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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 April 3, 2011

OR



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

For the Transition Period from              to

Commission File Number: 0-51532





IKANOS COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 73-1721486                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

47669 Fremont Boulevard

Fremont, CA 94538

(Address of principal executive office and zip code)

(510) 979-0400

(Registrants telephone number including area code)





Indicate by check mark whether 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) had been subject to such filing requirements for the past 90
days.    Yes   x    No    ̈

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   ̈    No   ̈

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 definition of accelerated filer,
large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

The number of shares outstanding of the Registrants Common Stock, $0.001 par value, was 68,185,912 as of April 29, 2011.









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##### Table of Contents

IKANOS COMMUNICATIONS, INC.

FORM 10-Q

TABLE OF CONTENTS



|         |  |                                                                                                           |  |          |    | 
|-------- |  | --------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|         |  |                                                                                                           |  | Page No. |   
|PART I:  |  | FINANCIAL INFORMATION                                                                                     |  |          |    | 
|         |  |                                                                                                          
|Item 1.  |  | Financial Statements (unaudited)                                                                          |  |          | 3  | 
|         |  |                                                                                                          
|         |  | Condensed Consolidated Balance Sheets as of April 3, 2011 and January 2, 2011                             |  |          | 3  | 
|         |  |                                                                                                          
|         |  | Condensed Consolidated Statements of Operations for the Three Months Ended April 3, 2011 andApril 4, 2010 |  |          | 4  | 
|         |  |                                                                                                          
|         |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 3, 2011 andApril 4, 2010 |  |          | 5  | 
|         |  |                                                                                                          
|         |  | Notes to Unaudited Condensed Consolidated Financial Statements                                            |  |          | 6  | 
|         |  |                                                                                                          
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  |          | 13 | 
|         |  |                                                                                                          
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                |  |          | 19 | 
|         |  |                                                                                                          
|Item 4.  |  | Controls and Procedures                                                                                   |  |          | 20 | 
|         |  |                                                                                                          
|PART II: |  | OTHER INFORMATION                                                                                         |  |          |    | 
|         |  |                                                                                                          
|Item 1.  |  | Legal Proceedings                                                                                         |  |          | 21 | 
|         |  |                                                                                                          
|Item 1A. |  | Risk Factors                                                                                              |  |          | 21 | 
|         |  |                                                                                                          
|Item 6.  |  | Exhibits                                                                                                  |  |          | 31 | 
|         |  |                                                                                                          
|         |  | Signatures                                                                                                |  |          | 33 | 



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PART I: FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

IKANOS COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands and unaudited)



|                                          |  |              |        |  |                |   |        | 
|----------------------------------------- |  | ------------ | ------ |  | -------------- | - | ------ | 
|                                          |  | April 3,2011 |        |  | January 2,2011 |  
|Assets                                    |  |              |        |  |                |   |        | 
|                                          |  |             
|Current assets:                           |  |              |        |  |                |   |        | 
|Cash and cash equivalents                 |  | $            | 34,859 |  |                | $ | 28,950 | 
|Short-term investments                    |  |              |       |  |                |   | 2,000  | 
|Accounts receivable                       |  |              | 19,214 |  |                |   | 24,147 | 
|Inventory                                 |  |              | 15,109 |  |                |   | 17,046 | 
|Prepaid expenses and other current assets |  |              | 2,266  |  |                |   | 2,096  | 
|                                          |  |              |        |  |                |   |        | 
|Total current assets                      |  |              | 71,448 |  |                |   | 74,239 | 
|Property and equipment, net               |  |              | 7,340  |  |                |   | 8,214  | 
|Intangible assets, net                    |  |              | 5,477  |  |                |   | 6,102  | 
|Other assets                              |  |              | 1,839  |  |                |   | 1,142  | 
|                                          |  |              |        |  |                |   |        | 
|                                          |  | $            | 86,104 |  |                | $ | 89,697 | 
|                                          |  |              |        |  |                |   |        | 
|                                          |  |             
|Liabilities and Stockholders Equity      |  |              |        |  |                |   |        | 
|                                          |  |             
|Current liabilities:                      |  |              |        |  |                |   |        | 
|Accounts payable                          |  | $            | 9,574  |  |                | $ | 10,401 | 
|Accrued liabilities                       |  |              | 12,985 |  |                |   | 13,297 | 
|                                          |  |              |        |  |                |   |        | 
|Total current liabilities                 |  |              | 22,559 |  |                |   | 23,698 | 
|Long-term liabilities                     |  |              | 478    |  |                |   | 478    | 
|                                          |  |              |        |  |                |   |        | 
|                                          |  |              | 23,037 |  |                |   | 24,176 | 
|Commitments and contingencies (Note 8)    |  |              |        |  |                |   |        | 
|Stockholders equity                      |  |              | 63,067 |  |                |   | 65,521 | 
|                                          |  |              |        |  |                |   |        | 
|                                          |  | $            | 86,104 |  |                | $ | 89,697 | 
|                                          |  |              |        |  |                |   |        | 

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



3



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IKANOS COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, and unaudited)



|                                                      |  |                    |        |   |              |   |        |  
|----------------------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | -
|                                                      |  | Three Months Ended |       
|                                                      |  | April 3,2011       |        |   | April 4,2010 |  
|Revenue                                               |  | $                  | 31,672 |   |              | $ | 57,383 |  
|Cost of revenue (1)                                   |  |                    | 15,151 |   |              |   | 35,438 |  
|                                                      |  |                    |        |   |              |   |        |  
|Gross profit                                          |  |                    | 16,521 |   |              |   | 21,945 |  
|                                                      |  |                    |        |   |              |   |        |  
|Operating expenses:                                   |  |                    |        |   |              |   |        |  
|Research and development (2)                          |  |                    | 13,656 |   |              |   | 17,072 |  
|Selling, general and administrative (3)               |  |                    | 6,145  |   |              |   | 7,787  |  
|Restructuring charges                                 |  |                    | 47     |   |              |   | 1,483  |  
|                                                      |  |                    |        |   |              |   |        |  
|Total operating expenses                              |  |                    | 19,848 |   |              |   | 26,342 |  
|                                                      |  |                    |        |   |              |   |        |  
|Loss from operations                                  |  |                    | (3,327 | ) |              |   | (4,397 | )
|Gain on sale of marketable securities                 |  |                    | 1,295  |   |              |   |       |  
|Interest income and other, net                        |  |                    | 68     |   |              |   | 62     |  
|                                                      |  |                    |        |   |              |   |        |  
|Loss before provision for income taxes                |  |                    | (1,964 | ) |              |   | (4,335 | )
|Provision for income taxes                            |  |                    | 99     |   |              |   | 68     |  
|                                                      |  |                    |        |   |              |   |        |  
|Net loss                                              |  | $                  | (2,063 | ) |              | $ | (4,403 | )
|                                                      |  |                    |        |   |              |   |        |  
|Basic and diluted net loss per share                  |  | $                  | (0.03  | ) |              | $ | (0.08  | )
|                                                      |  |                    |        |   |              |   |        |  
|Weighted average number of shares (basic and diluted) |  |                    | 68,186 |   |              |   | 54,063 |  
|                                                      |  |                    |        |   |              |   |        |  
|                                                      |  |                   
|Includes stock-based compensation expense as follows: |  |                    |        |   |              |   |        |  
|(1) Cost of revenue                                   |  | $                  | 42     |   |              | $ | 36     |  
|(2) Research and development                          |  |                    | 408    |   |              |   | 681    |  
|(3) Selling, general and administrative               |  |                    | 425    |   |              |   | 601    |  

The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.



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IKANOS COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands and unaudited)



|                                                                                       |  |                    |        |   |              |   |        |  
|-------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | -
|                                                                                       |  | Three Months Ended |       
|                                                                                       |  | April 3,2011       |        |   | April 4,2010 |  
|Cash flows from operating activities:                                                  |  |                    |        |   |              |   |        |  
|Net loss                                                                               |  | $                  | (2,063 | ) |              | $ | (4,403 | )
|Adjustments to reconcile net loss to net cash provided (used) by operating activities: |  |                    |        |   |              |   |        |  
|Depreciation and amortization                                                          |  |                    | 1,181  |   |              |   | 744    |  
|Stock-based compensation expense                                                       |  |                    | 875    |   |              |   | 1,318  |  
|Amortization of intangible assets and acquired technology                              |  |                    | 625    |   |              |   | 2,344  |  
|Gain on sale of marketable securities                                                  |  |                    | (1,295 | ) |              |   |       |  
|Changes in assets and liabilities:                                                     |  |                    |        |   |              |   |        |  
|Accounts receivable, net                                                               |  |                    | 4,933  |   |              |   | (3,844 | )
|Inventory                                                                              |  |                    | 1,937  |   |              |   | 2,362  |  
|Prepaid expenses and other assets                                                      |  |                    | (867   | ) |              |   | (267   | )
|Accounts payable and accrued liabilities                                               |  |                    | (701   | ) |              |   | (3,602 | )
|                                                                                       |  |                    |        |   |              |   |        |  
|Net cash provided (used) by operating activities                                       |  |                    | 4,625  |   |              |   | (5,348 | )
|                                                                                       |  |                    |        |   |              |   |        |  
|Cash flows from investing activities:                                                  |  |                    |        |   |              |   |        |  
|Purchases of property and equipment                                                    |  |                    | (747   | ) |              |   | (463   | )
|Maturities and sales of investments                                                    |  |                    | 2,000  |   |              |   | 5,510  |  
|                                                                                       |  |                    |        |   |              |   |        |  
|Net cash provided by investing activities                                              |  |                    | 1,253  |   |              |   | 5,047  |  
|                                                                                       |  |                    |        |   |              |   |        |  
|Cash flows from financing activities:                                                  |  |                    |        |   |              |   |        |  
|Net proceeds from exercise of stock options                                            |  |                    | 31     |   |              |   |       |  
|                                                                                       |  |                    |        |   |              |   |        |  
|Net increase in cash and cash equivalents                                              |  |                    | 5,909  |   |              |   | (301   | )
|Cash and cash equivalents at beginning of period                                       |  |                    | 28,950 |   |              |   | 13,317 |  
|                                                                                       |  |                    |        |   |              |   |        |  
|Cash and cash equivalents at end of period                                             |  | $                  | 34,859 |   |              | $ | 13,016 |  
|                                                                                       |  |                    |        |   |              |   |        |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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IKANOS COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Ikanos and Summary of Significant Accounting Policies

The Company

Ikanos Communications, Inc. (Ikanos or the Company) was incorporated in the State of California in April 1999
and reincorporated in the State of Delaware in September 2005. The Company is a provider of silicon and software for interactive triple play broadband. The Company develops and markets end-to-end products for the last mile and the digital home,
which enable carriers to offer enhanced triple play services, including voice, video and data. The Company has developed programmable, scalable chip architectures, which form the foundation for deploying and delivering multi-play services. Flexible
communication processor architecture with wire-speed packet processing capabilities enables high-performance residential gateways for distributing advanced services to the home. These products thereby support telecommunications services
providers triple play deployment plans to the digital home while keeping their capital and operating expenditures low and have been deployed by service providers in Asia, Europe and North America.

Since its inception, the Company has only been profitable in the third and fourth quarters of 2005. The Company incurred a net loss of
$2.1 million for the three months ended April 3, 2011 and had an accumulated deficit of $272.7 million as of April 3, 2011. To achieve consistent profitability, the Company will need to generate and sustain higher revenue, while
maintaining cost and expense levels appropriate and necessary for its business. Existing cash and cash equivalents, which include money market funds, and cash flows expected to be generated from future operations, if any, are expected to be
sufficient to meet anticipated cash needs for at least the next twelve months.

The Companys fiscal year ends on
the Sunday closest to December 31. The Companys fiscal quarters end on the Sunday closest to the end of the applicable calendar quarter, except in a 53-week fiscal year, in which case the additional week falls into the fourth quarter of
that fiscal year.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been
eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared
without audit in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Companys audited consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 10, 2011 (Annual Report).

In the opinion of the Companys management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary
to a fair statement of the Companys financial position, results of operations and cash flows for the interim periods presented. The operating results for the three month period ended April 3, 2011 are not necessarily indicative of the
results that may be expected for the fiscal year ending January 1, 2012 or for any other future period.

Use of Estimates

The preparation of the Companys unaudited condensed consolidated financial statements in conformity with GAAP
requires management to make certain estimates, judgments and assumptions. The Company believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates,
judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expenses during the
periods presented. To the extent there are material differences between these estimates and actual results, the Companys financial statements would be affected. In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require the Companys managements judgment in its application. There are also areas in which the Companys managements judgment in selecting any available alternative would not produce
a materially different result.



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Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued updated guidance related to fair value measurements and
disclosures, which requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. In addition, in the reconciliation
for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity should disclose separately information about purchases, sales, issuances and settlements (that is, on a gross basis rather than one net number). The
updated guidance also requires that an entity should provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and
non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The updated guidance is effective for interim and annual financial reporting periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The
implementation of this guidance had no impact and is not expected to have any impact on the Companys consolidated financial position, results of operations or cash flows.

Summary of Significant Accounting Policies

The Companys significant
accounting policies are described in Note 1 to its audited Consolidated Financial Statements for the fiscal year ended January 2, 2011, included in our Annual Report. These accounting policies have not significantly changed.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash, cash equivalents and accounts receivable. Cash and cash equivalents are held with a
limited number of financial institutions. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. Management believes that the financial institutions that hold the Companys investments
are credit worthy and, accordingly, minimal credit risk exists with respect to those investments. Short-term investments have included a diversified portfolio of commercial paper and government agency bonds. All investments are classified as
available-for-sale. The Company does not hold or issue financial instruments for trading purposes.

