10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 26, 2005
or
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from _________ to _________

COMMISSION FILE NO. 0-16538

MAXIM INTEGRATED PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE	94-2896096
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer I.D. No.)
120 SAN GABRIEL DRIVE
SUNNYVALE, CALIFORNIA	94086
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:
(408) 737-7600

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 is an accelerated filer (as defined in Exchange Act Rule 12b-2).
          Yes x  No o

Class: Common Stock,	Outstanding at April 22, 2005
$0.001 par value	327,967,265 shares

MAXIM INTEGRATED PRODUCTS, INC.

INDEX

			Page
PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 26, 2005 and June 26, 2004	3
		Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 26, 2005 and March 27, 2004	4
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 26, 2005 and March 27, 2004	5
		Notes to Condensed Consolidated Financial Statements	6-13
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-21
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	ITEM 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
	ITEM 1.	Legal Proceedings	22
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
	ITEM 6.	Exhibits	23
SIGNATURES

2

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)	Mar. 26, 2005			Jun. 26, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	142,482		$	147,734
Short-term investments		1,260,744			948,879
Total cash, cash equivalents and short-term investments		1,403,226			1,096,613
Accounts receivable, net		192,380			197,158
Inventories		159,463			117,785
Deferred tax assets		146,406			153,694
Income tax refund receivable		1,400			2,212
Other current assets		9,799			10,652
Total current assets		1,912,674			1,578,114
Property, plant and equipment, net		999,403			942,186
Other assets		27,624			29,162
TOTAL ASSETS	$	2,939,701		$	2,549,462
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,157		$	93,856
Income taxes payable		16,145			19,339
Accrued salary and related expenses		109,605			103,283
Accrued expenses		95,727			79,409
Deferred income on shipments to distributors		20,095			22,858
Total current liabilities		291,729			318,745
Other liabilities		4,000			4,000
Deferred tax liabilities		140,107			114,399
Total liabilities		435,836			437,144
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock		—			—
Common stock		328			325
Additional paid-in capital		152,825			80,137
Retained earnings		2,362,317			2,038,820
Accumulated other comprehensive loss		(11,605	)		(6,964	)
Total stockholders’ equity		2,503,865			2,112,318
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	2,939,701		$	2,549,462

See accompanying Notes to Condensed Consolidated Financial Statements.

3

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands, except per share data)	Mar. 26, 2005		Mar. 27, 2004		Mar. 26, 2005		Mar. 27, 2004
Net revenues	$	400,188	$	370,023	$	1,271,316	$	1,018,300
Cost of goods sold		111,896		111,761		351,585		307,818
Gross margin		288,292		258,262		919,731		710,482
Operating expenses:
Research and development		83,141		77,255		243,273		218,562
Selling, general and administrative		24,713		23,546		75,099		67,128
Total operating expenses		107,854		100,801		318,372		285,690
Operating income		180,438		157,461		601,359		424,792
Interest income and other, net		7,492		5,469		19,446		15,589
Income before provision for income taxes		187,930		162,930		620,805		440,381
Provision for income taxes		62,393		53,767		206,108		145,326
Net income	$	125,537	$	109,163	$	414,697	$	295,055
Earnings per share:
Basic	$	0.38	$	0.33	$	1.27	$	0.90
Diluted	$	0.37	$	0.31	$	1.21	$	0.84
Shares used in the calculation of earnings per share:
Basic		326,945		328,247		325,758		327,894
Diluted		342,720		354,183		343,607		351,801
Dividends declared per share	$	0.10	$	0.08	$	0.28	$	0.24

See accompanying Notes to Condensed Consolidated Financial Statements.

4

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
(In thousands)	Mar 26, 2005			Mar. 27, 2004
Cash flows from operating activities:
Net income	$	414,697		$	295,055
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other		57,101			43,571
Tax benefit related to stock based compensation plans		87,338			112,737
Changes in assets and liabilities:
Accounts receivable		4,778			(35,663	)
Inventories		(41,678	)		17,826
Deferred taxes		35,279			11,708
Income tax refund receivable		812			4,382
Other current assets		230			(3,249	)
Accounts payable		(43,699	)		43,388
Income taxes payable		(3,194	)		8,202
Deferred income on shipments to distributors		(2,763	)		(654	)
All other accrued liabilities		22,640			20,292
Net cash provided by operating activities		531,541			517,595
Cash flows from investing activities:
Additions to property, plant and equipment		(111,556	)		(162,749	)
Other non-current assets		1,358			684
Purchases of available-for-sale investments		(883,881	)		(885,822	)
Proceeds from sales/maturities of available-for-sale investments		563,133			864,902
Net cash used in investing activities		(430,946	)		(182,985	)
Cash flows from financing activities:
Issuance of common stock		82,066			143,479
Repurchase of common stock		(96,713	)		(501,117	)
Dividends paid		(91,200	)		(78,780	)
Net cash used in financing activities		(105,847	)		(436,418	)
Net decrease in cash and cash equivalents		(5,252	)		(101,808	)
Cash and cash equivalents:
Beginning of period		147,734			210,841
End of period	$	142,482		$	109,033
Supplemental disclosures of cash flow information:
Income tax paid, net of refund	$	85,873		$	8,301

See accompanying Notes to Condensed Consolidated Financial Statements.

5

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- Unaudited

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed interim consolidated financial statements included herein have been prepared by Maxim Integrated Products, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended March 26, 2005 are not necessarily indicative of the results to be expected for the entire year.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 26, 2004. The Balance Sheets as of June 26, 2004 was derived from audited consolidated financial statements.

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June.  Accordingly, every sixth or seventh fiscal year will be a 53-week fiscal year.  Fiscal years 2005 and 2004 are 52-week fiscal years.

