UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


________________




Form
10-Q







þ
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the Quarterly Period Ended
      May 29, 2009




or




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




For the transition period
      from
            To
            .





Commission
file number 000-51771


________________




SMART
MODULAR TECHNOLOGIES (WWH), INC.


(Exact
name of registrant as specified in its charter)




Cayman
      Islands
            20-2509518(State
      or Other Jurisdiction of
            (I.R.S.
      EmployerIncorporation
      or Organization)
            Identification
      No.)39870
      Eureka DriveNewark,
      CA
            94560(Address
      of Principal Executive Offices)
            (Zip
      Code)




(510)
623-1231


Registrant’s
Telephone Number, Including Area Code


________________




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 þ  No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  Yes o  No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller company. See definition
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      accelerated filer o
            Accelerated
      filer þNon-accelerated filer o (Do not check if
      a smaller reporting company)
            Smaller
      reporting company o




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




The
number of registrant’s ordinary shares outstanding as of July 6, 2009 was
61,869,400.





1


SMART
MODULAR TECHNOLOGIES (WWH), INC.




INDEX
TO QUARTERLY REPORT




TABLE
OF CONTENTS




PagePART I. FINANCIAL INFORMATION
            3Item 1. Financial Statements
            3Item 2. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            21Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
            31Item 4. Controls and Procedures
            31PART II. OTHER INFORMATION
            32Item 1. Legal Proceedings
            32Item 1A. Risk Factors
            32Item 2. Unregistered Sales of Equity
      Securities
            33Item 6. Exhibits
            33SIGNATURES
            34








2


PART I. FINANCIAL INFORMATION




Item 1. Financial
Statements




SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)





May
      29,
                                                                                            2009
                                                                                          
                                                                                          
                                                                                          August
      29,
                                                                                            2008(In
      thousands)ASSETSCash
      and cash equivalents
                                                                                          
                                                                                          $
                                                                                          139,229
                                                                                          
                                                                                          
                                                                                          $
                                                                                          115,994Accounts
      receivable, net of allowances of $1,115 and $1,517 as of May 29, 2009 and
      August 29, 2008, respectively
                                                                                          
                                                                                          
                                                                                          121,887
                                                                                          
                                                                                          
                                                                                          
                                                                                          193,736Inventories
                                                                                          
                                                                                          
                                                                                          53,983
                                                                                          
                                                                                          
                                                                                          
                                                                                          62,430Prepaid
      expenses and other current assets
                                                                                          
                                                                                          
                                                                                          12,939
                                                                                          
                                                                                          
                                                                                          
                                                                                          14,973Total
      current assets
                                                                                          
                                                                                          
                                                                                          328,038
                                                                                          
                                                                                          
                                                                                          
                                                                                          387,133Property
      and equipment, net
                                                                                          
                                                                                          
                                                                                          34,579
                                                                                          
                                                                                          
                                                                                          
                                                                                          39,317Goodwill
                                                                                          
                                                                                          
                                                                                          1,061
                                                                                          
                                                                                          
                                                                                          
                                                                                          7,210Other
      intangible assets, net
                                                                                          
                                                                                          
                                                                                          7,743
                                                                                          
                                                                                          
                                                                                          
                                                                                          8,545Other
      non-current assets
                                                                                          
                                                                                          
                                                                                          4,490
                                                                                          
                                                                                          
                                                                                          
                                                                                          4,943Total
      assets
                                                                                          
                                                                                          $
                                                                                          375,911
                                                                                          
                                                                                          
                                                                                          $
                                                                                          447,148LIABILITIES
      AND SHAREHOLDERS’ EQUITYAccounts
      payable
                                                                                          
                                                                                          $
                                                                                          55,789
                                                                                          
                                                                                          
                                                                                          $
                                                                                          93,482Accrued
      expenses and other current liabilities
                                                                                          
                                                                                          
                                                                                          14,397
                                                                                          
                                                                                          
                                                                                          
                                                                                          23,942Total
      current liabilities
                                                                                          
                                                                                          
                                                                                          70,186
                                                                                          
                                                                                          
                                                                                          
                                                                                          117,424Long-term
      debt
                                                                                          
                                                                                          
                                                                                          81,250
                                                                                          
                                                                                          
                                                                                          
                                                                                          81,250Other
      long-term liabilities
                                                                                          
                                                                                          
                                                                                          2,356
                                                                                          
                                                                                          
                                                                                          
                                                                                          1,568Total
      liabilities
                                                                                          
                                                                                          
                                                                                          153,792
                                                                                          
                                                                                          
                                                                                          $
                                                                                          200,242Shareholders’
      equity:Ordinary
      shares, net of repurchases, $0.00016667 par value; 600,000,000 shares
      authorized; 61,747,747 and 61,361,137 shares issued and outstanding as of
      May 29, 2009 and August 29, 2008, respectively
                                                                                          
                                                                                          
                                                                                          10
                                                                                          
                                                                                          
                                                                                          
                                                                                          10Additional
      paid-in capital
                                                                                          
                                                                                          
                                                                                          105,656
                                                                                          
                                                                                          
                                                                                          
                                                                                          100,234Deferred
      stock-based compensation
                                                                                          
                                                                                          
                                                                                          (21
                                                                                          )
                                                                                          
                                                                                          
                                                                                          (91
                                                                                          )Accumulated
      other comprehensive income (loss)
                                                                                          
                                                                                          
                                                                                          (5,033
                                                                                          )
                                                                                          
                                                                                          
                                                                                          14,132Retained
      earnings
                                                                                          
                                                                                          
                                                                                          121,507
                                                                                          
                                                                                          
                                                                                          
                                                                                          132,621Total
      shareholders’ equity
                                                                                          
                                                                                          
                                                                                          222,119
                                                                                          
                                                                                          
                                                                                          
                                                                                          246,906Total
      liabilities and shareholders’ equity
                                                                                          
                                                                                          $
                                                                                          375,911
                                                                                          
                                                                                          
                                                                                          $
                                                                                          447,148








See
accompanying notes to unaudited condensed consolidated financial
statements.








3








SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)







Three
      MonthsEnded
                      May
      29,2009
                    
                    
                    Three
      MonthsEnded
                      May
      30,2008
                    
                    
                    NineMonthsEnded
                      May
      29,2009
                    
                    
                    NineMonthsEnded
                      May
      30,2008(In
      thousands, except per share data)Net
      sales
                    
                    $
                    91,645
                    
                    
                    $
                    167,615
                    
                    
                    $
                    341,509
                    
                    
                    $
                    509,485Cost
      of sales*
                    
                    
                    73,008
                    
                    
                    
                    139,803
                    
                    
                    
                    272,989
                    
                    
                    
                    414,691Gross
      profit
                    
                    
                    18,637
                    
                    
                    
                    27,812
                    
                    
                    
                    68,520
                    
                    
                    
                    94,794Research
      and development*
                    
                    
                    4,478
                    
                    
                    
                    5,418
                    
                    
                    
                    15,056
                    
                    
                    
                    14,727Selling,
      general and administrative*
                    
                    
                    13,585
                    
                    
                    
                    15,393
                    
                    
                    
                    41,834
                    
                    
                    
                    44,785Restructuring
      charges
                    
                    
                    989
                    
                    
                    
                    —
                    
                    
                    
                    2,810
                    
                    
                    
                    —Goodwill
      impairment charge
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    10,416
                    
                    
                    
                    —In-process
      research and development charge
                    
                    
                    —
                    
                    
                    
                    4,400
                    
                    
                    
                    —
                    
                    
                    
                    4,400Total
      operating expenses
                    
                    
                    19,052
                    
                    
                    
                    25,211
                    
                    
                    
                    70,116
                    
                    
                    
                    63,912Income
      (loss) from operations
                    
                    
                    (415
                    )
                    
                    
                    2,601
                    
                    
                    
                    (1,596
                    )
                    
                    
                    30,882Interest
      expense, net
                    
                    
                    (1,629
                    )
                    
                    
                    (1,468
                    )
                    
                    
                    (5,079
                    )
                    
                    
                    (3,819
                    )Other
      (expense) income, net
                    
                    
                    26
                    
                    
                    
                    255
                    
                    
                    
                    (631
                    )
                    
                    
                    2,050Total
      other expense, net
                    
                    
                    (1,603
                    )
                    
                    
                    (1,213
                    )
                    
                    
                    (5,710
                    )
                    
                    
                    (1,769
                    )Income
      (loss) before provision for income taxes
                    
                    
                    (2,018
                    )
                    
                    
                    1,388
                    
                    
                    
                    (7,306
                    )
                    
                    
                    29,113Provision
      for income taxes
                    
                    
                    368
                    
                    
                    
                    12,391
                    
                    
                    
                    3,808
                    
                    
                    
                    16,611Net
      income (loss)
                    
                    $
                    (2,386
                    )
                    
                    $
                    (11,003
                    )
                    
                    $
                    (11,114
                    )
                    
                    $
                    12,502Net
      income (loss) per ordinary share, basic
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.18
                    )
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.21Shares
      used in computing basic net income (loss) per share
                    
                    
                    61,738
                    
                    
                    
                    61,027
                    
                    
                    
                    61,640
                    
                    
                    
                    60,864Net
      income (loss) per ordinary share, diluted
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.18
                    )
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.20Shares
      used in computing diluted net income (loss) per share
                    
                    
                    61,738
                    
                    
                    
                    61,027
                    
                    
                    
                    61,640
                    
                    
                    
                    63,606____________*
      Stock-based compensation
      by category:Cost
      of sales
                    
                    $
                    137
                    
                    
                    $
                    217
                    
                    
                    $
                    525
                    
                    
                    $
                    592Research
      and development
                    
                    
                    404
                    
                    
                    
                    471
                    
                    
                    
                    1,286
                    
                    
                    
                    1,277Selling,
      general and administrative
                    
                    
                    949
                    
                    
                    
                    1,198
                    
                    
                    
                    3,266
                    
                    
                    
                    3,491





See
accompanying notes to unaudited condensed consolidated financial
statements.








4








SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


(Unaudited)







Three
      MonthsEnded
                                                        May
      29,2009
                                                    
                                                    
                                                    Three
      MonthsEnded
                                                        May
      30,2008
                                                    
                                                    
                                                    Nine
      MonthsEnded
                                                        May
      29,2009
                                                    
                                                    
                                                    Nine
      MonthsEnded
                                                        May
      30, 2008(In
      thousands)Net
      income (loss)
                                                    
                                                    $
                                                    (2,386
                                                    )
                                                    
                                                    $
                                                    (11,003
                                                    )
                                                    
                                                    $
                                                    (11,114
                                                    )
                                                    
                                                    $
                                                    12,502Other
      comprehensive income (loss):Net
      changes in unrealized loss on derivative instruments accounted for as cash
      flow hedges
                                                    
                                                    
                                                    207
                                                    
                                                    
                                                    
                                                    905
                                                    
                                                    
                                                    
                                                    (144
                                                    )
                                                    
                                                    
                                                    (667
                                                    )Foreign
      currency translation adjustments
                                                    
                                                    
                                                    3,692
                                                    
                                                    
                                                    
                                                    1,897
                                                    
                                                    
                                                    
                                                    (19,021
                                                    )
                                                    
                                                    
                                                    4,600Comprehensive
      income (loss)
                                                    
                                                    $
                                                    1,513
                                                    
                                                    
                                                    $
                                                    (8,201
                                                    )
                                                    
                                                    $
                                                    (30,279
                                                    )
                                                    
                                                    $
                                                    16,435





See
accompanying notes to unaudited condensed consolidated financial
statements.