Credit risk with respect
to accounts receivable is concentrated due to the number of large orders recorded in any particular reporting period. Four customers represented 27%, 18%, 11% and 10% of accounts receivable at April 3, 2011. Three customers represented 26%, 21%
and 18% of accounts receivable at January 2, 2011. Two customers accounted for 24% and 17% of revenue for the three months ended April 3, 2011. Three customers accounted for 16%, 12%, and 11% of revenue for the three months ended
April 4, 2010.

Concentration of Suppliers

The Company subcontracts all of the manufacturing, assembly and testing of its products to third parties located primarily in Asia. As a result of this geographic concentration, a disruption in the
manufacturing process resulting from a natural disaster or other unforeseen event could have a material adverse effect on the Companys financial position and results of operations. Additionally, a small number of sources with whom the Company
has no long-term contracts manufacture, assemble and test the Companys products. Also, each product generally has only one foundry and one assembly and test provider. An inability to obtain these products and services in the amounts needed and
on a timely basis or at commercially reasonable prices could result in delays in product introductions, interruptions in product shipments or increases in product costs, which could have a material adverse effect on the Companys financial
position and results of operations.

Concentration of Other Risk

The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. The
Companys results of operations are affected by a wide variety of factors, including general economic conditions; economic conditions specific to the semiconductor industry; demand for the Companys products; the timely introduction of new
products; implementation of new manufacturing technologies; manufacturing capacity; the availability of materials and supplies; competition; the ability to safeguard patents and intellectual property in a rapidly evolving market; and reliance on
assembly and wafer fabrication subcontractors and on independent distributors and sales representatives. As a result, the Company may experience substantial period-to-period fluctuations in future periods due to the factors mentioned above,
factors described in the section titled Item 1A. Risk Factors or other factors.



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Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owner sources. The components of comprehensive loss are as
follows (in thousands):



|                                                                  |  |                    |        |   |              |   |        |  
|----------------------------------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | -
|                                                                  |  | Three Months Ended |       
|                                                                  |  | April 3,2011       |        |   | April 4,2010 |  
|Net loss                                                          |  | $                  | (2,063 | ) |              | $ | (4,403 | )
|Other comprehensive lossunrealized loss on marketable securities |  |                    |       |   |              |   | (51    | )
|                                                                  |  |                    |        |   |              |   |        |  
|                                                                  |  | $                  | (2,063 | ) |              | $ | (4,454 | )
|                                                                  |  |                    |        |   |              |   |        |  

Net Loss per Share

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period. Potentially dilutive securities have been excluded from the computation of diluted
net loss per share if their inclusion is anti-dilutive. The calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):



|                                      |  |                    |        |   |              |   |        |  
|------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | -
|                                      |  | Three Months Ended |       
|                                      |  | April 3,2011       |        |   | April 4,2010 |  
|Net loss                              |  | $                  | (2,063 | ) |              | $ | (4,403 | )
|Weighted average number of shares     |  |                    | 68,186 |   |              |   | 54,063 |  
|                                      |  |                    |        |   |              |   |        |  
|Basic and dilutive net loss per share |  | $                  | (0.03  | ) |              | $ | (0.08  | )
|                                      |  |                    |        |   |              |   |        |  

The following potential common shares have been excluded from the calculation of diluted net loss per share
as their effect would have been anti-dilutive (in thousands):



|                                                  |  |                    |        |  |              |  |        | 
|------------------------------------------------- |  | ------------------ | ------ |  | ------------ |  | ------ | 
|                                                  |  | Three Months Ended |       
|                                                  |  | April 3,2011       |        |  | April 4,2010 | 
|Anti-dilutive securities:                         |  |                    |        |  |              |  |        | 
|Warrants to purchase common stock                 |  |                    | 3,033  |  |              |  | 2,340  | 
|Weighted average restricted stock units           |  |                    | 827    |  |              |  | 1,230  | 
|Weighted-average options to purchase common stock |  |                    | 10,814 |  |              |  | 8,718  | 
|                                                  |  |                    |        |  |              |  |        | 
|                                                  |  |                    | 14,674 |  |              |  | 12,288 | 
|                                                  |  |                    |        |  |              |  |        | 

Note 2  Investments and Fair Value Measurements

As of April 3, 2011, the Company has no short-term investments. During the first quarter of 2011, the Company sold its auction rate
securities for $2.0 million and recognized a gain of $1.3 million. The Company has invested the $2.0 million of proceeds in money market funds. Money market funds are considered cash equivalents and included in cash and cash equivalents on the
balance sheet.

The following is a summary of the Companys investments as of January 2, 2011 (in thousands):



|                                                     |  |      |     |  |                     |   |       |                    |  |   |       | 
|---------------------------------------------------- |  | ---- | --- |  | ------------------- | - | ----- | ------------------ |  | - | ----- | 
|                                                     |  | Cost |     |  | GrossUnrealizedGain |   |       | EstimatedFairValue | 
|Total short-term investmentsauction rate securities |  | $    | 705 |  |                     | $ | 1,295 |                    |  | $ | 2,000 | 
|                                                     |  |      |     |  |                     |   |       |                    |  |   |       | 

There were no unrealized losses on investments aggregated by category as of January 2, 2011.

Marketable securities are classified as available-for-sale as of the balance sheet date and are reported at fair value with
unrealized gains and losses reported as a separate component of accumulated other comprehensive income (loss) in stockholders equity. Realized gains and losses and permanent declines in value, if any, on available-for-sale securities are
reported in other income or expense as incurred. Estimated fair values were determined for each individual security in the investment portfolio. The declines in value of these investments are primarily related to changes in interest rates and are
considered to be temporary in nature.



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Fair Value Measurements

Accounting Standards Codification (ASC) 820-20 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such
assumptions, authoritative guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than the quoted
prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions (Level 3). This hierarchy requires the
Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets, mainly comprised of marketable securities, at
fair value.

The Companys cash and investment instruments are classified within Levels 1 and 2 of the fair value
hierarchy. The types of Level 1 instruments, valued based on quoted market prices in active markets, include money market securities. Level 2 types of instruments are valued based on quoted prices of identical or similar instruments in markets that
are less than active or for which all inputs are observable. These include investment-grade U.S. government agencies, commercial paper, corporate bonds and notes and auction rate securities. Level 3 types of instruments are valued based on
unobservable inputs in which there is little or no market data, and which require the Company to develop its own assumptions. The fair value hierarchy of the Companys marketable securities as of April 3, 2011 and January 2, 2011 was
(in thousands):



|                        |  |                 |       |  |         |   |       |         |  |   |       |  |  |   |       | 
|----------------------- |  | --------------- | ----- |  | ------- | - | ----- | ------- |  | - | ----- |  |  | - | ----- | 
|                        |  | April 3, 2011   |      
|                        |  | Level 1         |       |  | Level 2 |   |       | Level 3 |  |   | Total | 
|Money market funds      |  | $               | 2,001 |  |         | $ |      |         |  | $ |      |  |  | $ | 2,001 | 
|                        |  |                 |       |  |         |   |       |         |  |   |       |  |  |   |       | 
|                        | 
|                        |  | January 2, 2011 |      
|                        |  | Level 1         |       |  | Level 2 |   |       | Level 3 |  |   | Total | 
|Auction rate securities |  | $               |      |  |         | $ | 2,000 |         |  | $ |      |  |  | $ | 2,000 | 
|                        |  |                 |       |  |         |   |       |         |  |   |       |  |  |   |       | 

Note 3  Inventory

Inventory consisted of the following (in thousands):



|                                  |  |              |        |  |                |   |        | 
|--------------------------------- |  | ------------ | ------ |  | -------------- | - | ------ | 
|                                  |  | April 3,2011 |        |  | January 2,2011 |  
|Finished goods                    |  | $            | 8,509  |  |                | $ | 11,629 | 
|Work-in-process                   |  |              | 5,817  |  |                |   | 4,758  | 
|Purchased parts and raw materials |  |              | 783    |  |                |   | 659    | 
|                                  |  |              |        |  |                |   |        | 
|                                  |  | $            | 15,109 |  |                | $ | 17,046 | 
|                                  |  |              |        |  |                |   |        | 

Note 4  Property and Equipment

Property and equipment consisted of the following (in thousands):



|                                                |  |              |         |   |                |   |         |  
|----------------------------------------------- |  | ------------ | ------- | - | -------------- | - | ------- | -
|                                                |  | April 3,2011 |         |   | January 2,2011 |  
|Machinery and equipment                         |  | $            | 18,066  |   |                | $ | 17,968  |  
|Software                                        |  |              | 7,095   |   |                |   | 6,294   |  
|Computer equipment                              |  |              | 4,811   |   |                |   | 4,777   |  
|Furniture and fixtures                          |  |              | 870     |   |                |   | 870     |  
|Leasehold improvements                          |  |              | 964     |   |                |   | 960     |  
|Construction in progress                        |  |              | 364     |   |                |   | 994     |  
|                                                |  |              |         |   |                |   |         |  
|                                                |  |              | 32,170  |   |                |   | 31,863  |  
|Less: Accumulated depreciation and amortization |  |              | (24,830 | ) |                |   | (23,649 | )
|                                                |  |              |         |   |                |   |         |  
|                                                |  | $            | 7,340   |   |                | $ | 8,214   |  
|                                                |  |              |         |   |                |   |         |  

Depreciation and amortization expense for property and equipment was $1.2 million and $0.7 million for the
three months ended April 3, 2011 and April 4, 2010, respectively.



9



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##### Table of Contents

Note 5  Purchased Intangible Assets

The carrying value of intangible assets is as follows (in thousands):



|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 
|----------------------------------- |  | --------------------- | ------ |  | ----------------------- | - | ------- | --------- |  | - | ------------------ |  |  |  | - | 
|                                    |  | April 3, 2011         |       
|                                    |  | GrossCarrying 
Amount |        |  | AccumulatedAmortization |   |         | NetAmount |  |   | Usefullife (Years) | 
|Existing technology                 |  | $                     | 13,390 |  |                         | $ | (10,556 | )         |  | $ | 2,834              |  |  |  | 3 | 
|Customer relationships              |  |                       | 8,216  |  |                         |   | (7,008  | )         |  |   | 1,208              |  |  |  | 4 | 
|In-process research and development |  |                       | 1,435  |  |                         |   |        |           |  |   | 1,435              |  |  |  | * | 
|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 
|                                    |  | $                     | 23,041 |  |                         | $ | (17,564 | )         |  | $ | 5,477              |  |  |  |   | 
|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 



|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 
|----------------------------------- |  | --------------------- | ------ |  | ----------------------- | - | ------- | --------- |  | - | ------------------ |  |  |  | - | 
|                                    |  | January 2, 2011       |       
|                                    |  | GrossCarrying 
Amount |        |  | AccumulatedAmortization |   |         | NetAmount |  |   | Usefullife (Years) | 
|Existing technology                 |  | $                     | 13,390 |  |                         | $ | (10,056 | )         |  | $ | 3,334              |  |  |  | 3 | 
|Customer relationships              |  |                       | 8,216  |  |                         |   | (6,883  | )         |  |   | 1,333              |  |  |  | 4 | 
|In-process research and development |  |                       | 1,435  |  |                         |   |        |           |  |   | 1,435              |  |  |  | * | 
|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 
|                                    |  | $                     | 23,041 |  |                         | $ | (16,939 | )         |  | $ | 6,102              |  |  |  |   | 
|                                    |  |                       |        |  |                         |   |         |           |  |   |                    |  |  |  |   | 



|* | Technical feasibility of IPR&D has not been reached and, therefore, a useful life has not been determined.
|- | ----------------------------------------------------------------------------------------------------------

For the three months ended April 3, 2011 and April 4, 2010, the amortization of intangible assets was $0.6 million and $2.3
million, respectively. The estimated future amortization of purchased intangible assets as of April 3, 2011 is $1.8 million for the remainder of 2011, 1.8 million in 2012 and $0.4 million in 2013.

