputs.

The fair value of our long-term debt (including the current portion) at February 27, 2011 was $1,086.1 million. The fair value measurements for our long-term debt instruments take into consideration credit rating changes, equity price movements, interest rate changes and other economic variables.

Note 3. Derivative Financial Instruments

The objective of our foreign exchange risk management policy is to preserve the U.S. dollar value of after-tax cash inflow in relation to non-U.S. dollar currency movements. We are exposed to foreign currency exchange rate risk that is inherent in orders, sales, cost of sales, expenses, and assets and liabilities denominated in currencies other than the U.S. dollar. We enter into foreign exchange contracts, primarily forwards and purchased options, to hedge against exposure to changes in foreign currency exchange rates. These contracts are matched at inception to the related foreign currency exposures that are being hedged. Exposures which are hedged include sales by subsidiaries, and assets and liabilities denominated in currencies other than the U.S. dollar. Our foreign currency hedges typically mature within six months.

Derivative instruments used to hedge exposures to variability in expected future foreign denominated cash flows are not designated as cash flow hedges. Gains or losses on these derivative instruments are immediately recorded in earnings.

We had an interest rate swap agreement that managed our exposure to interest rate changes from our $250 million senior unsecured notes due April 2015 (see below). The agreement effectively converted the fixed interest rate of the $250 million principal amount of senior unsecured notes to a floating interest rate. We designated this swap agreement as a fair value hedge and recognized the changes in the fair value of both the swap and the related debt, which we recorded as gains or losses on derivative instrument in fair value hedge included in other non-operating income, net.

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The following table provides information about gains (losses) associated with our derivative financial instruments:

		Amount of Gains (Losses) Recognized in Income on							Amount of Losses Recognized in Income on
	Location of Gains	Derivative						Location of Losses	Hedged Item
(In Millions)	(Losses) Recognized in Income on Derivative	Feb. 27, 2011			Feb. 28, 2010			Recognized in Income on Hedged Item	Feb. 27, 2011			Feb. 28, 2010
Three Months Ended: Instruments without hedge accounting designation:
Forward contracts	Selling, general and administrative	$	(0.4	)	$	—
Purchased options	Selling, general and administrative	(0.1		)	—
		$	(0.5	)	$	—
Nine Months Ended:
Fair value hedge:
Interest rate swap	Other non-operating income (expense), net	$	12.0		$	—		Other non-operating (expense) income, net	$	(14.1	)	$	—
		$	12.0		$	—			$	(14.1	)	$	—
Instruments without hedge accounting designation:
Forward contracts	Selling, general and administrative	$	(1.7	)	$	(0.2	)
Purchased options	Selling, general and administrative	(0.2		)	(0.1		)
		$	(1.9	)	$	(0.3	)

In September 2010, we liquidated our interest rate swap for which we received proceeds of $16.1 million including accrued interest through the liquidation date. Upon the date of liquidation, we measured the fair value of both the swap and the related debt, which resulted in a net gain on derivative instrument in fair value hedge of $0.3 million. We also incurred a loss of $0.7 million due to derecognition of the fair value hedge in connection with the liquidation of the interest rate swap. These amounts are included in other non-operating income, net for the first nine months of fiscal 2011. The accumulated fair value adjustment to the carrying value of the senior unsecured notes will be amortized over the remaining term of the debt on an effective yield basis and will be recorded as a reduction of interest expense.

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Fair Value and Notional Principal of Derivative Financial Instruments

The notional principal amounts for derivative financial instruments provide one measure of the transaction volume outstanding as of February 27, 2011 and May 30, 2010, and does not represent the amount of the exposure to credit or market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information at February 27, 2011 and May 30, 2010. The table below shows the fair value and notional principal of our derivative financial instruments.

	Asset Derivatives					Liability Derivatives
(In Millions)	Balance Sheet Location	Notional Principal		Fair Value		Balance Sheet Location	Notional Principal		Fair Value
Balance at February 27, 2011 Instruments without hedge accounting designation:
Forward contracts	Other current assets	$	—	$	—	Accrued liabilities	$	14.0	$	0.2
Purchased options	Other current assets	6.7		0.1		Accrued liabilities	6.7		0.2
Total		$	6.7	$	0.1		$	20.7	$	0.4
Balance at May 30, 2010
Fair value hedge:
Interest rate swap	Other assets	$	250.0	$	1.6
Instruments without hedge accounting designation:
Forward contracts	Other current assets	20.0		0.6
Total		$	270.0	$	2.2

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Note 4. Condensed Consolidated Financial Statements Detail

Condensed Consolidated Balance Sheets

(In Millions)	Feb. 27, 2011			May 30, 2010
Short-term investments:
Bank time deposits	$	40.0		$	—
Total short-term investments	$	40.0		$	—
Receivable allowances:
Doubtful accounts	$	0.5		$	0.4
Returns and allowances	30.8			29.6
Total receivable allowances	$	31.3		$	30.0
Inventories:
Raw materials	$	11.5		$	9.5
Work in process	88.5			67.8
Finished goods	38.2			41.3
Total inventories	$	138.2		$	118.6
Other current assets:
Prepaid income taxes	$	89.0		$	90.0
Prepaid expenses	16.7			19.8
Assets held for sale	33.9			45.8
Other	0.9			1.2
Total other current assets	$	140.5		$	156.8
Property, plant and equipment:
Total property, plant and equipment	$	2,216.1		$	2,199.0
Less accumulated depreciation and amortization	(1,795.7		)	(1,808.9		)
Total property, plant and equipment, net	$	420.4		$	390.1
Other assets:
Debt issuance costs	$	4.8		$	5.8
Income tax receivable	41.7			41.7
Deferred compensation plan assets	40.8			40.3
Other	11.5			14.4
Total other assets	$	98.8		$	102.2
Accrued liabilities:
Payroll and employee related	$	57.0		$	127.3
Accrued interest payable	13.4			24.6
Severance and restructuring expenses	3.2			15.4
Other	30.7			37.2
Total accrued liabilities	$	104.3		$	204.5
Other non-current liabilities:
Accrued pension obligation	$	72.0		$	67.3
Deferred compensation plan liability	40.8			40.3
Other	16.7			16.6
Total other non-current liabilities	$	129.5		$	124.2

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Condensed Consolidated Balance Sheets (Continued)

(In Millions)	Feb. 27, 2011			May 30, 2010
Accumulated other comprehensive loss:
Defined benefit pension plans	$	(132.4	)	$	(131.9	)
Other	(0.3		)	(0.3		)
Total accumulated other comprehensive loss	$	(132.7	)	$	(132.2	)

Condensed Consolidated Statements of Income

	Three Months Ended				Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011			Feb. 28, 2010
Other operating expense (income), net:
Litigation settlement	$	—	$	—	$	—		$	(0.5	)
Other	0.4		0.6		0.5			0.2
Total other operating expense (income), net	$	0.4	$	0.6	$	0.5		$	(0.3	)
Other non-operating income, net:
Trading securities:
Change in net unrealized holding gains/losses	$	1.8	$	0.5	$	5.5		$	5.8
Non-marketable investments:
Gain from liquidation of investment	—		0.3		—			0.3
Total gain on investments	1.8		0.8		5.5			6.1
Net loss on derivative instrument in fair value hedge	—		—		(2.1		)	—
Loss on liquidation of interest rate swap	—		—		(0.7		)	—
Total other non-operating income, net	$	1.8	$	0.8	$	2.7		$	6.1

Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended				Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011			Feb. 28, 2010
Net income	$	59.4	$	53.2	$	231.7		$	130.0
Other comprehensive loss, net of tax	—		—		(0.5		)	—
Comprehensive income	$	59.4	$	53.2	$	231.2		$	130.0

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Note 5. Statements of Cash Flows Information

	Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest	$	51.0	$	56.7
Income taxes	$	99.5	$	74.0
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Acquisition of software under license obligations	$	0.4	$	—
Cancellation of shares withheld for taxes on restricted stock and performance share unit awards	$	2.9	$	1.7
Deposit applied to purchase equipment	$	4.7	$	13.8

Note 6. Cost Reduction Programs and Restructuring of Operations

We recorded total net charges for severance and restructuring expenses of $8.2 million in the third quarter and $24.5 million in the first nine months of fiscal 2011. The following table provides additional detail related to these expenses:

(In Millions)	Analog Segment		All Others			Total
Three Months Ended February 27, 2011:
May 2010 business realignment:
Severance	$	—	$	0.2		$	0.2
March 2009 workforce reduction and plant closures:
Other exit-related costs	—		1.9			1.9
Severance	—		0.1			0.1
Impairment of property, plant and equipment	—		6.0			6.0
	—		8.0			8.0
Total severance and restructuring expenses, net	$	—	$	8.2		$	8.2
Nine Months Ended February 27, 2011:
May 2010 business realignment:
Severance	$	0.7	$	0.8		$	1.5
Other exit-related costs	0.3		0.1			0.4
Impairment of equipment and other assets	1.2		—			1.2
	2.2		0.9			3.1
March 2009 workforce reduction and plant closures:
Other exit-related costs	—		13.1			13.1
Severance	—		0.4			0.4
Gain on sale of equipment	—		(0.8		)	(0.8		)
Impairment of property, plant and equipment	—		8.8			8.8
Release of reserve:
Severance	—		(0.1		)	(0.1		)
	—		21.4			21.4
Total severance and restructuring expenses, net	$	2.2	$	22.3		$	24.5

In connection with exit activities related to the realignment of certain product line business units originally announced in May 2010, we recorded charges of $0.2 million in the third quarter and $3.1 million in the first nine months of

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fiscal 2011. These amounts include $0.2 million in the third quarter of fiscal 2011 for severance payments to an employee who was terminated in the quarter due to related exit activities and a total of $1.5 million for severance expenses in the first nine months of fiscal 2011. We also recorded $0.4 million for other exit-related costs in the first nine months of fiscal 2011 in connection with two leased facilities. In the first quarter of fiscal 2011, we decided to discontinue the development of a product which was originally acquired with the purchase of ActSolar, Inc. in fiscal 2009. As a result, the charges in the first nine months of fiscal 2011 include a $1.2 million charge to write off the intangible asset and certain equipment related to the development project that is no longer used. Remaining activities related to the product line business realignment are now expected to be completed by the end of fiscal 2011 and total cumulative charges are expected to be approximately $5 million to $6 million. Total cumulative charges since this action was originally announced in fiscal 2010 through February 27, 2011 were $4.8 million, which includes an additional $1.7 million for severance payments recorded in fiscal 2010.

In connection with the workforce reduction and plant closures announced in March 2009, we recorded a total net charge of $8.0 million in the third quarter and $21.4 million in the first nine months of fiscal 2011. These amounts include other exit-related costs of $1.9 million in the third quarter and $13.1 million in the first nine months of fiscal 2011 associated with the closure and transfer activities that occurred at our manufacturing sites in Texas and China during the same periods. These amounts also include severance costs of $0.1 million in the third quarter and $0.4 million in the first nine months of fiscal 2011. We recorded a $6.0 million impairment charge in the third quarter of fiscal 2011 to reduce the carrying value of one of the manufacturing sites that is held for sale since the industrial real estate market in its location has declined. In addition, we previously recorded a $0.8 million charge to write off certain Texas building improvements that were removed in the second quarter of fiscal 2010 and a $2.0 million charge to write off certain Texas equipment previously classified as held for sale that remained unsold after completing a final public sale of the equipment in the first quarter of fiscal 2011. As a result, total charges for the impairment of property, plant and equipment were $8.8 million in the first nine months of fiscal 2011. Partially offsetting the charges discussed above for the first nine months of fiscal 2011 was a $0.1 million recovery to reduce accrued severance upon redeploying an employee from Texas to another location and a $0.8 million gain on the sale of certain Texas equipment. Since these net charges relate to actions announced in fiscal 2009, total cumulative net charges in fiscal 2009, 2010 and 2011 through February 27, 2011 for these actions are presented in the following table:

(In Millions)	Analog Segment			All Others			Total
March 2009 workforce reduction and plant closures:
Severance	$	14.0		$	46.6		$	60.6
Other exit-related costs	—			45.1			45.1
Impairment of property, plant and equipment	—			63.1			63.1
Gain on sale of equipment	—			(2.1		)	(2.1		)
Other equipment gain, net	—			(1.2		)	(1.2		)
Release of reserves:
Severance	(0.4		)	(4.9		)	(5.3		)
Total cumulative severance and restructuring expenses for the March 2009 workforce reduction and plant closures	$	13.6		$	146.6		$	160.2

In fiscal 2010 we ceased production activity in both China and Texas. Remaining activities associated with the closures of the China and Texas manufacturing facilities were substantially completed by the end of November 2010. Until these facilities are both sold, we expect to incur ongoing maintenance expenses of less than $1 million each quarter.

Since production activity in both China and Texas has ceased, we are actively engaged in locating buyers to purchase each of these manufacturing facilities and the existing machinery and equipment located in these facilities. As a result, all of the China and Texas plant assets have been classified as held for sale. As of February 27, 2011, the total carrying value of assets held for sale was $33.9 million and is reported in other current assets in the condensed consolidated balance sheet. We have ceased depreciation on these assets and now measure the carrying value at the lower of historical net book value or fair value (less cost to sell). As discussed above, we recorded a $6.0 million impairment charge in the third quarter of fiscal 2011 to reduce the carrying value of one of our facilities that is held for sale to its fair value less cost to sell.During the first nine months of fiscal 2011, activity related to assets held for sale included the sale of certain Texas equipment with a carrying value of $2.6 million and the write off of certain Texas building improvements and equipment

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with a carrying value of $2.8 million. In addition, certain Texas equipment with a carrying value of $0.5 million (approximating fair value) was transferred to our manufacturing facility in Maine and reclassified as held and used.

The following table provides a summary of the activities through the first nine months of fiscal 2011 related to severance and restructuring costs included in accrued liabilities:

	Fiscal 2010 Business Unit Realignment						Fiscal 2009 Workforce Reduction and Plant Closures
(In Millions)	Severance			Other Exit- Related Costs			Severance			Other Exit- Related Costs			Total
Balance at May 30, 2010	$	1.7		$	—		$	13.1		$	0.6		$	15.4
Severance and restructuring expenses	1.5			0.4			0.4			13.1			15.4
Cash payments	(2.4		)	(0.4		)	(10.9		)	(13.6		)	(27.3		)
Release of residual reserves	—			—			(0.1		)	—			(0.1		)
Exchange rate adjustment	(0.1		)	—			(0.1		)	—			(0.2		)
Balance at February 27, 2011	$	0.7		$	—		$	2.4		$	0.1		$	3.2

During the first nine months of fiscal 2011 we paid severance to 197 employees in connection with exit activities as part of the business unit realignment announced in May 2010 and the plant closures. Payments for other exit-related costs were primarily for expenses associated with closure and transfer activities incurred in connection with the closures of our manufacturing facilities in Texas and China.

The balances at February 27, 2011 represent remaining estimated costs for activities that have occurred, but have yet to be paid, as a result of the business unit realignment and the manufacturing plant closures. Payments for the remaining severance balances of $0.7 million related to the business unit realignment and $2.4 million related to the plant closures that have been substantially completed are expected to be paid over the next quarter. Severance amounts are generally paid 30-60 days after the employee’s actual departure date or may be deferred until the beginning of the calendar year after their departure date. Other exit-related costs primarily relate to expenses associated with closure and transfer activities occurring in these manufacturing locations.

Note 7. Acquisition

In June 2010, we acquired substantially all of the assets of GTronix Inc. (GTronix), a fabless semiconductor company based in Fremont, California. GTronix’s proprietary analog technology provides very low-power solutions for noise cancellation in mobile applications such as wireless handsets and audio accessories. The acquisition of GTronix’s assets is intended to expand our existing audio portfolio. In addition, GTronix technology has potential for other broader applications in which low-power analog signal processing is important.

The acquisition was accounted for using the acquisition method of accounting with a purchase price of $4.5 million for the GTronix’s assets. The acquired assets constitute a business under FASB guidance and included primarily amortizable intangible assets, inventory and equipment. No liabilities were assumed in the transaction. The purchase price was allocated as follows:

(In Millions)	Total
Tangible assets	$	0.2
Acquired developed technology	1.7
Other intangible assets	0.4
Goodwill	2.2
Total	$	4.5

Goodwill from this acquisition is included in our Analog segment and it primarily represents the expected value of future technologies that have yet to be determined. Goodwill is expected to be deductible for tax purposes. Pro forma

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results of operations related to this acquisition have not been presented since GTronix’s operating results up to the date of acquisition were immaterial to our consolidated financial statements.

Note 8. Goodwill

The following table presents goodwill by reportable segments:

(In Millions)	Analog Segment		All Others		Total
Balance at May 30, 2010	$	58.8	$	7.3	$	66.1
Acquisition of GTronix	2.2		—		2.2
Balance at February 27, 2011	$	61.0	$	7.3	$	68.3

Note 9. Debt

Our multicurrency credit agreement with a bank was renewed and amended in October 2010 to provide up to $10 million for multicurrency loans, letters of credit and standby letters of credit. The agreement contains restrictive covenants, conditions and default provisions that require the maintenance of certain financial ratios. As of February 27, 2011, we were in compliance with all financial covenants under the agreement. The agreement will expire in October 2011.

