##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 000-31523
 IXIA
 (Exact name of Registrant as specified in its charter)
 California
    
    95-4635982(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 26601 West Agoura Road, Calabasas, CA 91302  (Address of principal executive offices, including zip code)
 (818) 871-1800  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Common Stock
    
    62,487,125(Class of Common Stock)
    
    (Outstanding at August 3, 2009)




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##### 



IXIA
 TABLE OF CONTENTS
 Page NumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of June 30,
2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Income for the
three and six months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market
Risk
    
    
    26Item 4. Controls and Procedures
    
    
    27PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    31EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



IXIACondensed Consolidated Balance Sheets
(in thousands)
 June 30,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,933
    
    
    $
    192,791Short-term investments in marketable securities
    
    
    41,846
    
    
    
    9,850Accounts receivable, net of allowance for
doubtful accounts of $828 and $764 as of June
30, 2009 and December 31, 2008, respectively
    
    
    31,649
    
    
    
    34,001Inventories
    
    
    18,420
    
    
    
    14,966Deferred income taxes
    
    
    6,475
    
    
    
    4,855Prepaid expenses and other current assets
    
    
    6,048
    
    
    
    4,981Total current assets
    
    
    135,371
    
    
    
    261,444Investments in marketable securities
    
    
    62,873
    
    
    
    3,657Property and equipment, net
    
    
    18,901
    
    
    
    18,506Deferred income taxes
    
    
    23,201
    
    
    
    14,945Intangible assets, net
    
    
    55,805
    
    
    
    10,592Goodwill
    
    
    39,194
    
    
    
    16,728Other assets
    
    
    2,254
    
    
    
    2,554Total assets
    
    $
    337,599
    
    
    $
    328,426Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    3,890
    
    
    $
    4,729Accrued expenses
    
    
    21,512
    
    
    
    18,823Deferred revenues
    
    
    26,401
    
    
    
    19,558Income taxes payable
    
    
    620
    
    
    
    452Total current liabilities
    
    
    52,423
    
    
    
    43,562Deferred revenues
    
    
    5,094
    
    
    
    6,109Other liabilities
    
    
    12,313
    
    
    
    5,559Total liabilities
    
    
    69,830
    
    
    
    55,230Shareholders equity:Common stock, without par value; 200,000
shares authorized, 62,422 and 63,391 shares
issued and outstanding as of June 30, 2009 and
December 31, 2008, respectively
    
    
    85,588
    
    
    
    92,386Additional paid-in capital
    
    
    114,390
    
    
    
    107,882Retained earnings
    
    
    66,537
    
    
    
    73,182Accumulated other comprehensive income (loss)
    
    
    1,254
    
    
    
    (254
    )Total shareholders equity
    
    
    267,769
    
    
    
    273,196Total liabilities and shareholders equity
    
    $
    337,599
    
    
    $
    328,426
  3




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##### Table of Contents



IXIACondensed Consolidated Statements of Income
(in thousands, except per share data)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Products
    
    $
    30,441
    
    
    $
    38,783
    
    
    $
    60,522
    
    
    $
    73,717Services
    
    
    7,964
    
    
    
    7,137
    
    
    
    15,007
    
    
    
    13,854Total revenues
    
    
    38,405
    
    
    
    45,920
    
    
    
    75,529
    
    
    
    87,571Costs and operating expenses:(1)Cost of revenues  products
    
    
    7,944
    
    
    
    8,658
    
    
    
    15,510
    
    
    
    16,840Cost of revenues  services
    
    
    801
    
    
    
    1,134
    
    
    
    1,744
    
    
    
    2,188Research and development
    
    
    11,443
    
    
    
    12,530
    
    
    
    23,309
    
    
    
    24,508Sales and marketing
    
    
    13,358
    
    
    
    15,027
    
    
    
    27,757
    
    
    
    29,723General and administrative
    
    
    6,514
    
    
    
    6,120
    
    
    
    12,738
    
    
    
    12,418Amortization of intangible assets
    
    
    1,386
    
    
    
    1,427
    
    
    
    2,711
    
    
    
    2,908Acquisition related
    
    
    2,522
    
    
    
