**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, 2005**
  **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
        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(g) of the Act:
  Common
        stock, $0.001 par value per share
   Indicate by check mark if the registrant is a well-known seasoned issuer,
        as
        defined in Rule 405 of the Securities Act. Yes o  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 o 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
o
  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, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
        One):
  Large
        accelerated filer o   Accelerated
        filer x    Non-accelerated filer o
  Indicate
        by check mark whether the Registrant is a shell company (as defined in Rule
        12b-2 of the Act ).
        Yes
o 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, 2005, as reported on The Nasdaq National Market, was approximately $171,712,727. Shares
        of common stock held by each executive officer and director and by each person
        who to the registrant's knowledge owns 5% or more of the outstanding voting
        stock have been excluded in that such persons may be deemed to be affiliates.
        This determination of affiliate status is not necessarily a conclusive
        determination for other purposes.
  The
        number of shares of common stock outstanding at March 1, 2006 was27,937,626.
  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 2006 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, 2005**


**Part
                    I.**
                
                
                
                **Page**Item 1.
                
                Business
                
                2Item 1A.
                
                Risk
                    Factors
                
                16Item 1B.
                
                Unresolved
                    Staff Comments
                
                23Item 2.
                
                Properties
                
                23Item 3.
                
                Legal
                    Proceedings
                
                24Item 4.
                
                Submission
                    of Matters to a Vote of Security
                    Holders
                
                24**Part
                    II.**Item 5.
                
                Market
                    for Registrant's Common Stock, Related Security
                    Holder Matters and Issuer Purchases of Equity
                    Securities
                
                24Item 6.
                
                Selected
                    Financial Data
                
                25Item 7.
                
                Management's
                    Discussion and Analysis of Financial Condition
                    and Results of Operations
                
                25Item 7A.
                
                Quantitative
                    and Qualitative Disclosures About Market
                    Risk
                
                34Item 8.
                
                Financial
                    Statements and Supplementary
                    Data
                
                34Item 9.
                
                Changes
                    in and Disagreements with Accountants on Accounting
                    and Financial Disclosures
                
                34Item 9A.
                
                Controls
                    and Procedures
                
                34Item 9B.
                
                Other
                    Information
                
                35**Part
                    III.**Item 10.
                
                Directors
                    and Executive Officers of the
                    Registrant
                
                35Item 11.
                
                Executive
                    Compensation
                
                35Item 12.
                
                Security
                    Ownership of Certain Beneficial Owners and
                    Management
                
                35Item 13.
                
                Certain
                    Relationships and Related
                    Transactions
                
                35Item 14.
                
                Principal
                    Accountant Fees and Services
                
                35**Part
                    IV.**Item 15.
                
                Exhibits
                    and Financial Statement
                    Schedules
                
                36**Signatures**
                
                
                
                60
   
  **PART
        I**
  **ITEM
        1: BUSINESS**
  **Overview**
  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. We offer
        a
        complete solution consisting of three related types of products: semiconductor
        devices, software development kits and hardware design kits. Our semiconductor
        devices simplify the development of data transfer circuits in microprocessor
        based systems. Our software development kits and hardware design kits promote
        sales of our semiconductor devices by lowering customers' development costs
        and
        by accelerating their ability to bring new products to market.
  In
        the
        last decade, demand for communications, storage, servers, imaging, PCs, consumer
        electronics and other products that transmit, store and process information
        rapidly has increased due to:
  ·
              growth
                  of the Internet,
 ·
              deployment
                  of high-speed networking, and
 ·
              proliferation
                  of multimedia.
  Suppliers
        of these products seek to reduce product development time and to use their
        scarce engineering resources more efficiently. Until the mid 90’s, these
        suppliers typically developed their own system components and the connections
        between the components. Now, however, they are increasingly building their
        equipment based on industry standard connection methods and purchasing
        components supplied by other companies that comply with these standards.
        By
        doing so, they reduce the time and resources required for product development.
        Consequently, there is a growing demand for standards-based components that
        connect systems together, such as our semiconductor devices. The majority
        of
        products we ship today are based on three interconnect standards that are
        widely
        used in our markets: Peripheral Component Interconnect (PCI), Universal Serial
        Bus (USB) and PCI Express. PLX is an active member of many of the trade
        associations that define current and future interconnect standards including
        PCITM, CompactPCI®, PCI-X®, PCI ExpressTM, Advanced Switching Interconnect, USB
        and HyperTransportTM.
  Our
        objective is to expand our advantages in data transfer technology by:
  ·
              focusing
                  on high-growth markets,
 ·
              extending
                  our technology advantages by incorporating new functions and technologies,
 ·
              driving
                  industry standards, and
 ·
              strengthening
                  and expanding our industry relationships.
  Our
        headquarters are located at 870 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.
  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**
  Microprocessor-based
        systems are found in many common products and offer varying levels of
        performance depending on each product's requirements. These products range
        from
        low performance devices such as electronic toys and kitchen appliances to
        complex, high-performance electronic equipment such as network routers and
        switches. High-performance microprocessor-based systems offer increased data
        processing capabilities and typically utilize one or more 32-bit or 64-bit
        microprocessors, fast memories and peripherals, and sophisticated operating
        systems and software applications.
  The
        growth of the communications infrastructure has increased the demand for
        high
        performance microprocessor-based systems. This demand has been fueled by
        the
        growth of the Internet; the deployment of high-speed networking systems to
        transmit, store, and process data; and the proliferation of data types in
        the
        network, including voice traffic and multimedia.
  Markets
        for electronic equipment that rely on high-performance microprocessor-based
        systems include the following:
  ·
              *Networking
                  and Telecommunications*.
                  Networking and telecommunications applications include digital
                  telephony,
                  multimedia gateways, wireless base stations, remote access concentrators,
                  routers, switches and cable modem equipment. This market segment
                  has grown
                  rapidly due to the rise of the Internet and the proliferation of
                  high
                  bandwidth communication technologies such as Fast Ethernet, Gigabit
                  and 10
                  Gigabit Ethernet, Asynchronous Transfer Mode, or ATM, cable modems,
                  Digital Subscriber Line, or xDSL, and Voice-over-IP, or VoIP.
  ·
              *Enterprise
                  Storage*.
                  Enterprise storage applications include disk storage systems in
                  both
                  Network Attached Storage (NAS) and Storage Area Networks (SAN).
                  The
                  growing use of multimedia applications and storage networks is
                  driving
                  demand for increased data storage capacity.
  ·
              *Servers*.
                  Data transfer rates through servers have increased because of their
                  higher
                  processing power and the greater data-handling workload caused
                  by broad
                  internet usage and the need to process high data-content material
                  such as
                  video files and complex
                  applications.
  ·
              *Imaging*.
                  Imaging applications include printers, copiers, medical instrumentation
                  and video and graphics equipment. The popularity of digital photography
                  and video, the demand for better image quality and higher performance,
                  increasing demand for video surveillance security equipment, as
                  well as
                  connection of these applications to high-speed networks, have increased
                  their data processing requirements.
  ·
              *Industrial*.
                  Industrial applications include a wide range of process control
                  computers
                  and factory automation equipment. These products have high data
                  transfer
                  rate requirements, are used to monitor and control complex processes
                  in
                  real-time and are being increasingly attached to
                  networks.
  ·
              *PC
                  Peripherals and Consumer Electronics*.
                  PC peripheral applications include graphics adapters, TV tuners
                  and
                  communication peripherals. Examples for consumer electronics applications
                  include portable media players, digital camcorders, set top boxes,
                  wireless LAN adapters, printers, and TV tuners for PCs. These products
                  are
                  increasingly using high speed connection standards for data transfers.
  Manufacturers
        of products that rely on high-performance microprocessor-based systems seek
        to
        maximize the performance and minimize the cost of their increasingly complex
        products. In addition, these manufacturers must develop and bring new products
        to market quickly to keep pace with technological advancements.
  ***The
        I/O Subsystem***
  A
        typical
        computer system can be described in terms of four primary functions: the
        host
        microprocessor, the memory, the peripherals and the input/output, or I/O,
        subsystem. The host microprocessor is the primary control center for the
        system.
        The memory acts as a storage area for instructions to be executed and data
        to be
        processed. The peripherals enable connections between the system and other
        external devices such as network components, printers and storage systems.
        The
        I/O subsystem is the interconnect circuitry and software that connects these
        three other functions and allows for the transfer of instructions and data
        among
        these functions. The I/O subsystem may also connect the system to the outside
        world. The I/O subsystem includes the system bus or switch fabric, which
        is a
        physical connection between these different functions.
  To
        enable
        increased performance and functionality from computer systems, semiconductor
        suppliers have historically focused on improving the operation of peripherals,
        microprocessors and memories. The interconnect silicon in the I/O subsystem
        must
        also improve to keep pace with these improvements by transferring more
        information efficiently and at faster speeds.
  In
        parallel with the increased performance demands of customers and their data
        traffic, the reliability of these systems is under constant pressure to improve.
        This is especially true as the networking and telecommunications disciplines
        merge through use of the Internet to carry all types of traffic. Highly
        available systems are required to meet the expectations of customers.
  As
        data
        transfer and reliability requirements for the I/O subsystem have increased,
        so
        has the complexity of its interface logic and related software. Until the
        mid
        90’s, most microprocessor-based systems used simple I/O subsystems that
        contained limited logic and rudimentary software, if any. Complex I/O subsystem
        components such as processors, elaborate control logic and advanced software
        were costly, and therefore their use was confined to very high-end equipment
        such as mainframe computers. Furthermore, the lack of widely accepted I/O
        standards impeded the use of complex I/O subsystems in other than high-end
        applications. However, advances in semiconductor technology combined with
        the
        widespread adoption of standards in microprocessor-based systems have enabled
        the development of highly integrated semiconductor devices that can better
        manage I/O subsystem performance at lower cost.
  ***Penetration
        of I/O Standards in Systems***
  Until
        the
        mid 90’s, microprocessor-based systems manufacturers relied on a wide variety of
        proprietary solutions and a fragmented set of industry standard I/O
        architectures. For example, many networking, imaging, storage and industrial
        applications employed proprietary architectures to meet their specific
        performance and cost requirements. A mix of standard buses such as VMEbus,
        Multibus and ISA was used in some industrial, telecommunications and military
        applications. Software was even more fragmented with many proprietary and
        application specific software architectures in use. While developers could
        take
        advantage of many standard microprocessor, memory and peripheral components
        supplied by external vendors, the lack of acceptable I/O standards forced
        many
        to develop custom I/O subsystems internally, placing a heavy demand on
        development resources.
  The
        deployment of the PCI standard was one of the catalysts for the widespread
        adoption of I/O standards in microprocessor-based systems. In the early 1990s,
        PC and server manufacturers developed PCI, a new standard hardware architecture
        to connect the major components of their systems at high speed. It offered
        up to
        a one hundred times improvement in I/O data transfer rates over the previous
        architectures. By the mid-1990s, PCI became the most widely used bus
        architecture in the PC market. Consequently, many suppliers of peripheral
        semiconductor components used in PCs adopted PCI as the standard system
        interface. In addition to penetrating the PC and server market, PCI gained
        popularity as a standard I/O architecture for many other high-performance
        microprocessor-based systems because it allows the use of low cost and
        state-of-the-art peripheral semiconductor components developed for the PC
        market
        and provides a foundation for system interoperability. PCI also offers
        equivalent or superior performance to the in-house developed standards of
        many
        electronic equipment suppliers. Furthermore, the use of PCI enables faster
        time
        to market, lower development cost and the ability to quickly integrate new
        I/O
        components.
  By
        the
        late 90’s, PCI became established as a major “in-the-box” interconnect for
        connecting components within a system.
  Also
        in
        the late 90’s USB emerged as a major “box-to-box” interconnect for connecting
        PCs to PC peripherals and consumer electronics devices. Prior to USB, a diverse
        collection of proprietary and industry standard connections, such as serial
        port, parallel port and SCSI (Small Computer Serial Interface) were used
        to
        connect PCs to peripherals such as printers and external storage devices
        and to
        consumer electronic devices such as cell phones, digital cameras and portable
        media players. USB provides a single standard connection that allows PCs
        to
        connect to peripherals and consumer electronics devices made by different
        manufacturers.
  In
        2001
        and 2002, the PCI Express standard was developed as a higher-performance
        upgrade
        to the widely-deployed PCI standard. Many builders of microprocessor-based
        systems need the improved performance of PCI Express to ensure that the I/O
        subsystem data transfer capacity keeps pace with the increasing performance
        of
        the surrounding processors and peripheral devices. In addition to higher
        data
        throughput, PCI Express enables more devices to be connected and improves
        system
        management. Although PCI Express, which is a switched-serial architecture,
        is
        different in terms of hardware than PCI, a parallel bus architecture, it
        is
        software compatible with PCI. This software compatibility attribute makes
        the
        task of upgrading PCI systems to take advantage of PCI Express’s performance
        advantages relatively simple and inexpensive. Consequently, PCI Express has
        gained rapid acceptance as an architecture for high performance
        microprocessor-based systems. In 2005, many of the PCs, PC peripherals and
        servers shipped utilized PCI Express architecture and many storage,
        communications and embedded systems were starting a transition to PCI Express
        architecture.
  ***Need
        for Standard I/O Interconnect Products and Comprehensive I/O
        Solutions***
  Even
        with
        standard I/O specifications, design teams must still create the circuitry
        and
        related software that implement these specifications. Designers must also
        update
        their I/O subsystems to include frequent improvements in these specifications.
  Instead
        of developing all the hardware and software technology internally, system
        developers seek to focus their scarce engineering resources on the proprietary
        features of their products. By using standard semiconductor devices in the
        I/O
        subsystem instead of custom-designed devices they are able to implement the
        basic framework of the system more easily and thereby reduce the I/O subsystem
        design effort resulting in faster time-to-market and lower development cost.
        Standard products allow the design teams to concentrate their efforts on
        differentiating hardware and software features. In addition to standard
        interconnect semiconductor devices, system designers can benefit from several
        other design elements, such as data control software, hardware design kits
        and
        third-party development tools to complete their development work in a timely
        manner. These additional elements simplify development and improve time to
        market. They provide design teams with proven hardware and software design
        examples and the tools to adapt these examples to their needs.
  Due
        to
        the availability and adoption of I/O standards by developers of
        microprocessor-based systems, servers and PC’s, there is now a large demand for
        I/O subsystem components based on these standards.
  **The
        PLX Solution**
  PLX
        develops and supplies interconnect semiconductor devices and supporting hardware
        and software platforms that accelerate and manage the transfer of data in
        high-performance microprocessor-based systems.
  Our
        solution consists of three related products:
  ·
              interconnect
                  semiconductor devices,
 ·
              software
                  development kits which assist in developing systems that incorporate
                  our
                  semiconductor devices, and
 ·
              hardware
                  design kits that allow development of a system using our semiconductor
                  devices and software development kits.
  Development
        tools provided by third parties support these three related products. Our
        products are designed for use in a variety of applications including networking
        and telecommunications, enterprise storage, servers, embedded control, PC
        peripheral and consumer electronics. Our chips are highly integrated,
        cost-effective semiconductor devices that optimize the flow of data and simplify
        the development of high-performance I/O subsystems. Our software development
        kits and hardware design kits promote sales of our semiconductor devices
        by
        lowering customers' development costs and allowing them to bring new products
        to
        market more quickly.
  PLX
        products shipping today provide I/O connectivity solutions mainly for the
        PCI,
        PCI-X, PCI Express and USB standards. As new I/O standards evolve, we expect
        to
        support them where appropriate. More than 1,000 electronic equipment
        manufacturers use PLX semiconductor devices in a wide variety of applications.
  **Strategy**
  Our
        objective is to continue to expand our market position as a developer and
        supplier of I/O connectivity solutions for high-performance systems. Key
        elements of our strategy include the following:
  *Focus
        on High-Growth Markets.* We
        focus
        on the high-growth communications, storage, server, embedded control, PC
        peripheral and consumer markets. Within these markets, there are many highly
        differentiated applications with different design criteria such as product
        function, performance, cost, power consumption, software, size limitations
        and
        design support. The requirements of many of these differentiated applications
        are addressed by our products, and we target those applications where we
        believe
        we can attain a leadership position.
  *Deliver
        Comprehensive Solutions.* Our
        products provide system developers with a comprehensive, proven development
        environment to simplify I/O subsystem design, enhance performance, reduce
        development costs and accelerate time-to-market. This solution consists of
        semiconductor devices, software development kits and hardware design kits.
        These
        design elements are supported by development tools provided by third parties.
  *Extend
        I/O Subsystem Technology.* We
        offer
        our customers highly integrated semiconductor devices and related software
        that
        incorporate many of the latest advances in I/O interconnect technology. Our
        semiconductor devices and software are designed to enable quick adoption
        of new
        I/O technologies and enhancements to existing I/O standards. We seek to
        integrate additional I/O-related functions into our semiconductor devices
        to
        provide our customers with additional value. We employ a team of engineers
        with
        expertise in system architectures, product definition, semiconductor and
        software design to maintain our I/O subsystem technology advantages.
  *Drive
        I/O Subsystem Standards.* We
        believe 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 technologies. Through our participation in key industry groups responsible
        for standards such as the PCI Special Interest Group, the PCI Industrial
        Computer Manufacturer's Group (PICMG), PCI-X Manufacturers' Group,
        HyperTransport Consortium, Advanced Switching Interconnect (ASI-SIG), and
        the
        USB Implementers Forum (USB-IF), we have taken an active role in defining
        new
        I/O standards.
  *Strengthen
        and Expand Industry Relationships.* We
        work
        with industry leaders in developing hardware and software development tools
        and
        marketing programs that promote the use of each company's products. Partners
        include AMD, Broadcom, Intel, Jungo, Microsoft, Freescale, One Stop Systems,
        Pigeon Point, RamBus, and ViXS. As a result of these relationships, we enable
        microprocessor-based systems designers to choose the best products for their
        particular applications while still employing our product as the core of
        their
        I/O subsystem design.
  **Customers**
  We
        supply
        our products to customers for a wide variety of communications, storage,
        server,
        embedded control, PC peripheral and consumer appliance applications. The
        typical
        product life cycle of a high performance microprocessor-based system is one
        to
        two years or more of product development and initial marketing activity followed
        by one to five years or more of volume production, assuming the product is
        successful in the market. The system 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 one to five year or more production life.
  Our
        products are standard semiconductor devices that may be incorporated into
        equipment used in several of our target markets. More than 1,000 electronic
        equipment manufacturers incorporate our semiconductor devices in their products.
  