5





SMART MODULAR TECHNOLOGIES (WWH),
INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS


(Unaudited)





Nine
                                                                                                          Months
                                                                                                          Ended
                                                                                                          May
      29,
                                                                                                          2009
                                                                                                        
                                                                                                        
                                                                                                        Nine
                                                                                                          Months
                                                                                                          Ended
                                                                                                          May
      30,
                                                                                                          2008(In
      thousands)Cash
      flows from operating activities:Net
      income (loss)
                                                                                                        
                                                                                                        $
                                                                                                        (11,114
                                                                                                        )
                                                                                                        
                                                                                                        $
                                                                                                        12,502Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
                                                                                                        
                                                                                                        
                                                                                                        9,586
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        9,054Stock-based
      compensation
                                                                                                        
                                                                                                        
                                                                                                        5,077
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        5,360Change
      in allowance for trade accounts receivable and sales
    returns
                                                                                                        
                                                                                                        
                                                                                                        (402
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        (784
                                                                                                        )Loss
      on disposal of assets
                                                                                                        
                                                                                                        
                                                                                                        672
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        55Amortization
      of debt issuance costs
                                                                                                        
                                                                                                        
                                                                                                        764
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        600In-process
      research and development charge
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        4,400Goodwill
      impairment
                                                                                                        
                                                                                                        
                                                                                                        10,416
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        —Non
      cash restructuring credit
                                                                                                        
                                                                                                        
                                                                                                        (7
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        —Excess
      tax benefits from share-based compensation
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (24
                                                                                                        )Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                                                        
                                                                                                        
                                                                                                        67,755
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        2,721Inventories
                                                                                                        
                                                                                                        
                                                                                                        4,587
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (490
                                                                                                        )Prepaid
      expenses and other assets
                                                                                                        
                                                                                                        
                                                                                                        480
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        5,646Accounts
      payable
                                                                                                        
                                                                                                        
                                                                                                        (37,860
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        (28,763
                                                                                                        )Accrued
      expenses and other liabilities
                                                                                                        
                                                                                                        
                                                                                                        (5,359
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        (6,305
                                                                                                        )Net
      cash provided by operating activities
                                                                                                        
                                                                                                        
                                                                                                        44,595
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        3,972Cash
      flows from investing activities:Capital
      expenditures
                                                                                                        
                                                                                                        
                                                                                                        (11,683
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        (11,401
                                                                                                        )Cash
      deposits on equipment
                                                                                                        
                                                                                                        
                                                                                                        (418
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        —Proceeds
      from sale of assets
                                                                                                        
                                                                                                        
                                                                                                        60
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        247Acquisition
      of businesses, net of cash acquired
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (20,303
                                                                                                        )Payment
      for Adtron contingent consideration
                                                                                                        
                                                                                                        
                                                                                                        (6,562
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        —Net
      cash used in investing activities
                                                                                                        
                                                                                                        
                                                                                                        (18,603
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        (31,457
                                                                                                        )Cash
      flows from financing activities:Excess
      tax benefits from share-based compensation
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        24Principal
      payment on acquired line of credit
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (940
                                                                                                        )Borrowings
      under revolving line of credit
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        11,500Repayments
      on revolving line of credit
                                                                                                        
                                                                                                        
                                                                                                        —
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (11,500
                                                                                                        )Repurchase
      of ordinary shares
                                                                                                        
                                                                                                        
                                                                                                        (84
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        —Proceeds
      from option exercises
                                                                                                        
                                                                                                        
                                                                                                        498
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        928Net
      cash provided by financing activities
                                                                                                        
                                                                                                        
                                                                                                        414
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        12Effect
      of exchange rate changes on cash and cash equivalents
                                                                                                        
                                                                                                        
                                                                                                        (3,171
                                                                                                        )
                                                                                                        
                                                                                                        
                                                                                                        625Net
      increase (decrease) in cash and cash equivalents
                                                                                                        
                                                                                                        
                                                                                                        23,235
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        (26,848
                                                                                                        )Cash
      and cash equivalents at beginning of period
                                                                                                        
                                                                                                        
                                                                                                        115,994
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        144,147Cash
      and cash equivalents at end of period
                                                                                                        
                                                                                                        $
                                                                                                        139,229
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        117,299Supplemental
      disclosures of cash flow information:Non-cash
      activities:Decline
      in fair value of derivative instruments
                                                                                                        
                                                                                                        
                                                                                                        144
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        667Cash
      paid during the period for:Interest
                                                                                                        
                                                                                                        
                                                                                                        5,573
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        6,507Income
      taxes
                                                                                                        
                                                                                                        
                                                                                                        4,108
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        7,583




See
accompanying notes to unaudited condensed consolidated financial
statements.


6


SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




NOTE
1 — Basis of Presentation and Principles of Consolidation




Basis
of Presentation




The
accompanying unaudited condensed consolidated financial statements of SMART
Modular Technologies (WWH), Inc. and subsidiaries (the Company) are as of May
29, 2009 and August 29, 2008 and for the three and nine months ended May 29,
2009 and May 30, 2008. These unaudited condensed consolidated financial
statements have been prepared by the Company in accordance with generally
accepted accounting principles in the United States. The results of operations
for the interim periods shown in this report are not necessarily indicative of
results to be expected for the full fiscal year ending August 28, 2009. In the
opinion of the Company’s management, the unaudited interim financial statements
reflect all adjustments, consisting only of normal, recurring adjustments
necessary for a fair statement of the financial position, results of operations
and cash flows for the periods indicated. The interim unaudited condensed
consolidated financial statements should be read in conjunction with the
Company’s audited consolidated financial statements as of and for the year ended
August 29, 2008, which are included in the Annual Report on Form 10-K filed with
the Securities and Exchange Commission (SEC).





The
accompanying unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and operations located
in Phoenix, Arizona; Newark, California; Irvine, California; Tewksbury,
Massachusetts; South Korea; Scotland; Puerto Rico; Malaysia; and
Brazil. All financial information for one of the Company’s subsidiaries,
SMART Modular Technologies Indústria de Componentes Eletrônicos Ltda. (SMART
Brazil) is included in the Company’s consolidated financial statements on a one
month lag.  All intercompany balances and transactions have been
eliminated upon consolidation.




The
preparation of unaudited condensed consolidated 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 and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates and assumptions.




Out
of Period Adjustment




During
the second quarter of fiscal 2009, the Company recorded one adjustment to net
sales and one adjustment to cost of sales, which adjustments represented
corrections of immaterial prior period errors in current liabilities. Each
adjustment was less than $0.5 million and together resulted in a net decrease to
net loss of $0.2 million during the second quarter of fiscal 2009.




Product and
Service Revenue




The
Company recognizes revenue in accordance with the SEC Staff Accounting Bulletin
(SAB) No. 104, Revenue
Recognition (“SAB 104”). Under SAB 104, product revenue is recognized
when persuasive evidence of an arrangement exists, product delivery has
occurred, the sales price is fixed or determinable, and collectibility is
reasonably assured. Product revenue typically is recognized at the time of
shipment or when the customer takes title of the goods. All amounts billed to a
customer related to shipping and handling are classified as sales, while all
costs incurred by the Company for shipping and handling are classified as cost
of sales.




In
addition, the Company has transactions with select customers that are accounted
for on an agency basis (that is, the Company recognizes the net profit
associated with serving as an agent with no associated cost of sales) in
accordance with Emerging Issues Task Force (EITF) Issue No. 99-19, Reporting Revenue Gross as a Principal versus
Net as an Agent. The Company provides procurement, logistics, inventory
management and temporary warehousing, kitting or packaging services for these
customers. Revenue from these arrangements is recognized as service revenue and
is based on material procurement costs plus a fee for services provided. The
Company recognizes service revenue upon the completion of the services,
typically upon shipment of the product. There are no post-shipment obligations
subsequent to shipment of the product. Gross amounts billed to customers for
service transactions totaled approximately $144.0 million and $216.9 million for
the three months ended May 29, 2009 and May 30, 2008, respectively. Total
service revenue recorded for the three months ended May 29, 2009 and May 30,
2008 amounted to approximately $8.0 million and $9.7 million, respectively.
Gross amounts billed to customers for service transactions totaled approximately
$495.0 million and $691.1 million for the nine months ended May 29, 2009 and May
30, 2008, respectively. Total service revenue recorded for the nine months ended
May 29, 2009 and May 30, 2008 amounted to approximately $28.8 million and $31.6
million, respectively.




7


Recent
Accounting Pronouncements




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurement. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value under generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS
No. 157 does not require any new fair value measurements. SFAS No. 157
is effective for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. However, in February 2008, the FASB issued
FASB Staff Positions (“FSP”) 157-1 and 157-2. FSP 157-1 amends SFAS No. 157
to exclude SFAS No. 13, Accounting for Leases, and
its related interpretive accounting pronouncements that address leasing
transactions, while FSP 157-2 delays the effective date of the application of
SFAS No. 157 to fiscal years beginning after November 15, 2008 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).





The
Company adopted SFAS No. 157 as of August 30, 2008, with the exception of
the application of the statement to non-recurring nonfinancial assets and
nonfinancial liabilities. The Company elected the one-year deferral option and
thus will not apply the provisions of SFAS No. 157 to nonfinancial assets
and nonfinancial liabilities that are recognized at fair value in the financial
statements on a non-recurring basis until the fiscal year beginning August 29,
2009. Non-recurring nonfinancial assets and nonfinancial liabilities for which
the Company has not applied the provisions of SFAS No. 157 include those
measured at fair value in goodwill impairment testing, intangible assets
measured at fair value for impairment, and those initially measured at fair
value in a business combination.





SFAS
No. 157 establishes a valuation hierarchy for disclosure of the inputs to
valuation used to measure fair value. This hierarchy prioritizes the inputs into
three broad levels as follows.





Level 1:
Quoted market prices in active markets for identical assets or
liabilities





Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data





Level 3:
Unobservable inputs that are not corroborated by market data





The
adoption of SFAS No. 157 did not have a material impact on our consolidated
results of operations and financial condition.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”).  SFAS 159
permits companies to choose to measure certain financial instruments and certain
other items at fair value.  SFAS 159 requires that unrealized gains
and losses on items for which the fair value option has been elected be reported
in earnings.  SFAS 159 also establishes presentation and disclosure
requirements designed to draw comparisons between the different measurement
attributes the Company elects for similar types of assets and
liabilities.  The provisions of SFAS 159 are effective for financial
statements issued for fiscal years beginning after November 15,
2007.  SFAS 159 became effective for the Company beginning in the
first quarter of fiscal 2009.  The Company has elected the option not
to measure eligible financial instruments at fair value allowable under SFAS 159
and believes that this election did not have a material impact on its financial
position or results of operations.





In June
2007, the FASB ratified EITF Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities. EITF 07-3 requires non-refundable advance
payments to acquire goods or pay for services that will be consumed or performed
in a future period in conducting R&D activities should be recorded as an
asset and recognized as an expense when the R&D activities are performed.
EITF 07-3 has been applied prospectively to new contractual arrangements entered
into beginning in fiscal 2009. The adoption of EITF 07-3 did not have a material
impact on our consolidated results of operations and financial
condition.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141R”).  SFAS 141R establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree.  SFAS 141R also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.  The provisions of SFAS 141R are effective for financial
statements issued for fiscal years beginning on or after December 15,
2008.  SFAS 141R will be applied to business combinations occurring
after the effective date and the Company will apply SFAS 141R as of that
time. Early adoption is not permitted.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research
Bulletin No. 51 (“SFAS 160”).  SFAS 160 will change the accounting and
reporting of minority interests, which will be recharacterized as noncontrolling
interests and classified as a component of equity.  The provisions of
SFAS 160 are effective for financial statements issued for fiscal years
beginning after December 15, 2008.  SFAS 160 is effective for the
Company beginning in the first quarter of fiscal 2010.  Early adoption
is not permitted.  The adoption of SFAS 160 is not expected to have a
significant effect on the Company’s financial position or results of
operations.





In March
2008, the FASB issued SFAS No. 161, Disclosure about Derivative
Instruments and Hedging Activities (“SFAS 161”).  SFAS 161
requires additional disclosures related to the use of derivative instruments,
the accounting for derivatives and how derivatives impact financial
statements.  The provisions of SFAS 161 are effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.  SFAS 161 is effective for the Company beginning the first
fiscal quarter of fiscal 2010 and the Company will apply SFAS 161 as of that
time.


8


In April
2008 the FASB issued FSP No. 142-3, Determination of the Useful Life of
Intangible Assets, or FSP 142-3, which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS 142.
This pronouncement requires enhanced disclosures concerning a company’s
treatment of costs incurred to renew or extend the term of a recognized
intangible asset. FSP 142-3 is effective for financial statements issued
for fiscal years beginning after December 15, 2008. The Company is
currently evaluating the impact of FSP 142-3, and does not expect the
adoption to have a material impact on our consolidated results of operations and
financial condition.





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  SFAS 162 identifies the
sources of accounting principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the U.S. (the GAAP
hierarchy). SFAS 162 is effective 60 days following the SEC approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles.  The
Company currently adheres to the GAAP hierarchy as presented in SFAS 162, and
does not expect its adoption will have a material impact on its consolidated
results of operations and financial condition.


In April
2009, the FASB issued three related FSP: (i) FSP FAS No. 115-2 and FAS No.
124-2, Recognition of
Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2 and FAS
124-2”), (ii) FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”)
No. 28-1, Interim Disclosures
about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB
28-1”), and (iii) FSP FAS No. 157-4, Determining the Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (“FSP
FAS 157-4), which are effective for interim and annual reporting periods ending
after June 15, 2009 and will be effective for us beginning in the fourth quarter
of fiscal 2009. FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to modify the requirement
for recognizing other-than-temporary impairments, change the existing impairment
model, and modify the presentation and frequency of related disclosures. FSP FAS
107-1 and APB 28-1 require disclosures about fair value of financial instruments
for interim reporting periods as well as in annual financial statements. FSP FAS
157-4 provides additional guidance for estimating fair value in accordance with
SFAS No. 157, Fair Value
Measurements. The Company is currently evaluating the impact of adopting
these Staff Positions, but does not expect the adoption to have a material
impact on our consolidated results of operations and financial
condition.