In October 2010, we also amended an existing credit agreement with a bank to extend the due date of our unsecured promissory note denominated in Japanese yen (2,408,750,000). Under the terms of the agreement, the promissory note will become due in November 2013 and all other terms under the agreement remain the same.

In June 2010, we repaid in full the $250.0 million aggregate principal amount of senior floating rate notes that became due June 2010. The total amount of the repayment was $250.3 million, which included the aggregate principal amount outstanding and accrued interest through the repayment date.

Note 10. Income Taxes

Income tax expense of $20.3 million in the third quarter and $87.6 million in the first nine months of fiscal 2011 was higher than the $19.2 million in the third quarter and the $42.1 million in the first nine months of fiscal 2010 primarily because of higher U.S. income in fiscal 2011. In December 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was enacted, which extended most expiring tax provisions, including the extension of the federal research and development tax credit through December 2011. As a result, income tax expense in the third quarter of fiscal 2011 includes a tax benefit arising from the retroactive reinstatement of the federal research and development tax credit that was partially offset by certain discrete tax expenses that arose in the same quarter.

Note 11. Retirement and Pension Plans

Net periodic pension costs for our defined benefit pension plans maintained in the United Kingdom, Germany and Taiwan are presented in the following table:

	Three Months Ended						Nine Months Ended
(In Millions)	Feb. 27, 2011			Feb. 28, 2010			Feb. 27, 2011			Feb. 28, 2010
Service cost of benefits earned during the period	$	0.7		$	0.8		$	2.1		$	2.5
Plan participant contributions	—			(0.2		)	—			(0.6		)
Interest cost on projected benefit obligation	4.1			4.0			12.1			12.1
Expected return on plan assets	(4.2		)	(3.5		)	(12.4		)	(10.4		)
Net amortization and deferral	1.6			1.4			4.6			4.2
Net periodic pension cost	$	2.2		$	2.5		$	6.4		$	7.8

Total contributions paid to these plans during fiscal 2011 were $0.4 million in the third quarter and $1.2 million in the first nine months. Total contributions paid to these plans during fiscal 2010 were $0.4 million in the third quarter and $1.4

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million in the first nine months. We currently expect our total fiscal 2011 contribution to these plans to be approximately $6 million.

Note 12. Shareholders’ Equity

Stock Repurchase Programs

During the third quarter and first nine months of fiscal 2011, we did not repurchase any shares of our common stock in connection with the $500 million stock repurchase program we announced in June 2007. Under this program, we had a balance of $127.4 million remaining available for future stock repurchases as of February 27, 2011. We do not have any plans to terminate the program prior to its completion, and there is no expiration date for this repurchase program.

Dividends

We paid cash dividends of $24.2 million ($0.10 per outstanding share of common stock) in the third quarter and a total of $67.3 million in the first nine months of fiscal 2011. We paid cash dividends of $19.1 million ($0.08 per outstanding share of common stock) in the third quarter and a total of $56.7 million in the first nine months of fiscal 2010.

On March 10, 2011 we announced that our Board of Directors declared a cash dividend of $0.10 per outstanding share of common stock, which will be paid on April 11, 2011 to shareholders of record at the close of business on March 21, 2011.

Note 13. Share-based Compensation Plans

Stock Option Plans

In fiscal 2011 to date, stock options were granted only from the 2009 Incentive Award Plan (the 2009 Plan), while stock options that were exercised, forfeited and expired represent stock options that were granted under the 2009 Plan and our former equity plans (the 1977 Stock Option Plan, the 2007 Employee Equity Plan (EEP), the 2005 Executive Officer Equity Plan (EOEP) and the Executive Officer Stock Option Plan). The following table summarizes the activity during the first nine months of fiscal 2011 of common stock shares related to stock options granted under all of our equity plans (excluding the director stock option plan):

	Number of Shares (In Millions)		Weighted-Average Exercise Price
Outstanding at May 30, 2010	30.9		$	15.64
Granted	0.8		$	14.57
Exercised	(2.3	)	$	11.21
Forfeited	(0.5	)	$	14.55
Expired	(4.4	)	$	19.64
Outstanding at February 27, 2011	24.5		$	15.33

The total intrinsic value of options exercised in fiscal 2011 was $3.5 million in the third quarter and $7.5 million in the first nine months. The total intrinsic value of options exercised in fiscal 2010 was $1.0 million in the third quarter and $7.1 million in the first nine months. Total unrecognized compensation cost related to stock option grants as of February 27, 2011 was $14.5 million, which is expected to be recognized over a weighted-average period of 2.1 years.

The following table provides additional information about total options outstanding under our stock option plans (excluding the director stock option plan) at February 27, 2011:

	Number of Shares (In Millions)	Weighted-Average Exercise Price		Aggregate Intrinsic Value (In Millions)		Weighted- Average Remaining Contractual Life (In Years)
Fully vested and expected to vest	24.3	$	15.36	$	55.4	2.4
Currently exercisable	18.5	$	15.69	$	43.3	1.8

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Other Stock Plans

In fiscal 2011 to date, restricted stock shares and restricted stock units were granted from the 2009 Plan, while restricted stock shares and restricted stock units that were vested or forfeited represent restricted stock awards that were granted under the 2009 Plan and the former EEP and restricted stock plan. The following table provides a summary of activity during the first nine months of fiscal 2011 for grants of restricted stock and restricted stock units under the 2009 Plan, the EEP and the restricted stock plan (excluding units granted with performance based restrictions):

	Number of Shares (In Millions)		Weighted-Average Grant-Date Fair Value
Outstanding at May 30, 2010	3.0		$	13.96
Granted	1.8		$	13.12
Vested	(0.8	)	$	13.73
Forfeited	(0.3	)	$	14.06
Outstanding at February 27, 2011	3.7		$	13.58

The total fair value of restricted shares that vested in fiscal 2011 was $4.2 million in the third quarter and $10.5 million in the first nine months. The total fair value of restricted shares that vested in fiscal 2010 was $0.3 million in the third quarter and $1.2 million in the first nine months. Total unrecognized compensation cost related to non-vested restricted stock shares and restricted stock units outstanding as of February 27, 2011 was $31.8 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Under the director stock plan, we granted 104,626 shares of common stock to our directors in the first nine months of fiscal 2011. Total unrecognized compensation cost as of February 27, 2011 related to non-vested awards granted under the plan was $0.8 million, which is expected to be recognized over a weighted-average period of 2.2 years.

With respect to performance share units under the EOEP, no shares were issued in July 2010 upon completion of the fourth two-year performance period because minimum performance thresholds were not achieved. Targets for a fifth two-year performance period that were established in July 2009 will be measured after the end of fiscal 2011. Targets for a one-year performance period that were also established in July 2009, were measured after the end of fiscal 2010, but require a two-year vesting period. Targets for a sixth two-year performance period were established in June 2010 and will be measured after the end of fiscal 2012. Total unrecognized compensation cost related to unvested performance share units as of February 27, 2011 was $5.7 million, which is expected to be recognized over a weighted-average period of 0.8 year.

On November 29, 2010, we paid a one-time cash payment of an aggregate of $14.6 million to our executive officers in connection with the special retention incentive program approved by our Compensation Committee in fiscal 2009. To receive the payment, the officer must have been providing services to the company on the payment date. The amount of each cash award was determined based upon the average daily closing price of our common stock for the second quarter of fiscal 2011 ended November 28, 2010, which was $13.06 per share.

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Note 14. Segment Information

The following table present information related to our reportable segments:

(In Millions)	Analog Segment		All Others			Total
Three months ended February 27, 2011:
Sales to unaffiliated customers	$	320.1	$	23.8		$	343.9
Segment income (loss) before taxes	$	91.1	$	(11.4	)	$	79.7
Three months ended February 28, 2010:
Sales to unaffiliated customers	$	336.0	$	25.9		$	361.9
Segment income (loss) before taxes	$	84.6	$	(12.2	)	$	72.4
Nine months ended February 27, 2011:
Sales to unaffiliated customers	$	1,071.1	$	75.2		$	1,146.3
Segment income (loss) before taxes	$	352.3	$	(33.0	)	$	319.3
Nine months ended February 28, 2010:
Sales to unaffiliated customers	$	948.6	$	72.3		$	1,020.9
Segment income (loss) before taxes	$	205.1	$	(33.0	)	$	172.1

In the first quarter of fiscal 2011, we combined the activities of the former key market segments group together with certain emerging product lines that were previously a part of two separate power business units to form a new business unit called the strategic growth markets business unit. This business unit will concentrate its efforts on selected high-growth emerging markets that represent promising opportunities to the company. The remaining product lines that were previously a part of the former performance power products business unit were combined with the remaining product lines within the infrastructure power business unit and were renamed the power products business unit. As a result, the Analog segment now comprises five operating segments which include the high-speed products, mobile devices power, power products, precision signal path and strategic growth markets business units.  The information in the table above for the third quarter and first nine months ended February 28, 2010 has been reclassified to present segment information based on the structure of our operating segments in fiscal 2011.

Operating segments that do not meet the criteria of a reportable segment are combined under the category “All Others.” Sales for the category “All Others” include sales of products from non-analog business units that are no longer a part of our core focus, as well as sales generated from foundry and contract service arrangements.

Note 15.  Contingencies — Legal Proceedings

Environmental Matters

We have been named to the National Priorities List for our Santa Clara, California, site and we have completed a remedial investigation/feasibility study with the Regional Water Quality Control Board (RWQCB), acting as an agent for the EPA. We have agreed in principle with the RWQCB on a site remediation plan and we are conducting remediation and cleanup efforts at the site. In addition to the Santa Clara site, we have been designated from time to time as a potentially responsible party (PRP) by international, federal and state agencies for certain environmental sites with which we may have had direct or indirect involvement. These designations are made regardless of the extent of our involvement. These claims are in various stages of administrative or judicial proceedings and include demands for recovery of past governmental costs and for future investigations and remedial actions. In many cases, the dollar amounts of the claims have not been specified, and, claims have been asserted against a number of other entities for the same cost recovery or other relief as is sought from us. We accrue costs associated with environmental matters when they become probable and can be reasonably estimated. The amount of all environmental charges to earnings, including charges for the Santa Clara site remediation, (excluding potential reimbursements from insurance coverage), were not material during the third quarter and first nine months of fiscal 2011.

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We have also retained responsibility for environmental matters connected with businesses we sold in fiscal 1996 and 1997. To date, the costs associated with the liabilities we have retained in these dispositions have not been material and there have been no related legal proceedings.

Tax Matters

The Internal Revenue Service is currently examining our federal tax returns for fiscal 2007 through 2009, as well as our amended federal tax returns for fiscal 2005 and 2006. Several U.S. state taxing jurisdictions are examining our state tax returns for fiscal 2001 through 2005. During fiscal 2010, the state of California closed its audits of fiscal years up through fiscal 2000, which resulted in an immaterial adjustment. Internationally, tax authorities from several foreign jurisdictions are also examining our tax returns. We believe we have made adequate tax payments and/or accrued adequate amounts of reserves such that the outcomes of these audits will have no material adverse effects on our financial statements.

Other Matters

In May 2008, eTool Development, Inc. and eTool Patent Holdings Corporation (collectively eTool) brought suit in the U.S. District Court for the Eastern District of Texas alleging that our WEBENCH® online design tools infringe an eTool patent and seeking an injunction and unspecified amounts of monetary damages (trebled because of the alleged willful infringement), attorneys’ fees and costs. In December 2008, eTool amended the complaint and counterclaims to include our SOLUTIONS online tool in its allegations of infringement of the eTool patent. We filed an answer to the amended complaint and counterclaims for declaratory judgment of non-infringement and invalidity of the patent. On February 27, 2009, the Court held a scheduling conference setting a claim construction hearing for August 2011 and a jury trial for January 2012. eTool served its infringement contentions in March 2009 and we served our invalidity contentions in May 2009. Both parties exchanged initial disclosures on May 29, 2009. The discovery phase of the case is now open and ongoing. In February 2010, we filed our inter partes reexamination petition with the United States Patent and Trademark Office (PTO), seeking a determination that the ‘919 patent is invalid. On March 15, 2010, the PTO issued a communication granting our inter partes reexamination petition. The inter partes proceeding is ongoing. On June 8, 2010, eTool filed its second amended complaint removing the infringement allegations against our SOLUTIONS online tool. We answered eTool’s second amended complaint on June 25, 2010. On February 7, 2011, we filed an amended answer, defenses and counterclaims that asserted an inequitable conduct defense and counterclaim. We intend to contest the case through all available means. We are currently unable to reasonably estimate a range of loss, if any, that may be incurred as a result of this proceeding.

We are currently a party to various claims and legal proceedings, including those noted above. We make provisions for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We believe we have made adequate provisions for potential liability in litigation matters. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on the information that is currently available to us, we believe that the ultimate outcome of litigation matters, individually and in the aggregate, will not have a material adverse effect on our results of operations or financial position. However, litigation is inherently unpredictable. If an unfavorable ruling or outcome were to occur, there is a possibility of a material adverse effect on results of operations or our financial position.

Contingencies — Other

In connection with our past divestitures, we have routinely provided indemnities to cover the indemnified party for matters such as environmental, tax, product and employee liabilities. We also routinely include intellectual property indemnification provisions in our terms of sale, development agreements and technology licenses with third parties. Since maximum obligations are not explicitly stated in these indemnification provisions, the potential amount of future maximum payments cannot be reasonably estimated. To date we have incurred minimal losses associated with these indemnification obligations and as a result, we have not recorded any liabilities in our consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This MD&A contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in Part II of Form 10-Q, “Item 1A. Risk Factors” and the “Outlook” section of this MD&A. These statements relate to, among other things, sales, gross margins, operating expenses, capital expenditures, economic and market conditions, research and development efforts, asset dispositions, and acquisitions of and investments in other companies, and are indicated by words or phrases such as “anticipate,” “expect,” “outlook,” “foresee,” “believe,” “could,” “should,” “intend,” “will,” and similar words or phrases. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. For a discussion of some of the factors that could cause actual results to differ materially from our forward-looking statements, see the discussion on risk factors that appears in Part II, Item 1A. of this Form 10-Q and other risks and uncertainties detailed in this and our other reports and filings with the SEC. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so.

This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q for the period ended February 27, 2011 and in our Annual Report on Form 10-K for the fiscal year ended May 30, 2010.

Strategy and Business

We design, develop, manufacture and market a wide range of semiconductor products, most of which are analog and mixed-signal integrated circuits. Our goal is to be the premier provider of high-performance, energy-efficient analog and mixed-signal solutions. Many of these solutions are marketed under our PowerWise® brand. We are focused on the following:

· growing our core revenues by marketing our extensive portfolio of general purpose analog products to a broad base of customers utilizing our established distribution channels and industry leading design tools;

· identifying and understanding the complex application specific system problems addressable by analog innovation;

· providing energy efficient, analog-intensive solutions that enable customers to differentiate their products while reducing the power consumption of their systems;

· targeting our analog solutions towards emerging areas or applications that can provide further growth on top of our core business (current examples would include LED lighting, automotive, personal mobile devices, renewable energy, communications infrastructure and portable medical);

· consistently delivering competitive products with superior quality and supply chain execution to our customers, and

· consistently delivering superior returns on invested capital to our shareholders.

Approximately 93 percent of our net sales in the first nine months of fiscal 2011 came from Analog segment products. Beyond the general purpose analog categories defined by the World Semiconductor Trade Statistics (WSTS), we also sell analog subsystems specifically targeted at certain particular markets and applications. Energy efficiency is our overarching theme, and our PowerWise® products enable systems that consume less power, extend battery life and generate less heat. Our leading-edge products include power management circuits and sub-systems, audio and operational amplifiers, communication interface products and data conversion solutions. For more information on our business, see Part I, “Item 1. Business,” in our Annual Report on Form 10-K for the fiscal year ended May 30, 2010.

Critical Accounting Policies and Estimates

We believe the following critical accounting policies are those policies that have a significant effect on the determination of our financial position and results of operations. These policies also require us to make our most difficult and subjective judgments:

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a)Revenue Recognition

We recognize revenue from the sale of semiconductor products upon shipment, provided we have persuasive evidence of an arrangement typically in the form of a purchase order, title and risk of loss have passed to the customer, the amount is fixed or determinable and collection of the revenue is reasonably assured. We record a provision for estimated future returns at the time of shipment. Approximately 70 percent of our semiconductor product sales were made to distributors in the first nine months of fiscal 2011, which includes approximately 10 percent of sales made through dairitens (fulfillment service providers) in Japan under local business practices. This compares to approximately 62 percent in the first nine months of fiscal 2010, which includes approximately 9 percent of sales made through dairitens in Japan under local business practices.  We have agreements with our distributors that cover various programs, including pricing adjustments based on resale pricing and volume, price protection for inventory and scrap allowances. The revenue we record for these distribution sales is net of estimated provisions for these programs. When determining this net distribution revenue, we must make significant judgments and estimates. Our estimates are based upon historical experience rates by geography and product family, inventory levels in the distribution channel, current economic trends and other related factors. We continuously monitor the claimed allowance against the rates assumed in our estimates of the allowances. Actual distributor claims activity has been materially consistent with the provisions we have made based on our estimates. However, because of the inherent nature of estimates, there is always a risk that there could be significant differences between actual amounts and our estimates. Our financial condition and operating results are dependent on our ability to make reliable estimates, and we believe that our estimates are reasonable. However, different judgments or estimates could result in variances that might be significant to our operating results.