 The
        following table lists representative end customers that purchased directly
        or
        through distributors more than $100,000 of our products in 2005.
  **Networking/Telecommunications**
                
                **Imaging/Industrial/Medical**Accton
                    Technology
                
                AdvantechAdlink
                
                ComtrolAlcatel
                
                EFIArtesyn
                    Technologies
                
                ESDAvaya
                
                Fuji
                    XeroxCisco
                    Systems
                
                General
                    ElectricDigi
                    International
                
                GeovisionEicon
                    Technology
                
                KodicomEricsson
                
                KonicaMinoltaHitachi
                
                MatroxHuawei
                
                Measurement
                    ComputingIntel
                
                Moxa
                    TechnologiesLeadtek
                
                OCEMarconi
                
                OKIMotorola
                
                PhilipsNortel
                    Networks
                
                Provideo
                    Multinedia Co., LTDPerformance
                    Technology
                
                SamsungPolycom
                
                SBS
                    TechnologiesQualtech
                    Inc.
                
                SiemensRadisys
                
                XeroxSagemSea
                    Level Systems
                
                **PC
                    Peripheral & Consumer Electronics**Toshiba
                
                Blackmagic
                    DesignZTE
                
                CanopusDell**Enterprise
                    Storage**
                
                Hauppauge
                    ComputerEMC
                
                Homecast
                    (EMTech)IBM
                
                MCT
                    CorporationSeiko
                    Epson**Servers**
                
                TopfieldFujitsuSun
                    Microsystems
   **Products**
  Our
        products consist of interconnect semiconductor devices, software development
        kits and hardware design kits. Development tools provided by third parties
        support these three design elements. The sales of our interconnect semiconductor
        devices account for substantially all of our revenues. We generate less than
        2%
        of our revenues from sales of our software and hardware design kits. Our
        software development kits and hardware design kits promote sales of our
        semiconductor devices by lowering customers' development costs allowing them
        to
        bring new products to market more quickly.
  *I/O
        Accelerators* .
        Our I/O
        accelerators are semiconductor devices that accelerate movement of data across
        a
        PCI bus and between one or more devices or subsystems that need to communicate
        across the PCI bus. These products incorporate the Data Pipe Architecture
        technology, a set of circuits and features that enable an efficient flow
        of data
        within systems with minimal supervision from the system processor. Our I/O
        accelerators address a range of applications and provide flexible interfaces
        that allow them to connect to a wide variety of semiconductor devices, including
        processors such as Freescale's PowerPC, Intel's i960 and Strong ARM, Hitachi's
        SH, and Motorola's 68K series. Customers also use these semiconductor devices
        in
        connection with digital signal processors, or DSPs, from Texas Instruments
        and
        others. The I/O accelerators can be connected with a wide range of peripheral
        devices, including LAN, WAN, disk control and graphics.
  *PCI-to-PCI
        Bridges.* PCI-to-PCI bridges are chips that increase the number of peripheral devices
        that
        can be included in a microprocessor-based system. PCI-to-PCI bridges have
        become
        common in a wide variety of systems, including servers, storage, communications,
        and embedded-control applications such as imaging, industrial control, and
        test
        equipment. PLX’s bridge product line spans the entire PCI range, from 32-bit
        33MHz through 64-bit 66MHz, and includes 133MHz PCI-X devices. PLX acquired
        this
        product line through the May 2003 acquisition of HiNT Corporation.
  *HyperTransport
        Interconnect Bridges.* The
        HyperTransport bridge allows a processor, typically a MIPS processor, to
        generate and control two PCI-X buses. The bridge chip converts the 8 or 16
        bit
        800MHz HyperTransport processor interface to two 64 bit 133MHz PCI-X buses.
        The
        bridge provides a means for the processor to communicate efficiently with
        multiple I/O devices such as Ethernet controllers. This product is a result
        of
        an agreement we entered into in May 2002 with Advanced Micro
        Devices.
  *USB
        Interface Chips.* USB
        interface chips are used by computer peripherals to connect to a PC through
        an
        external cabled connection.  The USB standard allows for connections to be
        made at different speeds.  Hi-Speed USB (also known as USB 2.0) provides
        40x the bandwidth of Full-Speed USB and can be found on most PCs sold after
        2003.  However, most PC peripherals today, such as mice, printers, and
        digital cameras, still utilize Full-Speed transfer rates.  PLX’s products
        are all USB 2.0 Hi-Speed. Hi-Speed connections can be found today on devices
        like multi-function printers, DVD camcorders, portable media players, digital
        cameras, PDAs, and hard disks . PLX
        acquired this product line through the May 2004 acquisition of NetChip
        Technology, Inc.
  *PCI
        Express Bridges.* The
        PCI
        Express bus standard has become the interconnect standard for the latest
        servers, notebooks, desktops, and storage systems. With its 2.5Gigabit per
        second data rate, it offers higher performance than legacy standards. 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, fibre channel HBA,
        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 still service and support the legacy PCI and PCI-X
        market.
  *PCI
        Express Switches.* With
        PCI
        Express being a point to point serial interconnect, it requires a switch
        to
        route the signal to its destination. Applications include fanout in servers,
        support for multi-channel Gigabit Ethernet, Fibre Channel, graphics and SAS
        cards. PLX switch products are offered in various configurations as requirements
        vary from one application to the next.
  *Software
        Development Kits* .
        Our
        software development kits, or SDKs, are designed to simplify and accelerate
        the
        development of systems that incorporate our semiconductor devices. Support
        is
        provided for several industry-leading operating systems, including VxWorks
        from
        Wind River, Linux, and Microsoft Windows as well as generic applications
        and
        other operating systems. The SDKs include an application programming interface,
        or API, that enables developers to execute complex transactions with simple
        commands. This common interface allows customers to preserve their software
        investment even as their designs evolve in complexity and as new I/O
        architectures are deployed.
  *Hardware
        Design Kits* .
        We
        offer hardware design kits that support the development of systems incorporating
        PLX semiconductor devices. We call our hardware design kits "rapid development
        kits", or RDKs. Designers use the RDKs to evaluate our semiconductor devices
        and
        to simplify and accelerate product development. Each hardware design kit
        includes a development circuit board that designers can use to evaluate the
        PLX
        products and also design their own system. These hardware design kits also
        include technical drawings, documentation and other design assistance tools.
  To
        offer
        additional design support, we work with third party companies that provide
        development tools for our customers. Although we receive no revenue directly
        from these development tools, they promote sales of our semiconductor devices
        because these tools often make it easier to develop systems incorporating
        our
        products. Examples include software development tools from Jungo, Microsoft,
        Pigeon Point, and Wind River and software modeling tools from Synopsys.
  Our
        principal product offerings and functions include the following:
  **Category**
                **Product**
                **Description****Semiconductor
                    Devices**32-bit/33
                    MHz Target I/O Accelerators
                PCI
                    9030
                o
                    Enable connection of 8-, 16- and 32-bit peripherals and
                    personalPCI
                    9050
                computer
                    adapters to PCIPCI
                    905232-bit/33
                    MHz Master I/O Accelerators
                PCI
                    9054
                o
                    Provide the flexibility to connect with a wide range of
                    processors,PCI
                    9060SD
                peripherals
                    and memoryPCI
                    9060ESPCI
                    9060PCI
                    908032
                    and 64-bit/66 MHz I/O Accelerators
                PCI
                    9056
                o
                    Provide the flexibility to connect with a wide range ofPCI
                    9656
                peripherals
                    and memoryHyperTransport
                    Bridge Chips
                HT
                    7520
                o
                    Connects HyperTransport interface to two PCI-X busesPCI
                    and PCI-X Bridge Chips
                PCI
                    6140
                o
                    Increase the number of PCI peripheral devices that can be included
                    inPCI
                    6150
                a
                    microprocessor-based systemPCI
                    6152PCI
                    6154PCI
                    6156PCI
                    6254PCI
                    6350PCI
                    6466PCI
                    6520PCI
                    6540USB
                    Bridge Chips
                NET
                    2260
                o
                    Connect CPUs and DSPs to a high-speed USB device portNET
                    2270NET
                    2272NET
                    2280NET
                    2282NET
                    2890PCI
                    Express Bridges and Switches
                PEX
                    8111
                o
                    Support the standard PCI Express serial interconnect
                    protocolPEX
                    8114
                o
                    Facilitate the connection of the newest PCI Express
                    processorsPEX
                    8311
                o
                    Provide essential system fanout required by the point-to-point
                    PCIPEX
                    8508
                Express
                    standardPEX
                    8518
                o
                    Enable conventional PCI products to be upgraded for use in the
                    newest
                    PCIPEX
                    8516
                Express
                    systemPEX
                    8524PEX
                    8532
 **Software
                    Development Kits**PCI
                    Software
                SDK
                o
                    Provide tools for accelerating design of data transport
                    softwareo
                    Include development and debugging utilities, sample firmware
                    and
                    drivers**Hardware
                    Design Kits**Rapid
                    Development Kits
                Kits
                    supporting a
                o
                    Include development circuit boards, SDK Software, documentation
                    andrange
                    of products
                schematics
                    to assist system development
  **Technology**
  We
        believe that supplying high-performance connectivity solutions for I/O
        subsystems requires expertise in four areas:
  ·  semiconductor
        design,
 ·  software
        technology,
 ·  system
        design, and
 ·  industry
        standards.
  *Semiconductor
        Design.* Our
        engineers have substantial expertise in semiconductor design and have developed
        a comprehensive library of complex functional blocks for use in semiconductor
        devices for I/O connectivity. As a result of this expertise, we offer both
        innovative architectures and high levels of functionality. We continue to
        integrate more functionality in our semiconductor devices to reduce cost,
        improve performance, reduce size and simplify the customer's design effort.
  *Software
        Technology.* We
        devote
        engineering resources to the development of software technology used to assist
        the system developer in debugging hardware and creating data control software.
        The quality and availability of these tools are key differentiating factors
        between PLX and competing alternatives. We continue to enhance and expand
        our
        software development kits, which contain a set of programming interfaces
        that
        simplify the development of software. Our software expertise provides us
        with
        valuable insights into our customers' software development issues, which
        aids
        the definition and development of future semiconductor devices.
  *System
        Design.* We
        employ
        a team of system level design engineers that develop hardware design kits.
        These
        kits are high-performance adapters and embedded systems that customers can
        use
        to assist development of their products. Each of these hardware design kits
        is a
        system or adapter similar in complexity to those built by our customers.
        The
        system design experience provides us valuable insights which we can use to
        improve future semiconductor device and software products.
  *Industry
        Standards.* Through
        our participation in the key industry groups responsible for interconnect
        standards, we take an active role in defining new I/O standards such as USB,
        PCI-X, HyperTransport, Advanced Switching Interconnect and PCI Express.
  **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.
  Competition
        in the various markets we serve comes from companies of various sizes, many
        of
        which are significantly larger and have greater financial and other resources.
        Thus they can better withstand adverse economic or market conditions. Our
        principal products compete with standard products from companies such as
        Alliance Semiconductor, Cypress Semiconductor, Genesys Logic, IDT, Intel,
        Kawasaki, NEC, Oxford Semiconductor, Pericom Semiconductor, Philips, Renesas,
        Seiko-Epson, Texas Instruments and Tundra Semiconductor.
  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 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.
  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 are more
        efficient and higher in performance. Furthermore, in general, our software
        and
        hardware development tools are more comprehensive than competing solutions.
        However, 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.
  **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 a distributor. We maintain
        United States direct sales offices in California, Connecticut, Massachusetts,
        North Carolina, and Texas.
  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 direct sales office in the United Kingdom to service
        customers in Europe and the Middle East. We also maintain direct sales offices
        in Taiwan and China to service Southeast Asia and The People's Republic of
        China. Finally, we maintain a direct sales office in Japan to service customers
        in Japan.
  As
        of
        December 31, 2005, we employed 48 individuals in sales and marketing. Sales in North America represented
        32 %,
        32%,
        and 37%, of net revenues for 2005, 2004, and 2003, respectively. All sales
        to
        date have been denominated in U.S. dollars.
  Net
        revenues through distributors accounted for approximately
        57%, 53%, and 56%
        of our net revenues for 2005, 2004, and 2003, respectively. Revenues related
        to
        sales through distributors are expected to continue to account for a large
        portion of our total revenues. See "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
        2005,
        sales to Metatech, a distributor, accounted for 23% of our net revenues.
        In
        2004 ,
        the
        same distributor accounted for 13% of our net revenues. In 2003, sales to
        Metatech and A2M, also a distributor, accounted for 11% and 10%, respectively,
        of our net revenues. No other distributor or direct customer accounted for
        more
        than 10% of net revenues in any period presented.
  Technical
        support to customers is provided through field and factory applications
        engineers, technical marketing personnel and, if necessary, product design
        engineers. Local field support is provided in person 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.
  Our
        research and development has focused on three main areas: semiconductor devices,
        hardware design kits and software development kits. 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
        $18.5 million ,
        $17.7 million, and $15.0 million in 2005, 2004, and 2003,
        respectively. Research and development expenses consist primarily of salaries
        and related costs of employees engaged in research, design, and development
        activities. In addition, expenses for outside engineering consultants,
        non-recurring engineering at our independent foundries, and deferred stock
        compensation are included in research and development expenses. As of
        December 31, 2005, there were
        66 employees engaged in research and development. We perform our research and
        development activities at our headquarters in Sunnyvale, California and in
        Salt
        Lake City, Utah. 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 "Certain
        Factors That May Affect Future Operating Results - We Could Lose Key Personnel
        Due to Competitive Market Conditions and Attrition."
  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.
 **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. We subcontract substantially
        all
        of our semiconductor manufacturing to AMD in the United States, Fujistu,
        NEC and
        Seiko-Epson Semiconductor in Japan, and Taiwan Semiconductor Manufacturing
        Corporation and UMC in Taiwan. None of our products are currently manufactured
        by more than one supplier, and all of our products are expected 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 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 "Certain Factors That May
        Affect
        Future Operating Results - Our Independent Manufacturers May Not Be Able
        To Meet
        Our Manufacturing Requirements."
  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 "Certain Factors That May Affect Future Operating
        Results - Defects in Our Products Could Increase Our Costs and Delay Our
        Product
        Shipments."
  **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 and USB
        industry standards, which are available to other companies. We currently
        have no
        patents on any of our I/O accelerator products and rely instead on trade
        secret
        protection. We hold 6 patents on switch technology that will expire at various
        dates beginning in 2019 through 2025. In addition, we have a patent on I/O
        buffer technology that will expire in September 2007 and a patent on clock
        and
        timing control technology that will expire in May 2014. 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
        and
        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.
  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 "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."
  **Employees**
  As
        of
        December 31, 2005, we employed a total
        of
        142 full -time
        employees, including
        66 engaged
        in research and development,
        48 engaged in sales
        and marketing,
        4 engaged in
        manufacturing operations and
        24 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.
  **Executive
        Officers and Directors**
  Our executive officers and directors, their ages and their positions as of
        December 31, 2005, are as follows:
  Name
              
              Age
              
              PositionMichael
                  J. Salameh
              
              
              51
              
              
              Chief
                  Executive Officer and DirectorRafael
                  Torres
              
              
              37
              
              
              Chief
                  Financial Officer, Vice President, Finance and SecretaryLawrence
                  Chisvin
              
              
              51
              
              
              Chief
                  Operating OfficerMatthew
                  Ready
              
              
              47
              
              
              Vice
                  President, Worldwide SalesHector
                  A, Berardi
              
              
              41
              
              
              Vice
                  President, OperationsJack
                  Regula
              
              
              57
              
              
              Vice
                  President, Chief Technology OfficerAlex
                  Wong
              
              
              43
              
              
              Vice
                  President, Business DevelopmentDavid
                  K. Raun
              
              
              43
              
              
              Vice
                  President, MarketingGeorge
                  Apostol
              
              
              41
              
              
              Vice
                  President, EngineeringD.
                  James Guzy
              
              
              69
              
              
              Chairman
                  of the Board of DirectorsJohn
                  H. Hart
              