In May
2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS
165”).  SFAS 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. SFAS 165 will be effective in our fourth
quarter of fiscal 2009.  The Company does not expect the adoption of
SFAS 165 to have a material impact on our consolidated results of operations and
financial condition.





NOTE
2 - Stock-Based Compensation





Stock
Options





The
Company’s equity incentive plan provides for grants of options to employees and
independent directors of the Company to purchase (upon vesting) the Company’s
ordinary shares at the fair value of such shares on the grant date. The options
generally vest over a four-year period beginning on the grant date and have a
10-year term. As of May 29, 2009, there were 10,985,968 ordinary shares reserved
for issuance under this plan, of which 1,925,434 ordinary shares represents the
number of shares available for grant.




Prior to
fiscal 2006, the Company accounted for its stock-based compensation plan using
the intrinsic value method prescribed in APB Opinion No. 25, Accounting for Stock Issued to
Employees,and related pronouncements. Under this method, compensation
expense was recorded only if the deemed fair value of the underlying shares
exceeded the exercise price on the date of grant. Deferred stock-based
compensation expense is amortized on a straight-line basis over the vesting
period of each grant, generally four years.




On August
27, 2005 (effective date), the Company adopted the FASB’s SFAS No. 123R, Share-Based Payment, applying
the prospective method, in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of SFAS No. 123R for all
share-based payments granted or modified after the effective date and (b) based
on the requirements of the intrinsic value method as prescribed in APB 25, and
related interpretations, for all awards granted to employees prior to the
effective date of SFAS No. 123R that remain unvested on the effective date. The
Company adopted SFAS No. 123R prospectively because, prior to the period of
adoption, it was a non-public entity that used the minimum value method for pro
forma disclosure under the provisions of SFAS No. 123, and applied APB 25 for
recognition purposes.




9


Restricted
Stock Units (RSUs)
  The Company’s equity incentive plan also provides for grants of RSUs, and,
beginning with the first quarter of fiscal 2009, the Company began issuing
performance-based and timed-based RSUs.  Generally, under the terms of
each RSU agreement, RSUs vest over a one year period and are subject to the
employee’s continuing service to the Company.  In accordance with SFAS
No. 123R, the cost of each RSU is determined using the fair value ofthe Company’s ordinary shares on the date of grant.
The compensation cost is recognized over two years: the first year is the period
during which certain predetermined performance goals must be achieved and the second
year is the one year service period required once the performance goals have
been achieved.  Performance-based RSUs are granted upon the Company’s
achievement of certain predetermined financial goals and satisfaction of the one year service
period.  The Company estimates the likelihood of such
performance goals being achieved and recognizes the related stock-based
compensation cost for each reporting period, if any.  The amount of
stock-based compensation expense recognized in any one period can vary based onthe achievement or anticipated achievement of the performance
goals.  If such performance goals are not met or are not expected to
be met, then no compensation cost is recognized and any previously recognized
compensation expense is reversed.  The weighted average grant date
fair value of the 5,000 time-based RSUs granted during the three months ended
November 28, 2008 was $2.84 per RSU.  There were no RSUs granted
during the three months ended May 29, 2009.  There were no stock-based
compensation cost related to the performance-based RSUs for the three and nine
months ended May 29, 2009.  As of May 29, 2009, there were 5,000
non-vested time-based RSUs outstanding and 75,000 performance-based RSUs
forfeited (unissued).


Summary of Assumptions and Activity


The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model that uses the assumptions noted in the
following table. Expected volatility for the nine months ended May 29, 2009 is
based on the historical volatility of the Company’s ordinary shares, as well as
the common stock of comparable publicly traded companies. The expected term of
options granted represents the weighted average period of time that options
granted are expected to be outstanding giving consideration to vesting schedules
and our historical exercise patterns. The risk-free rate for the expected term
of the option is based on the average U.S. Treasury yield curve at the date of
grant. During the three months ended May 29, 2009, there was an increase in the
Company’s expected forfeiture rate due to headcount reductions over the last
fiscal year.


The
following assumptions were used to value stock options:


Nine
      Months
                        Ended
                        May 29, 2009
                      
                      
                      Nine
      Months
                        Ended
                        May 30, 2008Stock
      options:Expected
      term (years)
                      
                      
                      5.3
                      
                      
                      
                      5.1Expected
      volatility
                      
                      
                      58
                      %
                      
                      
                      51
                      %Risk-free
      interest rate
                      
                      
                      2.01
                      %
                      
                      
                      3.58
                      %Expected
      dividends
                      
                      
                      —
                      
                      
                      
                      —





A summary
of option activity as of and for the nine months ended May 29, 2009, is
presented below (dollars and shares in thousands, except per share
data):





Shares
                                                                              
                                                                              
                                                                              Weighted
                                                                                Average
                                                                                Exercise
                                                                                Price
                                                                              
                                                                              
                                                                              Weighted
                                                                                Average
                                                                                Remaining
                                                                                Contractual
                                                                                Term
                                                                                (Years)
                                                                              
                                                                              
                                                                              Aggregate
                                                                                Intrinsic
                                                                                ValueOptions
      outstanding as of August 29, 2008
                                                                              
                                                                              
                                                                              8,458
                                                                              
                                                                              
                                                                              $
                                                                              5.72Options
      granted
                                                                              
                                                                              
                                                                              2,146
                                                                              
                                                                              
                                                                              
                                                                              2.78Options
      exercised
                                                                              
                                                                              
                                                                              (432
                                                                              )
                                                                              
                                                                              
                                                                              1.15Options
      forfeited or cancelled
                                                                              
                                                                              
                                                                              (1,041
                                                                              )
                                                                              
                                                                              
                                                                              7.42Options
      outstanding as of May 29, 2009
                                                                              
                                                                              
                                                                              9,131
                                                                              
                                                                              
                                                                              $
                                                                              5.05
                                                                              
                                                                              
                                                                              
                                                                              7.2
                                                                              
                                                                              
                                                                              $
                                                                              5,078Options
      exercisable as of May 29, 2009
                                                                              
                                                                              
                                                                              5,059
                                                                              
                                                                              
                                                                              $
                                                                              4.61
                                                                              
                                                                              
                                                                              
                                                                              6.0
                                                                              
                                                                              
                                                                              $
                                                                              4,905Options
      vested and expected to vest as of May 29, 2009
                                                                              
                                                                              
                                                                              8,556
                                                                              
                                                                              
                                                                              $
                                                                              5.03
                                                                              
                                                                              
                                                                              
                                                                              7.1
                                                                              
                                                                              
                                                                              $
                                                                              5,051





The
Black-Scholes weighted average fair value of options granted during the three
months ended May 29, 2009 and May 30, 2008 was $1.39 and $3.06 per option,
respectively.  The Black-Scholes weighted average fair value of
options granted during the nine months ended May 29, 2009 and May 30, 2008 was
$1.44 and $3.46 per option, respectively. The total intrinsic value of stock
options exercised during the nine months ended May 29, 2009 and May 30, 2008 was
approximately $0.4 million and $4.2 million, respectively. Upon the exercise of
options, the Company issues ordinary shares from its authorized
shares.  Total SFAS No. 123R compensation expense recognized for the
three months ended May 29, 2009 and May 30, 2008 was approximately $1.5 million
and $1.9 million, respectively.  Total SFAS No. 123R compensation
expense recognized for the nine months ended May 29, 2009 and May 30, 2008 was
approximately $5.1 million and $5.4 million, respectively.


10


A summary
of the status of the Company’s non-vested stock options as of May 29, 2009, and
changes during the nine months ended May 29, 2009, is presented below (dollars
and shares in thousands, except per share data):





Shares
                                              
                                              
                                              Weighted
      Average
                                                Grant
      Date Fair
                                                Value Per ShareNon-vested
      stock options as of August 29, 2008
                                              
                                              
                                              4,328
                                              
                                              
                                              $
                                              4.38Stock
      options granted
                                              
                                              
                                              2,146
                                              
                                              
                                              
                                              1.44Vested
      stock options
                                              
                                              
                                              (1,361
                                              )
                                              
                                              
                                              3.61Forfeited
      or cancelled stock options
                                              
                                              
                                              (1,041
                                              )
                                              
                                              
                                              3.56Non-vested
      stock options as of May 29, 2009
                                              
                                              
                                              4,072
                                              
                                              
                                              $
                                              3.08





As of May
29, 2009, there was approximately $14.6 million of total unrecognized
compensation expense related to stock option compensation arrangements, which is
expected to be recognized over the weighted average period of 2.7 years. The
total fair value of shares underlying stock options vested during the nine
months ended May 29, 2009 was approximately $4.9 million.





Share
Repurchase Program





In March
2009, our Board of Directors authorized a share repurchase program of up to
$10.0 million of our ordinary shares.  We intend to repurchase (and
have repurchased) shares using our available cash.  In April 2009, the
Company entered into a Rule 10b5−1 trading plan (“Plan”) with a broker to
repurchase ordinary shares based on pre-defined terms and
conditions.  Except as set forth in the Plan, the timing, duration,
and the exact number of additional shares to be purchased will be at the
Company’s discretion.  Under the repurchase program, depending on
price, regulatory requirements, market conditions and other factors, shares may
be purchased on the open market or in privately negotiated
transactions.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice. During the three
months ended May 29, 2009, we repurchased approximately forty-five thousand
of our ordinary shares through open market repurchases at an average price of
$1.82 per share for a total of approximately $0.1 million.  As of May
29, 2009, the remaining balance available for future share repurchases was $9.9
million under our share repurchase program.




NOTE
3 — Goodwill and Other Intangible Assets, net





In
accordance with SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”), the Company performs a goodwill impairment test of
its two reporting units (Memory, Embedded, & Display reporting unit and
Adtron reporting unit) annually during the fourth quarter of its fiscal year and
more frequently if an event or circumstance indicates that an impairment may
have occurred. Such events or circumstances may include significant adverse
changes in the general business climate, among others. The test is performed by
determining the fair value of the reporting unit based on estimated discounted
future cash flows, considering the market price of the Company’s ordinary
shares, and comparing the fair value to the carrying value of the reporting
unit, including goodwill.




If the
fair value of each reporting unit is less than its carrying value, the Company
then allocates the fair value of the unit to all the assets and liabilities of
the unit (including any unrecognized intangible assets) as if the reporting
unit’s fair value was the purchase price to acquire the reporting unit. The
excess of the fair value of the reporting unit over the amounts assigned to its
assets and liabilities is the implied fair value of the goodwill. If the
carrying amount of the reporting unit’s goodwill exceeds the implied fair value
of that goodwill, an impairment loss is recognized in an amount equal to that
excess.





As part
of the purchase of Adtron Corporation on March 3, 2008, the Company agreed to
pay earn-out consideration of up to $15.0 million to the sellers if the Adtron
Segment achieved two financial goals and one operational goal by December 31,
2008.  In December 2008, we paid $1.5 million for an operational goal
that had been achieved.  In the second quarter of fiscal 2009, the
Company provided to the sellers a good faith calculation of the remaining
earn-out consideration that would be potentially payable.  Based on
such calculation, we recorded $4.0 million in the second quarter of fiscal 2009.
Of the $4.0 million accrued, the effect of which increased the purchase price,
the Company recorded $3.2 million to impairment of goodwill and the remaining
$0.8 million to general and administrative expenses in the condensed
consolidated statement of operations for the nine months ended May 29,
2009.  In the third quarter of fiscal 2009, the Company reached an
agreement with the sellers to settle the remaining earn-out for an additional
$1.1 million which the Company recorded as goodwill, and we paid the sellers a
total of $5.1 million in May 2009.  No additional earn-out contingent
consideration remains in connection with the Adtron acquisition.




During
the first quarter of fiscal 2009, a charge of $7.2 million of goodwill
impairment was recorded and subsequently during the second quarter, the Company
recorded an additional $3.2 million of goodwill impairment.  These
amounts were recorded in the condensed consolidated statement of operations for
the nine months ended May 29, 2009.  In the third quarter of fiscal
2009, the Company recorded $1.1 million in goodwill related to the final
settlement of earn out consideration in connection with the Adtron
acquisition.  The Company conducted an impairment test of this $1.1
million remaining goodwill during the third quarter of fiscal 2009 and
determined that goodwill from its Adtron reporting unit was not
impaired.  In addition, the Company
conducted an impairment test of its intangible and other
long-lived assets as of May 29, 2009 in accordance with SFAS No.
144, Accounting for the
Impairment or Disposal of Long-Lived Assets, and found no impairment of
intangible and other long-lived assets.