Service revenues are recognized as the services are provided or as milestones are achieved, depending on the terms of the arrangement. These revenues are included in net sales and totaled $14.4 million in the first nine months of fiscal 2011 and $13.7 million in the first nine months of fiscal 2010.

Certain intellectual property income is classified as revenue if it meets specified criteria established by company policy that defines whether it is considered a source of income from our primary operations. These revenues are included in net sales and totaled $0.3 million in the first nine months of fiscal 2011 and $1.2 million in the first nine months of fiscal 2010. All other intellectual property income that does not meet the specified criteria is not considered a source of income from primary operations and is therefore classified as a component of other operating income, net, in the consolidated statement of income. Intellectual property income is recognized when the license is delivered, the fee is fixed or determinable, collection of the fee is reasonably assured and remaining obligations are perfunctory or inconsequential to the other party.

b)Valuation of Inventories

Inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out basis, or market. The total carrying value of our inventory is reduced for any difference between cost and estimated market value of inventory that is determined to be obsolete or unmarketable, based upon assumptions about future demand and market conditions. Reductions in carrying value are deemed to establish a new cost basis. Inventory is not written up if estimates of market value subsequently improve. We evaluate obsolescence by analyzing the inventory aging, order backlog and future customer demand on an individual product basis. If actual demand were to be substantially lower than what we have estimated, we may be required to write inventory down below the current carrying value. While our estimates require us to make significant judgments and assumptions about future events, we believe our relationships with our customers, combined with our understanding of the end-markets we serve, provide us with the ability to make reasonable estimates. The actual amount of obsolete or unmarketable inventory has been materially consistent with previously estimated write-downs we have recorded. We also evaluate the carrying value of inventory for lower-of-cost-or-market on an individual product basis, and these evaluations are intended to identify any difference between net realizable value and standard cost. Net realizable value is used as a measure of market for purposes of evaluating lower-of-cost-or-market and is determined as the selling price of the product less the estimated cost of disposal. When necessary, we reduce the carrying value of inventory to net realizable value. If actual market conditions and resulting product sales were to be less favorable than what we have projected, additional inventory write-downs may be required.

c)Impairment of Goodwill, Intangible Assets and Other Long-lived Assets

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from their use and eventual disposition. Our long-lived assets subject to this evaluation include property, plant and equipment and

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amortizable intangible assets. Amortizable intangible assets subject to this evaluation include developed technology we have acquired, patents and technology licenses. We assess the impairment of goodwill annually in our fourth fiscal quarter and whenever events or changes in circumstances indicate that it is more likely than not that an impairment loss has been incurred. We are required to make judgments and assumptions in identifying those events or changes in circumstances that may trigger impairment. Some of the factors we consider include:

· significant decrease in the market value of an asset;

· significant changes in the extent or manner for which the asset is being used or in its physical condition;

· significant change, delay or departure in our business strategy related to the asset;

· significant negative changes in the business climate, industry or economic conditions; and

· current period operating losses or negative cash flow combined with a history of similar losses or a forecast that indicates continuing losses associated with the use of an asset.

Our impairment evaluation of long-lived assets includes an analysis of estimated future undiscounted net cash flows expected to be generated by the assets over their remaining estimated useful lives. If our estimate of future undiscounted net cash flows is insufficient to recover the carrying value of the assets over the remaining estimated useful lives, we record an impairment loss in the amount by which the carrying value of the assets exceeds the fair value. We determine fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in our current business model. Major factors that influence our cash flow analysis are our estimates for future revenue and expenses associated with the use of the asset. Different estimates could have a significant impact on the results of our evaluation. If, as a result of our analysis, we determine that our amortizable intangible assets or other long-lived assets have been impaired, we will recognize an impairment loss in the period in which the impairment is determined. Any such impairment charge could be significant and could have a material adverse effect on our financial position and results of operations.

We classify long-lived assets as assets held for sale when the criteria have been met, in accordance with ASC Topic 360, “Property, Plant, and Equipment.” Upon classification of an asset as held for sale, we cease depreciation of the asset and classify the asset in other current assets at the lower of its carrying value or fair value (less cost to sell). If an asset is held for sale as a result of a restructuring of operations, any write down to fair value (less cost to sell) is included as a restructuring expense in the consolidated statement of income. When we commit to a plan to abandon a long-lived asset before the end of its previously estimated useful life, we revise depreciation estimates to reflect the use of the asset over its shortened useful life. We review depreciation estimates periodically, including both estimated useful lives and estimated salvage values. These reviews may result in changes to historical depreciation rates, which are considered to be changes in accounting estimates and are accounted for on a prospective basis.

Our impairment evaluation of goodwill is based on comparing the fair value to the carrying value of our reporting units containing goodwill. Our reporting units are based on our operating segments as defined under ASC Topic 280, “Segment Reporting.”  The fair value of a reporting unit is measured at the business unit level using a discounted cash flow approach that incorporates our estimates of future revenues and costs for those business units. As of February 27, 2011 our reporting units containing goodwill include our high speed products, mobile devices power, power products and precision signal path business units, all of which are operating segments within our Analog reportable segment, and our custom solutions business unit which is included in the category “All Others.” Based upon our latest annual impairment assessment of goodwill completed in the fourth quarter of fiscal 2010, we concluded that the fair value of each reporting unit substantially exceeded its carrying value. There have been no significant events or changes in circumstances since our annual assessment nor have there been significant changes in the underlying assumptions we used that would indicate the fair value of our reporting units substantially declined during the first nine months of fiscal 2011. The estimates we use in evaluating goodwill are consistent with the plans and estimates that we use to manage the underlying businesses. If we fail to deliver new products for these business units, if the products fail to gain expected market acceptance, or if market conditions for these business units fail to materialize as anticipated, our revenue and cost forecasts may not be achieved and we may incur charges for goodwill impairment, which could be significant and could have a material adverse effect on our results of operations.

d)Income Taxes

We determine deferred tax assets and liabilities based on the future tax consequences that can be attributed to net operating loss and credit carryovers and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, using the enacted tax rate expected to be applied when the taxes

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are actually paid or recovered. The recognition of deferred tax assets is reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which the net operating loss and credit carryovers and differences between financial statement carrying amounts and their respective tax bases become deductible. In determining a valuation allowance, we consider past performance, expected future taxable income and prudent and feasible tax planning strategies. We currently have a valuation allowance that has been established primarily against the reinvestment and investment tax credits related to our operation in Malaysia, as we have concluded that the deferred tax assets will not be realized in the foreseeable future due to a tax holiday granted by the Malaysian government that is effective for a ten-year period that began in our fiscal 2010 and the uncertainty of sufficient taxable income in Malaysia beyond fiscal 2019.

Our forecast of expected future taxable income is based on historical taxable income and projections of future taxable income over the periods that the deferred tax assets are deductible. Changes in market conditions that differ materially from our current expectations and changes in future tax laws in the United States and international jurisdictions or changes in our tax structure may cause us to change our judgments of future taxable income. These changes, if any, may require us to adjust the existing tax valuation allowance higher or lower than the amount we currently have recorded and such an adjustment could have a material impact on the tax expense for the fiscal year.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Although ASC Topic 740, “Income Taxes,” provides further clarification on the accounting for uncertainty in income taxes recognized in the financial statements, the threshold and measurement attribute prescribed by the FASB guidance will continue to require significant judgment by management. If the ultimate resolution of tax uncertainties is different from what we have currently estimated, this could have a material impact on income tax expense.

e)Share-based Compensation

We measure and record compensation expense for all share-based payment awards based on estimated fair values in accordance with ASC Topic 718, “Compensation-Stock Compensation.” We provide share-based awards to our employees, executive officers and directors through various equity compensation plans including our employee equity, stock option, stock purchase and restricted stock plans. The fair value of stock option and stock purchase equity awards is measured at the date of grant using a Black-Scholes option pricing model, and the fair value of restricted stock awards is based on the market price of our common stock on the date of grant.

In determining fair value using the Black-Scholes option pricing model, management is required to make certain estimates of the key assumptions such as expected life, expected volatility, dividend yields and risk free interest rates. The estimates of these key assumptions involve judgment regarding subjective future expectations of market price and trends. The assumptions used in determining expected life and expected volatility have the most significant effect on calculating the fair value of share-based awards. For all options granted after December 31, 2007, we determine expected life based on historical stock option exercise experience for the last four years, adjusted for our expectation of future exercise activity. For options granted prior to January 1, 2008, we use the simplified method specified by the SEC’s Staff Accounting Bulletin No. 107 to determine the expected life of stock options. Expected volatility is based on implied volatility, as management has determined that implied volatility better reflects the market’s expectation of future volatility than historical volatility. If we were to determine that another method to estimate these assumptions was more reasonable than our current methods, or if another method for calculating these assumptions were to be prescribed by authoritative guidance, the fair value for our share-based awards could change significantly. If the expected volatility and/or expected life were increased under our assumptions, then the Black-Scholes computations of fair value would also increase, thereby resulting in higher compensation costs being recorded.

Under GAAP, we are required to estimate forfeitures at the date of grant. Our estimate of forfeitures is based on our historical activity, which we believe is indicative of expected forfeitures. In subsequent periods if the actual rate of forfeitures differs from our estimate, the forfeiture rates may be revised, as necessary. Changes in the estimated forfeiture rates can have a significant effect on share-based compensation expense since the effect of adjusting the rate is recognized in the period the forfeiture estimate is changed.

We also grant performance share units to executive officers that require us to estimate expected achievement of performance targets over the performance period. This estimate involves judgment regarding future expectations of various financial performance measures such as those described in the overview section below. If

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there are changes in our estimate of the level of financial performance measures expected to be achieved, the related share-based compensation expense may be significantly increased or reduced in the period that our estimate changes.

Overview

We focus on providing leading-edge analog solutions with a large portion of our sales classified within the general purpose analog categories as defined by WSTS. In the first nine months of fiscal 2011, approximately 93 percent of our total sales came from our Analog segment. We believe that the success we have achieved in these markets has been driven by our knowledge of the analog markets, our circuit design capabilities and our understanding of electronic systems, especially as they pertain to energy efficiency that is enabled by our products. Our success has also been due to our innovative packaging and proprietary analog process technology, as well as our comprehensive manufacturing and supply chain competence.

Net sales were lower in the third quarter of fiscal 2011 compared to net sales in the third quarter of fiscal 2010, which caused gross margin in the third quarter of fiscal 2011 to be lower than it was in the third quarter of fiscal 2010. However, net sales in the first nine months of fiscal 2011 were higher compared to net sales in the first nine months of fiscal 2010 because net sales were higher in the first half of fiscal 2011 compared to the first half of fiscal 2010. Our gross margin in the first nine months of fiscal 2011 was also higher than it was in the first nine months of fiscal 2010. Our year-to-date performance in gross margin percentage is primarily attributable to continued improvement in manufacturing efficiencies from higher capacity utilization and benefits from factory consolidation activities that were completed by the end of fiscal 2010. We continue to direct our research and development investments on high-value growth areas in analog markets and applications, with particular focus on power management and energy efficiency where our PowerWise® products enable systems that consume less power, extend battery life and generate less heat.

In reviewing our performance, we consider several key financial measures. When reviewing our net sales performance, we look at sales growth rates (both absolute and relative to competitors), new order rates (including turns orders, which are orders received with delivery requested in the same quarter), sales of new products, market share and blended-average selling prices. We gauge our operating income performance based on gross margin trends, product mix, blended-average selling prices, factory utilization rates and operating expenses relative to sales. We remain focused on growing our revenue and earnings per share over time while generating a consistently high return on invested capital by concentrating on operating income, working capital management, capital expenditures and cash management. We determine return on invested capital based on net operating income after tax divided by invested capital, which generally consists of total assets reduced by goodwill and non-interest bearing liabilities.

We continued with the dividend program in the third quarter of fiscal 2011, during which time we paid a total of $24.2 million in cash dividends. Through the first nine months of fiscal 2011, we paid a total of $67.3 million in cash dividends. On March 10, 2011, we announced that our Board of Directors declared a cash dividend of $0.10 per outstanding share of common stock, which will be paid on April 11, 2011 to shareholders of record at the close of business on March 21, 2011.

The following table and discussion provide an overview of our operating results for the third quarter and first nine months of fiscal 2011 and 2010:

	Three Months Ended								Nine Months Ended
(In Millions)	Feb. 27, 2011			% Change		Feb. 28, 2010			Feb. 27, 2011			% Change		Feb. 28, 2010
Net sales	$	343.9		(5.0	)%	$	361.9		$	1,146.3		12.3	%	$	1,020.9
Gross margin	$	228.7				$	243.7		$	789.6				$	660.9
As a % of net sales	66.5		%			67.3		%	68.9		%			64.7		%
Operating income	$	91.4				$	86.0		$	355.7				$	210.2
As a % of net sales	26.6		%			23.8		%	31.0		%			20.6		%
Net income	$	59.4				$	53.2		$	231.7				$	130.0
As a % of net sales	17.3		%			14.7		%	20.2		%			12.7		%

Net income in the third quarter of fiscal 2011 includes a net charge of $8.2 million for severance and restructuring expenses, of which $8.0 million relates to activities associated with the closures of our manufacturing facilities in Texas and

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China announced in March 2009 and $0.2 million relates to exit activities associated with the realignment of certain product line business units announced in May 2010 (see Note 6 to the Condensed Consolidated Financial Statements). Third quarter fiscal 2011 net income also includes $0.4 million of other operating expense (See Note 4 to the Condensed Consolidated Financial Statements). Including these amounts, net income for the first nine months of fiscal 2011 includes a total net charge of $24.5 million for severance and restructuring expenses (see Note 6 to the Condensed Consolidated Financial Statements) and a total of $0.5 million for other operating expense, net (see Note 4 to the Condensed Consolidated Financial Statements). These charges are all pre-tax amounts.

Net income for fiscal 2010 included a net charge of $6.4 million in the third quarter and $12.8 million in the first nine months for severance and restructuring expenses related to the closures of our manufacturing facilities in Texas and China announced in March 2009. In addition, net income for fiscal 2010 included other operating expense of $0.6 million in the third quarter and other operating income of $0.3 million in the first nine months (See Note 4 to the Condensed Consolidated Financial Statements). These charges and credits are all pre-tax amounts.

Share-based Compensation Expense

Our operating results include the recognition of share-based compensation expense, which totaled $12.9 million in the third quarter of fiscal 2011 compared to $19.2 million in the third quarter of fiscal 2010 and $43.0 million in the first nine months of fiscal 2011 compared to $56.4 million in the first nine months of fiscal 2010. Our share-based compensation expense in the third quarter and the first nine months of fiscal 2011 was lower compared to the third quarter and the first nine months of fiscal 2010 since we granted fewer stock options as part of our annual equity award grant in fiscal 2011. Stock options are subject to accelerated expense associated with employees who are eligible for retirement or expected to be eligible for retirement during the nominal vesting period. Instead, we granted a greater portion of restricted stock units in fiscal 2011. No accelerated expense is associated with restricted stock units since retirement-eligible employees do not receive accelerated vesting privileges. In addition, share-based compensation expense in fiscal 2010 contained an incremental $1.7 million charge related to the stock option exchange that occurred in the second quarter of fiscal 2010. No such expense is included in fiscal 2011.

For further information and a description of our share-based compensation plans, see Note 1 and Note 14 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended May 30, 2010. Also see Note 1 and Note 13 to the Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding our share-based compensation plans and the effect of share-based compensation expense for the third quarter and first nine months of fiscal 2011 and 2010.

Net Sales

	Three Months Ended								Nine Months Ended
(In Millions)	Feb. 27, 2011			% Change		Feb. 28, 2010			Feb. 27, 2011			% Change		Feb. 28, 2010
Analog segment	$	320.1		(4.7	)%	$	336.0		$	1,071.1		12.9	%	$	948.6
As a % of net sales	93.1		%			92.8		%	93.4		%			92.9		%
All others	$	23.8		(8.1	)%	$	25.9		$	75.2		4.0	%	$	72.3
As a % of net sales	6.9		%			7.2		%	6.6		%			7.1		%
Total net sales	$	343.9				$	361.9		$	1,146.3				$	1, 020.9
	100.0		%			100.0		%	100.0		%			100.0		%

In the first quarter of fiscal 2011, we combined the activities of the former key market segments group together with certain emerging product lines that were previously a part of two separate power business units to form a new business unit called the strategic growth markets business unit. This business unit concentrates its efforts on selected high-growth emerging markets that represent promising opportunities to the company. The remaining product lines that were previously a part of the former performance power products business unit were combined with the remaining product lines within the infrastructure power business unit and renamed the power products business unit. As a result, the Analog segment now comprises five operating segments which include the high-speed products, mobile devices power, power products, precision signal path and strategic growth markets business units. The information for the third quarter and the first nine months of fiscal 2010 has been reclassified to present segment information based on the structure of our operating segments in the third quarter and the first nine months of fiscal 2011.