              
              60
              
              
              DirectorRobert
                  H. Smith
              
              
              68
              
              
              DirectorThomas
                  Riordan
              
              
              49
              
              
              DirectorPatrick
                  Verderico
              
              
              61
              
              
              Director
   *Michael
        J. Salameh* co-founded
        PLX and has served as our Chief Executive Officer and as a member of the
        Board
        of Directors since PLX's inception in May 1986. From 1980 through 1986,
        Mr. Salameh was employed in various marketing management positions with
        Hewlett-Packard Company. Mr. Salameh received a B.S. in Engineering and
        Applied Science from Yale University and an M.B.A. from Harvard Business
        School.
  *Rafael
        Torres* has
        served as our Chief Financial Officer, Vice President, Finance, and Secretary
        since November 2000. From May 1999 to November 2000, Mr. Torres served as
        our
        Corporate Controller. From September 1998 to May 1999, Mr. Torres was
        employed by OnCommand Corporation, an on demand video company, as Accounting
        Manager. From June 1997 to September 1998, Mr. Torres was employed by
        Silicon Valley Group, a semiconductor equipment company, as Manager of Financial
        Reporting and Analysis. From September 1994 to June 1997, Mr. Torres was
        employed with PriceWaterhouse LLP, a public accounting firm, as senior auditor.
        Mr. Torres received a B.S. in Accounting from Santa Clara University. Mr.
        Torres is a Certified Public Accountant.
  *Lawrence
        Chisvin* has
        served as our Chief Operating Officer since August 2004. From May 2000 to
        August
        2004, Mr. Chisvin served as our Vice President, Marketing. From September
        1998
        through May 2000, Mr. Chisvin was employed by Neomagic, a semiconductor
        company, as Director of Marketing. From May 1996 through September 1998,
        Mr. Chisvin was employed by LSI Logic, a semiconductor company, as Director
        of Marketing. Prior to LSI Logic, Mr. Chisvin was employed in a variety of
        marketing and engineering positions at S3, Philips, Western Digital, and
        Digital
        Equipment Corporation. Mr. Chisvin received a B.S. in Electrical
        Engineering from Northeastern University and an M.S. in Electrical Engineering
        from Worcester Polytechnic Institute.
  *Matthew
        Ready* has
        served as our Vice President, Worldwide Sales since November 2005.  From
        June 2005 to July 2005, Mr. Ready was Vice President of Brand Sales at Sigmatel,
        a consumer electronic company. From April 2004 to May 2005, Mr. Ready was
        Vice
        President of Worldwide Sales at Zeevo, a Bluetooth chip company, which was
        acquired by Broadcom in March 2005.  From April 2000 to March 2004 Mr.
        Ready was Vice President of Sales at Genesis Microchip, an integrated circuit
        semiconductor company.  From March 1996 to March 2000, Mr. Ready was
        General Manager at Brooks Technical Group, a global manufacturing representative
        company. From February 1991 to February 1996, Mr. Ready worked at OPTi, a
        PC-AT
        and audio IC chip company, where his last position was Vice President of
        Sales.  From 1989 to 1991, Mr. Ready co-founded and was General Manager of
        Infinity Sales, a Hi-Tech rep company. From 1984 to 1989, Mr. Ready held
        various
        sales and sales management positions at VLSI Technology.  Mr. Ready
        received a B.S in Business Administration from San Jose State
        University.
  *Hector
        A. Berardi* has
        served as our Vice President, Operations since August 2002. From April 1999
        to
        July 2002, Mr. Berardi served as the Vice President of Operations at Ubicom
        Inc., a developer of wireless network processors and software platforms.
        From
        June 1998 to April 1999, Mr. Berardi was a design and program manager for
        the advanced RISC core development group at ST Microelectronics, a semiconductor
        company. From July 1987 to May 1998, Mr. Berardi worked at National
        Semiconductor Corporation, a semiconductor company, where his last position
        was
        senior product engineering manager for microcontroller technologies.
        Mr. Berardi received an M.B.A. and a B.S. in Electrical Engineering from
        Santa Clara University.
  *Jack
        Regula* has
        served as our Vice President, Chief Technology Officer since October 2001.
        From
        May 2000 to October 2001, Mr. Regula served as our Chief Scientist. Mr. Regula
        founded Sebring Systems, a semiconductor company, in 1996 and was Sebring’s
        Chairman and Chief Technology Officer from 1996 until its acquisition by
        PLX in
        May 2000. Prior to Sebring Systems, Mr. Regula was employed in a variety
        of
        engineering management positions at Sunscoop Corporation, Force Computers,
        and
        Ironics, Inc. Mr. Regula received a B.S. in Electrical Engineering and an
        M.S.
        in Electrical Engineering, both from Rensselaer Polytechnic Institute.
  *David
        K. Raun* has
        served as our Vice President, Marketing since November 2004. From January
        2002
        to November 2004, Mr. Raun was Vice President of Marketing at Pericom
        Semiconductor.  From April 2001 to September 2001, Mr. Raun was Executive
        Vice President & General Manager at Actovate, a technology-based marketing
        company.  From September 1989 to November 2000, Mr. Raun worked at
        Waferscale Integration, Inc., where his last position was Vice President
        of PSD
& Memory Products.  From 1985 to 1989, Mr. Raun held various sales,
        sales management, and marketing positions at AMD.  Mr. Raun received a B.S.
        in Electrical and Computer Engineering from the University of California,
        Santa
        Barbara.
  *Alex
        Wong* has
        served as our Vice President, Business Development since October 2003. From
        May
        2003 to October 2003, Mr. Wong served as our Vice President. From September
        1991
        to May 2003, Mr. Wong served as President at HiNT Corporation, a fabless
        semiconductor company providing PCI-to-PCI bridge products, until its
        acquisition by PLX in May 2003. Prior to HiNT Corporation, Mr. Wong was the
        lead chipset developer for Silicon Integrated Systems, a semiconductor company.
        Mr. Wong received a B.S. in Computer Engineering from the University of Manitoba
        in Canada.
  *George
        Apostol* has
        served as our Vice President, Engineering since May 2005. From April 2004
        to
        April 2005, he was Vice President of Engineering at Audience, Inc. ,
        a
        fabless semiconductor company. From
        February 2000 to March 2004, Mr. Apostol was Vice President of Engineering
        at
        BRECIS Communications, a multi-service processor developer company. From
        1996 to
        2000, Mr. Apostol held various senior engineering and management positions
        at
        TiVo, RedCreek Communications, and Cabletron. Prior to that, Mr. Apostol
        was
        employed in a variety of engineering and management positions at Xerox, Sun
        Microsystems, Silicon Graphics, and LSI Logic. Mr. Apostol received a B.S.
        in
        Electrical Engineering from the Massachusetts Institute of
        Technology.
  *D.
        James Guzy* has
        served as our Chairman of the Board since 1986. Mr. Guzy is also a director
        of Cirrus Logic, Inc., Intel Corporation, Davis Selected Group of Mutual
        Funds
        and AllianceBernstein LLP Core Mutual Funds, and a member of the board of
        directors of several private technology companies. Mr. Guzy received a B.S.
        from the University of Minnesota and an M.S. from Stanford University.
  *Thomas
        J. Riordan* has
        been
        a director of PLX since November 2004. Mr. Riordan is an
        Entrepreneur-In-Residence at Bessemer Venture Partners, one of the nation’s
        original venture capital firms. From August 2000 to January 2005, Mr. Riordan
        served as vice president of architecture at PMC-Sierra, a provider of
        communications and storage semiconductors and MIPS based processors. Mr.
        Riordan
        co-founded Quantum Effect Devices, a supplier of MIPS-architecture
        microprocessors, and was chief executive officer and president from August
        1991
        until its acquisition by PMC-Sierra in August 2000. Mr. Riordan holds B.S.
        and
        M.S. degrees in Electrical Engineering as well as a B.A. degree in Government
        from the University of Central Florida and has done post-graduate work in
        electrical engineering at Stanford University.
  *Patrick
        Verderico* has
        been
        a director of PLX since November 2004. Mr. Verderico is also a director of
        OSE
        USA, Inc., a semiconductor-packaging foundry, and Micro Component Technology,
        Inc., a semiconductor test equipment manufacturer.  From January 2001 to
        January 2003, he was Chief Financial Officer of Ubicom, an Internet processor
        and software company.  From April 1997 to November 2000, he worked at OSE
        USA, Inc. where his last position was President and Chief Executive
        Officer.  Prior to 1997, Mr. Verderico held executive positions with Maxtor
        as Chief Operating Officer, Creative Technology as Chief Financial Officer,
        Cypress Semiconductor as Chief Financial Officer, Philips Semiconductors
        as Vice
        President of Assembly Operations, and National Semiconductor as Corporate
        Controller.  Mr. Verderico is a Certified Public Accountant and a former
        partner of PricewaterhouseCoopers.  Mr. Verderico received a B.A. from the
        University of Akron and an M.B.A. from Pennsylvania State
        University.
  *John
        H. Hart* has
        been
        a director of PLX since April 1999. Mr. Hart is currently a 3Com fellow and
        serves on the board of directors of Coherent Inc. and several private companies.
        In September 2000, he retired as Senior Vice President and Chief Technical
        Officer of 3Com Corporation, a position he held since August 1996. From the
        time
        Mr. Hart joined 3Com in September 1990 until July 1996, he was Vice
        President and Chief Technical Officer. Prior to joining 3Com, Mr. Hart worked
        for Vitalink Communications Corporation for seven years, where his most recent
        position was Vice President of Network Products. Mr. Hart is also a director
        of
        ClearSpeed Technology, PLC. Mr. Hart received a B.S. in Mathematics from
        the University of Georgia.
  *Robert
        H. Smith* has
        been
        a director of PLX since November 2002. Mr. Smith is also a director of ON
        Semiconductor, a power and data management company.  From May 1995 to
        August 2002, Mr. Smith worked at Novellus Systems Inc., a semiconductor
        equipment manufacturer, where his last position was Executive Vice President
        of
        Administration in the Office of the CEO and board member. From June 1994
        to
        September 1994, Mr. Smith held the position of chairman of the board of
        directors for Micro Component Technology, Inc., a semiconductor test-equipment
        manufacturer. From 1986 through 1990, Mr. Smith served as the president of
        Maxwell Graphics, Inc., a printing company. From 1982 through 1986,
        Mr. Smith held chief financial officer positions with Maxwell
        Communications of North America Corp. and R. R. Donnelley and Sons, printing
        companies. He previously held executive positions with Honeywell, Inc., Memorex
        Corp. and Control Data Corp. Mr. Smith is currently a member of the board
        of directors for Cirrus Logic, Inc and Virage Logic Corporation, both
        semiconductor companies, and Epicor Software Corporation, a software company.
  **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:
  **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 a significant customer(s),
 ·
              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,
 ·
              introduction
                  of products and technologies by our competitors,
 ·
              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
                  economic 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.
  **Our
        Potential Future Acquisitions May Not Be Successful Because Of Our Limited
        Experience With Acquisitions In The Past**
  As
        part
        of our business strategy, we expect to review acquisition prospects that
        would
        complement our existing product offerings, improve market coverage or enhance
        our technological capabilities. Future acquisitions could result in any or
        all
        of the following:
  ·
              potentially
                  dilutive issuances of equity
                  securities,
 ·
              large
                  acquisition-related write-offs,
 ·
              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,
 ·
              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 of acquired
                  organizations.
  We
        have
        had limited experience with acquisitions in the past and may not be able
        to
        successfully integrate any businesses, products, technologies or personnel
        that
        may be acquired in the future. Our failure to do so could have a material
        adverse effect on our business.
  **A
        Downturn In The Global Economy May Adversely Affect Our Revenues, Results
        Of
        Operations And Financial Condition**
  Demand
        for semiconductor components is increasingly dependent upon the rate of growth
        in the global economy. If the rate of global economic growth slows, or
        contracts, customer demand for products could be adversely affected, which
        in
        turn could adversely affect revenues, results of operations and financial
        condition. Many factors could adversely affect regional or global economic
        growth. Some of the factors that could slow global economic growth include:
        rising interest rates in the United States, a slowdown in the rate of growth
        of
        the Chinese economy, a significant act of terrorism which disrupts global
        trade
        or consumer confidence, geopolitical tensions including war and civil unrest.
        Reduced levels of economic activity, or disruptions of international
        transportation, could adversely affect sales on either a global basis or
        in
        specific geographic regions.
  **Because
        A Substantial Portion Of Our Net Sales Is 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. In
        2005,
        sales to Metatech accounted for 23% of net revenues.  In 2004,
        sales to Metatech accounted for 13% of our net revenues. In 2003, sales to
        Metatech and A2M, both distributors, accounted for 11% and 10%, respectively,
        of
        our net revenues. No other distributor or direct customer accounted for more
        than 10% of net revenues in any period presented.
  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.
  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 sales. Due
        to
        these factors, the following have in the past and may in the future reduce
        our
        net sales 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.
  **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. Net revenues
        through distributors accounted for approximately 57%, 53%, and 56% of our
        net
        revenues in 2005, 2004, and 2003, 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.
  **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
        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.
  **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 note 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.
  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.
  **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 Japan, Taiwan and Malaysia, 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.
  None
        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 this product 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.
  **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.
        Also, we compete with established microprocessor-based companies and others.
        Many of these indirect competitors and microprocessor-based companies have
        significantly greater financial, technical, marketing and other resources
        than
        PLX. 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 “Business -- Competition,”
and “ -- Products” in Part I of Item I of this Form 10-K.
  **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
        microprocessor-based 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.
  **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 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
        embedded systems may not grow.
  **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.
  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.
  **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
        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, PCI-X, USB, and PCI Express 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.
  **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
        thereunder 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.
  **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
        We Sell Our Products To Customers Outside Of North America And Because Our
        Products Are Incorporated With Products Of Others That Are Sold Outside Of
        North
        America We Face Foreign Business, Political And Economic
        Risks**
  Sales
        outside of North America accounted for 68%, 68%, and 63% of our net revenues
        in
        2005, 2004 and 2003, respectively. Sales outside of North America may fluctuate
        in future periods and are expected 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 North America, thereby exposing
        us
        indirectly to foreign risks. Further, most of our semiconductor products
        are
        manufactured outside of North America. 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.
  **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 55,000 square
        feet. This facility comprises our headquarters and includes our research
        and
        development, sales and marketing and administration departments. In addition,
        we
        have leases for an engineering design center in Utah and a sales office in
        Florida. Internationally, we lease sales offices in Japan, Taiwan and China.
        These leases comprise approximately 7,000 square feet and have terms expiring
        on
        or prior to January 2007. We
        believe that our current facilities will be adequate through 2006 .
  **ITEM
        3: LEGAL PROCEEDINGS**
  None.
  **ITEM
        4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS**
  No
        matters were submitted to a vote of security holders during the three months
        ended December 31, 2005 .
  
 **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 Stock Market and has been quoted on
        The
        Nasdaq National 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 closing price for our common stock as reported on
        The
        Nasdaq National Market:
  **2005**
                
                **High
                    Bid**
                
                **Low
                    Bid**First
                    Quarter
                
                $
                12.37
                
                $
                7.65Second
                    Quarter
                
                
                10.46
                
                
                7.21Third
                    Quarter
                
                
                10.90
                
                
                7.83Fourth
                    Quarter
                
                
                10.06
                
                
                6.90
 **2004**
                  
                  **High
                      Bid**
                  
                  **Low
                      Bid**First
                      Quarter
                  
                  $
                  11.20
                  
                  $
                  8.70Second
                      Quarter
                  
                  
                  17.26
                  
                  
                  10.55Third
                      Quarter
                  
                  
                  15.77
                  
                  
                  5.71Fourth
                      Quarter
                  
                  
                  11.22
                  
                  
                  7.96
  As
        of
        March 1, 2006, there were approximately
        194 holders of
        record of our common stock. As of March
        1, 2006,
        the last reported sales price of our common stock was $12.82 .
  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 2006 Annual Meeting of Stockholders under the heading "Equity
        Compensation Plan Information."
  **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,****2005**
                
                **2004
                    (1)(3)**
                
                **2003
                    (2)(4)**
                
                **2002**
                
                **2001**in
                    thousands, except per share dataConsolidated
                    Statement of Operations Data:Net
                    Revenues
                
                $
                54,615
                
                $
                54,449
                
                $
                38,038
                
                $
                34,810
                
                $
                44,128Gross
                    Margin
                
                
                35,002
                
                
                35,710
                
                
                27,171
                
                
                23,958
                
                
                28,521Operating
                    Loss
                
                
                (2,306
                )
                
                (831
                )
                
                (2,797
                )
                
                (3,264
                )
                
                (9,147
                )Net
                    Loss
                
                
                (1,748
                )
                
                (642
                )
                
                (2,259
                )
                
                (2,320
                )
                
                (6,537
                )Basic
                    and Diluted Loss Per Share
                
                $
                (0.06
                )
                $
                (0.03
                )
                $
                (0.10
                )
                $
                (0.10
                )
                $
                (0.28
                )Shares
                    Used to Compute Basic and Diluted Loss Per Share
                
                
                27,198
                
                
                25,422
                
                
                22,755
                
                
                22,785
                
                
                23,258
 **Years
                    Ended December 31,****2005**
                
                **2004
                    (3)**
                
                **2003
                    (4)**
                
                **2002**
                
                **2001**in
                    thousands, except per share dataConsolidated
                    Balance Sheet Data:Cash
                    and Cash Equivalents
                
                $
                21,028
                
                $
                9,556
                
                $
                10,955
                
                $
                5,482
                
                $
                9,631Working
                    Capital
                
                
                36,995
                
                
                23,108
                
                
                23,846
                
                
                23,601
                
                
                21,859Total
                    Assets
                
                
                117,911
                
                
                110,473
                
                
                81,803
                
                
                71,975
                
                
                75,229Long-Term
                    Debt
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Total
                    Stockholders' Equity
                