11


Presented
below are the changes in the Company’s goodwill by reporting segment for the
nine months ended May 29, 2009 (in thousands):





August
      29, 2008
                                                      
                                                      
                                                      Acquisition
                                                      
                                                      (Impairment)
                                                      
                                                      May
      29, 2009Reporting
      unit:Memory,
      Embedded, & Display
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —Adtron
                                                      
                                                      
                                                      7,210
                                                      
                                                      
                                                      
                                                      4,267
                                                      
                                                      
                                                      
                                                      (10,416
                                                      )
                                                      
                                                      
                                                      1,061Total
      Goodwill
                                                      
                                                      $
                                                      7,210
                                                      
                                                      
                                                      $
                                                      4,267
                                                      
                                                      
                                                      $
                                                      (10,416
                                                      )
                                                      
                                                      $
                                                      1,061




The
following table summarizes the gross amounts and accumulated amortization of
other intangible assets from the Adtron acquisition by type as of August 29,
2008 and May 29, 2009 (in thousands):





Weighted
      Avg. Life (years)
                                                                
                                                                
                                                                Fair
      Value at Date of Acquisition
                                                                
                                                                
                                                                Accumulated
      Amortization
                                                                
                                                                Carrying
      Value at August 29, 2008Amortized
      intangible assets:Leasehold
      interest
                                                                
                                                                
                                                                3
                                                                
                                                                
                                                                $
                                                                260
                                                                
                                                                
                                                                $
                                                                41
                                                                
                                                                $
                                                                219Product
      names
                                                                
                                                                
                                                                9
                                                                
                                                                
                                                                
                                                                60
                                                                
                                                                
                                                                
                                                                3
                                                                
                                                                
                                                                57Customer
      relationships
                                                                
                                                                
                                                                10
                                                                
                                                                
                                                                
                                                                3,700
                                                                
                                                                
                                                                
                                                                185
                                                                
                                                                
                                                                3,515Non-compete
      agreement
                                                                
                                                                
                                                                2
                                                                
                                                                
                                                                
                                                                220
                                                                
                                                                
                                                                
                                                                55
                                                                
                                                                
                                                                165Company
      trade name
                                                                
                                                                
                                                                20
                                                                
                                                                
                                                                
                                                                2,040
                                                                
                                                                
                                                                
                                                                51
                                                                
                                                                
                                                                1,989Technology
                                                                
                                                                
                                                                7
                                                                
                                                                
                                                                
                                                                2,800
                                                                
                                                                
                                                                
                                                                200
                                                                
                                                                
                                                                2,600Total
                                                                
                                                                
                                                                11
                                                                
                                                                
                                                                $
                                                                9,080
                                                                
                                                                
                                                                $
                                                                535
                                                                
                                                                $
                                                                8,545





Weighted
      Avg. Life (years)
                                                        
                                                        
                                                        Fair
      Value at Date of Acquisition
                                                        
                                                        
                                                        Accumulated
      Amortization
                                                        
                                                        Carrying
      Value at May 29, 2009Amortized
      intangible assets:Leasehold
      interest
                                                        
                                                        
                                                        3
                                                        
                                                        
                                                        $
                                                        260
                                                        
                                                        
                                                        $
                                                        101
                                                        
                                                        $
                                                        159Product
      names
                                                        
                                                        
                                                        9
                                                        
                                                        
                                                        
                                                        60
                                                        
                                                        
                                                        
                                                        8
                                                        
                                                        
                                                        52Customer
      relationships
                                                        
                                                        
                                                        10
                                                        
                                                        
                                                        
                                                        3,700
                                                        
                                                        
                                                        
                                                        462
                                                        
                                                        
                                                        3,238Non-compete
      agreement
                                                        
                                                        
                                                        2
                                                        
                                                        
                                                        
                                                        220
                                                        
                                                        
                                                        
                                                        138
                                                        
                                                        
                                                        82Company
      trade name
                                                        
                                                        
                                                        20
                                                        
                                                        
                                                        
                                                        2,040
                                                        
                                                        
                                                        
                                                        128
                                                        
                                                        
                                                        1,912Technology
                                                        
                                                        
                                                        7
                                                        
                                                        
                                                        
                                                        2,800
                                                        
                                                        
                                                        
                                                        500
                                                        
                                                        
                                                        2,300Total
                                                        
                                                        
                                                        11
                                                        
                                                        
                                                        $
                                                        9,080
                                                        
                                                        
                                                        $
                                                        1,337
                                                        
                                                        $
                                                        7,743




Amortization
expense related to identifiable intangible assets totaled approximately $0.3
million and $0.8 million for the three and nine months ended May 29, 2009,
respectively. Amortization expense related to identifiable intangible assets
total approximately $0.3 million for the three and nine months ended May 30,
2008. Acquired intangibles with definite lives are amortized on a straight-line
basis over the remaining estimated economic life of the underlying intangible
assets.


Estimated
amortization expenses of these intangible assets for the next five fiscal years
and all years thereafter are as follows (in thousands):





Estimated
      Amortization Expense:Remainder
      of 2009
                          
                          $
                          2682010
                          
                          
                          1,0152011
                          
                          
                          9362012
                          
                          
                          8792013
                          
                          
                          879Thereafter
                          
                          
                          3,766Total
                          
                          $
                          7,743


12




NOTE
4 — Net Income (Loss) Per Share




Basic net
income (loss) per ordinary share is calculated by dividing net income (loss) by
the weighted average of ordinary shares outstanding during the period. Diluted
net income (loss) per ordinary share is calculated by dividing the net income
(loss) by the weighted average ordinary shares and dilutive potential ordinary
shares outstanding during the period. Dilutive potential ordinary shares consist
of dilutive shares issuable upon the exercise of outstanding stock options and
vesting of restricted stock units (RSUs) computed using the treasury stock
method.




The
following table sets forth for all periods presented the computation of basic
and diluted net income (loss) per ordinary share, including the reconciliation
of the numerator and denominator used in the calculation of basic and diluted
net income (loss) per share (dollars and shares in thousands, except per share
data):





Three
      Months
                                                                                        Ended
                                                                                        May
      29,
                                                                                        2009
                                                                                      
                                                                                      
                                                                                      Three
      Months
                                                                                        Ended
                                                                                        May
      30,
                                                                                        2008
                                                                                      
                                                                                      
                                                                                      Nine
      Months
                                                                                        Ended
                                                                                        May
      29,
                                                                                        2009
                                                                                      
                                                                                      
                                                                                      Nine
      Months
                                                                                        Ended
                                                                                        May
      30,
                                                                                        2008Numerator:Net
      income (loss)
                                                                                      
                                                                                      $
                                                                                      (2,386
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (11,003
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (11,114
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      12,502Denominator:Weighted
      average ordinary shares
                                                                                      
                                                                                      
                                                                                      61,743
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,027
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,645
                                                                                      
                                                                                      
                                                                                      
                                                                                      60,864Less:
      Weighted average unvested RSUs subject to repurchase
                                                                                      
                                                                                      
                                                                                      (5
                                                                                      )
                                                                                      
                                                                                      
                                                                                      —
                                                                                      
                                                                                      
                                                                                      
                                                                                      (5
                                                                                      )
                                                                                      
                                                                                      
                                                                                      —Shares
      used in computing basic net income (loss) per share
                                                                                      
                                                                                      
                                                                                      61,738
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,027
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,640
                                                                                      
                                                                                      
                                                                                      
                                                                                      60,864Effect
      of dilutive securities:Stock
      options
                                                                                      
                                                                                      
                                                                                      —
                                                                                      
                                                                                      
                                                                                      
                                                                                      —
                                                                                      
                                                                                      
                                                                                      
                                                                                      —
                                                                                      
                                                                                      
                                                                                      
                                                                                      2,742Total
      ordinary shares, diluted
                                                                                      
                                                                                      
                                                                                      61,738
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,027
                                                                                      
                                                                                      
                                                                                      
                                                                                      61,640
                                                                                      
                                                                                      
                                                                                      
                                                                                      63,606Net
      income (loss) per ordinary share, basic
                                                                                      
                                                                                      $
                                                                                      (0.04
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.18
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.18
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      0.21Net
      income (loss) per ordinary share, diluted
                                                                                      
                                                                                      $
                                                                                      (0.04
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.18
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.18
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      0.20




For
the computation of net loss per share for the three and nine months ended May
29, 2009, the Company excluded 9,188,659 and 9,482,854 stock options from the
calculation of the net loss per share, respectively, as their inclusion would
have been anti-dilutive.  For the computation of net loss per share
for the three and nine months ended May 30, 2008 , respectively, the
Company excluded options totaling 8,260,257 and 4,376,797 shares from the
calculation of the net loss per share as their inclusion would have been
anti-dilutive.








NOTE
5 — Inventories




Inventories
consist of the following as of May 29, 2009 and August 29, 2008 (in
thousands):




May
      29,
                                        2009
                                      
                                      
                                      August
      29,
                                        2008Raw
      materials
                                      
                                      $
                                      18,257
                                      
                                      
                                      $
                                      28,122Work-in
      process
                                      
                                      
                                      3,024
                                      
                                      
                                      
                                      4,899Finished
      goods
                                      
                                      
                                      32,702
                                      
                                      
                                      
                                      29,409$
                                      53,983
                                      
                                      
                                      $
                                      62,430




NOTE
6 — Income Taxes




The provision for income tax expense is summarized as follows (in
thousands):




Three
      Months
                                                                  Ended
                                                                  May
      29,
                                                                  2009
                                                                
                                                                
                                                                Three
      Months
                                                                  Ended
                                                                  May
      30,
                                                                  2008
                                                                
                                                                
                                                                Nine
      Months
                                                                  Ended
                                                                  May
      29,
                                                                  2009
                                                                
                                                                Nine
      Months
                                                                  Ended
                                                                  May
      30,
                                                                  2008Current
                                                                
                                                                $
                                                                371
                                                                
                                                                
                                                                $
                                                                2,747
                                                                
                                                                
                                                                $
                                                                3,850
                                                                
                                                                $
                                                                6,942Deferred
                                                                
                                                                
                                                                (3
                                                                )
                                                                
                                                                
                                                                9,644
                                                                
                                                                
                                                                
                                                                (42
                                                                )
                                                                
                                                                9,669Total
                                                                
                                                                $
                                                                368
                                                                
                                                                
                                                                $
                                                                12,391
                                                                
                                                                
                                                                $
                                                                3,808
                                                                
                                                                $
                                                                16,611




13


Worldwide income (loss) before provision for income taxes for the three and nine
months ended May 29, 2009 and May 30, 2008, consisted of the following
components (in thousands):




Three
      Months
                                                                    Ended
                                                                    May
      29,
                                                                    2009
                                                                  
                                                                  
                                                                  Three
      Months
                                                                    Ended
                                                                    May
      30,
                                                                    2008
                                                                  
                                                                  
                                                                  Nine
      Months
                                                                    Ended
                                                                    May
      29,
                                                                    2009
                                                                  
                                                                  Nine
      Months
                                                                    Ended
                                                                    May
      30,
                                                                    2008U.S.
      loss
                                                                  
                                                                  $
                                                                  (2,515
                                                                  )
                                                                  
                                                                  $
                                                                  (9,978
                                                                  )
                                                                  
                                                                  $
                                                                  (22,902
                                                                  )
                                                                  $
                                                                  (16,105
                                                                  )Non-U.S.
      income
                                                                  
                                                                  
                                                                  497
                                                                  
                                                                  
                                                                  
                                                                  11,366
                                                                  
                                                                  
                                                                  
                                                                  15,596
                                                                  
                                                                  
                                                                  45,218Total
                                                                  
                                                                  $
                                                                  (2,018
                                                                  )
                                                                  
                                                                  $
                                                                  1,388
                                                                  
                                                                  
                                                                  $
                                                                  (7,306
                                                                  )
                                                                  $
                                                                  29,113





The effective tax rates for the three months ended May 29, 2009 and May 30, 2008
were approximately (18%), representing tax expense and a pre-tax loss, and 893%
(including a $9.6 million increase in the valuation allowance on U.S. deferred
tax assets), respectively.  The effective tax rates for the nine months
ended May 29, 2009 and May 30, 2008 were approximately (52%) and 57%
respectively.  The effective tax rates differ from the 35% U.S.
statutory tax rate principally due to losses in the United States generating no
tax benefit (due to the full valuation allowance on U.S. deferred tax assets)
and the write-downs of non-deductible goodwill of $10.4 million for the nine
months ended May 29, 2009.  The losses in the United States and write-downs
of non-deductible goodwill increasing the effective tax rate were partially
offset by a lower effective tax rate on profits being generated in non-U.S. tax
jurisdictions.




