UNITED STATES SECURITIES AND EXCHANGE
COMMISSION




Washington, D.C.
20549




FORM 10-K




(MARK
ONE)




[X] ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the fiscal year ended December
31, 2009




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
0-25699











PLX Technology, Inc.




(Exact
name of Registrant as Specified in its Charter)




Delaware
              94-3008334(State
      or Other Jurisdiction of Incorporation or
    Organization)
              (I.R.S.
      Employer Identification Number)


870 W. Maude Avenue


Sunnyvale, California  94085


(408) 774-9060




(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)




Securities
registered pursuant to Section 12(b) of the Act:




Title of
      Each Class:
                Name of
      Each Exchange on which RegisteredCommon Stock, par value $0.001 per
      share
                The NASDAQ Stock Market
  LLC




Securities
registered pursuant to Section 12(g) of the Act: None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [ ] No [X].




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No [X]




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




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 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K.  [X]


Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
definition of "large accelerated filer", "accelerated filer" and "small
reporting company" in Rule 12b-2 of the Exchange Act (Check One):


Large
accelerated filer [ ] Accelerated
filer [X] Non-accelerated
filer [ ] Smaller Reporting
Company [ ]




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Act ). Yes [
] No [X]




The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the registrant's common stock
on June 30,
2009 , as
reported on The NASDAQ Global Market, was $129,142,345.





The
number of shares of common stock outstanding at February
28, 2010  was
37,025,078.




DOCUMENTS
INCORPORATED BY REFERENCE


PART III
OF THIS REPORT ON FORM 10-K INCORPORATES INFORMATION BY REFERENCE FROM THE
REGISTRANT'S PROXY STATEMENT FOR ITS 2010 ANNUAL MEETING OF STOCKHOLDERS - ITEMS
10, 11, 12, 13 AND 14.





PLX Technology,
Inc.
  INDEX TO
 ANNUAL REPORT ON FORM
10-K
 FOR YEAR ENDED DECEMBER 31,
2009   Part I.
                
                PageItem 1.
                Business
                2Item 1A.
                Risk Factors
                11Item 1B.
                Unresolved Staff Comments
                18Item 2.
                Properties
                18Item 3.
                Legal Proceedings
                18Part II.Item 5.
                Market for Registrant's Common Equity and Related
      Stockholder Matters and Issuer Purchases of Equity
      Securities
                19Item 6.
                Selected Financial Data
                21Item 7.
                Management's Discussion and Analysis of Financial Condition
      and Results of Operations
                21Item 7A.
                Quantitative and Qualitative Disclosures About Market
      Risk
                32Item 8.
                Financial Statements and Supplementary
    Data
                33Item 9.
                Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosures
                33Item 9A.
                Controls and Procedures
                33Item 9B.
                Other Information
                34Part III.Item 10.
                Directors, Executive Officers and Corporate
      Governance
                35Item 11.
                Executive Compensation
                35Item 12.
                Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
                35Item 13.
                Certain Relationships and Related Transactions, and
      Director Independence
                35Item 14.
                Principal Accountant Fees and Services
                35Part IV.Item 15.
                Exhibits and Financial Statement
    Schedules
                36Signatures
                
                66
 1
 PART I
  ITEM 1: BUSINESS
  Overview
  PLX
Technology, Inc. ("PLX" or the "Company"), designs, develops, manufactures, and
sells integrated circuits that perform critical system connectivity
functions.  These interconnect products are a fundamental building
block for standards-based electronic equipment.  The company markets
its products to major customers that sell electronic systems in the server,
enterprise storage, consumer storage, communications, PC peripheral, consumer
and embedded markets.
 
 Products
based on current serial interconnect technology standards such as PCI Express,
USB, SATA, and Ethernet provide capabilities to customers that previous parallel
technologies did not.  They offer the ability for systems to scale in
performance and capabilities, and allow for a standards-based building block
approach that was not feasible in the past.  As these serial
technologies have become mainstream, PLX has been able to offer differentiated
products based on these standards that provide scalability and performance at a
low cost.
 
 The
company is the market share leader in PCI Express switches and
bridges.  We recognized the trend towards this serial, switched
interconnect technology early, launched products for this market long before our
competitors, and have deployed multiple generations of products to serve a
general-purpose, horizontal market.  In addition to enabling customer
differentiation through our product features, the breadth of our product
offering is in itself a significant benefit to our customers, since we can serve
the complete needs of our customers with cost-effective solutions tailored to
specific system requirements.  Our long experience with PCI Express
connectivity products enables PLX to deliver reliable devices that operate in
non-ideal real-world, system environments.
 
 PLX is
building on its broad, general purpose interconnect success, and in particular
its success in enterprise storage, by focusing on a rapidly growing vertical
market: Consumer/Small Office Home Office (SOHO) storage.  On January
2, 2009, PLX completed the acquisition of Oxford Semiconductor, Inc. (Oxford), a
leading supplier of semiconductor components for the consumer and SOHO markets.
Oxford has brought to market several generations of products that allow storage
customers to attach their disk subsystems directly to a computer through USB
(DAS), or to attach them through their local area network (NAS) via
Ethernet.  We identified the shift from parallel to serial hard disk
connectivity early, and benefited from this trend to become the leader in high
performance consumer/SOHO storage connectivity.   Our products
provide the richest variety of connectivity options, including USB, Serial ATA,
external Serial ATA, 1394, and Ethernet, and offer capabilities such as RAID and
data encryption at industry leading performance levels.
 
 PLX
offers a complete solution consisting of semiconductor devices, software
development kits, hardware design kits, operating system ports, and firmware
solutions that enable added-value features in our products.  We
differentiate our products by offering higher performance at lower power, by
enabling a richer customer experience based on proprietary features that enable
system-level customer advantages, and by providing capabilities that enable a
customer to get to market more quickly.
 
 The PLX
growth strategy has several key components:
 
 ·
                Identify
      the technology trends and discontinuities that drive high-volume markets
      and deliver appropriate products to that market before the
      competition;
 ·
                Deliver
      comprehensive solutions, including semiconductor devices, the necessary
      software and development kits to allow rapid time-to-market and worldwide
      local technical support;
 ·
                Offer
      added-value features that enable our customers to differentiate their
      products;
 ·
                Focus
      on adding value at high volume price
points;
  PLX is a
Delaware corporation established in 1986 with headquarters at 870 W. Maude
Avenue, Sunnyvale, California 94085. The telephone number is
(408) 774-9060. Additional information about PLX is available on our
website at http://www.plxtech.com. Information contained in the website is not
part of this report.
 
 2
 
 Our
Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports and the Proxy
Statement for our Annual Meeting of Stockholders are made available, free of
charge, on our website, http://www.plxtech.com, as soon as reasonably
practicable after the reports have been filed with or furnished to the
Securities and Exchange Commission.
 
 Industry
Background
  The
market for industry-standard interconnect has been invigorated by new
state-of-the-art serial technologies.  Previous parallel technologies,
such as PCI, provided basic connectivity, but did not offer the necessary
scalability, reliability, cost, and features for complex processing
systems.  As the subsystems, including the processing engines and end
point devices became more powerful, the true bottleneck in the system was not
the device and processor speed, but rather how quickly the data could be
transferred to and from the different subsystems.
 
 At the
same time the cost, complexity, and time-to-market problems of developing
robust, high performance interconnect vehicles lead to the development of
standards that provide the performance and features necessary for high
performance systems, but do so at a cost point that can only be achieved through
high volume standard products.
 
 These
serial technologies enabled, for the first time, the ability to offer high
performance, feature-rich computing solutions using off-the-shelf
standards-based building blocks.  The building block approach has
enabled the designers of these systems to bring their products to market more
quickly and with a vastly lower cost of development.  In addition, the
software base that has built up around these standard solutions allow the system
designer to focus on their own added value, rather than recreating the basic
plumbing necessary to move the data around.
 
 PLX
focuses on connecting together subsystems based on high volume, standard
connection points.  There are several aspects of this.  In
one aspect, the company serves a horizontal market need with its general purpose
PCI Express and USB devices.
 
 PCI
Express is the primary interconnection mechanism inside computing systems
today.  By remaining software compatible with the previous, ubiquitous
parallel technology, the new switched serial PCI Express quickly became the
connection of choice for the majority of devices in the
industry.  Since there is a PCI Express port on almost every system
building block, the least costly and highest performance approach for connecting
the devices together is through this interconnection
pathway.  However, to provide appropriate connection between
subsystems in complex multi-chip systems, a switch is the most cost-effective
approach.  The switch is thus a fundamental building block for the
system, carrying data to and from the subsystems without impeding the native
performance of the underlying devices.  For those few end points which
do not have native PCI Express connections, PLX also provides bridges to
translate the protocol.
 
 The
Universal Serial Bus (USB) was designed to replace the expensive, slow,
unreliable, and unscalable parallel interconnects of the time, originally to
connect PCs with peripherals such as printers and external
storage.  Its speed has been upgraded continuously since its initial
rollout, and USB has become the most popular “box-to-box” interconnect in the
industry.  USB has become the natural way that users upgrade their
system with peripherals, eliminating the need to open the box and add plug-in
cards.
 
 PLX has
recently added a vertical market capability to its more general-purpose
interconnect products.   These products address the fast growing
consumer/SOHO storage market.  The amount of digital data that
consumers need to store is increasing exponentially.  Trends such as
digital photography, digital video, MP3s and the on-line distribution of
high-definition movies are driving increased sales of external storage devices
in the consumer market.  Corresponding with these trends, demand for
data-protection features such as redundant array of inexpensive disks(RAID), automatic back-up,
and encryption is also growing.
 
 The
Direct Attached Storage (DAS) market consists of products that allow the user to
upgrade their storage through the USB connection on their PC.  These
systems can be configured in a variety of ways.  The simplest of such
systems consist of single drive upgrades to increase capacity, for backup, or to
provide security encryption.  By adding multiple drives to the
connection, the user can make use of standards such as RAID for higher
reliability (by mirroring the information on multiple disks) or higher
performance (by reading and writing to multiple disks at once).  The
disks themselves have made the migration to serial technology along with the
rest of the interconnect world, and the SATA (Serial ATA) interface is now the
fastest growing opportunity for external interconnect devices.
 
 3
 
 The
Network Attached Storage (NAS) solution is well established in the enterprise
market but is still in the early stages for the consumer market.  This
technology adds storage to the system through the network in either a wired or
wireless manner.  This allows the data to be saved and retrieved from
more than one computer and allows the data to be available from network-ready
appliances even when the main computer is not available.  Along with
basic storage, NAS products offer added-value opportunities by combining
subsystems as part of the connected device.  This can be
straightforward combinations such as a home gateway, which combines multiple
subsystems in a single box to reduce cost, power, and space.  But this
concept can be extended to add features within the NAS box that accelerate
multimedia applications or provide sophisticated encryption
capabilities.
 
 Strategy
  PLX
provides standards-based, off-the-shelf interconnect solutions to enable high
performance, low cost, added-value features and rapid
time-to-market.  Although the external connections are standard in
order to enable high volume markets, the products themselves offer proprietary
advantages through innovative technology.
 
 PLX
identifies technology trends, and provides products that cater to these trends
during the early, high growth phase of the technology market
discontinuity.  This allows the company to establish itself as the
leader and provides a powerful incumbency benefit as the technology becomes
mainstream.
 
 ·
                PLX
      recognized the promise of PCI Express in the early days of the standard,
      and brought to market leadership switches and bridges in 2004, gaining
      market share at the key customers necessary for success.  The
      company continues to enjoy market share leadership in the PCI Express
      interconnect market and continues to invest to maintain or growth this
      share. This included a broad Gen 2 product line roll out in 2008 followed
      by early development on Gen 3.
 ·
                The
      company identified the move from Parallel ATA to Serial ATA (SATA), and
      gained an early lead in this high growth market with our DAS product line.
      PLX is developing products to support the move to USB
  3.0.
 ·
                PLX
      has introduced its 3rd
      generation of NAS products to the consumer market, building on our
      System-On-A-Chip (SOC) capability and our strong software and firmware
      strength to offer leadership features to this early
  market.
  The
company focuses on offering leadership features to our customers at a high
volume price point.
 
 ·
                We
      focus on system level performance in all of our products.  Since
      the interconnect has such a large impact on system performance, we
      identify those areas that might limit overall latency or throughput and
      enhance them.  This is done through advanced silicon design
      techniques, and also through innovative software drivers that identify
      where the overhead is in the
system.
 ·
                We
      provide low power solutions to our customers, since this has become a
      major differentiator for total system cost and environmental
      reasons.  PLX offers reduced power through technology choices,
      and through design techniques that modulate power for sections of the
      device that are not in use.
 ·
                We
      offer added-value features that enable customer product
      differentiation.  This includes features such as
      non-transparency for multiprocessor capability, multiple virtual channels
      for communications backplanes, integrated DMA for higher performance in
      control planes, and encryption for storage systems.  On our
      storage products, we can enable customized features and enhance the
      performance of existing features through
  firmware.
 ·
                PLX
      focuses on providing these capabilities at high volume cost
      points.  We have a full COT (Customer Owned Tooling) capability
      – where PLX handles all of the design, placement, and layout of the
      circuits, and we manage the packaging and test pipeline.  We
      deploy our products on mainstream, high volume semiconductor technology
      process nodes, and use advanced synthesis and layout techniques to provide
      the best trade-off between features and
cost.
  PLX
provides more than just the semiconductor device.  We focus on
providing the whole product, and offering support that enables our customers to
get to market quickly with a robust high-end product.
 
 4
 
 ·
                We
      supply a hardware Rapid Development Kit (RDK) as part of our standard
      offering.  This allows customers to evaluate our products
      easily, and enables software development and interoperability testing to
      begin prior to the customer developing their own
  hardware.
 ·
                PLX
      provides simulation models to customers that allow them to develop their
      own devices and verify that they interoperate with our products prior to
      getting silicon.
 ·
                We
      provide a complete Software Development Kit (SDK) that provides
      kernel-level drivers, a user-level application programming interface
      (API), sample code for some of the advanced features, and a
      state-of-the-art graphical user interface (GUI) that allows customers to
      easily bring up their system.  Support is provided for
      industry-leading operating systems.
 ·
                In
      addition to these visible features, our products also include in-chip
      capabilities that allow rapid debug of complex system problems in order to
      improve time-to-market.  This allows high speed signals to be
      effectively debugged in the field without adding special
      instrumentation.
 ·
                We
      offer worldwide technical support, with local, direct Field Applications
      Engineers (FAEs) in North America, Europe, and throughout
      Asia.
  The
company has also enhanced its overall growth through acquisitions that provide
synergy with our overall added-value strategy.
 
 On
December 15, 2008, we signed a definitive agreement to acquire all of the
outstanding shares of capital stock of Oxford, a privately held fabless provider
of industry-leading silicon and software for the SOHO storage
markets.  The acquisition closed on January 2, 2009.
 
 Established
in 1992, Oxford has been providing reliable, high-performance silicon and
software solutions to interconnect digital systems, including PCIe, USB, 1394,
Ethernet, Serial ATA and external Serial ATA.  Oxford’s corporate
headquarters were located in Milpitas, California, with most of its employees
based in Oxford’s design center in Abingdon, United Kingdom.  The
rapidly growing consumer and SOHO external storage markets account for the
majority of Oxford’s sales.  Oxford provides advanced system-on-chip
solutions for both direct-attached storage (DAS) and network-attached storage
(NAS) external drives.  Oxford has a reputation for providing
innovative and reliable chip, software and firmware solutions for consumer
storage needs and counts leading manufacturers and marketers as customers,
including Seagate, Western Digital, LaCie, Hewlett Packard, and
Macpower.
 
 We
believe that through this acquisition, we have a leadership position in two of
the fastest-growing interconnect chip markets – PCI Express-based systems
and consumer external storage.  Major synergies include common
interconnect technologies and design flows, sales, marketing and support
systems, and supply chains.  Most importantly, we can create
innovative products that combine the considerable intellectual property and
industry knowledge of Oxford and PLX.  The two companies share a
customer-focused business philosophy that includes delivering the highest
quality products and services, and a culture that rewards innovation and
results.
 
 We
continue to evaluate our business strategies and may complete additional
acquisitions in future periods.
 
 Technology
  PLX
focuses on providing differentiated products to leadership
customers.  In order to achieve this, we have developed unique core
competencies in the underlying technologies necessary for success.
 
 Semiconductor Design.Our
engineers have substantial expertise in designing complex, reliable, high
performance products.  We utilize state-of-the-art EDA tools and
techniques for the entire design pipeline, and have developed proprietary
verification mechanisms to ensure robust operation prior to committing to
silicon.  It is relatively straightforward to get a device to operate
in normal, error free environments.  It is much more challenging to
have that device operative predictably and reliably in environments where errors
occur in the system, and where unexpected or complex combinations of
transactions occur.  PLX has built up an industry-leading suite of
tests that ensure such reliable operation in real-world customer
systems.
 
 In
addition to software-based simulation techniques, we have also invested in a
flexible hardware-based emulation platform that enables our designers to run
real software on a version of our design prior to committing to
silicon.  This allows our products to operate in more complex
system-level environments, where subtle and undocumented behaviors often
exist.
 
 5
 
 PLX has a
dedicated team and the appropriate EDA tools to translate the design into the
database that is used to fabricate the device.  This physical design
capability allows the company to provide a smaller, lower power product, since
the engineers who are doing this placement and layout work are part of our staff
and work with the design engineers from the start of the
project.  This capability also allows us to produce a product with
higher signal integrity, which enables the device to work in a wider range of
noisy environments more predictably.
 
 When we
receive our initial sample silicon back from the third-party wafer fabrication
facility (fab), we have a dedicated group of engineers to fully validate the
product prior to sending it to our broad customer base.  As with the
pre-silicon verification, this post-silicon phase makes use of our years of
product releases to ensure reliable product operation.  We have
invested in the talent and equipment, and use our extensive proprietary test
suites, to fully validate the device.  In addition, we have built up a
broad interoperability lab, where we exercise the product with a growing number
of other components and subsystems to ensure reliable operation in a range of
real-world environments.
 
 System-on-a-Chip Expertise.Our storage products are integrated, dedicated computer
SOCs.  We have the verification, emulation, and integration capability
to combine these subsystems on a single piece of silicon through tools and
expertise that we have developed through many generations of such
devices.  In addition to being able to allow basic connectivity
between different interconnect standards, we focus on providing higher
performance than our competitors by including on-chip acceleration engines, and
by understanding how the system level software operates with the hardware in
actual systems.
 
 Software Technology.We have
invested in a complete software development capability.  In order to
enable our customers to get to market quickly, PLX provides device drivers that
support our products for the most popular operating system platforms, as well as
API libraries that allow programmers to quickly make use of our
products.   In order to ensure that our products provide the
highest performance possible, we have developed the tools and expertise to
understand where the software bottlenecks occur in real-world systems, and our
device drivers make use of this knowledge to increase the performance of
targeted applications such as multimedia data transfer across a
network.
 
 Our
products have proprietary hardware features that allow complex problems to be
solved in the field without special instrumentation, and performance monitoring
hardware that makes visible important system performance metrics.  We
include software as part of our normal release that takes these hardware
features and allows them to be easily deployed through a modern GUI
interface.  We also enable the programmer to view and change the
registers in our device quickly and easy – and even access an on-line databook
explanation of the register directly - with our industry-leading PLXMon
application.
 
 Our
storage products are complex computer systems, with an on-chip processors and
special purpose building blocks.  We develop our own firmware for
these systems that orchestrate the operation of the subsystems to provide high
performance and reliable operation under often chaotic external
environments.  Our firmware allows PLX to enable features for specific
applications without needing to create new silicon, and it gives the company an
opportunity to improve performance in existing systems as the needs of the
system change.
 
 Products
  Our
products consist of interconnect semiconductor products, fully supported by the
software and hardware kits that enable our customers to get to market quickly
with robust, differentiated products.
 
 PCI Express
Switches.Since PCI Express is a point-to-point serial
interconnect standard, it requires a switch to connect a single PCI Express port
from a processor or chipset to multiple end-points.  Examples of
applications include fan-out in servers and storage systems, dual graphics in
gaming and workstation systems, control planes in networking and communications
systems and backplanes in embedded and industrial equipment. PLX switches allow
aggregation of multi-channel Gigabit Ethernet, Fibre Channel, graphics and SAS
cards to the host. PLX switch products are offered in various configurations as
requirements vary from one application to the next. PCI Express switches have
become a basic building block in systems being designed today using this
standard.  PLX started with the Gen 1 family of PCI Express at 2.5
Gigabits per second in 2004, followed by Gen 2 products in late 2007, where the
data rate has doubled to 5.0 Gigabits per second. We are in development of Gen 3
PCI Express supporting 8.0 Gigabits per second.
 
 6
 PCI Express
Bridges. PCI Express Bridges enable conventional PCI products
(32-bit/33 MHz, 32-bit/66 MHz and even 64-bit/133 MHz PCI-X) to be upgraded for
use in new PCI Express systems.  This allows users to quickly bring a
new product to market.  Applications using these bridge devices
include servers, storage host bus adapters, graphics, TV tuners and security
systems. The reverse bridging feature also allows users to bridge backwards
allowing the latest PCI Express based powerful CPUs/Graphics processors to still
service and support the legacy PCI and PCI-X market.  We also offer
bridges that translate PCI Express to general purpose serial and parallel
ports.
 
 Direct Attached Storage
(DAS).DAS devices are System-on-a-Chip (SOC) products that
allow external storage to be easily connected to a PC through either a USB,
1394, or external Serial ATA connection.  PLX products offer the
widest range of connection possibilities, and the most complete feature set,
including single, dual, and quad hard disk connection, RAID, and
encryption.  The PLX devices have industry leading performance across
all interfaces.
 
 Network Attached Storage
(NAS).NAS products provide storage that attaches to a Local
Area Network (LAN).  PLX NAS products are aimed at the consumer/SOHO
market, and are SOC devices that combine Ethernet, USB, PCI Express and SATA
ports with other standard interfaces necessary to complete a state-of-the-art
network appliance.  PLX products include a PCI interface to easily
create complete subsystems, a DDR DRAM interface, and on-chip capabilities such
as TCP off-load, RAID, and encryption.  These basic building blocks
are enabled with high performance firmware that runs on a powerful, low power
ARM processor.
 
 PCI Bridges. PLX offers a
range of general purpose bridges that translate and extend the PCI
bus.  These products offer a bridge between the PCI and a variety of
other serial and parallel general purpose interfaces.  Our PCI-to-PCI
bridges are chips that increase the number of peripheral devices that can be
included in a microprocessor-based system. PLX’s bridge product line spans the
entire PCI range, from 32-bit 33MHz through 64-bit 66MHz, and includes 133MHz
PCI-X devices.
 
 USB Interface
Chips.USB interface chips are used by computer peripherals to
connect to a PC through an external cabled connection.  The current
mainstream version of this spec, called USB 2.0, can be found today on devices
like multi-function printers, DVD camcorders, portable media players, portable
navigation systems, digital cameras, PDAs and hard disks.  Our USB
interface chips offer connection to both PCI or to a generic interface,
providing a simple connection that offers high performance. We are in
development of products using USB 3.0 which offers 5.0 Gigabit per second
transfers.
 
 Customers
  We supply
our products to the leading companies in the server, enterprise and consumer
storage, communications, pc peripheral, consumer and embedded markets, and more
than 1,000 electronic equipment manufacturers incorporate our semiconductor
devices in their systems.  Since the products that we design and sell
have innovative features, and since there is normally a software impact to the
vendor choice, the customer design team typically selects the sole-source
hardware and software components early in the design cycle. Generally, the
system will incorporate these same components throughout its product life
because changes require an expensive re-engineering effort. Therefore, when our
products are designed into a system, they are likely to be used in that system
throughout its production life.
 
 Competition
  Competition
in the semiconductor industry is intense. If our target markets continue to
grow, the number of competitors may increase significantly. In addition, new
semiconductor technologies may lead to new products that can perform similar
functions as our products.
 
 We
believe that the principal factors of competition in our business include
functionality, product performance, price, product innovation, availability of
development tools, customer service and reliability. We believe that we compete
favorably with respect to each of these factors. We differentiate our products
from those of our competitors by incorporating innovative features that allow
our customers to build systems based on industry standards that provide more
features, and higher performance. Furthermore, in general, our software and
hardware development tools are more comprehensive than competing
solutions.
 
 7
 
 Competition
in the various markets we serve comes from companies of different sizes, many of
which are significantly larger and have greater financial and other resources.
Our principal products compete with standard products from companies such as
ASMedia, Cavium, Cortina, Cypress Semiconductor, Genesys Logic, Gennum, IDT,
Initio, Intel, JMicron, LucidPoint, Marvell, MosChip, NEC, Pericom
Semiconductor, NXP Semiconductor, Renesas, Symwave, and Texas
Instruments.
 
 In
addition, two alternative devices can perform some or all of the functions of
our devices. The first is the Application Specific Integrated Circuit, or ASIC.
With the ASIC approach, a customer creates a custom semiconductor device for a
particular application. Because the customer buys the ASIC directly from the
semiconductor foundry, this approach may lead to lower unit production costs.
However, this approach entails a large initial time and resource investment in
developing the custom device. The second alternative device is the Field
Programmable Gate Array, or FPGA. The FPGA is a semiconductor device whose logic
function can be programmed by the system manufacturer. This requires less design
effort and time than the ASIC approach. However, because of the additional
circuitry required to enable the device to be programmed, this approach
typically entails higher unit production costs which can be prohibitive compared
to ASICs or standard semiconductor devices. Nevertheless, FPGA prices have
decreased steadily and in many cases are competitive with prices for standard
semiconductor devices. Accordingly, we also experience competition from leading
ASIC suppliers, including Fujitsu, IBM, LSI Logic, NEC, and Toshiba as well as
from FPGA suppliers, including Actel, Altera, Atmel,
Lattice,  QuickLogic and Xilinx. Many of these competitors are large
companies that have significantly greater financial, technical, marketing and
other resources than PLX.
 