Note 6  Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):



|                                          |  |               |        |  |                 |   |        | 
|----------------------------------------- |  | ------------- | ------ |  | --------------- | - | ------ | 
|                                          |  | April 3, 2011 |        |  | January 2, 2011 |  
|Accrued compensation and related benefits |  | $             | 3,057  |  |                 | $ | 3,289  | 
|Accrued royalties                         |  |               | 2,517  |  |                 |   | 2,236  | 
|Accrued rebates                           |  |               | 2,085  |  |                 |   | 2,216  | 
|Warranty accrual                          |  |               | 741    |  |                 |   | 895    | 
|Restructuring                             |  |               | 582    |  |                 |   | 1,041  | 
|Excess lease liability                    |  |               | 499    |  |                 |   | 873    | 
|Other accrued liabilities                 |  |               | 3,504  |  |                 |   | 2,747  | 
|                                          |  |               |        |  |                 |   |        | 
|                                          |  | $             | 12,985 |  |                 | $ | 13,297 | 
|                                          |  |               |        |  |                 |   |        | 

The following table summarizes the activity related to warranty (in thousands):



|                             |  |                    |      |   |               |   |     |  
|---------------------------- |  | ------------------ | ---- | - | ------------- | - | --- | -
|                             |  | Three Months Ended |     
|                             |  | April 3, 2011      |      |   | April 4, 2010 |  
|Balance, beginning of period |  | $                  | 895  |   |               | $ | 660 |  
|Provision (benefit)          |  |                    | (135 | ) |               |   | 175 |  
|Usage                        |  |                    | (19  | ) |               |   | (8  | )
|                             |  |                    |      |   |               |   |     |  
|Balance, end of period       |  | $                  | 741  |   |               | $ | 827 |  
|                             |  |                    |      |   |               |   |     |  

Note 7  Restructuring Charges

During the third quarter of 2010, the Company implemented a restructuring plan in order to better align its operating expenses with its revised revenue forecast and to reallocate sufficient engineering
resources to the continued development of its broadband technology and products. The Company expects the remaining severance and benefit costs to be paid in 2011. A summary of the restructuring activity follows (in thousands):



|                              |  |                        |      |   |                  |   |     |               |  |   |       |   |  |   |       |  
|----------------------------- |  | ---------------------- | ---- | - | ---------------- | - | --- | ------------- |  | - | ----- | - |  | - | ----- | -
|                              |  | Severance 
andBenefits |      |   | ExcessFacilities |   |     | SoftwareTools |  |   | Total |  
|Balance as of January 2, 2011 |  | $                      | 453  |   |                  | $ | 151 |               |  | $ | 437   |   |  | $ | 1,041 |  
|Restructuring charges         |  |                        | 47   |   |                  |   |    |               |  |   |      |   |  |   | 47    |  
|Cash payments                 |  |                        | (388 | ) |                  |   | (9  | )             |  |   | (109  | ) |  |   | (506  | )
|                              |  |                        |      |   |                  |   |     |               |  |   |       |   |  |   |       |  
|Balance as of April 3, 2011   |  | $                      | 112  |   |                  | $ | 142 |               |  | $ | 328   |   |  | $ | 582   |  
|                              |  |                        |      |   |                  |   |     |               |  |   |       |   |  |   |       |  



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Note 8  Commitments and Contingencies

Lease Obligations

The Company leases office facilities, equipment and
software under non-cancelable operating leases with various expiration dates through 2014. Rent expense for the three months ended April 3, 2011 and April 4, 2010 was $0.6 million and $0.7 million, respectively. The terms of the facility
leases provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rent expense incurred, but not paid. Future minimum lease payments as of April 3,
2011 under non-cancelable leases with original terms in excess of one year are $1.4 million for the remainder of 2011, $2.5 million in 2012, $2.7 million in 2013, $2.4 million in 2014 and $5.3 million in 2015 and thereafter.

Purchase Commitments

As
of April 3, 2011, the Company had $2.5 million of inventory purchase obligations with various suppliers.

Indemnities, Commitments and
Guarantees

During its normal course of business, the Company has made certain indemnities, commitments and guarantees
under which it may be required to make payments in relation to certain transactions. These indemnities include intellectual property indemnities to the Companys customers in connection with the sales of its products, indemnities for
liabilities associated with the infringement of other parties technology based upon the Companys products, and indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease. The
duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments that the
Company could be obligated to make. The Company believes its internal development processes and other policies and practices limit its exposure related to its contractual indemnification provisions. In addition, the Company requires its employees to
sign a proprietary information and inventions agreement, which assigns the rights to its employees development work to the Company. The Company has not recorded any liability for these indemnities, commitments and guarantees in the
accompanying consolidated balance sheets. The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount of the loss can
be reasonably estimated, in accordance with authoritative guidance.

In addition, the Company indemnifies its officers and
directors under the terms of indemnity agreements entered into with them, as well as pursuant to its certificate of incorporation, bylaws and applicable Delaware law. To date, the Company has not incurred any costs under these indemnity agreements
or provisions.

Litigation

In November 2006, three putative class action lawsuits were filed in the United States District Court for the Southern District of New York against the Company, its directors and two former executive
officers, as well as the lead underwriters for its initial and secondary public offerings. The lawsuits were consolidated and an amended complaint was filed on April 24, 2007. The amended complaint sought unspecified damages for
certain alleged misrepresentations and omissions made by the Company in connection with both its initial public offering in September 2005 and its follow-on offering in March 2006. On June 25, 2007, the Company filed motions to
dismiss the amended complaint, and on March 10, 2008, the Court dismissed the case with prejudice. On March 25, 2008, plaintiffs filed a motion for reconsideration, and on June 12, 2008, the District Court denied the motion for
reconsideration. On October 15, 2008, plaintiffs appealed the District Courts dismissal of the amended complaint and denial of its motion for reconsideration to the United States Court of Appeals for the Second Circuit. On
September 17, 2009, the Court of Appeals affirmed the District Courts dismissal of the amended complaint, but vacated its judgment on the motion for reconsideration and remanded the case to the District Court for further proceedings. On
May 13, 2010, the District Court granted plaintiffs leave to file a motion to amend the pleadings. Plaintiffs filed a motion for leave to amend the complaint on June 11, 2010. The Company opposed on July 11, 2010, and on
November 23, 2010, the District Court denied the motion. On January 6, 2011, plaintiffs filed a notice of appeal with the United States Court of Appeals for the Second Circuit and, on March 18, 2011, filed Appellants Opening
Brief. The Company will file its opposition brief by June 17, 2011. The Company cannot predict the likely outcome of its opposition brief, and an adverse result in the litigation could have a material effect on its financial statements.

Additionally, from time to time, the Company is a party to various legal proceedings and claims arising from the normal
course of business activities. Based on current available information, other than as set forth above, the Company does not expect that the ultimate outcome of any currently pending unresolved matters, individually or in the aggregate, will have a
material adverse effect on its results of operations, cash flows or financial position.

Note 9  Significant Customer Information and
Segment Reporting

In ASC 280-10, the FASB establishes standards for the manner in which public companies report
information about operating segments in annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The method for determining the information to
report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance.



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##### Table of Contents

The Companys chief operating decision maker is the Chief Executive Officer. The Chief
Executive Officer reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by geographic region for purposes of making operating decisions and assessing financial performance. On this
basis, the Company is organized and operates in a single segment: the design, development, marketing and sale of semiconductors.

The following table summarizes revenue and percentage of revenue by geographic region, based on the country in which the customers headquarters is located (in thousands):



|              |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  
|------------- |  | ------------------ | ------ |  | ------------- |  | --- | - |  | - | ------ |  |  |  | --- | -
|              |  | Three Months Ended |       
|              |  | April 3, 2011      |        |  | April 4, 2010 | 
|China         |  | $                  | 3,865  |  |               |  | 12  | % |  | $ | 13,542 |  |  |  | 24  | %
|Japan         |  |                    | 8,235  |  |               |  | 26  |   |  |   | 8,331  |  |  |  | 15  |  
|France        |  |                    | 8,566  |  |               |  | 27  |   |  |   | 8,796  |  |  |  | 15  |  
|Hong Kong     |  |                    | 1,314  |  |               |  | 4   |   |  |   | 7,755  |  |  |  | 14  |  
|Taiwan        |  |                    | 4,362  |  |               |  | 14  |   |  |   | 4,690  |  |  |  | 8   |  
|United States |  |                    | 313    |  |               |  | 1   |   |  |   | 1,668  |  |  |  | 3   |  
|Other         |  |                    | 5,017  |  |               |  | 16  |   |  |   | 12,601 |  |  |  | 21  |  
|              |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  
|              |  | $                  | 31,672 |  |               |  | 100 | % |  | $ | 57,383 |  |  |  | 100 | %
|              |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  

The Company divides its products into three product families: Broadband DSL, Communications Processors and
Other. Broadband DSL consists of the Companys central office products, DSL modem-only customer premise equipment products and the DSL value of the Companys integrated devices. Communications Processors includes the Companys stand
alone processors and the processor-only value of the Companys integrated devices. Other includes products that do not fall into the other two product families. Revenue and percentage of revenue by product family is as follows (in
thousands):



|                          |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  
|------------------------- |  | ------------------ | ------ |  | ------------- |  | --- | - |  | - | ------ |  |  |  | --- | -
|                          |  | Three Months Ended |       
|                          |  | April 3, 2011      |        |  | April 4, 2010 | 
|Broadband DSL             |  | $                  | 16,765 |  |               |  | 53  | % |  | $ | 33,681 |  |  |  | 59  | %
|Communications Processors |  |                    | 9,875  |  |               |  | 31  |   |  |   | 15,904 |  |  |  | 28  |  
|Other                     |  |                    | 5,032  |  |               |  | 16  |   |  |   | 7,798  |  |  |  | 13  |  
|                          |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  
|                          |  | $                  | 31,672 |  |               |  | 100 | % |  | $ | 57,383 |  |  |  | 100 | %
|                          |  |                    |        |  |               |  |     |   |  |   |        |  |  |  |     |  

The distribution of long-lived assets (excluding goodwill, intangible assets and other assets) is as follows
(in thousands):



|                          |  |              |       |  |                |   |       | 
|------------------------- |  | ------------ | ----- |  | -------------- | - | ----- | 
|                          |  | April 3,2011 |       |  | January 2,2011 |  
|United States             |  | $            | 4,960 |  |                | $ | 6,295 | 
|Asia, predominantly India |  |              | 1,657 |  |                |   | 1,914 | 
|Other                     |  |              | 723   |  |                |   | 5     | 
|                          |  |              |       |  |                |   |       | 
|                          |  | $            | 7,340 |  |                | $ | 8,214 | 
|                          |  |              |       |  |                |   |       | 



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This quarterly report on Form 10-Q, particularly in the sections entitled Risk Factors, and Managements Discussion
and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act), that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this document, including statements regarding our
future financial position, business strategy, plans and objectives of management for future operations, forecasts regarding the broadband market, market trends, our competitive status, our product development, our product marketing and inventory,
technological developments, the features, benefits and performance of our current and future products, our compliance with governmental rules, our ability to adapt to industry standards, future price reductions, our future liquidity and cash needs,
management of our expenses, anticipated demand for our products, customer relationships, the integration of our senior management, our dependence on our senior management and our ability to attract and retain key personnel, our ability to use of
third party intellectual property, the effect of one large stockholder group on our common stock, qualification of foundries and our foundries capacities, our ability to deliver quality products with acceptable manufacturing yields, current
and potential litigation, the expected benefits of our intellectual property and the potential outcomes of intellectual property disputes, our ability to protect our intellectual property, our expected future operating costs and expenses, our
internal controls, exchange rates, investment and foreign currency exposure, potential new competitors, sources of revenue, our continued growth, dependency and concentration of customer base, use of proceeds, the expected impact of various
accounting policies and rules adopted by the Financial Accounting Standards Board and our accounting policy estimates, our future office space needs, expected benefits or our corporate restructuring, our ability to operate internationally and
fluctuations in our stock price are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as believe, may, estimate, continue,
anticipate, intend, should, plan, expect, predict, potential, or the negative of these terms or other similar expressions. We have based these forward-looking
statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions described under the caption Risk Factors and elsewhere in this document, regarding, among other things:



| |  |  | our history of losses;
| | - |  | ----------------------



| |  |  | our ability to integrate the technologies and employees from acquisitions into our existing business;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | cyclical and unpredictable decreases in demand for our semiconductors;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to adequately forecast demand for our products;
| | - |  | -----------------------------------------------------------



| |  |  | our ability to develop and achieve market acceptance of new products and technologies;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our sales cycle;
| | - |  | ----------------



| |  |  | selling prices of products being subject to declines;
| | - |  | -----------------------------------------------------



| |  |  | our dependence on a few customers;
| | - |  | ----------------------------------



| |  |  | our reliance on subcontractors to manufacture, test and assemble our products;
| | - |  | ------------------------------------------------------------------------------



| |  |  | our dependence on and qualification of foundries to manufacture our products;
| | - |  | -----------------------------------------------------------------------------



| |  |  | production capacity;
| | - |  | --------------------



| |  |  | our customer relationships;
| | - |  | ---------------------------



| |  |  | the development and future growth of the broadband digital subscriber line (DSL) and communications processing markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | protection of our intellectual property;
| | - |  | ----------------------------------------



| |  |  | currency fluctuations;
| | - |  | ----------------------



| |  |  | competition and competitive factors of the markets in which we compete; and
| | - |  | ---------------------------------------------------------------------------



| |  |  | future costs and expenses and financing requirements.
| | - |  | -----------------------------------------------------

These risks are not exhaustive. Other sections of this quarterly report on Form 10-Q include additional factors that could adversely impact our business and financial performance. Moreover, we operate in
a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto in Part I, Item 1 above and with our financial
statements and notes thereto for the fiscal year ended



13



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January 2, 2011, contained in our Annual Report on Form 10-K filed on March 10, 2011.

In this quarterly report on Form 10-Q, references to Ikanos, we, us, our or the Company means Ikanos Communications, Inc. and its subsidiaries
except where it is made clear that the term means only the parent company.

Overview

We are a leading provider of advanced broadband semiconductor and software products for the digital home. Our broadband DSL,
communications processors and other offerings power access infrastructure and customer premises equipment (CPE) for many of the worlds leading network equipment manufacturers and telecommunications service providers. Our products are at the
core of digital subscriber line access multiplexers (DSLAMs), optical network terminals (ONTs), concentrators, modems, voice over Internet Protocol (VoIP) terminal adapters, integrated access devices (IADs) and residential gateways (RGs). Our
products have been deployed by service providers in Asia, Europe and North America.