On September 1, 2007, the Company adopted FIN No. 48, which clarifies the
accounting for uncertainty in income tax positions recognized in accordance with
SFAS No. 109.  The adoption of FIN No. 48 had no material effect on
the financial statements.  The Company recognized a $0.2 million net
decrease in liabilities for unrecognized tax benefits, which was accounted for
as an increase to the September 1, 2007 balance of retained
earnings.  This adjustment was the cumulative effect of applying an
enhanced measurement standard in accounting for uncertainty in income taxes
under FIN No. 48 and was reported as an adjustment to the opening balance of
retained earnings in the Condensed Consolidated Balance Sheet for fiscal
2008.




As of May 29, 2009, the Company evaluated its valuation allowance in accordance
with SFAS No. 109 to determine if a change in circumstances caused a change in
judgment regarding the realization of deferred tax assets in future years. 
The Company has a cumulative loss for the current year plus the two preceding
years for the U.S.  A cumulative loss in recent years within the U.S.
represents significant evidence in evaluating the need for a valuation allowance
on U.S. net deferred tax assets.  As a result, the Company continues
to record a full valuation allowance on its U.S. deferred tax
assets.





NOTE
7 – Indebtedness




On November 26, 2008, the
First Amendment to Second Amended and Restated Loan and Security Agreement (the
"Amendment") was entered into by and among SMART Modular Technologies, Inc.,
SMART Modular Technologies (Europe) Limited, and SMART Modular Technologies
(Puerto Rico) Inc., as borrowers, and Wells Fargo Bank, National Association, as
lender, arranger, administrative agent and security trustee (“WF Credit
Facility”). Under the Amendment, certain changes were made to the Second Amended
and Restated Loan and Security Agreement dated April 30, 2007 to, among other
things, (i) decrease the amount available for borrowing by $15 million, from $50
million to $35 million (of which $10 million instead of $30 million may be in
the form of letters of credit), (ii) modify the calculation and levels of
certain financial covenants, (iii) modify the fees payable, (iv) modify the
calculation of, and increase, the interest rates applicable to loans and other
amounts outstanding, (v) further limit Restricted Payments, and (vi) limit
voluntary repayment and/or retirement of subordinated debt issued by the
Company. The amended financial covenants require that the borrowers maintain, as
of the end of each fiscal quarter, an Adjusted Quick Ratio equal to or greater
than 1.45, and, depending on the applicable fiscal quarter and based on the
preceding four fiscal quarters then ended, (i) an Adjusted EBITDA equal to or
greater than $30 million to $45 million, and (ii) a Funded Debt to Adjusted
EBITDA Ratio equal to or less than 2.25 to 3.00. The Base Rate Margin and LIBOR
Rate Margin were increased to 2% and 3%, respectively. As of May 29, 2009, the
revolving credit facility was undrawn and had available borrowing capacity of
$35 million and the Company was in compliance with its covenants under the
revolving credit facility.  This credit facility is available until
April 30, 2010, unless earlier terminated or a default occurs. Based on current
projections, it is probable that we will not meet the WF Credit Facility
covenants requiring an adjusted EBITDA equal to or greater than $35 million or a
Funded Debt to adjusted EBITDA ratio equal to or lower than 2.5 as of the end of
our fourth fiscal quarter, August 28, 2009.  If we do not meet either
covenant or any other specified financial ratio or financial condition test,
then we will be unable to borrow under the WF Credit Facility.  We
have not borrowed under the WF Credit Facility since November 2007 and,
given our cash position and our anticipated operating cash flow,we have no plans to
utilize the WF Credit Facility before it expires on April 30,
2010.We are
in discussions with Wells Fargo and evaluating various alternatives.


As of May
29, 2009, the senior secured floating rate notes due on April 2012 (the Notes)
had a balance of $81.3 million.




14


NOTE
8 — Financial Instruments




Fair
Value of Financial Instruments




The fair
value of the Company’s cash, cash equivalents, accounts receivable, accounts
payable and Wells Fargo credit facility approximates the carrying amount due to
the relatively short maturity of these items. Cash and cash equivalents consist
of funds held in general checking accounts, money market accounts, certificates
of deposits and investments in securities with an original maturity on the date
of purchase of three months or less.  The Company does not have
investments in variable rate demand notes or auction rate
securities.




In
accordance with SFAS 157, the following table represents the Company’s fair
value hierarchy for our certain assets and liabilities measured at fair value on
a recurring basis (in millions) as of May 29, 2009:





Quoted
      Prices in Active Markets for Identical Assets or Liabilities
                                                                    Level
      1
                                                                  
                                                                  
                                                                  Observable/
                                                                    Unobservable
      Inputs Corroborated by Market Data
                                                                    Level
      2
                                                                  
                                                                  
                                                                  Significant
      Unobservable Inputs Not Corroborated by Market Data
                                                                    Level
      3
                                                                  
                                                                  TotalAssets:Money
      market funds (1)
                                                                  
                                                                  $
                                                                  84.4
                                                                  
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  $
                                                                  84.4Certificates
      of deposit (1)
                                                                  
                                                                  
                                                                  10.0
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  10.0Liabilities:Non-current variable-to-fixed interest rate swap
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (1.5
                                                                  )
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  (1.5
                                                                  )Total
      (2)
                                                                  
                                                                  $
                                                                  94.4
                                                                  
                                                                  
                                                                  $
                                                                  (1.5
                                                                  )
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  $
                                                                  92.9____________(1)
       Included in cash and cash equivalents on the Company’s Condensed
      Consolidated Balance Sheet.(2) 
      The total in Level 1 does not include $44.8 million of cash balances from
      checking and savings accounts.




Derivative
Instruments





The
Company has previously entered into two interest swap agreements (the Swaps),
one of which is expired and one of which is outstanding at May 29, 2009. The
expired Swap, which expired on April 1, 2008, was for approximately $41.3
million notional amount, and under its terms, the Company paid a fixed interest
rate of 9.78% related to such notional amount. The unexpired Swap is for
approximately $40.0 million notional amount, has an expiration date of April 28,
2010 and under its terms, the Company pays a fixed rate of 9.97% related to such
notional amount. The Company entered into the Swaps in order to hedge a portion
of its future cash flows against interest rate exposure resulting from the
Notes. In exchange, the Company receives interest income at a variable interest
rate equal to the 3-month LIBOR rate plus 5.50%. The Swaps essentially replaced
the variable interest rate on $81.3 million of the Notes with fixed interest
rates through the respective expiration dates. The remaining swap is accounted
for as cash flow hedges under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.





The total
fair value of the outstanding derivative instrument referred to above was a
liability of approximately $1.5 million and $1.0 million as of May 29, 2009 and
August 29, 2008, respectively.





For all
derivative transactions, the Company is exposed to counterparty credit risk. To
manage such risk, the Company limits its derivative transaction counterparties
to major financial institutions. The Company does not expect to experience any
material adverse financial consequences as a result of default by the Company’s
counterparties.




NOTE
9 — Commitments and Contingencies




Product
Warranty




Product
warranty reserves are established in the same period that revenue from the sale
of the related products is recognized, or in the period that a specific issue
arises as to the functionality of a Company’s product. The amounts of the
reserves are based on established terms and the Company’s best estimate of the
amounts necessary to settle future and existing claims on products sold as of
the balance sheet date.


15


The
following table reconciles the changes in the Company’s accrued warranty (in
thousands):





Nine
      Months Ended
                              May
      29, 2009Balance
      of accrual at August 29, 2008
                            
                            $
                            765Warranty
      claims
                            
                            
                            (678
                            )Provision
      for product warranties
                            
                            
                            482Balance
      of accrual at May 29, 2009
                            
                            $
                            569




Product
warranty reserves are recorded in accrued expenses and other current liabilities
in the accompanying unaudited condensed consolidated balance
sheets.




The
Company currently has in effect a number of agreements in which it has agreed to
defend, indemnify and hold harmless its customers and suppliers from damages and
costs which may arise from the infringement by its products of third-party
patents, trademarks or other proprietary rights. The Company believes its
internal development processes and other policies and practices limit its
exposure related to such indemnities. Maximum potential future payments cannot
be estimated because many of these agreements do not have a maximum stated
liability. However, to date, the Company has not had to reimburse any of its
customers or suppliers for any losses related to these indemnities. The Company
has not recorded any liability in its financial statements for such
indemnities.





Legal
Matters





From time
to time the Company is involved in disputes and litigation arising in the
ordinary course of business.  Litigation in general and intellectual
property and employment litigation in particular, can be expensive and
disruptive to normal business operations.  Moreover, the results of
complex legal proceedings are difficult to predict.  The Company
believes that it has defenses to the cases pending against it, including those
set forth below.  The Company is not currently able to estimate, with
reasonable certainty, the possible loss, or range of loss, if any, from the case
listed below, and accordingly no provision for any potential loss which may
result from the resolution of this matter has been recorded in the accompanying
unaudited condensed consolidated financial statements





Tessera,
Inc.




On
December 7, 2007, Tessera, Inc. filed a complaint under section 337 of the
Tariff Act of 1930 (“Tariff Act”), 19 U.S.C. § 1337, in the U.S.
International Trade Commission ("ITC") against the Company, as well as A-DATA
Technology Co., Ltd., A-DATA Technology (U.S.A.) Co., Ltd., Acer America Corp.,
Acer Inc., Centon Electronics, Inc., Elpida Memory, Inc., Elpida Memory (USA)
Inc., International Products Sourcing Group, Inc., Kingston Technology Co.,
Nanya Technology Corp., Nanya Technology Corp. U.S.A., Peripheral Devices &
Products Systems, Inc. d/b/a Patriot Memory, Powerchip Semiconductor Corp.,
ProMOS Technologies Inc., Ramaxel Technology Ltd., TwinMOS Technologies Inc.,
and Twin MOS Technologies USA Inc. (each a “Respondent” and collectively,
“Respondents”).  Tessera claims that "small-format Ball Grid Array
(“BGA”) semiconductor packages" and products containing such semiconductor
packages, including memory module products sold by the Company, infringe certain
claims of United States Patent Nos. 5,697,977, 6,133,627, 5,663,106 and
6,458,681 (the "Asserted Patents").  Tessera's Complaint requests that
the ITC institute an investigation into the matter.  Tessera has
requested the following relief in the ITC:





-  a
permanent general exclusion order pursuant to section 337(d)(2) of the Tariff
Act, as amended, excluding from entry into the U.S. all small-format BGA
semiconductor packaged DRAM chips (“BGA chips”) and products containing the same
that are manufactured, imported or sold for importation by or on behalf of
unlicensed entities and that infringe any claim of the Asserted Patents, and all
products (e.g., personal computers or “PCs”) that contain such infringing
small-format BGA chips;




-  a permanent exclusion order pursuant to section 337(d)(1) of the Tariff
Act, as amended, excluding from entry into the U.S. all semiconductor chips with
small-format BGA semiconductor packaging which are manufactured, imported or
sold for importation by or on behalf of Respondents and which infringe any claim
of the Asserted Patents, and all products (e.g., PCs) that contain such
infringing BGA chips; and





-  permanent
cease and desist orders—one per Respondent—pursuant to section 337(f) of the
Tariff Act, as amended, directing each Respondent having domestic inventories to
cease and desist from importing, marketing, advertising, demonstrating,
sampling, warehousing inventory for distribution, offering for sale, selling,
distributing, licensing, or using any semiconductor chips with small format BGA
semiconductor packaging and/or products containing such semiconductor chips,
that infringe any claim of the Asserted Patents.





16


On
January 3, 2008, the ITC instituted an investigation pursuant to 19 U.S.C. §
1337, entitled, “In the Matter of Certain Semiconductor Chips with Minimized
Chip Package Size and Products Containing Same (III)”, Inv.
No. 337-TA-630.  In May 2008, Tessera withdrew one of the four
Asserted Patents (U.S. Patent No. 6,458,681) from the ITC investigation in an
effort to streamline the case.  On May 29, 2008, the administrative
law judge set trial for September 22, 2008, which trial has been completed, and
ordered that an Initial Determination shall be due on January 14, 2009, and that
the target date for completing the investigation shall be April 24,
2009.  The deadline for the Initial Determination has been extended to
August 28, 2009 and the target date for completing the investigation has been
extended to December 29, 2009.  We believe that we have meritorious
defenses against Tessera’s claims, including the fact that over 95% of the
packaged DRAMs that SMART uses in its memory module products are purchased
(directly or indirectly) from DRAM manufacturers that Tessera acknowledges are
licensed under the Asserted Patents.