Certain amounts in the Notes to Condensed Consolidated Financial Statements have been reclassified to conform to the current year’s presentation.

NOTE 2: STOCK-BASED COMPENSATION

The Company accounts for its stock option and employee stock purchase plans using the intrinsic value method prescribed in Accounting Principles Board’s Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees.” Accordingly, employee and director compensation expense is recognized only for those options whose price is less than fair market value at the measurement date. In addition, the Company discloses pro forma information related to its stock plans according to Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock-Based Compensation,” as amended by Statement of Financial Accounting Standards (SFAS 148), “Accounting for Stock Based Compensation — Transition and Disclosure.”

Under SFAS 123, the Company may elect to continue to account for the grant of stock options under APB 25, in which options granted with an exercise price equal to the fair market value on the date of grant do not require recognition of expense in the Company’s financial statements. The Company is, however, required to provide pro forma disclosure regarding net income and earnings per share as if the Company had accounted for its employee stock options and employee stock purchase rights (including shares issued under the 1996 Stock Incentive Plan, 1993 Officer and Director Stock Option Plan, 1987 Stock Option Plan, 1987 Supplemental Stock Option Plan, 1987 Employee Stock Participation Plan (ESP Plan), and Supplemental Nonemployee Stock Option Plan) granted subsequent to June 30, 1995, under the methodology prescribed by SFAS 123. Since the Company has elected to account for the grant of options under APB 25, the following information is for disclosure purposes only.

As required under SFAS 148, the reported net income and earnings per share have been presented to reflect the impact had the Company been required to include the amortization of stock based compensation as an expense. The pro forma amounts are as follows:

6

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

	Three Months Ended						Nine Months Ended
(In thousands, except per share data)	Mar. 26, 2005			Mar. 27, 2004			Mar. 26, 2005			Mar. 27, 2004
Net income - as reported	$	125,537		$	109,163		$	414,697		$	295,055
Deduction: total stock-based employee compensation expense determined under the fair value method, net of tax		(43,619	)		(39,691	)		(118,105	)		(94,222	)
Net income - pro forma		81,918			69,472			296,592			200,833
Basic earnings per share - as reported	$	0.38		$	0.33		$	1.27		$	0.90
Basic earnings per share - pro forma	$	0.25		$	0.21		$	0.91		$	0.61
Diluted earnings per share - as reported	$	0.37		$	0.31		$	1.21		$	0.84
Diluted earnings per share - pro forma	$	0.24		$	0.20		$	0.87		$	0.58

NOTE 3: INVENTORIES

Inventories are stated at the lower of cost, which approximates actual cost on a first-in-first-out basis, or market value and consist of the following:

(In thousands)	Mar. 26, 2005		Jun. 26, 2004
Raw materials	$	16,407	$	14,713
Work-in-process		96,414		73,833
Finished goods		46,642		29,239
	$	159,463	$	117,785

NOTE 4: OTHER ASSETS

Included in other assets on the Condensed Consolidated Balance Sheet at March 26, 2005 is $8.1 million of intellectual property, net of $5.9 million of accumulated amortization and adjustments. Amortization expense for the intellectual property for three and nine months ended March 26, 2005 was $0.4 million and $1.1 million, respectively. Amortization expense for the intellectual property for three and nine months ended March 27, 2004 was $0.4 million and $1.1 million, respectively. The gross carrying amount of the intellectual property is $14.0 million and it is being amortized over ten years, which is its estimated useful life. The intellectual property acquired by the Company is being used to design and develop new products as well as in some products currently in production. As required by Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company assesses the recoverability of the intellectual property whenever an indicator of impairment exists. There were no indicators of impairment as of March 26, 2005. Based on the carrying amount of identified assets recorded at March 26, 2005 and assuming no subsequent impairment of the underlying assets, the future amortization expense are expected to be as follows:

(In thousands)	Fiscal Year: 2005 remaining		2006		2007		2008		2009		2010 and thereafter
Intellectual property assets:		350		1,400		1,400		1,400		1,400		2,153

Should it be determined in a future period that the projected remaining discounted cash flows attributable to products designed and developed with the acquired intellectual property are less than the net book value represented by the intellectual property, the Company’s results of operations could be materially adversely impacted in the period such determination is made.

7

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

Also included in other assets in the Condensed Consolidated Balance Sheet at March 26, 2005 are loans to employees of approximately $8.7 million. These loans are collateralized. To the extent such collateral is not sufficient to cover the amounts owed, there is risk of loss to the Company. To date, the Company has not experienced any material losses related to these employee loans.

NOTE 5: EARNINGS PER SHARE

Basic earnings per share are computed using the weighted average number of common shares outstanding during the period.  Diluted earnings per share incorporate the incremental shares issuable upon the assumed exercise of stock options.  The number of incremental shares from the assumed issuance of stock options is calculated by applying the treasury stock method.  The following table sets forth the computation of basic and diluted earnings per share.

	Three Months Ended				Nine Months Ended
(In thousands, except per share data)	Mar. 26, 2005		Mar. 27, 2004		Mar. 26, 2005		Mar. 27, 2004
Numerator for basic earnings per share and diluted earnings per share
Net income	$	125,537	$	109,163	$	414,697	$	295,055
Denominator for basic earning per share		326,945		328,247		325,758		327,894
Effect of dilutive securities:
Stock options		15,775		25,936		17,849		23,907
Denominator for diluted earnings per share		342,720		354,183		343,607		351,801
Earnings per share:
Basic	$	0.38	$	0.33	$	1.27	$	0.90
Diluted	$	0.37	$	0.31	$	1.21	$	0.84

Approximately 28.4 million and 6.5 million of the Company’s stock options were excluded from the calculation of diluted earnings per share for the three months ended March 26, 2005 and March 27, 2004, respectively.  Approximately 21.9 million and 13.7 million of the Company’s stock options were excluded from the calculation of diluted earnings per share for the nine months ended March 26, 2005 and March 27, 2004, respectively.  These options were excluded as they were antidilutive; however, such options could be dilutive in the future.