                $
                107,489
                
                $
                102,159
                
                $
                76,021
                
                $
                67,964
                
                $
                70,553
 (1)
              Results
                  of operations for 2004 include a $1.1 million charge for in-process
                  research and development as it relates to the acquisition of NetChip
                  Technology, Inc.
 (2)
              Results
                  of operations for 2003 include a $0.9 million charge for in-process
                  research and development as it relates to the acquisition of HiNT
                  Corporation.
 (3)
              The
                  Company acquired NetChip Technology, Inc. in May
                  2004.
 (4)
              The
                  Company acquired HiNT Corporation in May
                  2003.
  **ITEM
        7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION****AND
        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 (a) the growing demand for
        standards-based components such as our semiconductor devices that connect
        systems together, (b) our objective to expand our advantages in data
        transfer technology, under the heading "Item 1, Business - Overview"; our
        expectation that we will support new I/O standards where appropriate, under
        the
        heading "Item 1, Business - The PLX Solution"; the statements regarding
        (a) our objective to continue to expand our market position as a developer
        and supplier of I/O connectivity solutions for high performance systems,
        (b) our plan to target those applications where we believe we can attain a
        leadership position, (c) that we seek to integrate additional I/O-related
        functions into our semiconductor devices, (d) 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, under the heading "Item 1, Business - Strategy"; that we
        continue to integrate more functionality in our semiconductor devices and
        continue to enhance and expand our software development kits under the heading
        "Item 1, Business - Technology"; the statements regarding (a) our
        belief with respect to the principal factors of competition in the business,
        (b) our belief that we compete favorably with respect to each of those
        factors, under the heading "Item 1, Business - Competition"; the
        statements regarding (a) our expectation that revenues related to sales
        through distributors will continue to account for a significant portion of
        total
        revenues, (b) our belief that providing customers with comprehensive
        product support is critical to remaining competitive in the markets we serve,
        (c) our belief that our close contact with customer design engineers
        provides valuable input into existing product enhancements and next generation
        product specifications, under the heading "Item 1, Business - Sales,
        Marketing and Technical Support"; (a) our expectation that we will continue
        to make substantial investments in research and development and to participate
        in the development of industry standards, (b) our expectation that we will
        periodically seek to hire additional development engineers, under the heading
        "Item 1, Business - Research and Development"; our belief that the
        transition of our products to smaller geometries will be important for us
        to
        remain competitive under the heading "Item 1, Business - Manufacturing";
        our plan to seek patent protection when necessary, under the heading
        "Item 1, Business - Intellectual Property"; our belief that our current
        facility will be adequate through 2006 under the heading "Item 2,
        Properties"; the statement regarding our intention to retain earnings for
        use in
        our business and not to pay any cash dividend in the foreseeable future under
        the heading "Item 5, Market for Registrant's Common Equity and Related
        Stockholder Matters"; our belief that our long-term success will depend on
        our
        ability to introduce new products under the heading "Item 7, Management's
        Discussion and Analysis of Financial Condition and Results of Operations
        -
        Overview''; 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 under the heading
        "Item 7, Management's Discussion and Analysis of Financial Condition and
        Results of Operations - Liquidity and Capital Resources."
  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.
  **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 since 1996 have been 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 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. We generate less than 2% of our net revenues from sales of our software
        and hardware design kits.
  In
        May
        2003, we acquired HiNT Corporation which markets and sells PCI Bridges and
        PCI-X
        products into a variety of applications including networking and
        telecommunications, personal computer peripheral, imaging, industrial and
        other
        embedded applications. Beginning with the quarter ended June 30, 2003, our
        operating results include results of HiNT Corporation and its
        products.
  In
        May
        2004, we acquired NetChip Technology, Inc. which markets and sells USB Device
        Controllers used in a range of business and consumer applications, including
        printers, wireless LAN adapters, personal video recorders, and digital
        camcorders. Beginning with the quarter ended June 30, 2004, our operating
        results include results of NetChip Technology, Inc. and its products.
  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. We generally
        recognize revenue at the time of title passage. Recognition of sales to
        distributors, including international distributors, is deferred until the
        product is resold by the distributors to their customers. See “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.”
  Our
        gross
        margins have fluctuated in the past and are expected to fluctuate in the
        future
        due to changes in product and customer mix, write-downs 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 “Certain Factors That May Affect Future Operating Results --
        Our Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard
        to Our
        Expected Revenues.”
  **Results
        of Operations**
  The
        following table summarizes historical results of operations as a percentage
        of
        net revenues for the periods shown.
  **Years
                    Ended December 31,****2005**
                
                **2004**
                
                **2003**Net
                    revenues
                
                
                100.0
                %
                
                100.0
                %
                
                100.0
                %Cost
                    of revenues
                
                
                35.9
                %
                
                34.4
                %
                
                28.6
                %Gross
                    margin
                
                
                64.1
                %
                
                65.6
                %
                
                71.4
                %Operating
                    expensesResearch
                    and development
                
                
                33.8
                %
                
                32.5
                %
                
                39.6
                %Selling,
                    general and administrative
                
                
                30.4
                %
                
                29.4
                %
                
                34.5
                %In-process
                    research and development
                
                
                0.0
                %
                
                2.1
                %
                
                2.3
                %Amortization
                    and write-down of purchased intangible assets
                
                
                4.1
                %
                
                3.2
                %
                
                2.4
                %Total
                    operating expenses
                
                
                68.3
                %
                
                67.2
                %
                
                78.8
                %Operating
                    loss
                
                
                (4.2
                )%
                
                (1.6
                )%
                
                (7.4
                )%Interest
                    income and other, net
                
                
                1.5
                %
                
                0.8
                %
                
                1.5
                %Loss
                    before provision for income taxes
                
                
                (2.7
                )%
                
                (0.8
                )%
                
                (5.9
                )%Provision
                    for income taxes
                
                
                0.5
                %
                
                0.5
                %
                
                0.1
                %Net
                    loss
                
                
                (3.2
                )%
                
                (1.3
                )%
                
                (5.9
                )%
  **Comparison
        of Years Ended December 31, 2005, 2004, and 2003**
  *Net
        Revenues.* Net
        revenues consist of product revenues generated principally by sales of our
        semiconductor devices. Net
        revenues for the year ended December 31, 2005 were $54.6 million, an increase
        of
        $0.2 million or 0.3%  from
        $54.4 million for the year ended December 31, 2004.  The
        increase was primarily due to sales of our next generation PCI Express products
        as a result of the general market adoption of the PCI Express standard,
        partially offset by lower sales of our PCI I/O devices and USB products.
        For the
        twelve months ended December 31, 2005, sales of our PCI I/O devices, USB
        products and PCI Express products accounted for 78.8%, 14.4% and 6.8%,
        respectively, of our total net revenues. **** For the
        twelve months ended December 31, 2004, sales of our PCI I/O devices, USB
        products and PCI Express products accounted for 82.3%, 17.5% and 0.2%,
        respectively, of our total net revenues. **** We
        continue to generate significant revenues from Asia. For the twelve months
        ended
        December 31, 2005 and 2004, approximately $28.7 million and $27.2 million,
        respectively, of net revenues were generated from Asia. ****
  For
        the
        years ended December 31, 2005 and 2004, approximately 23% and 13%, respectively,
        of net revenues was derived from sales to one distributor, Metatech. The
        increase is primarily due to higher PCI Express product sales and increased
        sales in Asia. No other distributor or direct customer represented greater
        than
        10% of net revenues in 2005 and 2004. We generate less than 2% of our net
        revenues from software and hardware design kits.
  Net
        revenues for the year ended December 31, 2004 increased by $16.4 million
        or 43%
        to  $54.4
        million from  $38.0
        million for the year ended December 31, 2003. The increase was primarily
        due to
        sales of our USB products acquired as part of the NetChip Technology, Inc.
        acquisition which was completed in May 2004, as well as higher unit shipments
        of
        our PCI I/O devices. For the year ended December 31, 2004, approximately
        13% of
        net revenue was derived from sales to one distributor, Metatech. No other
        distributor or direct customer represented greater than 10% of net
        revenues.
  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 product to be delivered to the customer within the same quarter, also
        called
“turns fill” orders. Throughout
        2005, turns fill orders in any given quarter ranged from 50% to 70% of our
        total
        revenues . 
        Because of the long cycle time to build our products, our lack of visibility
        into demand when turns fill is high makes it difficult to predict what product
        to build to match future demand.  The high turns fill requirement together
        with the uncertainty of product mix and pricing, make it difficult to predict
        future levels of sales and profitability and may require us to carry higher
        levels of inventory.
  *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 and assembly and test contractors and (3) our operating
        costs associated with the procurement, storage and shipment of products.
  Gross
        margin for the year ended December 31, 2005 decreased by 0.2%, or
        $0.7 million, to $35.0 million from $35.7 million for 2004. As a
        percentage of sales, gross margin decreased to 64.1% for 2005 from 65.6%
        for
        2004. The decrease in absolute dollars and as a percentage of sales was
        primarily due to a change in our product and customer mix as well as the
        effect
        of selling previously written-down inventory of $0.6 million in
        2004.
  Gross
        margin for the year ended December 31, 2004 increased by 31.4%, or
        $8.5 million, to $35.7 million for 2004 from $27.2 million for
        2003. The increase in absolute dollars was primarily due to the shipments
        of USB
        products acquired as part of the NetChip Technology, Inc. acquisition beginning
        in May 2004 as well as higher unit shipments of PCI products. The decrease
        in
        gross margin as a percentage of sales to 65.6% for 2004 from 71.4% for 2003
        was
        primarily due to shipments of lower margin products acquired as part of the
        NetChip Technology, Inc. acquisition. Included in gross margin for 2004 and
        2003
        is the effect of selling previously written-down inventory of $0.6 million
        and
        $0.7 million, respectively. The decrease in our gross margin percentage was
        primarily due to an expected change in our product and customer mix associated
        with the acquisition of NetChip Technology, Inc.
  Future
        gross margin is highly dependent on the product and customer mix of net
        revenues. 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 salaries and
        related costs of employees engaged in research, design, and development
        activities. In addition, expenses for outside engineering consultants,
        non-recurring engineering at our independent foundries, and deferred stock
        compensation are included in R&D expenses.
  R&D
        as a percent of net revenues increased to 33.8% for the year ended December
        31,
        2005 as compared to 32.5% for the same period in 2004. In absolute dollars,
        R&D expenses increased by $0.8 million, or 4.4%, to $18.5 million for the
        year ended December 31, 2005, from $17.7 million for the same period in 2004.
        Included in R&D is deferred stock compensation of $0.1 million for each of
        the years ended December 31, 2005 and 2004. The increase in R&D in absolute
        dollars and as a percentage of sales was primarily due to an increase of
        approximately $0.6 million in compensation and benefit expenses as a result
        of
        having a full year’s worth of compensation related to the NetChip acquisition as
        well as overall higher headcount and an increase in external engineering
        tools
        expense of approximately $0.3 million associated with the development of
        new
        products and enhancement of existing products.
  R&D
        as a percent of net revenues decreased to 32.5% for the year ended December
        31,
        2004 as compared to 39.6% for the same period in 2003. The percentage decrease
        is due primarily to an increase in net revenues. In absolute dollars, R&D
        expenses increased by $2.7 million, or 17.5%, to $17.7 million for the year
        ended December 31, 2004, from $15.0 million for the same period in 2003.
        Included in R&D is deferred stock compensation of $0.1 million and $1.0
        million for the years ended December 31, 2004 and 2003, respectively. The
        increase in R&D was primarily due to an increase of approximately $1.7
        million in compensation and benefit expenses as a result of higher headcount
        associated primarily with the NetChip Technology, Inc. acquisition, and an
        increase in engineering tools expense of approximately $1.6 million associated
        with the development of new products and enhancement of existing products.
  We
        believe continued spending on research and development to develop new products
        is critical to our success and, consequently, expect to increase research
        and
        development expenses in future periods.
  *Selling,
        General and Administrative Expenses* .
        Selling, general and administrative (SG&A) expenses consist primarily of
        salaries and related costs of employees engaged in selling and administrative
        activities, professional fees, trade show and other promotional expenses,
        as
        well as sales commissions to manufacturers' representatives.
  SG&A
        as a percent of net revenues increased to 30.4% for the year ended December
        31,
        2005, as compared to 29.4% for the year ended December 31, 2004. In absolute
        dollars, SG&A expenses increased by $0.6 million or 3.5% to $16.6 million
        for the year ended December 31, 2005 from $16.0 million for the same period
        in
        2004. The increase in SG&A in absolute dollars and as a percentage of sales
        was due primarily to higher compensation and benefit expenses of approximately
        $1.1 million resulting mainly from higher compensation as a result of having
        a
        full year’s worth of NetChip related compensation expenses. This was partially
        offset by lower consulting and professional fees of $0.6 million due in part
        to
        the lower cost associated with our 2005 Sarbanes Oxley compliance effort
        compared to our effort in 2004.
  SG&A
        as a percent of net revenues decreased to 29.4% for the year ended December
        31,
        2004, as compared to 34.5% for the year ended December 31, 2003. The percentage
        decrease is due primarily to an increase in net revenues. In absolute dollars,
        SG&A expenses increased by $2.9 million or 22% to $16.0 million for the year
        ended December 31, 2004 from $13.1 million for the same period in 2003. The
        increase in SG&A was due primarily to higher compensation and benefit
        expenses of approximately $1.4 million resulting mainly from higher headcount
        in
        connection with acquisitions, higher consulting and professional fees of
        $0.9
        million due in part to our Sarbanes Oxley compliance effort, and an increase
        of
        approximately $0.4 million in sales commissions to manufacturer's
        representatives as a result of higher revenues.
  We
        expect
        SG&A expenses in absolute dollars to likely increase in future
        periods.
  *Amortization
        and Write-down of Purchased* *Intangible
        Assets* .
        Amortization and write-down of purchased intangible assets increased by
        $0.5 million or 31.7% to $2.3 million for the year ended December 31,
        2005  from
        $1.7 million for the same period in 2004 . The
        increase is due primarily to (1) having a full year’s worth of amortization
        expense from developed/core technology and customer base acquired as a result
        of
        the NetChip Technology, Inc. acquisition in May 2004 (see Note 7 to the
        Consolidated Financial Statements) and (2) a $0.2 million write-down of a
        tradename that was acquired as part of the Sebring Systems acquisition in
        2000.
        A portion of the total amortization expense was attributable to amortization
        of
        developed/core technology which was $1.0 million and $0.7 million for the
        years
        ended December 31, 2005 and 2004, respectively.
  Amortization
        of purchased intangible assets increased by $0.8 million or 84.5% to
        $1.7 million for the year ended December 31, 2004 from $0.9 million
        for the same period in 2003. The increase is due primarily to additional
        amortization expense from developed/core technology and customer base acquired
        as a result of the NetChip Technology, Inc. acquisition in May 2004 and the
        HiNT
        Corporation acquisition in May 2003.
  *Deferred
        Stock Compensation* .
        We did
        not record deferred stock compensation in 2005. We recorded deferred stock
        compensation of $0.9 million related to unvested stock options assumed in
        connection with the acquisition of NetChip Technology, Inc. in May 2004.
        We
        recorded deferred stock compensation of $0.1 million related to unvested
        stock
        options assumed in connection with the acquisition of HiNT Corporation in
        May
        2003. Unamortized deferred stock compensation is presented as a reduction
        of
        stockholders’ equity and is amortized ratably to the Consolidated Statements of
        Operations over the vesting period of the applicable stock grants.
  Amortization
        of deferred stock compensation expense recorded in 2005, 2004, and 2003,
        was
        $0.2 million, $0.1 million and $1.0 million, respectively .
        The
        $0.1 million increase from 2004 to 2005 is due primarily to us having a full
        year’s worth of amortization expense from deferred stock compensation expense
        acquired as a result of the NetChip Technology, Inc. acquisition in May 2004.
        The $0.9 million decrease in deferred stock compensation expense from 2003
        to
        2004 is primarily the result of certain stock options becoming fully vested.
        Substantially all of these amounts are included in research and development
        expenses.
  *Interest
        Income* .
        Interest income reflects interest earned on average cash, cash equivalents
        and
        short-term and long-term investment balances.
        Interest income increased to $0.8 million in 2005 from $0.4 million
        for 2004.  This
        increase was primarily due to higher cash and investment balances as well
        as
        higher interest rates. Interest income remained flat at $0.4 million for
        2003 as compared to 2004.
  *Other
        Income, Net* . Other
        income, net, remained relatively flat at $12,000 for 2005 and
        2004.
  *Provision
        for Income Taxes* .
        Income
        tax expense for the period ended December 31, 2005 was $0.3 million on a
        pretax
        loss of $1.5 million, compared to income tax expense of $0.3 million on a
        pretax
        loss of $0.4 million and income tax expense of $29,000 on a pretax loss of
        $2.2
        million for the periods ended December 31, 2004 and 2003, respectively.
 Our 2005 income tax expense differs from the expected 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 the benefit of research and development tax
        credits. **** Our
        2004
        income tax expense differs from the expected benefit derived by applying
        the
        applicable U.S. federal statutory rate to the loss from operations primarily
        due
        to the write off of in-process research and development and the impact of
        purchase accounting. This was partially offset by the benefit of research
        and
        development tax credits. Our 2003 **** income
        tax expense differs from the expected benefit derived by applying the applicable
        U.S. federal statutory rate to the loss from operations primarily due to
        non-deductible amortization of deferred compensation and the write off of
        in-process research and development.
  **Liquidity
        and Capital Resources**
  Cash
        and
        cash equivalents and short-term investments were $35.0 million at
        December 31, 2005, an increase of $4.7 million from $30.3 million
        at December 31, 2004. The increase was primarily due to the following:
        (1) a net loss of $1.7 million adjusted for non-cash expenses of
        $4.8 million, which includes $2.3 million in amortization of intangible
        assets, (2) increases in accounts payable, other accrued expenses and
        deferred revenues of $0.9 million, $0.6 million and $0.7 million, respectively,
        (3) a decrease in other current assets of $0.2 million and (4) cash received
        from the exercise of stock options of $1.6 million. This was partially offset
        by: (1) an increase in accounts receivable of $1.1 million due primarily
        to
        higher product shipments in December 2005 as compared to December 2004, (2)
        increases in inventories and other assets of $0.2 million and $0.3 million,
        respectively, and (3) capital expenditures of $0.7 million.
  In
        September 2002, our Board of Directors authorized the repurchase of up
        to 2,000,000 shares of common stock.  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 had
        been repurchased for approximately $1.9 million in cash in 2003. We did not
        repurchase any shares during 2004 or 2005.
  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 inventory levels we maintain, 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. 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.
  As
        of
        December 31, 2005, we had the following significant contractual obligations
        and commercial commitments (in thousands):
 **Payments
                      due in****Total**
                  