We believe that we can offer advanced
products by continuing to push existing limits in silicon, systems and software. We have developed programmable, scalable chip architectures, which form the foundation for deploying and delivering multi-play services. Expertise in the creation and
integration of digital signal processor (DSP) algorithms with advanced digital, analog and mixed signal semiconductors enables us to offer high performance, high-density and low-power asymmetric DSL (ADSL) and very-high-bit rate DSL (VDSL) products.
In addition, flexible communications processor architectures with wirespeed packet processing capabilities enable high-performance end-user devices for distributing advanced services in the home. These products thus support service providers
multi-play deployment plans to the digital home while keeping their capital and operating expenditures low.

We outsource all
of our semiconductor fabrication, assembly and test functions, which allows us to focus on the design, development, sales and marketing of our products and reduces the level of our capital investment. Our direct customers consist primarily of
original design manufacturers (ODMs), contract manufacturers (CMs), network equipment manufacturers (NEMs) and original equipment manufacturers (OEMs), who in turn sell our semiconductors as part of their product solutions to the service provider
market.

We have not been profitable for five years. We incurred a net loss of $2.1 million for the fiscal quarter ended
April 3, 2011 and had an accumulated deficit of $272.7 million as of April 3, 2011. To achieve consistent profitability, we will need to generate and sustain higher revenue, while maintaining cost and expense levels appropriate and
necessary for our business. While we believe that we have the cash necessary to fund our operations for the next twelve months, we may also seek additional financing as deemed appropriate to support future company needs and investments. We filed a
shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on October 25, 2010 (declared effective on November 1, 2010) under which we can offer and sell up to $30.0 million of our common stock and warrants.
On November 11, 2010 and December 7, 2010 we sold a total of 12.8 million shares of common stock under the Form S-3 in an underwritten offering for $13.5 million. After deducting underwriting fees, legal, accounting and other costs,
we realized proceeds of $12.5 million.

We were incorporated in April 1999 and, through December 31, 2001, we were
engaged principally in research and development. We began commercial shipment of our products in the fourth quarter of 2002. Over the last three fiscal years, our revenue was $106.5 million in fiscal year 2008, $130.7 million in fiscal year 2009 and
$191.7 million in fiscal year 2010.

Quarterly revenue fluctuations are characteristic of our industry and affect our
business, especially due to the concentration of our revenue among a few customers. These quarterly fluctuations can result from a mismatch of supply and demand. Specifically, service providers purchase equipment based on planned deployment.
However, service providers may deploy equipment more slowly than initially planned, while OEMs continue for a time to manufacture equipment at rates higher than the rate at which equipment is deployed. As a result, periodically and usually without
significant notice, service providers will reduce orders with OEMs for new equipment, and OEMs, in turn, will reduce orders for our products, which will adversely impact the quarterly demand for our products, even when deployment rates may be
increasing.

Furthermore, our future revenue growth depends upon new service providers beginning to deploy new platforms
with our products, among other factors. It is inherently difficult to predict if and when platforms will pass qualification, when service providers will begin to deploy the equipment and at what rate, because we do not control the qualification
criteria or process, and the systems manufacturers and service providers do not always share all of the information available to them regarding qualification and deployment decisions. However we believe our team of engineers, DSL products,
technology, patents and other intellectual property will allow us to create products which will allow us to extend our market leadership and enable us to implement our digital home initiatives and next generation VDSL2 development.

Critical Accounting Policies and Estimates

In preparing our unaudited condensed consolidated financial statements, we make assumptions, judgments and estimates that can



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##### Table of Contents

have a significant impact on amounts reported. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the
circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly. We also discuss our critical
accounting estimates with the Audit Committee of our Board of Directors. We believe that the assumptions, judgments and estimates involved in the accounting for revenue, cost of revenue, marketable securities, accounts receivable, inventories,
warranty, income taxes, impairment of goodwill and related intangibles, acquisitions and stock-based compensation expense have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting
policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

The critical accounting policies, are described in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K
for the fiscal year ended January 2, 2011, and have not changed materially as of April 3, 2011.

Results of Operations

Revenue

Our revenue is derived from sales of our semiconductor products. Revenue from product sales is generally recognized upon shipment, net of sales returns, rebates and allowances. Depending on the
distributor, product sales to the distributor are recognized either based on contract terms or when the distributor has sold through to the end customer. As is typical in our industry, the selling prices of our products generally decline over time.
Therefore, our ability to increase revenue is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products in greater quantities. Our ability to increase unit sales volume is dependent
primarily upon our ability to increase and fulfill current customer demand and obtain new customers. The continuing effects of the worldwide recession have adversely affected the businesses of service providers around the world, causing them to
re-evaluate how they employ capital. Consequently the rate at which broadband infrastructure is upgraded may slow or new broadband programs could be delayed.

Revenue declined by $25.7 million, or 45%, to $31.7 million for the three months ended April 3, 2011 from $57.4 million in the three months ended April 4, 2010. Revenue decreased throughout 2010
from $57.4 million in the first quarter to $55.6 million in the second quarter, to $41.5 in the third quarter and to $37.1 million in the fourth quarter. The decline in first quarter revenue reflects Ikanos move away from lower margin segments
of the ADSL market, and our customers desire to have multiple sources of supply for VDSL components. We generally sell our products to OEMs through a combination of our direct sales force, third-party sales representatives and
distributors. Sales are generally made under short-term, non-cancelable purchase orders. We also have volume purchase agreements with certain customers who provide us with non-binding forecasts. Although certain OEM customers may provide us
with rolling forecasts, our ability to predict future sales in any given period is limited and subject to change based on demand for our OEM customers systems and their supply chain decisions. Historically, a small number of OEM customers, the
composition of which has varied over time, have accounted for a substantial portion of our revenue, and we expect that significant customer concentration will continue for the foreseeable future. However, customer concentration may diversify across
more carrier customers as we expect more service providers world-wide to begin deployments of our broadband solutions.

The
following direct customers accounted for more than 10% of our revenue for the periods indicated. Sales made to OEMs are based on information that we receive at the time of ordering.



|                               |  |                    |    |   |              |  |    |   |  | 
|------------------------------ |  | ------------------ | -- | - | ------------ |  | -- | - |  | 
|                               |  | Three Months Ended |   
|Our Direct Customer            |  | April 3,2011       |    |   | April 4,2010 | 
|Sagemcom                       |  |                    | 24 | % |              |  | 12 | %
|Paltek Corporation             |  |                    | 17 |   |              |  | *  |  
|Flextronics International Ltd. |  |                    | *  |   |              |  | 16 |  
|ZTE Corporation                |  |                    | *  |   |              |  | 11 |  



| | * | Less than 10%
| | - | -------------

Revenue by Country as a
Percentage of Total Revenue



|              |  |                    |    |   |              |  |    |  
|------------- |  | ------------------ | -- | - | ------------ |  | -- | -
|              |  | Three Months Ended |   
|              |  | April 3,2011       |    |   | April 4,2010 | 
|China         |  |                    | 12 | % |              |  | 24 | %
|Japan         |  |                    | 26 |   |              |  | 15 |  
|France        |  |                    | 27 |   |              |  | 15 |  
|Hong Kong     |  |                    | 4  |   |              |  | 14 |  
|Taiwan        |  |                    | 14 |   |              |  | 8  |  
|United States |  |                    | 1  |   |              |  | 3  |  
|Other         |  |                    | 16 |   |              |  | 21 |  



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##### Table of Contents

The table above reflects sales to our direct customers based on the country in which the
customers headquarters is located. It does not necessarily reflect carrier deployment of our products as we do not sell directly to them. Revenue from China in the first quarter of 2011 was $3.9 million, a decline of $9.6 million from the
$13.5 million of revenue recognized in the first quarter of 2010. Compared to the fourth quarter of 2010, Chinese revenue fell by $0.6 million or 14% from $4.5 million to $3.9 million. Japanese first quarter revenue of $8.2 million was flat versus
$8.3 million in the first quarter of 2010 and was greater than fourth quarter 2010 revenue of $6.4 million. Although French revenue of $8.6 million in the first quarter of 2011 was only marginally lower than the $8.8 million of revenue in the first
quarter of 2010, French revenue was substantially lower than the $12.7 million recognized in the fourth quarter of 2010. Other includes Italy, the Netherlands and South Korea, all of whose revenue declined from the first quarter of 2010 to the first
quarter of 2011.

Revenue by Product Family as a Percentage of Total Revenue



|                          |  |                    |    |   |              |  |    |  
|------------------------- |  | ------------------ | -- | - | ------------ |  | -- | -
|                          |  | Three Months Ended |   
|                          |  | April 3,2011       |    |   | April 4,2010 | 
|Broadband DSL             |  |                    | 53 | % |              |  | 59 | %
|Communications Processors |  |                    | 31 |   |              |  | 28 |  
|Other                     |  |                    | 16 |   |              |  | 13 |  

The change in mix
reflects the decline in our ADSL business and our continuing migration away from lower margin products.

Cost and Operating
Expenses



|                                  |  |                    |      |  |              |   |      |         |  |  |     |   
|--------------------------------- |  | ------------------ | ---- |  | ------------ | - | ---- | ------- |  |  | --- | --
|                                  |  | Three Months Ended |      |  |              |  
|                                  |  | April 3,2011       |      |  | April 4,2010 |   |      | %Change | 
|                                  |  | (In millions)      |      |  |              |  
|Cost of revenue                   |  | $                  | 15.2 |  |              | $ | 35.4 |         |  |  | (57 | )%
|Research and development          |  |                    | 13.7 |  |              |   | 17.1 |         |  |  | (20 | ) 
|Sales, general and administrative |  |                    | 6.1  |  |              |   | 7.8  |         |  |  | (22 | ) 
|Restructuring charges             |  |                    |     |  |              |   | 1.5  |         |  |  | *   |   



| | * | Not meaningful
| | - | --------------

Cost and Operating Expenses
as a Percentage of Total Revenue:



|                                  |  |                    |    |   |              |  |    |  
|--------------------------------- |  | ------------------ | -- | - | ------------ |  | -- | -
|                                  |  | Three Months Ended |   
|                                  |  | April 3,2011       |    |   | April 4,2010 | 
|Cost of revenue                   |  |                    | 48 | % |              |  | 62 | %
|Research and development          |  |                    | 43 |   |              |  | 30 |  
|Sales, general and administrative |  |                    | 19 |   |              |  | 14 |  
|Restructuring charges             |  |                    |   |   |              |  | 3  |  

Cost of Revenue

Our cost of revenue consists primarily of the cost of silicon wafers purchased from third-party foundries and third-party costs associated
with assembling, testing and shipping of our semiconductors. Because we do not have formal, long-term pricing agreements with our outsourcing partners, our wafer costs and services are subject to price fluctuations based on the cyclical demand for
semiconductors among other factors. In addition, after we purchase wafers from foundries, we also incur yield loss related to manufacturing these wafers into usable die. Manufacturing yield is the percentage of acceptable product resulting from the
manufacturing process, as identified when the product is tested. When our manufacturing yields decrease, our cost per unit increases which could have a significant adverse impact on our cost of revenue. Cost of revenue also includes accruals for
actual and estimated warranty obligations and write-downs of excess and obsolete inventories, payroll and related personnel costs, licensed third-party intellectual property, depreciation of equipment, stock-based compensation expenses and
amortization of acquisition-related intangibles.

Cost of revenue decreased 57% to $15.2 million for the three months ended
April 3, 2011 compared to $35.4 million for the three months ended April 4, 2010. The decrease in cost of revenue is directly attributable to our first quarter 2011 sales decline particularly in China and Hong Kong of 2010. Our gross
margins were 52% for the three months ended April 3, 2011 as compared to 38% for the year ago period. The increase in gross margin is attributable to the lower intangible amortization charges of $1.0 million, the 2010 amortization of the fair
value adjustment of inventory acquired of $1.5 million related to a prior acquisition and the revenue recognized in the first quarter of 2011 from the sale of previously written off inventory of $1.7 million.



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Research and development

All research and development (R&D) expenses are expensed as incurred and generally consist of compensation and associated expenses of employees engaged in research and development; contractors;
tape-out expenses; reference board development; development testing, evaluation kits and tools; stock-based compensation; amortization of acquisition-related intangibles; and depreciation expense. Before releasing new products, we incur charges for
mask sets, prototype wafers, mask set revisions, bring-up boards and other qualification materials, which we refer to as tape-out expenses. These tape-out expenses may cause our R&D expenses to fluctuate because they are not incurred uniformly
every quarter.

R&D expenses decreased $3.4 million, or 20%, to $13.7 million for the three months ended April 3,
2011 compared to $17.1 million for the three months ended April 4, 2010. Personnel costs declined by $1.8 million as a result of our restructurings in the first quarter of 2010 to better align the Company after the 2009 Broadband Acquisitions
product line and in third quarter of 2010 to reflect the decline in our sales forecasts related to declining ADSL sales and our moving away from lower margin products. Other reductions included $0.3 million of lower stock-based compensation related
to personnel reduction, $0.6 million related to lower software and licensing fees, and $0.5 million related to lower backend costs, resulting, in part, from moving from gold to copper for wafers.

The majority of our R&D personnel are located in the United States or India. As of April 3, 2011, we had 241 people engaged in
research and development, of whom 84 were located in India and 152 were located in the United States. As of April 4, 2010, we had 332 people engaged in research and development, of whom 127 were located in India and 158 were located in the
United States.