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Analog segment sales were higher in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010 due to higher overall demand from customers, particularly in the first half of fiscal 2011, as the global economy continued to slowly recover. Sales of products for the industrial and the communications and networking markets were major contributors to year-over-year growth in sales. However, Analog segment sales were lower in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 as shipments to our wireless handset customers declined. Unit shipments in our Analog segment were lower by 2 percent in the third quarter of fiscal 2011 compared to the volume shipped in the third quarter of fiscal 2010, but in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010, unit shipments were higher by 14 percent. Our blended-average selling prices in our Analog segment were lower in fiscal 2011 by 3 percent in the third quarter and 1 percent in the first nine months compared to the comparable periods of fiscal 2010.

For purposes of the following discussion, we have combined as one group the business units whose products fundamentally entail power management technology (mobile devices power, power products and strategic growth markets). Net sales from this group decreased by 1 percent in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010, but in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010, net sales increased 13 percent. Net sales from our high speed products and precision signal path business units in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 decreased by 5 percent and 13 percent, respectively.  For the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010, net sales from our high-speed products and precision signal path business units increased by 19 percent and 8 percent, respectively.

For other operating business units included in “All Others,” sales were higher in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010 due to a higher volume of demand from non-analog business units that are no longer a part of our core focus. However, the sales from these non-analog business units have been declining in fiscal 2011 and in the third quarter of fiscal 2011, sales were lower compared to the third quarter of fiscal 2010. The sales from these non-analog business units also include sales generated from foundry and contract service arrangements.

Gross Margin

	Three Months Ended								Nine Months Ended
(In Millions)	Feb. 27, 2011			% Change		Feb. 28, 2010			Feb. 27, 2011			% Change		Feb. 28, 2010
Net sales	$	343.9		(5.0	)%	$	361.9		$	1,146.3		12.3	%	$	1,020.9
Cost of sales	115.2			(2.5	)%	118.2			356.7			(0.9	)%	360.0
Gross margin	$	228.7				$	243.7		$	789.6				$	660.9
As a % of net sales	66.5		%			67.3		%	68.9		%			64.7		%

Our gross margin percentage in the third quarter of fiscal 2011 was lower compared to the gross margin percentage in third quarter of fiscal 2010 primarily due to lower sales and lower manufacturing volume in our assembly and test facilities. However, our gross margin percentage was higher in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010 mainly due to higher factory utilization, higher sales and the favorable effect of cost savings from the closures of our manufacturing facilities in both Texas and China, where we ceased production activity during fiscal 2010. Wafer fabrication capacity utilization (based on wafer starts) was 66 percent in the first nine months of fiscal 2011 compared to 47 percent in the first nine months of fiscal 2010. Although our blended-average selling prices in our Analog segment were down slightly in both the third quarter and first nine months of fiscal 2011 compared to the corresponding periods of fiscal 2010, product mix within our portfolio of analog products had a positive influence on our performance in gross margin percentage. Gross margin includes share-based compensation expense of $2.0 million in the third quarter and $5.8 million in the first nine months of fiscal 2011 compared to fiscal 2010 which was $2.4 million in the third quarter and $8.2 million in the first nine months.

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Research and Development

	Three Months Ended								Nine Months Ended
(In Millions)	Feb. 27, 2011			% Change		Feb. 28, 2010			Feb. 27, 2011			% Change		Feb. 28, 2010
Research and development	$	65.6		(4.9	)%	$	69.0		$	206.4		1.9	%	$	202.5
As a % of net sales	19.1		%			19.1		%	18.0		%			19.8		%

Although we have continued to increase our investment in research and development on analog product areas, research and development expenses were lower in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 reflecting a decrease in payroll expenses in the third quarter of fiscal 2011 due to greater savings from the holiday shutdowns. Research and development expenses in the first nine months of fiscal 2011 remained higher compared to the first nine months of 2010 primarily reflecting higher annual payroll expenses. Share-based compensation expense included in R&D expense was $3.7 million in the third quarter and $12.0 million in the first nine months of fiscal 2011 compared to fiscal 2010 which was $4.4 million in the third quarter and $13.9 million in the first nine months. We are continuing to concentrate our research and development spending on analog products and underlying analog capabilities with particular emphasis on circuits that enable greater energy efficiency. We continue to invest in the development of new analog products that can serve applications in a wide variety of end markets such as portable electronics, industrial and automotive, LED lighting, communications infrastructure, renewable energy products and medical applications. Because of our focus on markets and applications that require or involve greater energy efficiency, a significant portion of our research and development is directed at power management technology.

Selling, General and Administrative

	Three Months Ended								Nine Months Ended
(In Millions)	Feb. 27, 2011			% Change		Feb. 28, 2010			Feb. 27, 2011			% Change		Feb. 28, 2010
Selling, general and administrative	$	63.1		(22.8	)%	$	81.7		$	202.5		(14.1	)%	$	235.7
As a % of net sales	18.3		%			22.6		%	17.7		%			23.1		%

We record a charge or credit in selling, general and administrative expenses for the change in the liability associated with the employee deferred compensation plan due to an increase or decrease in the market value of the employees’ corresponding investment assets for the plan. See the discussion of the corresponding gain and loss on the employees’ investment asset described in the paragraph, “Other Non-Operating Income, Net.” SG&A expenses in fiscal 2011 include charges of $1.8 million in the third quarter and $5.5 million in the first nine months due to increases in the liability related to market fluctuation in the plan’s investment assets. SG&A expenses in fiscal 2010 included charges of $0.5 million in the third quarter and $5.8 million in the first nine months due to increases in the liability related to market fluctuation in the plan’s investment assets. Excluding these amounts, SG&A expenses for fiscal 2011 decreased compared to fiscal 2010 by $19.9 million, or 25 percent, in the third quarter and $32.9 million, or 14 percent, in the first nine months.  We believe that excluding these charges relating to changes in the liability associated with the employee deferred compensation plan liability provides a better understanding of the changes in our SG&A expenses that are related to our core operating performance during the relevant fiscal periods. The decrease in SG&A expense reflects lower payroll and employee compensation expenses and lower share-based compensation expense. Share-based compensation expense included in SG&A expenses was $7.2 million in the third quarter and $25.2 million in the first nine months of fiscal 2011 compared to fiscal 2010 which was $12.4 million in the third quarter and $34.3 million in the first nine months.

Interest Income

	Three Months Ended				Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011		Feb. 28, 2010
Interest income	$	0.6	$	0.4	$	1.8	$	1.3

The increase in interest income in the third quarter and first nine months of fiscal 2011 compared to the third quarter and first nine months of fiscal 2010 is due to higher average cash balances.

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Interest Expense

	Three Months Ended				Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011		Feb. 28, 2010
Interest expense	$	14.1	$	14.8	$	40.9	$	45.5

The decrease in interest expense in the third quarter and first nine months of fiscal 2011 compared to the third quarter and first nine months of fiscal 2010 is due to lower interest rates and a lower overall debt balance.

Other Non-Operating Income, Net

	Three Months Ended				Nine Months Ended
(In Millions)	Feb. 27, 2011		Feb. 28, 2010		Feb. 27, 2011			Feb. 28, 2010
Gain on investments	$	1.8	$	0.8	$	5.5		$	6.1
Net loss on derivative instrument in fair value hedge	—		—		(2.1		)	—
Loss on liquidation of interest rate swap	—		—		(0.7		)	—
Total other non-operating income, net	$	1.8	$	0.8	$	2.7		$	6.1

The gain on investments in the third quarter and the first nine months of fiscal 2011 and fiscal 2010 reflects an increase in the market value of the investment assets held in a trust for the employee deferred compensation plan. As described in the paragraph, “Selling, General and Administrative,” SG&A expenses for the third quarter and the first nine months of fiscal 2011 and 2010 include an offsetting charge pertaining to the corresponding liability.

The loss in the first nine months of fiscal 2011 on derivative instrument in fair value hedge is a non-cash charge and is related to fair market valuation changes associated with our interest rate swap agreement related to the $250 million senior unsecured notes due April 2015 (see Note 3 to the Condensed Consolidated Financial Statements). In the first nine months of fiscal 2011, we also recognized a loss in connection with the liquidation of the interest rate swap in September 2010 (see Note 3 to the Condensed Consolidated Financial Statements).

Income Tax Expense

	Three Months Ended						Nine Months Ended
(In Millions)	Feb. 27, 2011			Feb. 28, 2010			Feb. 27, 2011			Feb. 28, 2010
Income tax expense	$	20.3		$	19.2		$	87.6		$	42.1
Effective tax rate	25.5		%	26.5		%	27.4		%	24.5		%

Although the effective tax rate was higher in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010 primarily because of higher U.S. income in fiscal 2011, it was lower in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010. In December 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was enacted, which extended most expiring tax provisions, including the extension of the federal research and development tax credit through December 31, 2011. As a result, the effective tax rate in the third quarter of fiscal 2011 was lower since it includes the effect of a tax benefit arising from the retroactive reinstatement of the federal research and development tax credit that was partially offset by certain discrete tax expenses that arose in the same quarter.

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Liquidity and Capital Resources

	Nine Months Ended
(In Millions)	Feb. 27, 2011			Feb. 28, 2010
Net cash provided by operating activities	$	227.0		$	246.2
Net cash used in investing activities	(116.3		)	(24.8		)
Net cash used in financing activities	(277.4		)	(53.1		)
Net change in cash and cash equivalents	$	(166.7	)	$	168.3

The primary factors contributing to the changes in cash and cash equivalents in the first nine months of fiscal 2011 and 2010 are described below:

During the first nine months of 2011, cash provided by operating activities was generated by net income adjusted for non-cash items (primarily depreciation and amortization, and share-based compensation expense), which was partially offset by the negative effect from changes in working capital components. The negative effect in changes in working capital components was primarily caused by a decrease in accounts payable and accrued liabilities combined with an increase in inventories. In the first nine months of fiscal 2010, cash from operating activities was generated by net income, adjusted for non-cash items (primarily depreciation and amortization, and share-based compensation expense), combined with the positive effect from changes in working capital components.

The primary use of cash for investing activities in the first nine months of fiscal 2011 was the purchase of property, plant and equipment of $81.0 million, mainly representing the purchase of machinery and equipment, and the purchase of short-term investments of $40.0 million. The primary use of cash for investing activities in the first nine months of fiscal 2010 was the purchase of property, plant and equipment of $25.9 million, mainly representing the purchase of machinery and equipment, combined with a net payment of $4.8 million associated with our acquisition of Energy Recommerce Inc. in October 2009.

The primary use of cash for financing activities in the first nine months of fiscal 2011 was for the repayment of our $250 million senior notes due June 2010. We also used cash to make payments of $67.3 million for cash dividends and $6.6 million for software license obligations in the first nine months of fiscal 2011. These amounts were partially offset by proceeds of $35.5 million from the issuance of common stock under employee benefit plans and $13.0 million from the liquidation of the interest rate swap agreement related to our $250 million senior unsecured notes due April 2015. The primary use of cash for financing activities in the first nine months of fiscal 2010 was for payments of $56.7 million for cash dividends, $46.8 million of principal payments on the bank term loan and $6.3 million for software license obligations. These amounts were partially offset by proceeds of $59.5 million from the issuance of common stock under employee benefit plans.

On March 10, 2011, we announced that our Board of Directors declared a cash dividend of $0.10 per outstanding share of common stock, which will be paid on April 11, 2011 to shareholders of record at the close of business on March 21, 2011.

We anticipate that our fiscal 2011 capital expenditures will be higher than the fiscal 2010 amount. We will continue to manage the level of capital expenditures relative to sales levels, capacity utilization and industry business conditions. Although we ceased production activity in both China and Texas by the end of fiscal 2010, activities associated with the closures of those manufacturing facilities, including ongoing expenses for the maintenance of those facilities until they are sold, are expected to continue during fiscal 2011. We also expect exit activities associated with the realignment of certain product line business units to continue through the end of fiscal 2011. Our existing cash and investment balances, together with existing lines of credit and cash generated by operations, should be sufficient to finance the capital investments currently planned for the remainder of fiscal 2011 and into the first half of fiscal 2012, as well as payments related to the plant closures and product line business unit realignment, and our debt service payments. However, we cannot assure you that if economic conditions were to substantially deteriorate within the next year, we would have adequate financial resources to meet our business requirements.

Our cash and investment balances are dependent in part on continued collection of customer receivables and the ability to sell inventories. Although we have not experienced major problems with our customer receivables, future declines

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in overall economic conditions could lead to deterioration in the quality of customer receivables in the future. Since we no longer hold marketable investments with maturities greater than 90 days, we did not experience any major declines in our cash equivalents or marketable investments as a result of the downturn in the financial markets. However, major declines in financial markets could cause reductions in our cash equivalents and marketable investments in the future.

Recently Issued Accounting Pronouncements

In December 2010, the FASB issued ASU No. 2010-29, “Business Combinations (Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations - a consensus of the FASB Emerging Issues Task Force.” This ASU clarifies the acquisition date that should be used for reporting the pro forma financial information disclosures in Topic 805 when comparative financial statements are presented. It also improves the usefulness of the pro forma revenue and earnings disclosures by requiring a description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination. This ASU is effective for us beginning in fiscal 2012. The adoption of this ASU may expand the existing disclosure requirements, but we do not expect the adoption to have a significant effect on our consolidated financial statements.

In December 2010, the FASB issued ASU No. 2010-28, “Intangibles—Goodwill and Other (Topic 350) - When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts - a consensus of the FASB Emerging Issues Task Force.” This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts and it provides guidance on when Step 2 of the goodwill impairment test is required for those reporting units. This ASU is effective for us beginning in fiscal 2012. We do not expect the adoption of this ASU to have a significant effect on our consolidated financial statements.

Outlook

Net sales in the third quarter of fiscal 2011 were lower than in the preceding second quarter due to inventory adjustments in the distribution channel and seasonally lower shipments to wireless handset customers following the holiday sales period. Despite the decrease in net sales, we saw some positive indicators. The declining pattern in new orders that we experienced in the first two quarters of the fiscal year appears to be leveling out. New orders in the third quarter were about at the same level as they were in the second quarter of fiscal 2011, but we saw sequential improvement in the weekly rate of new orders in January and February. Turns orders, which are orders received with delivery requested in the same quarter, were higher in the third quarter than in the preceding second quarter of fiscal 2011 and we expect turns orders to increase in the fourth quarter of fiscal 2011.

Considering all factors, including those described above and our historical seasonality patterns, we provided guidance for net sales in the fourth quarter of fiscal 2011 to be between $360 million to $370 million, an increase of approximately 4 percent to 7 percent from the level achieved in our recently completed third quarter of fiscal 2011. However, if backlog orders are cancelled or if the currently anticipated level of turns orders is less than expected, we may not be able to achieve this level of sales. In addition, we have not yet determined the effect of the recent earthquake and tsunami in Japan on end demand patterns and inventory levels throughout the supply chain. We anticipate that our gross margin percentage for the fourth quarter of fiscal 2011 will range from 66 percent to 67 percent since we expect our wafer fabrication utilization will remain below 60 percent in the fourth quarter. However, if there are declines in factory utilization or changes in the expected sales level or product mix, our gross margin percentage could be unfavorably affected.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended May 30, 2010 and to the subheading “Financial Market Risks” under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 37 of our Annual Report on Form 10-K for the fiscal year ended May 30, 2010 and to Note 1, “Summary of Significant Accounting Policies,” and Note 3, “Financial Instruments,” in the Notes to the Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended May 30, 2010. There have been no material changes in market risk from the information reported in these sections.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are intended to ensure that the information required to be disclosed in our Exchange Act filings is properly and timely recorded, processed, summarized and reported. In designing and evaluating our disclosure controls and procedures, we recognize that management necessarily is required to apply its judgment in evaluating controls and procedures. Since we have investments in certain unconsolidated entities which we do not control or manage, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain for our consolidated subsidiaries.

We have a disclosure controls committee comprised of key individuals from a variety of disciplines in the company that are involved in the disclosure and reporting process. The committee meets regularly to ensure the timeliness, accuracy and completeness of the information required to be disclosed in our filings containing financial statements. As required by SEC Rule 13a-15(b), the committee reviewed this Form 10-Q and also met with the Chief Executive Officer and the Chief Financial Officer to review this Form 10-Q and the required disclosures and the effectiveness of the design and operation of our disclosure controls and procedures. The committee performed an evaluation, under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter covered by this report. Based on that evaluation and their supervision of and participation in the process, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Controls

As part of our efforts to ensure compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we conduct a continual review of our internal control over financial reporting. The review is an ongoing process and it is possible that we may institute additional or new internal controls over financial reporting as a result of the review. During the third quarter of fiscal 2011, we did not make any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Further, because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree on compliance with policies or procedures.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We currently are a party to various legal proceedings, including those noted below. While we believe that the ultimate outcome of these various proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations, litigation is always subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include money damages or an injunction prohibiting us from selling one or more products. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the net income of the period in which the ruling occurs, and future periods.