NOTE 6: SHORT-TERM INVESTMENTS

All short-term investments at March 26, 2005 are classified as available-for-sale and consist primarily of U.S. Treasury and Federal Agency debt securities with original maturities beyond three months.  Unrealized gains and losses, net of tax, on securities in this category are included in accumulated other comprehensive loss which is a separate component of stockholders’ equity. The cost of securities sold is based on the specific identification method. Interest earned on securities is included in interest income and other, net in the Condensed Consolidated Statements of Income. Included in cash and cash equivalents at March 26, 2005 is $21.1 million of restricted cash.

8

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

NOTE 7: SEGMENT INFORMATION

The Company operates and tracks its results in one reporting segment.  The Company designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits.  The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by Statement of Financial Accounting Standard No. 131 (SFAS 131), “Disclosures about Segments of an Enterprise and Related Information.”

Enterprise-wide information is provided in accordance with SFAS 131. Geographical revenue information is based on the customer’s ship-to location.  Long-lived assets consist of property, plant and equipment.  Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal period.

Net revenues from unaffiliated customers by geographic region were as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	Mar. 26, 2005		Mar. 27, 2004		Mar. 26, 2005		Mar. 27, 2004
United States	$	110,240	$	98,806	$	340,245	$	272,253
China		81,088		66,110		273,673		185,171
Japan		37,200		40,270		130,860		103,127
Rest of Asia		80,847		81,675		251,644		230,373
Europe		79,689		72,329		240,449		198,805
Rest of World		11,124		10,833		34,445		28,571
	$	400,188	$	370,023	$	1,271,316	$	1,018,300

Net long-lived fixed assets by geographic region were as follows:

(In thousands)	Mar. 26, 2005		June 26, 2004
United States	$	752,234	$	755,472
Philippines		197,691		170,806
Rest of World		49,478		15,908
	$	999,403	$	942,186

9

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

NOTE 8: COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) consists of net income and net unrealized gains (losses) on available-for-sale investments and forward exchange contracts.  The components of comprehensive income (loss) and related tax effects were as follows:

	Three Months Ended					Nine Months Ended
(In thousands)	Mar. 26, 2005			Mar. 27, 2004		Mar. 26, 2005			Mar. 27, 2004
Net income - as reported	$	125,537		$	109,163	$	414,697		$	295,055
Change in unrealized gains (losses) on investments, net of tax of $(3,207), $2,558, $(2,643) and $1,866, respectively		(6,398	)		5,199		(5,371	)		4,026
Change in unrealized gains (losses) on forward exchange contracts, net of tax of $286, $417, $360 and $(2), respectively		578			846		730			(3	)
Total comprehensive income	$	119,717		$	115,208	$	410,056		$	299,078

Accumulated other comprehensive loss presented in the Condensed Consolidated Balance Sheet at March 26, 2005 consists of net unrealized losses on investments of $(10.4) million, net unrealized gains on forward exchange contracts of $0.3 million, and net foreign currency translation adjustments of $(1.5) million. 

NOTE 9: INCOME TAXES

The Company is currently evaluating the impact of the one-time favorable foreign dividend provisions enacted on October 22, 2004, as part of the American Jobs Creation Act of 2004.  The Company may decide to repatriate earnings to take advantage of these provisions, however, any such repatriations are not expected to have a material impact on the Company’s financial condition, results of operations and liquidity.

NOTE 10: CONTINGENCIES

On March 15, 2005, the Company and Linear Technology Corporation (LTC) settled their on-going patent litigation that was brought by LTC against Maxim and other unrelated parties concerning LTC’s United States Patent 5,481,178, which relates to control circuits and methods for maintaining high efficiencies over broad current ranges in a switching regulator circuit. The settlement agreement resolves all legal claims between the LTC and the Company and their respective subsidiaries, and it provides for the license of LTC’s United States Patent 5,481,178 to the Company for use in current and future products. Under the terms of the settlement agreement, the Company will pay LTC $40 million in the fourth quarter of fiscal year 2005, of which $37.3 million has been allocated to sales of licensed products for all periods up to and including the three months ended March 26, 2005. The Company has $37.3 million accrued for this payment which is included in accrued expenses in the Condensed Consolidated Balance Sheets. In addition, the Company will pay LTC royalties for future product sales in fiscal year 2006 through fiscal year 2013. These future royalties will not materially impact the Company’s quarterly operating results. As contemplated by the settlement agreement, the Company and LTC have dismissed the patent litigation with prejudice.

10

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

On December 12, 2002, Qualcomm Inc. (Qualcomm) filed and on February 4, 2003 served the Company with a complaint for patent infringement claiming that certain of the Company’s products infringe one or more of Qualcomm’s patents.  Qualcomm seeks a preliminary and permanent injunction as well as unspecified actual and treble damages including costs, expenses and attorneys fees. Qualcomm withdrew one of its patents from the claim in June 2003 and another in May 2004, and has added three more related patents. The Company is presently reviewing these claims and does not believe that the products in question infringe upon Qualcomm patents.  In May 2004, the Company won a motion for summary judgment on the issue of the inducement of infringement by its customers. In January, 2005, Qualcomm moved for a preliminary injunction to toll the Company’s production and sale of certain products for alleged misappropriation of Qualcomm’s trade secrets. The court denied this motion but enjoined the Company from receiving any of Qualcomm’s confidential information from third parties. This issue is on appeal. While no assurance can be given in this regard, the Company does not believe that the ultimate outcome of the action will have a material adverse effect on the financial condition or liquidity of the Company. However, were Qualcomm to prevail in its claims against the Company, the Company’s operating results could be materially adversely affected.