Selling, general and administrative

Selling, general and administrative (SG&A) expenses generally consist of compensation and related expenses for personnel; public company costs; legal, recruiting and auditing fees; and depreciation.
SG&A expenses decreased by $1.7 million for the three months ended April 3, 2011, or 22%, to $6.1 million compared to $7.8 million for the three months ended April 4, 2010. The decline in SG&A expense includes lower personnel costs
of $0.9 million which was the result of our first and third quarter 2010 restructuring efforts; lower stock compensation costs of $0.2 million and lower amortization of acquired intangibles of $0.8 million which was the result of our impairment of
intangible assets taken in the third quarter of 2010.

As of April 3, 2011, SG&A headcount was 80 compared to 108 at
April 4, 2010.

Restructuring charges

During the first quarter of 2010, we implemented a plan to restructure our work force and reduce our cost structure subsequent to our 2009 acquisition of the Conexant BBA product line. Restructuring
charges, consisting of severance and benefits costs, were $1.5 million. The remaining severance and benefit costs related to this restructuring were generally paid in fiscal year 2010.

During the first quarter of 2011, we incurred an additional $47 thousand related to our third quarter 2010 restructuring. There is no
outstanding liability from our first quarter 2010 restructuring plan. We expect the remaining severance related to the third quarter 2010 restructuring plan to be paid out in 2011 and the remaining facilities and tooling costs from our third quarter
2010 restructuring plan to be paid during the fiscal years of 2011 through 2013.

Gain on sale of marketable securities

In the first quarter of 2011 we sold our auction rate securities for $2.0 million and recognized a gain of $1.3
million.

Interest income and other, net

Interest income and other, net consists primarily of interest income earned on our cash and cash equivalents (which includes money market funds) and is partially offset by other non-operating expenses.
For the three months ended April 3, 2011 and the three months ended April 4, 2010, interest income and other, net was $0.1 million.

Provision for income taxes

Income taxes are comprised mostly of foreign income taxes and state minimum taxes. Tax expense was marginally higher in the first quarter of 2011 versus the first quarter of 2010 due in part to the
expiration of our Indian subsidiarys tax holiday during the current year. Federal income taxes have not been provided for on a portion of the unremitted earnings of foreign subsidiaries because such earnings are intended to be permanently
reinvested.

Net loss

As a result of the above factors, we had a net loss of $2.1 million for the three months ended April 3, 2011 compared to a net



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loss of $4.4 million for the three months ended April 4, 2010. Over the past several years, we have taken actions to reduce our operating expense structure such as consolidating locations,
reducing capital expenditures, outsourcing our back-end physical design, reducing the number of development projects and reducing overall headcount. As appropriate, we have restructured parts of our business due to changes in the nature of our
business and the business environment in which we operate. In addition, we have reduced our unit manufacturing costs by working to achieve better wafer pricing based on larger volume of purchases, consolidating business with vendors and
reducing other input costs.

Liquidity and Capital Resources

Year-to-date, cash and investments increased by $3.9 million to $34.9 million as of April 3, 2011 versus $31.0 million as of January 3, 2010.

As of April 3, 2011, we have funded our operations primarily through cash from private and public offerings of our common stock and
cash generated from the sale of our products. Our uses of cash include payroll and payroll-related expenses, manufacturing costs, purchases of equipment, tools and software and operating expenses, such as tape outs, marketing programs, travel,
professional services and facilities and related costs. We believe there will be additional working capital requirements to fund and operate our business. We expect to finance our operations primarily through operating cash flows and existing cash
and investment balances.

The following table summarizes our statement of cash flows for the three months ended April 3,
2011 and April 4, 2010 (in millions):



|                                                |  |      |      |  |      |   |      |  
|----------------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | -
|                                                |  | 2011 |      |  | 2010 |  
|Statements of Cash Flows Data:                  |  |      |      |  |      |   |      |  
|Cash and cash equivalents - beginning of period |  | $    | 29.0 |  |      | $ | 13.3 |  
|Net cash used by operating activities           |  |      | 4.6  |  |      |   | (5.3 | )
|Net cash provided by investing activities       |  |      | 1.3  |  |      |   | 5.0  |  
|                                                |  |      |      |  |      |   |      |  
|Cash and cash equivalents - end of period       |  | $    | 34.9 |  |      | $ | 13.0 |  
|                                                |  |      |      |  |      |   |      |  

Operating Activities

For the three months ended April 3, 2011, we generated $4.6 million of net cash from operating activities while incurring a net loss of $2.1 million. Included in the net loss was approximately $2.7
million in various non-cash expenses consisting of depreciation, stock-based compensation expense and amortization of intangible assets and acquired technology. Operating cash flows also benefited from a decrease in accounts receivable of $4.9
million and inventory of $1.9 million slightly offset by an increase in prepaid expenses and other assets of $0.9 million and a decrease in accounts payable and accrued liabilities of $0.7 million. In addition, our $1.3 million gain on the sale of
auction rate securities is a reduction to cash from operating activities, but the proceeds from the sale are included in cash from investing activities.

For the three months ended April 4, 2010, we used $5.3 million of net cash in operating activities, while incurring a net loss of $4.4 million. Included in the net loss was approximately $4.4 million
in various non-cash expenses consisting of depreciation, stock-based compensation expense and amortization of intangible assets and acquired technology. Operating cash flows also benefited from a decrease in inventory of $2.4 million offset by an
increase in accounts receivable of $3.8 million and a $3.6 million decrease in accounts payable and accrued liabilities. Accounts receivable increased as we recognized a majority of our revenue for three months ended April 4, 2010 in the last
fiscal month. Accounts payable decreased as our vendors used the tightness in the supply chain to ensure timely payment of invoices.

Investing Activities

Investing activities provided $1.3 million for the three months ended April 3, 2011, primarily consisting of $2.0 million in proceeds from the sale of our auction rate securities, offset by capital
expenditures of $0.7 million.

Investing activities provided $5.0 million for the three months ended April 4, 2010,
primarily consisting of $5.5 million from the sales of short-term investments, offset by capital expenditures of $0.5 million.

We currently have no investments. Previously, we have classified our investment portfolio as available for sale. Our
investment objectives are to preserve principal and provide liquidity, while maximizing yields without significantly increasing risk. We may sell an investment at any time if the quality rating of the investment declines; the yield on the investment
is no longer attractive; or we are in need of cash. We have used cash to invest in technologies that enhance and expand our product offering and, we anticipate that we will continue to do so in the future. The nature of these transactions makes it
difficult to predict the amount and timing of such cash requirements. We anticipate that we will continue to purchase necessary property and equipment in the normal course of our business. The amount and timing of these purchases and the related
cash outflows in future periods depend on a number of factors, including the hiring of employees, the rate of change of computer hardware and software used in our business and our business outlook.



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##### Table of Contents

Financing Activities

There was minimal financing activity for each of the three month periods ending April 3, 2011 and April 4, 2010.

We have used, and intend to continue to use, the net proceeds from any financing activities for working capital and general corporate purposes, which may include the acquisition of businesses, products,
product rights or technologies, strategic investments or purchases of common stock.

We believe that our existing cash and
cash equivalents will be sufficient to meet our anticipated cash needs for at least the next twelve months. Our future capital requirements will depend upon many factors including our rate of revenue growth, our ability to develop future
revenue streams, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to
adequate manufacturing capacity and the continuing market acceptance of our products. Additionally in the future, we may become party to agreements with respect to potential investments in, or acquisitions of, other complementary businesses,
products or technologies, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would
result in increased interest expenses and could result in covenants that would restrict our operations. We have not made arrangements to obtain additional financing, and there is no assurance that such financing, if required, will be available in
amounts or on terms acceptable to us, if at all.

Contractual Commitments and Off-Balance Sheet Arrangements

We lease certain office facilities, equipment and software under non-cancelable operating leases. The following table summarizes our
contractual obligations as of April 3, 2011, and the effect those obligations are expected to have on our liquidity and cash flow in future periods (in millions):



|                               |  |       |      |  |                  |   |     |              |  |   |               |  |  |                    |     |  |  |   |     | 
|------------------------------ |  | ----- | ---- |  | ---------------- | - | --- | ------------ |  | - | ------------- |  |  | ------------------ | --- |  |  | - | --- | 
|                               |  | Total |      |  | Remainderof 2011 |   |     | 2012 and2013 |  |   | 2014 
and2015 |  |  | 2016 andthereafter |    
|Operating lease payments       |  | $     | 14.3 |  |                  | $ | 1.4 |              |  | $ | 5.2           |  |  | $                  | 4.4 |  |  | $ | 3.3 | 
|CAD software tools             |  |       | 4.1  |  |                  |   | 2.8 |              |  |   | 1.3           |  |  |                    |    |  |  |   |    | 
|Inventory purchase obligations |  |       | 2.5  |  |                  |   | 2.5 |              |  |   |              |  |  |                    |    |  |  |   |    | 
|                               |  |       |      |  |                  |   |     |              |  |   |               |  |  |                    |     |  |  |   |     | 
|                               |  | $     | 20.9 |  |                  | $ | 6.7 |              |  | $ | 6.5           |  |  | $                  | 4.4 |  |  | $ | 3.3 | 
|                               |  |       |      |  |                  |   |     |              |  |   |               |  |  |                    |     |  |  |   |     | 

For the purpose of this table, purchase obligations for the purchase of goods or services are defined as
agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our
purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within short time horizons. In addition, we have purchase orders that represent authorizations to purchase rather than binding agreements. We do not have
significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements.

In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our products.
Historically, costs related to these indemnification provisions have not been significant, and we are unable to estimate the maximum potential impact of these indemnification provisions on our future consolidated results of operations.

Recent Accounting Pronouncements

Recent accounting pronouncements are detailed above and in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on March 10, 2011.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

All market risk sensitive instruments were entered into for non-trading purposes. We do not use derivative financial instruments for speculative trading purposes. As of April 3, 2011, we did not hold
derivative financial instruments.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We do not use derivative financial instruments in our investment portfolio. The primary objective
of our investment activities is to preserve principal and meet liquidity needs, while maximizing yields and without significantly increasing risk. Our investment policy specifies credit quality standards for our investments and limits the amount of
credit exposure to any single issue, issuer, or type of investment. Our investments currently consist primarily of money market funds and are carried at market value.



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As of April 3, 2011, we had cash and cash equivalents totaling $34.9 million. Money market funds are
considered cash equivalents and accounted for $2.0 million of the amount. We do not enter into investments for trading or speculative purposes. If the return on our money market funds were to change by one hundred basis points, the effect would be
immaterial.

Investment Risk

Our marketable securities portfolio as of April 3, 2011 was $2.0 million and consisted entirely of money market funds. Our money market funds are considered cash equivalents and included in the line
item cash and cash equivalents on our balance sheet. Investment risk is minimal.

Foreign Currency Risk

Our revenue and costs, including subcontractor manufacturing expenses, are predominately denominated in U.S. dollars. An increase of the
U.S. dollar relative to the currencies of the countries in which our customers operate would make our products more expensive to them and increase pricing pressure or reduce demand for our products. We also incur a portion of our expenses in
currencies other than the U.S. dollar, including the Euro, the Japanese yen, Korean won, Indian rupee, Singapore dollar, Chinese Yuan and the Taiwanese dollar. We do not currently enter into forward exchange contracts to hedge exposure denominated
in foreign currencies or any other derivative financial instruments for trading or speculative purposes. We expect that our foreign currency exposure will increase as our operations in India and other countries expand. If exchange rates were to
change by ten percent, the effect would be to change fiscal year 2011 projected operating expenses by approximately $1.0 million.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of
disclosure controls and procedures.

Under the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by
this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded these disclosure controls and procedures are effective to ensure that information we are required to disclose in
reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our
Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our certifying officers concluded that these disclosure controls and procedures were
effective at the reasonable assurance level.

We believe that a system of internal controls, no matter how well designed and
operated, is based in part upon certain assumptions about the likelihood of future events, and can be affected by limitations inherent in all internal controls systems including the realities that human judgment in decision-making can be faulty,
that persons responsible for establishing controls need to consider their relative costs and benefits, that breakdowns can occur because of human failures such as simple error or mistake, and that controls can be circumvented by collusion of two or
more people. Accordingly, we believe that our system of internal controls, while effective, can only provide reasonable, not absolute, assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within Ikanos have been detected. There was no change in our internal control over financial reporting during the quarter ended April 3, 2011 that our certifying officers
concluded materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II: OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

In
November 2006, three putative class action lawsuits were filed in the United States District Court for the Southern District of New York against us, our directors and two former executive officers, as well as the lead underwriters for our initial
and secondary public offerings. The lawsuits were consolidated and an amended complaint was filed on April 24, 2007. The amended complaint sought unspecified damages for certain alleged misrepresentations and omissions made by us in
connection with both our initial public offering in September 2005 and its follow-on offering in March 2006. On June 25, 2007, we filed motions to dismiss the amended complaint, and on March 10, 2008, the Court dismissed the case with
prejudice. On March 25, 2008, plaintiffs filed a motion for reconsideration, and on June 12, 2008, the District Court denied the motion for reconsideration. On October 15, 2008, plaintiffs appealed the District Courts dismissal
of the amended complaint and denial of its motion for reconsideration to the United States Court of Appeals for the Second Circuit. On September 17, 2009, the Court of Appeals affirmed the District Courts dismissal of the amended
complaint, but vacated its judgment on the motion for reconsideration and remanded the case to the District Court for further proceedings. On May 13, 2010, the District Court granted plaintiffs leave to file a motion to amend the pleadings.
Plaintiffs filed a motion for leave to amend the complaint on June 11, 2010. We opposed on July 11, 2010, and on November 23, 2010, the District Court denied the motion. On January 6, 2011, plaintiffs filed a notice of appeal
with the United States Court of Appeals for the Second Circuit and, on March 18, 2011, filed Appellants Opening Brief. We will file our opposition brief by June 17, 2011. We cannot predict the likely outcome of our opposition brief,
and an adverse result in the litigation could have a material effect on our financial statements.