Tax Matters

The Internal Revenue Service is currently examining our federal tax returns for fiscal 2007 through 2009, as well as our amended federal tax returns for fiscal 2005 and 2006. Several U.S. state taxing jurisdictions are examining our state tax returns for fiscal 2001 through 2005. During fiscal 2010, the state of California closed its audits of fiscal years up through fiscal 2000, which resulted in an immaterial adjustment. Internationally, tax authorities from several foreign jurisdictions are also examining our foreign tax returns. We believe we have made adequate tax payments and/or accrued adequate amounts such that the outcome of these audits will have no material adverse effect on our financial statements.

Environmental Matters

We have been named to the National Priorities List (Superfund) for our Santa Clara, California site and we have completed a remedial investigation/feasibility study with the Regional Water Quality Control Board (RWQCB), which is acting as agent for the EPA. We have agreed in principle with the RWQCB on a site remediation plan, and we are conducting remediation and cleanup efforts at the site. In addition to the Santa Clara site, we have been designated from time to time as a potentially responsible party by international, federal and state agencies for certain environmental sites with which we may have had direct or indirect involvement. These designations are made regardless of the extent of our involvement. These claims are in various stages of administrative or judicial proceedings and include demands for recovery of past governmental costs and for future investigations and remedial actions. In many cases, the dollar amounts of the claims have not been specified and the claims have been asserted against a number of other entities for the same cost recovery or other relief as is sought from us. We have also retained responsibility for environmental matters connected with businesses we sold in fiscal 1996 and 1997, but we are not currently involved in any legal proceedings relating to those liabilities.

Other

In May 2008, eTool Development, Inc. and eTool Patent Holdings Corporation (collectively eTool) brought suit in the U.S. District Court for the Eastern District of Texas alleging that our WEBENCH® online design tools infringe an eTool patent and seeking an injunction and unspecified amounts of monetary damages (trebled because of the alleged willful infringement), attorneys’ fees and costs. In December 2008, eTool amended the complaint and counterclaims to include our SOLUTIONS online tool in its allegations of infringement of the eTool patent. We filed an answer to the amended complaint and counterclaims for declaratory judgment of non-infringement and invalidity of the patent. On February 27, 2009, the Court held a scheduling conference setting a claim construction hearing for August 2011 and a jury trial for January 2012. eTool served its infringement contentions in March 2009 and we served our invalidity contentions in May 2009. Both parties exchanged initial disclosures on May 29, 2009. The discovery phase of the case is now open and ongoing. In February 2010, we filed our inter partes reexamination petition with the United States Patent and Trademark Office (PTO), seeking a determination that the ‘919 patent is invalid. On March 15, 2010, the PTO issued a communication granting our inter partes reexamination petition. The inter partes proceeding is ongoing. On June 8, 2010, eTool filed its second amended complaint removing the infringement allegations against our SOLUTIONS online tool. We answered eTool’s second amended complaint on June 25, 2010. On February 7, 2011, we filed an amended answer, defenses and counterclaims that asserted an inequitable conduct defense and counterclaim. We intend to contest the case through all available means.

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ITEM 1A. RISK FACTORS

A description of the risk factors associated with our business is set forth below. We review and update our risk factors each quarter. The description set forth below includes any changes to and supersedes the description of risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 30, 2010 and our subsequent Quarterly Reports on Form 10-Q. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations, results or financial condition.

You should read the following risk factors in conjunction with the factors discussed elsewhere in this and our other filings with the SEC and in materials incorporated by reference in these filings. These risk factors are intended to highlight certain factors that may affect our financial condition and results of operations and are not meant to be an exhaustive discussion of risks that apply to companies like National with broad international operations. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and our performance and the performance of our customers. Similarly, the price of our stock is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control.

RISK FACTORS RELATING TO GENERAL BUSINESS CONDITIONS

Significant deterioration in the global economy has reduced demand for our products, and our business has been and may continue to be adversely affected.

As a result of the credit market crisis and other macro-economic challenges affecting the economy of the United States and other parts of the world, customers have modified, delayed and cancelled plans to purchase our products. Consequently, we experienced a significant reduction in order rates during fiscal 2009. Although near-term market conditions have shown some improvement since then, our order rates have not returned to pre-crisis levels as business conditions have fluctuated. Global economic conditions remain uncertain, and could be adversely affected by the recent earthquake and tsunami in Japan, unrest in the Middle East and other geopolitical factors, and it is possible that current conditions could remain or worsen.

A large portion of our revenues is dependent on the wireless handset market.

The wireless handset market (including smart phones) is a significant source of our overall sales. Global economic difficulties have affected the sales of handsets and have adversely affected our revenues and profitability. This environment may continue even though we continue to develop new products to address new features and functionality in handsets. The worldwide handset market is large and future trends and other variables are difficult to predict. As a consumer-driven market, changes in the economy that adversely affect consumer demand for wireless handsets will impact demand for our products and adversely affect our business and operating results.

Conditions inherent in the semiconductor industry may cause periodic fluctuations in our operating results.

Rapid technological change and frequent introduction of new technology leading to more complex and integrated products characterize the semiconductor industry. The result is a cyclical environment with potentially short product life cycles, characterized by significant and rapid increases and decreases in product demand. Substantial capital and R&D investment are required to support products and manufacturing processes in the semiconductor industry, which amplify the effect of this cyclicality. As a result of this environment, we may experience rapid and significant fluctuations in our operating results.  Market or other shifts in our product mix toward or away from higher margin products, including analog products, or reductions in our product margins may also have a significant impact on our operating results.

Our business will be harmed if we are unable to compete successfully in our markets.

Competition in the semiconductor industry is intense. Our major competitors include Analog Devices, Intersil Corporation, Linear Technology, Maxim Integrated Products and Texas Instruments. In some cases, we may also compete with our customers. Competition is based on design and quality of products, product performance, price and service, with the relative importance of these factors varying among products, markets and customers. We cannot assure you that we will be able to compete successfully in the future against existing or new competitors or that our operating results will not be adversely affected by increased competition.

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RISK FACTORS RELATING TO INTERNATIONAL OPERATIONS

We operate in the global marketplace and face risks associated with worldwide operations.

During the first nine months of fiscal 2011, approximately 77 percent of our sales were derived from customers in international markets. We expect that international sales will continue to account for a significant majority of our total revenue in future years. We have manufacturing facilities outside the United States in Scotland and Malaysia. We are subject to the economic and political risks inherent in international operations, including the risks associated with ongoing uncertainties and political and economic instability in many countries around the world. In addition, the management of global operations subjects us to risks associated with legal and regulatory requirements, trade balance issues, currency controls, differences in local business and cultural factors, fluctuations in interest and currency exchange rates, and difficulties in staffing and managing foreign operations.

Global disruptions and events could adversely affect our financial performance and operating results.

Terrorist activities worldwide and hostilities in and between nation states, including the continuing hostilities and violence in Iraq and Afghanistan, unrest in the Middle East and the threat of future hostilities involving the United States and other countries, may cause uncertainty and instability in the overall state of the global economy or in the industries in which we operate. We have no assurance that the consequences from these events will not disrupt our operations in either the United States or other regions of the world. Significant destabilization of relations between the United States and other countries where we operate or between the countries where we operate and other countries could result in restrictions and prohibitions in the countries where we operate. Continued increases in oil prices, as well as spreading subprime mortgage failures, could also affect our operations. Pandemic illnesses that spread globally and/or substantial natural disasters such as the recent earthquake and tsunami in Japan, as well as geopolitical events, may also affect our future costs, operating capabilities and revenues.

We have significant manufacturing operations in Malaysia and, as a result, are subject to risks.

We have significant assembly and test facilities in Melaka, Malaysia. We may be adversely affected by laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters.  We cannot assure you that we will be able to maintain compliance with all of these laws and regulations, that new, stricter laws or regulations will not be imposed or that interpretations of existing regulations will not be changed, each of which would require additional expenditures or result in other adverse effects. Changes in the political environment or government policies could result in laws or regulations that impact us adversely. A significant destabilization of relations between the United States and Malaysia or with either of these countries and other countries could result in restrictions or prohibitions on our operations in that country.

We are subject to fluctuations in the exchange rate of the U.S. dollar and foreign currencies.

While we transact business primarily in U.S. dollars, and most of our revenues are denominated in U.S. dollars, a portion of our costs and revenues is denominated in other currencies, such as the euro, the Japanese yen, pound sterling and certain other Asian currencies. As a result, changes in the exchange rates of these or any other applicable currencies to the U.S. dollar will affect our net sales, costs of goods sold and operating margins. We have a program to hedge our exposure to currency rate fluctuations, but our hedging program may not be fully effective in preventing foreign exchange losses.

We are subject to export restrictions and laws affecting trade and investments.

As a global company headquartered in the United States, we are subject to U.S. laws and regulations that limit and restrict the export of some of our products and related product information. Compliance with these laws has limited our operations and sales in the past and could significantly limit them in the future. We maintain a compliance program but there are risks of noncompliance exposing us to significant legal liabilities. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments which may conflict with the laws and regulations in the United States or other countries in which we do business. There is a risk that these restrictions and laws could significantly restrict our operations in the future.

RISK FACTORS RELATING TO SALES AND OPERATIONS

Our increased focus on revenue growth could adversely impact margins over time.

Our current priority is to grow revenues at an annual rate greater than the rate of growth we have achieved in recent fiscal years. During those recent fiscal years our rate of revenue growth was consistently below that of our competitors, as we

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directed more of our efforts on maintaining and increasing our profit margins. By focusing on our relationship with our customers and delivering exceptional value to our customers we hope to increase sales while retaining our overall profitability. It is possible, however, that elevating our priority on increasing sales could come at the expense of gross margin. If a decrease in gross margin is not offset by sufficient increased revenue it would adversely affect our overall profitability. In addition, we may not achieve increased revenue growth rates.

Our performance depends on the availability and cost of raw materials, utilities, critical manufacturing equipment and third-party manufacturing services.

Our manufacturing processes and critical manufacturing equipment require that certain key raw materials and utilities be available. Limited or delayed access to or increases in the cost of these items, or the inability to implement new manufacturing technologies or install manufacturing equipment on a timely basis, could adversely affect our results of operations. We subcontract a portion of our wafer fabrication and assembly and testing of our integrated circuits. We depend on a limited number of third parties, most of whom are located outside of the United States, to perform these subcontracted functions. We do not have long-term contracts with all of these third parties. Reliance on these third parties involves risks, including possible shortages of capacity in periods of high demand. We have had difficulties in the past with supplies and subcontractors and could experience them in the future, including as a result of weak global economic conditions.

A substantial portion of our sales are made to distributors and the termination of an agreement with one or more distributors could result in a negative impact on our business.

In the first nine months of fiscal 2011, our distributors accounted for approximately 70 percent of our sales, which includes approximately 10 percent of sales made through dairitens (fulfillment service providers) in Japan under local business practices. Two of our distributors together accounted for 35 percent of total sales. Distributors typically sell products from several of our competitors along with our products. A significant reduction of effort to sell our products, the termination of our relationship with one or more distributors or distributor cash flow problems or other financial difficulties could reduce our access to certain end-customers and adversely impact our ability to sell our products. The termination of the distributor relationship agreement with a specific distributor could also result in the return of our inventory held by the distributor.

Our profit margins may vary over time.

Our profit margins may be adversely affected by a number of factors, including decreases in our shipment volume, reductions in, or obsolescence of our inventory, and shifts in our product mix or strategy. Because we own most of our manufacturing capacity, a significant portion of our operating costs is fixed, including costs associated with depreciation expense. In general, these costs do not decline proportionally with reductions in customer demand or utilization of our manufacturing capacity, nor do they increase proportionally as volume increases. Failure to maintain utilization rates of our manufacturing facilities or maintain the fixed costs associated with these facilities at current levels will result in higher average unit costs and lower gross margins.

We make forecasts of customer demand that may be inaccurate.

Our ability to match inventory and production mix with the product mix needed to fill current orders and orders to be delivered in any given quarter may affect our ability to meet that quarter’s revenue forecast. To be able to accommodate customer requests for shorter shipment lead times, we manufacture product based on customer forecasts. These forecasts are based on multiple assumptions. While we believe our relationships with our customers, combined with our understanding of the end markets we serve, provide us with the ability to make reliable forecasts, if we inaccurately forecast customer demand, it could result in inadequate, excess or obsolete inventory that would reduce our profit margins.

We are subject to warranty claims, product recalls and product liability.

We could be subject to warranty or product liability claims that could lead to significant expenses as we defend such claims or pay damage awards. In the event of a warranty claim, we may also incur costs if we compensate the affected customer. We maintain product liability insurance, but there is no guarantee that such insurance will be available or adequate to protect against all such claims. We may incur costs and expenses relating to a recall of one of our customers’ products containing one of our devices. Any future costs or payments made in connection with warranty claims or product recalls could materially affect our results of operations and financial condition in future periods.

We may be harmed by natural disasters and other disruptions.

Our worldwide operations could be subject to natural disasters and other disruptions. Our corporate headquarters are located near major earthquake fault lines in California. In the event of a major earthquake, or other natural or manmade disaster, we

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could experience loss of life of our employees, destruction of facilities or other business interruptions. The operations of our suppliers could also be subject to natural disasters and other disruptions, which could cause shortages and price increases in various essential materials. We use third party freight firms for nearly all of our shipments from vendors and from our wafer manufacturing facilities to assembly and test sites and for shipments to customers of our final product. This includes ground, sea and air freight. Any significant disruption of our freight shipments globally or in certain parts of the world, particularly where our operations are concentrated, would materially affect our operations. We maintain property and business interruption insurance, but there is no guarantee that such insurance will be available or adequate to protect against all costs associated with such disasters and disruptions.

We may incur losses in connection with the sale of, or we may be unable to sell, our manufacturing facilities in China and Texas.

In March 2009, we announced the eventual closure of our wafer fabrication facility in Texas and our assembly and test plant in China. We have since ceased production activity in these two facilities. We are actively engaged in locating buyers to purchase each of these manufacturing facilities and the machinery and equipment located in these facilities. In selling these properties, we are faced with the inherent volatility in the industrial real estate market, which is a function of the supply and demand for industrial properties in the micro-markets where our facilities are located. Although we believe we will be able to sell these facilities, it may take longer than we currently expect. If we must incur additional costs to maintain the facilities over a longer time frame than we currently expect, if we are forced to accept a lower price than we originally estimated, or if we are unable to locate a buyer for either or both of these facilities, our operating results will be negatively affected.

We may be subject to information technology system failures, network disruptions and breaches in data security.

Information technology system failures, network disruptions and breaches of data security could disrupt our operations by causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, preventing the processing of transactions and reporting of financial results. They could also result in the unintentional disclosure of confidential information about the company or with respect to our customers and employees. While management has taken steps to address these concerns by implementing sophisticated network security and internal control measures, there can be no assurance that a system failure or data security breach will not have a material adverse effect on our financial condition and operating results.

We may experience delays in implementing a new enterprise resource planning system.

We began a significant initiative to transform National’s mainframe application landscape with a large scale enterprise resource planning (ERP) implementation intended to reduce the risk associated with our existing mainframe systems, simplify our complex information technology landscape to reduce cost of ownership and increase flexibility for evolving business needs. This program will introduce risks to our business operations. For example, implementation of a new ERP system will require significant investment, re-engineering of many processes used to run our business, and the attention of many employees who would otherwise be focused on other aspects of our business. The design and implementation of the new ERP system could also take longer than anticipated, which could result in delays in our ability to realize any anticipated benefits of the new ERP system, as well as additional costs and disruption to our business, and could have a material adverse effect on our cash flows, results of operations and financial condition.

RISK FACTORS RELATING TO R&D, INTELLECTUAL PROPERTY AND LITIGATION

We may experience delays in introducing new products or market acceptance of new products may be below our expectations.

Rapidly changing technologies and industry standards, along with frequent new product introductions, characterize the industries in which our primary customers operate. As our customers evolve and introduce new products, our success depends on our ability to anticipate and adapt to these changes in a timely and cost-effective manner by developing and introducing into the market new products that meet the needs of our customers. We are also directing efforts to develop new and different types of products to serve emerging mega trends such as energy efficiency. We believe that continued focused investment in research and development, especially the timely development, introduction and market acceptance of new products, is a key factor to successful growth and the ability to achieve strong financial performance. Successful development and introduction of these new products are critical to our ability to maintain a competitive position in the marketplace. We cannot assure you, however, that we will be successful in timely developing and introducing successful new products demanded by the market, or in achieving anticipated revenues from new products, and a failure to bring new products to market or achieve market success with them may harm our operating results. We also cannot assure you that products that may be developed in the future by our competitors will not render our products obsolete or non-competitive.

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Our products are dependent on the use of intellectual property that we need to protect.