                  **Less
                      than**
                    **1
                      Year**
                  
                  **1-3**
                    **Years**Operating
                      leases - facilities and equipment
                  
                  $
                  126
                  
                  $
                  119
                  
                  $
                  7Software
                      licenses
                  
                  
                  4,187
                  
                  
                  716
                  
                  
                  3,471Inventory
                      purchase commitments
                  
                  
                  8,663
                  
                  
                  8,663
                  
                  
                  -Total
                      cash obligations
                  
                  $
                  12,976
                  
                  $
                  9,498
                  
                  $
                  3,478
  See
        Note
        11 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
        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 (Organization and Summary of Significant Accounting
        Policies) of the Notes to our 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.* We ** recognize
        revenue when persuasive evidence of an arrangement exists, delivery or customer
        acceptance, where applicable, has occurred, the fee is fixed or determinable,
        and collection is reasonably assured.
  Revenue
        from product sales to direct customers is recognized upon shipment and transfer
        of risk of loss, generally shipping point, 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 is assessed based on
        the
        age of the receivable and the individual customer’s creditworthiness.
  We
        also
        sell products to distributors under agreements which may or may not include
        price protection and stock rotation programs. Revenue from sales of our products
        to all distributors is recognized when the distributor sells the product
        to an
        end customer.  When we sell our products to distributors, we defer our
        gross selling price of the product shipped and its related cost and reflect
        such
        net amounts on our balance sheet as a current liability entitled “deferred
        revenues”. Net revenues from the sales of our software developments tools is
        generally recognized upon shipment and is insignificant for all years presented.
  We
          currently defer revenue on sales to distributors until the distributor
          has
          resold the product to its customer. We are performing an evaluation of
          whether
          to recognize such revenue at t he
          time
          of shipment to a distributor. Statement of Financial Accounting Standards
          No.
          48, “Revenue Recognition When Right of Return Exists,” sets forth conditions
          that must be met to recognize revenue at the time of sale. Among those
          conditions is that a company that provides a right of return to a buyer
          be able
          to reasonably estimate the amount of future returns. In the past, we have
          concluded that we did not meet this condition, so we have deferred revenue
          on
          sales to distributors in the manner described above. We believe our ability
          to
          estimate returns and pricing concessions has improved. At December 31,
          2005, we
          are carrying approximately $2.0 million in deferred revenues on the balance
          sheet, which represents the net deferred margin on approximately $2.9 million
          on
          shipments to all distributors. We anticipate that we will complete this
          evaluation in the first quarter of 2006 and that we are likely to conclude
          that
          it is appropriate to recognize revenue on sales to most or all of the
          distributors at the time we ship products to them.  As a result of this
          expected change, we would expect a material one-time increase in our
          revenues and operating income for the first quarter of 2006.
  *Inventory
        Valuation.* We
        evaluate the need for potential write-downs of inventory by considering a
        combination of factors. Based on the life of the product, sales history,
        obsolescence, and sales forecast, we may record write-downs to our inventory
        ranging from 0% to 100%. Any adverse changes to our future product demand
        may
        result in increased write-downs, resulting in decreased gross margin. In
        addition, future sales of 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 collectibility of our accounts receivable based on length of
        time
        the receivables are past due, generally thirty days. 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 customer's creditworthiness or other matters affecting the
        collectibility 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.
  *Goodwill* .
        Our
        methodology for allocating the purchase price related to purchase 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 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 on November 1 and between annual
        tests in certain circumstances. To date, no such impairment has been recorded.
        In response to changes in industry and market conditions, we may strategically
        realign our resources and consider restructuring, disposing of, or otherwise
        exiting businesses, which could result in an impairment of goodwill.
  *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, 2005, we carried a valuation
        allowance for the entire deferred tax asset of $14.1 million as a result
        of
        uncertainties regarding the realization of the asset balance (see Note 10
        to the
        Consolidated Financial Statements). 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.
  **Recent
        Accounting Pronouncements**
  In
        November 2004, the Financial Accounting Standards Board (FASB) issued
        SFAS 151 “Inventory Costs”. SFAS 151  amends  the guidance in ARB
        No. 43, Chapter 4, “Inventory Pricing,” to clarify the 
accounting  for abnormal amounts of idle  facility  expense,
        freight,  handling  costs,  and wasted  material 
(spoilage). In addition,  SFAS 151  requires  that 
allocation  of  fixed production  overhead to the costs of
        conversion be based  on  the normal capacity of the production
        facilities. The provisions of SFAS 151 will be effective for fiscal years
        beginning after June 15, 2005. We are currently evaluating the impact of
        SFAS 151, but believe that it will not have a material impact on our financial
        position, consolidated statements of operations or consolidated statements
        of
        cash flows.
  In
        December 2004, the FASB issued SFAS 123R which requires the
        measurement of all employee share-based payments to employees, including
        grants
        of employee stock options, using a fair-value-based method and the recording
        of
        such expense in our consolidated statements of operations. The accounting
        provisions of SFAS 123R was originally effective for reporting periods
        beginning after June 15, 2005. On April 14, 2005 the U.S. Securities
        and Exchange Commission (the “SEC”) announced a deferral of the effective date
        of SFAS 123R for calendar year companies until the beginning of 2006. The
        pro
        forma disclosures previously permitted under SFAS 123 will no longer be an
        alternative to financial statement recognition beginning in the first fiscal
        quarter of 2006. See "Stock-Based Compensation" (Note 1 of the Consolidated
        Financial Statements) for the pro forma net loss and net loss per share amounts,
        for the years ended December 31, 2005, 2004, and 2003 as if we had used a
        fair-value-based method similar to the methods required under SFAS 123 to
        measure compensation expense for employee stock incentive awards. Although
        we
        have not yet determined whether the adoption of SFAS 123R will result in
        amounts that are similar to the current pro forma disclosures under
        SFAS 123, we are evaluating the requirements under SFAS 123R and
        expect the adoption to have a material impact on our consolidated statements
        of
        operations and net income (loss) per share.
  In
        May
        2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections” which
        replaces Accounting Principles Board Opinions No. 20 “Accounting Changes” and
        SFAS 3, “Reporting Accounting Changes in Interim Financial Statements — An
        Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting
        for and reporting of accounting changes and error corrections. It establishes
        retrospective application, or the earliest practicable date, as the required
        method for reporting a change in accounting principle and restatement with
        respect to the reporting of a correction of an error. SFAS 154 is effective
        for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005 and is required to be adopted by us in the first
        fiscal
        quarter of 2006.
  **ITEM
        7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
  We
        have
        an investment portfolio of fixed income securities, including those classified
        as cash equivalents and investments of approximately
        $32.4 million
        at December 31, 2005. These securities are subject to interest rate
        fluctuations and will decrease in market value if interest rates increase.
  The
        primary objective of the Company's investment activities is to preserve
        principal while at the same time maximizing yields without significantly
        increasing risk. The Company invests primarily in high-quality, short-term
        and
        long-term debt instruments. A hypothetical 100 basis point increase in interest
        rates would result in approximately a
        $0.1 million decrease (less than 1%) in the fair
        value of the Company's available-for-sale securities. At December 31, 2005
        and
        2004, we had unrealized losses on our investments of approximately $43,000
        and
        $0.2 million, respectively.
  **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 ACCOUNTING****AND
        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, 2005, 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) 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.
  **(b)**
              **Changes
                  in internal controls.**
 
 There
          has been no change
          in our internal control over financial reporting that occurred during our
          most
          recent fiscal quarter 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, 2005. 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, 2005, our internal control over
        financial reporting is effective based on these criteria. Our independent
        registered public accounting firm, BDO Seidman , LLP,
        have issued an audit report on our assessment of our internal control over
        financial reporting, which is included herein.
  **ITEM
        9B: OTHER INFORMATION**
  On
        March
        2, 2006, the Compensation Committee (the “Committee”) of the Board of Directors
        of PLX Technology, Inc. (the “Company”), approved the 2006 Bonus and Deferred
        Compensation Plan (the “Plan”) effective as of January 1, 2006 to encourage
        performance and achieve retention of a select group of executive employees
        of
        the Company. The Plan is intended to comply with the requirements of Section
        409A of the Internal Revenue Code (the “Code”), recently enacted under the
        American Jobs Creation Act of 2004. Section 409A imposes a number of
        requirements on non-qualified deferred compensation plans, primarily relating
        to
        the timing of elections and distributions. The following is a summary of
        the
        terms and conditions of the Plan that are material to the Company. The Plan
        provides for a bonus amount for the 2006 performance to be awarded to eligible
        employees. Portions of such bonus amount shall be paid to employees on January
        31st of each of 2007, 2008 and 2009. No interest shall be paid on
        any
        such bonus.
  Through
        December 31, 2006, the Committee, in its sole and unlimited discretion, may
        amend or terminate the Plan. After January 1, 2007, the Committee may amend
        or
        terminate the Plan, provided that such amendment does not reduce or increase
        any
        benefit to which a participant has accrued and is otherwise entitled to under
        the terms of the Plan, nor accelerate the timing of any payment under the
        Plan,
        except as permitted under Code Section 409A.
  The
        foregoing description of the Plan is qualified in its entirety by reference
        to
        the Plan, a copy of which is filed herewith as Exhibit 10.15 and is incorporated
        herein by reference.
   
  **PART
        III**
  **ITEM
        10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**
  The
        information required by this Item is incorporated herein by reference to
        the
        Company's Proxy Statement for the 2006 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 2006 Annual Meeting of Stockholders.
  **ITEM
        12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT**
  The
        information required by this Item is incorporated herein by reference to
        the
        Company's Proxy Statement for the 2006 Annual Meeting of Stockholders.
  **ITEM
        13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
  The
        information required by this Item is incorporated herein by reference to
        the
        Company's Proxy Statement for the 2006 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 2006 Annual Meeting of Stockholders.
   
  **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 38:
 Report
                  of BDO Seidman, LLP, Independent Registered Public Accounting
                  FirmReport
                  of Ernst & Young, LLP, Independent Registered Public Accounting
                  Firm
                
                Report
                  of BDO Seidman, LLP. Independent Registered Public Accounting Firm
                  on
                  Internal Control Over Financial Reporting
                
                Consolidated
                  Balance Sheets as of December 31, 2005 and 2004.
                
                Consolidated
                  Statements of Operations for each of the three years in the period
                  ended
                  December 31, 2005.
                
                Consolidated
                  Statements of Stockholders' Equity for each of the three years
                  in the
                  period ended December 31, 2005.
                
                Consolidated
                  Statements of Cash Flows for each of the three years in the period
                  ended
                  December 31, 2005.
                
                Notes
                  to Consolidated Financial Statements.
  2.
              Financial
                  Statement
                  Schedule
  The
        financial statement schedules of the Company are included in Part IV of this
        report: For the three years ended December 31, 2005-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.
   
 **PLX
        TECHNOLOGY, INC.**
 **INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS**
   **Page**Report
                    of BDO Seidman, LLP, Independent Registered Public
                    Accounting Firm
                
                38Report
                    of Ernst & Young, LLP, Independent Registered
                    Public Accounting Firm
                
                39Report
                    of BDO Seidman, LLP, Independent Registered Public
                    Accounting Firm on Internal Control Over Financial
                    Reporting
                
                40Consolidated
                    Balance Sheets as of December 31, 2005 and
                    2004
                
                41Consolidated
                    Statements of Operations for each of the three
                    years in the period ended December 31, 2005
                
                42Consolidated
                    Statements of Stockholders' Equity for each of
                    the three years in the period ended December 31,
                    2005
                
                43Consolidated
                    Statements of Cash Flows for each of the
                    three years in the period ended December 31, 2005
                
                44Notes
                    to Consolidated Financial
                    Statements
                
                45
   
 **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 sheet of PLX Technology, Inc.
        as
        of December 31, 2005 and the related consolidated statements of operations,
        stockholders’ equity, and cash flows for the year then ended. These financial
        statements are the responsibility of the Company’s management. We have also
        audited Schedule II - Valuation and Qualifying Accounts as of and for the
        year
        ended December 31, 2005. Our responsibility is to express an opinion on these
        financial statements and schedule 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 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
        audit
        provides 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, 2005, and the results of its operations and its cash flows for
        the
        year then ended **,** in
        conformity with accounting principles generally accepted in the United States
        of
        America. Also, in our opinion, Schedule II - Valuation and Qualifying Accounts
        presents fairly, in all material respects, the information set forth therein
        as
        of and for the year ended December 31, 2005.
  We
        also
        have audited, in accordance with the standards of the Public Company Accounting
        Oversight Board (United States), the effectiveness of PLX Technology, Inc.’s
        internal control over financial reporting as of December 31, 2005, based
        on
        criteria established in *Internal
        Control - Integrated Framework* issued
        by
        the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
        and
        our report dated February 24, 2006 expressed an unqualified opinion
        thereon.
   /s/
        BDO
        Seidman, LLP
 San
        Francisco, California
 February
        24, 2006
 
 **Report
        of Independent Registered Public Accounting
        Firm**
  The
        Board
        of Directors and Stockholders
 PLX
        Technology, Inc.
  We
        have
        audited the accompanying consolidated balance sheet of PLX Technology, Inc.
        as
        of December 31, 2004 and the related consolidated statements of operations,
        stockholders’ equity and cash flows for each of the two years in the period
        ended December 31, 2004. Our audits also included the financial statement
        schedule listed in the Index at Item 15(a) for the two years in the period
        ended
        December 31, 2004. These consolidated financial statements and schedule are
        the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these consolidated 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 are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. 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 consolidated financial position of PLX Technology,
        Inc. at December 31, 2004 and the consolidated results of its operations
        and its
        cash flows for each of the two years in the period ended December 31, 2004,
        in
        conformity with U.S. generally accepted accounting principles. Also, in our
        opinion, the related financial statement schedule, when considered in relation
        to the basic financial statements taken as a whole, presents fairly in all
        material respects the information set forth therein.
   /s/
        Ernst
& Young, LLP
 San
        Jose,
        California
 February
        24, 2005
  
 **Report
        of BDO Seidman, LLP, Independent Registered Public Accounting Firm, on Internal
        Control Over Financial Reporting**
  The
        Board
        of Directors and Stockholders
 PLX
        Technology, Inc.
 Sunnyvale,
        California
  We
        have
        audited management's assessment, included in the accompanying Management
        Report
        on Internal Control over Financial Reporting, that PLX Technology, Inc.
        maintained effective internal control over financial reporting as of December
        31, 2005, based on criteria established in *Internal
        Control-Integrated Framework* issued
        by the Committee of Sponsoring Organizations of the Treadway Commission (the
        COSO criteria). The Company'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. Our
        responsibility is to express an opinion on management's assessment and an
        opinion on the effectiveness of 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, evaluating management's assessment, testing and evaluating
        the design and operating effectiveness of internal control, and 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, management's assessment that PLX Technology, Inc. maintained effective
        internal control over financial reporting as of December 31, 2005, is fairly
        stated, in all material respects, based on the COSO criteria. Also, in our
        opinion, PLX Technology, Inc. maintained, in all material respects, effective
        internal control over financial reporting as of December 31, 2005, 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 sheet as of December
        31, 2005 and the related consolidated statements of operations, stockholders'
        equity and cash flows for the year then ended, and the 2005 financial statement
        schedule listed in the accompanying index, of PLX Technology, Inc. and our
        report dated February 24, 2006, expressed an unqualified opinion
        thereon.
   /s/ BDO
        Seidman, LLP
 San
        Francisco, California
 February
        24, 2006
 
 **PLX
        TECHNOLOGY, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(in
        thousands, except share and per share data)**
  **December
                    31,****2005**
                
                **2004****ASSETS**Current
                    Assets:Cash
                    and cash equivalents
                
                $
                21,028
                
                $
                9,556Short-term
                    investments
                
                
                14,015
                
                
                10,565Accounts
                    receivable, less allowance for doubtful accounts of $131 in 2005
                    and $127
                    in 2004
                
                
                6,203
                
                
                5,084Inventories
                
                
                4,328
                
                
                4,159Other
                    current assets
                
                
                1,842
                
                
                2,058Total
                    current assets
                
                
                47,416
                
                
                31,422Goodwill
                
                
                35,818
                
                
                30,965Other
                    purchased intangible assets,net
                    of accumulated amortization of $6,071 in 2005 and $4,164 in 2004
                
                
                4,729
                
                
                6,991Property
                    and equipment, net
                
                
                29,535
                
                
                30,860Long-term
                    investments
                
                
                -
                
                
                10,155Other
                    assets
                
                
                413
                
                
                80Total
                    assets
                
                $
                117,911
                
                $
                110,473**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    Liabilities:Accounts
                    payable
                
                $
                4,530
                
                $
                3,627Accrued
                    compensation and benefits
                
                
                1,754
                
                
                1,813Deferred
                    revenues
                
                
                1,963
                
                
                1,310Accrued
                    commissions
                
                
                298
                
                
                300Other
                    accrued expenses
                
                
                1,877
                
                
                1,264Total
                    current liabilities
                
                
                10,422
                
                
                8,314Commitments
                    and contingencies (Note 11)Stockholders'
                    equity:Preferred
                    stock, $.001 par value per share:Authorized
                    -- 5,000,000 shares: none issued and outstanding
                
                
                -
                
                
                -Common
                    stock, $.001 par value per share: authorized -- 50,000,000 shares:issued
                    and outstanding -- 27,666,868 in 2005 and 26,706,763 in 2004
                
                
                28
                
                
                27Additional
                    paid-in capital
                
                
                118,441
                
                
                111,739Deferred
                    stock compensation
                
                
                (128
                )
                
                (406
                )Accumulated
                    other comprehensive loss
                
                
                (114
                )
                
                (211
                )Accumulated
                    deficit
                
                
                (10,738
                )
                
                (8,990
                )Total
                    stockholders' equity
                
                
                107,489
                
                
                102,159Total
                    liabilities and stockholders' equity
                
                $
                117,911
                
                $
                110,473
      See
        accompanying notes to consolidated financial statements.
  
  
  **PLX
        TECHNOLOGY, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(in
        thousands, except per share data)**
  ****
                
                
                **Years
                    Ended December 31,****2005**
                
                
                **2004**
                
                
                **2003**Net
                    revenues
                
                $
                54,615
                
                $
                54,449
                
                $
                38,038Cost
                    of revenues
                
                
                19,613
                
                
                18,739
                
                
                10,867Gross
                    margin
                
                
                35,002
                
                
                35,710
                
                
                27,171Operating
                    expensesResearch
                    and development
                
                
                18,469
                
                
                17,686
                
                
                15,048Selling,
                    general and administrative
                
                
                16,577
                
                
                16,014
                
                
                13,114In-process
                    research and development
                
                
                -
                
                
                1,123
                
                
                875Amortization
                    and write-down of purchased intangible assets
                
                
                2,262
                
                
                1,718
                
                
                931Total
                    operating expenses
                
                
                37,308
                
                
                36,541
                
                
                29,968Operating
                    loss
                
                
                (2,306
                )
                
                (831
                )
                
                (2,797
                )Interest
                    income
                
                
                812
                
                
                435
                
                
                437Other
                    income, net
                
                
                11
                
                
                12
                
                
                130Loss
                    before provision for income taxes
                
                
                (1,483
                )
                
                (384
                )
                
                (2,230
                )Provision
                    for income taxes
                
                
                265
                
                
                258
                
                
                29Net
                    loss
                
                $
                (1,748
                )
                $
                (642
                )
                $
                (2,259
                )Basic
                    and diluted net loss per share
                
                $
                (0.06
                )
                $
                (0.03
                )
                $
                (0.10
                )Shares
                    used to compute basic and diluted per share amounts
                
                
                27,198
                
                
                25,422
                
                
                22,755
 See
        accompanying notes to consolidated financial statements.
 