Additionally, from time to
time, we are a party to various legal proceedings and claims arising from the normal course of business activities. Based on current available information, other than as set forth above, we do not expect that the ultimate outcome of any currently
pending unresolved matters, individually or in the aggregate, will have a material adverse effect on our results of operations, cash flows or financial position.



|Item 1A. | Risk Factors
|-------- | ------------

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the
other information in this quarterly report on Form 10-Q, and in our other filings with the SEC, before deciding whether to invest in shares of our common stock. Additional risks and uncertainties not presently known to us may also affect our
business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our
common stock will likely decline and you may lose all or part of your investment.

Risks Related to Our Customers and Markets

Our operating results have fluctuated significantly over time and are likely to continue to do so, and as a result, we may fail to
meet or exceed our revenue forecasts or the expectations of securities analysts or investors, which could cause the market price of our common stock to decline.

Our industry is highly cyclical and is characterized by constant and rapid technological change, product obsolescence and price erosion, evolving standards, uncertain product life cycles and wide
fluctuations in product supply and demand. The industry has, from time to time, experienced significant and sometimes prolonged, downturns, often connected with or in anticipation of, maturing product cycles and declines in general economic
conditions. To respond to these downturns, some service providers have decreased their capital expenditures, changed their purchasing practices to use refurbished rather than purchasing new equipment, canceled or delayed new developments, and taken
a cautious approach to acquiring new equipment and technologies from OEMs, usually with very little notice. This, in turn, has reduced the demand for new semiconductors by our direct customers which could result in significant fluctuations of
revenue as the economy changes.

Any future downturns may reduce our revenue and result in us having excess inventory. By
contrast, any upturn in the semiconductor industry could result in increased demand and competition for limited production capacity, which may affect our ability to ship products and prevent us from benefiting from such an upturn. Accordingly, our
operating results may vary significantly as a result of the general conditions in the semiconductor or broadband communications industry, which could cause the market price of our common stock to decline.

Fluctuations in our expenses could affect our operating results.

Our expenses are subject to fluctuations resulting from various factors, including, but not limited to, higher expenses associated with new product releases, costs for manufacturing or components
increasing without notice because we do not have formal pricing arrangements with our subcontractors, costs of design tools and large up-front license fees to third parties for intellectual property integrated into our products, as well as other
factors identified throughout these risk factors.



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Because many of our expenses are relatively fixed in the short term, or are incurred in
advance of anticipated sales, we may not be able to reduce our expenses sufficiently to mitigate any reductions in revenue. In addition, the acquisition of other businesses can generate extraordinary expenses, such as our acquisition of the
Broadband Access, or BBA, product line from Conexant Systems, Inc. in 2009. As a result, quarter to quarter comparisons of our operating expenses and results should not be relied on as an indicator of future performance. If our operating results do
not meet the expectations of securities analysts or investors for any quarter or other reporting period, the market price of our common stock may decline.

General macroeconomic conditions could reduce demand for services based upon our products.

Our business is susceptible to macroeconomic and other market conditions. As an example, we believe that consumer-targeted broadband services, which are deployed using our technology, are part of most
households discretionary spending. If individual consumers decide not to installor decide to discontinue purchasingbroadband services in their homes in order to save money in an uncertain economy, the resulting drop in demand could
cause telecommunications service providers to reduce or stop placing orders for OEM equipment containing our products. Accordingly, the OEMs demand for our products could drop further, potentially having a materially negative effect on our
revenue.

We have had a history of losses, and future losses or the inability achieve or sustain profitability in the future may cause the
market price of our common stock to decline.

Since our inception, we have only been profitable in the third and fourth
quarter of 2005. Prior to the third quarter of 2005, we incurred significant net losses, and we incurred net losses in the past five fiscal years. We have an accumulated deficit of $272.7 million as of April 3, 2011. To achieve profitability
again, we will need to generate and sustain higher revenue and to improve our gross margins while maintaining expense levels that are appropriate and necessary for our business. We may not be able to achieve profitability again and, even if it were
able to attain profitability, we may not be able to sustain profitability on an on-going quarterly or an annual basis in the future.

We
may need additional capital, and the sale of additional shares of common stock or other securities would result in additional dilution to our stockholders.

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the net proceeds received by us from our public offering in fiscal year 2010 will be sufficient to meet our
anticipated cash needs for the next twelve months. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our
resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness
would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if
at all.

Our success is dependent upon achieving new design wins into commercially successful systems sold by our OEM and ODM
customers.

Our products are generally incorporated into our OEM and ODM customers systems at the design stage. As a
result, we rely on OEMs and ODMs to select our products to be designed into their systems, which we refer to as a design win. At any given time, we are competing for one or more of these design wins and we often incur significant
expenditures over multiple fiscal quarters without any assurance that we will achieve a design win. Furthermore, even if we achieve a design win, we cannot be assured that the OEM or ODMs equipment that we are designed into will be marketed,
sold or commercially successful and, accordingly, we may not generate any revenue from the design win. In addition, our OEM and ODM customers can choose at any time to discontinue their systems that include our products or delay deployment, which
has occurred in the past from time to time. If we are unable to achieve design wins or if our OEM customers systems incorporating our products are not commercially successful or deployed, our operating results would suffer.

If we are unable to develop, introduce or achieve market acceptance of our new semiconductor products, our operating results would be adversely
affected.

Our industry is characterized by rapid technological innovation and intense competition. Our future success will
depend on our ability to continue to predict what new products are needed to meet the demand of the broadband, communication processor or other markets addressable by our products and then introduce, develop and distribute such products in a timely
and cost-effective manner. The development of new semiconductor products is complex, and from time to time we have experienced delays in completing the development and introduction of new products. We have in the past invested substantial resources
in developing and purchasing emerging technologies that did not achieve the market acceptance that we had expected.



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Our ability to develop and deliver new semiconductor products successfully will depend on
various factors, including our ability to:



| |  |  | successfully integrate certain technologies acquired in acquisitions into our product lines;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | accurately predict market requirements and evolving industry standards;
| | - |  | -----------------------------------------------------------------------



| |  |  | accurately define new semiconductor products;
| | - |  | ---------------------------------------------



| |  |  | timely complete and introduce new product designs or features;
| | - |  | --------------------------------------------------------------



| |  |  | timely qualify and obtain industry interoperability certification of our products and the equipment into which our products will be incorporated;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ensure that our subcontractors have sufficient foundry capacity and packaging materials and achieve acceptable manufacturing yields;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | shift our products to smaller geometry process technologies to achieve lower cost and higher levels of design integration; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | gain market acceptance of our products and our OEM customers products.
| | - |  | -----------------------------------------------------------------------

If we are unable to develop and introduce new semiconductor products successfully and in a cost-effective and timely manner, we will not
be able to attract new customers or retain our existing customers, which would harm our business.

If we do not successfully manage our
inventory in the transition process to next generation semiconductor products, our operating results may be harmed.

If we
are successful in timely developing new semiconductor products ahead of competitors but do not cost-effectively manage our inventory levels of existing products when making the transition to the new semiconductor products, our financial results
could be negatively affected by high levels of obsolete inventory and our operating results would be harmed.

The average selling prices
and gross margins of our products are subject to declines, which may harm our revenue and profitability.

Our products are
subject to rapid declines in average selling prices due to competitive pressures, including lowering average selling prices in order to maintain or increase market share. We have lowered our prices significantly at times to gain or maintain market
share, and we expect to do so again in the future. In addition, we have not been able to reduce our costs of goods sold as rapidly as our prices have declined. Our financial results, in particular (but not limited to) our gross margins, will suffer
if we are unable to maintain or increase pricing, or are unable to offset any future reductions in our average selling prices by increasing our sales volumes, reducing our manufacturing costs or developing new or enhanced products that command
higher prices or better gross margins on a timely basis.

Our product sales mix is subject to frequent changes, which may impact our
revenue and margin.

Our product margins vary widely by product. As a result, a change in the sales mix of our products
could have an impact on the forecasted revenue and margins for the quarter. For example, our Broadband DSL product family generally has higher margins as compared to our Communication Processor product family. Furthermore, the product margins within
our Broadband DSL product family can vary based on the type and performance of deployment being used as customers typically pay higher selling prices for higher performance. While we forecast a quarters product mix, actual results can be
materially different than our forecast, which could negatively impact our revenue and margins.



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Because we depend on a relatively small number of significant customers for a substantial portion of our
revenue, the loss of any of our key customers, our inability to continue to sell existing and new products to our key customers in significant quantities or our failure to attract new significant customers could adversely impact our revenue and harm
our business.

We have in the past and expect in the future to derive a substantial portion of our revenue from sales to a
relatively small number of customers. The composition of these customers has varied in the past, and we expect that it will continue to vary over time. As a result, the loss of any significant customer or a decline in business with any significant
customer would materially and adversely affect our financial condition and results of operations. The following customers accounted for more than 10% of our revenue in the periods indicated below:



|                               |  |                |    |   |                             |  |    |   |  |  |    |  
|------------------------------ |  | -------------- | -- | - | --------------------------- |  | -- | - |  |  | -- | -
|                               |  | Year Ended     |    |   | Quarter 
EndedApril 3, 2011 | 
|Direct Customer                |  | January 3,2010 |    |   | January 2,2011              |  |   
|Sagemcom                       |  |                | 19 | % |                             |  | 16 | % |  |  | 24 | %
|Paltek Corporation             |  |                | 12 |   |                             |  | *  |   |  |  | 17 |  
|Flextronics International Ltd. |  |                | *  |   |                             |  | *  |   |  |  | *  |  
|NEC Corporation of America     |  |                | 11 |   |                             |  | *  |   |  |  | *  |  



|* | Less than 10%
|- | -------------

Recent changes in our senior
management positions could negatively affect our operations and relationships with our customers and employees.

Since
April 2010, a majority of our senior management have resigned or been replaced. In April 2010, our President and Chief Executive Officer resigned and, in June 2010, our Chief Financial Officer resigned. Our Chairman of the Board served as our
interim President and Chief Executive Officer while we searched for a permanent replacement. Our Board of Directors appointed a new Chief Financial Officer in June 2010 and a new President and Chief Executive Officer in August 2010. In March 2011,
our Vice President of Operations, resigned. Changes in our senior management or technical personnel could affect our customer relationships, employee morale, and our ability to operate in compliance with existing internal controls and regulations
and harm our business. If we are unable to successfully integrate our new members of senior management, our business could be negatively affected.

Because competition for qualified personnel is intense in our industry, we may not be able to recruit and retain necessary personnel, which could impact our product development and sales.

Our future success depends on our ability to continue to attract, retain and motivate other senior management and
qualified technical personnel, particularly software engineers, digital circuit designers, mixed-signal circuit designers and systems and algorithms engineers. Competition for these employees is intense. If we are unable to retain our existing
personnel, or attract and train additional qualified personnel, our growth may be limited due to our lack of capacity to develop and market our products. All of our key employees are employed on an at will basis. The loss of any of these
key employees could slow our product development processes and sales efforts or harm the perception of our business. We may also incur increased operating expenses and be required to divert the attention of other senior management to recruit
replacements for key employees. Also, our depressed common stock price may result in difficulty attracting and retaining personnel as stock options and other forms of incentive equity grants generally comprise a significant portion of our
compensation packages for all employees, which could harm our ability to provide technologically competitive products.

In
addition, in the third quarter of 2010 we implemented a corporate restructuring plan that included a reduction in work force of approximately 20% and the closure of three of our overseas offices. That restructuring is predominantly complete. The
changes in senior management and the multiple restructurings and reductions in force over the past year have had and may continue to have a negative effect on employee morale.

Risks Related to the Tallwood Investment

Tallwood Investors may exercise
significant influence over us, including through their ability to elect three members of our Board of Directors.

In April
2009, we sold 24 million shares of our common stock and warrants to purchase up to an additional 7.8 million shares of our common stock (such common stock and warrants collectively referred to as the Securities) to Tallwood III, L.P., a
Delaware limited partnership, Tallwood III Partners, L.P., a Delaware limited partnership, Tallwood III Associates, L.P., a Delaware limited partnership, and Tallwood III Annex, L.P., a Delaware limited partnership (collectively referred to as the
Tallwood Investors). The funds raised for the sale of the Securities funded a portion of our acquisition of the Broadband Access product line from Conexant Systems, Inc. In addition, one of the Tallwood Investors participated in our public offering
of our common stock in fiscal year 2010 and purchased an additional 5.6 million shares of our common stock. The common stock owned by Tallwood Investors represented approximately 43% of



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the outstanding shares of our common stock (excluding the exercise of warrants) as of May 5, 2011. Assuming the full exercise of the warrants, the common stock owned by the Tallwood
Investors would represent 49% of the outstanding shares of our common stock. Until the third anniversary of the closing of the original issuance of the Securities to the Tallwood Investors, the Tallwood Investors have agreed to vote all of their
shares in excess of the shares constituting 35% of our outstanding common stock in the same proportion as the votes cast by all our other stockholders. We also entered into a stockholder agreement with the Tallwood Investors, which, among other
things, contains certain governance arrangements and various provisions relating to board composition, stock ownership, transfers by the Tallwood Investors and their affiliates, voting and other matters. Subject to certain exceptions, the Tallwood
Investors are permitted under the terms of the stockholder agreement to maintain their ownership interest in Ikanos in subsequent equity offerings. As a result, the Tallwood Investors may have the ability to significantly influence the outcome of
any matter submitted for the vote of our stockholders. The Tallwood Investors may have interests that diverge from, or even conflict with, our interests and those of our other stockholders. In addition, the Certificate of Designation of the Series A
Preferred Stock provides that the Tallwood Investors have the right to designate three directors to our Board of Directors while the Tallwood Investors hold at least 35% of our outstanding common stock, and a number of directors to our Board of
Directors proportional to the Tallwood Investors ownership position in us at such time as the Tallwood Investors hold less than 35% of our outstanding common stock. As a result, the directors elected to our Board of Directors by the Tallwood
Investors may exercise significant influence on matters considered by our Board of Directors.