 Sales, Marketing and Technical
Support
  Our sales
and marketing strategy is to achieve design wins at leading systems-companies in
high-growth market segments. We market and sell our products in the United
States through a combination of direct regional sales managers, a network of
independent manufacturers' representatives and distributors.
 
 Outside
the United States, we have engaged a team of manufacturers' representatives,
stocking representatives and distributors to sell and market our products. Our
international network includes representatives in Australia, Austria, Belgium,
Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland,
Israel, Italy, Japan, Korea, Norway, People's Republic of China, Singapore,
South Africa, Spain, Sweden, Switzerland, Taiwan, The Netherlands and the United
Kingdom. We maintain a sales liaison office in the United Kingdom to service
customers in Europe and the Middle East. We also maintain sales liaison offices
in Korea, Taiwan, and China to service customers in Korea, Southeast Asia and
The People's Republic of China.  Finally, we maintain a sales liaison
office in Japan to service customers in Japan.
 
 Sales in
North America represented 18%, 31% and 29%, of net revenues for 2009, 2008 and
2007, respectively. All worldwide sales to date have been denominated in U.S.
dollars. We have one operating segment, the sale of semiconductor devices.
Additional segment reporting information is included in Note 14 to the
consolidated financial statements in this form 10-K.
 
 Net
revenues through distributors accounted for approximately 89%, 80% and 77% of
our net revenues for 2009, 2008 and 2007, respectively. Revenues related to
sales through distributors are expected to continue to account for a large
portion of our total revenues. See "Item 1A, Risk Factors - Certain Factors That
May Affect Future Operating Results - A Large Portion of Our Revenues Is Derived
from Sales to Third-Party Distributors Who May Terminate Their Relationships
with Us at Any Time" in this Form 10-K.
 
 8
 
 There
were no direct end customers that accounted for more than 10% of net revenues.
Sales to the following distributors accounted for 10% or more of net
revenues:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Excelpoint
      Systems Pte Ltd
                  
                  
                  25
                  %
                  
                  
                  29
                  %
                  
                  
                  18
                  %Promate
      Electronics Co., Ltd
                  
                  
                  15
                  %
                  
                  
                  -
                  
                  
                  
                  *
                  %Answer
      Technology, Inc.
                  
                  
                  12
                  %
                  
                  
                  13
                  %
                  
                  
                  10
                  %Avnet,
      Inc.
                  
                  
                  12
                  %
                  
                  
                  12
                  %
                  
                  
                  *
                  %Metatech
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17
                  %
 
 *       Less
than 10%
 
 Technical
support to customers provided under warranty is provided through field and
factory applications engineers, technical marketing personnel and, if necessary,
product design engineers. Local field support is provided in person, email,
Internet or by telephone. We also use our website to provide product
documentation and technical support information. We believe that providing
customers with comprehensive product support is critical to remaining
competitive in the markets we serve. In addition, our close contact with
customer design engineers provides valuable input into existing product
enhancements and next generation product specifications.
 
 Research and
Development
  Our
future success will depend to a large extent on our ability to rapidly develop
and introduce new products and enhancements to our existing products that meet
emerging industry standards and satisfy changing customer requirements. We have
made and expect to continue to make substantial investments in research and
development and to participate in the development of new and existing industry
standards.
 
 The
majority of our engineers are involved in semiconductor device development, with
the remaining engineers working on software and reference design hardware.
Before development of a new product commences, our marketing managers work
closely with research and development engineers and customers to develop a
comprehensive requirements specification. In addition, our marketing managers
and engineers review the applicable industry standards and incorporate desired
changes into the new product specification. After the product is designed and
commercially available, our engineers continue to work with various customers on
specific design issues to understand emerging requirements that may be
incorporated into future product generations or product upgrades.
 
 Our
research and development expenditures totaled $31.4 million, $27.1 million
and $24.4 million in 2009, 2008 and 2007, respectively. Research and
development expenses consist primarily of tape-out related costs at our
independent foundries, salaries and related costs, including share-based
compensation and expenses for outside engineering consultants. We perform our
research and development activities at our headquarters in Sunnyvale, California
and in Abingdon, United Kingdom. We periodically seek to hire additional skilled
development engineers who are currently in short supply. Our business could be
adversely affected if we encounter delays in hiring additional engineers. See
"Item 1A, Risk Factors - Certain Factors That May Affect Future Operating
Results - We Could Lose Key Personnel Due to Competitive Market Conditions and
Attrition" in this Form 10-K.
 
 Our
future performance depends on a number of factors, including our ability to
identify emerging technology trends in our target markets, define and develop
competitive new products in a timely manner, enhance existing products to
differentiate them from those of competitors and bring products to market at
competitive prices. The technical innovations and product development required
for us to remain competitive are inherently complex and require long development
cycles. We typically must incur substantial research and development costs
before the technical feasibility and commercial viability of a product can be
ascertained. We must also continue to make significant investments in research
and development in order to continually enhance the performance and
functionality of our products to keep pace with competitive products and
customer demands for improved performance. Revenues from future products or
product enhancements may not be sufficient to recover the development costs
associated with these products or enhancements. The failure to successfully
develop new products on a timely basis could have a material adverse effect on
our business.
 
 9
 
 Manufacturing
  We have
adopted a "fabless" semiconductor manufacturing model and outsource all of our
semiconductor manufacturing, assembly and testing. This approach allows us to
focus our resources on the design, development and marketing of products and
significantly reduces our capital requirements. Currently, our products are
primarily being fabricated, assembled or tested by AMD, Advanced Semiconductor
Engineering, Ardentec, Faraday, Fujitsu, FST, MagnaChip, NEC, Open-Silicon,
Samsung, Seiko-Epson Semiconductor, STATS ChipPAC Ltd., Taiwan Semiconductor
Manufacturing Corporation, UMC and United Test and Assembly Center Ltd.. These
manufacturers assemble and test our products based on the design and test
specifications we have provided. A small number of our products are currently
manufactured by more than one supplier, and we expect a substantial amount of
our products to be single-source manufactured for the foreseeable future. We
must place orders two to four months in advance of expected delivery of finished
goods. We maintain inventory levels based on current lead times from foundries
plus safety stock to account for unanticipated interruption in supply and
fluctuations in demand. Our inventory comprises a large portion of our working
capital. As a result, we have limited ability to react to fluctuations in demand
for our products which could cause us to have an excess or a shortage of
inventory of a particular product and reduced product revenues.
 
 In the
event of a loss of, or a decision by us to change, a key supplier or foundry,
qualifying a new supplier or foundry and commencing volume production would
likely involve delay and expenses, resulting in lost revenues, reduced operating
margins and possible detriment to customer relationships. Since we place our
orders on a purchase order basis and do not have a long-term volume purchase
agreement with any of our existing suppliers, any of these suppliers may
allocate capacity to the production of other products while reducing deliveries
to us on short notice. While we believe we currently have good relationships
with our foundries and adequate capacity to support our current sales levels,
there can be no assurance that adequate foundry capacity will be available in
the future on acceptable terms, if at all. See "Item 1A, Risk Factors - Certain
Factors That May Affect Future Operating Results - Our Independent Manufacturers
May Not Be Able To Meet Our Manufacturing Requirements" in this Form
10-K.
 
 Our
semiconductor devices are currently fabricated using a range of semiconductor
manufacturing processes. We must continuously develop our devices using more
advanced processes to remain competitive on a cost and performance basis.
Migrating to new technologies is a challenging task requiring new design skills,
methods and tools. We believe that the transition of our products to smaller
geometries will be important for us to remain competitive. Our business could be
materially adversely affected if any transition to new processes is delayed or
inefficiently implemented. See " Item 1A, Risk Factors - Certain Factors That
May Affect Future Operating Results - Defects in Our Products Could Increase Our
Costs and Delay Our Product Shipments" in this Form 10-K.
 
 Intellectual
Property
  Our
future success and competitive position depend upon our ability to obtain and
maintain the proprietary technology used in our principal products. Most of our
current products include implementations of the PCI, PCI Express, Serial ATA,
Ethernet, 1394 and USB industry standards, which are available to other
companies. We hold 26 patents on switching, interconnect and storage
technologies that will expire at various dates beginning in 2014 through 2028.
In the future, we plan to seek patent protection when we believe it is
necessary.
 
 Our
existing or future patents may be invalidated, circumvented, challenged or
licensed to others. The rights granted may not provide competitive advantages to
us. In addition, our future patent applications may not be issued with the scope
of the claims sought by us, if at all. Furthermore, others may develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned or licensed by us. In addition,
effective patent, trademark, copyright and trade secret protection may be
unavailable or limited in foreign countries where we may need this protection.
We cannot be sure that steps taken by us to protect our technology will prevent
misappropriation of our technology.
 
 The
semiconductor industry is characterized by vigorous protection and pursuit of
intellectual property rights or positions. This often results in significant,
often protracted and expensive litigation. There is no intellectual property
litigation currently pending against us. However, we may from time to time
receive notifications of claims that we may be infringing patents or other
intellectual property rights owned by other third parties. If it is necessary or
desirable, we may seek licenses under these third party patents or intellectual
property rights. However, we cannot be sure that licenses will be offered or
that the terms of any offered licenses will be acceptable to us.
 
 10
 
 The
failure to obtain a license from a third party for technology used by us could
cause us to incur substantial liabilities and to suspend the manufacture or
shipment of products or our use of processes requiring the technology.
Litigation could result in significant expenses to us, adversely affect sales of
the challenged product or technology and divert the efforts of our technical and
management personnel, whether or not the litigation is determined in our favor.
In the event of an adverse result in any litigation, we could be required to pay
substantial damages, cease the manufacture, use, sale or importation of
infringing products, expend significant resources to develop or acquire
non-infringing technology, and discontinue the use of processes requiring the
infringing technology or obtain licenses to the infringing technology. In
addition, we may not be successful in developing or acquiring the necessary
licenses under reasonable terms. This could require expenditures by us of
substantial time and other resources. Any of these developments would have a
material adverse effect on our business. See "Item 1A, Risk Factors - Certain
Factors That May Affect Future Operating Results - Our Limited Ability to
Protect Our Intellectual Property and Proprietary Rights Could Adversely Affect
Our Competitive Position" in this Form 10-K.
 
 Employees
  As of
December 31, 2009, we employed a total of 197 full-time employees,
including 106 engaged in research and development, 60 engaged in sales and
marketing, 3 engaged in manufacturing operations and 28 engaged in general
administration activities. We also from time to time employ part-time employees
and hire contractors. Our employees are not represented by any collective
bargaining agreement, and we have never experienced a work stoppage. We believe
that our employee relations are good.
 
 Backlog
  PLX's
backlog at any particular date is not necessarily indicative of actual sales for
any succeeding period. This results from expected changes in product delivery
schedules and cancellation of product orders. In addition, PLX's sales will
often reflect orders shipped in the same quarter that they are
received.
 
 ITEM 1A: RISK
FACTORS
  FACTORS THAT MAY AFFECT FUTURE
OPERATING RESULTS
  If a
company’s operating results are below the expectation of public market analysts
or investors, then the market price of its common stock could
decline.  Many factors that can affect a company’s quarterly and
annual results are difficult to control or predict.  Factors which can
affect the operating results of a semiconductor company such as PLX are
described below.
  Risks and
uncertainties that could cause actual results to differ materially from those
described herein include the following:
 
 Global
Economic Conditions May Continue to Have an Adverse Effect on Our Businesses and
Results of Operations
  In late 2008 and
2009, the severe tightening of the credit markets, turmoil in the financial
markets, and weakening global economy contributed to slowdowns in the industries
in which we operate.  Economic uncertainty exacerbated negative trends
in spending and caused certain customers to push out, cancel, or refrain from
placing orders, which reduced revenue. We have seen market conditions improve in
the second half of 2009, however, the outlook for 2010 remains uncertain.
Difficulties in obtaining capital and uncertain market conditions may lead to
the inability of some customers to obtain affordable financing, resulting in
lower sales. Customers with liquidity issues may lead to additional bad debt
expense. These conditions may also similarly affect key suppliers, which could
affect their ability to deliver parts and result in delays in the availability
of product.  Further, these conditions and uncertainty about future
economic conditions make it challenging for us to forecast our operating
results, make business decisions, and identify the risks that may affect our
business, financial condition and results of operations. In addition, we
maintain an investment portfolio that is subject to general credit, liquidity,
market and interest rate risks that may be exacerbated by deteriorating
financial market conditions and, as a result, the value and liquidity of the
investment portfolio could be negatively impacted and lead to
impairment.  If the current improving economic conditions are not
sustained and deteriorate further, or if we are not able to timely and
appropriately adapt to changes resulting from the difficult macroeconomic
environment, our business, financial condition or results of operations may be
materially and adversely affected.
 11
 
 Our
Operating Results May Fluctuate Significantly Due To Factors Which Are Not
Within Our Control
  Our
quarterly operating results have fluctuated significantly in the past and are
expected to fluctuate significantly in the future based on a number of factors,
many of which are not under our control.  Our operating expenses,
which include product development costs and selling, general and administrative
expenses, are relatively fixed in the short-term.  If our revenues are
lower than we expect because we sell fewer semiconductor devices, delay the
release of new products or the announcement of new features, or for other
reasons, we may not be able to quickly reduce our spending in
response.
 
 Other
circumstances that can affect our operating results include:
 
 ·
                the
      timing of significant orders, order cancellations and
      reschedulings;
 ·
                the
      loss of one or more significant
customers;
 ·
                introduction
      of products and technologies by our
competitors;
 ·
                the
      availability of production capacity at the fabrication facilities that
      manufacture our products;
 ·
                our
      significant customers could lose market share that may affect our
      business;
 ·
                integration
      of our product functionality into our customers’
  products;
 ·
                our
      ability to develop, introduce and market new products and technologies on
      a timely basis;
 ·
                unexpected
      issues that may arise with devices in
  production;
 ·
                shifts
      in our product mix toward lower margin
products;
 ·
                changes
      in our pricing policies or those of our competitors or suppliers,
      including decreases in unit average selling prices of our
      products;
 ·
                the
      availability and cost of materials to our
  suppliers;
 ·
                general
      macroeconomic conditions; and
 ·
                political
      climate.
  These
factors are difficult to forecast, and these or other factors could adversely
affect our business.  Any shortfall in our revenues would have a
direct impact on our business.  In addition, fluctuations in our
quarterly results could adversely affect the market price of our common stock in
a manner unrelated to our long-term operating performance.
 
 The
Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances
In The Demand For Our Products
  In the
past, the semiconductor industry has been characterized by significant downturns
and wide fluctuations in supply and demand.  Also, the industry has
experienced significant fluctuations in anticipation of changes in general
economic conditions.  This cyclicality has led to significant
variances in product demand and production capacity.  It has also
accelerated erosion of average selling prices per unit.  We may
experience periodic fluctuations in our future financial results because of
industry-wide conditions.
 
 Because
A Substantial Portion Of Our Net Revenues Are Generated By A Small Number Of
Large Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our Net
Revenues And Earnings Will Be Harmed
  Historically,
a relatively small number of customers have accounted for a significant portion
of our net revenues in any particular period. See Note 5 of the consolidated
financial statements for customer concentrations.
 
 We have
no long-term volume purchase commitments from any of our significant customers.
We cannot be certain that our current customers will continue to place orders
with us, that orders by existing customers will continue at the levels of
previous periods or that we will be able to obtain orders from new customers. In
addition, some of our customers supply products to end-market purchasers and any
of these end-market purchasers could choose to reduce or eliminate orders for
our customers' products. This would in turn lower our customers' orders for our
products.
 
 12
 We
anticipate that sales of our products to a relatively small number of customers
will continue to account for a significant portion of our net
revenues.  Due to these factors, the following have in the past and
may in the future reduce our net revenues or earnings:
 
 ·
                the
      reduction, delay or cancellation of orders from one or more of our
      significant customers;
 ·
                the
      selection of competing products or in-house design by one or more of our
      current customers;
 ·
                the
      loss of one or more of our current customers;
or
 ·
                a
      failure of one or more of our current customers to pay our
      invoices.
 
 Intense
Competition In The Markets In Which We Operate May Reduce The Demand For Or
Prices Of Our Products
  Competition in the
semiconductor industry is intense.  If our main target market, the
microprocessor-based systems market, continues to grow, the number of
competitors may increase significantly. In addition, new semiconductor
technology may lead to new products that can perform similar functions as our
products.  Some of our competitors and other semiconductor companies
may develop and introduce products that integrate into a single semiconductor
device the functions performed by our semiconductor devices.  This
would eliminate the need for our products in some applications.
 
 In
addition, competition in our markets comes from companies of various sizes, many
of which are significantly larger and have greater financial and other resources
than we do and thus can better withstand adverse economic or market
conditions.  Therefore, we cannot assure you that we will be able to
compete successfully in the future against existing or new competitors, and
increased competition may adversely affect our business.  See “Item 1,
Business - Competition” and “-Products” in this Form 10-K.
 
 Our
Independent Manufacturers May Not Be Able To Meet Our Manufacturing
Requirements
  We do not
manufacture any of our semiconductor devices.  Therefore, we are
referred to in the semiconductor industry as a “fabless” producer of
semiconductors.  Consequently, we depend upon third party
manufacturers to produce semiconductors that meet our
specifications.  We currently have third party manufacturers located
in China, Japan, Korea, Malaysia, Singapore and Taiwan that can produce
semiconductors which meet our needs.  However, as the semiconductor
industry continues to progress towards smaller manufacturing and design
geometries, the complexities of producing semiconductors will
increase.  Decreasing geometries may introduce new problems and delays
that may affect product development and deliveries.  Due to the nature
of the semiconductor industry and our status as a “fabless” semiconductor
company, we could encounter fabrication-related problems that may affect the
availability of our semiconductor devices, delay our shipments or may increase
our costs.
 
 Only a
small number of our semiconductor devices are currently manufactured by more
than one supplier.  We place our orders on a purchase order basis and
do not have a long term purchase agreement with any of our existing
suppliers.  In the event that the supplier of a semiconductor device
was unable or unwilling to continue to manufacture our products in the required
volume, we would have to identify and qualify a substitute
supplier.  Introducing new products or transferring existing products
to a new third party manufacturer or process may result in unforeseen device
specification and operating problems.  These problems may affect
product shipments and may be costly to correct.  Silicon fabrication
capacity may also change, or the costs per silicon wafer may
increase.  Manufacturing-related problems may have a material adverse
effect on our business.
 
 Lower
Demand For Our Customers’ Products Will Result In Lower Demand For Our
Products
  Demand
for our products depends in large part on the development and expansion of the
high-performance microprocessor-based systems markets including networking and
telecommunications, enterprise and consumer storage, imaging and industrial
applications.  The size and rate of growth of these
microprocessor-based systems markets may in the future fluctuate significantly
based on numerous factors. These factors include the adoption of alternative
technologies, capital spending levels and general economic
conditions.  Demand for products that incorporate high-performance
microprocessor-based systems may not grow.
  13
 Our
Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our
Expected Revenues
  Our
customers typically perform numerous tests and extensively evaluate our products
before incorporating them into their systems.  The time required for
test, evaluation and design of our products into a customer’s equipment can
range from six to twelve months or more.  It can take an additional
six to twelve months or more before a customer commences volume shipments of
equipment that incorporates our products.  Because of this lengthy
sales cycle, we may experience a delay between the time when we increase
expenses for research and development and sales and marketing efforts and the
time when we generate higher revenues, if any, from these
expenditures.
 
 In
addition, the delays inherent in our lengthy sales cycle raise additional risks
of customer decisions to cancel or change product plans.  When we
achieve a design win, there can be no assurance that the customer will
ultimately ship products incorporating our products.  Our business
could be materially adversely affected if a significant customer curtails,
reduces or delays orders during our sales cycle or chooses not to release
products incorporating our products.
 
 Failure
To Have Our Products Designed Into The Products Of Electronic Equipment
Manufacturers Will Result In Reduced Sales
  Our
future success depends on electronic equipment manufacturers that design our
semiconductor devices into their systems.  We must anticipate market
trends and the price, performance and functionality requirements of current and
potential future electronic equipment manufacturers and must successfully
develop and manufacture products that meet these requirements.  In
addition, we must meet the timing requirements of these electronic equipment
manufacturers and must make products available to them in sufficient
quantities.  These electronic equipment manufacturers could develop
products that provide the same or similar functionality as one or more of our
products and render these products obsolete in their applications.
 
 We do not
have purchase agreements with our customers that contain minimum purchase
requirements.  Instead, electronic equipment manufacturers purchase
our products pursuant to short-term purchase orders that may be canceled without
charge. We believe that in order to obtain broad penetration in the markets for
our products, we must maintain and cultivate relationships, directly or through
our distributors, with electronic equipment manufacturers that are leaders in
the embedded systems markets.  Accordingly, we will incur significant
expenditures in order to build relationships with electronic equipment
manufacturers prior to volume sales of new products. If we fail to develop
relationships with additional electronic equipment manufacturers to have our
products designed into new microprocessor-based systems or to develop sufficient
new products to replace products that have become obsolete, our business would
be materially adversely affected.
 
 Defects
In Our Products Could Increase Our Costs And Delay Our Product
Shipments
  Our
products are complex. While we test our products, these products may still have
errors, defects or bugs that we find only after commercial production has begun.
We have experienced errors, defects and bugs in the past in connection with new
products.
 
 Our
customers may not purchase our products if the products have reliability,
quality or compatibility problems. This delay in acceptance could make it more
difficult to retain our existing customers and to attract new
customers.  Moreover, product errors, defects or bugs could result in
additional development costs, diversion of technical and other resources from
our other development efforts, claims by our customers or others against us, or
the loss of credibility with our current and prospective customers. In the past,
the additional time required to correct defects has caused delays in product
shipments and resulted in lower revenues. We may have to spend significant
amounts of capital and resources to address and fix problems in new
products.
 
 14
 
 We must
continuously develop our products using new process technology with smaller
geometries to remain competitive on a cost and performance
basis.  Migrating to new technologies is a challenging task requiring
new design skills, methods and tools and is difficult to achieve.
 
 Failure
Of Our Products To Gain Market Acceptance Would Adversely Affect Our Financial
Condition
  We
believe that our growth prospects depend upon our ability to gain customer
acceptance of our products and technology.  Market acceptance of
products depends upon numerous factors, including compatibility with other
products, adoption of relevant interconnect standards, perceived advantages over
competing products and the level of customer service available to support such
products.  There can be no assurance that growth in sales of new
products will continue or that we will be successful in obtaining broad market
acceptance of our products and technology.
 
 We expect
to spend a significant amount of time and resources to develop new products and
refine existing products. In light of the long product development cycles
inherent in our industry, these expenditures will be made well in advance of the
prospect of deriving revenues from the sale of any new products. Our ability to
commercially introduce and successfully market any new products is subject to a
wide variety of challenges during this development cycle, including start-up
bugs, design defects and other matters that could delay introduction of these
products to the marketplace. In addition, since our customers are not obligated
by long-term contracts to purchase our products, our anticipated product orders
may not materialize, or orders that do materialize may be cancelled. As a
result, if we do not achieve market acceptance of new products, we may not be
able to realize sufficient sales of our products in order to recoup research and
development expenditures. The failure of any of our new products to achieve
market acceptance would harm our business, financial condition, results of
operation and cash flows.
 
 A
Large Portion Of Our Revenues Is Derived From Sales To Third-Party Distributors
Who May Terminate Their Relationships With Us At Any Time
  We depend
on distributors to sell a significant portion of our products. Sales through
distributors accounted for approximately 89%, 80% and 77% of our net revenues in
2009, 2008 and 2007, respectively. Some of our distributors also market and sell
competing products.  Distributors may terminate their relationships
with us at any time.  Our future performance will depend in part on
our ability to attract additional distributors that will be able to market and
support our products effectively, especially in markets in which we have not
previously distributed our products. We may lose one or more of our current
distributors or may not be able to recruit additional or replacement
distributors. The loss of one or more of our major distributors could have a
material adverse effect on our business, as we may not be successful in
servicing our customers directly or through manufacturers’
representatives.
 
 The
Demand For Our Products Depends Upon Our Ability To Support Evolving Industry
Standards
  A
majority of our revenues are derived from sales of products, which rely on the
PCI Express, PCI, PCI-X, Serial ATA, Ethernet, 1394 and USB
standards.  If markets move away from these standards and begin using
new standards, we may not be able to successfully design and manufacture new
products that use these new standards.  There is also the risk that
new products we develop in response to new standards may not be accepted in the
market.  In addition, these standards are continuously evolving, and
we may not be able to modify our products to address new
specifications.  Any of these events would have a material adverse
effect on our business.
 
 We
Must Make Significant Research And Development Expenditures Prior To Generating
Revenues From Products
  To
establish market acceptance of a new semiconductor device, we must dedicate
significant resources to research and development, production and sales and
marketing.  We incur substantial costs in developing, manufacturing
and selling a new product, which often significantly precede meaningful revenues
from the sale of this product.  Consequently, new products can require
significant time and investment to achieve profitability.  Investors
should understand that our efforts to introduce new semiconductor devices or
other products or services may not be successful or profitable.  In
addition, products or technologies developed by others may render our products
or technologies obsolete or noncompetitive.
 
 15
 
 We record
as expenses the costs related to the development of new semiconductor devices
and other products as these expenses are incurred.  As a result, our
profitability from quarter to quarter and from year to year may be adversely
affected by the number and timing of our new product launches in any period and
the level of acceptance gained by these products.
 