    18
    
    
    
    2,522
    
    
    
    738Restructuring
    
    
    1,011
    
    
    
    
    
    
    
    1,011
    
    
    
    Total costs and operating expenses
    
    
    44,979
    
    
    
    44,914
    
    
    
    87,302
    
    
    
    89,323(Loss) income from operations
    
    
    (6,574
    )
    
    
    1,006
    
    
    
    (11,773
    )
    
    
    (1,752
    )Interest and other income, net
    
    
    668
    
    
    
    1,756
    
    
    
    1,229
    
    
    
    4,533Other-than-temporary impairment on investments
    
    
    
    
    
    
    
    
    
    
    (1,405
    )
    
    
    (Loss) income before income taxes
    
    
    (5,906
    )
    
    
    2,762
    
    
    
    (11,949
    )
    
    
    2,781Income tax (benefit) expense
    
    
    (3,252
    )
    
    
    981
    
    
    
    (5,304
    )
    
    
    894Net (loss) income
    
    $
    (2,654
    )
    
    $
    1,781
    
    
    $
    (6,645
    )
    
    $
    1,887(Loss) earnings per share:Basic
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    (0.11
    )
    
    $
    0.03Diluted
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    (0.11
    )
    
    $
    0.03Weighted average number of common and common
equivalent shares outstanding:Basic
    
    
    62,349
    
    
    
    65,343
    
    
    
    62,699
    
    
    
    66,646Diluted
    
    
    62,349
    
    
    
    66,265
    
    
    
    62,699
    
    
    
    67,594(1)      Stock-based
compensation included in:Cost of revenues  products
    
    $
    93
    
    
    $
    91
    
    
    $
    263
    
    
    $
    248Cost of revenues  services
    
    
    36
    
    
    
    35
    
    
    
    100
    
    
    
    95Research and development
    
    
    1,042
    
    
    
    774
    
    
    
    2,663
    
    
    
    1,883Sales and marketing
    
    
    797
    
    
    
    860
    
    
    
    2,061
    
    
    
    1,774General and administrative
    
    
    644
    
    
    
    672
    
    
    
    1,360
    
    
    
    1,368
  4




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##### Table of Contents



IXIACondensed Consolidated Statements of Cash Flows
(in thousands)
 Six months endedJune 30,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (6,645
    )
    
    $
    1,887Adjustments to reconcile net (loss) income to net cash
provided by operating activities:Depreciation and amortization
    
    
    5,114
    
    
    
    5,876Amortization of intangible assets
    
    
    2,711
    
    
    
    2,908Stock-based compensation
    
    
    6,447
    
    
    
    5,368Deferred income taxes
    
    
    (6,444
    )
    
    
    693Impairment on investments
    
    
    1,405
    
    
    
    Tax benefit (shortfall) from stock option transactions
    
    
    61
    
    
    
    (821
    )Excess tax benefits from stock-based compensation
    
    
    (53
    )
    
    
    (29
    )Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable, net
    
    
    6,167
    
    
    
    (3,483
    )Inventories
    
    
    496
    
    
    
    3,073Prepaid expenses and other current assets
    
    
    563
    
    
    
    (754
    )Other assets
    
    
    1,436
    
    
    
    (1,245
    )Accounts payable
    
    
    (1,391
    )
    
    
    936Accrued expenses
    
    
    (6,581
    )
    
    
    174Deferred revenues
    
    
    (72
    )
    
    
    1,315Income taxes payable and other liabilities
    
    
    72
    
    
    
    1,350Net cash provided by operating activities
    
    
    3,286
    
    
    
    17,248Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,611
    )
    
    
    (4,844
    )Purchases of available-for-sale securities
    
    
    (211,260
    )
    
    
    Proceeds from available-for-sale securities
    
    
    133,988
    
    
    
    2,001Purchases of held-to-maturity securities
    
    
    
    
    
    
    (8,924
    )Proceeds from held-to-maturity securities
    
    
    
    
    
    
    13,065Purchases of other intangible assets
    
    
    (156
    )
    
    
    (118
    )Payments in connection with acquisitions, net of cash
acquired
    
    
    (76,360
    )
    