The market price of our common stock may
decline as a result of future sales of our common stock by the Tallwood Investors.

We are unable to predict the potential
effects of the Tallwood Investors ownership of our outstanding common stock on the trading activity in and market price of our common stock. Pursuant to the stockholder agreement, we have granted the Tallwood Investors and their permitted
transferees registration rights for the resale of the shares of our common stock and shares of our common stock underlying the warrants. Under the terms of the registration rights, we have filed a registration statement that permits the resale of
such securities into the public market, and any such resale would increase the number of shares of our common stock available for public trading. Sales by the Tallwood Investors or their permitted transferees of a substantial number of shares of our
common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our common stock.

Risks Related to Our Operations and Technology

We rely on third-party
technologies for the development of our products, and our inability to use such technologies in the future or the failure of such technology would harm our ability to remain competitive.

We rely on third parties for technologies that are integrated into some of our products, including the memory cells, input/output cells,
hardware interfaces and core processor logic. If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies fail to operate properly, we may not be able to secure alternatives in a timely manner and
our ability to remain competitive would be harmed. In addition, the third party intellectual property could also expose us to liability and, while we have not experienced material warranty costs in any period as a result of third party intellectual
property, there can be no assurance that we will not experience such costs in the future.

We are a fabless semiconductor company and
failure to secure and maintain sufficient capacity with our subcontractors could significantly disrupt shipment of our products, impair our relationships with customers and decrease sales, which would negatively impact our market share and operating
results.

We are a fabless semiconductor company and currently use nine wafer foundries and five outside factory
subcontractors, located in Austria, China, Israel, Korea, Malaysia, Singapore, Taiwan, and the United States to manufacture, assemble and test all of our current semiconductor devices. While we work with multiple suppliers, generally each product is
made by one foundry and one assembly and test subcontractor. Accordingly, we are greatly dependent on a limited number of suppliers to deliver quality products on time. In past periods of high demand in the semiconductor market, we have experienced
delays in meeting our capacity demand and as a result were unable to deliver products to our customers on a timely basis. In addition, we have experienced similar delays due to technical and quality control problems.

If we were to need to qualify a new facility to meet our capacity, or if a foundry or subcontractor ceased working with us, as has
happened in the past, or if production is disrupted, we may be unable to meet our customer demand on a timely basis, or at all. We may be required to incur additional costs and may need to successfully qualify an alternative facility in order to not
disrupt our business.

In the event we seek to use new wafer foundries to manufacture a portion of our semiconductor products, we may not
be able to bring the new foundries on-line rapidly enough and may not achieve anticipated cost reductions.

As indicated
above, we use a limited number of independent wafer foundries to manufacture all of our semiconductor products which could expose us to risks of delay, increased costs and customer dissatisfaction in the event that any of these foundries are unable
to meet our semiconductor requirements. We may seek to qualify additional wafer foundries to meet our future requirements but the qualification process typically requires several months or more. By the time a new foundry is qualified, the need for
additional capacity



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may have passed or we may have lost the potential opportunity to a competitor. If we cannot accomplish this qualification in a timely manner, we would experience a significant interruption in
supply of the affected products which could in turn cause our costs of revenue to increase and our overall revenue to decrease. This would harm our customer relationships and our market share and operating results would suffer as a result.

When demand for manufacturing capacity is high, we may take various actions to try to secure sufficient capacity, which could be costly
and negatively impact our operating results.

Although we have purchase order commitments to supply specified levels of
products to our OEM customers, we do not have a guaranteed level of production capacity from any of our subcontractors facilities that we depend upon to produce semiconductors. Facility capacity may not be available when we need it or at
reasonable prices. We place our orders on the basis of our OEM customers purchase orders or our forecast of customer demand, and our subcontractors may not be able to meet our requirements in a timely manner, or at all.

In order to secure sufficient manufacturing facility capacity when demand is high and mitigate the risks described in the foregoing
paragraphs, we may enter into various arrangements with subcontractors that could be costly and negatively affect our operating results, including:



| |  |  | option payments or other prepayments to a subcontractor;
| | - |  | --------------------------------------------------------



| |  |  | nonrefundable deposits with or loans to subcontractors in exchange for capacity commitments;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | contracts that commit us to purchase specified quantities of components over extended periods;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | purchase of testing equipment for specific use at subcontractors facilities;
| | - |  | -----------------------------------------------------------------------------



| |  |  | issuance of equity securities to a subcontractor; and
| | - |  | -----------------------------------------------------



| |  |  | other contractual relationships with subcontractors.
| | - |  | ----------------------------------------------------

We may not be able to make any such arrangements in a timely fashion or at all, and any arrangements may be costly, reduce our financial flexibility, not be on terms favorable to us and may contain
financial penalties if we do not use all of our allocated facility capacity. These penalties and obligations may be expensive and could harm our business.

Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share, and we may face warranty and product liability claims
arising from defective products.

We have in the past, and may in the future experience, defects (commonly referred to as
bugs) in our products which may not always be detected by testing processes. Defects can result from a variety of causes, including but not limited to manufacturing problems or third party intellectual property incorporated into our
products. If defects are discovered after our products have shipped, we have experienced, and could continue to experience, warranty and consequential damages claims from our customers. If we are unable to deliver quality products, our reputation
would be harmed, which could result in the loss of, future orders and business with our customers. Further, we may experience difficulties in achieving acceptable yields on some of our products, which may result in higher per unit cost, shipment
delays, and increased expenses associated with resolving yield problems. If any of these adverse risks are realized and we are not able to offset the lost opportunities, our revenue, margins and operating results would decline.

If our forecasts of our OEM customers demand are inaccurate, our financial condition and liquidity would suffer.

We place orders with our suppliers based on the forecasts of our OEM customers demand. Our forecasts are based on multiple
assumptions, each of which may introduce errors into our estimates. If we do not accurately forecast customer demand, we may forego revenue opportunities, lose market share, damage customer relationships or allocate resources to manufacturing
products that we may not be able to sell. As a result, as we experienced in the second and third quarters of fiscal 2010, we could have excess or obsolete inventory, resulting in a decline in the value of our inventory, which would increase our cost
of revenue, negatively affect gross margins, and create a drain on our liquidity. Our failure to accurately manage inventory against demand would adversely affect our financial results.

To remain competitive, we need to continue to reduce the cost of our semiconductor chips, which includes migrating to smaller geometrical processes, and our failure to do so may harm our business.

We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometrical processes, which
are measured in microns or nanometers. We have in the past, and may in the future, experience some difficulties in shifting to smaller geometry process technologies or new manufacturing processes, which resulted in reduced manufacturing yields,
delays in product deliveries and increased product costs and expenses. Additionally, upfront expenses associated with smaller geometry process technologies such as for masks and tooling can be significantly higher than those for the processes that
we currently use, and our



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migration to these newer process technologies can result in significantly higher research and development expenses.

Third-party claims of infringement or other claims against us could adversely affect our ability to market our products, require us to redesign our products or seek licenses from third parties, and
harm our business. In addition, any litigation required to defend such claims could result in significant expenses and diversion of our resources.

Semiconductor industry companies and intellectual property holding companies often aggressively protect and pursue their intellectual property rights. From time to time, we receive, and we are likely to
continue to receive in the future, notices that claim our products infringe upon other parties proprietary rights. We may in the future be engaged in litigation with parties who claim that we have infringed their patents or misappropriated or
misused their trade secrets or who may seek to invalidate one or more of our patents, and it is possible that we would not prevail in any future lawsuits. An adverse determination in any of these types of claims could prevent us from manufacturing
or selling some of our products, could increase our costs of products and could expose us to significant liability. In addition, a court could issue a preliminary or permanent injunction that would require us to withdraw or recall certain products
from the market or redesign certain products offered for sale or that are under development. In addition, we may be liable for damages for past infringement and royalties for future use of the technology and we may be liable for treble damages if
infringement is found to have been willful. Even if claims against us are not valid or successfully asserted, these claims could result in significant costs and a diversion of management and personnel resources to defend.

Any potential dispute involving our patents or other intellectual property could also include our customers which could trigger our indemnification
obligations to one or more of them and result in substantial expense to us.

In any potential dispute or claim involving
our patents or other intellectual property, our customers could also become the target of litigation. Because we may indemnify our customers for intellectual property claims made against them for products incorporating our technology, any litigation
could trigger technical support and indemnification obligations in some of our license agreements, which could result in substantial expenses. While we have not incurred any indemnification expenses as a result of infringement notices to our
customers, any future indemnity claim could adversely affect our relationships with our OEM customers and result in substantial costs to us.

We face intense competition in the semiconductor industry and the broadband communications markets, which could reduce our market share and negatively
impact our revenue.

The semiconductor industry and the broadband communications markets are intensely competitive. In the
VDSL or VDSL-like technology, PON and communications processing markets, we currently compete or expect to compete with, among others, Broadcom Corporation, BroadLight, Inc., Cavium Networks, Inc., Freescale Semiconductor, Inc., Lantiq Deutschland
GmbH, Marvell Technology Group Ltd., PMC-Sierra, Inc., Realtek Semiconductor Corp and Ralink Corp.

Many of our competitors
may have stronger manufacturing subcontractor relationships than us and longer operating histories, greater name recognition, larger customer bases, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and
other resources. In addition, many of our competitors have extensive technology libraries that could enable them to incorporate broadband or communications processing technologies into a system on a chip, creating a more attractive product line than
ours. These competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. In addition, current and potential competitors have established or may establish financial or strategic relationships
among themselves or with existing or potential customers, resellers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Existing or new competitors may also
develop alternative technologies that more effectively address our markets with products that offer enhanced features and functionality, lower power requirements, greater levels of semiconductor integration or lower cost. We cannot assure you that
we will be able to compete successfully against current or new competitors, in which case we may lose market share in our existing markets and our revenue may fail to increase or may decline.

Other data transmission technologies and communications processing technologies may compete effectively with the service provider services addressed by our products, which could adversely affect our
revenue and business.

Our revenue currently is dependent upon the increase in demand for service provider services that
use broadband technology and integrated residential gateways. Besides xDSL and other DMT-based technologies, service providers can decide to deploy PON or fiber and there would be reduced need for our products. For example, a major service provider
in Korea announced its intention to use more FTTH deployments in the future, which could be in lieu of xDSL products. If more service providers decide to use FTTH deployments, it could harm our xDSL business if our products are not needed.
Furthermore, residential gateways compete against a variety of different data distribution technologies, including Ethernet routers, set-top boxes provided by cable and satellite providers, wireless (WiFi and WiMax) and emerging power line and
multimedia over coax alliance technologies. If any of these competing technologies proves to be more reliable, faster or less expensive than, or has any other advantages over the broadband technologies we provide, the demand for our products may
decrease and our business would be harmed.



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Rapidly changing standards and regulations could make our products obsolete, which would cause our
revenue and operating results to suffer.

We design our products to conform to regulations established by governments and
to standards set by industry standards bodies worldwide such as the Committee T1E1.4 (now known as NIPP-NAI) of the ATIS (accredited by ANSI), and worldwide by both the IEEE and the ITU-T. Because our products are designed to conform to current
specific industry standards, if competing standards emerge that are preferred by our customers, we would have to make significant expenditures to develop new products. If our customers adopt new or competing industry standards with which our
products are not compatible, or the industry groups adopt standards or governments issue regulations with which our products are not compatible, our existing products would become less desirable to our customers, and our revenue and operating
results would suffer.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies,
which could weaken our competitive position, reduce our revenue or increase our cost.

Our success will depend, in part, on
our ability to protect our intellectual property. We rely on a combination of patent, copyright, trademark and trade secret laws, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. Our pending
patent applications may not result in issued patents, and our existing and future patents may not be sufficiently broad to protect our proprietary technologies or may be held invalid or unenforceable in court. While we are not currently aware of
misappropriation of our existing technology, policing unauthorized use of our technology is difficult and we cannot be certain that the steps we have taken will prevent the misappropriation or unauthorized use of our technologies, particularly in
foreign countries where we have not applied for patent protections and, even if such protections were available, the laws may not protect our proprietary rights as fully as United States law. The patents we have obtained or licensed, or may obtain
or license in the future, may not be adequate to protect our proprietary rights. Our competitors may independently develop or may have already developed technology similar to us, duplicate our products or design around any patents issued to us or
our other intellectual property. In addition, we have been, and may be, required to license our patents as a result of our participation in various standards organizations. If competitors appropriate our technology and it is not adequately
protected, our competitive position would be harmed, our legal costs would increase and our revenue would be harmed.

Changes in current or
future laws or regulations or the imposition of new laws or regulations by federal or state agencies or foreign governments could impede the sale of our products or otherwise harm our business.