Tessera
also filed a parallel patent infringement claim in the Eastern District of
Texas, alleging infringement of the same patents at issue in the ITC
action.  The district court action seeks an unspecified amount of
damages and injunctive relief.  The district court action has been
stayed pending the completion of the ITC action.  In the Company’s opinion,
the resolution of the Tessera disputes and litigation is not expected to have a
material impact on our consolidated financial position, results of operations or
cash flows.




Commitments





Adtron Earn-Out
Consideration





As part
of the purchase of Adtron Corporation on March 3, 2008, the Company agreed to
pay earn-out consideration of up to $15.0 million to the sellers if the Adtron
Segment achieved two financial goals and one operational goal by December 31,
2008.  In December 2008, we paid $1.5 million for an operational goal
that had been achieved.  In the second quarter of fiscal 2009, the
Company provided to the sellers a good faith calculation of the remaining
earn-out consideration that would be potentially payable.  Based on
such calculation, we recorded $4.0 million in the second quarter of fiscal 2009.
Of the $4.0 million accrued, the effect of which increased the purchase price,
the Company recorded $3.2 million to impairment of goodwill and the remaining
$0.8 million to general and administrative expenses in the condensed
consolidated statement of operations for the nine months ended May 29,
2009.  In the third quarter of fiscal 2009, the Company reached an
agreement with the sellers to settle the remaining earn-out for an additional
$1.1 million which the company recorded as goodwill, and we paid the sellers a
total of $5.1 million in May 2009.  No additional earn-out contingent
consideration remains in connection with the Adtron acquisition.




Contingencies





During
its third quarter of fiscal 2007, the Company identified certain discrepancies
in the invoicing of certain products that it sold in the Brazilian market in
fiscal 2006. Some of the Company’s imported products were invoiced in a manner
that may have left customers with the impression that they were manufactured in
Brazil, rather than imported, and therefore potentially impact the customers’
eligibility for tax incentives.  The Company assessed the impact arising
from these discrepancies and noted that the customers had access to other
information to determine the origin of the products and may not have relied on
the information contained in the invoices for computing their tax
liability.  Also, the revenues related to these invoices were not material
to the Company’s operations.  Therefore, the Company believes that the
likelihood of any liability arising from these discrepancies in the invoices is
remote and as such, is not likely to have a material adverse effect on its
consolidated financial position, results of operations or cash flows for any
periods impacted.





During
the fourth quarter of fiscal 2008, the Sao Paulo, Brazil, State Tax Inspector
informed the Company that certain tax credits transferred during 2004 between
two Brazilian entities may not have represented an authorized
transfer.  These transfers occurred prior to the acquisition in April
2004 of SMART from Solectron Corporation (Solectron) and the full amount of any
related tax assessment against SMART would be subject to indemnification by
Solectron to SMART pursuant to the Transaction Agreement dated February 11,
2004.   A notice was received from the Sao Paulo, Brazil Tax
Authorities (Delegacia Tributaria de Julgamento) by SMART on October 3, 2008
providing an assessment for interest and penalties, related to the transfer of
these credits.  SMART has notified Solectron and its parent company,
Flextronics International Ltd. (Flextronics) of this assessment, and under the
terms of the Transaction Agreement, Flextronics has elected to assume
responsibility for the appeals process for this case
on SMART's behalf.  The San Paolo, Brazil Tax Authorities
rejected the appeal prepared by Flextronics’ legal counsel, and the latter filed
an appeal to the Tax Administrative Court (Tribunal de Impostos e Taxas), which
appeal is still pending judgment.  As of May 29, 2009 the Company
carries both a tax liability and a corresponding indemnity receivable for
approximately $3.0 million.   The Company believes that the
likelihood of any material loss arising from this matter is not probable, and as
such, not likely to have a material adverse effect on its consolidated financial
position, results of operations or cash flows for any periods
impacted.







NOTE
10 — Segment and Geographic Information




With the acquisition of Adtron in fiscal 2008, based on information regularly
reviewed by the Company’s CEO and chief operating decision maker to evaluate
Adtron’s performance and to allocate resources to Adtron, the Company revised
its segment reporting to include Adtron as a separate segment.  The
Company now operates in two business segments, the Memory, Embedded, &
Display Segment and the Adtron Segment.   The accounting policies
of the operating segments are the same as those described in the summary of
significant accounting policies.  The following tables present
summarized information by segment or geographic area:





17


Property
and equipment, net, and certain results of operations by
segment:




May
      29,
                                        2009
                                      
                                      
                                      August
      29,
                                        2008(In
      thousands)Property and
      equipment, net:Memory,
      Embedded, & Display
                                      
                                      $
                                      33,906
                                      
                                      
                                      $
                                      38,772Adtron
                                      
                                      
                                      673
                                      
                                      
                                      
                                      545Total
      property and equipment, net
                                      
                                      $
                                      34,579
                                      
                                      
                                      $
                                      39,317




Memory,
      Embedded, & Display
                        
                        Adtron
                        
                        Total(In
      thousands)Three
      Months Ended May 29, 2009Net
      sales
                        
                        $
                        88,083
                        
                        
                        $
                        3,562
                        
                        
                        $
                        91,645Gross
      profit
                        
                        
                        17,214
                        
                        
                        
                        1,423
                        
                        
                        
                        18,637Depreciation
      and amortization
                        
                        
                        2,843
                        
                        
                        
                        299
                        
                        
                        
                        3,142Income
      (loss) from operations
                        
                        $
                        1,369
                        
                        
                        $
                        (954
                        )
                        
                        $
                        (415
                        )Nine
      Months Ended May 29, 2009Net
      sales
                        
                        $
                        328,085
                        
                        
                        $
                        13,424
                        
                        
                        $
                        341,509Gross
      profit
                        
                        
                        62,219
                        
                        
                        
                        6,301
                        
                        
                        
                        68,520Depreciation
      and amortization
                        
                        
                        8,708
                        
                        
                        
                        878
                        
                        
                        
                        9,586Impairment
      of goodwill
                        
                        
                        —
                        
                        
                        
                        10,416
                        
                        
                        
                        10,416Income
      (loss) from operations
                        
                        $
                        10,551
                        
                        
                        $
                        (12,147
                        )
                        
                        $
                        (1,596
                        )







Memory,
      Embedded, & Display
                        
                        Adtron
                        
                        Total(In
      thousands)Three
      Months Ended May 30, 2008Net
      sales
                        
                        $
                        163,889
                        
                        
                        $
                        3,726
                        
                        
                        $
                        167,615Gross
      profit
                        
                        
                        26,159
                        
                        
                        
                        1,653
                        
                        
                        
                        27,812Depreciation
      and amortization
                        
                        
                        3,206
                        
                        
                        
                        278
                        
                        
                        
                        3,484In-process
      research and development charge
                        
                        
                        —
                        
                        
                        
                        4,400
                        
                        
                        
                        4,400Income
      (loss) from operations
                        
                        $
                        7,820
                        
                        
                        $
                        (5,219
                        )
                        
                        $
                        2,601Nine
      Months Ended May 30, 2008Net
      sales
                        
                        $
                        505,759
                        
                        
                        $
                        3,726
                        
                        
                        $
                        509,485Gross
      profit
                        
                        
                        93,141
                        
                        
                        
                        1,653
                        
                        
                        
                        94,794Depreciation
      and amortization
                        
                        
                        8,776
                        
                        
                        
                        278
                        
                        
                        
                        9,054In-process
      research and development charge
                        
                        
                        —
                        
                        
                        
                        4,400
                        
                        
                        
                        4,400Income
      (loss) from operations
                        
                        $
                        36,101
                        
                        
                        $
                        (5,219
                        )
                        
                        $
                        30,882





18


Three
      MonthsEnded
                                                      May
      29,
                                                      2009
                                                    
                                                    
                                                    Three
      MonthsEnded
                                                      May
      30,
                                                      2008
                                                    
                                                    
                                                    Nine
      MonthsEnded
                                                      May
      29,
                                                      2009
                                                    
                                                    
                                                    Nine
      MonthsEnded
                                                      May
      30,
                                                      2008(In
      thousands)Geographic net
      sales:U.S.A.
                                                    
                                                    $
                                                    44,076
                                                    
                                                    
                                                    $
                                                    92,504
                                                    
                                                    
                                                    $
                                                    152,031
                                                    
                                                    
                                                    $
                                                    296,975Other
      North and Latin America
                                                    
                                                    
                                                    21,837
                                                    
                                                    
                                                    
                                                    30,268
                                                    
                                                    
                                                    
                                                    89,011
                                                    
                                                    
                                                    
                                                    88,947Europe
                                                    
                                                    
                                                    5,962
                                                    
                                                    
                                                    
                                                    18,785
                                                    
                                                    
                                                    
                                                    36,694
                                                    
                                                    
                                                    
                                                    49,866Asia
                                                    
                                                    
                                                    19,770
                                                    
                                                    
                                                    
                                                    26,058
                                                    
                                                    
                                                    
                                                    63,773
                                                    
                                                    
                                                    
                                                    73,697$
                                                    91,645
                                                    
                                                    
                                                    $
                                                    167,615
                                                    
                                                    
                                                    $
                                                    341,509
                                                    
                                                    
                                                    $
                                                    509,485








May
      29,
                                    2009
                                  
                                  
                                  August
      29,
                                    2008(In
      thousands)Property
      and equipment, net:U.S.A.
                                  
                                  $
                                  8,039
                                  
                                  
                                  $
                                  6,679Other
      North and Latin America
                                  
                                  
                                  20,546
                                  
                                  
                                  
                                  28,492Europe
                                  
                                  
                                  41
                                  
                                  
                                  
                                  59Asia
                                  
                                  
                                  5,953
                                  
                                  
                                  
                                  4,087$
                                  34,579
                                  
                                  
                                  $
                                  39,317





NOTE
11 — Major Customers




A
majority of the Company’s net sales are attributable to customers operating in
the information technology industry. Major customers are defined as those with
net sales in excess of 10% of total net sales or those who have outstanding
accounts receivable balances at the end of the fiscal period of 10% or more of
our total net accounts receivable.




Net sales
from major customers as a percentage of total net sales are as
follows:





Three
      Months
                        Ended
                        May 29, 2009
                      
                      
                      Three
      Months
                        Ended
                        May 30, 2008
                      
                      
                      Nine
      Months
                        Ended
                        May 29, 2009
                      
                      
                      Nine
      Months
                        Ended
                        May 30, 2008Customer
      A
                      
                      
                      24
                      %
                      
                      
                      33
                      %
                      
                      
                      30
                      %
                      
                      
                      40
                      %Customer
      B
                      
                      
                      14
                      %
                      
                      
                      12
                      %
                      
                      
                      13
                      %
                      
                      
                      13
                      %Customer
      C
                      
                      
                      *
                      
                      
                      
                      *
                      
                      
                      
                      *
                      
                      
                      
                      *





*Less
      than 10%





As of May
29, 2009, approximately 22%, 19% and 39% of accounts receivable were
concentrated with Customer A, B and C, respectively. As of August 29, 2008,
approximately 32%, 19% and 28% of accounts receivable were concentrated with
Customer A, B and C, respectively. The loss of a major customer, a significant
reduction in revenue from a major customer, or the uncollectibility of accounts
receivable from Customer A, B, or C could have a material adverse effect on the
Company’s business, financial condition and results of
operations.





NOTE
12 — Restructuring Charges




Starting
in 2007, DRAM prices steadily eroded as the result of worldwide
overcapacity.  This downturn was exacerbated by poor macro-economic
conditions that persisted through our third quarter of fiscal 2009.  The
erosion of DRAM prices and reduced demand for our products led to significant
declines in our net sales and profitability.  To moderate the impact, the
Company initiated several measures to reduce various costs and expenses as part
of several restructurings as disclosed below.
  During the fourth quarter of fiscal 2008, the Company initiated a restructuring
plan, the FY08 Plan, to reduce operating expenses and improve cash flows by
consolidating certain operations in Asia and the Caribbean.  The
intent of the plan was to decrease the Company’s cost structure through
workforce reductions and facility and resource consolidation.  Costs
resulting from the restructuring plan include severance payments,
severance-related benefits, lease costs associated with the closure of our
Dominican Republic facility, charges for assets written off and other
costs.  The Company expects ongoing annual savings of approximately
$11.4 million related to the FY08 Plan.  These costs relate to the
Memory, Embedded, & Display segment.  All other exit costs related
to the FY08 Plan have been paid as of May 29, 2009.