 **PLX
        TECHNOLOGY, INC.**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS'
        EQUITY**
 **(in
        thousands, except share amounts)**
  Notes
                
                AccumulatedDeferred
                
                Receivable
                
                OtherAdditional
                
                Stock
                
                for
                    Employee
                
                Comprehensive
                
                
                
                TotalCommon
                    Stock
                
                
                
                Paid-in
                
                Compen-
                
                Stock
                
                Income
                
                Accumulated
                
                Stockholders'Shares
                
                Amount
                
                Capital
                
                sation
                
                Repurchases
                
                (Loss)
                
                Deficit
                
                EquityBalance
                    at December 31, 2002
                
                
                21,124,192
                
                $
                21
                
                $
                74,953
                
                $
                (900
                )
                $
                (67
                )
                $
                46
                
                $
                (6,089
                )
                $
                67,964Issuance
                    of common stock and options relatedto
                    the acquisition of HiNT Corporation
                
                
                2,996,589
                
                
                3
                
                
                10,160
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                10,163Deferred
                    compensation on options issued
                
                
                -related
                    to acquisition of HiNT Corporation
                
                
                
                
                
                -
                
                
                -
                
                
                (110
                )
                
                -
                
                
                -
                
                
                -
                
                
                (110
                )Issuance
                    of stock pursuantto
                    exercise of stock options
                
                
                69,687
                
                
                -
                
                
                317
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                317Stockholder
                    notes receivable interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (3
                )
                
                -
                
                
                -
                
                
                (3
                )Repurchase
                    of common stock
                
                
                (342,300
                )
                
                -
                
                
                (922
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (922
                )Amortization
                    of deferred stock compensation
                
                
                
                
                
                -
                
                
                -
                
                
                966
                
                
                -
                
                
                -
                
                
                -
                
                
                966Comprehensive
                    loss:Change
                    in unrealized loss on investments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (91
                )
                
                -
                
                
                (91
                )Translation
                    adjustments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (4
                )
                
                -
                
                
                (4
                )Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,259
                )
                
                (2,259
                )Total
                    comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,354
                )Balance
                    at December 31, 2003
                
                
                23,848,168
                
                
                24
                
                
                84,508
                
                
                (44
                )
                
                (70
                )
                
                (49
                )
                
                (8,348
                )
                
                76,021Issuance
                    of common stock and options relatedto
                    the acquisition of HiNT Corporation
                
                
                337,162
                
                
                
                
                
                2,994
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                2,994Issuance
                    of common stock and options relatedto
                    the acquisition of NetChip Technology, Inc.
                
                
                2,035,077
                
                
                2
                
                
                22,588
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                22,590Deferred
                    compensation on options issuedrelated
                    to acquisition of HiNT Corporation
                
                
                -
                
                
                -
                
                
                -
                
                
                (869
                )
                
                -
                
                
                -
                
                
                -
                
                
                (869
                )Issuance
                    of stock pursuantto
                    exercise of stock options
                
                
                486,356
                
                
                1
                
                
                2,026
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                2,027Repayment
                    of stockholder notes receivable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                70
                
                
                -
                
                
                -
                
                
                70Reversal
                    of deferred compensation on optionsassociated
                    with employee terminations
                
                
                -
                
                
                -
                
                
                (377
                )
                
                377
                
                
                -
                
                
                -
                
                
                -
                
                
                -Amortization
                    of deferred stock compensation
                
                
                -
                
                
                -
                
                
                -
                
                
                130
                
                
                -
                
                
                -
                
                
                -
                
                
                130Comprehensive
                    loss:Change
                    in unrealized loss on investments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (163
                )
                
                -
                
                
                (163
                )Translation
                    adjustments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1
                
                
                -
                
                
                1Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (642
                )
                
                (642
                )Total
                    comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (804
                )Balance
                    at December 31, 2004
                
                
                26,706,763
                
                
                27
                
                
                111,739
                
                
                (406
                )
                
                -
                
                
                (211
                )
                
                (8,990
                )
                
                102,159Proceeds
                    from the exercise of warrants assumedin
                    the acquisition of HiNT Corporation
                
                
                3,057
                
                
                -
                
                
                26
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                26Issuance
                    of common stock related to theacquisition
                    of NetChip Technology, Inc.
                
                
                554,306
                
                
                1
                
                
                5,119
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                5,120Issuance
                    of stock pursuantto
                    exercise of stock options
                
                
                402,742
                
                
                -
                
                
                1,641
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,641Reversal
                    of deferred compensation on optionsassociated
                    with employee terminations
                
                
                -
                
                
                -
                
                
                (110
                )
                
                110
                
                
                -
                
                
                -
                
                
                -
                
                
                -Amortization
                    of deferred stock compensation
                
                
                -
                
                
                -
                
                
                -
                
                
                168
                
                
                -
                
                
                -
                
                
                -
                
                
                168Tax
                    benefit related to exercise of stock options
                
                
                -
                
                
                -
                
                
                26
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                26Comprehensive
                    loss:Change
                    in unrealized loss on investments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                115
                
                
                -
                
                
                115Translation
                    adjustments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (18
                )
                
                -
                
                
                (18
                )Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,748
                )
                
                (1,748
                )Total
                    comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,651
                )Balance
                    at December 31, 2005
                
                
                27,666,868
                
                $
                28
                
                $
                118,441
                
                $
                (128
                )
                $
                -
                
                $
                (114
                )
                $
                (10,738
                )
                $
                107,489
   See
        accompanying notes to consolidated financial statements.
 
 **PLX
        TECHNOLOGY, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(in
        thousands)**
  **Years
                    Ended December 31,****2005**
                
                **2004**
                
                **2003****Cash
                    flows from operating activities**Net
                    loss
                
                $
                (1,748
                )
                $
                (642
                )
                $
                (2,259
                )Adjustments
                    to reconcile net loss to cash flows provided by operating activities:Depreciation
                    and amortization
                
                
                2,065
                
                
                2,197
                
                
                2,335Amortization
                    of deferred stock compensation
                
                
                168
                
                
                130
                
                
                966Amortization
                    and write-down of purchased intangible assets
                
                
                2,262
                
                
                1,718
                
                
                929In-process
                    research and development
                
                
                -
                
                
                1,123
                
                
                875Changes
                    in pre-acquisition deferred tax balances
                
                
                207
                
                
                162
                
                
                -Other
                    non-cash items
                
                
                215
                
                
                135
                
                
                104Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (1,123
                )
                
                1,480
                
                
                (1,840
                )Inventories
                
                
                (169
                )
                
                (1,772
                )
                
                (423
                )Income
                    tax receivable
                
                
                -
                
                
                -
                
                
                3,635Other
                    current assets
                
                
                216
                
                
                (313
                )
                
                225Other
                    assets
                
                
                (333
                )
                
                253
                
                
                (20
                )Accounts
                    payable
                
                
                903
                
                
                766
                
                
                (413
                )Accrued
                    compensation and benefits
                
                
                (59
                )
                
                360
                
                
                380Deferred
                    revenues
                
                
                653
                
                
                319
                
                
                378Accrued
                    commissions
                
                
                (2
                )
                
                (233
                )
                
                167Other
                    accrued expenses
                
                
                611
                
                
                (1,035
                )
                
                (714
                )Net
                    cash provided by operating activities
                
                
                3,866
                
                
                4,648
                
                
                4,325**Cash
                    flows provided by (used in) investing activities:**Cash
                    paid for the acquisition of HiNT Corporation
                
                
                -
                
                
                (137
                )
                
                (704
                )Cash
                    acquired in acquisition of NetChip Technology, Inc.
                
                
                -
                
                
                2,821
                
                
                -Purchase
                    of investments
                
                
                (6,027
                )
                
                (22,815
                )
                
                (6,094
                )Sales
                    and maturities of investments
                
                
                12,725
                
                
                13,902
                
                
                10,000Purchase
                    of property and equipment
                
                
                (740
                )
                
                (1,919
                )
                
                (1,441
                )Net
                    cash provided by (used in) investing activities
                
                
                5,958
                
                
                (8,148
                )
                
                1,761**Cash
                    flows provided by (used in) financing activities:**Proceeds
                    from exercise of common stock options
                
                
                1,641
                
                
                2,027
                
                
                317Proceeds
                    from exercise of warrants
                
                
                26
                
                
                -
                
                
                -Repurchases
                    of common stock
                
                
                -
                
                
                -
                
                
                (922
                )Proceeds
                    from stockholder notes receivable
                
                
                -
                
                
                70
                
                
                -Net
                    cash provided by (used in) financing activities
                
                
                1,667
                
                
                2,097
                
                
                (605
                )Effect
                    of exchange rate fluctuations on cash and cash equivalents
                
                
                (19
                )
                
                4
                
                
                (8
                )Increase
                    (decrease) in cash and cash equivalents
                
                
                11,472
                
                
                (1,399
                )
                
                5,473Cash
                    and cash equivalents at beginning of year
                
                
                9,556
                
                
                10,955
                
                
                5,482Cash
                    and cash equivalents at end of year
                
                $
                21,028
                
                $
                9,556
                
                $
                10,955**Supplemental
                    disclosure of cash flow information:**Cash
                    from income tax refunds
                
                $
                79
                
                $
                16
                
                $
                4,028Cash
                    paid for income taxes
                
                $
                14
                
                $
                74
                
                $
                49**Non-cash
                    investing and financing activities**Common
                    stock issued for the acquisition of HiNT Corporation
                
                $
                -
                
                $
                2,994
                
                $
                10,163Common
                    stock issued for the acquisition of NetChip Technology, Inc.
                
                $
                5,120
                
                $
                22,590
                
                $
                -
   See
        accompanying notes to consolidated financial statements.
 
 **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 three related types of products:
        semiconductor devices, software development kits and hardware design kits.
        The
        Company’s semiconductor devices simplify the development of data transfer
        circuits in micro-processor based systems. The Company’s software development
        kits and hardware design 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 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***
  The
        Company accounts for its investments in accordance with Statement of Financial
        Accounting Standards No. 115, "Accounting for Certain Investments in Debt
        and Equity Securities" (SFAS 115). At December 31, 2005, the Company’s
        securities consisted of debt securities. Under SFAS 115, 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,
        2005 and 2004, all debt securities were designated as available-for-sale.
        Available-for-sale securities are carried at fair value with unrealized gains
        and losses reported in a separate component of stockholders' equity. The
        fair
        value of securities is based on quoted market prices. The amortized cost
        of debt
        securities in this category is adjusted for the amortization of premiums
        and the
        accretion of discounts to maturity. Such amortization, as well as any interest
        earned on the securities, is included in interest income. Realized gains
        and
        losses and declines in value judged to be other-than-temporary on
        available-for-sale securities are included in interest income. The cost of
        securities sold is based 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 collectibility.
        Account balances are charged off against the allowance when the Company believes
        that it is probable the receivable will not be recovered.
  ***Inventories***
  Inventories
        are valued at the lower of cost (first-in, first-out method) or market.
        Inventories were as follows:
  December
                    31,2005
                
                2004(in
                    thousands)Work-in-process
                
                $
                1,605
                
                $
                1,083Finished
                    goods
                
                
                2,723
                
                
                3,076Total
                
                $
                4,328
                
                $
                4,159
 
 The
        Company evaluates the need for potential write-downs of inventory by considering
        a combination of factors. Based on the life of the product, sales history,
        obsolescence and sales forecast, the Company may record write-downs to inventory
        ranging from 0% to 100%.
  ***Goodwill
        and Other Intangible Assets***
  Goodwill
        represents the excess of cost over the value of net assets of businesses
        acquired pursuant to Statement of Financial Accounting Standards No. 141,
        "Business Combinations" and is carried at cost unless write-downs for impairment
        are required. The Company evaluates the carrying value of goodwill on an
        annual
        basis (November 1st) 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.
        To
        date, no such impairment has been recorded. 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 are being amortized over the assets’ useful lives, which ranges from
        three to six years. Also, see Note 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, 2005
        and
        2004 are as follows (in thousands):
  Balance
                    as of December 31, 2003
                
                $
                15,998NetChip
                    acquisition
                
                
                11,998HiNT
                    acquisition - additional consideration (see note 3)
                
                
                3,131Changes
                    in pre-acquisition deferred tax balances
                
                
                (162
                )Balance
                    as of December 31, 2004
                
                
                30,965NetChip
                    acquisition - additional consideration (see note 3)
                
                
                5,120Changes
                    in pre-acquisition deferred tax balances
                
                
                (207
                )Other
                
                
                (60
                )Balance
                    as of December 31, 2005
                
                $
                35,818
  ***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
        in accordance with SFAS 144. 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 7 to the Consolidated Financial Statements.
  ***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
        39 years for buildings and three to five years for equipment, furniture and
        purchased software. Leasehold improvements are amortized using the straight-line
        method over the shorter of the useful lives of the assets or the terms of
        the
        leases.
  Property
        and equipment are as follows:
  December
                  31,2005
              
              2004(in
                  thousands)Land
              
              $
              8,550
              
              $
              8,550Building
              
              
              19,333
              
              
              19,333Equipment
                  and furniture
              
              
              10,357
              
              
              11,168Purchased
                  software
              
              
              4,064
              
              
              4,87842,304
              
              
              43,929Accumulated
                  depreciation and amortization
              
              
              (12,769
              )
              
              (13,069
              )Net
                  property and equipment
              
              $
              29,535
              
              $
              30,860
 
 Depreciation
        expense was approximately $2.1 million, $2.2 million and $2.3 million for
        the
        years ended December 31, 2005, 2004, and 2003, respectively.
  ***Foreign
        Currency Translation***
  The
        functional currency of each of the Company’s international subsidiaries in
        China, Japan and the United Kingdom is the local currency of the country
        in
        which it operates. 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.
  ***Income
        Taxes***
  Income
        taxes are accounted for using the asset and liability method in accordance
        with
        Statement of Financial Accounting Standards No. 109, *Accounting
        for Income Taxes* (“SFAS
        109”). 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.
  ***Stock-Based
        Compensation***
  The
        Company has employee stock plans, which are more fully described in Note
        6. The
        Company has elected to account for its stock option and stock grant plans
        in
        accordance with the intrinsic value method under Accounting Principles Board
        Opinion No. 25, "Accounting for Stock Issued to Employees" (APB Opinion
        No. 25).
  The
        Company has elected to follow APB Opinion No. 25 and related
        interpretations in accounting for its stock options and grants since the
        alternative fair market value accounting provided for under Statement of
        Financial Accounting Standards (SFAS) No. 123 requires use of
        valuation models that were not developed for use in valuing employee stock
        options and grants. Under APB Opinion No. 25, if the exercise price of the
        Company's stock grants and options equals the deemed fair value of the
        underlying stock on the date of grant, no compensation expense is recognized.
  If
        compensation cost for the Company's stock-based compensation plans had been
        determined based on the fair value at the grant dates for awards under those
        plans consistent with the method of SFAS 123, then the Company's net
        loss per share would have been adjusted to the pro forma amounts indicated
        below:
 
 **Years
                    Ended December 31,**
                ********
                ****
                **2005**
                
                **2004**
                
                **2003**(in
                    thousands, except per share data)Net
                    loss as reported
                
                $
                (1,748
                )
                $
                (642
                )
                $
                (2,259
                )Add:
                    Stock-based compensation included in reported net loss
                
                
                168
                
                
                130
                
                
                966Deduct:
                    Stock-based compensation cost under SFAS 123
                
                
                (5,291
                )
                
                (5,257
                )
                
                (6,348
                )Pro
                    forma net loss
                
                $
                (6,871
                )
                $
                (5,769
                )
                $
                (7,641
                )Pro
                    forma basic and diluted net loss per common share:Pro
                    forma shares used in the calculation of pro formanet
                    loss per common share - basic and diluted
                
                
                27,198
                
                
                25,422
                
                
                22,755Pro
                    forma net loss per common share - basic and diluted
                
                $
                (0.25
                )
                $
                (0.23
                )
                $
                (0.34
                )Reported
                    net loss per common share - basic and diluted
                
                $
                (0.06
                )
                $
                (0.03
                )
                $
                (0.10
                )
   Pro
        forma
        information regarding net loss is required by FAS 123, which also requires
        that the information be determined as if the Company had accounted for grants
        subsequent to December 31, 1994 under a method specified by FAS 123.
        Options granted were estimated using the Black-Scholes valuation model. The
        following weighted average
        assumptions were used for 2005, 2004, and 2003:
  **Years
                      Ended December 31,**
                  ********
                  ****
                  **2005**
                  
                  **2004**
                  
                  **2003**Volatility
                  
                  
                  0.93
                  
                  
                  1.13
                  
                  
                  1.16Expected
                      life of options (in years)
                  