    
    (81
    )Net cash (used in) provided by investing activities
    
    
    (158,399
    )
    
    
    1,099Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    1,626
    
    
    
    1,998Repurchase of common stock
    
    
    (8,424
    )
    
    
    (40,809
    )Excess tax benefits from stock-based compensation
    
    
    53
    
    
    
    29Net cash used in financing activities
    
    
    (6,745
    )
    
    
    (38,782
    )Net decrease in cash and cash equivalents
    
    
    (161,858
    )
    
    
    (20,435
    )Cash and cash equivalents at beginning of period
    
    
    192,791
    
    
    
    188,892Cash and cash equivalents at end of period
    
    $
    30,933
    
    
    $
    168,457
  5




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##### Table of Contents



IXIANotes to Condensed Consolidated Financial Statements
(unaudited)
 1. Business
  2. Basis of Presentation
    3. Acquisition
  6




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##### Table of Contents



Cash and cash equivalents
    
    $
    28,190Short-term investments in marketable securities
    
    
    8,638Accounts receivable
    
    
    3,815Inventories
    
    
    3,950Other current assets
    
    
    3,331Long-term investments in marketable securities
    
    
    4,366Deferred income taxes (non-current)
    
    
    2,490Other non-current assets
    
    
    2,108Identifiable intangible assets
    
    
    48,790Goodwill
    
    
    22,466Total assets acquired
    
    
    128,144Accounts payable and accrued expenses
    
    
    (9,116
    )Deferred revenues
    
    
    (5,900
    )Other liabilities (non-current)
    
    
    (6,570
    )Net assets acquired
    
    $
    106,558
    For the six months ended June 30,2009
    
    2008Total revenues
    
    $
    90,834
    
    
    $
    103,596Net loss
    
    
    (19,926
    )
    
    
    (8,457
    )
  7




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##### Table of Contents



4. Restructuring Costs
  RestructuringChargesInitial costs
    
    $
    1,011Cash payments
    
    
    (256
    )Adjustments
    
    
    Reserve balances at June 30, 2009
    
    $
    755
 5. Selected Balance Sheet Data
  Amortized
    
    
    FairCost
    
    
    ValueAvailable-for-sale  short-term:U.S. Treasury, government and agency debt securities
    
    $
    33,023
    
    
    $
    33,042Corporate debt securities
    
    
    8,680
    
    
    
    8,804Available-for-sale  long-term:U.S. Treasury, government and agency debt securities
    
    
    34,548
    
    
    
    34,559Corporate debt securities
    
    
    20,287
    
    
    
    20,680Auction rate securities
    
    
    6,173
    
    
    
    7,634$
    102,711
    
    
    $
    104,719
   Amortized
    
    
    FairCost
    
    
    ValueAvailable-for-sale  short-term:Corporate debt securities
    
    $
    10,182
    
    
    $
    9,850Available-for-sale  long-term:Auction rate securities
    
    
    3,211
    
    
    
    3,211Corporate debt securities
    
    
    446
    
    
    
    4463,657
    
    
    
    3,657$
    13,839
    
    
    $
    13,507
 8




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##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    4,300
    
    
    $
    1,987Work in process
    
    
    4,566
    
    
    
    4,932Finished goods
    
    
    9,554
    
    
    
    8,047$
    18,420
    
    
    $
    14,966
 6. Shareholders Equity
 Stock-Based Compensation
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Expected lives (in years)
    
    
    3.8
    
    
    
    4.0
    
    
    
    3.8
    
    
    
    4.1Risk-free interest rates
    
    
    1.8
    %
    
    
    2.9
    %
    
    
    1.3
    %
    
    
    2.6
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    48.1
    %
    
    
    49.5
    %
    
    
    47.8
    %
    
    
    49.7
    %
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise Price
    
    
    Contractual
    
    
    Intrinsicof Options
    
    
    Per Share
    
    
    Life (in years)
    
    
    ValueOutstanding as of December 31, 2008
    
    
    8,443
    
    
    $
    8.30Granted
    
    
    632
    
    
    
    4.98Exercised
    
    
    (116
    )
    