 We
Could Lose Key Personnel Due To Competitive Market Conditions And
Attrition
  Our
success depends to a significant extent upon our senior management and key
technical and sales personnel.  The loss of one or more of these
employees could have a material adverse effect on our business.  We do
not have employment contracts with any of our executive officers.
 
 Our
success also depends on our ability to attract and retain qualified technical,
sales and marketing, customer support, financial and accounting, and managerial
personnel.  Competition for such personnel in the semiconductor
industry is intense, and we may not be able to retain our key personnel or to
attract, assimilate or retain other highly qualified personnel in the
future.  In addition, we may lose key personnel due to attrition,
including health, family and other reasons.  We have experienced, and
may continue to experience, difficulty in hiring and retaining candidates with
appropriate qualifications.  If we do not succeed in hiring and
retaining candidates with appropriate qualifications, our business could be
materially adversely affected.
 
 The
Successful Marketing And Sales Of Our Products Depend Upon Our Third Party
Relationships, Which Are Not Supported By Written Agreements
  When
marketing and selling our semiconductor devices, we believe we enjoy a
competitive advantage based on the availability of development tools offered by
third parties.  These development tools are used principally for the
design of other parts of the microprocessor-based system but also work with our
products.  We will lose this advantage if these third party tool
vendors cease to provide these tools for existing products or do not offer them
for our future products.  This event could have a material adverse
effect on our business.  We have no written agreements with these
third parties, and these parties could choose to stop providing these tools at
any time.
 
 Our
Limited Ability To Protect Our Intellectual Property And Proprietary Rights
Could Adversely Affect Our Competitive Position
  Our
future success and competitive position depend upon our ability to obtain and
maintain proprietary technology used in our principal
products.  Currently, we have limited protection of our intellectual
property in the form of patents and rely instead on trade secret
protection.  Our existing or future patents may be invalidated,
circumvented, challenged or licensed to others.  The rights granted
there under may not provide competitive advantages to us.  In
addition, our future patent applications may not be issued with the scope of the
claims sought by us, if at all.  Furthermore, others may develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned or licensed by us.  In
addition, effective patent, trademark, copyright and trade secret protection may
be unavailable or limited in foreign countries where we may need
protection.  We cannot be sure that steps taken by us to protect our
technology will prevent misappropriation of the technology.
 
 We may
from time to time receive notifications of claims that we may be infringing
patents or other intellectual property rights owned by third
parties.  While there is currently no intellectual property litigation
pending against us, litigation could result in significant expenses to us and
adversely affect sales of the challenged product or technology.  This
litigation could also divert the efforts of our technical and management
personnel, whether or not the litigation is determined in our
favor.  In addition, we may not be able to develop or acquire
non-infringing technology or procure licenses to the infringing technology under
reasonable terms.  This could require expenditures by us of
substantial time and other resources.  Any of these developments would
have a material adverse effect on our business.
 
 16
 Acquisitions
Could Adversely Affect Our Financial Condition And Could Expose Us To
Unanticipated Liabilities
  As part
of our business strategy, we expect to continue to review acquisition prospects
that would complement our existing product offerings, improve market coverage or
enhance our technological capabilities.  Potential future acquisitions
could result in any or all of the following:
 
 ·
                potentially
      dilutive issuances of equity
securities;
 ·
                large
      acquisition-related write-offs;
 ·
                potential
      patent and trademark infringement claims against the acquired
      company;
 ·
                the
      incurrence of debt and contingent liabilities or amortization expenses
      related to other intangible assets;
 ·
                difficulties
      in the assimilation of operations, personnel, technologies, products and
      the information systems of the acquired
  companies;
 ·
                the
      incurrence of additional operating losses and expenses of companies we may
      acquire;
 ·
                possible
      delay or failure to achieve expected
synergies;
 ·
                diversion
      of management’s attention from other business
  concerns;
 ·
                risks
      of entering geographic and business markets in which we have no or limited
      prior experience; and
 ·
                potential
      loss of key employees.
  Because
We Sell Our Products To Customers Outside Of The United States And Because Our
Products Are Incorporated With Products Of Others That Are Sold Outside Of The
United States We Face Foreign Business, Political And Economic
Risks
  Sales
outside of the United States accounted for 84%, 77% and 71% of our net revenues
in 2009, 2008 and 2007, respectively.  Sales outside of the United
States may fluctuate in future periods and may continue to account for a large
portion of our revenues. In addition, equipment manufacturers who incorporate
our products into their products sell their products outside of the Unites
States, thereby exposing us indirectly to foreign risks. Further, most of our
semiconductor products are manufactured outside of the United States.
Accordingly, we are subject to international risks, including:
 
 ·
                difficulties
      in managing distributors;
 ·
                difficulties
      in staffing and managing foreign subsidiary and branch
      operations;
 ·
                political
      and economic instability;
 ·
                foreign
      currency exchange fluctuations;
 ·
                difficulties
      in accounts receivable collections;
 ·
                potentially
      adverse tax consequences;
 ·
                timing
      and availability of export
licenses;
 ·
                changes
      in regulatory requirements, tariffs and other
  barriers;
 ·
                difficulties
      in obtaining governmental approvals for telecommunications and other
      products; and
 ·
                the
      burden of complying with complex foreign laws and
  treaties.
  Because
sales of our products have been denominated to date exclusively in United States
dollars, increases in the value of the United States dollar will increase the
price of our products so that they become relatively more expensive to customers
in the local currency of a particular country, which could lead to a reduction
in sales and profitability in that country.
 
 17
 
 We
May Be Required To Record A Significant Charge To Earnings If Our Goodwill,
Amortizable Intangible Assets Or Other Long Lived Asset Become
Impaired
  Under
generally accepted accounting principles, we review our amortizable intangible
and long lived assets for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. Goodwill is tested for
impairment annually during the fourth quarter and between annual tests in
certain circumstances. Factors that may be considered a change in circumstances,
indicating that the carrying value of our goodwill, amortizable intangible
assets or other long lived assets may not be recoverable, include a persistent
decline in stock price and market capitalization, reduced future cash flow
estimates, and slower growth rates in our industry. As a result of the goodwill
impairment testing in the fourth quarter of 2008 we fully impaired the goodwill
and remaining intangible assets associated with the Sebring, HiNT Corporation
and NetChip Technology, Inc. acquisitions for a total of $35.5 million. During
this review we also recorded an impairment charge of $18.8 million due to the
decline in the value of our Sunnyvale headquarters building. In the fourth
quarter of 2009, we tested the goodwill acquired in 2009 through the acquisition
of Oxford and determined there was no impairment. We may record additional
goodwill and other intangible assets related to the acquisition of Oxford and
potential future acquisitions. We may be required to record a significant charge
in our financial statements during the period in which any additional impairment
of our goodwill, amortizable intangible assets or other long lived assets is
determined, which would adversely impact our results of
operations.
  Our
Principal Stockholders Have Significant Voting Power And May Take Actions That
May Not Be In The Best Interests Of Our Other Stockholders
  Our
executive officers, directors and other principal stockholders, in the
aggregate, beneficially own a substantial amount of our outstanding common
stock.  Although these stockholders do not have majority control, they
currently have, and likely will continue to have, significant influence with
respect to the election of our directors and approval or disapproval of our
significant corporate actions.  This influence over our affairs might
be adverse to the interests of other stockholders.  In addition, the
voting power of these stockholders could have the effect of delaying or
preventing a change in control of PLX.
 
 The
Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely
Affect The Rights Of The Holders Of Our Common Stock
  Anti-takeover
provisions of Delaware law and our Certificate of Incorporation may make a
change in control of PLX more difficult, even if a change in control would be
beneficial to the stockholders.  These provisions may allow the Board
of Directors to prevent changes in the management and control of
PLX.
 
 As part
of our anti-takeover devices, our Board of Directors has the ability to
determine the terms of preferred stock and issue preferred stock without the
approval of the holders of the common stock.  Our Certificate of
Incorporation allows the issuance of up to 5,000,000 shares of preferred
stock.  There are no shares of preferred stock
outstanding.  However, because the rights and preferences of any
series of preferred stock may be set by the Board of Directors in its sole
discretion without approval of the holders of the common stock, the rights and
preferences of this preferred stock may be superior to those of the common
stock.  Accordingly, the rights of the holders of common stock may be
adversely affected.  Consistent with Delaware law, our Board of
Directors may adopt additional anti-takeover measures in the
future.
 
 ITEM 1B: UNRESOLVED STAFF COMMENTS
  None.
 
 ITEM 2:
PROPERTIES
  We own
one facility in Sunnyvale, California, which has approximately 53,000 square
feet. This facility comprises our headquarters and includes our research and
development, sales and marketing and administration
departments.  Internationally, we lease sales offices in China, Japan,
Korea, Taiwan and the United Kingdom. These leases comprise approximately 22,400
square feet and have terms expiring in or prior to June 2015. We believe that
our current facilities will be adequate through 2010.
 
 ITEM 3: LEGAL
PROCEEDINGS
  None.
 
 18
 PART
II
  ITEM 5: MARKET FOR
REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Our
common stock is traded on The NASDAQ Global Market and has been quoted on The
NASDAQ Global Market under the symbol "PLXT" since its initial public offering
on April 5, 1999. The following table sets forth, for the periods
indicated, the range of quarterly high and low sales price for our common stock
as reported on The NASDAQ Global Market:
 
 2009
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  2.79
                  
                  
                  $
                  1.45Second
      Quarter
                  
                  
                  4.40
                  
                  
                  
                  2.21Third
      Quarter
                  
                  
                  4.12
                  
                  
                  
                  2.88Fourth
      Quarter
                  
                  
                  3.73
                  
                  
                  
                  2.992008
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  9.56
                  
                  
                  $
                  5.76Second
      Quarter
                  
                  
                  9.40
                  
                  
                  
                  6.32Third
      Quarter
                  
                  
                  7.65
                  
                  
                  
                  4.50Fourth
      Quarter
                  
                  
                  5.07
                  
                  
                  
                  1.51
 As of
February 28, 2010, there were approximately 139 holders of record of our
common stock and as of that date, the last reported sales price of our common
stock was $4.54.
 
 We have
never paid cash dividends on our common stock. We currently intend to retain
earnings, if any, for use in our business and do not anticipate paying any cash
dividends in the foreseeable future. Any future declaration and payment of
dividends will be subject to the discretion of our Board of Directors, will be
subject to applicable law and will depend upon our results of operations,
earnings, financial condition, contractual limitations, cash requirements,
future prospects and other factors deemed relevant by our Board of
Directors.
 
 Securities
Authorized For Issuance Under Equity Compensation Plans
  This
information is incorporated herein by reference to the Company's Proxy Statement
for the 2009 Annual Meeting of Stockholders under the heading "Equity
Compensation Plan Information."
 
 Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
  In
September 2002, our Board of Directors authorized the repurchase of up
to 2,000,000 shares of common stock. In July 2008, our Board of Directors
authorized an additional 2,000,000 shares under the repurchase program.  At
the discretion of the management, we can repurchase the shares from time to time
in the open market or in privately negotiated transactions.  Approximately
774,000 shares were repurchased for approximately $1.9 million in cash in 2002
and 2003. We did not repurchase any additional shares from January 1, 2004
through December 31, 2007. In 2008, we repurchased 956,000 shares for
approximately $6.5 million. We did not purchase any additional shares in 2009.
As of December 31, 2009, under the Board’s repurchase authorization, we had the
capacity to repurchase an additional 2,269,000 shares.
 
 19
 Performance
Graph
   
 Cumulative
      Total Return12/04
                  
                  
                  
                  12/05
                  
                  
                  
                  12/06
                  
                  
                  
                  12/07
                  
                  
                  
                  12/08
                  
                  
                  
                  12/09PLX
      Technology, Inc.
                  
                  
                  100.00
                  
                  
                  
                  82.69
                  
                  
                  
                  125.38
                  
                  
                  
                  89.42
                  
                  
                  
                  16.54
                  
                  
                  
                  31.06Russell
      2000
                  
                  
                  100.00
                  
                  
                  
                  104.55
                  
                  
                  
                  123.76
                  
                  
                  
                  121.82
                  
                  
                  
                  80.66
                  
                  
                  
                  102.58Philadelphia
      Semiconductor
                  
                  
                  100.00
                  
                  
                  
                  115.78
                  
                  
                  
                  106.63
                  
                  
                  
                  115.13
                  
                  
                  
                  64.57
                  
                  
                  
                  102.97
 The graph
and other information furnished under the above caption "Performance Graph" in
this Part II, Item 5 of this Form 10-K shall not be deemed to be "soliciting
material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or
to the liabilities of the Exchange Act, as amended.
 
 20
 ITEM 6: SELECTED
FINANCIAL DATA
  The
following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Annual Report on
Form 10-K.
 
 Years
      Ended December 31,2009
      (1)
                  
                  
                  2008
      (2)
                  
                  
                  2007
                  
                  
                  2006
      (4)
                  
                  
                  2005in
      thousands, except per share dataConsolidated
      Statement of Operations Data:Net
      Revenues
                  
                  $
                  82,832
                  
                  
                  $
                  81,068
                  
                  
                  $
                  81,734
                  
                  
                  $
                  81,425
                  
                  
                  $
                  54,615Gross
      Profit
                  
                  
                  46,932
                  
                  
                  
                  48,282
                  
                  
                  
                  49,525
                  
                  
                  
                  47,630
                  
                  
                  
                  35,002Operating
      Income (Loss)
                  
                  
                  (15,490
                  )
                  
                  
                  (57,947
                  )
                  
                  
                  (643
                  )
                  
                  
                  1,715
                  
                  
                  
                  (2,306
                  )Net
      Income (Loss)
                  
                  
                  (18,802
                  )
                  
                  
                  (56,530
                  )
                  
                  
                  1,174
                  
                  
                  
                  3,006
                  
                  
                  
                  (1,748
                  )Basic
      Net Income (Loss) Per Share
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04
                  
                  
                  $
                  0.11
                  
                  
                  $
                  (0.06
                  )Shares
      Used to Compute Basic Per Share Amounts
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  28,724
                  
                  
                  
                  28,177
                  
                  
                  
                  27,198Diluted
      Net Income (Loss) Per Share
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04
                  
                  
                  $
                  0.10
                  
                  
                  $
                  (0.06
                  )Shares
      Used to Compute Diluted Per Share Amounts
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  29,156
                  
                  
                  
                  28,925
                  
                  
                  
                  27,198
 Years
      Ended December 31,2009
                  
                  
                  2008
      (3)
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005in
      thousandsConsolidated
      Balance Sheet Data:Cash
      and Cash Equivalents
                  
                  $
                  11,299
                  
                  
                  $
                  6,865
                  
                  
                  $
                  19,175
                  
                  
                  $
                  32,804
                  
                  
                  $
                  21,028Working
      Capital
                  
                  
                  49,945
                  
                  
                  
                  49,153
                  
                  
                  
                  50,153
                  
                  
                  
                  49,031
                  
                  
                  
                  36,994Total
      Assets
                  
                  
                  84,020
                  
                  
                  
                  77,260
                  
                  
                  
                  135,800
                  
                  
                  
                  127,948
                  
                  
                  
                  117,911Total
      Long Term Capital Lease Obligations
                  
                  
                  1,098
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      Stockholders' Equity
                  
                  $
                  71,999
                  
                  
                  $
                  69,203
                  
                  
                  $
                  127,892
                  
                  
                  $
                  120,926
                  
                  
                  $
                  107,489
  (1)
                Results
      of operations for 2009 include acquisition and related restructuring
      expenses of $2.9 million and a loss of $3.8 million on the fair value
      remeasurement of the contingently convertible note payable associated with
      the acquisition of Oxford in January
2009.
 (2)
                Results
      of operations for 2008 include impairment charges of $54.3 million and
      acquisition related fees of $0.8 million associated with the acquisition
      of Oxford in January 2009.
 (3)
                Total
      assets and stockholders’ equity for 2008 reflect impairment charges of
      $54.3 million.
 (4)
                Results
      of operations for 2006 include an increase in revenues and cost of
      revenues of $2.8 million and $0.9 million, respectively, as a result from
      a change in accounting for revenues from
  distributors.
  ITEM
7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF
OPERATIONS
  This
Annual Report on Form 10-K and certain information incorporated herein by
reference contain forward-looking statements within the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. All statements
contained in this Report on Form 10-K that are not purely historical are
forward-looking statements, including, without limitation, statements regarding
our expectations, objectives, anticipations, plans, hopes, beliefs, intentions
or strategies regarding the future. Forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties that
could cause actual results to differ materially from the results contemplated by
the forward-looking statements.
 
 Forward-looking
statements include, without limitation, the statements regarding the
following:
 
 ·
                the
      growing demand for standards-based components such as our semiconductor
      devices that connect systems
together;
 ·
                our
      objective to expand our advantages in data transfer
      technology;
 ·
                our
      expectation that we will support new I/O standards where
      appropriate;
 ·
                the
      statements regarding our objective to continue to expand our market
      position as a developer and supplier of I/O connectivity solutions for
      high performance systems;
  21
  ·
                our
      plan to target those applications where we believe we can attain a
      leadership position;
 ·
                our
      plan to seek to integrate additional I/O-related functions into our
      semiconductor devices;
 ·
                our
      belief that our understanding of I/O technology trends and market
      requirements allows us to bring to market more quickly new products that
      support the latest I/O technology;
 ·
                that
      we continue to integrate more functionality in our semiconductor devices
      and continue to enhance and expand our software development
      kits;
 ·
                our
      belief with respect to the principal factors of competition in the
      business;
 ·
                our
      belief that we compete favorably with respect to each of those
      factors;
 ·
                our
      expectation that revenues related to sales through distributors will
      continue to account for a large portion of total
  revenues;
 ·
                our
      belief that providing customers with comprehensive product support is
      critical to remaining competitive in the markets we
  serve;
 ·
                our
      belief that our close contact with customer design engineers provides
      valuable input into existing product enhancements and next generation
      product specifications;
 ·
                our
      expectation that we will periodically seek to hire additional development
      engineers;
 ·
                our
      expectation that we will continue to make significant investments in
      research and development in order to continually enhance the performance
      and functionality of our products to keep pace with competitive products
      and customer demands for improved
performance;
 ·
                our
      belief that we must continuously develop our devices using more advanced
      processes to remain competitive on a cost and performance
      basis;
 ·
                our
      belief that the transition of our products to smaller geometries will be
      important for us to remain
competitive;
 ·
                our
      plan to seek patent protection when
necessary;
 ·
                our
      belief that our current facility will be adequate through
      2010;
 ·
                our
      intention to retain earnings for use in our business and not to pay any
      cash dividend in the foreseeable
future;
 ·
                our
      belief that our long-term success will depend on our ability to introduce
      new products;
 ·
                our
      belief that we may be required to carry higher levels of inventory because
      of the difficulty in predicting future levels of sales and
      profitability;
 ·
                our
      expectation that selling, general and administrative and research and
      development expenses in absolute dollars will increase in future periods;
      and
 ·
                our
      belief that our existing resources, together with cash expected to be
      generated from our operations, will be sufficient to meet our capital
      requirements for at least the next twelve
  months.
 All
forward-looking statements included in this document are subject to additional
risks and uncertainties further discussed under "Item 1A: Risk Factors -
Factors That May Affect Future Operating Results" and are based on information
available to us on the date hereof. We assume no obligation to update any such
forward-looking statements. It is important to note that our actual results
could differ materially from those included in such forward-looking statements.
The factors that could cause our actual results to differ from those included in
such forward-looking statements are set forth under the heading "Item 1A:
Risk Factors - Factors That May Affect Future Operating Results," as well as
those disclosed from time to time in our reports on Forms 10-Q and 8-K and our
Annual Reports to Stockholders.
 
 The
following discussion should be read in conjunction with our consolidated
financial statements and related notes thereto included elsewhere in this
report.
  22
 Overview
  PLX was
founded in 1986, and between 1994 and 2002 we focused on development of I/O
interface semiconductors and related software and development tools that are
used in systems incorporating the PCI standard.  In 1994 and 1995, a
significant portion of our revenues were derived from the sale of semiconductor
devices that perform similar functions as our current products, except they were
based on a variety of industry standards.  Our revenues between 1996
and 2007 were derived predominantly from the sale of semiconductor devices based
on the PCI standard to a large number of customers in a variety of applications
including servers, networking and telecommunications, enterprise storage,
imaging, industrial and other embedded applications as well as in related
adapter cards.  In 2002, we shifted the majority of our development
efforts to PCI Express.  In September 2004, we began shipping products
based on the PCI Express standard for next-generation
systems.  Between 2004 and 2007, an industry-wide adoption of the PCI
Express standard took place. PCI Express went from being one of many new
protocols in the market to becoming the interconnect of choice and a basic
building block of systems. Being a market leader in PCI Express, our line of PCI
Express switches and bridges followed suit and also gained a lot of traction in
the market. PCI Express was so well accepted that a follow-on was called for. In
December of 2006, PCI Express Rev 2.0 (commonly referred to as “PCIe Gen 2”) was
released. The Gen 2 protocol doubled the bandwidth supported by PCI Express Gen
1 (from 2.5 Gigabits per second to 5.0 Gigabits per second) and incorporated a
number of other protocol enhancements. In September 2007, we announced the
addition of the Gen 2 switches to our PCI Express product family and began
shipping in January 2008. We are
in development of Gen 3 PCI Express supporting 8.0 Gigabits per
second.
 
 We
utilize a “fabless” semiconductor business model whereby we purchase wafers and
packaged and tested semiconductor devices from independent manufacturing
foundries.  This approach allows us to focus on defining, developing,
and marketing our products and eliminates the need for us to invest large
amounts of capital in manufacturing facilities and work-in-process
inventory.
 
 We rely
on a combination of direct sales personnel and distributors and manufacturers’
representatives throughout the world to sell a significant portion of our
products.  We pay manufacturers’ representatives a commission on sales
while we sell products to distributors at a discount from the selling
price.
 
 Our gross
margins have fluctuated in the past and are expected to fluctuate in the future
due to changes in product and customer mix, provisions and recoveries of excess
or obsolete inventory, the position of our products in their respective life
cycles, and specific product manufacturing costs.
 
 The time
period between initial customer evaluation and design completion can range from
six to twelve months or more. Furthermore, there is typically an additional six
to twelve month or greater period after design completion before a customer
requests volume production of our products.  Due to the variability
and length of these design cycles and variable demand from customers, we may
experience significant fluctuations in new orders from month to month. In
addition, we typically make inventory purchases prior to receiving customer
orders.  Consequently, if anticipated sales and shipments in any
quarter do not occur when expected, expenses and inventory levels could be
disproportionately high, and our results for that quarter and potentially future
quarters would be materially and adversely affected.
 
 Our
long-term success will depend on our ability to introduce new
products.  While new products typically generate little or no revenues
during the first twelve months following their introduction, our revenues in
subsequent periods depend upon these new products. Due to the lengthy sales
cycle and additional time before our customers request volume production,
significant revenues from our new products typically occur twelve to twenty-four
months after product introduction.  As a result, revenues from newly
introduced products have, in the past, produced a small percentage of our total
revenues in the year the product was introduced.  See “Item 1A, Risk
Factors - Certain Factors That May Affect Future Operating Results -- Our
Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our
Expected Revenues” in this Form 10-K.
 
 On
December 15, 2008 we signed a definitive agreement to acquire all of the
outstanding shares of capital stock of Oxford, a privately held fabless provider
of industry-leading silicon and software for the consumer and small office/home
office (SOHO) storage markets.  The acquisition closed on January 2,
2009.  Additional information about the acquisition is set forth in
Note 7 to the consolidated financial statements.
 
 23
 
 Results of
Operations
  Comparison of Years EndedDecember 31, 2009,
2008 and 2007
  Net Revenues.Net revenues
consist of product revenues generated principally by sales of our semiconductor
devices.
 
 The
following table shows the revenue by product type (in thousands) and as a
percentage of net revenues:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007PCI
      Express products
                  
                  $
                  31,819
                  
                  
                  $
                  38,052
                  
                  
                  $
                  28,449As
      a percentage of revenues
                  
                  
                  38.4
                  %
                  
                  
                  46.9
                  %
                  
                  
                  34.8
                  %Storage
      products
                  
                  $
                  19,007
                  
                  
                  $
                  -
                  
                  
                  $
                  -As
      a percentage of revenues
                  
                  
                  23.0
                  %
                  
                  
                  -
                  
                  
                  
                  -Connectivity
      products
                  
                  $
                  32,006
                  
                  
                  $
                  43,016
                  
                  
                  $
                  53,285As
      a percentage of revenues
                  
                  
                  38.6
                  %
                  
                  
                  53.1
                  %
                  
                  
                  65.2
                  %
 Net
revenues for the year ended December 31, 2009 were $82.8 million, an increase of
$1.8 million or 2.2% from $81.1 million in 2008. The increase in 2009
net revenues was due to revenues generated from the Storage and Connectivity
products acquired as part of the Oxford acquisition, largely offset by lower
sales of our PCI Express and Connectivity product as a result of a decline in
enterprise and consumer spending, which resulted from the weakened global
economy and economic uncertainty.
 
 Net
revenues for the year ended December 31, 2008 were $81.1 million, a decrease of
$0.6 million or 0.8% from $81.7 million in 2007. The decrease in 2008
net revenues was due primarily to decreased sales of our Connectivity products
due to customer migration to PCI Express, end of life of customers’ products and
general demand fluctuations, partially offset by increased sales of our PCI
Express products as a result of an increase of customers in volume
production.
 