                  
                  4.68
                  
                  
                  5.10
                  
                  
                  5.15Dividend
                      yield
                  
                  
                  --
                  %
                  
                  --
                  %
                  
                  --
                  %Risk-free
                      interest rate
                  
                  
                  4.00
                  %
                  
                  3.55
                  %
                  
                  3.23
                  %
  The
        weighted average grant date fair value of options granted during 2005, 2004,
        and
        2003 was $7.14 ,
        $9.15,
        and $2.98, respectively.
  ***Revenue
        Recognition***
  The
        Company ** recognizes
        revenue when persuasive evidence of an arrangement exists, delivery or customer
        acceptance, where applicable, has occurred, the fee is fixed or determinable,
        and collection is reasonably assured.
  Revenue
        from product sales to direct customers 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 also sells products to distributors under agreements which may or
        may
        not include price protection and stock rotation programs. Revenue from sales
        of
        the Company’s products to all distributors is recognized when the distributor
        sells the product to an end customer.  When the Company sells its products
        to distributors, it defers its gross selling price of the product shipped
        and
        its related cost and reflect such net amounts on the balance sheet as a current
        liability entitled “deferred revenues”. Net revenues from the sales of the
        Company’s software and hardware design kits is generally recognized upon
        shipment and is insignificant for all years presented.
  The
          Company currently defers revenue on sales to distributors until the distributor
          has
          resold the product to its customer. The Company is performing an evaluation
          of
          whether to recognize such revenue at the time of shipment to a distributor.
          Statement of Financial Accounting Standards No. 48, “Revenue Recognition When
          Right of Return Exists,” sets forth conditions that must be met to recognize
          revenue at the time of sale. Among those conditions is that a company that
          provides a right of return to a buyer be able to reasonably estimate the
          amount
          of future returns. In the past, the Company has concluded that it did not
          meet this condition, so it has deferred revenue on sales to distributors in
          the manner described above. The Company believes that its ability to estimate
          returns and pricing concessions has improved. At December 31, 2005, the
          Company
          is carrying approximately $2.0 million in deferred revenues on the balance
          sheet, which represents the net deferred margin on approximately $2.9 million
          on
          shipments to all distributors. The Company anticipates that it will complete
          this evaluation in the first quarter of 2006 and
          that it is likely to conclude that it is appropriate to recognize
          revenue on sales to most or all of the distributors at the time it ships
          products to them. As a result of this expected change, the Company would
          expect
          a material one-time increase in its revenues and operating income for the
          first
          quarter of 2006.
 ***Product
        Warranty***
  The
        Company generally sells products with a limited warranty of product quality
        for
        a period of one year 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.
  ***Software
        Development Costs***
  In
        accordance with Statement of Financial Accounting Standards No. 86,
        "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
        Marketed," the Company is required to capitalize eligible computer software
        costs upon achievement of technological feasibility subject to net realizable
        value considerations. The Company has defined technological feasibility as
        completion of a working model. The period between the achievement of
        technological feasibility and release of the Company's software products
        has
        been of short duration. As of December 31, 2005, 2004, and 2003 such costs
        were insignificant. Accordingly, the Company has charged all such costs to
        research and development expenses in the accompanying consolidated statements
        of
        operations.
  ***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, income taxes, inventories, revenue recognition, allowance for doubtful
        accounts 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 financial statements .
  ***Comprehensive
        Loss***
  At
        December 31, 2005, the components of accumulated
        other comprehensive loss, reflected in the Consolidated Statements of Stockholders' Equity, consisted
        of
        the following:
  **Years
                    Ended December 31,****2005**
                
                **2004**
                
                **2003**(in
                    thousands)Unrealized
                    gain (loss) on investments, net
                
                $
                (43
                )
                $
                (157
                )
                $
                6Cumulative
                    translation adjustments
                
                
                (71
                )
                
                (54
                )
                
                (55
                )Accumulated
                    other comprehensive loss
                
                $
                (114
                )
                $
                (211
                )
                $
                (49
                )
 ***Recent
        Accounting Pronouncements***
  In
        November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
        151 “Inventory Costs”. SFAS 151 amends  the guidance in ARB
        No. 43, Chapter 4, “Inventory Pricing,” to clarify the 
accounting  for abnormal amounts of idle  facility  expense,
        freight,  handling  costs,  and wasted  material 
(spoilage). In addition,  SFAS 151  requires  that 
allocation  of  fixed production  overhead to the costs of
        conversion be based  on  the normal capacity of the production
        facilities. The provisions of SFAS 151 will be effective for fiscal years
        beginning after June 15, 2005. The Company is currently evaluating the
        impact of SFAS 151, but believe that it will not have a material impact on
        the
        Company’s financial position, consolidated statements of operations or
        consolidated statements of cash flows.
  In
        December 2004, the FASB issued SFAS 123R which requires the
        measurement of all employee share-based payments to employees, including
        grants
        of employee stock options, using a fair-value-based method and the recording
        of
        such expense in our consolidated statements of operations. The accounting
        provisions of SFAS 123R was originally effective for reporting periods
        beginning after June 15, 2005. On April 14, 2005 the U.S. Securities
        and Exchange Commission (the “SEC”) announced a deferral of the effective date
        of FAS 123R for calendar year companies until the beginning of 2006. The
        pro
        forma disclosures previously permitted under SFAS 123 will no longer be an
        alternative to financial statement recognition beginning in the first fiscal
        quarter of 2006. See "Stock-Based Compensation" (Note 1) for the pro forma
        net
        loss and net loss per share amounts, for the years ended December 31, 2005,
        2004, and 2003, as if the Company had used a fair-value-based method similar
        to
        the methods required under SFAS 123 to measure compensation expense for
        employee stock incentive awards. Although the Company has not yet determined
        whether the adoption of SFAS 123R will result in amounts that are similar
        to the current pro forma disclosures under SFAS 123, the Company is
        evaluating the requirements under SFAS 123R and expect the adoption to have
        a material impact on our consolidated statements of operations and net income
        (loss) per share.
  In
        May
        2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections” which
        replaces Accounting Principles Board Opinions No. 20 “Accounting Changes” and
        SFAS 3, “Reporting Accounting Changes in Interim Financial Statements — An
        Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting
        for and reporting of accounting changes and error corrections. It establishes
        retrospective application, or the earliest practicable date, as the required
        method for reporting a change in accounting principle and restatement with
        respect to the reporting of a correction of an error. SFAS 154 is effective
        for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005 and is required to be adopted by the Company in the
        first fiscal quarter of 2006.
  **2.**  **Net
        Loss Per Share**
  Basic
        and
        diluted net loss per share is computed by dividing the net loss by the weighted
        average number of common shares outstanding during the period.
  As
        the
        Company incurred a loss for each of the years ended December 31, 2005,
        2004, and 2003, the effect of dilutive securities, totaling
        4.5 million, 4.4
        million, and 4.2 million equivalent shares, respectively, have 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.
  **3.** **Business
        Combination**
  On
        May
        24, 2004, the Company purchased NetChip Technology, Inc., a fabless supplier
        of
        high-performance semiconductors based on Universal Serial Bus (USB) and
        Peripheral Component Interconnect (PCI) standards, for an aggregate purchase
        price, including acquisition costs, of $27.3 million. Included in the aggregate
        purchase price is the June 20, 2005 issuance of 554,306 shares of the Company’s
        common stock valued at approximately $5.1 million to the former NetChip
        Technology, Inc. shareholders because the purchased entity partially met
        certain
        agreed upon milestones. The Company has no additional obligation to pay
        contingent purchase consideration outstanding. The transaction was accounted
        for
        using purchase accounting. The Company acquired NetChip Technology, Inc.
        in
        order to expand its position of strength in the market for PCI, PCI-X and
        PCI
        Express interconnect chips to include the USB product line, where NetChip
        Technology, Inc. offered an industry-leading product line offering
        high-performance and low-power products for the USB 2.0 market. NetChip
        Technology, Inc. also had PCI Express products in development that complemented
        the Company's PCI Express chips. The combined company provides a wide selection
        of interconnect chips based on these standards.
  **4.
        Cash, Cash Equivalents, Short-Term Investments and Long-Term
        Investments**
  The
        Company invests its excess cash in high quality, short-term and long-term
        debt
        instruments. The following is a summary of the Company's investments by major
        security type at December 31, 2005 and December 31, 2004 (in thousands):
  **Amortized**
                
                **Unrealized**
                
                **Estimated****Cost**
                
                **Gains
                    (Losses), net**
                
                **Fair
                    Value****2005**Classified
                    as Current Assets:Cash
                
                $
                2,678
                
                $
                -
                
                $
                2,678Cash
                    equivalents:Money
                    market mutual funds
                
                
                7,977
                
                
                -
                
                
                7,977Commercial
                    paper
                
                
                10,375
                
                
                (2
                )
                
                10,373Total
                    cash equivalents
                
                
                18,352
                
                
                (2
                )
                
                18,350Total
                    cash and cash equivalents
                
                
                21,030
                
                
                (2
                )
                
                21,028Short
                    term investments:Commercial
                    paper
                
                
                3,880
                
                
                (1
                )
                
                3,879Corporate
                    bonds
                
                
                1,167
                
                
                (6
                )
                
                1,161US
                    government & agency securities
                
                
                9,009
                
                
                (34
                )
                
                8,975Total
                    short-term investments
                
                
                14,056
                
                
                (41
                )
                
                14,015Total
                    cash, cash equivalents, and short-term investments
                
                $
                35,086
                
                $
                (43
                )
                $
                35,043**2004**Classified
                    as Current Assets:Cash
                
                $
                1,896
                
                $
                -
                
                $
                1,896Cash
                    equivalents:Money
                    market mutual funds
                
                
                6,360
                
                
                -
                
                
                6,360Municipal
                    auction rate securities
                
                
                3,975
                
                
                -
                
                
                3,975Commercial
                    paper
                
                
                1,300
                
                
                -
                
                
                1,300Total
                    cash equivalents
                
                
                11,635
                
                
                -
                
                
                11,635Total
                    cash and cash equivalents
                
                
                13,531
                
                
                -
                
                
                13,531Short
                    term investments:Commercial
                    paper
                
                
                2,298
                
                
                -
                
                
                2,298Corporate
                    bonds
                
                
                1,306
                
                
                (16
                )
                
                1,290US
                    government & agency securities
                
                
                3,016
                
                
                (14
                )
                
                3,002Total
                    short-term investments
                
                
                6,620
                
                
                (30
                )
                
                6,590Long-term
                    investments:Corporate
                    bonds
                
                
                1,197
                
                
                (7
                )
                
                1,190US
                    government & agency securities
                
                
                9,085
                
                
                (120
                )
                
                8,965Total
                    long-term investments
                
                
                10,282
                
                
                (127
                )
                
                10,155Total
                    cash, cash equivalents, short-term and long-term investments
                
                $
                30,433
                
                $
                (157
                )
                $
                30,276
  At December 31, 2005, the contractual maturity of
        investments (including cash equivalents) was less than one year. 
The Company determined the $43,000 unrealized losses as of December
        31, 2005 were due to declines in the fair values of the investments below
        their cost basis that were judged to be temporary.  Therefore, there were
        no impairments as of December 31, 2005.
  **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 and short-term investments were approximately $35.0 million as
        of
        December 31, 2005 which exceeded the amount insured by the 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 .
        The
        Company's single largest receivable balance accounted for approximately 21%
        and
        20%, of net accounts receivable as of December 31, 2005 and 2004, respectively.
  The
        Company analyzes the need for reserves for potential credit losses and records
        reserves when necessary. Through
        fiscal 2005, a relatively small number of direct customers and distributors
        accounted for a significant percentage of the Company's revenues. For the
        year
        ended December 31, 2005, approximately 23% of net revenue was derived from
        sales
        to one distributor, Metatech. No other distributor or direct customer
        represented greater than 10% of net revenues. For the year ended December
        31,
        2004, approximately 13% of net revenue was derived from sales to one
        distributor, Metatech. No other distributor or direct customer represented
        greater than 10% of net revenues. For the year ended December 31, 2003,
        approximately 11% and 10% of net revenue were derived from sales to two
        distributors, Metatech and A2M, respectively. No other distributor or direct
        customer represented greater than 10% of net revenues.
  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.
        Employee Stock Plans**
  At December 31,
        2005,  5,515,956 shares
        of the Company's common stock were reserved for future issuance.
  The
        Company's 1998 Stock Incentive Plan (the "1998 Plan") was approved by the
        Board
        of Directors on January 15, 1998. The 1998 Plan provides for the grant of
        both incentive and nonqualified stock options. The Company's 1999 Stock
        Incentive Plan was approved by the Board of Directors on January 25, 1999
        and amended on May 24, 2000, May 22, 2001 and May 22, 2002 (as so
        amended, the "1999 Plan"). The 1999 Plan provides for the grant of both
        incentive and nonqualified stock options. The maximum term of any stock option
        granted under the 1998 and 1999 Plans is ten years, except that with respect
        to
        incentive stock options granted to a person possessing more than 10% of the
        combined voting power of the Company (a 10% stockholder), the term of such
        stock
        options shall be for no more than five years. The exercise price of incentive
        stock options granted under the 1998 and 1999 Plan must be at least 100%
        of the
        fair market value of the common stock on the grant date except that the exercise
        price of incentive stock options granted to a 10% stockholder must be at
        least
        110% of such fair market value on the date of grant. The options generally
        vest
        over a period of four years.
  Activity
        under the Company’s 1998 and 1999 Plans, as well as the
        Sebring Systems, Inc. 1997 Stock Option/Stock Issuance Plan, the HiNT
        Corporation 2000 Stock Plan and the NetChip Technology, Inc. 1996 Flexible
        Stock
        Incentive Plan, assumed upon the Company’s acquisition of Sebring Systems, Inc.,
        HiNT Corporation and NetChip Technology, Inc., respectively, is
        summarized as follows:
  Options
                    OutstandingOptions
                
                
                
                
                
                WeightedAvailable
                
                
                
                Aggregate
                
                Averagefor
                
                Number
                    of
                
                Exercise
                
                ExerciseGrant
                
                Options
                
                Price
                
                PriceBalance
                    at December 31, 2002
                
                
                2,026,007
                
                
                3,403,308
                
                $
                44,535,923
                
                $
                13.09Options
                    assumed
                
                
                -
                
                
                267,920
                
                
                415,645
                
                
                1.55Options
                    granted
                
                
                (942,500
                )
                
                942,500
                
                
                3,303,040
                
                
                3.50Options
                    exercised
                
                
                -
                
                
                (69,687
                )
                
                (317,338
                )
                
                4.55Options
                    cancelled
                
                
                306,021
                
                
                (307,627
                )
                
                (4,152,600
                )
                
                13.50Balance
                    at December 31, 2003
                
                
                1,389,528
                
                
                4,236,414
                
                
                43,784,670
                
                
                10.34Options
                    authorized
                
                
                700,000
                
                
                -
                
                
                -
                
                
                -Options
                    assumed
                
                
                -
                
                
                126,419
                
                
                232,219
                
                
                1.84Options
                    granted
                
                
                (969,850
                )
                
                969,850
                
                
                10,093,811
                
                
                10.41Options
                    exercised
                
                
                -
                
                
                (486,356
                )
                
                (2,026,986
                )
                
                4.17Options
                    cancelled
                
                
                444,453
                
                
                (480,292
                )
                
                (5,533,876
                )
                
                11.52Balance
                    at December 31, 2004
                
                
                1,564,131
                
                
                4,366,035
                
                
                46,549,838
                
                
                10.66Options
                    granted
                
                
                (979,300
                )
                
                979,300
                
                
                8,772,075
                
                
                8.96Options
                    exercised
                
                
                -
                
                
                (402,742
                )
                
                (1,641,389
                )
                
                4.08Options
                    cancelled
                
                
                448,074
                
                
                (459,542
                )
                
                (6,316,427
                )
                
                13.75Balance
                    at December 31, 2005
                
                
                1,032,905
                
                
                4,483,051
                
                $
                47,364,097
                
                
                10.57
 
 There
        were no options assumed in 2005. Options assumed in 2004 of 126,419 represent
        options related to the May 2004 acquisition of NetChip Technology, Inc. Options
        assumed in 2003 of 267,920 represent options related to the May 2003 acquisition
        of HiNT Corporation. Options assumed from both NetChip Technology, Inc. and
        HiNT
        Corporation are no longer available for grant once canceled.
  The
        following table summarizes the information about options outstanding at
        December 31, 2005 :
 Options
                    Outstanding
                
                Options
                    ExercisableWeightedAverage
                
                Weighted
                
                
                
                WeightedRemaining
                
                Average
                
                
                
                AverageRange
                    of
                
                Number
                
                Contractual
                
                Exercise
                
                Number
                
                ExerciseExercise
                    Price
                
                Outstanding
                
                Life
                
                Price
                
                Exercisable
                
                Price$0.88-$4.10
                
                
                756,270
                
                
                6.64
                    years
                
                $
                3.09
                
                
                520,467
                
                $
                3.04$4.48-$7.95
                
                
                885,254
                
                
                4.86
                    years
                
                
                6.89
                
                
                714,439
                
                
                6.77$7.98-$9.00
                
                
                882,951
                
                
                5.65
                    years
                
                
                8.79
                
                
                309,678
                
                
                8.82$9.12-$10.29
                
                
                770,727
                
                
                7.85
                    years
                
                
                9.47
                
                
                224,912
                
                
                9.23$12.37-$21.06
                
                
                824,130
                
                
                5.75
                    years
                
                
                17.68
                
                
                727,420
                
                
                17.96$23.31-$27.00
                
                
                363,719
                
                
                4.51
                    years
                
                
                25.55
                
                
                363,719
                
                
                25.55Total
                
                
                4,483,051
                
                
                5.97
                    years
                
                $
                10.57
                
                
                2,860,635
                
                $
                11.74
  As
        of
        December 31, 2005, 2004, and 2003, there were 2,860,635, 2,769,349, and
        2,500,572 stock options exercisable at weighted average exercise prices
        of $11.74 ,
        $11.88,
        and $12.04 per share, respectively.
  The
        Company did not record deferred stock compensation in 2005. During the year
        ended  December 31 ,
        2004,
        the Company recorded aggregate deferred stock compensation of $0.9 million,
        representing the difference between the grant price and the deemed fair value
        of
        the Company's common stock options granted during this period. The Company
        recorded $0.1 million of deferred stock compensation in 2003. The amortization
        of deferred stock compensation is charged to operations and is amortized
        on a
        straight-line basis over the vesting period of the options, which is typically
        three years. For the years ended December 31, 2005, 2004, and 2003,
        amortization expense was $0.2 million,
        $0.1 million, and $1.0 million, respectively. In addition, for the years
        ended December 31, 2005, 2004, and 2003, the Company reversed aggregate
        deferred stock compensation of $0.1
        million ,
        $0.4
        million, and $0, respectively, on options associated with employee terminations.
  **7.
        Other Intangible Assets**
  Information
        regarding the Company's
        other identified intangible assets subject to amortization is as follows
        (in
        thousands):
  **2005**Estimated
                
                Gross
                    Carrying
                
                Accumulated
                
                NetUseful
                    Life
                
                Amounts
                
                Amortization
                
                ValuePatents
                
                
                4
                    years
                
                $
                2,132
                
                $
                (2,132
                )
                $
                -Developed
                    Core Technology
                
                
                6
                    years
                
                
                5,422
                
                
                (1,915
                )
                $
                3,507Customer
                    Base
                