In addition to the above, the Company is subject to other legal proceedings and claims that arise in the normal course of its business. The Company does not believe that the ultimate outcome of these other legal proceedings will have a material adverse effect on the financial position of the Company.

NOTE 11: INDEMNIFICATION

The Company indemnifies certain customers, distributors, suppliers, and subcontractors for attorney fees and damages and costs awarded against these parties in certain circumstances in which the Company’s products are alleged to infringe third party intellectual property rights, including patents, registered trademarks, or copyrights. The terms of the Company’s indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification relating to intellectual property infringement claims. The Company cannot estimate the amount of potential future payments, if any, that the Company might be required to make as a result of these agreements. To date, the Company has not paid or been required to defend any indemnification claims, and accordingly, the Company has not accrued any amounts for our indemnification obligations. However, there can be no assurances that the Company will not have any future financial exposure under those indemnification obligations.

NOTE 12: PRODUCT WARRANTY

The Company warrants its products to its customers generally for one year from the date of shipment, but in certain cases for longer periods. In certain other cases, the Company warrants products to include significant liability beyond the cost of replacing the product. If there is a material increase in the rate of customer claims or the Company’s estimates of probable losses relating to specifically identified warranty exposures are inaccurate, the Company may record a charge against future cost of goods sold. Warranty expense has historically been immaterial to the Company’s  financial statements.

NOTE 13: SELF-INSURANCE ACCRUALS

The Company is self-insured with respect to defective product claims, employment practice claims, workers’ compensation claims, and general liability.   Accruals are primarily based on the actuarially estimated, undiscounted cost of claims, which includes incurred-but-not-reported claims.  Amounts accrued for defective product claims, employment practice claims, workers’ compensation claims and general liability are included in accrued expenses in the Condensed Consolidated Balance Sheets. 

In addition to the above, the Company is primarily self-insured with respect to healthcare benefits for most of its domestic (United States) employees.   Accruals are primarily based on estimated incurred-but-not-reported claims. Amounts accrued for employee healthcare claims are included in salary and salary related expenses.

11

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

NOTE 14: COMMON STOCK REPURCHASES

In fiscal year 2002, the Board of Directors authorized the Company to repurchase up to 20 million shares of the Company’s common stock from time to time at the discretion of the Company’s management between the dates of such authorizations and the end of the Company’s fiscal year 2003. In May 2003, the Board of Directors extended the share repurchase authorization noted above to the end of the Company’s fiscal year 2004. In March 2004, the Board of Directors authorized the Company to repurchase an additional 10 million shares of the Company’s common stock; such share repurchase authorization has no expiration date. During fiscal year 2004, the Company repurchased approximately 12.4 million shares of its common stock for $601.2 million. As of June 26, 2004, approximately 4.0 million shares remained available under the repurchase authorization.

During the nine months ended March 26, 2005, the Company repurchased approximately 2.2 million shares of its common stock for $96.7 million. As of March 26, 2005, approximately 1.8 million shares remained available under the repurchase authorization. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock, general market and business conditions, level of option exercise activity by the employee base and other factors.

NOTE 15: DEFERRED COMPENSATION

The Company and the Chief Executive Officer (CEO) have entered into a deferred compensation plan, pursuant to which the CEO defers receipt of a portion of his cash compensation.  Deferred compensation bears interest at a rate equal to the interest rate that employees of the Company are required to pay the Company under the Company’s employee loan program.  Compensation deferred on or prior to December 31, 2004, including interest, is payable (i) upon the CEO’s termination as an employee or service provider to the Company, in approximately equal quarterly installments over a five-year period, (ii) upon his death, to his designated beneficiary, in a lump sum payment as soon as administratively possible, or (iii) in the event of an unforeseeable emergency.  Compensation deferred after December 31, 2004, including interest, is payable under the same terms and conditions as compensation deferred on or prior to December 31, 2004, except to the extent that those terms and conditions would cause a violation of  Section 409A of the Internal Revenue Code, as supplemented by any guidance issued by the Internal Revenue Service thereunder. As of March 26, 2005, the CEO’s deferred compensation balance, including interest thereon, totaled $23.8 million and is included in accrued salary and related expenses in the Condensed Consolidated Balance Sheets.

NOTE 16: NEW ACCOUNTING PRONOUNCEMENT

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151 (SFAS 151), “Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4.”  SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing” to clarify the accounting for abnormal amounts of idle facility expense, freight handling costs, and wasted material (spoilage). SFAS 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS 151 requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS 151 will be effective for fiscal years beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 151 and does not believe that its adoption will have a material impact on the Company’s financial condition, results of operations or liquidity.

12

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS 123(R)), “Share-Based Payment.”  SFAS 123(R) replaces Statement of Financial Accounting Standards No. 123, “Accounting for Stock Issued to Employees,” and supersedes Accounting Principal Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.”  SFAS 123(R) requires that compensation costs relating to share-based payment transactions be recognized in the consolidated financial statements. Compensation costs will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) is effective as of the first annual reporting period that begins after June 15, 2005. The Company is currently evaluating the provisions of SFAS 123(R) and has not yet determined whether to use the modified prospective or the modified retrospective methods allowed by SFAS 123(R), nor has it determined its impact on the Company’s financial condition, results of operations or liquidity beyond the disclosure on Note 2 of the Notes to Condensed Consolidated Financial Statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153 (SFAS 153), “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions.” SFAS 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges in fiscal periods beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 153 and does not believe that its adoption will have a material impact on the Company’s financial condition, results of operations or liquidity.

In March 2005, the FASB issued FASB Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 in its fiscal year 2006. The Company is currently analyzing FIN 47 and believes the adoption of FIN 47 will not have material impact on the Company’s financial condition, results of operations or liquidity.