    
    1.15Forfeited/canceled
    
    
    (415
    )
    
    
    8.61Outstanding as of June 30, 2009
    
    
    8,544
    
    
    $
    8.14
    
    
    
    3.73
    
    
    $
    4,194Exercisable as of June 30, 2009
    
    
    4,616
    
    
    $
    8.36
    
    
    
    2.49
    
    
    $
    2,929
 9




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##### Table of Contents



WeightedAverage GrantNumber
    
    
    Date Fair Valueof Awards
    
    
    Per ShareOutstanding as of December 31, 2008
    
    
    1,475
    
    
    $
    6.77Awarded
    
    
    144
    
    
    
    5.12Released
    
    
    (234
    )
    
    
    7.29Forfeited/canceled
    
    
    (39
    )
    
    
    6.72Outstanding as of June 30, 2009
    
    
    1,346
    
    
    $
    6.60
 Stock Buyback Program
  Other Comprehensive Income
  7. (Loss) Earnings Per Share
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net (loss) income
    
    $
    (2,654
    )
    
    $
    1,781
    
    
    $
    (6,645
    )
    
    $
    1,887Denominator:Basic presentation:Weighted average common shares
    
    
    62,349
    
    
    
    65,343
    
    
    
    62,699
    
    
    
    66,646Denominator for basic calculation
    
    
    62,349
    
    
    
    65,343
    
    
    
    62,699
    
    
    
    66,646
 10




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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Diluted presentation:Shares used above
    
    
    62,349
    
    
    
    65,343
    
    
    
    62,699
    
    
    
    66,646Weighted average effect of
dilutive stock options and other
share-based awards
    
    
    
    
    
    
    922
    
    
    
    
    
    
    
    948Denominator for diluted calculation
    
    
    62,349
    
    
    
    66,265
    
    
    
    62,699
    
    
    
    67,594Basic (loss) earnings per share
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    (0.11
    )
    
    $
    0.03Diluted (loss) earnings per share
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    (0.11
    )
    
    $
    0.03
  8. Concentrations
 Significant Customer
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Amount of total revenues
    
    $
    7,134
    
    
    $
    9,177
    
    
    $
    13,984
    
    
    $
    19,745As a percentage of total revenues
    
    
    18.6
    %
    
    
    20.0
    %
    
    
    18.5
    %
    
    
    22.5
    %
  International Data
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Amount of total revenues
    
    $
    13,477
    
    
    $
    17,037
    
    
    $
    30,205
    
    
    $
    30,853As a percentage of total revenues
    
    
    35.1
    %
    
    
    37.1
    %
    
    
    40.0
    %
    
    
    35.2
    %
  11




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##### Table of Contents



9. Fair Value Measurements
  Level 1.
    
    Observable inputs such as quoted prices in active markets;Level 2.
    
    Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; andLevel 3.
    
    Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
  June 30, 2009
    
    
    December 31, 2008Quoted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    QuotedPrices in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prices inActive
    
    
    Significant
    
    
    
    
    
    
    
    
    
    
    Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    Significant
    
    
    
    
    
    
    Markets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    
    
    
    
    Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    
    
    
    
    Assets
    
    
    Inputs
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents:(1)Money market funds
    
    $
    14,680
    
    
    $
    14,680
    
    
    $
    
    
    
    $
    
    
    
    $
    185,858
    
    
    $
    185,858
    
    
    $
    
    
    
    $
    Short-term investments:(1)U.S. Treasury, government and agency
debt securities
    
    
    33,042
    
    
    
    
    
    
    
    33,042
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate debt securities
    
    
    8,804
    
    
    
    
    
    
    
    8,804
    
    
    
    
    
    
    
    9,850
    
    
    
    
    
    
    
    9,850
    
    
    
    Long-term investments:U.S. Treasury, government and agency
debt securities
    
    
    34,559
    
    
    
    
    
    
    
    34,559
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate debt securities
    
    
    20,680
    
    
    
    
    
    
    
    20,680
    
    
    
    
    
    
    
    446
    
    
    
    
    
    
    
    446
    
    
    
    Auction rate securities (2)
    
    
    7,634
    
    
    