The effects of regulation on our customers or the industries in which they operate may materially and adversely impact our business. For
example, Indias government is currently considering regulation that may limit or prohibit sales of certain telecommunications products manufactured in China. While the rule-making process is not final, if the rules apply to equipment
containing our semiconductor products, such regulation could reduce sales of our products and have a negative effect on our operating results.

In addition, the Ministry of Internal Affairs and Communications in Japan, the Ministry of Communications and Information in Korea, various national regulatory agencies in Europe, the European Commission
in the European Union, the U.S. Federal Communications Commission have broad jurisdiction over our target markets. Although the laws and regulations of these and other federal or state agencies may not be directly applicable to our products, they do
apply to much of the equipment into which our products are incorporated. Governmental regulatory agencies worldwide may affect the ability of telephone companies to offer certain services to their customers or other aspects of their business, which
may in turn impede sales of our products.

In addition to the laws and regulations specific to telecommunications equipment,
other laws and regulations affect our business. For instance, changes in tax, employment and import/export laws and regulations, and their enforcement commonly occur in the various countries in which we operate. If changes in those laws and
regulations, or in the enforcement of those laws and regulations, occur in a manner that we did not anticipate, those changes could cause us to have increased operating costs or to pay higher taxes, and thus have a negative effect on our operating
results.

Failure to maintain adequate internal controls as required by Section 404 of the Sarbanes-Oxley Act (SOX) could harm our
operating results, our ability to operate our business and our investors view of Ikanos.

If we do not maintain the
adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of SOX. Effective internal controls
particularly those related to revenue recognition, valuation of inventory and warranty provisions, are necessary for us to produce reliable financial reports and are important in helping to prevent financial fraud. If we cannot provide reliable
financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.



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Our international operations subject us to risks not faced by companies without international operations.

We currently obtain substantially all of our manufacturing, assembly and testing services from suppliers and
subcontractors located outside the United States, and have a significant portion of our research and development team located in China and India. In addition, 99% of our revenue for the three months ended April 3, 2011 and 98% of our revenue
for the fiscal year ended January 2, 2011 were derived from sales to customers outside the United States. We have expanded our international business activities and may open other design and operational centers abroad. International operations
are subject to many other inherent risks, including but not limited to:



| |  |  | political, social and economic instability, including war and terrorist acts;
| | - |  | -----------------------------------------------------------------------------



| |  |  | exposure to different legal standards, particularly with respect to intellectual property;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | trade and travel restrictions;
| | - |  | ------------------------------



| |  |  | the imposition of governmental controls and restrictions or unexpected changes in regulatory requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | burdens of complying with a variety of foreign laws;
| | - |  | ----------------------------------------------------



| |  |  | import and export license requirements and restrictions of the United States and each other country in which we operate;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign technical standards;
| | - |  | ----------------------------



| |  |  | changes in tariffs;
| | - |  | -------------------



| |  |  | difficulties in staffing and managing international operations;
| | - |  | ---------------------------------------------------------------



| |  |  | foreign currency exposure and fluctuations in currency exchange rates;
| | - |  | ----------------------------------------------------------------------



| |  |  | difficulties in collecting receivables from foreign entities or delayed revenue recognition; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | potentially adverse tax consequences.
| | - |  | -------------------------------------

Because we are currently substantially dependent on our foreign sales, research and development and operations, any of the factors described above could significantly harm our ability to produce quality
products in a timely and cost effective manner, and increase or maintain our foreign sales.

Fluctuations in exchange rates between and
among the U.S. dollar and other currencies in which we do business, may adversely affect our operating results.

We
maintain extensive operations internationally. We have offices in China, India and other offices in France, Germany, Japan, Korea, Singapore and Taiwan. We incur a portion of our expenses in currencies other than the U.S. dollar, including the
Chinese Yuan, the Euro, the Indian rupee, the Korean won, the Japanese yen, Singapore dollar and the Taiwanese dollar. As a result, we may experience foreign exchange gains or losses due to the volatility of these currencies compared to the U.S.
dollar. Because we report our results in U.S. dollars, the difference in exchange rates in one period compared to another directly impacts period to period comparisons of our operating results. In addition, our sales have been historically
denominated in U.S. dollars. Currency exchange rates have been especially volatile in the recent past and these currency fluctuations may make it difficult for us to predict and/or provide guidance on our results. Currently, we have not implemented
any strategies to mitigate risks related to the impact of fluctuations in currency exchange rates and we cannot predict future currency exchange rate changes.

Several of the facilities that manufacture our products, most of our OEM customers and the service providers they serve, and our California facility are located in regions that are subject to
earthquakes and other natural disasters.

Several of our subcontractors facilities that manufacture, assemble and
test our products and five of our wafer foundries are located in Malaysia, Singapore and Taiwan. Several large customers are located in Japan and Korea. The Asia-Pacific region has experienced significant earthquakes and other natural disasters in
the past, including a recent major earthquake and tsunami in Japan, and could be subject to additional seismic activities. Any earthquake or other natural disaster in these areas could significantly disrupt these manufacturing facilities
production capabilities and could result in our experiencing a significant delay in delivery, or substantial shortage of wafers, in particular, and possibly in higher wafer prices, and our products in general. Our headquarters in California are also
located near major earthquake fault lines. If there is a major earthquake or any other natural disaster in a region where one of our facilities is located, it could significantly disrupt our operations.

Changes in our tax rates could affect our future results.

Our future effective tax rates could be favorably or unfavorably affected by the absolute amount and future geographic distribution of our pre-tax income, our ability to successfully shift our operating
activities to foreign operations and the amount and timing of inter-company payments from our foreign operations subject to U.S. income taxes related to the transfer of certain rights and functions.



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Risks Related to Our Common Stock

The market price of our common stock has been and may continue to be volatile, and holders of our common stock may not be able to resell shares at or above the price paid, or at all.

The market price of our common stock has fluctuated substantially since our initial public offering and is likely to continue to be highly
volatile and subject to wide fluctuations. Fluctuations have occurred and may continue to occur in response to various factors, many of which we cannot control, including:



| |  |  | quarter-to-quarter variations in our operating results;
| | - |  | -------------------------------------------------------



| |  |  | announcements of changes in our senior management;
| | - |  | --------------------------------------------------



| |  |  | the gain or loss of one or more significant customers or suppliers;
| | - |  | -------------------------------------------------------------------



| |  |  | announcements of technological innovations or new products by our competitors, customers or us;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the gain or loss of market share in any of our markets;
| | - |  | -------------------------------------------------------



| |  |  | general economic and political conditions and specific conditions in the semiconductor industry and broadband technology markets, including seasonality
in sales of consumer products into which our products are incorporated;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continuing international conflicts and acts of terrorism;
| | - |  | ---------------------------------------------------------



| |  |  | changes in earnings estimates or investment recommendations by analysts;
| | - |  | ------------------------------------------------------------------------



| |  |  | changes in investor perceptions;
| | - |  | --------------------------------



| |  |  | changes in product mix; or
| | - |  | --------------------------



| |  |  | changes in expectations relating to our products, plans and strategic position or those of our competitors or customers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

The closing sale price of our common stock on the NASDAQ Global Market for the period of January 1, 2007 to April 3, 2011
ranged from a low of $0.86 to a high of $9.34.

In addition, the market prices of securities of semiconductor and other
technology companies have been volatile, particularly for companies like us, with low trading volumes. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the
operating performance of the specific companies. Accordingly, holders of our common stock may not be able to resell their shares at or above the price paid.

If we fail to continue to meet all applicable NASDAQ Global Market requirements, our stock could be delisted from the NASDAQ Global Market. If delisting occurs, it would adversely affect the
market liquidity of our common stock and harm our business.

Our common stock is currently traded on the NASDAQ Global
Market under the symbol IKAN. If we fail to meet any of the continued listing standards of the NASDAQ Global Market, our common stock could be delisted from the NASDAQ Global Market. These continued listing standards include
specifically enumerated criteria, including a $1.00 minimum closing bid price.

Our common stock has traded below $1.00 per
share in the past. If our common stock trades below $1.00 per share for a period of 30 consecutive business days, there can be no assurance that NASDAQ will not take action to enforce its listing requirements. Any delisting could adversely
affect the market price of and liquidity of the trading market for our common stock, our ability to obtain financing for the continuation of its operations and could result in the loss of confidence by investors, suppliers and employees.

The pending class action litigation could cause us to incur substantial costs and divert our managements attention and resources.

In November 2006, three putative class action lawsuits were filed in the United States District Court for the Southern
District of New York against us, our directors and two former executive officers, as well as the lead underwriters for its initial and secondary public offerings. The lawsuits were consolidated and an amended complaint was filed on April 24,
2007. The amended complaint sought unspecified damages for certain alleged misrepresentations and omissions made by us in connection with both our initial public offering in September 2005 and its follow-on offering in March 2006. On
June 25, 2007, we filed motions to dismiss the amended complaint, and on March 10, 2008, the Court dismissed the case with prejudice. On March 25, 2008, plaintiffs filed a motion for reconsideration, and on June 12, 2008, the
District Court denied the motion for reconsideration. On October 15, 2008, plaintiffs appealed the District Courts dismissal of the amended complaint and denial of its motion for reconsideration to the United States Court of Appeals for
the Second Circuit. On September 17, 2009, the Court of Appeals affirmed the District Courts dismissal of the amended complaint, but vacated its judgment on the motion for reconsideration and remanded the case to the District Court for
further proceedings. On May 13, 2010, the District Court granted plaintiffs leave to file a motion to amend the pleadings. Plaintiffs filed a motion for leave to amend the complaint on June 11, 2010. We opposed on July 11, 2010, and
on November 23, 2010, the District Court denied the motion. On January 6, 2011, plaintiffs filed a notice of appeal with the United States Court of Appeals for the Second Circuit and, on March 18, 2011, filed Appellants Opening
Brief. We will file our opposition brief by June 17, 2011.



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Additionally, from time to time, we are a party to various legal proceedings and claims
arising from the normal course of business activities. Based on current available information, other than set forth above, we do not expect that the ultimate outcome of any currently pending unresolved matters, individually or in the aggregate, will
have a material adverse effect on our results of operations, cash flows or financial position.

If the securities analyst who currently
publishes reports on Ikanos does not continue to publish research or reports about our business, or if he issues an adverse opinion regarding our common stock, the market price of our common stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts
publish about us or our business. We have lost all the securities research coverage with the exception of one analyst. If this analyst issues an adverse opinion regarding our common stock, the stock price would likely decline. If the analyst ceases
coverage of us or fails to regularly publish reports on us, we could lose further visibility to the financial markets, which in turn could cause the market price of our common stock or trading volume to decline.

Takeover attempts that stockholders may consider favorable may be delayed or discouraged due to our corporate charter and bylaws which contain
anti-takeover provisions, Delaware law, or the Tallwood Investors.

Provisions in our certificate of incorporation may have
the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:



| |  |  | the right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the establishment of a classified Board of Directors requiring that not all members of the board be elected at one time;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | the prohibition of cumulative voting in the election of directors which would otherwise allow less than a majority of stockholders to elect director
candidates;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon at a
stockholders meeting;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of our Board of Directors to alter our bylaws without obtaining stockholder approval;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the ability of our Board of Directors to issue, without stockholder approval, up to 1,000,000 shares of preferred stock with terms set by the Board of
Directors, which rights could be senior to those of common stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the required approval of holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws
or amend or repeal the provisions of our certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the required approval of holders of a majority of the shares entitled to vote at an election of directors to remove directors for cause; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the elimination of the right of stockholders to call a special meeting of stockholders and to take action by written consent.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203
of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These provisions in our certificate of
incorporation, bylaws and under Delaware law could discourage potential takeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than
it would without these provisions.

Due to the significant number of shares of our common stock that the Tallwood Investors
hold as discussed above, the Tallwood Investors may have the ability to significantly influence the outcome of any matter submitted for the vote of our stockholders, including a takeover attempt, and may have interests that diverge from, or even
conflict with, our interests and those of our other stockholders.



|Item 6. | Exhibits
|------- | --------



|               |  |                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                                                           
|               | 
|3.1            |  | Certificate of Designation of Series A Preferred Stock. Incorporated by reference to Exhibit 3.2 of the Registrants current report on Form 8-K filed with the SEC on
August 25, 2009.



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##### Table of Contents

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



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##### Table of Contents

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.



|                   |  |                             |  |                                                      
|------------------ |  | --------------------------- |  | -----------------------------------------------------
|                   |  | IKANOS COMMUNICATIONS, INC.
|                   |  |                            
|Dated: May 5, 2011 |  | By:                         |  | /s/ John H. Quigley                                  
|                   |  |                             |  | John H. Quigley                                      
|                   |  |                             |  | President and Chief Executive Officer                
|                   |  |                             |  | (Principal Executive Officer)                        
|                   |  |                            
|Dated: May 5, 2011 |  | By:                         |  | /s/ Dennis Bencala                                   
|                   |  |                             |  | Dennis Bencala                                       
|                   |  |                             |  | Chief Financial Officer and Vice President of Finance
|                   |  |                             |  | (Principal Financial and Accounting Officer)         



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IKANOS COMMUNICATIONS, INC.

EXHIBITS TO FORM 10-Q QUARTERLY REPORT

For the Quarter Ended April 3, 2011



|               |  |                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                                                           
|3.1            |  | Certificate of Designation of Series A Preferred Stock. Incorporated by reference to Exhibit 3.2 of the Registrants current report on Form 8-K filed with the SEC on
August 25, 2009.
|               | 
|31.1           |  | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.     
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.     
|               | 
|32.1           |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.        



34