19
 During the second quarter of fiscal 2009, the Company initiated another
restructuring plan, the FY09 Plan, to reduce further its global workforce in
order to improve the Company’s cost structure in the continued uncertain
economic environment.  In an effort to reduce cost in the third
quarter of fiscal 2009, the Company initiated a third restructuring plan to
reduce its global workforce, which plan is now included in the FY09
Plan.  The Company expects ongoing annual savings of approximately
$8.0 to $9.0 million related to the FY09 Plan.  The FY09 Plan includes
charges consisting primarily of severance payments and other employee-related
payments.  All severance payments and severance-related benefits
related to the FY09 Plan accrued as of May 29, 2009 are expected to be paid by
the end of fiscal 2009.  Total restructuring costs accrued as of May
29, 2009 were approximately $0.08 million and are recorded in accrued expenses
in the condensed consolidated balance sheets.


The following table represents the activity with respect to restructuring and
other charges related to the FY08 Plan for the three and nine months ended May
29, 2009 (in thousands):




Severance
      and
                                                        Benefits
                                                      
                                                      
                                                      Assets/Facility
      Related
                                                      
                                                      
                                                      Other
                                                      
                                                      
                                                      TotalAccrual
      as of February 27, 2009
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      68
                                                      
                                                      
                                                      $
                                                      68Provision
      (credit)
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (60
                                                      )
                                                      
                                                      
                                                      (60
                                                      )Non-cash
      charges
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (7
                                                      )
                                                      
                                                      
                                                      (7
                                                      )Cash
      payments
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (1
                                                      )
                                                      
                                                      
                                                      (1
                                                      )Accrual
      as of May 29, 2009
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —







Severance
      and
                                                        Benefits
                                                      
                                                      
                                                      Assets/Facility
      Related
                                                      
                                                      
                                                      Other
                                                      
                                                      
                                                      TotalAccrual
      as of August 29, 2008
                                                      
                                                      $
                                                      572
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      258
                                                      
                                                      
                                                      $
                                                      830Provision
                                                      
                                                      
                                                      484
                                                      
                                                      
                                                      
                                                      179
                                                      
                                                      
                                                      
                                                      311
                                                      
                                                      
                                                      
                                                      974Non-cash
      charges
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (7
                                                      )
                                                      
                                                      
                                                      (7
                                                      )Cash
      payments
                                                      
                                                      
                                                      (1,056
                                                      )
                                                      
                                                      
                                                      (179
                                                      )
                                                      
                                                      
                                                      (562
                                                      )
                                                      
                                                      
                                                      (1,797
                                                      )Accrual
      as of May 29, 2009
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —







The
following table represents the activity with respect to restructuring and other
charges related to the FY09 Plan for the three and nine months ended May 29,
2009 (in thousands):





Severance
      and
                                                        Benefits
                                                      
                                                      
                                                      Assets/Facility
      Related
                                                      
                                                      
                                                      Other
                                                      
                                                      
                                                      TotalAccrual
      as of February 27, 2009
                                                      
                                                      $
                                                      159
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      159Provision
                                                      
                                                      
                                                      990
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      59
                                                      
                                                      
                                                      
                                                      1,049Cash
      payments
                                                      
                                                      
                                                      (1,073
                                                      )
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (59
                                                      )
                                                      
                                                      
                                                      (1,132
                                                      )Accrual
      as of May 29, 2009
                                                      
                                                      $
                                                      76
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      76







Severance
      and
                                                        Benefits
                                                      
                                                      
                                                      Assets/Facility
      Related
                                                      
                                                      
                                                      Other
                                                      
                                                      
                                                      TotalAccrual
      as of August 29, 2008
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —Provision
                                                      
                                                      
                                                      1,777
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      59
                                                      
                                                      
                                                      
                                                      1,836Cash
      payments
                                                      
                                                      
                                                      (1,701
                                                      )
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      (59
                                                      )
                                                      
                                                      
                                                      (1,760
                                                      )Accrual
      as of May 29, 2009
                                                      
                                                      $
                                                      76
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      $
                                                      76





There
were no restructuring activities for the three and nine months ended May 30,
2008.




NOTE
13 — Subsidiary Guarantors




The
Company has not presented separate financial statements of subsidiary guarantors
in the Notes, as (1) each of the subsidiary guarantors is wholly-owned by the
Company, the issuer of the Notes, (2) the guarantees are full and unconditional,
(3) the guarantees are joint and several, and (4) the Company has no independent
assets and operations and all subsidiaries of the Company other than the
subsidiary guarantors are insignificant.




20


Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations




This
Quarterly Report on Form 10-Q, including this Management’s Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements regarding future events and our future results that
are subject to the safe harbors created under the Securities Act of 1933 (the
“Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).
These statements are based on current expectations, estimates, forecasts, and
projections about the industries in which we operate and the beliefs and
assumptions of our management. Words such as “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “continues,” “may,” and variations of such words and similar
expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future financial
performance, our anticipated trends in our businesses, and other
characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties, and assumptions that are
difficult to predict, including those identified below, under “Risk Factors,”
elsewhere herein, and those discussed in Part II, Item 1A, “Risk Factors” in our
Annual Report on Form 10-K for the year ended August 29, 2008 filed with the SEC
on November 12, 2008. Therefore, actual results may differ materially and
adversely from those expressed in any forward-looking statements. We undertake
no obligation to revise or update any forward-looking statements for any
reason.





Executive
Overview




We are a leading independent designer, manufacturer and supplier of value added
subsystems sold primarily to OEMs. Our subsystem products include memory
modules, solid state storage , embedded computing and TFT-LCD products that we
offer to customers worldwide. We also offer our customers custom supply chain
services including procurement, logistics, inventory management and temporary
warehousing, and kitting or packaging services. Our products and services are
used for a variety of applications in the computing, networking, communications,
printer, storage and industrial markets worldwide. Products that incorporate our
subsystems include servers, routers, switches, storage systems, workstations,
PCs, portable computers, printers and gaming machines. Generally, while
increases in overall unit demand by end users for, and increases in memory
content in, products that incorporate our subsystems should have a positive
effect on our business, financial condition and results of operations,
conversely, decreases in product unit demand and memory content can have a
negative effect on our business, financial condition and results of
operations.  We offer more than 500 standard and custom products to
leading OEMs, including Cisco Systems, Dell, and Hewlett-Packard. We maintain a
large global footprint with manufacturing capabilities in the U.S., Malaysia,
Brazil and Puerto Rico. Our global operations enable us to control costs and
rapidly respond to our customers’ requirements worldwide.




In
April 2004, a group of investors led by TPG, Francisco Partners and Shah Capital
Partners acquired SMART Modular Technologies, Inc. (“SMART Modular”) from
Solectron Corporation, at which time we began to operate our business as an
independent company incorporated under the laws of the Cayman Islands. Since the
acquisition by our principal investors, we repositioned a portion of our
business by focusing on the delivery of certain higher value added products,
diversifying our end markets and extending into new vertical markets, creating
more technically engineered products and solutions, migrating manufacturing to
low cost regions and controlling expenses.  For example, in fiscal
2005 we acquired Estecom, a producer of TFT-LCD products, in fiscal 2006 we
acquired ConXtra, Inc., a product design and design manufacturing services
provider, and in fiscal 2008 we acquired Adtron Corporation, a leading designer
and global supplier for high performance and high capacity solid state storage
products . Also, in fiscal 2006 we completed our manufacturing facility in
Atibaia, Brazil into which we import finished wafers and package them into
memory integrated circuits and into memory modules.




Beginning
fiscal 2008, we categorized our products and services into the following two
business segments, the Memory, Embedded, & Display Segment and the Adtron
Segment.  In prior fiscal years we operated under one
segment.  Since the acquisition of Adtron on March 3, 2008, SMART’s
CEO and chief operating decision maker separately evaluates Adtron’s performance
and the allocation of resources to Adtron.





In March
2009, we entered into a seven year operating lease with Newark Eureka Industrial
Capital LLC to lease approximately 79,480 square feet of office, manufacturing,
engineering, research and development, warehouse and distribution space to serve
as our new corporate headquarters starting in the third quarter of fiscal
2009.  Our principal executive office is now located at 39870 Eureka
Drive, Newark, California 94560.





In March
2009, our Board of Directors authorized the repurchase of up to $10.0 million of
our ordinary shares.  We intend to repurchase (and have repurchased)
shares using our available cash.  In April 2009, we entered into a
Rule 10b5−1 trading plan (“Plan”) with a broker to repurchase ordinary shares
based on pre-defined terms and conditions.  Except as set forth in the
Plan, the timing, duration, and the exact number of additional shares to be
purchased will be at our discretion.  Under the repurchase program,
depending on price, regulatory requirements, market conditions and other
factors, shares may be purchased on the open market or in privately negotiated
transactions.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice. During the three
months ended May 29, 2009, we repurchased approximately forty-five thousand
of our ordinary shares through open market repurchases at an average price of
$1.82 per share for a total of approximately $0.1 million.  As of May
29, 2009, the remaining balance available for future share repurchases was $9.9
million under our share repurchase program.




21


Key
Business Metrics





The
following is a brief description of the major components of the key line items
in our financial statements.




Net
Sales




We
generate our product revenues from sales of our subsystems, including memory
modules and flash memory cards, solid state storage devices, embedded computing
boards and TFT-LCD products, principally to leading computing, networking,
communications, printer, storage and industrial OEMs. Sales of our products are
generally made pursuant to purchase orders rather than long-term commitments. We
generate service revenue from a limited number of customers by providing
procurement, logistics, inventory management and temporary warehousing, and
kitting or packaging services. Our net sales are dependent upon demand in the
end markets that we serve and fluctuations in end-user demand can have a rapid
and material effect on our net sales. Furthermore, sales to relatively few
customers have accounted for, and we expect will continue to account for, a
significant percentage of our net sales in the foreseeable future.





Cost
of Sales





The most
significant components of cost of sales are materials, fixed manufacturing
costs, labor and depreciation. Increases in capital expenditures may increase
our future cost of sales due to higher levels of depreciation
expense.  Cost of sales also includes any inventory write-downs. We
may write-down inventory for a variety of reasons, including obsolescence,
excess quantities and declines in market value below our cost.





Research
and Development Expenses




Research and development expenses consist primarily of the costs associated with
the design and testing of new products. These costs relate primarily to
compensation of personnel involved with development efforts, materials and
outside design and testing services. Our customers typically do not separately
compensate us for design and engineering work involved in the development of
custom products.




Selling,
General and Administrative Expenses




Selling, general and administrative expenses consist primarily of personnel
costs, including commissions, facilities and equipment costs, costs related to
advertising and marketing and other support costs including utilities, insurance
and professional fees.







Critical
Accounting Policies




Management’s Discussion and Analysis of Financial Condition and Results of
Operations are based on our financial statements which have been prepared in
accordance with accounting principles generally accepted in the U.S.The preparation of these
financial statements requires us to make certain estimates that affect the
reported amounts in our financial statements. We evaluate our estimates on an
ongoing basis, including those related to our net sales, accounts receivables,
inventories, asset impairments, restructuring charges, income taxes, stock-based
compensation and commitments and contingencies. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances.  Actual results may differ from
these estimates under different assumptions or conditions.  We believe
the following critical accounting policies are the most significant to the
presentation of our financial statements and they at times require the most
difficult, subjective and complex estimates.




Revenue
Recognition




Our product revenues are derived from the sale of value added subsystems,
including memory modules and flash memory cards, solid state storage devices,
embedded computing boards and TFT-LCD products, which we design and manufacture.
We recognize revenue primarily upon shipment, following receipt of written
purchase orders, when the price is fixed or determinable, title has transferred,
product acceptance has occurred and collection of the resulting accounts
receivable is reasonably assured. Amounts billed to customers related to
shipping and handling are classified as sales, while costs incurred by us for
shipping and handling are classified as cost of sales.  Taxes,
including value added taxes, assessed by a government authority that are both
imposed on and concurrent with a specific revenue producing transaction are
excluded from revenue.




Our
service revenues are derived from procurement and logistics, inventory
management and temporary warehousing, and kitting or packaging services. The
terms of our contracts vary, but we generally recognize service revenue upon the
completion of the contracted services. Our service revenue is reported on a net
basis in accordance with Emerging Issues Task Force (EITF) Issue No. 99-19,
Reporting Revenue Gross as a
Principal versus Net as an Agent.  Service revenue for these
arrangements is typically based on material procurement costs plus a fee for any
services provided. We determine whether to report revenue on a net or gross
basis depending on a number of factors, including whether we are the primary
obligor in the arrangement, have general inventory risk, have the ability to set
the price, have the ability to determine who the suppliers are, can physically
change the product or have credit risk.