    
    
    
    
    
    
    
    
    7,634
    
    
    
    3,211
    
    
    
    
    
    
    
    
    
    
    
    3,211Total financial assets
    
    $
    119,399
    
    
    $
    14,680
    
    
    $
    97,085
    
    
    $
    7,634
    
    
    $
    199,365
    
    
    $
    185,858
    
    
    $
    10,296
    
    
    $
    3,211
 
 (1)
    
    To estimate the fair value of our money market funds, U.S. Treasury, government and
agency debt securities, and corporate debt securities, we use the estimated fair value per
our investment brokerage/custodial statements. To the extent deemed necessary, we may also
obtain non-binding market quotes to corroborate the estimated fair values reflected in our
investment brokerage/custodial statements.(2)
    
    Given the disruption in the auction process described below, there is no longer an
actively quoted market price for these securities. Accordingly, we utilized models to
estimate the fair values of these auction rate securities based on, among other items: (i)
the underlying structure of each security; (ii) the present value of future principal,
interest 12




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and/or dividend payments discounted at the appropriate rate considering the market rate and
conditions; (iii) consideration of the probabilities of default, auction failure, or
repurchase at par for each period; and (iv) credit quality and estimates of the recovery
rates in the event of default for each security. These estimated fair values could change
significantly based on future market conditions.  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Beginning balance
    
    $
    1,806
    
    
    $
    14,335
    
    
    $
    3,211
    
    
    $
    14,345Unrealized gain (loss) recorded in
other comprehensive income
    
    
    1,462
    
    
    
    (952
    )
    
    
    1,462
    
    
    
    (962
    )Unrealized loss recorded in earnings
    
    
    
    
    
    
    
    
    
    
    (1,405
    )
    
    
    Additions from Catapult (See Note 3)
    
    
    4,366
    
    
    
    
    
    
    
    4,366
    
    
    
    Ending balance
    
    $
    7,634
    
    
    $
    13,383
    
    
    $
    7,634
    
    
    $
    13,383Unrealized losses recorded in earnings
for level 3 assets still held at June 30
    
    $
    
    
    
    $
    
    
    
    $
    (1,405
    )
    
    $
    
     13




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 
  10. Commitments and Contingencies
  Litigation
 Ixia v. Charles Bettinelli and IneoQuest Technologies, Inc. st
  IneoQuest Technologies, Inc. vs. Ixia.
  Tucana Telecom NV vs. Catapult.
 14




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11. Recent Accounting Pronouncements
    15




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ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
  Acquisition of Catapult Communications Corporation.
  Revenues.
 16




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17




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Stock-Based Compensation.
  18




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Cost of Revenues
    
    
    our pricing policies and those of our competitors;
    
    the pricing we are able to obtain from our component suppliers and contract
manufacturers;
    
    the mix of customers and sales channels through which our products are sold;
    
    the mix of our products sold, such as the mix of software versus hardware product
sales;
    
    new product introductions by us and by our competitors;
    
    demand for our products; and
    
    production volume.
  Operating Expenses
  19




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Interest and Other Income, Net.
 Income Tax.
 RESULTS OF OPERATIONS
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Revenues:Products
    
    
    79.3
    %
    
    
    84.5
    %
    
    
    80.1
    %
    
    
    84.2
    %Services
    
    
    20.7
    
    
    
    15.5
    
    
    
    19.9
    
    
    
    15.8Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Costs and operating expenses:(1)Cost of revenues  products
    
    
    20.7
    
    
    
    18.9
    
    
    
    20.5
    
    
    
    19.2Cost of revenues  services
    
    
    2.1
    
    
    
    2.5
    
    
    
    2.3
    
    
    
    2.5Research and development
    
    
    29.8
    
    
    
    27.2
    
    
    
    30.9
    
    
    
    28.0Sales and marketing
    
    
    34.7
    
    
    
    32.6
    
    
    
    36.8
    
    
    
    33.9General and administrative
    
    
    17.0
    
    
    
    13.4
    
    
    
    16.8
    
    
    
    14.3Amortization of intangible assets
    
    
    3.6
    
    
    
    3.2
    
    
    