NOTE 17: SUBSEQUENT EVENT

During the fourth quarter of fiscal year 2005, the Board of Directors declared a cash dividend of $0.10 per share on the Company’s common stock payable on June 1, 2005 to stockholders of record on May 16, 2005.

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

FORWARD-LOOKING INFORMATION AND RISK FACTORS

This Report on Form 10-Q contains forward-looking statements that fall within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  All statements included or incorporated by reference in this Report, other than statements that are purely historical, are forward-looking statements, including statements regarding or implicating the Company’s expectations, intentions, plans, goals and hopes regarding the future.  Words such as “anticipates,” “expects,” “intends,” “plans,” believes,” “seeks,” and “estimates” and variations of such words and similar expressions identify forward-looking statements.  Forward-looking statements in this Report, including this Management’s Discussion and Analysis section, involve risk and uncertainty.

Forward-looking statements include, without limitation, the Company’s expectation that repatriating earnings to take advantage of the American Jobs Creation Act of 2004 will not have a material impact on its financial condition, results of operations and liquidity; the Company’s belief that the ultimate outcome of the Qualcomm litigation and any other pending legal proceedings will not have a material adverse effect on the financial position or liquidity of the Company; the Company’s belief that the adoption of the provisions of FIN 47, SFAS 151 and SFAS 153 will not have a material impact on the Company’s financial condition, results of operations and liquidity; the Company’s belief that it is more likely than not that net deferred tax assets will be realized; the Company’s belief that it possesses sufficient liquidity and capital resources to fund operations for at least the next twelve months; the Company’s expectation that it will continue to repurchase its common stock in fiscal year 2005; the Company’s continuous attempts to control and reduce, if possible, expenses; and the Company’s continued use of acquired  intellectual property.

Actual results could differ materially from those forecasted based upon, among other things, unexpected interpretations of the American Jobs Creation Act of 2004; unexpected outcomes in the Company’s pending legal proceedings; unexpected interpretations of FIN 47, SFAS 151 and SFAS 153; unexpected changes in earnings and taxable income that adversely affect the realizability of net deferred tax assets; unexpected decline in cash flow; the Company’s ability to repurchase its common stock at favorable prices; the Company’s effectiveness in controlling and, if possible, reducing expenses; and the Company’s ability to use acquired  intellectual property.

In addition, future business could be adversely affected by technical difficulties in bringing new products and processes to market in a timely manner; market developments that could adversely affect the growth of the mixed-signal analog market; the Company being unable to sustain its success in recruiting and retaining high-quality personnel; the Company’s success in the markets its products are introduced in; whether, and the extent to which, demand for the Company’s products increases and reflects real end-user demand; customer cancellations and delays of outstanding orders; whether the Company is able to manufacture in a correct mix to respond to orders on hand and new orders received in the future; whether the Company is able to achieve its new product development and introduction goals; whether the Company is able to effectively and successfully manage manufacturing operations; whether the Company is able to successfully commercialize its new technologies; the risks of doing business internationally and in less developed countries, including the risks of theft and damage to products during transit; overall worldwide economic conditions; demand for electronic products and semiconductors generally; demand for the end-user products for which the Company’s semiconductors are suited; timely availability of raw materials, equipment, supplies and services; unanticipated manufacturing problems; technological and product development risks; competitors that may outperform the Company; and other risk factors described in the Company’s filings with the Securities and Exchange Commission and in particular its report on Form 10-K for the fiscal year ended June 26, 2004.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

All forward-looking statements are based on the Company’s current outlook, expectations, estimates, projections, beliefs and plans or objectives about its business and its industry.  These statements are not guarantees of future performance and are subject to risk and uncertainty.  Actual results could differ materially from those predicted or implied in any such forward-looking statements.

The Company disclaims any duty to and undertakes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q.  Readers should carefully review future reports and documents that the Company files from time to time with the Securities and Exchange Commission, such as its annual reports on Form 10-K (particularly Management’s Discussion and Analysis of Financial Condition and Results of Operations) and any current reports on Form 8-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results of operations, and require the Company to make its most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include revenue recognition and accounts receivable allowances, which impact the recording of revenues; valuation of inventories, which impacts costs of goods sold and gross margins; the assessment of recoverability of long-lived assets, which impacts write-offs of fixed assets; accounting for income taxes, which impacts the income tax provision; and assessment of contingencies, which impacts charges recorded in cost of goods sold and selling, general and administrative expenses. These policies and the estimates and judgments involved are discussed further below. The Company has other key accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or are less likely to have a material impact on the Company’s reported results of operations for a given period.

Revenue Recognition and Accounts Receivable Allowances

The Company recognizes revenue for sales to direct customers and sales to international distributors upon shipment, provided that persuasive evidence of a sales arrangement exists, the price is fixed or determinable, title has transferred to the customer, collectibility of the resulting receivable is reasonably assured, there are no customer acceptance requirements and the Company does not have any significant post-shipment obligations. The Company estimates returns for sales to direct customers and international distributors based on historical return rates applied against current period gross revenues. Specific customer returns and allowances are considered within this estimate.