 There
were no direct end customers that accounted for more than 10% of net revenues.
Sales to the following distributors accounted for 10% or more of net
revenues:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Excelpoint
      Systems Pte Ltd
                  
                  
                  25
                  %
                  
                  
                  29
                  %
                  
                  
                  18
                  %Promate
      Electronics Co., Ltd
                  
                  
                  15
                  %
                  
                  
                  -
                  
                  
                  
                  *
                  %Answer
      Technology, Inc.
                  
                  
                  12
                  %
                  
                  
                  13
                  %
                  
                  
                  10
                  %Avnet,
      Inc.
                  
                  
                  12
                  %
                  
                  
                  12
                  %
                  
                  
                  *
                  %Metatech
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17
                  %
 
 *       Less
than 10%
 
 We
continue to generate significant revenues from Asia. For the twelve months ended
December 31, 2009, 2008 and 2007, approximately 72%, 56% and 60%, respectively,
of net revenues were generated from Asia.
 
 In the
fourth quarter of 2008, we experienced a broad decrease in order rates across
most product lines, markets and end customers. We have seen improved market
conditions in the second half of 2009 and in the first two months of 2010.
Future demand for our products is uncertain and is highly dependent on general
macroeconomic conditions and the demand for products that contain our chips.
Customer demand for semiconductors can change quickly and unexpectedly.
 Our revenue levels have been highly dependent on the amount of new orders
that are received for products to be delivered to the customer within the same
quarter, also called “turns fill” orders.  Because of the long cycle time
to build our products and our lack of visibility into demand when turns fill
orders are high, it is difficult to predict which products to build to match
future demand.  We believe the current high turns fill requirements will
continue indefinitely.  The high turns fill orders pattern, together
with the uncertainty of product mix and pricing, makes it difficult to predict
future levels of sales and profitability and may require us to carry higher
levels of inventory.
 
 24
 Gross Margin.Gross margin
represents net revenues less the cost of revenues. Cost of revenues primarily
includes the cost of (1) purchasing semiconductor devices from our independent
foundries, (2) packaging, assembly and test services from our independent
foundries, assembly contractors and test contractors and (3) our operating costs
associated with the procurement, storage and shipment of products as allocated
to production.
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007in
      thousandsGross
      profit
                  
                  $
                  46,932
                  
                  
                  $
                  48,282
                  
                  
                  $
                  49,525Gross
      margin
                  
                  
                  56.7
                  %
                  
                  
                  59.6
                  %
                  
                  
                  60.6
                  %
 
 Gross
profit for the year ended December 31, 2009 decreased by 2.8%, or $1.4 million
compared to 2008. The decrease in absolute dollars and as a percentage was
primarily due to the lower margins of the Storage products acquired in the
Oxford acquisition as well as overall product mix.
 
 Gross
profit for the year ended December 31, 2008 decreased by 2.5%, or $1.2 million
compared to 2007. The decrease in absolute dollars and as a percentage was
primarily due to decreased Connectivity product shipments and increased product
shipments and customer mix of our PCI Express products, which have lower margins
relative to our Connectivity products.
 
 Future
gross margin is highly dependent on the product and customer mix, provisions and
sales of excess or obsolete inventory, the position of our products in their
respective life cycles and specific manufacturing costs. Accordingly, we are not
able to predict future gross profit levels or gross margins with
certainty.
 
 Research and Development
Expenses. Research and development (R&D) expenses consist primarily
of tape-out costs at our independent foundries, salaries and related costs,
including share-based compensation, software licenses, and expenses for outside
engineering consultants included in R&D expenses.
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007in
      thousandsR&D
      expenses
                  
                  $
                  31,387
                  
                  
                  $
                  27,091
                  
                  
                  $
                  24,373As
      a percentage of revenues
                  
                  
                  37.9
                  %
                  
                  
                  33.4
                  %
                  
                  
                  29.8
                  %
 
 R&D
expenses increased by $4.3 million, or 15.9% in the year ended December 31, 2009
compared to 2008. The increase in R&D in absolute dollars and as a
percentage of revenue was primarily due to increases in R&D spending on
compensation and benefit expenses of $2.2 million, engineering tools of $1.8
million and office lease expenses of $0.6 million associated with the
acquisition of Oxford, partially offset by decreases in consulting expenses of
$0.8 million due to the timing of projects taped-out and cost control
efforts.
 
 R&D
expenses increased by $2.7 million, or 11.2% in the year ended December 31, 2008
compared to 2007. The increase in R&D in absolute dollars and as a
percentage of revenue was primarily due to increases in R&D spending on
engineering tools of $1.5 million and consulting fees of $1.2 million associated
with new product designs.
 
 We
believe continued spending on research and development to develop new products
is critical to our success.  In addition, we expect to increase
research and development expenses in future periods as we increase new product
designs in lower geometries.
 
 Selling, General and Administrative
Expenses. Selling, general and administrative (SG&A) expenses consist
primarily of salaries and related costs, including share-based compensation,
sales commissions to manufacturers’ representatives and professional fees, as
well as trade show and other promotional expenses.
 
 25
 
  Years
      Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007in
      thousandsSG&A
      expenses
                    
                    $
                    24,719
                    
                    
                    $
                    23,368
                    
                    
                    $
                    24,516As
      a percentage of revenues
                    
                    
                    29.8
                    %
                    
                    
                    28.8
                    %
                    
                    
                    30.0
                    %
 
 SG&A
expenses increased by $1.4 million or 5.8% in the year ended December 31, 2009
compared to 2008. The increase in SG&A in absolute dollars and as a
percentage of revenue was primarily due to increases in compensation and benefit
expenses of $0.7 million as a result of the redundancies associated with the
acquisition of Oxford in the first quarter of 2009, accounting and consulting
fees of $0.4 million as a result of the integration of Oxford and software
licenses of $0.3 million.
 
 SG&A
expenses decreased by $1.1 million or 4.7% in the year ended December 31, 2008
compared to 2007. The decrease in SG&A in absolute dollars and as a
percentage of revenue was primarily due to decreases in share-based compensation
expenses of $0.8 million and commission expenses to manufacturer’s
representatives of $0.4 million due to lower commission rates.
 
 Acquisition and Restructuring
Related Costs.
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007in
      thousandsDeal
      costs
                  
                  $
                  439
                  
                  
                  $
                  756
                  
                  
                  $
                  -Severance
      costs
                  
                  
                  2,112
                  
                  
                  
                  -
                  
                  
                  
                  -Asset
      impairment
                  
                  
                  38
                  
                  
                  
                  -
                  
                  
                  
                  -Lease
      commitment accrual
                  
                  
                  311
                  
                  
                  
                  -
                  
                  
                  
                  -$
                  2,900
                  
                  
                  $
                  756
                  
                  
                  $
                  -
 
 In 2009
and 2008 we recorded $2.9 million and $0.8 million, respectively, in acquisition
related costs associated with the January 2, 2009 acquisition of Oxford. Deal
costs related primarily to outside legal and accounting costs. Severance costs
were the result of layoffs due to the redundancy issue that arose as a result of
the acquisition and the downsizing of our Singapore R&D facility. In
addition, we assumed a building lease in Milpitas, California which was vacated
upon the acquisition.  As a result, we took a lease commitment charge
on the operating lease in the first quarter of 2009. See Note 8 of the
consolidated financial statements for additional information.
 
 Amortization of Purchased Intangible
Assets. Amortization of acquired intangible assets consists of
amortization expense related to developed core technology, tradename and
customer base acquired in the Oxford acquisition in January 2009 and the
developed core technology acquired in the HiNT Corporation acquisition in May
2003 and NetChip Technology, Inc. acquisition in May 2004.
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007in
      thousandsAmortization
      of purchased intangible assets
                  
                  $
                  3,416
                  
                  
                  $
                  742
                  
                  
                  $
                  1,279As
      a percentage of revenues
                  
                  
                  4.1
                  %
                  
                  
                  0.9
                  %
                  
                  
                  1.6
                  %
 
 Amortization
of acquired intangible increased by $2.7 million or 360.4% in the year ended
December 31, 2009 compared to 2008. The 2008 amortization expense related to
intangibles acquired in our prior acquisitions of HiNT and NetChip. In December
2008 we determined that these assets were impaired and the remaining carrying
value of $0.8 million was written off. The amortization expense in 2009 relates
to the developed core technology, tradename and customer base acquired through
the acquisition of Oxford. See Note 7 to our consolidated financial statements
for additional information.
 
 26
 
 Amortization
of purchased intangible assets decreased by $0.5 million or 42.0% in the
year ended December 31, 2008 compared to 2007. The decrease was due to customer
base acquired as a result of the NetChip Technology, Inc. acquisition in May
2004 becoming fully amortized in 2007 and the developed core technology acquired
as a result of the HiNT Corporation acquisition in May 2003 becoming fully
amortized in May 2008.
 
 Impairment of Goodwill, Other
Intangible Assets and Long-Lived Assets.During the fourth quarter of
2008, we assessed goodwill and long lived assets for impairment as we observed
that there were indicators of impairment. The notable indicators were a
sustained decline in our market capitalization below book value, depressed
market conditions, deteriorating industry trends and a significant downward
revision of our forecasts. These market conditions continuously change and it is
difficult to project how long an economic downturn may last. Our goodwill and
intangible assets were primarily established in purchase accounting at the
completion of the Sebring, HiNT Corporation and NetChip Technology, Inc
acquisitions in 2000, 2003 and 2004, respectively.
 
 The
projected discounted cash flows for our single reporting unit were based on
discrete five-year financial forecasts developed by management for planning
purposes. Cash flows beyond the discrete forecasts were estimated using terminal
value calculations. The terminal value represents the value of our single
reporting unit at the end of the discrete forecast period.  These
forecasts represent the best estimate that our management had at the time and
were believed to be reasonable. The annual sales growth rates ranged from 5% to
7% during the discrete forecast period and the future cash flows and terminal
value were discounted to present value using a discount rate of 22%. The
terminal value was based on the application of an 8.0x multiple to forecasted
2013 earnings before interest, taxes, depreciation and amortization expense
(EBITDA).  The discount rate was based on an analysis of the weighted
average cost of capital of our single reporting unit.  The EBITDA
multiple used in the terminal value calculation was based upon EBITDA multiples
paid in comparative merger and acquisition transactions and a review of trading
multiples for similar public companies and considered the growth prospects and
profitability for our single reporting unit at the end of the discrete forecast
period.
 
 Prior to
our goodwill impairment testing, we also assessed the fair value of our
long-lived assets, including our corporate headquarters building and amortizable
intangible assets.  For the corporate headquarters building, we used
the sales comparison approach and the income capitalization approach, each
equally weighted, to arrive at a fair value estimate. We determined that the
carrying value of the property was not recoverable and exceeded its fair value,
and we recorded an impairment charge of $18.8 million.  For the
amortizable intangible assets, which included acquired technology, we estimated
a negligible fair value using a relief from royalty method and recorded an
impairment charge of $0.8 million related to all of the remaining net book value
of this acquired technology.
 
 As part
of the goodwill impairment test for the fourth quarter of 2008, we determined
that step two of the impairment analysis was required because the estimated
carrying value of our net assets, subsequent to the impairment of long-lived
assets noted above, exceeded its estimated fair value. The second step of the
goodwill impairment test compared the implied fair value of the goodwill with
the carrying amount of that goodwill. When the carrying amount of the goodwill
exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair value of goodwill
is determined in the same manner as the amount of goodwill recognized in a
business combination. The determination of the amount of the impairment required
that the fair values of our assets and liabilities be determined as if the
Company had been acquired in a hypothetical business combination with a purchase
price equal to the fair value of the reporting unit as of December 31,
2008.  As a result of this analysis, we recorded an impairment charge
of $34.7 million related to all of the recorded goodwill.
 
 In the
fourth quarter of 2009, we tested the goodwill acquired in the Oxford
acquisition in January 2009 and determined there was no impairment.
 
 27
 Interest Income, Interest Expense
and Other, Net.
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007in
      thousandsInterest
      Income
                  
                  $
                  622
                  
                  
                  $
                  1,521
                  
                  
                  $
                  2,385Interest
      Expense
                  
                  
                  (450
                  )
                  
                  
                  -
                  
                  
                  
                  -Other
      Income
                  
                  
                  164
                  
                  
                  
                  22
                  
                  
                  
                  9$
                  336
                  
                  
                  $
                  1,543
                  
                  
                  $
                  2,394
 
 Interest
income reflects interest earned on average cash, cash equivalents and short-term
and long-term investment balances. Interest income decreased by
$0.9 million or 59.1% in the year ended December 31, 2009 compared to 2008.
The decrease was due to lower cash and investment balances and decreased
interest rates.
 
 Interest
income decreased to $1.5 million in 2008 from $2.4 million for
2007.  The decrease was due to lower cash and investment balances as a
result of the stock repurchases and decreased interest rates.
 
 Interest
expense for the year ended December 31, 2009 of $0.5 million primarily consisted
of interest recorded on the $14.2 million note associated with the acquisition
of Oxford. This note was converted to 3.4 million shares of common stock of PLX
on May 22, 2009. In addition, there was interest recorded on our capital lease
obligations. We did not record interest expense for the same period in 2008 or
2007.
 
 Other
income includes foreign currency transaction gains and losses and other
miscellaneous transactions. Other income for the year ended December 31, 2009
included a $0.1 million loss due to the liquidation of our subsidiary in the
United Kingdom as a result of the acquisition of Oxford and its subsidiary in
the United Kingdom.  Other income may fluctuate
significantly.
 
 Loss on Fair Value Remeasurement of
Contingently Convertible Note Payable.As a part of the consideration for
the Oxford acquisition, we recorded a liability for the contingent consideration
due which was recorded at fair value as of the acquisition date. We are required
to remeasure the liability to fair value until the contingency is resolved and
record the change in fair value in earnings.  The fair value of the
note payable was based on 3.4 million shares with a stock price of $1.82, or
$6.2 million. As of March 31, 2009, the closing stock price was $2.17, or $7.4
million. The loss on the fair value of the note remeasurement is the increase in
fair value of the liability of $1.2 million, which was recorded in the first
quarter of 2009. As of May 22, 2009, the date of conversion of the note into
shares of common stock of PLX, the closing stock price was $2.95, or $10.0
million. The loss on the fair value of the note of $2.7 million was recorded in
the second quarter of 2009. See Note 7 of the consolidated financial statements
for additional information on the contingent consideration
arrangement.
 
 Provision for Income Taxes.
Income tax benefit for the period ended December 31, 2009 was $0.2 million on a
pretax loss of $19.0 million, compared to a provision of $0.1 million on a
pretax loss of $56.4 million and a provision of $0.6 million on a pretax profit
of $1.8 million for the periods ended December 31, 2008 and 2007, respectively.
Our 2009 benefit differs from the benefit derived by applying the applicable
U.S. federal statutory rate to the loss from operations primarily due to
the recording of a valuation allowance for the deferred tax asset partially
offset by a benefit of research and development tax credits. Our 2008 provision
differs from the benefit derived by applying the applicable U.S. federal
statutory rate to the loss from operations due to non deductible goodwill
impairment and the recording of a valuation allowance for the deferred tax asset
partially offset by a benefit of research and development tax credits. Our 2007
income tax expenses differs from the expense derived by applying the applicable
U.S. federal statutory rate to the income from operations primarily due to
the recording of a valuation allowance for the deferred tax asset partially
offset by a $0.1 million tax benefit from the release of tax reserves following
the expiration of certain state statute of limitations and the benefit of
research and development tax credits. See Note 12 of the consolidated financial
statements for reconciliation of statutory tax rates.
 
 28
 Liquidity and Capital
Resources
  In
summary, our cash flows were (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      cash provided by (used in) operating activities
                  
                  $
                  (8,410
                  )
                  
                  $
                  7,625
                  
                  
                  $
                  5,777Net
      cash provided by (used in) investing activities
                  
                  
                  14,446
                  
                  
                  
                  (14,246
                  )
                  
                  
                  (20,665
                  )Net
      cash used in financing activities
                  
                  
                  (1,566
                  )
                  
                  
                  (5,646
                  )
                  
                  
                  (1,301
                  )Effect
      of exchange rate fluctuations on cash and cash equivalents
                  
                  
                  (36
                  )
                  
                  
                  (43
                  )
                  
                  
                  (42
                  )
 
 We invest
cash not needed for current operations predominantly in debt instruments that
are highly liquid, of high-quality investment grade and predominantly have
maturities of less than one year with the intent to make such funds readily
available for operating purposes. As of December 31, 2009 cash, cash
equivalents, short and long-term marketable securities were $40.0 million, a
decrease of $7.1 million from $47.1 million at December 31, 2008, and a decrease
of $6.6 million from $46.6 million at December 31, 2007.
 
 Cash
provided by (used in) operating activities primarily consists of net income
(loss) adjusted for certain non-cash items including depreciation, amortization,
share-based compensation expense, impairments, fair value remeasurements,
provisions for excess and obsolete inventories, changes in pre-acquisition
deferred tax balances, other non-cash items and the effect of changes in working
capital and other activities. Cash used in operating activities in 2009 of $8.4
million consisted primarily of a net loss of $18.8 million adjusted for non-cash
items of $13.4 million and an increase in accounts receivable of $1.9 million
due to higher sales in the fourth quarter of 2009 compared to the same period of
2008 and a decrease in accrued compensation of $1.8 million, partially offset by
a decrease in other current assets of $2.3 million due to the amortization and
decreased purchases of software and IP licenses. Cash provided by operating
activities in 2008 of $7.6 million consisted primarily of a net loss of $56.5
million adjusted for non-cash items of $60.9 million and a decrease in accounts
receivable of $4.8 million due to lower sales in the fourth quarter of 2008
compared to the same period of 2007, partially offset by increases in other
current assets and other assets of $1.2 million due to an increase in software
and IP licenses and inventory of $0.5 million. Cash provided by operating
activities in 2007 of $5.8 million consisted primarily of net income of $1.2
million adjusted for non-cash items of $8.7 million and an increase in accounts
payable of $1.5 million due to timing of vendor payments, partially offset by
increases in other assets of $3.2 million due to an increase in software and IP
licenses and $2.0 million in accounts receivable due to timing of customer
payments and higher sales in the fourth quarter of 2007 compared
to  the fourth quarter of 2006.
 
 Cash
provided by investing activities in 2009 of $14.4 million was primarily due to
sales and maturities of investments (net of purchases of investments) of $11.2
million and cash acquired through the acquisition of Oxford of $4.4 million,
partially offset by capital expenditures of $1.2 million primarily to provide
infrastructure for new product designs. Cash used in investing activities in
2008 of $14.2 million was primarily due to purchases of marketable securities
(net of sales and maturities of investments) of $12.4 million and capital
expenditures of $1.8 million. Cash used in investing activities in 2007 of $20.7
million was primarily due to purchases of marketable securities (net of sales
and maturities of investments) of $17.6 million and capital expenditures of $3.1
million. Capital expenditures have been generally comprised of purchases of
engineering equipment, computer hardware, software, server equipment and
furniture and fixtures.
 
 Cash
used in financing activities in 2009 of $1.6 million was due to the payments
made to employees associated with the tender offer of $0.9 million and on
capital lease obligations of $0.7 million.  Cash used in financing
activities in 2008 of $5.6 million was due to common stock repurchases of $6.5
million partially offset by proceeds from the exercise of stock options of $0.9
million. Cash provided by financing activities in 2007 of $1.3 million were due
to proceeds from the exercise of stock options.
 
 The
negative effect of exchange rates on cash and cash equivalents during 2009, 2008
and 2007 was due to the weakening of the U.S. dollar against other foreign
currencies.
 
 29
 
 As of
December 31, 2009, we had the following significant contractual obligations
and commercial commitments (in thousands):
 
 Payments
      due inLess
      than
                  
                  
                  1-3
                  
                  
                  More
      thanTotal
                  
                  
                  1
      Year
                  
                  
                  Years
                  
                  
                  3
      YearsOperating
      leases - facilities and equipment
                  
                  $
                  2,681
                  
                  
                  $
                  573
                  
                  
                  $
                  1,432
                  
                  
                  $
                  676Capital
      leases - IP
                  
                  
                  2,175
                  
                  
                  
                  825
                  
                  
                  
                  1,350
                  
                  
                  
                  -Software
      licenses
                  
                  
                  4,193
                  
                  
                  
                  2,238
                  
                  
                  
                  1,955
                  
                  
                  
                  -Inventory
      purchase commitments
                  
                  
                  7,687
                  
                  
                  
                  7,687
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      cash obligations
                  
                  $
                  16,736
                  
                  
                  $
                  11,323
                  
                  
                  $
                  4,737
                  
                  
                  $
                  676
 
 We
believe that our existing resources, together with cash generated from our
operations will be sufficient to meet our capital requirements for at least the
next twelve months. Our future capital requirements will depend on many factors,
including the level of investment we make in new technologies and improvements
to existing technologies and the levels of monthly expenses required to launch
new products. From time to time, we may also evaluate potential acquisitions and
equity investments complementary to our technologies and market strategies. To
the extent that existing resources and future earnings are insufficient to fund
our future activities, we may need to raise additional funds through public or
private financings. Given the current economic and credit conditions, additional
funds may not be available or, if available, we may not be able to obtain them
on terms favorable to us and our stockholders.
 
 See Note
13 to our consolidated financial statements for additional information on our
contractual obligations and commercial commitments.
 
 Critical
Accounting Policies
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses and related disclosures of contingent assets and
liabilities in the consolidated financial statements and accompanying notes. The
U.S. Securities and Exchange Commission (“SEC”) has defined a company's critical
accounting policies as the ones that are most important to the portrayal of the
company's financial condition and results of operations, and which require the
company to make its most difficult and subjective judgments, often as a result
of the need to make estimates of matters that are inherently uncertain. Based on
this definition, we have identified the critical accounting policies and
judgments addressed below. We also have other key accounting policies which
involve the use of estimates, judgments and assumptions that are significant to
understanding our results. For additional information see Note 1 to the
consolidated financial statements. Although we believe that our estimates,
assumptions and judgments are reasonable, they are based upon information
presently available. Actual results may differ significantly from these
estimates under different assumptions, judgments or conditions.
 
 Revenue Recognition.Werecognize revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the fee is
fixed or determinable and collection is reasonably assured.
 
 Revenue
from product sales to customers is recognized upon shipment and transfer of risk
of loss if we believe collection is reasonably assured and all other revenue
recognition criteria are met. We assess the probability of collection based on a
number of factors, including past transaction history and the customer’s
creditworthiness.  At the end of each reporting period, the sufficiency of
allowances for doubtful accounts is assessed based on the age of the receivable
and the individual customer’s creditworthiness.
 
 We offer
pricing protection to two distributors whereby we support the distributor’s
resale product margin on certain products held in the distributor’s inventory.
We analyze current requests for credit in process, also known as ship and
debits, and inventory at the distributor to determine the ending sales reserve
required for this program. We also offer stock rotation rights to three
distributors such that they can return up to a total of 5% of products purchased
every six months in exchange for other PLX products of equal value. We analyze
current stock rotation requests and past experience, which has historically been
insignificant, to determine the ending sales reserve required for this program.
In addition, we have arrangements with a small number of customers offering a
rebate program on various products. We record rebates as a reduction of revenue
when the rebate is in the form of cash consideration or a reduction to accounts
receivable. Reserves are reduced directly from revenue and recorded as a
reduction to accounts receivable.
 
 30
 
 Inventory Valuation.We
evaluate the need for potential inventory provisions by considering a
combination of factors, including the life of the product, sales history,
obsolescence, and sales forecast. Any adverse changes to our future product
demand may result in increased provisions, resulting in decreased gross margin.
In addition, future sales on any of our previously written down inventory may
result in increased gross margin in the period of sale.
 
 Allowance for Doubtful Accounts.We evaluate the collectability of our accounts receivable based on length
of time the receivables are past due. Generally, our customers have between
thirty days to forty five days to remit payment of invoices. We record reserves
for bad debts against amounts due to reduce the net recognized receivable to the
amount we reasonably believe will be collected.  Once we have
exhausted collection efforts, we will reduce the related accounts receivable
against the allowance established for that receivable.  We have
certain customers with individually large amounts due at any given balance sheet
date. Any unanticipated change in one of those customers’ creditworthiness or
other matters affecting the collectability of amounts due from such customers
could have a material affect on our results of operations in the period in which
such changes or events occur.  Historically, our write-offs have been
insignificant. However, due to the current economic conditions, our customers
may encounter liquidity issues leading to additional bad debt
expense.
 
 Goodwill. Our methodology for
allocating the purchase price related to business acquisitions is determined
through established valuation techniques.  Goodwill is measured as the
excess of the cost of the acquisition over the amounts assigned to identifiable
tangible and intangible assets acquired less assumed liabilities. We have one
operating segment and business reporting unit, the sales of semiconductor
devices, and we perform goodwill impairment tests annually during the fourth
quarter and between annual tests in certain circumstances. In 2008, we
determined that our carrying value exceeded fair value, indicating that goodwill
was potentially impaired. As a result, we initiated the second step of the
goodwill impairment test which involves calculating the implied fair value of
goodwill by allocating the fair value of the Company to all of our assets and
liabilities other than goodwill and comparing it to the carrying amount of
goodwill. We determined that there was no implied fair value of goodwill and
recorded an impairment charge of $34.7 million in 2008. In the fourth quarter of
2009, we tested the goodwill acquired in the acquisition of Oxford in 2009 and
determined there was no impairment.
 