    3.6
    
    
    
    3.3
 20




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Three months ended
    
    Six months endedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Acquisition related
    
    
    6.6
    
    
    
    0.0
    
    
    
    3.3
    
    
    
    0.8Restructuring
    
    
    2.6
    
    
    
    
    
    
    
    1.3
    
    
    
    Total costs and operating expenses
    
    
    117.1
    
    
    
    97.8
    
    
    
    115.5
    
    
    
    102.0(Loss) income from operations
    
    
    (17.1
    )
    
    
    2.2
    
    
    
    (15.5
    )
    
    
    (2.0
    )Interest and other income, net
    
    
    1.7
    
    
    
    3.8
    
    
    
    1.6
    
    
    
    5.2Other-than-temporary impairment on investments
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    (Loss) income before income taxes
    
    
    (15.4
    )
    
    
    6.0
    
    
    
    (15.8
    )
    
    
    3.2Income tax (benefit) expense
    
    
    (8.5
    )
    
    
    2.1
    
    
    
    (7.0
    )
    
    
    1.0Net (loss) income
    
    
    (6.9
    )%
    
    
    3.9
    %
    
    
    (8.8
    )%
    
    
    2.2
    %____________________(1)   Stock-based compensation included in:Cost of revenues  products
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    0.3
    %Cost of revenues  services
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Research and development
    
    
    2.7
    
    
    
    1.7
    
    
    
    3.5
    
    
    
    2.2Sales and marketing
    
    
    2.1
    
    
    
    1.9
    
    
    
    2.7
    
    
    
    2.0General and administrative
    
    
    1.7
    
    
    
    1.5
    
    
    
    1.8
    
    
    
    1.6
 Comparison of Three and Six Months Ended June 30, 2009 and 2008
 Revenues.
   Cost of Revenues
 21




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Research and Development Expenses.
  Sales and Marketing Expenses.
  General and Administrative Expenses.
 22




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Amortization of Intangible Assets.
 Acquisition Related Expenses.
 Restructuring
 Interest and Other Income, Net.
 Other-than-Temporary Impairment on Investments.
 Income Tax.
 LIQUIDITY AND CAPITAL RESOURCES
  23




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Six Months Ended June 30,2009
    
    2008Net cash provided by operating activities
    
    
    3,286
    
    
    
    17,248Net cash (used in) provided by investing
activities
    
    
    (158,399
    )
    
    
    1,099Net cash used in financing activities
    
    
    (6,745
    )
    
    
    (38,782
    )
       24




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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Beginning balance
    
    $
    1,806
    
    
    $
    14,335
    
    
    $
    3,211
    
    
    $
    14,345Unrealized gain (loss) recorded in
other comprehensive income
    
    
    1,462
    
    
    
    (952
    )
    
    
    1,462
    
    
    
    (962
    )Unrealized loss recorded in earnings
    
    
    
    
    
    
    
    
    
    
    (1,405
    )
    
    
    Additions from Catapult (See Note 3)
    
    
    4,366
    
    
    
    
    
    
    
    4,366
    
    
    
    Ending balance
    
    $
    7,634
    
    
    $
    13,383
    
    
    $
    7,634
    
    
    $
    13,383Unrealized losses recorded in earnings
for level 3 assets still held at June 30
    
    $
    
    
    
    $
    
    
    
    $
    (1,405
    )
    
    $
    
     SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
  25




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Sensitivity
  Exchange Rate Sensitivity
  26




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   Inherent Limitations on Effectiveness of Controls
  27




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PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
   We may not realize the expected financial benefits from our acquisition of Catapult Communications
Corporation.
  The inability to successfully defend claims from taxing authorities or the adoption of new tax
legislation could adversely affect our operating results and financial position.
   28




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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Total Number of
    
    
    Approximate DollarShares Purchased
    
    
    Value of Sharesas Part of Publicly
    
    
    that mayAverage Price
    
    
    Announced
    
    
    yet be PurchasedTotal Number of
    
    
    Paid
    
    
    Plans or
    
    
    under the Plans orPeriod
    
    Shares Purchased
    
    
    Per Share
    
    
    Programs
    
    
    ProgramsApril 1  April 30
    
    
    315,352
    
    
    $
    5.46
    
    
    