We rely on patents, trade secrets, trademarks, mask works and copyrights to protect our products and technologies, and have a program to file applications for and obtain patents, trademarks, mask works and copyrights in the United States and in selected foreign countries where we believe filing for such protection is appropriate. Effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for by us in some countries. Some of our products and technologies are not covered by any patent or patent application. In addition, we cannot assure you that:

·the patents owned by us or numerous other patents which third parties license to us will not be invalidated, circumvented, challenged or licensed to other companies; or

·any of our pending or future patent applications will be issued within the scope of the claims sought by us, if at all; or

·our products will not be held to infringe patents of others.

We also seek to protect our proprietary technologies, including technologies that may not be patented or patentable, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with our collaborators, advisors, employees and consultants. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our collaborators will not assert rights to intellectual property arising out of our research collaborations. In addition, we may not be able to enforce these agreements globally. Some of our technologies have been licensed on a non-exclusive basis from other companies, which may license such technologies to others, including our competitors. If necessary or desirable, we may seek licenses under patents or intellectual property rights claimed by others. However, we cannot assure you that we will obtain such licenses or that the terms of any offered licenses will be acceptable to us. The failure to obtain a license from a third party for technologies we use could cause us to incur substantial liabilities and to suspend the manufacture or shipment of products or our use of processes requiring the technologies.

The protection of our intellectual property is essential in preventing unauthorized third parties from copying or otherwise obtaining and using our technologies. Despite our efforts, we cannot assure you that we will be able to adequately prevent misappropriation or improper use of our protected technologies.

We are subject to litigation risks.

All industries, including the semiconductor industry, are subject to legal claims. We are involved in a variety of routine legal matters that arise in the normal course of business. Further discussion of certain specific material legal proceedings in which we are involved is contained in Note 15 to the Condensed Consolidated Financial Statements. We believe it is unlikely that the final outcome of these legal claims will have a material adverse effect on our consolidated financial position or results of operations. However, litigation is inherently uncertain and unpredictable. An unfavorable resolution of any particular legal claim or proceeding could have a material adverse effect on our consolidated financial position or results of operations.

RISK FACTORS RELATED TO OUR DEBT

Increased leverage may harm our financial condition and results of operations.

Our total long term debt at February 27, 2011 was $1.0 billion and it will have important effects on our future operations, including, without limitation:

·we will have additional cash requirements in order to support the payment of principal and interest on our outstanding indebtedness;

·increases in our outstanding indebtedness and leverage may increase our vulnerability to adverse changes in general economic and industry conditions, as well as to competitive pressure;

·our ability to obtain additional financing for working capital, capital expenditures, general corporate and other purposes may be limited; and

·our flexibility in planning for, or reacting to, changes in our business and our industry may be limited.

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our consolidated operations, many of which are beyond our control. In addition, under our multicurrency credit agreement with a bank, we are required to comply with certain restrictive covenants, conditions, and default provisions that require the maintenance of certain financial ratios. If we are unable to generate sufficient cash flow from operations in the future to

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service our debt or maintain compliance with the financial covenants of our multicurrency credit agreement due to current economic conditions or otherwise, we may take certain actions which require us to, among other things:

·seek additional financing in the debt or equity markets;

·refinance, retire or restructure all or a portion of our indebtedness;

·sell selected assets;

·reduce or delay planned capital expenditures; or

·reduce or delay planned operating expenditures.

Such measures might not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms, if at all, particularly if our credit rating is not strong.

Difficulties in the credit markets may limit our ability to refinance our debt as it becomes due.

We cannot assure you that we will be able to refinance our debt as it becomes due. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Continued turbulence in the U.S. and international markets and economies may adversely affect the liquidity and financial conditions of issuers.

RISK FACTORS RELATING TO PERSONNEL AND MERGER AND ACQUISITION ACTIVITY

We may not be able to attract or retain employees with skills necessary to remain competitive in our industry.

Our continued success depends in part on the recruitment and retention of skilled personnel, including technical, marketing, management and staff personnel. Experienced personnel in the semiconductor industry, particularly in our targeted analog areas, are in high demand and competition for their skills is intense. We cannot assure you that we will be able to successfully recruit and retain the key personnel we require.

We may pursue acquisitions and investments that could harm our operating results and may disrupt our business.

We have made and will continue to consider making strategic business investments, alliances and acquisitions we consider necessary to gain access to key technologies that we believe will augment our existing technical capability and support our business model objectives. Acquisitions and investments involve risks and uncertainties that may unfavorably impact our future financial performance. We may not be able to integrate and develop the technologies we acquire as expected. If the technology is not developed in a timely manner, we may be unsuccessful in penetrating target markets. With any acquisition there are risks that future operating results may be unfavorably affected by acquisition related costs and incremental R&D spending.

RISK FACTORS RELATING TO TAX AND ENVIRONMENTAL REGULATIONS

We may be affected by higher than expected tax rates or exposure to additional income tax liabilities.

As a global company, our effective tax rate is dependent upon the geographic composition of worldwide earnings and tax regulations governing each region. We are subject to income taxes in both the United States and various foreign jurisdictions, and complex analyses and significant judgment are required to determine worldwide tax liabilities. From time to time, we have received notices of tax assessments in various jurisdictions where we operate. We may receive future notices of assessments and the amounts of these assessments or our failure to favorably resolve such assessments may have a material adverse effect on our financial condition or results of operations.

We have significant amounts of deferred tax assets. The recognition of deferred tax assets is reduced by a valuation allowance if it is more likely than not that the tax benefits associated with the deferred tax benefits will not be realized. If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the enacted tax rates or the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase the valuation allowances against our deferred tax assets, which would cause an increase in our effective tax rate. Proposals and discussions in Congress and the Executive branch for new U.S. tax legislation, as well as in California and other states for new state tax legislation, could, if adopted, adversely affect our effective tax rate. A significant increase in our effective tax rate could have a material adverse effect on our financial condition or results of operations.

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We were granted a tax holiday by the Malaysian government that is effective for a ten-year period that began in our fiscal 2010. Such tax holiday is contingent upon meeting certain minimum requirements either on an annual basis or over specified periods of time ranging from 5 to 7 years. These requirements relate to capital expenditures levels, statutory revenue realization and the maintenance of a skilled workforce in Malaysia. If we are unable to meet these requirements, our income in Malaysia would be subject to taxation by the Malaysian government and this would result in increasing our effective tax rate.

We are subject to many environmental laws and regulations.

Increasingly stringent environmental regulations restrict the amount and types of materials that can be released from our operations into the environment. While the cost of compliance with environmental laws has not had a material adverse effect on our results of operations historically, compliance with these and any future regulations could require significant capital investments in pollution control equipment or changes in the way we make our products. In addition, because we use hazardous and other regulated materials in our manufacturing processes, we are subject to risks of liabilities and claims, regardless of fault, resulting from accidental releases, including personal injury claims and civil and criminal fines. The following should also be considered:

·we currently are remediating past contamination at some of our sites;

·we have been identified as a potentially responsible party at a number of Superfund sites where we (or our predecessors) disposed of wastes in the past; and

·significant regulatory and public attention on the impact of semiconductor operations on the environment may result in more stringent regulations, further increasing our costs.

For more information on environmental matters, see Note 15 to the Condensed Consolidated Financial Statements.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)During the third quarter of fiscal 2011, we did not make any unregistered sales of our equity securities.

(b)The following table summarizes our purchases of our common stock during the third quarter of fiscal 2011:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
Month # 1:
November 29, 2010 - December 28, 2010	76,797	$	13.61	—	$	127 million
Month # 2:
December 29, 2010 - January 28, 2011	790	$	15.42	—	$	127 million
Month # 3:
January 29, 2011 - February 27, 2011	5,430	$	15.20	—	$	127 million
Total	83,017			—

(1)  Represents 82,101 shares that were reacquired through the withholding of shares to pay employee tax obligations upon the vesting of restricted stock and 916 shares purchased by the rabbi trust utilized by our Deferred Compensation Plan, which permits participants to direct investment of their accounts in our common stock in accordance with their instructions.

(2) No purchases were made under our $500 million stock repurchase program announced in June 2007. As of February 27, 2011, $127 million of the $500 million stock repurchase program remains available for future stock repurchases. We do not have any plans to terminate the program prior to its completion, and there is no expiration date for this repurchase program.

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ITEM 6.  EXHIBITS

(a)	Exhibits
10.1*	Form of stock option agreement under the National Semiconductor Corporation 2009 Incentive Award Plan.
10.2*	Form of restricted stock unit agreement under the National Semiconductor Corporation 2009 Incentive Award Plan.
10.3*	Form of restricted stock award agreement under the National Semiconductor Corporation 2009 Incentive Award Plan.
31.1	Rule 13a-14 (a) /15d-14 (a) Certifications.
32.1	Section 1350 Certifications.
101.1	Interactive Data File.

*      Management contract or compensatory plan or arrangement.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NATIONAL SEMICONDUCTOR CORPORATION
Date: March 28, 2011	/s/ Jamie E. Samath
	Jamie E. Samath Vice President and Corporate Controller Signing on behalf of the registrant and as principal accounting officer

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EX-10.1

Exhibit 10.1

National Semiconductor Corporation

Notice of Grant of Stock Option and Option Agreement

ID: [Employee Name]

Address

You have been granted a Non-Qualified Stock Option (“Option”)  under the National Semiconductor Corporation 2009 Incentive Award Plan (“Plan”):

Option Grant Date:
Option Price:
Number of Shares:
Vesting Schedule:	1/4th on first anniversary of grant date and 1/48th each month thereafter on the day in the month corresponding to the grant date
Option Term:	Six years and one day
Option Number:

Except in certain instances, vesting on options ceases upon a termination of employment. After termination, vested options generally may be exercised within 3 months although certain exceptions apply. Consult the Plan and the additional terms and conditions of the Stock Option Agreement (“Agreement”), as well as the related Prospectus, for details.

The option is subject to the terms and conditions of this Notice of Grant of Stock Option (“Notice”), the additional terms and conditions of the Agreement and the Plan.  These documents, as well as the Prospectus for the Plan, may be accessed on the intranet at the National Semiconductor Corporate Human Resources website, http://myworkplace.nsc.com. Hard copies are available upon request from Stock Administration, Mail Stop C1-640, 2900 Semiconductor Drive, Santa Clara, CA 95051, stock.administration@nsc.com.

The exercise of a stock option has tax implications. Consult the Prospectus and your tax adviser for details.

PLEASE NOTE: The granting of stock options is solely at the Company’s discretion. There is no guarantee that you will be granted options in the future. In addition, the Company is not responsible for and does not guarantee that you will be able to achieve any particular sales price in connection with your stock option exercise.

By agreeing to accept this Option, you confirm that you have received copies of and agree to be bound by the terms and conditions of this Notice, the Plan and the Agreement.  In particular, you should note that by accepting this Option grant, you consent to the collection, use and transfer of personal data about you as described in the Agreement. This Option cannot be exercised unless you have accepted this Notice and related Agreement.

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NATIONAL SEMICONDUCTOR CORPORATION

2009 INCENTIVE AWARD PLAN (“Plan”)

STOCK OPTION AGREEMENT
ADDITIONAL TERMS AND CONDITIONS

1.                Definitions and Incorporation of Terms

(a)                  Disability.  The inability of the optionee named in the notice of grant of stock option (“Optionee”) to perform any services for the Company or an Affiliate and eligibility to receive disability benefits under the standards used by the applicable disability benefit plans or of the Company (or an Affiliate) or any successor plan thereto.

(b)                 Retirement.  Permanent termination of employment with the Company or an Affiliate and (i) age is at least fifty-five (55) and Optionee’s years of service in the employ of the Company or an Affiliate is then (10) or more, and (ii) the terminating employee has confirmed to the Company that he or she does not intend to engage in a full-time vocation.

(c)                  Incorporation of Terms of Plan.  The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. Capitalized terms not otherwise defined herein have the meanings set forth in the Plan.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

2.                Termination of Option.  The Option shall terminate and may not be exercised if the Optionee incurs a Termination of Service within six months following the date the Option was granted.  If Optionee incurs a Termination of Service  such six month period, the Option shall terminate and may not be exercised except as follows:

(a)                  If Optionee’s Termination of Service is for any reason other than (i) Retirement, (ii) Disability, or (iii) death, Optionee may exercise the Option to the extent that Optionee was entitled to exercise it at the date of such termination at any time within a period of three (3) months following the date of such termination.  If Optionee shall die during such three (3) month period without having exercised the Option, the person or persons to whom the Optionee’s rights under the Option shall pass by will or by the laws of descent or distribution may exercise the Option within a period of one year following Optionee’s death but only to the extent the Option was exercisable at the date of Optionee’s termination;

(b)                 If Optionee’s Termination of Service is due to (i) Retirement, (ii) Disability, or (iii) death, the Option may be exercised as provided in the Vesting Schedule (subject to the accelerated vesting provisions of Section 3 hereof) at any time within a period of five (5) years following the date of such termination by Optionee, or in the event of Optionee’s death, by the person or persons to whom Optionee’s rights under the Option shall pass by will or by the laws of descent or distribution; provided, however, that if Optionee shall become employed by or provide services in any manner to a competitor of the Company, the Option shall terminate immediately and may not be exercised.

3.                If Optionee does not incur a Termination of Service within six (6) months following the date the Option was granted and Optionee’s Termination of Service is due to (i) death or (ii) Retirement or Disability and Optionee dies within three (3) years following the date of such termination, the Option shall be fully exercisable upon Optionee’s death notwithstanding the installment exercise provisions of the Vesting Schedule.

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4.                Nothing contained in Section 2 or Section 3 hereof is intended to extend the stated Option Term, and in no event may the Option be exercised after the Option Term has expired.

5.                The Option is exercisable, during the lifetime of the Optionee, only by the Optionee.  The Option shall not be sold, pledged, assigned or transferred in any manner otherwise than by will or the laws of descent and distribution, and shall not be subject to attachment or similar process.  Any attempted sale, pledge, assignment, transfer or other disposition of the Option contrary to the provisions hereof and the levy of any attachment or similar process upon the Option shall be null and void and without effect.

6.                Upon the occurrence of certain events relating to the Common Stock contemplated by Section 13.2 of the Plan (including, without limitation, an extraordinary cash dividend on such Common Stock), the Administrator shall make such adjustments the Administrator deems appropriate in the number of shares of Common Stock subject to the Option, the exercise price of the Option and the kind of securities that may be issued upon exercise of the Option.  Optionee acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and Section 13.2 of the Plan.

7.                Subject to the terms and conditions of this Agreement, the Option may be exercised by giving notice to he Company at such location and in such form, which may be electronic, as the Company may designate.  Such notice shall (i) state the election to exercise the Option and the number of full shares in respect of which it is being exercised, and (ii) be signed by the person or persons so exercising the Option and, in the event the Option is being exercised (pursuant to Section 2 hereof) by any person or persons other than the Optionee, be accompanied by appropriate proof of the right of such person or persons to exercise the Option.  Such notice may be in electronic form and shall be accompanied by payment of the full purchase price of such shares, whereupon the Company shall issue and deliver, or cause to be issued and delivered a certificate or certificates which may be in book entry form, representing such shares, as soon as practicable after such notice is received.  The purchase price for such shares must be paid in full in one, or a combination of one or more of the following methods: (i) cash or check, (ii) in Common Stock; or (iii) other property acceptable to the Administrator (including, without limitation, through the delivery of a notice that Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale).  If Common Stock is used to pay any portion of the purchase price, it must have been held by the Optionee for such period of time as is sufficient to avoid the imposition on the Company of adverse accounting consequences, must be duly endorsed for transfer to the Company by the Optionee and must have an aggregate Fair Market Value as of the payment date of the applicable purchase price.  The payment of all or part of the required withholding taxes due upon exercise of the Option, up to the highest marginal rates then in effect, may be made by the withholding of shares otherwise issuable upon exercise of the Option with an aggregate Fair Market Value (determined, as applicable, on the date of exercise) equal to the amount that must be withheld by the Optionee’s employer for federal, state, local and/or other tax purposes. The certificate or certificates, which may be in electronic form, for the shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option and shall be delivered as aforesaid to or upon the order of the person or persons exercising the Option.  The date of the exercise of the Option will be the date on which the aforesaid notice, properly executed and accompanied as aforesaid, is received by the Company.  All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable.  Until the certificate or certificates have been issued as aforesaid, the person or persons exercising the Option shall possess no rights of a record holder with respect to any of such shares.

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8.                The Company shall not be required to issue or deliver any certificate or certificates for shares of stock to satisfy the Option pursuant to this Agreement prior to fulfillment of all of the following conditions:

(a)                  Optionee has evidenced Optionee’s acceptance of the terms of this agreement, which acceptance may be in written or electronic format;

(b)                 The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;

(c)                  The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(d)                 The obtaining of any approval or other clearance from any state, federal, or other governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(e)                  Subject to the provisions of Section 7, the payment by Optionee of all amounts required to be withheld under federal, state, local and other applicable tax laws, with respect to the exercise of the Option and any shares of the Common Stock issued or issuable to satisfy the Option thereunder; and

(f)                  The lapse of such reasonable period of time as the Administrator may from time to time establish for reasons of administrative convenience.