Sales to US distributors are made pursuant to agreements allowing the possibility of certain sales price rebates and for non-warranty product return privileges. The non-warranty product return privileges include allowing US distributors to rotate a small portion based on their previous 90 days of purchases.  Given the uncertainties associated with the levels of non-warranty product returns and sales price rebates that could be issued to US distributors, the Company defers recognition of such revenue and related cost of goods sold until the product is sold by the US distributors to their end customers. Accounts receivable from direct customers, US distributors and international distributors are recognized and inventory is relieved upon shipment as title to inventories generally transfers upon shipment at which point the Company has a legally enforceable right to collection under normal terms. In addition, the Company estimates returns for sales to domestic distributors based on historical return rates applied against current period gross revenues.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

The Company makes estimates of potential future returns and sales allowances related to current period product revenue.  Management analyzes historical returns, changes in customer demand, and acceptance of products when evaluating the adequacy of returns and sales allowances.  Estimates made by the Company may differ from actual returns and sales allowances.  These differences may materially impact reported revenue and amounts ultimately collected on accounts receivable. In addition, the Company monitors collectibility of accounts receivable primarily through review of the accounts receivable aging. When facts and circumstances indicate the collection of specific amounts or from specific customers is at risk, the Company assesses the impact on amounts recorded for bad debts and, if necessary, will record a charge in the period such determination is made.  To date, the Company has not experienced material write-offs of accounts receivable due to uncollectibility.

Inventories

Inventories are stated at the lower of cost, which approximates actual cost on a first-in-first-out basis, or market value. The Company’s standard cost revision policy is to continuously monitor manufacturing variances and revise standard costs when necessary. Because of the cyclicality of the market, inventory levels, obsolescence of technology, and product life cycles, the Company generally writes down inventories to net realizable value based on 12 months forecasted product demand. Actual demand and market conditions may be lower than those projected by the Company. This difference could have a material adverse effect on the Company’s gross margin should inventory write downs beyond those initially recorded become necessary. Alternatively, should actual demand and market conditions be more favorable than those estimated by the Company, gross margin could be favorably impacted in future periods.

Long-Lived Assets

The Company evaluates the recoverability of property, plant and equipment in accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company performs periodic reviews to determine whether indicators of impairment exist that would indicate that the carrying amounts of property, plant and equipment might not be fully recoverable. If facts and circumstances indicate that the carrying amount of property, plant and equipment might not be fully recoverable, the Company compares projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful life against their respective carrying amounts. In the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are written down to their estimated fair market values based on the expected discounted future cash flows attributable to the assets. Evaluation of impairment of property, plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows. Actual future operating results and the remaining economic lives of the Company’s property, plant and equipment could differ from the Company’s estimates used in assessing the recoverability of these assets. These differences could result in additional impairment charges, which could have a material adverse impact on the Company’s results of operations.

Accounting for Income Taxes

The Company records a valuation allowance to reduce the net deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for a valuation allowance, historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered. In the event it is determined that the deferred tax assets to be realized in the future would be in excess of the net recorded amount, an adjustment to the deferred tax asset valuation allowance would be recorded. This adjustment would increase income in the period such determination was made. Likewise, should it be determined that all or part of the net deferred tax asset would not be realized in the future, an adjustment to increase the deferred tax asset valuation allowance would be charged to income in the period such determination would be made.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

On a periodic basis the Company evaluates its deferred tax asset balance for realizability. To the extent the Company believes it is more likely than not that some portion of its deferred tax assets will not be realized, the Company will increase the valuation allowance against the deferred tax assets. Realization of the Company’s deferred tax assets is dependent primarily upon future U.S. taxable income. The Company’s judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made.

Contingencies

From time to time, the Company receives notices that its products or manufacturing processes may be infringing the patent or intellectual property rights of others. The Company periodically assesses each matter in order to determine if a contingent liability in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies,” should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. Based on the information obtained combined with management’s judgment regarding all the facts and circumstances of each matter, the Company determines whether it is probable that a contingent loss may be incurred and whether the amount of such loss can be estimated. Should a loss be probable and estimable, the Company records a contingent loss in accordance with SFAS 5. In determining the amount of a contingent loss, the Company takes into consideration advice received from experts in the specific matter, current status of legal proceedings, settlement negotiations which may be ongoing, prior case history and other factors. Should the judgments and estimates made by management be incorrect, the Company may need to record additional contingent losses that could materially adversely impact the Company’s results of operations. Alternatively, if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss recorded would be reversed thus favorably impacting the Company’s results of operations.

RESULTS OF OPERATIONS

Net Revenues

Net revenues were $400.2 million and $370.0 million for the three months ended March 26, 2005 and March 27, 2004, respectively, an increase of 8.2%.  Net revenues were $1,271.3 million and $1,018.3 million for the nine months ended March 26, 2005 and March 27, 2004, respectively, an increase of 24.8%. The increase in net revenues for both the three and nine months ended March 26, 2005 as compared to the three and nine months ended March 27, 2004 is primarily due to higher unit shipments of the Company’s products.

During the three months ended March 26, 2005 and March 27, 2004, approximately 72% and 73%, respectively, of net revenues were derived from customers outside of the United States.  During the nine months ended March 26, 2005 and March 27, 2004, approximately 73% of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in U.S. dollars, the Company enters into foreign currency forward contracts to mitigate its risks on firm commitments and net monetary assets denominated in foreign currencies.  The impact of changes in foreign exchange rates on revenue and the Company’s results of operations for the three and nine months ended March 26, 2005 and March 27, 2004 was immaterial.

Gross Margin

Gross margin as a percentage of net revenues was 72.0% and 69.8% for the three months ended March 26, 2005 and March 27, 2004, respectively. The gross margin percentage for the three months ended March 26, 2005 as compared to the three months ended March 27, 2004 increased primarily due to continued improvement in manufacturing efficiencies. Gross margin for the three months ended March 26, 2005 was negatively impacted due to $3.2 million of inventory write downs.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

Gross margin as a percentage of net revenues was 72.3% and 69.8% for the nine months ended March 26, 2005 and March 27, 2004, respectively.  The gross margin percentage for the nine months ended March 26, 2005 as compared to the nine months ended March 27, 2004 increased primarily due to continued improvement in manufacturing efficiencies. Gross margin for the nine months ended March 27, 2004 was negatively impacted due to $2.8 million start up costs at the Company’s wafer fabrication facility in San Antonio, Texas. Gross margins for the nine months ended March 26, 2005 and March 27, 2004 were negatively impacted due to $11.9 million and $2.2 million of inventory write downs, respectively.