    315,352
    
    
    $
    16,929,049May 1  May 31
    
    
    243,000
    
    
    
    5.61
    
    
    
    243,000
    
    
    
    13,844,894June 1  June 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    558,352
    
    
    $
    5.52
    
    
    
    558,352
    
    
    
    
 
 ITEM 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    On May 28, 2009, the Company held its Annual Meeting of Shareholders (the Annual Meeting).(b)
    
    At the Annual Meeting, the following persons were elected as directors of the Company. The
number of votes cast for each director as well as the number of votes withheld, are listed
opposite each directors name.
 Name of Director
    
    Votes Cast For Director
    
    Votes WithheldLaurent Asscher
    
    58,916,466
    
    1,766,799Atul Bhatnagar
    
    60,510,246
    
    173,019Jonathan Fram
    
    54,447,342
    
    6,235,923Errol Ginsberg
    
    60,451,085
    
    232,180Gail Hamilton
    
    58,936,366
    
    1,746,899Jon F. Rager
    
    58,440,830
    
    2,242,435
 (c)
    
    At the Annual Meeting, with 33,135,547 votes cast in favor and 19,650,524 votes cast against,
the shareholders approved an amendment to the Companys 2008 Equity Incentive Plan, as
amended, to (1) increase the total number of shares of Common Stock authorized and reserved
for issuance thereunder as equity incentives by 3,000,000 shares and (2) increase the
limitation on the aggregate number of shares that may be issued pursuant to restricted stock
units and restricted stock awards granted thereunder by
3,000,000, from a total of 2,000,000 to a total of 5,000,000 shares. There were 5,000,552
broker non-votes with respect to this matter and 2,896,642 abstentions.(d)
    
    At the Annual Meeting, with 60,617,500 votes cast in favor and 47,921 votes cast against, the
shareholders ratified the appointment of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting firm for the year ending December 31, 2009. There
were 17,844 abstentions with respect to this matter.
 29




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##### Table of Contents



ITEM 5. Other Information
  
 ITEM 6. Exhibits
 2.1
    
    Agreement and Plan of Merger dated as of May 11, 2009 among Ixia, Catapult
Communications Corporation and Josie Acquisition Company(1)2.2
    
    Support Agreement dated as of May 11, 2009 among Ixia, Josie Acquisition
Company and the stockholders listed on the signature pages
thereto(2)10.1
    
    Employment Agreement dated as of May 11, 2009 by and between Ixia and
Richard A. Karp(3)10.2
    
    Amendment No. 2 to Ixia 2008 Equity Incentive Plan, as amended(4)31.1
    
    Certification of Chief Executive Officer of Ixia pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer of Ixia pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer of
Ixia pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
 
 (1)
    
    Incorporated by reference to Exhibit 2.1 to Ixias Current Report on Form 8-K dated May 11,
2009 (File No. 000-31523), as filed with the Commission on May 12, 2009.(2)
    
    Incorporated by reference to Exhibit 2.2 to Ixias Current Report on Form 8-K dated May 11,
2009 (File No. 000-31523), as filed with the Commission on May 12, 2009.(3)
    
    Incorporated by reference to Exhibit 10.1 to Ixias Current Report on Form 8-K dated May 11,
2009 (File No. 000-31523), as filed with the Commission on May 12, 2009.(4)
    
    Incorporated by reference to Exhibit 10.1 to Ixias Current Report on Form 8-K dated May 28,
2009 (File No. 000-31523), as filed with the Commission on June 2, 2009. 30




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SIGNATURES
  IXIADate: August 7, 2009
    By:
    /s/ Atul BhatnagarAtul BhatnagarPresident and Chief Executive OfficerDate: August 7, 2009
    By:
    /s/ Thomas B. MillerThomas B. MillerChief Financial Officer 31




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer of Ixia pursuant
to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer of Ixia pursuant
to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certifications of Chief Executive Officer and Chief
Financial Officer of Ixia pursuant to Rule 13a-14(b)
under the Exchange Act and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002