9.                By entering into this Agreement and accepting the grant of an option evidenced hereby, Optionee acknowledges that: (i) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (ii) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company and the Administrator; (iv) the Optionee’s receipt of this Option shall not create a right to further employment with the Company and shall not interfere with the ability of the Company to terminate the Optionee’s employment relationship at any time with or without cause; (v) the Optionee’s participation in the Plan is voluntary; (vi) the value of the Option is an extraordinary item of compensation which is outside the scope of the Optionee’s employment contract, if any; (vii) the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (viii) the future value of the underlying shares is unknown and cannot be predicted with certainty; and (ix) if the underlying shares do not increase in value, the Option will have no value.

10.              The Company and/or the Optionee’s employer will assess its requirements regarding tax, social insurance and any other payroll tax (the “Tax-Related Items”) withholding and reporting in connection with the Option, including the grant, vesting or exercise of the Option or sale of shares acquired pursuant to such exercise.  These requirements may change from time to time as laws or interpretations change. Regardless of the actions of the Company and/or the Optionee’s employer in this regard, the Optionee hereby acknowledges and agrees that the ultimate liability for any and all Tax-Related Items is and remains his or her responsibility and liability and that the Company and/or the

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Optionee’s employer (i) makes no representations nor undertakings regarding treatment of any Tax-Related Items in connection with any aspect of the Option grant, including the grant, vesting or exercise of the Option and the subsequent sale of shares acquired pursuant to such exercise; and (ii) does not commit to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Optionee’s liability regarding Tax-Related Items.  In the event that the Company and/or the Optionee’s employer must withhold any Tax-Related Items as a result of the grant, vesting, or exercise of the Option or sale of shares, the Optionee agrees to make arrangements satisfactory to the Company and/or the Optionee’s employer to satisfy all withholding requirements.  The Optionee authorizes the Company and/or the Optionee’s employer to withhold all applicable Tax-Related Items legally due from the Optionee from his or her wages or other cash compensation paid him or her by the Company and/or the Optionee’s employer or from proceeds from the sale of shares. Optionee further authorizes the Company and/or the Optionee’s employer to withhold from his or her wages or other cash compensation paid him or her by the Company  and/or the Optionee’s employee any additional Tax-Related Items that the Company and the Optionee’s employer subsequently determine in the future to be the responsibility of the Optionee.

11.              As a condition of the grant of the Option, the Optionee consents to the collection, use and transfer of personal data as described in this Section 11.  The Optionee understands that the Company and its subsidiaries hold certain personal information about the Optionee, including the Optionee’s name, home address and telephone number, date of birth, social security number or identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or outstanding in the Optionee’s favor, for the purpose of managing and administering the Plan (the “Data”).  The Optionee further understands that the Company and its subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of the Optionee’s participation in the Plan, and that the Company and its subsidiaries may further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan.  The Optionee understands that these recipients may be located in the European Economic Area, or elsewhere, such as the United States.  The Optionee authorizes the Company and its subsidiaries to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Optionee’s participation in the Plan, including any requisite transfer to a broker or other third party with whom the Optionee may elect to deposit any shares of stock acquired upon exercise of the Option, such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of stock on his or her behalf.  The Optionee understands that he or she may, at any time, view Data, require any necessary amendments to it or withdraw the consents herein in writing by contacting his or her local Human Resources representative.  Withdrawal of consent may, however, affect Optionee’s ability to exercise or realize benefits from the Option.

12.              Pursuant to Section 13.2(d) of the Plan, the Option shall become fully vested and exercisable in the event that within twelve (12) months after a Change in Control in connection with which the successor corporation assumes the Option or substitutes an equivalent award for the Option, Optionee’s service is terminated by the Company (or an Affiliate) without Cause or Optionee resigns for Good Reason.

13.               Miscellaneous

(a)                  The Administrator has the power to interpret the Plan, this Agreement and all other documents relating to the Option and to adopt rules for the administration, interpretation and application of the Plan, and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Optionee, the

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Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith.

(b)                 Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

(c)                  This Agreement shall be administered, and the Common Stock subject to the Option shall be issued, only in such a manner as to conform to all applicable laws, rules and regulations.

(d)                 This Agreement may be amended only by a document, which may be in written or electronic form, executed by the parties hereto which specifically states that it is amending this Agreement. Signatures evidencing such execution may be written or electronic.

(e)                  The rights and obligations of the Company under this Agreement shall be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.

(f)                  Optionee agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Agreement.

(g)                 Optionee acknowledges and agrees that he or she has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing and accepting this Agreement and fully understands all provisions of this Agreement.

(h)                 All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of substantially all of the business and/or assets of the Company.

(i)                   If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid.

(j)                   Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him or her at the address provided by Optionee to the Company for maintenance in Company’s personnel records concerning Optionee. By a notice given pursuant to this Section 13(j), either party may designate a different address for notices to be given to it. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section 13(j). Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the postal service in the country of residence of the party sending the notice.

(k)                  Notwithstanding anything in the Plan to the contrary, the Administrator may, in its sole discretion, in the event of serious misconduct by Optionee (including, without limitation, any

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misconduct prejudicial to or in conflict with the Company) or any Termination of Service for cause or in the event that Optionee terminates employment for Retirement and subsequently engages in full-time employment, or any activity of Optionee in competition with the business of the Company, (i) cancel any outstanding Option granted to Optionee, in whole or in part, whether or not vested or (ii) following the exercise of an Option within a period specified by the Administrator, require Optionee to repay to the Company any gain realized or payment received upon the exercise of such Option (with such gain or payment valued as of the date of exercise or payment). Such cancellation or repayment obligation shall be effective as of the date specified by the Administrator. The determination of whether Optionee has engaged in a serious breach of conduct or any activity in competition with the business of the Company shall be determined by the Administrator in good faith and in its sole discretion. This Section 13(k) shall have no application following a Change in Control.

(l)                   This Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”).  However, notwithstanding any other provision of the Plan or this Agreement, if at any time the Administrator determines that the Option (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Optionee or any other person for failure to do so) to adopt such amendments to the Plan or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

(m)                 The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

14.              This Option is granted pursuant to the Plan. A copy of the Plan is available in electronic form on the Company’s Human Resources website or in hard copy from the Stock Administration department and is by reference incorporated herein. In the event of any inconsistency between the terms of this Agreement and the provisions of the Plan, the Plan shall govern.

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EX-10.2

Exhibit 10.2

NATIONAL SEMICONDUCTOR CORPORATION
2009 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT GRANT NOTICE AND RESTRICTED STOCK UNIT AGREEMENT

National Semiconductor Corporation, a Delaware corporation, (the “Company”), pursuant to its 2009 Incentive Award Plan (the “Plan”), hereby grants to the holder listed below (“Participant”), an award of restricted stock units (“Restricted Stock Units” or “RSUs”).  Each Restricted Stock Unit represents the right to receive one share of Common Stock (as defined in the Plan) upon vesting of such Restricted Stock Unit.  This award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Restricted Stock Unit Agreement”) and the Plan, each of which are incorporated herein by reference.  Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Unit Agreement.

Participant:
Grant Date:
Total Number of RSUs:
Vesting Commencement Date:
Vesting Schedule:	[1/3][1/4] of the RSUs shall vest on each of the first [three][four] anniversaries of the Vesting Commencement Date
Termination Prior to Vesting:	Pursuant to Section 2.5 of the Restricted Stock Unit Agreement, if Participant incurs a Termination of Service prior to the applicable vesting date, all RSUs that have not become vested on or prior to the date of such Termination of Service will thereupon be automatically forfeited by Participant without payment of any consideration therefor.

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Unit Agreement and this Grant Notice.  Participant has reviewed the Restricted Stock Unit Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Restricted Stock Unit Agreement and the Plan.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Unit Agreement.

NATIONAL SEMICONDUCTOR CORPORATION:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:

EXHIBIT A

TO RESTRICTED STOCK UNIT GRANT NOTICE

RESTRICTED STOCK UNIT AGREEMENT

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Agreement (this “Agreement”) is attached, National Semiconductor Corporation, a Delaware corporation (the “Company”), has granted to Participant an award of restricted stock units (“Restricted Stock Units” or “RSUs”) under the National Semiconductor Corporation 2009 Incentive Award Plan, as amended from time to time (the “Plan”).

ARTICLE 1.

GENERAL

1.1Defined Terms.  Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.

1.2Incorporation of Terms of Plan.  The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE 2.

GRANT OF RESTRICTED STOCK UNITS

2.1Grant of RSUs.  In consideration of Participant’s past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company grants to Participant an award of RSUs as set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.  However, no shares of Common Stock shall be issued with respect to the RSUs until such RSUs have vested pursuant to Section 2.3, and prior to the issuance of such shares, the RSUs will represent an unsecured obligation of the Company and shall not be treated as property or as a trust fund of any kind.

2.2Company’s Obligation.  Unless and until the RSUs will have vested in the manner set forth in Article 2 hereof, Participant will have no right to payment with respect to such RSUs.  Prior to the actual issuance of Common Stock with respect to any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable only from the general assets of the Company.

2.3Vesting Schedule.

(a)Subject to Sections 2.3(b) and 2.5 hereof, the RSUs awarded by the Grant Notice will vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth on the Grant Notice to which this Agreement is attached (the “Vesting Schedule”), subject to Participant’s continued employment or services through the applicable vesting dates.

(b)Notwithstanding Section 2.3(a) hereof and the Grant Notice and subject to Section 2.5 hereof, pursuant to Section 13.2(d) of the Plan, the RSUs shall become fully vested and nonforfeitable in the event that within twelve (12) months after a Change in Control in connection with

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which the successor corporation assumes the RSUs or substitutes equivalent rights for the RSUs, Participant’s service is terminated by the Company (or an Affiliate) without Cause or Participant resigns for Good Reason.

2.4No Right to Continued Employment or Service.  Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause.

2.5Forfeiture, Termination and Cancellation upon Termination of Service.  Notwithstanding any contrary provision of this Agreement, upon Participant’s Termination of Service for any or no reason, all then unvested RSUs subject to this Agreement will thereupon be automatically forfeited, terminated and cancelled as of the applicable termination date without payment of any consideration by the Company, and Participant, or Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder.

2.6Issuance of Common Stock upon Vesting.

(a)As soon as administratively practicable following the vesting of any Restricted Stock Units pursuant to Section 2.3 hereof, but in no event later than sixty (60) days after such vesting date (for the avoidance of doubt, this deadline is intended to comply with the “short-term deferral” exemption from Section 409A of the Code), the Company shall deliver to Participant (or any transferee permitted under Section 3.2 hereof) a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion) equal to the number of Restricted Stock Units subject to this award that vest on the applicable vesting date.   Notwithstanding the foregoing, in the event shares of Common Stock cannot be issued pursuant to Section 2.7(a), (b) or (c) hereof, then the shares of Common Stock shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that shares of Common Stock can again be issued in accordance with Sections 2.7(a), (b) and (c) hereof.

(b)Notwithstanding anything to the contrary in this Agreement, the Company shall be entitled to require payment by Participant of any sums required by applicable law to be withheld with respect to the grant of RSUs or the issuance of shares of Common Stock.  Such payment shall be made by deduction from other compensation payable to Participant or in such other form of consideration acceptable to the Company which may, in the sole discretion of the Administrator, include:

(i)Cash or check;

(ii)Surrender of shares of Common Stock (including, without limitation, shares of Common Stock otherwise issuable under the RSUs) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the minimum amount required to be withheld by statute; or

(iii)Other property acceptable to the Administrator (including, without limitation, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to shares of Common Stock then issuable under the RSUs, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of its

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withholding obligations; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale).

The Company shall not be obligated to deliver any new certificate representing shares of Common Stock to Participant or Participant’s legal representative or enter such share of Common Stock in book entry form unless and until Participant or Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of Participant resulting from the grant of the RSUs or the issuance of shares of Common Stock.

2.7Conditions to Delivery of Stock.  Subject to Section 2.6, the shares of Common Stock deliverable hereunder, or any portion thereof, may be either previously authorized but unissued shares of Common Stock or issued shares of Common Stock which have then been reacquired by the Company.  Such shares of Common Stock shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any shares of Common Stock deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a)The admission of such shares of Common Stock to listing on all stock exchanges on which such Common Stock is then listed;

(b)The completion of any registration or other qualification of such shares of Common Stock under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)The receipt by the Company of full payment for such shares of Common Stock, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 2.6 hereof; and

(e)The lapse of such reasonable period of time following the vesting of any Restricted Stock Units as the Administrator may from time to time establish for reasons of administrative convenience.

2.8Rights as Stockholder.  The holder of the RSUs shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of the RSUs and any shares of Common Stock underlying the RSUs and deliverable hereunder unless and until such shares of Common Stock shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares of Common Stock are issued, except as provided in Section 13.2 of the Plan.

ARTICLE 3.

OTHER PROVISIONS

3.1Administration.  The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as

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are consistent therewith and to interpret, amend or revoke any such rules.  All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons.  No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.

3.2Grant is Not Transferable.  During the lifetime of Participant, the RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution.

3.3Binding Agreement.  Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.4Adjustments Upon Specified Events.  The Administrator may accelerate payment and vesting of the Restricted Stock Units in such circumstances as it, in its sole discretion, may determine.  In addition, upon the occurrence of certain events relating to the Common Stock contemplated by Section 13.2 of the Plan (including, without limitation, an extraordinary cash dividend on such Common Stock), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Restricted Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Restricted Stock Units.  Participant acknowledges that the RSUs are subject to amendment, modification and termination in certain events as provided in this Agreement and Section 13.2 of the Plan.

3.5Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s last address reflected on the Company’s records.  By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party.  Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.6Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.7Governing Law.  The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

3.8Conformity to Securities Laws.  Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.9Amendments, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any

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time or from time to time by the Committee or the Board; provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of Participant.

3.10Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth in Section 3.2 hereof, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

3.11Entire Agreement.  The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

3.12Section 409A.  The RSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”).  However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that the RSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the RSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

3.13Participant Acknowledgements.  By entering into this Agreement and accepting the RSUs, Participant acknowledges that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of RSUs is a one-time benefit which does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs; (c) all determinations with respect to any such future grants, including, but not limited to, the times when RSUs shall be granted and the number of RSUs, will be at the sole discretion of the Company and the Administrator; (d) Participant’s receipt of the RSUs shall not create a right to further employment with the Company and shall not interfere with the ability of the Company to terminate Participant’s employment relationship at any time with or without cause; (e) Participant’s participation in the Plan is voluntary; (f) the value of the RSUs is an extraordinary item of compensation which is outside the scope of Participant’s employment contract, if any; (g) the RSUs are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (h) the future value of the underlying shares is unknown and cannot be predicted with certainty.

3.14Foreign Employee — Tax-Related Items.  The Company and/or Participant’s employer will assess its requirements regarding tax, social insurance and any other payroll tax (“Tax-Related Items”) withholding and reporting in connection with the RSUs.  These requirements may change from time to time as laws or interpretations change.  Regardless of the actions of the Company and/or Participant’s employer in this regard, Participant hereby acknowledges and agrees that the ultimate liability for any and all Tax-Related Items is and remains his or her responsibility and liability and that the Company and/or Participant’s employer (a) make no representations nor undertakings regarding treatment of any Tax-Related Items in connection with any aspect of the grant of RSUs; and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s

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liability regarding Tax-Related Items.  In the event that the Company and/or Participant’s employer must withhold any Tax-Related Items as a result of the RSUs, Participant agrees to make arrangements satisfactory to the Company and/or Participant’s employer to satisfy all withholding requirements (as described above in Section 2.6).  Participant authorizes the Company and/or Participant’s employer to withhold all applicable Tax-Related Items legally due from Participant from his or her wages or other cash compensation paid him or her by the Company and/or Participant’s employer.  Participant further authorizes the Company and/or Participant’s employer to withhold from his or her wages or other cash compensation paid him or her by the Company and/or Participant’s employer any additional Tax-Related Terms that the Company and Participant’s employer subsequently determine in the future to be the responsibility of Participant.

3.15Participant Data.  As a condition of the grant of the RSUs, Participant consents to the collection, use and transfer of personal data as described in this Section 3.15.  Participant understands that the Company and its Subsidiaries hold certain personal information about Participant, including Participant’s name, home address and telephone number, date of birth, social security number or identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of Common Stock awarded, cancelled, exercised, vested, unvested or outstanding in Participant’s favor, for the purpose of managing and administering the Plan (“Data”).  Participant further understands that the Company and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Participant’s participation in the Plan, and that the Company and/or any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan.  Participant understands that these recipients may be located in the European Economic Area, or elsewhere, such as the United States.   Participant authorizes them to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in the Plan, including any requisite transfer to a broker or other third party with whom Participant may elect to deposit any shares of Common Stock acquired upon payment of a Restricted Stock Unit, such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of Common Stock on his or her behalf.  Participant understands that he or she may, at any time, view Data, require any necessary amendments to it or withdraw the consents herein in writing by contacting his or her local Human Resources representative. Withdrawal of consent may, however, affect Participant’s ability to realize benefits from the Restricted Stock Units.