Research and Development

Research and development expenses were $83.1 million and $77.3 million for the three months ended March 26, 2005 and March 27, 2004, respectively, which represented 20.8% and 20.9% of net revenues, respectively.  The increase in research and development expenses in absolute dollars is primarily due to $4.3 million increase in salary related expenses and $0.6 million increase in mask expenses.

Research and development expenses were $243.3 million and $218.6 million for the nine months ended March 26, 2005 and March 27, 2004, respectively, which represented 19.1% and 21.5% of net revenues, respectively.  The increase in research and development expenses in absolute dollars is primarily due to $19.9 million resulting from hiring additional engineers to support the Company’s research and development efforts and increase in salary related expenses, $1.4 million increase in mask expenses and $1.0 million increase in travel and entertainment expenses.

The level of research and development expenditures as a percentage of net revenues will vary from period to period, depending, in part, on the level of net revenues and, in part, on the Company’s success in recruiting the technical personnel needed for its new product introductions and process development. The Company continuously attempts to control and, if possible, reduce expense levels in all areas including research and development. However, the Company views research and development expenditures as critical to maintaining a high level of new product introductions, which in turn are critical to the Company’s plan for future growth.

Selling, General and Administrative

Selling, general and administrative expenses were $24.7 million and $23.5 million for the three months ended March 26, 2005 and March 27, 2004, respectively, which represented 6.2% and 6.4% of net revenues, respectively.  The increase in selling, general, and administrative expenses in absolute dollars for the three months ended March 26, 2005 as compared to the three months ended March 27, 2004 is primarily due to $2.2 million increase in legal expense offset by a $1.2 million decrease in advertising and marketing costs.

Selling, general and administrative expenses were $75.1 million and $67.1 million for the nine months ended March 26, 2005 and March 27, 2004, respectively, which represented 5.9% and 6.6% of net revenues, respectively.  The increase in selling, general, and administrative expenses in absolute dollars for the nine months ended March 26, 2005 as compared to the nine months ended March 27, 2004 is primarily due to a $3.7 million increase in legal expense and $3.3 million increase in salary related expenses.

Interest Income and Other, Net

Interest income and other, net was $7.5 million and $19.4 million for the three and nine months ended March 26, 2005, respectively, compared to $5.5 million and $15.6 million for the three and nine months ended March 27, 2004, respectively.  The increase in interest income and other, net for the three and nine months ended March 26, 2005 as compared to the three and nine months ended March 27, 2004 is primarily due to higher average interest rates.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

Income Taxes

The effective income tax rate for the three and nine months ended March 26, 2005 and March 27, 2004 was 33.2% and 33.0%, respectively. The effective rates were lower than the U.S. federal and state combined statutory rate primarily due to tax benefits on export sales.

Realization of the net deferred tax asset of $6.3 million at March 26, 2005 is dependent primarily upon achieving future U.S. taxable income of $17.0 million.  The Company believes it is more likely than not that the net deferred tax assets will be realized based on historical earnings and expected levels of future taxable income.  Levels of future taxable income are subject to the various risks and uncertainties as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 26, 2004. An increase in the valuation allowance against net deferred tax assets may be necessary if it becomes more likely than not that all or a portion of the net deferred tax assets will not be realized.  The Company periodically assesses the need for increases to the deferred tax asset valuation allowance.

Recently Issued Accounting Pronouncement

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151 (SFAS 151), “Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4.”  SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing” to clarify the accounting for abnormal amounts of idle facility expense, freight handling costs, and wasted material (spoilage). SFAS 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS 151 requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS 151 will be effective for fiscal years beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 151 and does not believe that its adoption will have a material impact on the Company’s financial condition, results of operations or liquidity.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) (SFAS 123(R)), “Share-Based Payment.”  SFAS 123(R) replaces Statement of Financial Accounting Standards No. 123, “Accounting for Stock Issued to Employees,” and supersedes Accounting Principal Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.”  SFAS 123(R) requires that compensation costs relating to share-based payment transactions be recognized in the consolidated financial statements. Compensation costs will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) is effective as of the first annual reporting period that begins after June 15, 2005. The Company is currently evaluating the provisions of SFAS 123(R) and has not yet determined whether to use the modified prospective or the modified retrospective methods allowed by SFAS 123(R), nor has it determined its impact on the Company’s financial condition, results of operations or liquidity beyond the disclosure on Note 2 of the Notes to Condensed Consolidated Financial Statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153 (SFAS 153), “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions.” SFAS 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges in fiscal periods beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 153 and does not believe that its adoption will have a material impact on the Company’s financial condition, results of operations or liquidity.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

In March 2005, the FASB issued FASB Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 in its fiscal year 2006. The Company is currently analyzing FIN 47 and believes the adoption of FIN 47 will not have material impact on the Company’s financial condition, results of operations or liquidity.

BOOKINGS AND BACKLOG

Bookings during the third quarter of fiscal year 2005 were approximately $373 million, a 6% increase from the second quarter of fiscal year 2005’s level of $353 million. Turns orders received during the third quarter of fiscal year 2005 were $156 million, a 28% increase from the $122 million received during the second quarter of fiscal year 2005 (turns orders are customer orders that are for delivery within the same quarter and may result in revenue within the same quarter if the Company has available inventory that matches those orders). Bookings increased in all geographic locations except Europe during the third quarter of fiscal year 2005.