 Long-lived Assets. We review
long-lived assets, principally property and equipment and identifiable
intangibles, for impairment whenever events or circumstances indicate that the
carrying amount of assets may not be recoverable. We evaluate recoverability of
assets to be held and used by comparing the carrying amount of an asset to
estimated future net undiscounted cash flows generated by the
asset.  If such assets are considered to be impaired, the impairment
recognized is measured as the amount by which the carrying amount of the assets
exceeds the fair value of the assets.  Also see Note 6 to the
consolidated financial statements. During 2008, as a result of the goodwill
impairment testing, we had to evaluate our other long-lived assets for
impairment. We purchased our headquarters building in 2000. It is ideal for our
operations and have no plans to relocate or sell the building. However, due to
the decline in the value of commercial property, the building was appraised for
$18.8 million less than its carrying value, which was recorded as an impairment
charge in 2008.
 
 Taxes.We account for income
taxes using the asset and liability method.  Deferred taxes are determined
based on the differences between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.  Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. As of December 31, 2009, we carried a valuation allowance for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset balance (see Note 12 to the consolidated financial statements). The
net deferred tax assets are reduced by a valuation allowance if, based upon
weighted available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.  We must make significant
judgments to determine our provision for income taxes, our deferred tax assets
and liabilities and any valuation allowance to be recorded against our net
deferred tax asset.  As of December 31, 2009, a valuation allowance
continues to be recorded for the deferred tax assets based on management’s
assessment that realization of deferred tax assets is uncertain due to the
history of losses, the variability of operating results and the inability to
conclude that it is more likely than not that sufficient taxable income would be
generated in future periods to realize those deferred tax assets. Future taxable
income and/or tax planning strategies may eliminate all or a portion of the need
for the valuation allowance. In the event we determine we are able to realize
our deferred tax asset, an adjustment to the valuation allowance may
significantly increase income in the period such determination is
made.
 
 31
 Recent
Accounting Pronouncements
  In
December 2007, the Financial Accounting Standards Board (“FASB”) revised the
accounting guidance related to business combinations. This guidance establishes
principles and requirements intending to improve the relevance, representational
faithfulness and comparability of information that a reporting entity provides
in its financial reports about a business combination and its effects. This
guidance became effective for fiscal years beginning after December 15,
2008.  The adoption this guidance on January 1, 2009 changed our
accounting treatment for business combinations. Among other things, acquisition
related costs are required to be expensed as incurred. On January 2, 2009 we
completed the acquisition of Oxford and as a result, we expensed acquisition
related costs of $0.8 million and $0.4 million in 2008 and 2009,
respectively.
 
 In April
2008, the FASB issued new accounting guidance related to the determination of
the useful life of intangible assets. This guidance amends the factors an entity
should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets and adds certain
disclosures for an entity’s accounting policy of the treatment of the costs,
period of extension, and total costs incurred.  This guidance must be
applied prospectively to intangible assets acquired after January 1,
2009.  The adoption of this guidance did not have a material impact on
our financial position or results of operations.
 
 In April
2009, the FASB issued three related sets of accounting guidance intended to
enhance disclosures regarding fair value measurements and impairments of
securities. This guidance sets forth rules related to determining the fair value
of financial assets and financial liabilities when the activity levels have
significantly decreased in relation to the normal market, guidance related to
the determination of other-than-temporary impairments to include intent and
ability of the holder as an indicator in the determination of whether an
other-than-temporary exists and interim disclosure requirements for the fair
value of financial instruments. These sets of accounting guidance became
effective June 15, 2009. The adoption of this guidance did not have a material
impact on our on our financial position or results of operations.
 
 In June
2009, the FASB issued the FASB Accounting Standards Codification (ASC). The ASC
has become the authoritative source of generally accepted accounting principles
in the United States. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under federal securities laws are also sources of
authoritative GAAP for SEC registrants. ASC became effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption of the ASC did not have a material impact on our on our
financial position or results of operations.
 
 In
January 2010, the FASB issued new guidance related to fair value disclosures.
This amended guidance require disclosures about inputs and valuation techniques
used to measure fair value as well as disclosures about significant transfers,
beginning in the first quarter of 2010. Additionally, these amended standards
require presentation of disaggregated activity within the reconciliation for
fair value measurements using significant unobservable inputs (Level 3),
beginning in the first quarter of 2011. We do not expect the adoption of this
guidance to have a material impact on our financial position or results of
operations.
 
 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Interest
Rate Risk
  We have
an investment portfolio of fixed income securities, including amounts classified
as cash equivalents short-term investments and long-term investments of
approximately $32.3 million at December 31, 2009. These securities are
subject to interest rate fluctuations and will decrease in market value if
interest rates increase.
 
 32
 The
primary objective of our investment activities is to preserve principal while at
the same time maximizing yields without significantly increasing risk. We invest
primarily in high quality, short-term and long-term debt instruments. A
hypothetical 100 basis point increase in interest rates would result in less
than a $1,000 decrease (less than 1%) in the fair value of the Company's
available-for-sale securities.  At December 31, 2009 and 2008, we had
an unrealized gain on our investments of approximately $28,000 and $0.3 million,
respectively.
 
 Foreign
Currency Exchange Risk
  All of
our revenue and a majority of our expense and capital purchasing activities are
transacted in U.S. dollars. However, we have significant operating activities
incurred in or exposed to other currencies, primarily the British Pound.
Therefore, significant strengthening or weakening of the U.S. dollar
relative to those foreign currencies could have a material impact on our results
of operations. We considered the historical trends in currency exchange rates
and determined that it was reasonably possible that a weighted average adverse
change of 20% in currency exchange rates could be experienced in the near term.
Such an adverse change would have resulted in an adverse impact on income before
taxes of $2.2 million as of December 31, 2009.
 
 ITEM 8: FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
  The
information required by this Item is contained in the financial statements and
schedule set forth in Item 15 (a) of this Form 10-K.
 
 ITEM
9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL
DISCLOSURE
  None.
 
 ITEM
9A:  CONTROLS
AND PROCEDURES
  Controls
and Procedures
  (a)
                Evaluation
      of disclosure controls and
procedures.
  Based on
their evaluation as of December 31, 2009, our Chief Executive Officer and
Chief Financial Officer, have concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective
to ensure that the information required to be disclosed by us in this Annual
Report on Form 10-K was recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and instructions for
Form 10-K and that such disclosure controls and procedures were also
effective to ensure that information required to be disclosed in the reports we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure.
 
 (b)
                Changes
      in internal controls.
  There has
been no change in our internal control over financial reporting that occurred
during our most recent fiscal year that has materially affected or is reasonably
likely to materially affect our internal control over financial
reporting.
 
 Management's
Report on Internal Control over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended). Our management assessed the
effectiveness of our internal control over financial reporting as of
December 31, 2009. In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") in Internal Control-Integrated Framework. Our management has
concluded that, as of December 31, 2009, our internal control over
financial reporting is effective based on these criteria.
 
 33
 Our
independent registered public accounting firm, BDO Seidman, LLP, which audited
the financial statements in this Annual Report on Form 10-K, independently
assessed the effectiveness of the company’s internal control over financial
reporting. BDO Seidman, LLP has issued an attestation report, included in
Part IV, Item 15(a) of this report.
 
 ITEM 9B:  OTHER INFORMATION
  None.
 
 34
 PART III
  ITEM 10: DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  The
information required by this Item is incorporated herein by reference to the
Company's Proxy Statement for the 2010 Annual Meeting of
Stockholders.
 
 ITEM 11: EXECUTIVE
COMPENSATION
  The
information required by this Item is incorporated herein by reference to the
Company's Proxy Statement for the 2010 Annual Meeting of
Stockholders.
 
 ITEM 12: SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  The
information required by this Item is incorporated herein by reference to the
Company's Proxy Statement for the 2010 Annual Meeting of
Stockholders.
 
 ITEM 13: CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
  The
information required by this Item is incorporated herein by reference to the
Company's Proxy Statement for the 2010 Annual Meeting of
Stockholders.
 
 ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
  The
information required by this Item is incorporated herein by reference to the
Company's Proxy Statement for the 2010 Annual Meeting of Stockholders.
 
 35
 PART
IV
  ITEM 15: EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
 
 (a)      
1.     Consolidated Financial Statements
 
 For
the following financial information included herein, see Index on page
37:
 
 Report of Independent Registered Public Accounting Firm
 
 Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting
 
 Consolidated
      Balance Sheets as of December 31, 2009 and
  2008.
  Consolidated
      Statements of Operations for each of the three years in the period ended
      December 31, 2009.
  Consolidated
      Statements of Stockholders' Equity and Comprehensive Income (Loss) for
      each of the three years in the period ended December 31,
    2009.
  Consolidated
      Statements of Cash Flows for each of the three years in the period ended
      December 31, 2009.
  Notes
      to Consolidated Finacial
Statements.
 
 2.     Financial Statement Schedule
 The
financial statement schedules of the Company are included in Part IV of this
report: As of and for each of the three years in the period ended
December 31, 2009-II Valuation and Qualifying Accounts. All other schedules
have been omitted because they are not applicable.
 3.     Exhibit Index
 See Exhibit Index immediately following the signature page for a list of
exhibits filed or incorporated by reference as a part of this
report.
 
 (b)      Exhibits
 
 The Company hereby files, as exhibits to this Form 10-K, those exhibits
listed on the Exhibit Index referenced in Item 15 (a)
(3) above.
 
 36
 
 PLX TECHNOLOGY,
INC.
 INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
 PageReport
      of BDO Seidman, LLP, Independent Registered Public Accounting
      Firm
                  38Report
      of BDO Seidman, LLP, Independent Registered Public Accounting Firm on
      Internal Control Over Financial Reporting
                  39Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                  40Consolidated
      Statements of Operations for each of the three years in the period ended
      December 31, 2009
                  41Consolidated
      Statements of Stockholders' Equity and Comprehensive Income (Loss) for
      each of the three years in the period ended December 31,
    2009
                  42Consolidated
      Statements of Cash Flows for each of the three years in the period ended
      December 31, 2009
                  43Notes
      to the Consolidated Financial Statements
                  44
 37
 Report of Independent Registered
Public Accounting Firm
  The Board
of Directors and Stockholders
 PLX
Technology, Inc.
 Sunnyvale,
California
 
 
 We have
audited the accompanying consolidated balance sheets of PLX Technology, Inc. as
of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders’ equity and comprehensive income (loss), and cash flows
for each of the three years in the period ended December 31, 2009.  In
connection with our audits of the financial statements, we have also audited
Schedule II – Valuation and Qualifying Accounts as of and for each of the years
ended December 31, 2009, 2008 and 2007.  These financial statements
and schedule are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and schedule are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and schedule,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements and schedule.  We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of PLX Technology, Inc. at
December 31, 2009 and 2008, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2009, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Also, in
our opinion, Schedule II – Valuation and Qualifying Accounts, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), PLX Technology, Inc.’s internal control over
financial reporting as of December 31, 2009, based on criteria established in
Internal Control – Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated March 4, 2010, expressed an
unqualified opinion thereon.
   /s/ BDO
Seidman, LLP
 San
Francisco, California
 March 4,
2010
  38
 Report
of Independent Registered Public Accounting Firm
  The Board
of Directors and Stockholders
 PLX
Technology, Inc.
 Sunnyvale,
California
 
 
 We have
audited PLX Technology, Inc.’s internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria).  PLX Technology, Inc.’s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the company's internal control over
financial reporting based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances.  We
believe that our audit provides a reasonable basis for our opinion.
 
 A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable  assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting  principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, PLX Technology, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on the
COSO criteria.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of PLX
Technology, Inc. as of December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss),
and cash flows for each of the three years in the period ended December 31,
2009, and our report dated March 4, 2010, expressed an unqualified opinion
thereon.
 
 
 /s/ BDO
Seidman, LLP
 San
Francisco, California
 March 4,
2010
  39
 PLX
TECHNOLOGY, INC.
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands, except share and per share data)
  December
      31,2009
                  
                  
                  2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  11,299
                  
                  
                  $
                  6,865Short-term
      investments
                  
                  
                  27,060
                  
                  
                  
                  32,677Accounts
      receivable, less allowances of $2,147 and $383
                  
                  
                  9,167
                  
                  
                  
                  5,712Inventories
                  
                  
                  9,628
                  
                  
                  
                  7,257Other
      current assets
                  
                  
                  3,712
                  
                  
                  
                  4,699Total
      current assets
                  
                  
                  60,866
                  
                  
                  
                  57,210Goodwill
                  
                  
                  1,367
                  
                  
                  
                  -Other
      purchased intangible assets, net of accumulated amortization of $3,416 in
      2009
                  
                  
                  5,640
                  
                  
                  
                  -Property
      and equipment, net
                  
                  
                  10,856
                  
                  
                  
                  10,590Long-term
      investments
                  
                  
                  1,656
                  
                  
                  
                  7,585Other
      assets
                  
                  
                  3,635
                  
                  
                  
                  1,875Total
      assets
                  
                  $
                  84,020
                  
                  
                  $
                  77,260LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                  
                  $
                  6,489
                  
                  
                  $
                  4,003Accrued
      compensation and benefits
                  
                  
                  1,261
                  
                  
                  
                  2,360Accrued
      commissions
                  
                  
                  740
                  
                  
                  
                  475Short
      term capital lease obligation
                  
                  
                  776
                  
                  
                  
                  -Other
      accrued expenses
                  
                  
                  1,657
                  
                  
                  
                  1,219Total
      current liabilities
                  
                  
                  10,923
                  
                  
                  
                  8,057Long
      term capital lease obligation
                  
                  
                  1,098
                  
                  
                  
                  -Total
      liabilities
                  
                  
                  12,021
                  
                  
                  
                  8,057Commitments
      and contingencies (Notes 11 and 13)Stockholders'
      equity:Preferred
      stock, $0.001 par value per share:Authorized
      -- 5,000,000  shares: none issued and
outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $0.001 par value per share:Authorized
      -- 50,000,000 shares: issued and outstanding - 37,012,223 and
      28,004,262
                  
                  
                  37
                  
                  
                  
                  28Additional
      paid-in capital
                  
                  
                  153,939
                  
                  
                  
                  132,159Accumulated
      other comprehensive income (loss)
                  
                  
                  (87
                  )
                  
                  
                  104Accumulated
      deficit
                  
                  
                  (81,890
                  )
                  
                  
                  (63,088
                  )Total
      stockholders' equity
                  
                  
                  71,999
                  
                  
                  
                  69,203Total
      liabilities and stockholders' equity
                  
                  $
                  84,020
                  
                  
                  $
                  77,260
 See
accompanying notes to consolidated financial statements.
 
 40
 PLX
TECHNOLOGY, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (in
thousands, except per share data)
  Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      revenues
                  
                  $
                  82,832
                  
                  
                  $
                  81,068
                  
                  
                  $
                  81,734Cost
      of revenues
                  
                  
                  35,900
                  
                  
                  
                  32,786
                  
                  
                  
                  32,209Gross
      profit
                  
                  
                  46,932
                  
                  
                  
                  48,282
                  
                  
                  
                  49,525Operating
      expensesResearch
      and development
                  
                  
                  31,387
                  
                  
                  
                  27,091
                  
                  
                  
                  24,373Selling,
      general and administrative
                  
                  
                  24,719
                  
                  
                  
                  23,368
                  
                  
                  
                  24,516Acquisition
      and restructuring related costs
                  
                  
                  2,900
                  
                  
                  
                  756
                  
                  
                  
                  -Amortization
      of purchased intangible assets
                  
                  
                  3,416
                  
                  
                  
                  742
                  
                  
                  
                  1,279Impairment
      of assets
                  
                  
                  -
                  
                  
                  
                  54,272
                  
                  
                  
                  -Total
      operating expenses
                  
                  
                  62,422
                  
                  
                  
                  106,229
                  
                  
                  
                  50,168Operating
      loss
                  
                  
                  (15,490
                  )
                  
                  
                  (57,947
                  )
                  
                  
                  (643
                  )Interest
      income
                  
                  
                  622
                  
                  
                  
                  1,521
                  
                  
                  
                  2,385Interest
      expense
                  
                  
                  (450
                  )
                  
                  
                  -
                  
                  
                  
                  -Other
      income, net
                  
                  
                  164
                  
                  
                  
                  22
                  
                  
                  
                  9Loss
      on fair value remeasurement
                  
                  
                  (3,842
                  )
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) before provision for income taxes
                  
                  
                  (18,996
                  )
                  
                  
                  (56,404
                  )
                  
                  
                  1,751Provision
      (benefit) for income taxes
                  
                  
                  (194
                  )
                  
                  
                  126
                  
                  
                  
                  577Net
      income (loss)
                  
                  $
                  (18,802
                  )
                  
                  $
                  (56,530
                  )
                  
                  $
                  1,174Basic
      net income (loss) per share
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04Shares
      used to compute basic per share amounts
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  28,724Diluted
      net income (loss) per share
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04Shares
      used to compute diluted per share amounts
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  29,156
 See
accompanying notes to consolidated financial statements.
 
 41
 PLX
TECHNOLOGY, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 &
COMPREHENSIVE INCOME (LOSS)
 (in
thousands, except share amounts)
  AccumulatedOtherAdditional
                  
                  
                  Comprehensive
                  
                  
                  
                  
                  
                  TotalCommon
      Stock
                  
                  
                  Paid-in
                  
                  
                  Income
                  
                  
                  Accumulated
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  (Loss)
                  
                  
                  Deficit
                  
                  
                  EquityBalance
      at December 31, 2006
                  
                  
                  28,630,022
                  
                  
                  $
                  29
                  
                  
                  $
                  128,735
                  
                  
                  $
                  (96
                  )
                  
                  $
                  (7,732
                  )
                  
                  $
                  120,936Share-based
      compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,441
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,441Issuance
      of stock under employee option plans
                  
                  
                  211,417
                  
                  
                  
                  -
                  
                  
                  
                  1,301
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,301Tax
      benefit related to exercise of stock options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26Comprehensive
      income:Change
      in unrealized loss on investments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  56
                  
                  
                  
                  -
                  
                  
                  
                  56Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (42
                  )
                  
                  
                  -
                  
                  
                  
                  (42
                  )Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,174
                  
                  
                  
                  1,174Total
      comprehensive income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,188Balance
      at December 31, 2007
                  
                  
                  28,841,439
                  
                  
                  
                  29
                  
                  
                  
                  134,503
                  
                  
                  
                  (82
                  )
                  
                  
                  (6,558
                  )
                  
                  
                  127,892Share-based
      compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,301
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,301Issuance
      of stock under employee option plans
                  
                  
                  119,229
                  
                  
                  
                  -
                  
                  
                  
                  845
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  845Repurchase
      of common stock
                  
                  
                  (956,406
                  )
                  
                  
                  (1
                  )
                  
                  
                  (6,490
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (6,491
                  )Comprehensive
      income (loss):Change
      in unrealized loss on investments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  229
                  
                  
                  
                  -
                  
                  
                  
                  229Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (43
                  )
                  
                  
                  -
                  
                  
                  
                  (43
                  )Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (56,530
                  )
                  
                  
                  (56,530
                  )Total
      comprehensive loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (56,344
                  )Balance
      at December 31, 2008
                  
                  
                  28,004,262
                  
                  
                  
                  28
                  
                  
                  
                  132,159
                  
                  
                  
                  104
                  
                  
                  
                  (63,088
                  )
                  
                  
                  69,203Share-based
      compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,398
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,398Tender
      offer payments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (933
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (933
                  )Issuance
      of stock:under
      employee stock option plans
                  
                  
                  8,000
                  
                  
                  
                  -
                  
                  
                  
                  26
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26in
      connection with the acquisition of Oxford
                  
                  
                  8,999,961
                  
                  
                  
                  9
                  
                  
                  
                  20,213
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  20,222Tax
      benefit related to exercise of stock options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  76
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  76Comprehensive
      income (loss):Change
      in unrealized loss on investments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (263
                  )
                  
                  
                  -
                  
                  
                  
                  (263
                  )Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  72
                  
                  
                  
                  -
                  
                  
                  
                  72Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (18,802
                  )
                  
                  
                  (18,802
                  )Total
      comprehensive loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (18,993
                  )Balance
      at December 31, 2009
                  
                  
                  37,012,223
                  
                  
                  $
                  37
                  
                  
                  $
                  153,939
                  
                  
                  $
                  (87
                  )
                  
                  $
                  (81,890
                  )
                  
                  $
                  71,999
 See
accompanying notes to consolidated financial statements.
 
 42
 PLX
TECHNOLOGY, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (in
thousands)
  Years
      Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Cash
      flows from operating activities:Net
      income (loss)
                    
                    $
                    (18,802
                    )
                    
                    $
                    (56,530
                    )
                    
                    $
                    1,174Adjustments
      to reconcile net income (loss) to net cash flows provided by operating
      activities,net
      of assets acquired and liabilities assumed:Depreciation
      and amortization
                    
                    
                    3,289
                    
                    
                    
                    2,240
                    
                    
                    
                    2,029Share-based
      compensation expense
                    
                    
                    2,398
                    
                    
                    
                    3,301
                    
                    
                    
                    4,441Amortization
      of purchased intangible assets
                    
                    
                    3,416
                    
                    
                    
                    742
                    
                    
                    
                    1,279Impairment
      of assets
                    
                    
                    -
                    
                    
                    
                    54,272
                    
                    
                    
                    -Provision
      for inventories
                    
                    
                    521
                    
                    
                    
                    684
                    
                    
                    
                    763Fair
      value remeasurement of note payable
                    
                    
                    3,842
                    
                    
                    
                    -
                    
                    
                    
                    -Changes
      in pre-acquisition deferred tax balances
                    
                    
                    -
                    
                    
                    
                    (151
                    )
                    
                    
                    435Other
      non-cash items
                    
                    
                    (95
                    )
                    
                    
                    (176
                    )
                    
                    
                    (217
                    )Changes
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    (1,887
                    )
                    
                    
                    4,822
                    
                    
                    
                    (2,031
                    )Inventories
                    
                    
                    (180
                    )
                    
                    
                    (519
                    )
                    
                    
                    110Other
      current assets
                    
                    
                    2,300
                    
                    
                    
                    (911
                    )
                    
                    
                    (3,188
                    )Other
      assets
                    
                    
                    (252
                    )
                    
                    
                    (298
                    )
                    
                    
                    86Accounts
      payable
                    
                    
                    (662
                    )
                    
                    
                    (444
                    )
                    
                    
                    1,452Accrued
      compensation and benefits
                    
                    
                    (1,840
                    )
                    
                    
                    123
                    
                    
                    
                    (180
                    )Accrued
      commissions
                    
                    
                    168
                    
                    
                    
                    (177
                    )
                    
                    
                    (448
                    )Other
      accrued expenses
                    
                    
                    (626
                    )
                    
                    
                    647
                    
                    
                    
                    72Net
      cash provided by (used in) operating activities
                    
                    
                    (8,410
                    )
                    
                    
                    7,625
                    
                    
                    
                    5,777Cash
      flows provided by (used in) investing activities:Cash
      acquired in Oxford acquisition
                    
                    
                    4,392
                    
                    
                    
                    -
                    
                    
                    
                    -Purchase
      of investments
                    
                    
                    (34,265
                    )
                    
                    
                    (48,360
                    )
                    
                    
                    (34,677
                    )Sales
      and maturities of investments
                    
                    
                    45,499
                    
                    
                    
                    35,890
                    
                    
                    
                    17,100Purchase
      of property and equipment
                    
                    
                    (1,182
                    )
                    
                    
                    (1,776
                    )
                    
                    
                    (3,088
                    )Proceeds
      from sales of property and equipment
                    
                    
                    2
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      cash provided by (used in) investing activities
                    
                    
                    14,446
                    
                    
                    
                    (14,246
                    )
                    
                    
                    (20,665
                    )Cash
      flows provided by (used in) financing activities:Proceeds
      from exercise of common stock options
                    
                    
                    26
                    
                    
                    
                    845
                    
                    
                    
                    1,301Repurchase
      of common stock
                    
                    
                    -
                    
                    
                    
                    (6,491
                    )
                    
                    
                    -Tender
      Offer payments
                    
                    
                    (933
                    )
                    
                    
                    -
                    
                    
                    
                    -Principal
      payments on capital lease obligations
                    
                    
                    (659
                    )
                    
                    
                    -
                    
                    
                    
                    -Net
      cash provided by (used in) financing activities
                    
                    
                    (1,566
                    )
                    
                    
                    (5,646
                    )
                    
                    
                    1,301Effect
      of exchange rate fluctuations on cash and cash equivalents
                    
                    
                    (36
                    )
                    
                    
                    (43
                    )
                    
                    
                    (42
                    )Increase
      (decrease) in cash and cash equivalents
                    
                    
                    4,434
                    
                    
                    
                    (12,310
                    )
                    
                    
                    (13,629
                    )Cash
      and cash equivalents at beginning of year
                    
                    
                    6,865
                    
                    
                    
                    19,175
                    
                    
                    
                    32,804Cash
      and cash equivalents at end of year
                    
                    $
                    11,299
                    
                    
                    $
                    6,865
                    
                    
                    $
                    19,175Supplemental
      disclosure of cash flow information:Cash
      from income tax refunds
                    
                    $
                    1,111
                    
                    
                    $
                    4
                    
                    
                    $
                    41Cash
      paid for income taxes
                    
                    $
                    59
                    
                    
                    $
                    199
                    
                    
                    $
                    165Cash
      paid for interest
                    
                    $
                    418
                    
                    
                    $
                    -
                    
                    
                    $
                    -Common
      stock issued in connection with acquisition
                    
                    $
                    10,192
                    
                    
                    $
                    -
                    
                    
                    $
                    -Common
      stock issued in connection with acquisition after conversion of the note
      into shares
                    
                    $
                    10,030
                    
                    
                    $
                    -
                    
                    
                    $
                    -
 See
accompanying notes to consolidated financial statements.
 