3.16Forfeiture Provisions.  As permitted under the terms of the Plan, (a) any proceeds, gains or other economic benefit actually or constructively received by Participant upon the receipt or resale of any shares of Common Stock underlying the RSUs, must be paid to the Company, and (b) the RSUs shall terminate and shall be forfeited, if Participant at any time engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or Participant incurs a Termination of Service for Cause.  The determination of whether Participant has engaged in any activity in competition with the business of the Company shall be determined by the Administrator in good faith and in its sole discretion.  This Section shall have no application following a Change in Control.

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EX-10.3

Exhibit 10.3

NATIONAL SEMICONDUCTOR CORPORATION

2009 INCENTIVE EQUITY PLAN

SERVICE BASED RESTRICTED STOCK AGREEMENT

Restricted Stock has been granted to you under the National Semiconductor Corporation 2009 Incentive Equity Plan (the “Plan”).

Employee:

Award Date:

Number of Shares of

Restricted Stock Issued

Pursuant to Section 2A:

Restriction Lapsing

Schedule:

33 1/3% of shares vest on second anniversary of Award Date

(shares are round down to next whole number)

33 1/3% of shares vest on fourth anniversary of Award Date

(shares are round down to next whole number)

33 1/3% of shares vest on sixth anniversary of Award Date

(shares are round up to next whole number)

The grant of Restricted Stock is subject to the terms and conditions of this Service Based Restricted Stock Agreement (“Agreement”), the Plan. These documents may be accessed on the intranet at the National Semiconductor Corporation Human Resources website, www-hr.nsc.com/site-map/site-map.html. Hard copies are available upon request from Stock Administration, Mail Stop C1-640, 2900 Semiconductor Drive, Santa Clara, CA 95051, stock.administration@nsc.com.

The lapsing of restrictions on the Restricted Stock has tax implications. Consult the Plan and your tax advisor for details.

PLEASE NOTE:The granting of Restricted Stock is solely at the Company’s discretion. There is no guarantee that you will receive other grants for Restricted Stock in the future. In addition, the Company is not responsible for and does not guarantee that you will be able to achieve any particular result in connection with your Restricted Stock.

By accepting the Restricted Stock, you confirm that you have received copies of and agree to be bound by the terms and conditions of the Plan, the Agreement, and Prospectus. In particular, you should note that you consent to the collection, use and transfer of personal data about you as described in the Agreement.

1.Definitions

Whenever used in this Agreement, the following terms shall have the meaning set forth below.

Fair Market Value:   As of given date, the Fair Market Value of a share of the Common Stock shall be the closing stock price of the Common Stock on the New York Stock Exchange on such date or if the Common Stock is not traded on such day, then on the immediately preceding trading day on the New York Stock Exchange.

Restrictions:	Reacquisition and transferability restrictions imposed upon Restricted Stock under this Agreement.
Vesting Date:	Date that the restrictions and/or risk of forfeiture of an Award lapse.
Vested Shares:	Number of shares of Restricted Stock derived from the percentage specified in Section 3.A.

Capitalized terms not otherwise defined herein have the meanings set forth in the Plan.

2.Issuance of Restricted Stock

A.In consideration of past services rendered to the Company and for other good and valuable consideration which the Committee has determined to be at least equal to the par value of the Common Stock, on the Award Date National Semiconductor Corporation issues to the Employee the number shares of its Common Stock set forth hereinabove on the first page of this Agreement, upon the terms and conditions set forth in this Agreement.

B.By entering into this Agreement, Employee acknowledges that:

(i)the Plan is discretionary in nature and may be amended, suspended or terminated by National Semiconductor Corporation at any time;

(ii)the grant of shares of Restricted Stock is a one-time benefit which does not create any contractual or other right to receive future grants of shares of Restricted Stock, or benefits in lieu of shares of Restricted Stock;

(iii)all determinations with respect to any grants of Restricted Stock, including, but not limited to, the times when shares of Restricted Stock shall be granted, the number of shares of Restricted Stock, and the time or times when the restrictions on the shares of Restricted Stock shall expire, will be at the sole discretion of National Semiconductor Corporation and the Committee;

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(iv)the Employee’s receipt of these shares of Restricted Stock shall not create a right to further employment with the Company and shall not interfere with the ability of the Company to terminate the Employee’s employment relationship at any time with or without cause;

(v)the Employee’s participation in the Plan is voluntary;

(vi)the value of the shares of Restricted Stock is an extraordinary item of compensation which is outside the scope of the Employee’s employment contract, if any;

(vii)the shares of Restricted Stock are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(viii)the future value of the shares of Restricted Stock is unknown and cannot be predicted with certainty.

3.Restrictions

A.All shares of Restricted Stock issued to the Employee are initially subject to reacquisition by National Semiconductor Corporation immediately upon a Termination of Employment; provided, however, that no reacquisition shall occur in the event of a Termination of Employment because of the Employee’s Disability or Death, in which event all shares of Restricted Stock shall immediately fully vest and all Restrictions shall immediately expire. In all other cases, all Restrictions on the Restricted Stock issued to Employee hereunder shall expire in accordance with the Restriction Lapsing Schedule set forth hereinabove on the first page of this Agreement. For the avoidance of doubt, until the final date on which Restrictions lapse, any fractional shares shall be rounded down to the nearest whole number of shares, with any remainder carried over to any subsequent date on which Restrictions lapse. On the final date that Restrictions lapse, any fractional shares shall be rounded up to the nearest whole number of the shares. Once Restrictions have expired on the Restricted Stock, such shares will become Vested Shares, the Restrictions subjecting the Restricted Stock to reacquisition by the Company shall not apply to any Vested Shares held by the Employee, and the Vested Shares shall become available to the Employee.

B.Certificates representing shares of Restricted Stock issued pursuant to this Agreement shall, until all Restrictions lapse and new certificates are issued pursuant to Section 3.C, bear the following legend:

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY NATIONAL SEMICONDUCTOR CORPORATION UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN NATIONAL SEMICONDUCTOR CORPORATION AND THE HOLDER OF THE SECURITIES. PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES. COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF NATIONAL SEMICONDUCTOR CORPORATION AT 2900 SEMICONDUCTOR DRIVE, M/S G3-135, SANTA CLARA, CA 95051.

In the alternative, certificates representing shares of Restricted Stock may be issued in unvested book form, and remain subject to the same Restrictions as set forth herein.

C.Upon the vesting of the shares of Restricted Stock and subject to Section 5.C and payment of taxes as required by Section 5.J, National Semiconductor Corporation shall cause new certificates to be issued with respect to the Vested Shares and delivered to the Employee or his legal representative, free from legend and any other Restrictions. Vested Shares shall cease to be Restricted Stock subject to the terms and conditions of this Agreement.

D.Upon a Change-of-Control, all shares of Restricted Stock shall fully vest and all Restrictions shall immediately expire.

E.In the event that the outstanding shares of the Common Stock are changed into or exchanged for a different number or kind of shares or other securities of National Semiconductor Corporation or of another corporation pursuant to: (i) a merger of National Semiconductor Corporation into another corporation; (ii) the exchange of all or substantially all of the assets of National Semiconductor Corporation for the securities of another corporation; (iii) a Change-of-Control; or (iv) a stock split-up or stock dividend, such new, additional or different shares or securities which are held or received by the Employee in his or her capacity as a holder of Restricted Stock shall be considered to be Restricted Stock and shall be subject to all of the Restrictions.

4.Non-Disclosure

It is understood and agreed that this Agreement shall be confidential and shall not be disclosed by Employee to any person, including other Company employees, without the express written consent of the Company; provided, however, that Employee may disclose this Agreement to Employee’s spouse and legal and financial advisors subject to the Employee ensuring that the recipient of the disclosure agrees to comply with this non-disclosure provision.

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5.Miscellaneous

A.The Committee has the power to interpret the Plan, this Agreement and all other documents relating to Restricted Stock and to adopt rules for the administration, interpretation and application of the Plan, and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith.

B.No Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition is voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.B shall not prevent transfers by will or by applicable laws of descent and distribution and the Employee may provide written notice to the Company designating a third party who, in the event of Employee’s death, shall thereafter be entitled to receive any benefits pursuant to this Agreement.

C.National Semiconductor Corporation shall not be required to issue or deliver any certificate or certificates for shares of stock pursuant to this Agreement prior to fulfillment of all of the following conditions:

(i)Employee has evidenced Employee’s acceptance of the terms of this Agreement, which acceptance may be in written or electronic format;

(ii)The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;

(iii)The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable;

(iv)The obtaining of any approval or other clearance from any state, federal or other governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable;

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(v)Subject to the provisions of Section 5.J, the payment by the Employee of all amounts required to be withheld under federal, state, local and other applicable tax laws, with respect to the issuance of Restricted Stock and/or the lapse or removal of any of the Restrictions; and

(vi)The lapse of such reasonable period of time as the Committee may from time to time establish for reasons of administrative convenience.

D.The Secretary or such other escrow holder as the Committee may appoint shall retain physical custody of the certificates representing Restricted Stock, including shares of Restricted Stock issued pursuant to Section 3.E, until all of the Restrictions expire or are removed.

E.Any notice to be given under the terms of this Agreement to National Semiconductor Corporation shall be addressed to National Semiconductor Corporation in care of its Secretary, and any notice to be given to the Employee shall be addressed to him or her at the address provided by Employee to the Company for maintenance in Company’s personnel records concerning Employee.  By a notice given pursuant to this Section 5.E, either party may designate a different address for notices to be given to it. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee’s personal representative if such representative has previously informed National Semiconductor Corporation of his or her status and address by written notice under this Section 5.E. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the postal service in the country of residence of the party sending the notice.

F.Upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 5.D, the Employee shall have all the rights of a stockholder with respect to said shares, subject to the Restrictions herein (including the provisions of Section 5.J), including the right to vote the shares and to receive all dividends or other distributions paid or made with respect to the shares.

G.Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

H.This Agreement shall be administered, and the Restricted Stock shall be issued, only in such a manner as to conform to all applicable laws, rules and regulations.

I.This Agreement may be amended only by a document, which

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may be in written or electronic form, executed by the parties hereto which specifically states that it is amending this Agreement. Signatures evidencing such execution may be written or electronic.

J.National Semiconductor Corporation’s obligation to issue or deliver to the Employee any certificate or certificates for unrestricted shares of stock or to pay to the Employee any dividends or make any distributions with respect to the Restricted Stock is expressly conditioned upon receipt from the Employee, on or prior to the date the same is required to be withheld, of:

(i)Full payment (in cash or by check) of any amount that must be withheld by the Employee’s employer for federal, state, local, and/or other tax purposes; or

(ii)Subject to Section 5.J(iii), full payment by delivery to National Semiconductor Corporation of unrestricted shares of Common Stock previously owned by the Employee for such period of time as is sufficient to avoid the imposition on National Semiconductor Corporation of adverse accounting consequences duly endorsed for transfer to National Semiconductor Corporation by the Employee with an aggregate Fair Market Value (determined, as applicable, as of the date of the lapse of the Restrictions or vesting, or as of the date of the distribution) equal to the amount that must be withheld by for federal, state, local, and/or other tax purposes; or

(iii)With respect to the withholding obligation for shares of Restricted Stock that become unrestricted shares as of a Vesting Date and subject to the timing requirements set forth in this Section 5.J(iii), payment by retention by National Semiconductor Corporation of a portion of such shares of Restricted Stock which become unrestricted or vested with an aggregate Fair Market Value (determined as of the Vesting Date) equal to the statutory minimum amount that must be withheld by the Employee’s employer for federal, state, local, and/or other tax purposes; provided, however, that any fractional share amounts shall be settled by payroll deductions.

(iv)Any combination of payments provided for in the foregoing subsections (i), (ii) or (iii).

For the avoidance of doubt, Employee shall have no rights under this Agreement or the Plan to defer (i) the receipt of Vested Shares or (ii) the date when taxes are required to be withheld with respect to Vested Shares.

K.National Semiconductor Corporation and/or the Employee’s employer will assess its requirements regarding tax, social insurance and any other payroll tax (“Tax-Related Items”) withholding and reporting in connection with the shares of

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Restricted Stock.  These requirements may change from time to time as laws or interpretations change. Regardless of the actions of National Semiconductor Corporation and/or the Employee’s employer in this regard, Employee hereby acknowledges and agrees that the ultimate liability for any and all Tax-Related Items is and remains his or her responsibility and liability and that National Semiconductor Corporation and the Employee’s employer make no representations nor undertakings regarding treatment of any Tax-Related Items in connection with any aspect of the grant of Restricted Stock and do not commit to structure the terms of the grant or any aspect of the Restricted Stock to reduce or eliminate the Employee’s liability regarding Tax-Related Items. In the event that National Semiconductor Corporation and/or the Employee’s employer must withhold any Tax-Related Items as a result of the grant or vesting of the Restricted Stock, Employee agrees to make arrangements satisfactory to National Semiconductor Corporation and/or the Employee’s employer to satisfy all withholding requirements.  Employee authorizes National Semiconductor Corporation and/or the Employee’s employer to withhold all applicable Tax-Related Items legally due from the Employee from his or her wages or other cash compensation paid him or her by National Semiconductor Corporation and/or the Employee’s employer. Employee further authorizes National Semiconductor Corporation and/or the Employee’s employer to withhold from his or her wages or other cash compensation paid him or her by National Semiconductor Corporation and/or the Employee’s employer any additional Tax-Related Items that National Semiconductor Corporation and the Employee’s employer subsequently determine in the future to be the responsibility of the Employee.

L.As a condition of the grant of the Restricted Stock, Employee consents to the collection, use and transfer of personal data as described in this Section 5.L.  Employee understands that National Semiconductor Corporation and its subsidiaries hold certain personal information about the Employee, including the Employee’s name, home address and telephone number, date of birth, social security number or identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock (restricted or otherwise) awarded, cancelled, exercised, vested, unvested or outstanding in Employee’s favor, for the purpose of managing and administering the Plan (“Data”). Employee further understands that National Semiconductor Corporation and/or its subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Employee’s participation in the Plan, and that National Semiconductor Corporation and/or any of its subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. Employee understands that these recipients may be located in the European Economic Area, or elsewhere, such as the United States. Employee authorizes National Semiconductor Corporation, its subsidiaries, and such third parties to receive, possess, use, retain and transfer the

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Data, in electronic or other form, for the purposes of implementing, administering and managing Employee’s participation in the Plan, including any requisite transfer to a broker or other third party with whom Employee may elect to deposit any shares of stock acquired upon vesting of the shares of Restricted Stock. Employee understands that he or she may, at any time, view Data, require any necessary amendments to it or withdraw the consents herein in writing by contacting his or her local Human Resources representative. Withdrawal of consent may, however, affect Employee’s ability to realize benefits from the Plan.

M.The rights and obligations of National Semiconductor Corporation under this Agreement shall be transferable by National Semiconductor Corporation to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by National Semiconductor Corporation’s successors and assigns.

N.Employee agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of National Semiconductor Corporation to carry out the purposes or intent of this Agreement.

O.Employee acknowledges and agrees that he or she has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing and accepting this Agreement and fully understands all provisions of this Agreement.

P.All obligations of National Semiconductor Corporation under the Plan and this Agreement shall be binding on any successor to National Semiconductor Corporation, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of National Semiconductor Corporation.

Q.If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

R.Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, in the event of serious misconduct by the Employee (including, without limitation, any misconduct prejudicial to or in conflict with the Company) or any Termination of Employment for cause or any activity of the Employee in competition with the business of the Company, (i) cancel any outstanding Award granted to such Employee, in whole or in part, whether or not vested or (ii) following the payment of an

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Award within a period specified by the Committee, require the Employee to repay to the Company any gain realized or payment received upon the payment of such Award (with such gain or payment valued as of the date of payment). The determination of whether the Employee has engaged in a serious breach of conduct or any activity in competition with the business of the Company shall be determined by the Committee in good faith and in its sole discretion. This Section 5.R shall have no application following a Change-of-Control.

S.The laws of the State of Delaware, USA shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

T.In the event of any inconsistency between the terms of this Agreement and the provisions of the Plan, the Plan shall govern.

IN WITNESS HEREOF, this Agreement has been accepted and delivered by the parties hereto.

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SIGNATURE BLOCK FOR WRITTEN AGREEMENTS

	NATIONAL SEMICONDUCTOR CORPORATION
	By:
	Its:	Senior Vice President
Employee Signature
Date
Employee Address:

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Donald Macleod, certify that:

1.I have reviewed this quarterly report on Form 10-Q of National Semiconductor Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2011	/s/ Donald Macleod
	Donald Macleod Chairman and Chief Executive Officer

CERTIFICATION

I, Lewis Chew, certify that:

1.I have reviewed this quarterly report on Form 10-Q of National Semiconductor Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2011	/s/ Lewis Chew
	Lewis Chew Senior Vice President, Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of National Semiconductor Corporation (the “Company”) on Form 10-Q for the period ended February 27, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald Macleod, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

·The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and

·The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 28, 2011	/s/ Donald Macleod
	Donald Macleod Chairman and Chief Executive Officer

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of National Semiconductor Corporation (the “Company”) on Form 10-Q for the period ended February 27, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lewis Chew, Senior Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

·The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and

·The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 28, 2011	/s/ Lewis Chew
	Lewis Chew Senior Vice President, Finance and Chief Financial Officer