                
                3
                    years
                
                
                3,246
                
                
                (2,024
                )
                $
                1,222Total
                
                
                
                
                $
                10,800
                
                $
                (6,071
                )
                $
                4,729
 **2004**
                ****Estimated
                
                Gross
                    Carrying
                
                Accumulated
                
                NetUseful
                    Life
                
                Amounts
                
                Amortization
                
                ValuePatents
                
                
                4
                    years
                
                $
                2,132
                
                $
                (2,132
                )
                $
                -Developed
                    Core Technology
                
                
                6
                    years
                
                
                5,422
                
                
                (950
                )
                $
                4,472Customer
                    Base
                
                
                3
                    years
                
                
                3,246
                
                
                (942
                )
                $
                2,304Total
                
                
                
                
                $
                10,800
                
                $
                (4,024
                )
                $
                6,776
  Identified
        intangible asset amortization expense was approximately $2.3 million, $1.7
        million, and $0.9 million, for the years ended December 31, 2005, 2004 and
        2003
        respectively.
  Estimated
        amortization expense for fiscal
        years ending December 31 is as follows (in millions):
 2006
                
                $
                1.92007
                
                $
                1.32008
                
                $
                0.72009
                
                $
                0.62010
                
                $
                0.2Total
                
                $
                4.7
  An
        indefinite lived intangible (Tradename) acquired in connection with the Sebring
        acquisition was written off in 2005 as it was deemed to have no value. The
        total
        write-down, included in the amortization and write-down of purchased intangible
        assets on the consolidated statement of operations, was $0.2
        million.
  **8.
        Stock Repurchase**
  In
        September 2002, the Company’s Board of Directors approved a repurchase of up to
        2,000,000 shares of common stock. The Company, at the discretion of management,
        can repurchase the shares from time to time in the open market or in privately
        negotiated transactions. In fiscal 2003, approximately 774,000 shares were
        repurchased for approximately $1.9 million. No shares were repurchased in
        2004
        or 2005.
  **9.
        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. Employee contributions are limited to a maximum annual amount
        as
        set up 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
        participant contributions. The Company's expenses to the total plan remained
        flat at approximately $0.3 million for
        2005, 2004, and 2003.
  **10.
        Income Taxes**
  The
        provision for income taxes consists of the following:
 **Years
                    Ended December 31,****2005**
                ****
                **2004**
                ****
                **2003**(in
                    thousands)Federal:Current
                
                $
                26
                
                $
                34
                
                $
                -Deferred
                
                
                188
                
                
                130
                
                
                -214
                
                
                164
                
                
                -State:Current
                
                
                9
                
                
                8
                
                
                6Deferred
                
                
                19
                
                
                32
                
                
                -28
                
                
                40
                
                
                6Foreign:Current
                
                
                23
                
                
                54
                
                
                2323
                
                
                54
                
                
                23Total
                
                $
                265
                
                $
                258
                
                $
                29
  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:
  **Years
                    Ended December 31,**
                ********
                ****
                **2005**
                ****
                **2004**
                ****
                **2003**(in
                    thousands)Tax
                    benefit at the U.S. statutory rate
                
                $
                (504
                )
                $
                (134
                )
                $
                (780
                )State
                    taxes (net of federal benefit)
                
                
                329
                
                
                (25
                )
                
                (97
                )Non-deductible
                    in-process R&D write off
                
                
                -
                
                
                382
                
                
                345Non-deductible
                    amortization of deferred compensation
                
                
                -
                
                
                -
                
                
                380Research
                    and development credit
                
                
                (1,291
                )
                
                (576
                )
                
                -Change
                    in valuation allowance
                
                
                1,770
                
                
                553
                
                
                98Other
                    individually immaterial items
                
                
                (39
                )
                
                58
                
                
                83$
                265
                
                $
                258
                
                $
                29
  During
        the years ended December 31, 2005, 2004 and 2003, the Company’s deferred tax
        asset valuation allowance increased by $3.5 million, $4.7 million and $0.6
        million, respectively. The increase through December 31, 2004 in the valuation
        allowance relates to acquired tax benefits associated with the Company’s
        acquisitions of NetChip Technology, Inc., HiNT Corporation and Sebring Systems,
        Inc.
  The
        increase between December 31, 2004 and December 31, 2005 relates to increases
        in
        federal and state research and development credits that have not been realized
        along with a decrease in the deferred liability related to acquired
        intangibles.
  Significant
        components of the Company's
        deferred tax assets and liabilities are as follows:
  **December
                    31,****2005**
                
                **2004**Deferred
                    tax assets:Accrued
                    expenses and reserves
                
                $
                1,680
                
                $
                1,493Net
                    operating loss carryforwards
                
                
                7,782
                
                
                7,608Research
                    and development credits
                
                
                7,037
                
                
                4,824Costs
                    capitalized for tax purposes
                
                
                -
                
                
                78Gross
                    deferred tax assets:
                
                
                16,499
                
                
                14,003Valuation
                    Allowance
                
                
                (14,136
                )
                
                (10,649
                )2,363
                
                
                3,354Deferred
                    tax liabilities:Acquisition
                    related intangibles
                
                
                (2,201
                )
                
                (3,034
                )Other
                
                
                (162
                )
                
                (320
                )(2,363
                )
                
                (3,354
                )Total
                    net deferred tax assets
                
                $
                -
                
                $
                -
   At
        December 31, 2005, the Company had federal and state net operating loss
        carryforwards of $21.2 million and $6.1 million, respectively. These
        carryforwards will expire at various dates beginning in 2007 through 2025,
        if
        not utilized. In addition, as of December 31, 2005, the Company had federal
        and state tax credit carryforwards of approximately $3.6 million and $5.3
        million, respectively. The federal research and development credits will
        expire
        beginning in 2012 and the state credits will carryforward indefinitely.
        Approximately $3.8 million of the federal and $0.8 million of the state net
        operating loss carryforward represents the stock option deduction arising
        from
        activity under the Company’s stock option plan, the benefit of which will
        increase capital in excess of par value when realized.
  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 $14.7 million of federal
        net
        operating loss and $4.8 million of state net operating loss are subject to
        an
        annual limitation under the Internal Revenue Code of 1986, as amended, and
        similar state provisions. Utilization of $1.1 million of federal research
        and
        development credits and $1.8 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 net operating loss carryforwards before
        utilization.
  A
        valuation allowance has been recorded for the net deferred tax asset as a
        result of uncertainties regarding the realization of the asset balance due
        to
        the history of losses and the variability of operating results. Approximately
        $7.1 million of the valuation allowance relates to acquired tax benefits,
        which
        will result in an adjustment to goodwill, net of the related deferred liability
        on acquired intangibles when such benefits are realized. During 2005, $0.2
        million was released from the deferred tax valuation allowance and credited
        to
        goodwill.
  The
        Company has made no provision for U.S. income taxes on approximately $0.3
        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 $0.1 million. Pre-tax income from foreign operations was $55,000,
        $79,000 and $56,000 in 2005, 2004 and 2003, respectively.
  **11.
        Commitments and Contingencies**
  In
        October 2005, the Company purchased two software license agreements with
        unrelated parties totaling $4.3 million. As of December 31, 2005, the
        Company is required to make payments in accordance to the agreements of
        approximately $0.7 million, $1.7 million, and $1.7 million for the years
        ending
        2006, 2007, and 2008, respectively.
  The
        Company uses several contract manufacturers and suppliers to provide
        manufacturing services for its products. As of December 31,  2005,
        the
        Company has purchase commitments for inventory with these contract manufacturers
        and suppliers of approximately $8.7 million. These inventory purchase
        commitments are placed on a sales order basis with lead times ranging from
        8 to
        13 weeks to meet estimated customer demand requirements.
  The
        Company leases facilities and equipment under non-cancelable operating lease
        agreements. Future minimum payments under facility and equipment leases at
        December 31, 2005 are as follows:
  (in
                      thousands)2006
                  
                  $
                  1192007
                  
                  
                  7Total
                  
                  $
                  126
 Rental
        expense for all facility leases aggregated approximately $0.2
        million for the year ended December 31, 2005. Rental expense aggregated
        approximately $0.8 million
        and $0.7 million, net of sublease income of $38,000,
        and $8,000 for the years ended December 31, 2004 and 2003, respectively.
  ***Warranty
        and Indemnification Provisions***
  The
        Company generally sells products with a limited warranty of product quality
        for
        a period of one year 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. The
        accrual and the related expense for known issues were not significant during
        the
        periods presented.  As of December 31, 2005, the warranty accrual balance
        was $92,000.
  **12.
        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. The
        majority of the Company’s assets are located in the United States.
  Revenues
        by geographic region based on customer location were as follows:
  **Years
                  Ended December 31,****2005**
              
              **2004**
              
              **2003**Revenues:
              
              
              (in
                  thousands)Asia
                  - excluding Taiwan
              
              
              23,919
              
              
              18,675
              
              
              10,691United
                  States
              
              
              15,256
              
              
              15,708
              
              
              12,155Europe
              
              
              8,244
              
              
              9,511
              
              
              9,125Taiwan
              
              
              4,760
              
              
              8,571
              
              
              4,097The
                  Americas - excluding United States
              
              
              2,436
              
              
              1,984
              
              
              1,970Total
              
              $
              54,615
              
              $
              54,449
              
              $
              38,038
   Revenues
        by product type were as follows:
  **Years
                    Ended December 31,**
                ********
                ****
                **2005**
                
                **2004**
                
                **2003**Revenues:
                
                
                (in
                    thousands)PCI
                    I/O Devices
                
                $
                43,031
                
                $
                44,791
                
                $
                38,038USB
                
                
                7,847
                
                
                9,529
                
                
                -PCI
                    Express
                
                
                3,737
                
                
                129
                
                
                -Total
                
                $
                54,615
                
                $
                54,449
                
                $
                38,038
  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,****2005**
                
                **2004**
                
                **2003**Metatech
                
                
                23
                %
                
                13
                %
                
                11
                %A2M
                
                
                -
                
                
                4
                %
                
                10
                %
   **13.
        Quarterly Summaries (unaudited)**
  (In
        thousands, except per share amounts)
  **Three
                      Months Ended****March
                      31,**
                  
                  **June
                      30,**
                  
                  **September
                      30,**
                  
                  **December
                      31,****2005**
                  
                  **2005**
                  
                  **2005**
                  
                  **2005**Net
                      revenues
                  
                  $
                  13,222
                  
                  $
                  13,185
                  
                  $
                  12,869
                  
                  $
                  15,339Gross
                      profit
                  
                  $
                  8,365
                  
                  $
                  8,285
                  
                  $
                  8,475
                  
                  $
                  9,877Net
                      income (loss)
                  
                  $
                  (541
                  )
                  $
                  (732
                  )
                  $
                  (510
                  )
                  $
                  35Net
                      income (loss) per basic share
                  
                  $
                  (0.02
                  )
                  $
                  (0.03
                  )
                  $
                  (0.02
                  )
                  $
                  0.00Net
                      income (loss) per diluted share
                  
                  $
                  (0.02
                  )
                  $
                  (0.03
                  )
                  $
                  (0.02
                  )
                  $
                  0.00
 **Three
                    Months Ended****March
                    31,**
                
                **June
                    30,**
                
                **September
                    30,**
                
                **December
                    31,****2004**
                
                **2004
                    (1)**
                
                **2004**
                
                **2004**Net
                    revenues
                
                $
                11,642
                
                $
                14,016
                
                $
                15,457
                
                $
                13,334Gross
                    profit
                
                $
                8,413
                
                $
                9,091
                
                $
                9,818
                
                $
                8,388Net
                    income (loss)
                
                $
                277
                
                $
                (537
                )
                $
                327
                
                $
                (709
                )Net
                    income (loss) per basic share
                
                $
                0.01
                
                $
                (0.02
                )
                $
                0.01
                
                $
                (0.03
                )Net
                    income (loss) per diluted share
                
                $
                0.01
                
                $
                (0.02
                )
                $
                0.01
                
                $
                (0.03
                )
  (1)
        Net
        loss includes a $1.1 million charge for in-process research and
        development.
    **SCHEDULE
        II-VALUATION AND QUALIFYING ACCOUNTS**
 (IN
        THOUSANDS)
  **Additions**
                
                **Deductions****Balance
                    at**
                
                **Charged
                    to**
                
                **Charged
                    to**
                
                **Amount**
                
                **Balance
                    at****Beginning
                    of**
                
                **Costs
                    and**
                
                **Other**
                
                **Recovered**
                
                **End
                    of****Description**
                
                **Period**
                
                **Expenses**
                
                **Accounts**
                
                **(Written
                    off)**
                
                **Period**Year
                    ended December 31, 2005Allowance
                    for doubtful accounts
                
                $
                127
                
                $
                14
                
                $
                -
                
                $
                (10
                )
                $
                131Deferred
                    tax asset valuation allowance
                
                $
                10,649
                
                $
                -
                
                $
                3,487
                
                $
                -
                
                $
                14,136Year
                    ended December 31, 2004Allowance
                    for doubtful accounts
                
                $
                161
                
                $
                45
                
                $
                -
                
                $
                (79
                )
                $
                127Deferred
                    tax asset valuation allowance
                
                $
                5,967
                
                $
                -
                
                $
                4,682
                
                $
                -
                
                $
                10,649Year
                    ended December 31, 2003Allowance
                    for doubtful accounts
                
                $
                127
                
                $
                39
                
                $
                -
                
                $
                (5
                )
                $
                161Deferred
                    tax asset valuation allowance
                
                $
                5,321
                
                $
                -
                
                $
                646
                
                $
                -
                
                $
                5,967
   
 **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
                    3, 2006
                PLX
                    Technology, Inc.
                  by:
                  /s/
                    Michael J. Salameh
                  Name:
                    Michael J. Salameh
                  Title:
                    Chief Executive Officer
 
 **POWER
        OF ATTORNEY**
  KNOW
        ALL
        PERSONS BY THESE PRESENTS, that each person whose signature appears below
        constitutes and appoints Michael J. Salameh and Rafael Torres, 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/
                      Michael J. Salameh
                  
                  
                  Chief
                      Executive Officer and Director
                  
                  
                  March
                      3, 2006Michael
                      J. Salameh
                  
                  
                  (Principal
                      Executive Officer)/s/
                      Rafael Torres
                  
                  
                  Chief
                      Financial Officer, Vice President, Finance and Secretary
                  
                  
                  March
                      3, 2006Rafael
                      Torres
                  
                  
                  (Principal
                      Financial and Accounting Officer)/s/
                      D. James Guzy
                  
                  
                  Director
                      and Chairman of the Board of Directors
                  
                  
                  March
                      3, 2006D.
                      James Guzy/s/
                      Robert H. Smith
                  
                  
                  Director
                  
                  
                  March
                      3, 2006Robert
                      H. Smith/s/
                      John H. Hart
                  
                  
                  Director
                  
                  
                  March
                      3, 2006John
                      H. Hart/s/
                      Thomas Riordan
                  
                  
                  Director
                  
                  
                  March
                      3, 2006Thomas
                      Riordan/s/
                      Patrick Verderico
                  
                  
                  Director
                  
                  
                  March
                      3, 2006Patrick
                      Verderico
 
 **EXHIBIT
                    INDEX****Exhibit****Number**
                
                **Description**2.1
                    (3)
                
                Agreement
                    and Plan of Reorganization by and among PLX Technology, Inc.,
                    NC
                    Acquisition Sub, Inc., NetChip Technology, Inc. and Wei-Ti Liu
                    as
                    Shareholders' Agent.3.1
                    (1)
                
                Amended
                    and Restated Certificate of Incorporation of the
                    Registrant.3.2
                    (1)
                
                Registrant's
                    Amended and Restated Bylaws.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 3.3.4.2
                
                Registration
                    Rights Agreement, filed as Exhibit 4.2 to the Company’s Registration
                    Statement on Form S-3, filed on June 21, 2004 and incorporated
                    herein by
                    reference.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
                    (1)
                
                Lease
                    Agreement dated October 17, 1997 between The Arrillaga Foundation and
                    The Perry Foundation as Landlords and PLX as Tenant, as
                    amended.10.10
                    (5)*
                
                HiNT
                    Corporation 2000 Stock Plan.10.11
                    (4)*
                
                Sebring
                    Systems, Inc. 1997 Stock Option/Stock/Issuance Plan.10.12
                    (6)*
                
                NetChip
                    Technology, Inc. 1996 Flexible Stock Incentive Plan.10.13*
                
                PLX
                    Technology, Inc. 2004 Bonus and Deferred Compensation Plan, filed
                    as
                    Exhibit 10.2 to the Company’s quarterly report on Form 10-Q for the
                    quarter ended June 30, 2004, and incorporated herein by
                    reference.10.14*
                
                PLX
                    Technology, Inc. 2005 Bonus and Deferred Compensation Plan, filed
                    as
                    Exhibit 10.1 to the Company’s Form 8-K, filed on April 13, 2005, and
                    incorporated herein by reference.10.15*
                
                PLX
                    Technology, Inc. 2006 Bonus and Deferred Compensation
                    Plan.14.1
                
                Code
                    of Ethics.16.1
                
                Letter
                    from Ernst & Young, LLP, to the Securities and Exchange Commission,
                    dated July 13, 2005, and filed as Exhibit 16.1 to the Company’s Form
                    8-K/A, filed July 15, 2005, and incorporated herein by
                    reference.21.1
                
                Subsidiaries
                    of the Company.23.1
                
                Consent
                    of Independent Registered Public Accounting Firm.23.2
                
                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 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 2002.32.2
                
                Certification
                    of Chief Financial Officer Pursuant to 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.(3)
                
                Incorporated
                    by reference to Exhibit 2.1 to Form 8-K as filed on March 9,
                    2004.(4)
                
                Incorporated
                    by reference to Exhibit 2.1 to Form 8-K as filed on June 2,
                    2000.(5)
                
                Incorporated
                    by reference to Exhibit 10.1 to the Company's quarterly report on
                    Form 10-Q for the quarter ended September 30,
                    2003.(6)
                
                Incorporated
                    by reference to Exhibit 10.2 to the Company’s quarterly report on Form
                    10-Q for the quarter ended June 30, 2004.*
                
                Management
                    contract or compensatory plan or arrangement.