 43
 PLX TECHNOLOGY,
INC.
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
  1.  Organization and
      Summary of Significant Accounting
  Policies
  Description of
Business
  PLX
Technology, Inc. ("PLX" or the "Company"), a Delaware corporation established in
May 1986, develops and supplies semiconductor devices that accelerate and manage
the transfer of data in microprocessor-based systems including networking and
telecommunications, enterprise storage, servers, personal computers (PCs), PC
peripherals, consumer electronics, imaging and industrial products. The Company
offers a complete solution consisting of two related types of products:
semiconductor devices and development kits. The Company’s semiconductor devices
simplify the development of data transfer circuits in micro-processor based
systems. The Company’s development kits promote sales of its semiconductor
devices by lowering customers' development costs and by accelerating their
ability to bring new products to market. The Company utilizes a “fabless”
semiconductor business model whereby it purchases wafers and packaged and tested
semiconductor devices from independent manufacturing
foundries.  Semiconductor devices account for substantially all of the
Company's net revenues.
 
 Basis of
Presentation
  The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries in China, Japan, Korea, Singapore, Taiwan and the
United Kingdom. All intercompany transactions and balances have been
eliminated.
 
 Cash and Cash
Equivalents
  The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
 
 Investments
 
 At
December 31, 2009, the Company’s securities consisted of debt
securities.  Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. At December 31, 2009 and 2008, all debt securities
were designated as available-for-sale. Available-for-sale securities are carried
at fair value, based on quoted market prices or prices quoted in markets that
are not active, with unrealized gains and losses reported in a separate
component of stockholders' equity. The amortized cost of debt securities is
adjusted for the amortization of premiums and the accretion of discounts to
maturity both of which are included in interest income. Realized gains and
losses are recorded on the specific identification method.
 
 Accounts
Receivable and Allowance for Doubtful Accounts
  Accounts
receivable are recorded at the invoiced amount and do not bear
interest.  The allowance for doubtful accounts is the Company’s best
estimate of the amount of probable credit losses in its existing accounts
receivable.  The Company determines the allowance based on historical
write-off experience and customer economic data.  The Company reviews
its allowance for doubtful accounts monthly.  Past due balances over
90 days are reviewed individually for collectability.  Account
balances are charged off against the allowance when the Company believes that it
is probable the receivable will not be recovered.
 
 44
 Inventories
  Inventories
are valued at the lower of cost (first-in, first-out method) or market (net
realizable value).  Inventories were as follows (in
thousands):
 
 December
      31,2009
                  
                  
                  2008Work-in-process
                  
                  $
                  2,242
                  
                  
                  $
                  2,506Finished
      goods
                  
                  
                  7,386
                  
                  
                  
                  4,751Total
                  
                  $
                  9,628
                  
                  
                  $
                  7,257
 
 The
Company evaluates the need for potential provision for inventory by considering
a combination of factors, including the life of the product, sales history,
obsolescence and sales forecasts.
 
 Goodwill
and Other Intangible Assets
  Goodwill
represents the excess of cost over the value of net assets of businesses
acquired and is carried at cost unless write-downs for impairment are required.
The Company evaluates the carrying value of goodwill on an annual basis during
the fourth quarter and whenever events and changes in circumstances indicate
that the carrying amount may not be recoverable. Such indicators would include a
significant reduction in the Company's market capitalization, a decrease in
operating results or a deterioration in the Company's financial position. The
Company operates under a single reporting unit, and accordingly, all of its
goodwill is associated with the entire company.
 
 The
purchased intangible assets including customer base and developed/core
technology were being amortized over the assets’ useful lives, which ranged from
three to five years, utilizing the straight-line or accelerated methods which
approximates the estimated future cash flows from the intangible. Also, see
Notes 6 and 7 to the consolidated financial statements. The Company evaluates
other intangible assets for impairment whenever events and circumstances
indicate that such assets might be impaired.
 
 Changes
in the carrying amount of goodwill for the years ended December 31, 2009 and
2008 are as follows (in thousands):
 
 December
      31,2009
                  
                  
                  2008Goodwill
                  
                  $
                  34,692
                  
                  
                  $
                  34,541Accumulated
      impairment losses
                  
                  
                  (34,692
                  )
                  
                  
                  -Net
      goodwill at beginning of period
                  
                  
                  -
                  
                  
                  
                  34,541Changes
      in pre-acquisition deferred tax balances
                  
                  
                  -
                  
                  
                  
                  151Impairment
      charge
                  
                  
                  -
                  
                  
                  
                  (34,692
                  )Goodwill
      acquired in the acquisition of Oxford
                  
                  
                  1,367
                  
                  
                  
                  -Net
      goodwill at end of period
                  
                  $
                  1,367
                  
                  
                  $
                  -
 
 Goodwill
is required to be tested for impairment annually or at an interim date if an
event occurs or conditions change that would more likely than not reduce the
fair value of our reporting unit below its carrying value. During the quarter
ended December 31, 2008, the Company determined that its carrying value exceeded
its fair value, indicating that goodwill was potentially impaired. As a result,
the Company initiated the second step of the goodwill impairment test which
involves calculating the implied fair value of its goodwill by allocating the
fair value of the Company to all of its assets and liabilities other than
goodwill and comparing it to the carrying amount of goodwill. The Company
determined that there was no implied fair value of its goodwill and recorded an
impairment charge of $34.7 million in 2008.  Also see Note 6 to the
consolidated financial statements.
 
 In the
fourth quarter of 2009, the Company tested the goodwill acquired in the
acquisition of Oxford in 2009 and determined there was no
impairment.
 
 45
 
 Long-lived
Asset Impairment
  Long-lived
assets, principally property and equipment and identifiable intangibles, held
and used by the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable.  The Company evaluates recoverability of assets to be
held and used by comparing the carrying amount of an asset to estimated future
net undiscounted cash flows generated by the asset.  If such assets
are considered to be impaired, the impairment recognized is measured as the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.  Also see Note 6 to the consolidated financial
statements.
 
 During
2008, as a result of the goodwill impairment testing, the Company had to
evaluate its other long-lived assets for impairment. The Company purchased its
headquarters building in 2000. It is ideal for its operations and has no plans
to relocate or sell the building. However, due to the decline in the value of
commercial property, the building was appraised for $18.8 million less than its
carrying value, which was recorded as an impairment charge.
 
 Property and
Equipment
  Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of
thirty nine years for buildings, three to eight years for building
improvements and three to seven years for equipment, furniture and purchased
software.
 
 Property
and equipment are as follows (in thousands):
 
 December
      31,2009
                  
                  
                  2008Land
                  
                  $
                  3,150
                  
                  
                  $
                  3,150Building
      and improvements
                  
                  
                  4,078
                  
                  
                  
                  3,950Equipment
      and furniture
                  
                  
                  10,846
                  
                  
                  
                  9,012Purchased
      software
                  
                  
                  3,317
                  
                  
                  
                  2,86121,391
                  
                  
                  
                  18,973Accumulated
      depreciation
                  
                  
                  (10,535
                  )
                  
                  
                  (8,383
                  )Net
      property and equipment
                  
                  $
                  10,856
                  
                  
                  $
                  10,590
 
 Depreciation
and amortization expense pertaining to property and equipment was approximately
$2.2 million, $2.2 million and $2.0 million for the years ended December 31,
2009, 2008 and 2007, respectively. During 2009, the Company reduced the cost and
accumulated depreciation of property and equipment for $5.0 million of fully
depreciated assets no longer in use.  It was determined that these assets
were also fully depreciated and no longer being used as of December 31,
2008.  Accordingly, the prior year presentation of property and equipment
above has been reclassified to conform with the current period
presentation.  This reclassification had no impact on net property and
equipment.
 
 Foreign
Currency Translation
  The
functional currency of the Company’s international subsidiaries, PLX China, PLX
Japan, PLX Korea and PLX Taiwan, is the local currency of the resident
countries.  Assets and liabilities of the Company’s foreign
subsidiaries are translated into the Company’s reporting currency at month-end
exchange rates.  Revenues and expenses of the Company’s foreign
subsidiaries are translated into the Company’s reporting currency at
weighted-average exchange rates. The effects of the translation are included in
a separate component of the Consolidated Statements of Stockholder’s equity and
Comprehensive Income (Loss).
 
 Foreign
Currency Transaction
  The
functional currency of the Company’s international subsidiaries, Oxford UK,
Oxford Taiwan and Oxford Singapore, is the United States dollar. Assets and
liabilities maintained in currencies other than the United States dollar are
remeasured using the foreign exchange rate at the balance sheet dates.
Operational accounts are remeasured and recorded at the rate in effect at the
date of the transactions. The effects of the remeasurement are included within
other income, net in the Consolidated Statements of Operations.
 
 46
 
 Income
Taxes
  Income
taxes are accounted for using the asset and liability method.  Under
this method, deferred tax liabilities and assets are recognized for the expected
future tax consequences of differences between the carrying amounts and the tax
bases of assets and liabilities.  A valuation allowance is provided
when it is more likely than not that all or some portion of deferred tax assets
will not be realized.
 
 Revenue
Recognition
  The
Companyrecognizes
revenue when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, and collection is reasonably
assured.
 
 Revenue
from product sales to direct customers and distributors is recognized upon
shipment and transfer of risk of loss, if the Company believes collection is
reasonably assured and all other revenue recognition criteria are met. The
Company assesses the probability of collection based on a number of factors,
including past transaction history and the customer’s creditworthiness.  At
the end of each reporting period, the sufficiency of allowances is assessed
based on the age of the receivable and the individual customer’s
creditworthiness.
 
 The
Company offers pricing protection to two distributors whereby the Company
supports the distributor’s resale product margin on certain products held in the
distributor’s inventory. The Company analyzes current requests for credit in
process, also known as ship and debits, and inventory at the distributor to
determine the ending sales reserve required for this program. The Company also
offers stock rotation rights to three distributors such that they can return up
to a total of 5% of products purchased every six months in exchange for other
PLX products of equal value. The Company analyzes current stock rotation
requests and past experience to determine the ending sales reserve required for
this program. In addition, the Company has arrangements with a small number of
customers offering a rebate program on various products. The Company records
rebates as a reduction of revenue when the rebate is in the form of cash
consideration or a reduction to accounts receivable. Reserves are reduced
directly from revenue and recorded as a reduction to accounts
receivable.
 
 Product
Warranty
  The
Company sells products with a limited warranty of product quality for a period
of one year, and up to three years for a small number of customers, and a
limited indemnification of customers against intellectual property infringement
claims related to the Company’s products. The Company accrues for known warranty
and indemnification issues if a loss is probable and can be reasonably
estimated, and accrues for estimated incurred but unidentified issues based on
historical activity.
 
 Use
of Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect various accounts, including but not limited to
goodwill, long-lived assets, income taxes, inventories, revenue recognition,
allowance for doubtful accounts, share-based compensation and warranty reserves
as reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates and such
differences may be material to the consolidated financial
statements.
 
 47
 Comprehensive
Income (Loss)
  The
components of accumulated other comprehensive income (loss), reflected in the
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss),
consisted of the following (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Unrealized
      gain on investments, net
                  
                  $
                  28
                  
                  
                  $
                  291
                  
                  
                  $
                  62Cumulative
      translation adjustments
                  
                  
                  (115
                  )
                  
                  
                  (187
                  )
                  
                  
                  (144
                  )Accumulated
      other comprehensive income (loss)
                  
                  $
                  (87
                  )
                  
                  $
                  104
                  
                  
                  $
                  (82
                  )
 
 Recent Accounting
Pronouncements
  In
December 2007, the Financial Accounting Standards Board (“FASB”) revised the
accounting guidance related to business combinations. This guidance establishes
principles and requirements intending to improve the relevance, representational
faithfulness and comparability of information that a reporting entity provides
in its financial reports about a business combination and its effects. This
guidance became effective for fiscal years beginning after December 15,
2008.  The adoption this guidance on January 1, 2009 changed the
Company’s accounting treatment for business combinations. Among other things,
acquisition related costs are required to be expensed as incurred. On January 2,
2009 the Company completed the acquisition of Oxford and as a result, it
expensed acquisition related costs of $0.8 million and $0.4 million in the
fourth quarter of 2008 and in 2009, respectively.
 
 In April
2008, the FASB issued new accounting guidance related to the determination of
the useful life of intangible assets. This guidance amends the factors an entity
should consider in developing renewal or extension assumptions used in
determining the useful life of recognized intangible assets and adds certain
disclosures for an entity’s accounting policy of the treatment of the costs,
period of extension, and total costs incurred.  This guidance must be
applied prospectively to intangible assets acquired after January 1,
2009.  The adoption of this guidance did not have a material impact on
the Company’s financial position or results of operations.
 
 In April
2009, the FASB issued three related sets of accounting guidance intended to
enhance disclosures regarding fair value measurements and impairments of
securities. This guidance sets forth rules related to determining the fair value
of financial assets and financial liabilities when the activity levels have
significantly decreased in relation to the normal market, guidance related to
the determination of other-than-temporary impairments to include intent and
ability of the holder as an indicator in the determination of whether an
other-than-temporary exists and interim disclosure requirements for the fair
value of financial instruments. These sets of accounting guidance became
effective June 15, 2009. The adoption of this guidance did not have a material
impact on the Company’s financial position or results of
operations.
 
 In June
2009, the FASB issued the FASB Accounting Standards Codification (ASC). The ASC
has become the authoritative source of generally accepted accounting principles
in the United States. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under federal securities laws are also sources of
authoritative GAAP for SEC registrants. ASC became effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption of the ASC did not have a material impact on the Company’s
financial position or results of operations.
 
 In
January 2010, the FASB amended the guidance related to fair value disclosures.
This amended guidance require disclosures about inputs and valuation techniques
used to measure fair value as well as disclosures about significant transfers,
beginning in the first quarter of 2010. Additionally, this guidance requires
presentation of disaggregated activity within the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), beginning in the
first quarter of 2011. The Company does not expect the adoption of this guidance
to have a material impact on its financial position or results of
operations.
 
 48
  2.  Share-Based
      Compensation
  Stock
Option Plans
  In May
2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (“2008
Plan”).  Under the 2008 Plan, there is authorized for issuance and
available for awards an aggregate of 1,200,000 shares of the Company’s common
stock, plus the number of shares of the Company’s common stock available for
issuance under the Company’s prior incentive plan, its 1999 Stock Incentive
Plan, that are not subject to outstanding awards as of May 27,
2008.  In addition, the share reserve under the 2008 Plan will be
increased by the number of shares issuable pursuant to awards outstanding under
the prior plan that would have otherwise reverted to the prior plan because it
expires, are canceled or otherwise terminated without being exercised. Awards
under the 2008 Plan may include stock options, restricted stock, stock
appreciation rights, performance awards, restricted stock units and other
awards, provided that with respect to full value awards, such as restricted
stock or restricted stock units, no more than 300,000 shares may be issued in
the form of full value awards during the term of the 2008
Plan.  Awards under the 2008 Plan may be made to the Company’s
officers and other employees, its board members and consultants that it hires
and have a term of seven years.  The 2008 Plan has a term of ten
years.
 
 Share-Based
Compensation Expense
  The fair
value of share-based awards to employees is calculated using the Black-Scholes
option pricing model, which requires subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect the
calculated values.
 
 The
weighted-average fair value of share-based compensation to employees is based on
the multiple option valuation approach. Forfeitures are estimated and it is
assumed no dividends will be declared. The estimated fair value of share-based
compensation awards to employees is amortized using the straight-line method
over the vesting period of the options. The weighted-average fair value
calculations are based on the following average assumptions:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Volatility
                  
                  
                  0.62
                  
                  
                  
                  0.54
                  
                  
                  
                  0.59Expected
      term of options (in years)
                  
                  
                  4.51
                  
                  
                  
                  4.47
                  
                  
                  
                  4.35Risk-free
      interest rate
                  
                  
                  2.34
                  %
                  
                  
                  2.55
                  %
                  
                  
                  4.31
                  %
 Risk-Free Interest Rate. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant for the expected term of the option.
 
 Expected Term. The Company’s
expected term represents the weighted-average period that the Company’s stock
options are expected to be outstanding. The expected term is based on the
observed and expected time to post-vesting exercise of options by employees. The
Company uses historical exercise patterns of previously granted options in
relation to stock price movements to derive an employee behavioral pattern used
to forecast expected exercise patterns.
 
 Expected Volatility. The
Company has historically calculated its expected volatility assumption required
in the Black-Scholes model by blending the historical and implied volatility.
The historical volatility is based on the weekly closing prices of its common
stock over a period equal to the expected term of the option. Market based
implied volatility is based on utilizing market data of actively traded options
on the Company’s stock, from options at- or near-the-money traded options, at a
point in time as close to the grant of the employee options as reasonably
practical and with similar terms to the employee share option, or a remaining
maturity of at least six months if no similar terms are available. The
historical volatility of the price of the Company’s common stock over the
expected term of the option is a strong indicator of the expected future
volatility. In addition, implied volatility takes into consideration market
expectations of how future volatility will differ from historical
volatility.  Historically, the Company did not believe that one
estimate was more reliable than the other so it used a 50/50 blend of historical
volatility and market-based volatility. However, due to the recent lack of
available market data to calculate implied volatility, the Company began using
100% historical volatility during the fourth quarter of 2008.
 
 49
 These
factors could change in the future, which would affect the share-based
compensation expense in future periods.
 
 As
share-based compensation expense recognized in the Consolidated Statements of
Operations for the fiscal years 2009, 2008 and 2007 is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures.
Forfeitures are estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. The
Company’s estimated forfeiture rate of 29%, 26% and 27% for the years ended
December 31, 2009, 2008 and 2007, respectively, was based on historical
experience.
 
 The
following table shows total share-based compensation and employee stock
ownership plan expenses recorded for the years ended December 31, 2009, 2008 and
2007 (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Cost
      of revenues
                  
                  $
                  91
                  
                  
                  $
                  59
                  
                  
                  $
                  54Research
      and development
                  
                  
                  862
                  
                  
                  
                  1,317
                  
                  
                  
                  1,712Selling,
      general and administrative
                  
                  
                  1,767
                  
                  
                  
                  1,925
                  
                  
                  
                  2,675Total
      share-based compensation expense
                  
                  $
                  2,720
                  
                  
                  $
                  3,301
                  
                  
                  $
                  4,441
 
 The 2009
share-based compensation expense included $1.6 million of share-based
compensation expense related to the unamortized expense of options accelerated
in connection with the Company’s tender offer.  For more information
on the tender offer, refer to the ‘Tender Offer’ section in this Note
2.
 
 A summary
of option activity under the Company’s stock equity plans during the years ended
December 31, 2009, 2008 and 2007 are as follows:
 
 Weighted
      AverageRemaining
                  
                  
                  AggregateOptions
      Available
                  
                  
                  Number
      of
                  
                  
                  Weighted
      Average
                  
                  
                  Contractual
      Term
                  
                  
                  IntrinsicOptions
                  
                  for
      Grant
                  
                  
                  Shares
                  
                  
                  Exercise
      Price
                  
                  
                  (in
      years)
                  
                  
                  ValueOutstanding
      at December 31, 2006
                  
                  
                  1,640,010
                  
                  
                  
                  3,713,477
                  
                  
                  $
                  11.47Authorized
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Granted
                  
                  
                  (790,650
                  )
                  
                  
                  790,650
                  
                  
                  
                  10.30Exercised
                  
                  
                  -
                  
                  
                  
                  (211,417
                  )
                  
                  
                  6.16Cancelled
                  
                  
                  293,237
                  
                  
                  
                  (293,237
                  )
                  
                  
                  13.44Outstanding
      at December 31, 2007
                  
                  
                  1,142,597
                  
                  
                  
                  3,999,473
                  
                  
                  
                  11.38
                  
                  
                  
                  4.79
                  
                  
                  $
                  2,663,803Authorized
                  
                  
                  1,200,000
                  
                  
                  
                  -
                  
                  
                  
                  -Granted
                  
                  
                  (1,531,500
                  )
                  
                  
                  1,531,500
                  
                  
                  
                  5.12Exercised
                  
                  
                  -
                  
                  
                  
                  (119,229
                  )
                  
                  
                  7.09Cancelled
                  
                  
                  651,901
                  
                  
                  
                  (651,901
                  )
                  
                  
                  8.96Plan
      Termination (1)
                  
                  
                  (150,753
                  )
                  
                  
                  -
                  
                  
                  
                  -Adjustment
                  
                  
                  (60
                  )
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at December 31, 2008
                  
                  
                  1,312,185
                  
                  
                  
                  4,759,843
                  
                  
                  
                  9.80
                  
                  
                  
                  4.20
                  
                  
                  $
                  1,262Granted
                  
                  
                  (1,265,400
                  )
                  
                  
                  1,265,400
                  
                  
                  
                  2.43Exercised
                  
                  
                  -
                  
                  
                  
                  (8,000
                  )
                  
                  
                  3.22Cancelled
                  
                  
                  3,191,447
                  
                  
                  
                  (3,191,447
                  )
                  
                  
                  11.62Retired
      (2)
                  
                  
                  (2,133,278
                  )Plan
      Termination (3)
                  
                  
                  (234,144
                  )
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at December 31, 2009
                  
                  
                  870,810
                  
                  
                  
                  2,825,796
                  
                  
                  
                  4.36
                  
                  
                  
                  5.14
                  
                  
                  $
                  1,794,310Exercisable
      at December 31, 2009
                  
                  
                  
                  
                  
                  
                  1,077,042
                  
                  
                  $
                  6.98
                  
                  
                  
                  3.63
                  
                  
                  $
                  198,345
  (1)
                Represents
      options cancelled and no longer issuable under the 1998 Stock Incentive
      Plan and the NetChip Technology, Inc. 1996 Flexible Stock Incentive
      Plan.
 (2)
                Represents
      options that were tendered and retired pursuant to the Company’s 2009
      tender offer program.
 (3)
                Represents
      options cancelled and no longer issuable under the 1998 Stock Incentive
      Plan and the Sebring Systems, Inc. 1997 Stock Option/Issuance
      Plan.
  50
 
 The
Black-Scholes weighted average fair values of options granted during the years
ended December 31, 2009, 2008 and 2007 were $1.20, $2.27 and $5.34,
respectively.
 
 The
following table summarizes ranges of outstanding and exercisable options as of
December 31, 2009:
 
 Options
      Outstanding
                  
                  
                  Options
      ExercisableWeighted
      AverageRemaining
                  
                  
                  Weighted
                  
                  
                  
                  
                  
                  WeightedRange
      of
                  
                  
                  
                  
                  
                  Contractual
      Term
                  
                  
                  Average
                  
                  
                  
                  
                  
                  AverageExercise
      Price
                  
                  
                  Number
                  
                  
                  (in
      years)
                  
                  
                  Exercise
      Price
                  
                  
                  Number
                  
                  
                  Exercise
      Price$1.25-$2.00
                  
                  
                  
                  878,039
                  
                  
                  
                  6.10
                  
                  
                  $
                  1.91
                  
                  
                  
                  4,539
                  
                  
                  $
                  1.44$2.04-$3.22
                  
                  
                  
                  646,976
                  
                  
                  
                  5.23
                  
                  
                  
                  2.25
                  
                  
                  
                  262,976
                  
                  
                  
                  2.51$3.27-$4.95
                  
                  
                  
                  592,000
                  
                  
                  
                  5.77
                  
                  
                  
                  4.10
                  
                  
                  
                  172,161
                  
                  
                  
                  4.03$5.50-$10.21
                  
                  
                  
                  579,031
                  
                  
                  
                  3.37
                  
                  
                  
                  8.56
                  
                  
                  
                  518,926
                  
                  
                  
                  8.63$10.46-$25.94
                  
                  
                  
                  129,750
                  
                  
                  
                  3.11
                  
                  
                  
                  13.98
                  
                  
                  
                  118,440
                  
                  
                  
                  14.24Total
                  
                  
                  
                  2,825,796
                  
                  
                  
                  5.14
                  
                  
                  $
                  4.36
                  
                  
                  
                  1,077,042
                  
                  
                  $
                  6.98
 The total
intrinsic value of options exercised during the year ended December 31, 2009 was
approximately $2,000. In 2008, the intrinsic value of options exercised was
approximately $0.2 million. The fair value of options vested during the year
ended December 31, 2009 was approximately $5.6 million. As of December 31, 2009,
total unrecognized compensation costs related to nonvested stock options net of
estimated forfeitures was $0.8 million which is expected to be recognized as
expense over a weighted average period of approximately 1.39 years.
 
 Tender
Offer
  On March
31, 2009, the Company commenced an offer to purchase for cash certain
outstanding options held by its employees (including officers) and directors,
and filed associated documents with the SEC under Schedule
TO.  Options to purchase 3,262,809 shares of our common stock were
eligible for purchase under the offer.  Eligible options must have had
an exercise price of at least $5.50 and must have met other conditions set forth
in the offer.  The amount of cash offered for eligible options was
based on the Black-Scholes valuation of each eligible option, subject to a
minimum of $0.05 per share, and ranged from $0.05 to $1.42 per
share.
 
 On May 1,
2009, upon the closing of the offer, options to purchase 2,533,278 shares of the
Company’s common stock were validly tendered and not withdrawn, and the Company
accepted the repurchase of these options.  Each eligible optionee who
validly tendered eligible options pursuant to the offer to purchase received a
cash payment in the range of $0.05 to $1.42 per optioned share for an aggregate
amount of $0.9 million.  The Company recognized $1.6 million in
share-based compensation expenses associated with the acceleration of
unamortized compensation expenses on the previously unvested tendered options in
the second quarter of 2009. The aggregate amount of the payments made in
exchange for eligible options was charged to stockholders' equity to the extent
that the amount did not exceed the fair value of the eligible options accepted
for payment, as determined at the purchase date. The amount paid in excess of
that fair value of $16,000, as determined at the purchase date, was also
recorded as compensation expense.
 