Third quarter of fiscal year 2005 ending backlog shippable within the next 12 months was approximately $328 million, including approximately $284 million requested for shipment in the fourth quarter of fiscal year 2005. The Company’s second quarter of fiscal year 2005 ending backlog shippable within the next 12 months was approximately $370 million, including approximately $300 million that was requested for shipment in the third quarter of fiscal year 2005.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funds for the nine months ended March 26, 2005 were from net cash generated from operating activities of $531.5 million and proceeds from the exercises of stock options and purchases of common stock under the Employee Stock Participation Plan of 5.4 million shares in the amount of $82.1 million.

Included in cash provided by operating activities are the tax benefits that arise from exercise of options.  These tax benefits amounted to $87.3 million in the nine months ended March 26, 2005. 

The principal uses of funds for the nine months ended March 26, 2005 were the repurchase of 2.2 million shares of the Company’s common stock for $96.7 million, the payment of $91.2 million for dividends and the purchase of $111.6 million in property, plant and equipment.  The Company believes that it possesses sufficient liquidity and capital resources to fund its property, plant and equipment purchases, common stock repurchases, dividend payments, and operations for at least the next twelve months.  The Company plans to continue to repurchase its common stock in fiscal year 2005.  The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock, general market conditions, level of option exercise activity by the employee base and other factors.  See Note 14 of Notes to Condensed Consolidated Financial Statements regarding the status of the Company’s common stock repurchases.

During the fourth quarter of fiscal year 2005, the Board of Directors declared a cash dividend of $0.10 per share on the Company’s common stock payable on June 1, 2005 to stockholders of record on May 16, 2005. In the fourth quarter of fiscal year 2005, the Company will pay LTC a $40 million royalty payment related to a settlement agreement entered into during the three months ended March 26, 2005 (see Note 10 of Condensed Consolidated Financial Statements).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT’D)

The Company is subject to pending legal proceedings.  See Note 10 of the Notes to Condensed Consolidated Financial Statements for information regarding pending litigation.  Although the results of such legal proceedings are unpredictable, the Company does not believe that any pending legal proceedings will have a material adverse impact on its liquidity or financial position.  However, were Qualcomm to prevail in their claims against the Company, the Company’s operating results could be materially adversely affected.

Off-Balance-Sheet Arrangements

As of March 26, 2005, the Company did not have any material off-balance-sheet arrangements, as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk has not changed materially from the interest rate and foreign currency risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 26, 2004.

ITEM 4: CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures.  The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934 is properly and timely recorded, processed, summarized and reported.  Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information that the Company is required to disclose in reports that the Company files or submits under the Securities Exchange Act of 1934 is properly recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

It should be noted that any control system, no matter how well designed and operated, can provide only reasonable assurance to the tested objectives.  The design of any control systems is based in part upon 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, regardless of how remote.

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEMS 3, 4 AND 5 OF PART II HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE PROCEEDINGS

ITEM 1: LEGAL PROCEEDINGS

The information set forth above under Note 10 contained in the “Notes to Condensed Consolidated Financial Statements” is incorporated herein by reference.

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

Issuer Purchases of Equity Securities

The following table summarizes the activity related to stock repurchases for the third quarter of fiscal year 2005.

	Issuer Repurchases of Equity Securities
	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Dec. 26, 2004 – Jan. 22, 2005		49,878	$	40.05		49,878		2,340,846
Jan. 23, 2005 – Feb. 19, 2005		393,846	$	40.05		393,846		1,947,000
Feb. 20, 2005 – Mar. 26, 2005		154,448	$	43.26		154,448		1,792,552
Total for the Quarter		598,172	$	40.88		598,172		1,792,552

All shares were repurchased pursuant to the Company’s share repurchase program authorized in March 2004 to repurchase up to 10 million shares, which has no expiration date. During the third quarter of fiscal year 2005, the Company purchased approximately 0.6 million shares for approximately $24.5 million. As of March 26, 2005, approximately 1.8 million shares remained available under the repurchase authorization. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock, general market and business conditions, the level of the Company’s unrestricted cash,  level of option exercise activity by the employee base and other factors.

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ITEM 6: EXHIBITS

Exhibits are incorporated herein by reference or are filed with this report as indicated below (numbered in accordance with Item 601 of Regulation S-K):

Exhibit Number	Description
31.1	Certification pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
31.2	Certification pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2	Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

23

SIGNATURES

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.

May 5, 2005	MAXIM INTEGRATED PRODUCTS, INC.
(Date)	(Registrant)
	/s/ CARL W. JASPER
	CARL W. JASPER
	Vice President,
	Chief Financial Officer (For the Registrant and as Principal Financial Officer and as Chief Accounting Officer)

24

Exhibit Index

Exhibit Number	Description
31.1	Certification pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
31.2	Certification pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2	Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

25

EX-31.1

Exhibit 31.1

CERTIFICATE

I, John F. Gifford, certify that:

1.	I have reviewed the quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
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 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)	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
	c)	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:  May 5, 2005

/s/ JOHN F. GIFFORD

John F. Gifford

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATE

I, Carl W. Jasper, certify that:

1.	I have reviewed the quarterly report on Form 10-Q of Maxim Integrated Products, Inc.;
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 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)	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
	c)	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:  May 5, 2005

/s/ CARL W. JASPER

Carl W. Jasper

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER

In connection with the Quarterly Report of Maxim Integrated Products, Inc. (the “Company”) on Form 10-Q for the third fiscal quarter ended March 26, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, John F. Gifford, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date:  May 5, 2005
	By:	/s/ JOHN F. GIFFORD
		John F. Gifford
		Chief Executive Officer

This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATE OF CHIEF FINANCIAL OFFICER

In connection with the Quarterly Report of Maxim Integrated Products, Inc. (the “Company”) on Form 10-Q for the third fiscal quarter  ended March 26, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, Carl W. Jasper, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date:  May 5, 2005
	By:	/s/ CARL W. JASPER
		Carl W. Jasper
		Chief Financial Officer

This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.