 The
Company returned to its 2008 Equity Incentive Plan the first 400,000 shares
underlying options purchased pursuant to the offer that were originally issued
under the 2008 plan or our 1999 Stock Incentive Plan.  These options
have become available for future grant. The Company retired the remaining
2,133,278 tendered options.
 
 51
 
 3.  Net Income (Loss) Per
Share
  The
Company uses the treasury stock method to calculate the weighted-average shares
used in the diluted earnings per. The following table sets forth the computation
of basic and diluted net income (loss) per share (in thousands, except per share
data):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      income (loss)
                  
                  $
                  (18,802
                  )
                  
                  $
                  (56,530
                  )
                  
                  $
                  1,174Weighted
      average shares of common stock outstanding
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  28,724Net
      income (loss) per share - basic
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04Shares
      used in computing basic net income (loss) per share
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  28,724Dilutive
      effect of stock options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  432Shares
      used in computing diluted net income (loss) per share
                  
                  
                  35,653
                  
                  
                  
                  28,203
                  
                  
                  
                  29,156Net
      income (loss) per share - diluted
                  
                  $
                  (0.53
                  )
                  
                  $
                  (2.00
                  )
                  
                  $
                  0.04
 
 As the
Company incurred a loss for the years ended December 31, 2009 and 2008, the
effect of dilutive securities, totaling 2.8 million and 4.8 million shares,
respectively, has been excluded from the computation of diluted loss per share,
as their impact would be anti-dilutive.  Dilutive securities are
comprised of options to purchase common stock.
 
 Weighted
average employee stock options to purchase approximately 2.3 million shares for
the year ended December 31, 2007, were outstanding, but were not included in the
computation of diluted earnings per share because the exercise price of the
stock options, including unamortized share-based compensation, was greater than
the average share price of the common shares and, therefore, the effect would
have been anti-dilutive.
 
 4.  Financial
Instruments
  Fair
Value Measurements
  The
accounting guidance for fair value measurements provided a framework for
measuring fair value and expands related disclosures. Fair value is defined as
the price that would be received for an asset or the exit price that would be
paid to transfer a liability in the principal or most advantageous market in an
orderly transaction between market participants on the measurement date. The
guidance also established a hierarchy which requires an entity to maximize the
use of observable inputs, when available.  The guidance requires fair
value measurement be classified and disclosed in one of the following three
categories:
 
 Level 1:
Valuations based on quoted prices in active markets for identical assets and
liabilities.  The fair value of available-for-sale securities included
in the level 1 category is based on quoted prices that are readily and regularly
available in an active market.
 
 Level 2:
Valuations based on observable inputs (other than Level 1 prices), such as
quoted prices for similar assets at the measurement date; quoted prices in
markets that are not active; or other inputs that are observable, either
directly or indirectly. The fair value of available-for-sale securities included
in the Level 2 category is based upon quoted prices in markets that are not
active and incorporate available trade, bid and other market
information.
 
 Level 3:
Valuations based on inputs that are unobservable and involve management judgment
and the reporting entity’s own assumptions about market participants and
pricing.
 
 52
 
 The fair
value of financial assets and liabilities measured on a recurring basis is as
follows (in thousands):
 
 Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
                  
                  
                  Significant
      Other
                  
                  
                  Significantfor
      Identical Assets or Liabilities
                  
                  
                  Observable
      Inputs
                  
                  
                  Unobservable
      InputsDecember
      31, 2009
                  
                  
                  (Level
      1)
                  
                  
                  (Level
      2)
                  
                  
                  (Level
      3)Assets:Money
      market funds
                  
                  $
                  3,611
                  
                  
                  $
                  3,611
                  
                  
                  $
                  -
                  
                  
                  $
                  -Marketable
      securities
                  
                  
                  28,716
                  
                  
                  
                  -
                  
                  
                  
                  28,716
                  
                  
                  
                  -Total
                  
                  $
                  32,327
                  
                  
                  $
                  3,611
                  
                  
                  $
                  28,716
                  
                  
                  $
                  -
 
 Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
                  
                  
                  Significant
      Other
                  
                  
                  Significantfor
      Identical Assets or Liabilities
                  
                  
                  Observable
      Inputs
                  
                  
                  Unobservable
      InputsDecember
      31, 2008
                  
                  
                  (Level
      1)
                  
                  
                  (Level
      2)
                  
                  
                  (Level
      3)Assets:Money
      market funds
                  
                  $
                  73
                  
                  
                  $
                  73
                  
                  
                  $
                  -
                  
                  
                  $
                  -Marketable
      securities
                  
                  
                  40,262
                  
                  
                  
                  -
                  
                  
                  
                  40,262
                  
                  
                  
                  -Total
                  
                  $
                  40,335
                  
                  
                  $
                  73
                  
                  
                  $
                  40,262
                  
                  
                  $
                  -
 
 Investments
  As of
December 31, 2009, the Company’s securities consisted of debt securities and
were designated as available-for-sale. Available-for-sale securities are carried
at fair value, based on quoted market prices or prices quoted in markets that
are not active, with unrealized gains and losses reported in a separate
component of stockholders’ equity.  The amortized cost of debt
securities is adjusted for the amortization of premiums and the accretion of
discounts to maturity, both of which are included in interest
income.  Realized gains and losses are recorded on the specific
identification method.
 
 The fair
value of available-for-sale investments is as follows (in
thousands):
 
 December
      31, 2009Amortized
                  
                  
                  Unrealized
                  
                  
                  Unrealized
                  
                  
                  EstimatedCost
                  
                  
                  Gain
                  
                  
                  Loss
                  
                  
                  Fair
      ValueCertificate
      of deposit
                  
                  $
                  1,726
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,726Corporate
      bonds and notes
                  
                  
                  1,937
                  
                  
                  
                  8
                  
                  
                  
                  (3
                  )
                  
                  
                  1,942Municipal
      bonds
                  
                  
                  106
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  106US
      treasury and government agencies securities
                  
                  
                  24,919
                  
                  
                  
                  35
                  
                  
                  
                  (12
                  )
                  
                  
                  24,942Total
      short and long-term available-for-sale investments
                  
                  $
                  28,688
                  
                  
                  $
                  43
                  
                  
                  $
                  (15
                  )
                  
                  $
                  28,716Contractual
      maturity dates for investments:Less
      than one year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  27,060One
      to two years
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,656$
                  28,716
 
 53
 
 December
      31, 2008Amortized
                  
                  
                  Unrealized
                  
                  
                  Unrealized
                  
                  
                  EstimatedCost
                  
                  
                  Gain
                  
                  
                  Loss
                  
                  
                  Fair
      ValueCorporate
      bonds and notes
                  
                  $
                  9,898
                  
                  
                  $
                  92
                  
                  
                  $
                  (47
                  )
                  
                  $
                  9,943Municipal
      bonds
                  
                  
                  1,509
                  
                  
                  
                  6
                  
                  
                  
                  -
                  
                  
                  
                  1,515US
      treasury and government agencies securities
                  
                  
                  28,564
                  
                  
                  
                  240
                  
                  
                  
                  -
                  
                  
                  
                  28,804Total
      short and long-term available-for-sale investments
                  
                  $
                  39,971
                  
                  
                  $
                  338
                  
                  
                  $
                  (47
                  )
                  
                  $
                  40,262Contractual
      maturity dates for investments:Less
      than one year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  32,677One
      to two years
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7,585$
                  40,262
 The
Company reviews its available for sale investments for impairment at the end of
each period.  Investments in debt securities, which make up the
majority of the Company’s investments, are considered impaired when the fair
value of the debt security is below its amortized cost. If an impairment exists
and the Company determines it has intent to sell the debt security or if it is
more likely than not that it will be required to sell the debt security before
recovery of its amortized cost basis, an other-than-temporary impairment loss is
recognized in earnings to write the debt security down to its fair value.
However, even if the Company does not expect to sell the debt security, it must
evaluate expected cash flows to be received and determine if a credit loss
exists. In the event of a credit loss, only the amount of impairment associated
with the credit loss is recognized in earnings. Amounts relating to factors
other than credit losses are recognized in other comprehensive income (loss).
The Company did not record any other-than-temporary write-downs in the
accompanying financial statements.
 
 5.  Concentrations of
Credit, Customer and Supplier Risk
  Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash equivalents, short-term investments, long-term
investments and trade receivables. The Company generally invests its excess cash
in money market funds, commercial paper of corporations with high credit
ratings, municipal bonds and treasury bills. The Company’s cash, cash
equivalents, short and long-term investments were approximately $40.0 million as
of December 31, 2009 which exceeded the amount insured by the Federal Deposit
Insurance Corporation (“FDIC”).  The Company has not experienced any
significant losses on its cash equivalents or short and long-term
investments.
 
 The
Company performs ongoing credit evaluations of its customers and generally
requires no collateral. Customers who accounted for 10% or more of net accounts
receivable are as follows:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Excelpoint
      Systems Pte Ltd
                  
                  
                  25
                  %
                  
                  
                  36
                  %
                  
                  
                  31
                  %Promate
      Electronics Co., Ltd
                  
                  
                  14
                  %
                  
                  
                  -
                  
                  
                  
                  *
                  %Answer
      Technology, Inc.
                  
                  
                  18
                  %
                  
                  
                  18
                  %
                  
                  
                  14
                  %Avnet,
      Inc.
                  
                  
                  21
                  %
                  
                  
                  10
                  %
                  
                  
                  13
                  %
  *
                Less
      than 10%
  54
 
 The
Company analyzes the need for reserves for potential credit losses and records
reserves when necessary. Through fiscal 2009, there were no direct end customers
that accounted for more than 10% of net revenues. Sales to the following
distributors accounted for 10% or more of net revenues:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Excelpoint
      Systems Pte Ltd
                  
                  
                  25
                  %
                  
                  
                  29
                  %
                  
                  
                  18
                  %Promate
      Electronics Co., Ltd
                  
                  
                  15
                  %
                  
                  
                  -
                  
                  
                  
                  *
                  %Answer
      Technology, Inc.
                  
                  
                  12
                  %
                  
                  
                  13
                  %
                  
                  
                  10
                  %Avnet,
      Inc.
                  
                  
                  12
                  %
                  
                  
                  12
                  %
                  
                  
                  *
                  %Metatech
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17
                  %
  *
                Less
      than 10%
  Currently,
the Company relies on single source suppliers for the significant majority of
its product inventory. As a result, should the Company's current suppliers not
produce and deliver inventory for the Company to sell on a timely basis,
operating results may be adversely impacted.
 
 6.  Asset
Impairment Charges
  During
the fourth quarter of 2008, the Company assessed goodwill and long lived assets
for impairment as it observed that there were indicators of impairment. The
notable indicators were a sustained decline in the Company’s market
capitalization below book value, depressed market conditions, deteriorating
industry trends and a significant downward revision of its forecasts. These
market conditions continuously change and it is difficult to project how long an
economic downturn may last. The Company’s goodwill and intangible assets were
primarily established in purchase accounting at the completion of the Sebring,
HiNT Corporation and NetChip Technology, Inc acquisitions in 2000, 2003 and
2004, respectively.
 
 The
projected discounted cash flows for the Company’s single reporting unit were
based on discrete five-year financial forecasts developed by management for
planning purposes. Cash flows beyond the discrete forecasts were estimated using
terminal value calculations. The terminal value represents the value of the
Company’s single reporting unit at the end of the discrete forecast
period.  These forecasts represent the best estimate that management
had at the time and were believed to be reasonable. The annual sales growth
rates ranged from 5% to 7% during the discrete forecast period and the future
cash flows and terminal value were discounted to present value using a discount
rate of 22%. The terminal value was based on the application of an 8.0x multiple
to forecasted 2013 earnings before interest, taxes, depreciation and
amortization expense (EBITDA).  The discount rate was based on an
analysis of the weighted average cost of capital of our single reporting
unit.  The EBITDA multiple used in the terminal value calculation was
based upon EBITDA multiples paid in comparative merger and acquisition
transactions and a review of trading multiples for similar public companies and
considered the growth prospects and profitability for our single reporting unit
at the end of the discrete forecast period.
 
 Prior to
the Company’s goodwill impairment testing, it also assessed the fair value of
its long-lived assets, including its corporate headquarters building and
amortizable intangible assets.  For the corporate headquarters
building, the Company used the sales comparison approach and the income
capitalization approach, each equally weighted, to arrive at a fair value
estimate. The Company determined that the carrying value of the property was not
recoverable and exceeded its fair value, and it recorded an impairment charge of
$18.8 million.  For the amortizable intangible assets, which included
acquired technology, the Company estimated a negligible fair value using a
relief from royalty method and recorded an impairment charge of $0.8 million
related to all of the remaining net book value of this acquired
technology.
 
 55
 
 As part
of the goodwill impairment test for the fourth quarter of 2008, the Company
determined that step two of the impairment analysis was required because the
estimated carrying value of its net assets, subsequent to the impairment of
long-lived assets noted above, exceeded its estimated fair value. The second
step of the goodwill impairment test compared the implied fair value of the
goodwill with the carrying amount of that goodwill. When the carrying amount of
the goodwill exceeds the implied fair value of that goodwill, an impairment loss
is recognized in an amount equal to that excess. The implied fair value of
goodwill is determined in the same manner as the amount of goodwill recognized
in a business combination. The determination of the amount of the impairment
required that the fair values of our assets and liabilities be determined as if
the Company had been acquired in a hypothetical business combination with a
purchase price equal to the fair value of the reporting unit as of December 31,
2008.  As a result of this analysis, the Company recorded an
impairment charge of $34.7 million related to all of the recorded
goodwill.
 
 In the
fourth quarter of 2009, the Company tested the goodwill acquired in the Oxford
acquisition in 2009 and determined there was no impairment.
 
 7.  Acquisition
of Oxford Semiconductor, Inc.
  On
January 2, 2009, the Company acquired all of the outstanding shares of capital
stock of Oxford Semiconductor, Inc. (Oxford), a privately held fabless provider
of industry-leading silicon and software for the consumer and small office/home
office (SOHO) storage markets.
 
 Established
in 1992, Oxford has been providing silicon and software solutions to
interconnect digital systems, including PCIe, USB, 1394, Ethernet, Serial ATA
and external Serial ATA.  Oxford’s corporate headquarters were located
in Milpitas, California, with most of its employees based in Oxford’s design
center in Abingdon, United Kingdom.  The consumer and SOHO external
storage markets account for the majority of Oxford’s sales.  Oxford
provides advanced system-on-chip solutions for both direct-attached storage
(DAS) and network-attached storage (NAS) external drives.  Oxford’s
customers include Seagate, Western Digital, LaCie, Hewlett Packard, and
Macpower.
 
 The
Company believes that through this acquisition, it has a leadership position in
two of the fastest-growing interconnect chip markets – PCI Express-based systems
and consumer external storage.  Major synergies include common
interconnect technologies and design flows, sales, marketing and support
systems, and supply chains.  Most importantly, the Company can create
innovative products that combine the considerable intellectual property and
industry knowledge of Oxford and PLX.
 
 The total
consideration paid for the transaction was $16.4 million, consisting of 5.6
million shares at $1.82 per share, the closing price on January 2, 2009, the
date the transaction was closed, and the fair value of the contingently
convertible debt liability as of January 2, 2009, of $6.2 million.
 
 As a part
of the merger agreement, the Company acquired all of the outstanding shares of
capital stock of Oxford in exchange for 5.6 million shares of common stock of
PLX and a promissory note in the principal amount of $14.2 million (the “Note”)
that was to be satisfied by either (i) the issuance of an additional 3.4 million
shares of common stock of PLX upon approval of PLX’s stockholders, or (ii) the
repayment of the principal amount of the Note if such stockholder approval was
not obtained by June 30, 2009.  On May 22, 2009 at a special meeting
of the shareholders, the shareholders approved the conversion of the $14.2
million note into 3.4 million shares of common stock of the
Company.
 
 Under the
revised business combinations guidance, which became effective for the Company
on January 1, 2009, the contingently convertible promissory note was considered
contingent consideration which was recorded at fair value as of the acquisition
date, and changes to the fair value of contingent consideration were reflected
through the statement of operations.  The fair value of the
convertible note on the acquisition date was based on that day’s closing stock
price of $1.82 per share.  On March 31, 2009, the convertible note was
remeasured to fair value. Based on the closing stock price of $2.17 as of March
31, 2009, the fair value of the convertible note was $7.4 million. The change in
fair value of $1.2 million was recognized as a loss in the quarter ended March
31, 2009. On May 22, 2009, the date of the conversion, the closing stock price
was $2.95. The fair value of the 3.4 million shares was $10.0
million.  The change in fair value of $2.7 million was recognized as a
loss in the second quarter of 2009.
 
 56
 
 The
following table summarizes the consideration paid for Oxford and the amounts of
the assets acquired and liabilities assumed at the acquisition
date.
 
 Fair
value of consideration transferred (in thousands):
 
 5,600,000
      common shares of PLX
                  
                  $
                  10,192Contingent
      consideration
                  
                  
                  6,188Fair
      value of total consideration
                  
                  $
                  16,380
 
 Recognized
amounts of identifiable assets acquired and liabilities assumed (in
thousands):
 
 Cash
      and cash equivalents
                  
                  $
                  4,392Trade
      receivables
                  
                  
                  1,286Inventories
                  
                  
                  2,677Tax
      receivable
                  
                  
                  835Licensed
      IP
                  
                  
                  2,499Property,
      plant and equipment
                  
                  
                  1,357Identifiable
      intangible assets
                  
                  
                  9,056Other
      assets
                  
                  
                  482Trade
      and other payable
                  
                  
                  (3,163
                  )Accruals
      and other liabilities
                  
                  
                  (4,408
                  )Total
      indentifiable net assets
                  
                  $
                  15,013Goodwill
                  
                  
                  1,367$
                  16,380
 
 The fair
value of assets acquired includes trade receivables of $1.6
million.  The gross amount due under sales related contracts is $1.6
million, of which $0.3 million is expected to be uncollectible as a result of
recognized credits due to distributors for the difference in the price they
previously purchased products for from Oxford Semiconductor, Inc. and the
authorized quote price based on the distributors’ sell through
activity.  The gross amount under a prior IP royalty arrangement is
$0.3 million and the full amount is expected to be uncollectible.
 
 The
identified intangible assets consist of core technology, trade name and customer
relationships.  The valuation of the acquired intangibles is
classified as a level 3 measurement under the fair value measurement guidance,
because the valuation was based on significant unobservable inputs and involved
management judgment and assumptions about market participants and
pricing.   In determining fair value of the acquired intangible
assets, we determined the appropriate unit of measure, the exit market and the
highest and best use for the assets. The fair value was estimated using an
incremental income approach.
 
 The
goodwill arising from the acquisition is largely attributable to the synergies
expected to be realized after the Company’s acquisition and integration of
Oxford.  The Company only has one operating segment, semiconductor
products, so all of the goodwill was assigned to the one
segment.  Goodwill is not expected to be deductible for tax
purposes.
 
 Oxford
contributed revenues and gross profit of $25.7 million and $13.1 million,
respectively, to the Company for the year ended December 31,
2009.  Oxford operations were fully integrated as of the end of the
first quarter of 2009 and it is therefore not practicable to identify earnings
associated with Oxford’s contribution.
 
 Because
the acquisition took place on January 2, 2009, which was in substance the
beginning of the year, no pro forma data is presented for the year ended
December 31, 2009 as the Company’s historical statement of operations already
includes the results of Oxford for the entire period. The following unaudited
pro forma summary presents consolidated information of the Company as if the
business combination occurred on January 1, 2008 (in thousands).
 57
 
 Pro
      Forma Year EndedDecember
      31 2008,Revenue
                  
                  $
                  118,071Net
      loss
                  
                  $
                  (67,691
                  )
 
 The pro
forma amounts have been calculated after applying the Company’s accounting
policies and adjusting the results of Oxford to reflect the amortization that
would have been recorded assuming the intangible assets had been acquired on
January 1, 2008.
 
 For the
years ended December 31, 2009 and 2008, the Company incurred $0.4 million and
$0.8 million, respectively, of third party acquisition related costs, primarily
for outside legal and accounting costs.  These expenses were included
in operating expenses under acquisition related costs in the Company’s
Consolidated Statement of Operations for the year ended December 31, 2009 and
2008.
 
 8.  Restructuring
Costs
  Severance
  In the
year ended December 31, 2009, the Company recorded approximately $2.1 million of
severance and benefit related costs, included in acquisition and restructuring
related costs in the Consolidated Statement of Operations, related to the
termination of 61 employees as a result of the redundancy issue associated with
the acquisition of Oxford and the downsizing of the Company’s R&D facility
in Singapore. As of December 31, 2009 essentially all of the $2.1 million
severance and benefit related costs were paid, and the small amount remaining is
included in accrued compensation and benefits in the Consolidated Balance Sheet.
The Company expects all severance and benefit accruals to be paid by March 31,
2010.
 
 Lease
Termination
  In
January 2009, associated with the acquisition of Oxford, the company assumed a
building lease in Milpitas, California which was vacated upon acquisition. The
Company has not been able to find a sublease for this property given the current
market conditions and available space in the area. The future lease costs for
the property were $0.3 million which extended through February 2010. The Company
recorded the liability, included in other accrued expenses in the Consolidated
Balance Sheet, for the costs to be incurred at the future cash payment amount of
$0.3 million as the total cash payment is not materially different from the fair
value. The lease accrual charge of $0.3 million was recorded in the Consolidated
Statement of Operations in the first quarter of 2009. The accrued lease
liability was paid in full in January 2010.
 
 9.  Other Intangibles
Assets
  As
discussed in Note 7 above, the acquisition of Oxford included the acquisition of
$9.1 million of identifiable intangible assets.  All of these
intangibles are subject to amortization.  There is no estimated
residual value on any of the intangible assets.
 
 The
following table summarizes the gross carrying amount and accumulated
amortization for each major intangible class and the weighted average
amortization period, in total and by major intangible asset class, as of
December 31, 2009 (in thousands).
 
 EstimatedGross
      Carrying
                  
                  
                  Accumulated
                  
                  
                  Net
                  
                  Amortization
                  UsefulValue
                  
                  
                  Amortization
                  
                  
                  Value
                  
                  Method
                  LifeExisting
      and core technologyUSB
      and Serial Connectivity
                  
                  $
                  4,600
                  
                  
                  $
                  (2,300
                  )
                  
                  $
                  2,300
                  
                  Accelerated
                  3
      yearsNetwork
      Attached Storage Connectivity
                  
                  
                  3,800
                  
                  
                  
                  (760
                  )
                  
                  
                  3,040
                  
                  Straight-line
                  5
      yearsTrade
      Name
                  
                  
                  600
                  
                  
                  
                  (300
                  )
                  
                  
                  300
                  
                  Straight-line
                  2
      yearsCustomer
      Relationships
                  
                  
                  56
                  
                  
                  
                  (56
                  )
                  
                  
                  -
                  
                  Accelerated
                  1
      yearTotals
                  
                  $
                  9,056
                  
                  
                  $
                  (3,416
                  )
                  
                  $
                  5,640
                  
                  
                  3.8
      years
 
 58
 
 The
amortization expense for the year ended December 31, 2009 was $3.4
million.  Estimated future amortization expense is as follows (in
thousands):
 
 2010
                  
                  $
                  2,5932011
                  
                  
                  1,5272012
                  
                  
                  7602013
                  
                  
                  760Total
                  
                  $
                  5,640
 
 Amortization
expense for the years ended December 31, 2008 and 2007 of $0.7 million and $1.3
million, respectively, was related to the amortization of intangibles acquired
through our prior acquisitions of HiNT Corporation and NetChip Technology,
Inc.  As of December 31, 2008, the Company determined that these
assets were impaired and the remaining carrying value of $0.8 million was
written off.
 
 10.  Stock
Repurchase
  In
September 2002, the Company’s Board of Directors approved a repurchase of up to
2,000,000 shares of common stock.  In July 2008, the Company’s Board
of Directors authorized an additional 2,000,000 shares under the repurchase
program.  At the discretion of management, the Company can repurchase the
shares from time to time in the open market or in privately negotiated
transactions. Approximately 774,000 shares were repurchased for approximately
$1.9 million in cash in 2002 and 2003.  The Company did not repurchase
any additional shares from January 1, 2004 through December 31, 2007. In 2008,
the Company repurchased 956,000 shares for approximately $6.5 million. The
Company did not repurchase any additional shares in 2009.
 
 11.  Retirement Savings
Plan
  The
Company sponsors the PLX Technology, Inc. 401(k) Plan (the
“Plan”).  The Plan allows all full-time employees to contribute up to
100% of their annual compensation.  However, employee contributions
are limited to a maximum annual amount established by the Internal Revenue
Service. Beginning in 1996, the Company made a matching contribution calculated
at 50 cents on each dollar of the first 6% of the participant’s compensation.
The Company's expenses relating to the plan were approximately $0.5 million and
$0.5 million for 2008 and 2007, respectively. In January 2009, the Company
announced that it suspended the matching contributions as a result of the
current macroeconomic conditions. The Company will reevaluate its matching
contribution in the future.
 
 As a
result of the acquisition of Oxford, the Company contributed and plans to
continue contributing to the U.K. national pension program. The Company expensed
approximately $0.3 million in 2009 relating to this program.
 
 In
January 2009, the Company established the PLX Technology, Inc. Employee Stock
Ownership Plan (the “ESOP”). The ESOP is non-contributory and provides cash
contribution at a percent of eligible U.S. compensation that is determined
annually by the Board of Directors. In 2009, the Company contributed 2% of
eligible compensation. The expense recorded for contributions to this plan was
approximately $0.3 million for 2009.
  59
 
 12.
Income Taxes
  The
provision (benefit) for income taxes consists of the following (in
thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Federal:Current
                  
                  $
                  (120
                  )
                  
                  $
                  16
                  
                  
                  $
                  187Deferred
                  
                  
                  (160
                  )
                  
                  
                  -
                  
                  
                  
                  414(280
                  )
                  
                  
                  16
                  
                  
                  
                  601State:Current
                  
                  
                  21
                  
                  
                  
                  69
                  
                  
                  
                  (101
                  )Deferred
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3321
                  
                  
                  
                  69
                  
                  
                  
                  (68
                  )Foreign:Current
                  
                  
                  65
                  
                  
                  
                  41
                  
                  
                  
                  4465
                  
                  
                  
                  41
                  
                  
                  
                  44Total
                  
                  $
                  (194
                  )
                  
                  $
                  126
                  
                  
                  $
                  577
 
 The
provision for income taxes differs from the amount of income taxes
determined by applying the U.S. statutory federal income tax rate as follows (in
thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Tax
      expense (benefit) at the U.S. statutory rate
                  
                  $
                  (6,648
                  )
                  
                  $
                  (19,741
                  )
                  
                  $
                  613State
      taxes (net of federal benefit)
                  
                  
                  (798
                  )
                  
                  
                  (2,420
                  )
                  
                  
                  47Goodwill
      impairment
                  
                  
                  -
                  
                  
                  
                  13,424
                  
                  
                  
                  -Release
      of income tax reserves
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (115
                  )Research
      and development credit
                  
                  
                  (1,125
                  )
                  
                  
                  (1,307
                  )
                  
                  
                  (112
                  )True
      ups
                  
                  
                  228
                  
                  
                  
                  (65
                  )
                  
                  
                  1,137Change
      in valuation allowance
                  
                  
                  6,436
                  
                  
                  
                  10,123
                  
                  
                  
                  (1,006
                  )Fair
      value remeasurement of note payable
                  
                  
                  1,345
                  
                  
                  
                  -
                  
                  
                  
                  -Other
      individually immaterial items
                  
                  
                  368
                  
                  
                  
                  112
                  
                  
                  
                  13$
                  (194
                  )
                  
                  $
                  126
                  
                  
                  $
                  577
 
 During
the year ended December 31, 2009, the Company’s deferred tax asset valuation
allowance increased by $9.3 million. The Company’s deferred tax asset valuation
allowance increased by $10.1 million in 2008 and decreased by $2.2 million in
2007.  The increase from December 31, 2008 to December 31, 2009
relates to acquired assets currently unrealizable and the current year generated
net operating loss. The increase from December 31, 2007 to December 31, 2008
primarily relates to the deferred tax assets generated for the building and land
impairment charges that are currently non deductible for tax
purposes.
 
 60
 
 Significant
components of the Company's deferred tax assets and liabilities are as follows
(in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008Deferred
      tax assets:Accrued
      expenses and reserves
                  
                  $
                  2,667
                  
                  
                  $
                  1,526Net
      operating loss carryforwards
                  
                  
                  11,302
                  
                  
                  
                  2,764Research
      and development credits
                  
                  
                  11,870
                  
                  
                  
                  10,321Depreciation
                  
                  
                  5,844
                  
                  
                  
                  6,345Share-based
      compensation
                  
                  
                  3,634
                  
                  
                  
                  2,753Other
                  
                  
                  131
                  
                  
                  
                  166Gross
      deferred tax assets:
                  
                  
                  35,448
                  
                  
                  
                  23,875Valuation
      Allowance
                  
                  
                  (33,192
                  )
                  
                  
                  (23,875
                  )2,256
                  
                  
                  
                  -Deferred
      tax liabilities:Acquisition
      related intangibles
                  
                  
                  (2,256
                  )
                  
                  
                  -Total
      net deferred tax assets
                  
                  $
                  -
                  
                  
                  $
                  -
 
 At
December 31, 2009, the Company had federal and state net operating loss
carryforwards of $29.5 million and $17.3 million, respectively. These
carryforwards will expire at various dates beginning in 2012 through 2029, if
not utilized. In addition, as of December 31, 2009, the Company had federal
and state tax credit carryforwards of approximately $7.4 million and $11.3
million, respectively.  The federal research and development credits
will expire beginning in 2019 and the state credits will carryforward
indefinitely.  Approximately $2.6 million of the federal and $1.6
million of the state net operating loss carryforward relate to excess tax
deductions from stock options which have not yet been realized.  SFAS
123R prohibits recognition of a deferred income tax asset for excess tax
benefits due to stock option exercises that have not yet been realized through a
reduction in income tax payable.
 
 Utilization
of the net operating loss and credit carryforwards may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended and similar state provisions.
The annual limitation may result in the expiration of net operating loss
carryforwards before utilization.   Utilization of $26.9 million
and $2.0 million of federal and state net operating loss is subject to an annual
limitation under the Internal Revenue Code of 1986, as amended, and similar
state provisions.  Utilization of $2.0 million of federal research and
development credits and $4.8 million of state research and development credits
are subject to an annual limitation under the Internal Revenue Code of 1986, as
amended, and similar state provisions.  The annual limitation may
result in the expiration of the federal and state research and development
credits before utilization.
 
 Due to
operating losses incurred, the Company created a full valuation allowance as of
December 2002 for deferred tax assets.  As of December 2009, a
valuation allowance continues to be recorded for the net deferred tax asset
based on management’s assessment that the realization of deferred tax assets is
uncertain due to the history of losses, the variability of operating results and
the inability to conclude that it is more likely than not that sufficient
taxable income would be generated in future periods to realize those deferred
tax assets. The Company will maintain a full valuation allowance until
sufficient positive evidence exists to support a reversal of the valuation
allowance. Approximately $10.3 million of the valuation allowance relates to
acquired tax benefits, which will result in an adjustment to tax expense, net of
the related deferred liability on acquired intangibles when such benefits are
realized.
 
 On
January 1, 2007, the Company adopted the guidance related to the accounting for
uncertainty in income taxes and as a result of the implementation, the Company
recognized no material adjustment in the liability for unrecognized income tax
benefits.
 
 61
 
 A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is a follows (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Unrecognized
      tax benefits balance, beginning of period
                  
                  $
                  2,208
                  
                  
                  $
                  1,895
                  
                  
                  $
                  1,916Gross
      increase for tax positions for prior year
                  
                  
                  876
                  
                  
                  
                  26
                  
                  
                  
                  (225
                  )Gross
      increase for tax positions for current year
                  
                  
                  578
                  
                  
                  
                  287
                  
                  
                  
                  319Reduction
      for lapse of California statute of limitations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (115
                  )Unrecognized
      tax benefits balance, end of period
                  
                  $
                  3,662
                  
                  
                  $
                  2,208
                  
                  
                  $
                  1,895
 
 Future
changes in the remaining balance of unrecognized tax benefits will have no
impact on the effective tax rate as it is subject to a full valuation
allowance.
 
 The
Company does not have any material accrued interest or penalties associated with
any unrecognized tax benefits. The Company does not believe it is reasonably
possible that its unrecognized tax benefits will significantly change within the
next twelve months.
 
 The
Company is subject to taxation in the US and various state and foreign
jurisdictions. The tax years 1997-2008 remain open to examination by the federal
and state tax authorities due to certain acquired net operation loss and overall
credit carryforward positions.
 
 The
Company has made no provision for U.S. income taxes on approximately $0.7
million of cumulative undistributed earnings of certain foreign subsidiaries
because it is the Company’s intention to permanently reinvest such
earnings.  If such earnings were distributed, the Company would accrue
additional taxes of approximately $0.2 million. Pre-tax income (loss) from
foreign operations was ($8.8 million), $81,000 and $86,000 in 2009, 2008 and
2007, respectively.
 
 13.  Commitments
and Contingencies
  The
Company uses several contract manufacturers and suppliers to provide
manufacturing services for its products. As of December 31, 2009, the
Company has purchase commitments for inventory with these contract manufacturers
and suppliers of approximately $7.7 million. These inventory purchase
commitments are placed on a sales order basis with lead times ranging from 4 to
16 weeks to meet estimated customer demand requirements.
 
 The
Company leases facilities, equipment, software tools and intellectual property
(IP) under non-cancelable operating or capital leases and service agreements.
Future minimum payments under facility, equipment, software tool and IP leases
and agreements at December 31, 2009 are as follows (in
thousands):
 
 Facility
      andEquipment
                  
                  
                  Software
                  
                  
                  IP
                  
                  
                  Total2010
                  
                  $
                  573
                  
                  
                  $
                  2,238
                  
                  
                  $
                  825
                  
                  
                  $
                  3,6362011
                  
                  
                  477
                  
                  
                  
                  1,955
                  
                  
                  
                  1,200
                  
                  
                  
                  3,6322012
                  
                  
                  477
                  
                  
                  
                  -
                  
                  
                  
                  150
                  
                  
                  
                  627Total
                  
                  $
                  1,527
                  
                  
                  $
                  4,193
                  
                  
                  $
                  2,175
                  
                  
                  $
                  7,895
 
 Rental
expense for all facility leases aggregated approximately $1.0 million, $0.2
million and $0.1 million for the years ended December 31, 2009, 2008 and 2007,
respectively.
 
 As of
December 31, 2009, the Company’s capital leases consist of IP. Amortization
expense relating to capital leases was approximately $1.0 million in 2009.
Included in other assets are capital lease assets of $2.4 million as of December
31, 2009 and is net of accumulated amortization of $1.0 million. There were no
capital leases in 2008 and 2007.
 
 62
 
 Warranty
and Indemnification Provisions
  Changes
in sales warranty reserve are as follows (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Balance,
      beginning of period
                  
                  $
                  73
                  
                  
                  $
                  66
                  
                  
                  $
                  98Warranty
      costs incurred
                  
                  
                  (212
                  )
                  
                  
                  (234
                  )
                  
                  
                  (236
                  )Additions
      related to current period sales
                  
                  
                  219
                  
                  
                  
                  241
                  
                  
                  
                  204Balance,
      end of period
                  
                  $
                  80
                  
                  
                  $
                  73
                  
                  
                  $
                  66
 
 Warranty
costs, which relate to product quality issues, remained consistent and
insignificant during the periods presented.
 
 The
Company enters into standard indemnification agreements with many of its
customers and certain other business partners in the ordinary course of
business. These agreements include provisions for indemnifying the customer
against any claim brought by a third-party to the extent any such claim alleges
that a PLX product infringes a patent, copyright or trademark, or violates any
other proprietary rights of that third-party. It is not possible to estimate the
maximum potential amount of future payments the Company could be required to
make under these indemnification agreements. To date, the Company has not
incurred any costs to defend lawsuits or settle claims related to these
indemnification agreements. No liability for these indemnification agreements
has been recorded at December 31, 2009 or 2008.
 
 14.  Segments
of an Enterprise and Related Information
  The
Company has one operating segment, the sale of semiconductor devices. The Chief
Executive Officer has been identified as the Chief Operating Decision Maker
(CODM) because he has final authority over resource allocation decisions and
performance assessment. The CODM does not receive discrete financial information
about individual components of the Company's business.  Substantially
all of the Company’s assets are located in the United States.
 
 Revenues
by geographic region based on customer location were as follows (in
thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Revenues:China
                  
                  $
                  29,131
                  
                  
                  $
                  10,650
                  
                  
                  $
                  12,130United
      States
                  
                  
                  12,971
                  
                  
                  
                  18,856
                  
                  
                  
                  21,251Singapore
                  
                  
                  11,803
                  
                  
                  
                  14,417
                  
                  
                  
                  15,047Taiwan
                  
                  
                  10,654
                  
                  
                  
                  10,354
                  
                  
                  
                  10,002Other
      Asia Pacific
                  
                  
                  8,331
                  
                  
                  
                  10,282
                  
                  
                  
                  11,604Europe
                  
                  
                  7,994
                  
                  
                  
                  10,339
                  
                  
                  
                  8,962The
      Americas - excluding United States
                  
                  
                  1,948
                  
                  
                  
                  6,170
                  
                  
                  
                  2,738Total
                  
                  $
                  82,832
                  
                  
                  $
                  81,068
                  
                  
                  $
                  81,734
  63
 
 Revenues
by product type were as follows (in thousands):
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Revenues:PCI
      Express products
                  
                  $
                  31,819
                  
                  
                  $
                  38,052
                  
                  
                  $
                  28,449Storage
      products
                  
                  
                  19,007
                  
                  
                  
                  -
                  
                  
                  
                  -Connectivity
      products
                  
                  
                  32,006
                  
                  
                  
                  43,016
                  
                  
                  
                  53,285Total
                  
                  $
                  82,832
                  
                  
                  $
                  81,068
                  
                  
                  $
                  81,734
 
 There
were no direct end customers that accounted for more than 10% of net
revenues.  Sales to the following distributors accounted for 10% or
more of net revenues:
 
 Years
      Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Excelpoint
      Systems Pte Ltd
                  
                  
                  25
                  %
                  
                  
                  29
                  %
                  
                  
                  18
                  %Promate
      Electronics Co., Ltd
                  
                  
                  15
                  %
                  
                  
                  -
                  
                  
                  
                  *
                  %Answer
      Technology, Inc.
                  
                  
                  12
                  %
                  
                  
                  13
                  %
                  
                  
                  10
                  %Avnet,
      Inc.
                  
                  
                  12
                  %
                  
                  
                  12
                  %
                  
                  
                  *
                  %Metatech
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17
                  %
 
 *
                Less
      than 10%
  15.  Quarterly
Financial Data (unaudited)
  (In
thousands, except per share amounts)
 
 Three
      Months EndedMarch
      31,
                  
                  
                  June
      30,
                  
                  
                  September
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2009
                  
                  
                  2009
                  
                  
                  2009Net
      revenues
                  
                  $
                  16,457
                  
                  
                  $
                  18,178
                  
                  
                  $
                  21,559
                  
                  
                  $
                  26,638Gross
      profit
                  
                  $
                  8,946
                  
                  
                  $
                  10,102
                  
                  
                  $
                  12,139
                  
                  
                  $
                  15,745Net
      income (loss)
                  
                  $
                  (10,497
                  )
                  
                  $
                  (9,056
                  )
                  
                  $
                  (1,854
                  )
                  
                  $
                  2,605Net
      income (loss) per basic share (1)
                  
                  $
                  (0.31
                  )
                  
                  $
                  (0.26
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  0.07Net
      income (loss) per diluted share (1)
                  
                  $
                  (0.31
                  )
                  
                  $
                  (0.26
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  0.07
 
 Three
      Months EndedMarch
      31,
                  
                  
                  June
      30,
                  
                  
                  September
      30,
                  
                  
                  December
      31,2008
                  
                  
                  2008
                  
                  
                  2008
                  
                  
                  2008Net
      revenues
                  
                  $
                  22,755
                  
                  
                  $
                  23,350
                  
                  
                  $
                  20,790
                  
                  
                  $
                  14,173Gross
      profit
                  
                  $
                  13,843
                  
                  
                  $
                  13,858
                  
                  
                  $
                  12,160
                  
                  
                  $
                  8,421Net
      income (loss)
                  
                  $
                  1,062
                  
                  
                  $
                  (75
                  )
                  
                  $
                  798
                  
                  
                  $
                  (58,315
                  )Net
      income (loss) per basic share (1)
                  
                  $
                  0.04
                  
                  
                  $
                  (0.00
                  )
                  
                  $
                  0.03
                  
                  
                  $
                  (2.08
                  )Net
      income (loss) per diluted share (1)
                  
                  $
                  0.04
                  
                  
                  $
                  (0.00
                  )
                  
                  $
                  0.03
                  
                  
                  $
                  (2.08
                  )
 
 (1)
                The
      sum of per share amounts for the quarters does not necessarily equal that
      for the year due to rounding as the computations were made
      independently.
  64
 SCHEDULE II-VALUATION AND QUALIFYING
ACCOUNTS
 (in
thousands)
  Additions
                  
                  
                  DeductionsBalance
      at
                  
                  
                  Charged
      to
                  
                  
                  Charged
      to
                  
                  
                  Amount
                  
                  
                  Balance
      atBeginning
      of
                  
                  
                  Costs
      and
                  
                  
                  Other
                  
                  
                  Recovered
                  
                  
                  End
      ofDescription
                  
                  Period
                  
                  
                  Expenses
                  
                  
                  Accounts
      (1)
                  
                  
                  (Written
      off)
                  
                  
                  PeriodYear
      ended December 31, 2009:Allowance
      for doubtful accounts
                  
                  $
                  82
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  82Provision
      for excess and obsolete inventories
                  
                  $
                  1,819
                  
                  
                  $
                  460
                  
                  
                  $
                  -
                  
                  
                  $
                  (146
                  )
                  
                  $
                  2,133Allowance
      for returns and price concessions
                  
                  $
                  52
                  
                  
                  $
                  -
                  
                  
                  $
                  2,318
                  
                  
                  $
                  (1,040
                  )
                  
                  $
                  1,330Allowance
      for ship and debits
                  
                  $
                  249
                  
                  
                  $
                  -
                  
                  
                  $
                  2,259
                  
                  
                  $
                  (1,773
                  )
                  
                  $
                  735Year
      ended December 31, 2008:Allowance
      for doubtful accounts
                  
                  $
                  82
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  82Provision
      for excess and obsolete inventories
                  
                  $
                  1,279
                  
                  
                  $
                  684
                  
                  
                  $
                  -
                  
                  
                  $
                  (144
                  )
                  
                  $
                  1,819Allowance
      for returns and price concessions
                  
                  $
                  149
                  
                  
                  $
                  -
                  
                  
                  $
                  152
                  
                  
                  $
                  (249
                  )
                  
                  $
                  52Allowance
      for ship and debits
                  
                  $
                  285
                  
                  
                  $
                  -
                  
                  
                  $
                  2,192
                  
                  
                  $
                  (2,228
                  )
                  
                  $
                  249Year
      ended December 31, 2007:Allowance
      for doubtful accounts
                  
                  $
                  94
                  
                  
                  $
                  3
                  
                  
                  $
                  -
                  
                  
                  $
                  (15
                  )
                  
                  $
                  82Provision
      for excess and obsolete inventories
                  
                  $
                  936
                  
                  
                  $
                  763
                  
                  
                  $
                  -
                  
                  
                  $
                  (420
                  )
                  
                  $
                  1,279Allowance
      for returns and price concessions
                  
                  $
                  75
                  
                  
                  $
                  -
                  
                  
                  $
                  358
                  
                  
                  $
                  (284
                  )
                  
                  $
                  149Allowance
      for ship and debits
                  
                  $
                  143
                  
                  
                  $
                  -
                  
                  
                  $
                  2,101
                  
                  
                  $
                  (1,959
                  )
                  
                  $
                  285
 (1)
                Amounts
      charged to other accounts are recorded as a reduction of
      revenue.
  65
 
 SIGNATURES
   Pursuant
to the requirements of Section 13 or 15(d) 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.
 
 
 March
      4, 2010
                PLX
      Technology, Inc.
                  by:
                  /s/     Ralph
      H. Schmitt
                  Name:
      Ralph H. Schmitt
                  Title:
      Chief Executive Officer
  66
  POWER OF ATTORNEY
  KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Ralph H. Schmitt and Arthur O. Whipple, and each of
them, his attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any amendments to this Report on Form 10-K and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in- fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Name
      and Signature
                  
                  Title(s)
                  
                  Date/s/
      Raph H. Schmitt
                  
                  Chief
      Executive Officer and Director
                  
                  March
      4, 2010Ralph
      H. Schmitt
                  
                  (Principal
      Executive Officer)Chief
      Financial Officer, Vice President,/s/
      Arthur O. Whipple
                  
                  Finance
      and Secretary
                  
                  March
      4, 2010Arthur
      O. Whipple
                  
                  (Principal
      Finanacial and Accounting Officer)/s/
      D. James Guzy
                  
                  Director
      and Chairman of the Board of
                  
                  March
      4, 2010D.
      James Guzy
                  
                  Directors/s/
      Michael J. Salameh
                  
                  Director
                  
                  March
      4, 2010Michael
      J. Salameh/s/
      Robert H. Smith
                  
                  Director
                  
                  March
      4, 2010Robert
      H. Smith/s/
      John H. Hart
                  
                  Director
                  
                  March
      4, 2010John
      H. Hart/s/
      Thomas J. Riordan
                  
                  Director
                  
                  March
      4, 2010Thomas
      Riordan/s/
      Patrick Verderico
                  
                  Director
                  
                  March
      4, 2010Patrick
      Verderico
 67
 
 ExhibitNumber
                  
                  Description2.1
                  
                  Agreement
      and Plan of Merger, dated December 15, 2008, by and among PLX Technology,
      Inc., Osprey Acquisition Sub, Inc., Oxford Semiconductor, Inc. and
      VantagePoint Venture Partners IV (Q), L.P., as stockholder representative
      (without exhibits), filed as Exhibit 2.1 to the Company's Form 8-K, filed
      on December 19, 2008, and incorporated herein by
  reference.2.2
                  
                  Amendment
      to the Agreement and Plan of Merger, dated January 2, 2009, by and among
      PLX Technology, Inc., Osprey Acquisition Sub, Inc., Oxford Semiconductor,
      Inc. and VantagePoint Venture Partners IV (Q), L.P., as stockholder
      representative, filed as Exhibit 2.1 to the Company's Form 8-K, filed on
      January 6, 2009, and incorporated herein by reference.2.3
                  
                  Exchange
      Agent Agreement, dated January 2, 2009, by and among PLX Technology, Inc.,
      Computershare, Inc. and Computershare Trust Company, N.A., filed as
      Exhibit 2.3 to the Company's Form 10-K, filed on March 6, 2009, and
      incorporated herein by reference.2.4
                  
                  Escrow
      Agreement, dated January 2, 2009, by and among PLX Technology, Inc.,
      VantagePoint Venture Partners IV (Q), L.P., as the representative of the
      stockholders of Oxford Semiconductor, Inc. and Computershare Trust
      Company, filed as Exhibit 2.4 to the Company's Form 10-K, filed on March
      6, 2009, and incorporated herein by reference.2.5
                  
                  Form
      of Stockholder Support Agreement, dated December 15, 2008, by and among
      PLX Technology, inc., Oxford Semiconductor, Inc., VantagePoint Venture
      Partners IV (Q), L.P., as the representative of the stockholders of Oxford
      Semiconductor, Inc., and certain stockholders of the Registrant, filed as
      Exhibit 2.5 to the Company's Form 10-K, filed on March 6, 2009, and
      incorporated herein by reference.3.1
      (1)
                  
                  Amended
      and Restated Certificate of Incorporation of the
  Company.3.2
                  
                  Amended
      and Restated Bylaws of the Company, filed as Exhibit 3.1 to the Company's
      Form 8-K, filed on November 26, 2007 and incorporated herein by
      reference.3.3
                  
                  Certificate
      of Amendment to Amended and Restated Certificate of Incorporation, filed
      as Exhibit 3.1 to the Company’s quarterly report on Form 10-Q for the
      quarter ended June 30, 2004 and incorporated herein by
      reference.4.1
                  
                  Reference
      is made to Exhibits 3.1 and 3.3.10.1
      (1)*
                  
                  Form
      of Indemnification Agreement between PLX and each of its Officers and
      Directors.10.2
      (1)*
                  
                  1998
      Stock Incentive Plan.10.3
      (1) (2)*
                  
                  1999
      Stock Incentive Plan, As Amended.10.4*
                  
                  PLX
      Technology, Inc. 2008 Variable Compensation Plan, filed as Exhibit 10.17
      to the Company's Form 10-K, filed on March 6, 2008 and incorporated herein
      by reference.10.5*
                  
                  Amended
      and Restated PLX Technology, Inc. 1999 Stock Incentive Plan, titled as
      Appendix A to the Company's Proxy Statement on Schedule 14A, dated April
      18, 2006, and incorporated herein by reference.10.6*
                  
                  PLX
      Technology, Inc. 2008 Equity Incentive Plan, attached as Appendix A to the
      Company's Definitive Proxy Statement on Schedule 14A, filed on April 18,
      2008, and incorporated herein by reference.10.7*
                  
                  Offer
      Letter, dated as of October 15, 2008, by and between the Company and Ralph
      Schmitt, filed as Exhibit 10.1 to the Company's Form 8-K, filed on October
      27, 2008, and incorporated herein by reference.10.8*
                  
                  PLX
      Technology, Inc. Employee Stock Ownership Plan, filed as Exhibit 99.1 to
      the Company’s Registration Statement on Form S-8 (Registration No.
      333-160026), filed on June 17, 2009, and incorporated herein by
      reference.14.1
                  
                  Code
      of Ethics, filed as Exhibit 14.1 to the Company’s Form 10-K, filed on
      March 3, 2006, and incorporated herein by reference.21.1
                  
                  Subsidiaries
      of the Company.23.1
                  
                  Consent
      of Independent Registered Public Accounting Firm.24.1
                  
                  Power
      of Attorney (See Signature page).31.1
                  
                  Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                  
                  Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
                  
                  Certification
      of Chief Executive Officer Pursuant to 18 U.S.C.Section 1350,
      Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
                  
                  Certification
      of Chief Financial Officer Pursuant to 18 U.S.C.Section 1350,
      Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.(1)
                  
                  Incorporated
      by reference to the same numbered exhibit previously filed with the
      Company's Registration Statement on Form S-1 (Registration
      No. 333-71795).(2)
                  
                  Incorporated
      by reference to Exhibit 10.1 to the Company's quarterly report on
      Form 10-Q for the quarter ended June 30,
2002.*
                  
                  Management
      contract or compensatory plan or arrangement.
  68