22


The
following is a summary of our net sales and gross billings (in
thousands):





Three
      Months Ended
                                                                                
                                                                                
                                                                                Nine
      Months EndedMay
      29,
                                                                                
                                                                                
                                                                                May
      30,
                                                                                
                                                                                
                                                                                May
      29,
                                                                                
                                                                                
                                                                                May
      30,2009
                                                                                
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                2008Product
      net sales
                                                                                
                                                                                $
                                                                                83,692
                                                                                
                                                                                
                                                                                $
                                                                                157,932
                                                                                
                                                                                
                                                                                $
                                                                                312,682
                                                                                
                                                                                
                                                                                $
                                                                                477,888Service
      revenue
                                                                                
                                                                                
                                                                                7,953
                                                                                
                                                                                
                                                                                
                                                                                9,683
                                                                                
                                                                                
                                                                                
                                                                                28,827
                                                                                
                                                                                
                                                                                
                                                                                31,597Net
      sales
                                                                                
                                                                                
                                                                                91,645
                                                                                
                                                                                
                                                                                
                                                                                167,615
                                                                                
                                                                                
                                                                                
                                                                                341,509
                                                                                
                                                                                
                                                                                
                                                                                509,485Plus:
      Cost of sales(1)
                                                                                
                                                                                
                                                                                136,070
                                                                                
                                                                                
                                                                                
                                                                                207,243
                                                                                
                                                                                
                                                                                
                                                                                466,192
                                                                                
                                                                                
                                                                                
                                                                                659,511Gross
      billing to customers
                                                                                
                                                                                $
                                                                                227,715
                                                                                
                                                                                
                                                                                $
                                                                                374,858
                                                                                
                                                                                
                                                                                $
                                                                                807,701
                                                                                
                                                                                
                                                                                $
                                                                                1,168,996


________


(1)
Represents cost of sales associated with service revenue reported on a net
basis.





Accounts
Receivable




We
evaluate the collectability of accounts receivable based on a combination of
factors. When we are aware of circumstances that may impair a specific
customer’s ability to meet its financial obligations, we record a specific
allowance against amounts due and, thereby, reduce the net recognized receivable
to the amount we reasonably believe will be collected. Increases to the
allowance for bad debt are recorded as a component of general and administrative
expenses. For all other customers, we record an allowance for doubtful accounts
based on a combination of factors including the length of time the receivables
are outstanding, industry and geographic concentrations, the current business
environment, and historical experience.





As a
result of the current macroeconomic environment and associated credit market
conditions, both liquidity and access to capital have impacted some of our
customers. We have continued to closely monitor our credit exposure with our
customers to anticipate exposures and minimize our risk.





Inventory
Valuation




At each
balance sheet date, we evaluate our ending inventories for excess quantities and
obsolescence. This evaluation includes analysis of sales levels by product
family. Among other factors, we consider historical demand and forecasted demand
in relation to the inventory on hand, competitiveness of product offerings,
market conditions and product life cycles when determining obsolescence and net
realizable value. We adjust remaining balances to approximate the lower of our
manufacturing cost or net realizable value. Inventory cost is determined on a
specific identification basis and includes material, labor, and manufacturing
overhead. From time to time, our customers may request that we purchase and
maintain significant inventory of raw materials for specific programs. Such
inventory purchases are evaluated for excess quantities and potential
obsolescence and could result in a provision at the time of purchase or
subsequent to purchase. The portion, if any, of slow moving inventory estimated
to be sold beyond one year from the balance sheet date, is classified as
non-current inventory and included in non-current assets in our consolidated
balance sheets. Our provisions for excess and obsolete inventory are also
impacted by our arrangements with our customers and/or suppliers, including our
ability or inability to re-sell such inventory to them. If actual market
conditions or our customers’ product demands are less favorable than those
projected or if our customers or suppliers are unwilling or unable to comply
with any arrangements related to their purchase or sale of inventory, additional
provisions may be required and would have a negative impact on our gross margins
in that period. We have had to write-down inventory in the past for reasons such
as obsolescence, excess quantities and declines in market value below our costs,
and we may be required to do so from time to time in the future.





Restructuring
Charges




We record and account for our restructuring activities following formally
approved plans that identify the actions and timelines over which the
restructuring activities will occur. Restructuring charges include estimates
pertaining to such items as employee severance and fringe benefit costs,
facility exit costs and subleasing assumptions, among other
items.  Adjustments to these estimates are made when changes in facts
and circumstances suggest actual amounts will differ from original estimates.
These changes in estimates may result in increases or decreases to our results
of operations in future periods and would be presented on the restructuring
charge line of our consolidated statements of operations.




Income
Taxes





We use the asset and liability method of accounting for income taxes. Deferred
tax assets and liabilities are recognized for the future consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and net operating
loss and credit carry-forwards. When necessary, a valuation allowance is
recorded or reduced to value tax assets to amounts that are more likely than not
expected to be realized. The effect of changes in tax rates is recognized in the
period in which the rate change occurs.  U.S. income and foreign
withholding taxes are not provided on that portion of unremitted earnings of
foreign subsidiaries since they are expected to be reinvested
indefinitely.




23


After excluding ordinary losses in a tax jurisdiction for which no tax benefit
can be recognized, we estimate our annual effective tax rate and apply such rate
to year-to-date income, adjusting for unusual or infrequent items that are
treated as discrete events in the period. We also evaluate our valuation
allowance to determine if a change in circumstances causes a change in judgment
regarding realization of deferred tax assets in future years. If the valuation
allowance is adjusted as a result of a change in judgment regarding future
years, that adjustment is recorded in the period of such change affecting our
tax expense in that period.




The
calculation of our tax liabilities involves accounting for uncertainties in the
application of complex tax rules, regulations and practices.  As a
result of the implementation of FIN No. 48, we recognize benefits for uncertain
tax positions based on a two-step process.  The first step is to
evaluate the tax position for recognition of a benefit (or the absence of a
liability) by determining if the weight of available evidence indicates that it
is more likely than not that the position taken will be sustained upon audit,
including resolution of related appeals or litigation processes, if
any.  If it is not, in our judgment, “more likely than not” that the
position will be sustained, then we do not recognize any benefit for the
position.  If it is more likely than not that the position will be
sustained, a second step in the process is required to estimate how much of the
benefit we will ultimately receive. This second step requires that we estimate
and measure the tax benefit as the largest amount that is more than 50 percent
likely of being realized upon ultimate settlement. It is inherently difficult
and subjective to estimate such amounts.  We reevaluate these
uncertain tax positions on a quarterly basis.  This evaluation is
based on a number of factors including, but not limited to, changes in facts or
circumstances, changes in tax law, new facts, correspondence with tax
authorities during the course of an audit, effective settlement of audit issues,
and commencement of new audit activity.  Such a change in recognition
or measurement could result in the recognition of a tax benefit or an additional
charge to the tax provision in the period.





Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed




We review
our long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to the future undiscounted cash flows expected to be
generated by the asset. If such assets are found to be impaired, the impairment
loss is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed are reported at the
lower of the carrying amount or fair value, less cost to sell.





Impairment
of Goodwill




In
accordance with SFAS No. 142, Goodwill and Other Intangible Assets(“SFAS 142”), the Company performs a goodwill impairment test of its two
reporting units (Memory, Embedded, & Display and Adtron) annually during the
fourth quarter of its fiscal year and more frequently if an event or
circumstance indicates that an impairment may have occurred. Such events or
circumstances may include significant adverse changes in the general business
climate, among others. The test is performed by determining the fair value of
the reporting unit based on estimated discounted future cash flows, considering
the market price of the Company’s ordinary shares, and comparing the fair value
to the carrying value of the reporting unit, including goodwill.





If the
fair value of each reporting unit is less than its carrying value, the Company
then allocates the fair value of the unit to all the assets and liabilities of
the unit (including any unrecognized intangible assets) as if the reporting
unit’s fair value was the purchase price to acquire the reporting unit. The
excess of the fair value of the reporting unit over the amounts assigned to its
assets and liabilities is the implied fair value of the goodwill. If the
carrying amount of the reporting unit’s goodwill exceeds the implied fair value
of that goodwill, an impairment loss is recognized in an amount equal to that
excess.




Stock-Based
Compensation




Effective
August 27, 2005, we adopted SFAS No. 123R, Share-Based Payment, using the
prospective method. The key assumptions used in applying the provisions of SFAS
No. 123R are described in Note 2 to the Unaudited Condensed Consolidated
Financial Statements.




Financial Information about
Segments




Our
corporate structure includes two operating segments, the Memory, Embedded, &
Display Segment and the Adtron Segment.  Accordingly, we report
certain financial information by segment.  We may adjust our reported
segments in fiscal 2009 to reflect changes regarding how we manage the
business.  See Note 10 to the Unaudited Condensed Consolidated
Financial Statements for information regarding our business
segments.





24


Certain
results of operations by segment (in millions):





Memory,
      Embedded, & Display
                      
                      Adtron
                      
                      TotalThree
      Months Ended May 29, 2009Net
      sales
                      
                      $
                      88.1
                      
                      
                      $
                      3.5
                      
                      
                      $
                      91.6Gross
      profit
                      
                      
                      17.2
                      
                      
                      
                      1.4
                      
                      
                      
                      18.6Depreciation
      and amortization
                      
                      
                      2.8
                      
                      
                      
                      0.3
                      
                      
                      
                      3.1Income
      (loss) from operations
                      
                      $
                      1.4
                      
                      
                      $
                      (1.0
                      )
                      
                      $
                      (0.4
                      )Three
      Months Ended May 30, 2008Net
      sales
                      
                      $
                      163.9
                      
                      
                      $
                      3.7
                      
                      
                      $
                      167.6Gross
      profit
                      
                      
                      26.2
                      
                      
                      
                      1.6
                      
                      
                      
                      27.8Depreciation
      and amortization
                      
                      
                      3.2
                      
                      
                      
                      0.3
                      
                      
                      
                      3.5In-process
      research and development charge
                      
                      
                      —
                      
                      
                      
                      4.4
                      
                      
                      
                      4.4Income
      (loss) from operations
                      
                      $
                      7.8
                      
                      
                      $
                      (5.2
                      )
                      
                      $
                      2.6





Memory,
      Embedded, & Display
                    
                    Adtron
                    
                    TotalNine
      Months Ended May 29, 2009Net
      sales
                    
                    $
                    328.1
                    
                    
                    $
                    13.4
                    
                    
                    $
                    341.5Gross
      profit
                    
                    
                    62.2
                    
                    
                    
                    6.3
                    
                    
                    
                    68.5Depreciation
      and amortization
                    
                    
                    8.7
                    
                    
                    
                    0.9
                    
                    
                    
                    9.6Impairment
      of goodwill
                    
                    
                    —
                    
                    
                    
                    10.4
                    
                    
                    
                    10.4Income
      (loss) from operations
                    
                    $
                    10.5
                    
                    
                    $
                    (12.1
                    )
                    
                    $
                    (1.6
                    )Nine
      Months Ended May 30, 2008Net
      sales
                    
                    $
                    505.8
                    
                    
                    $
                    3.7
                    
                    
                    $
                    509.5Gross
      profit
                    
                    
                    93.2
                    
                    
                    
                    1.6
                    
                    
                    
                    94.8Depreciation
      and amortization
                    
                    
                    8.8
                    
                    
                    
                    0.3
                    
                    
                    
                    9.1In-process
      research and development charge
                    
                    
                    —
                    
                    
                    
                    4.4
                    
                    
                    
                    4.4Income
      (loss) from operations
                    
                    $
                    36.1
                    
                    
                    $
                    (5.2
                    )
                    
                    $
                    30.9





Out
of Period Adjustment




During
the second quarter of fiscal 2009, we recorded one adjustment to net sales and
one adjustment to cost of sales, which adjustments represented corrections of
immaterial prior period errors in current liabilities. Each adjustment was less
than $0.5 million and together resulted in a net decrease to net loss of $0.2
million during the second quarter of fiscal 2009.




25


Results
of Operations





The
following is a summary of our results of operations for the three and nine
months ended May 29, 2009 and May 30, 2008:




Three
      Months Ended
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    Nine
      Months EndedMay
      29,
                                                                                                                                      2009
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    May
      30,
                                                                                                                                      2008
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    May
      29,
                                                                                                                                      2009
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    May
      30,
                                                                                                                                      2008(In
      millions)Net
      sales
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    91.6
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    167.6
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    341.5
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    509.5Cost
      of sales
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    73.0
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    139.8
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    273.0
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    414.7Gross
      profit (1)
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    18.6
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    27.8
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    68.5
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    94.8Research
      and development
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    4.5
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    5.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    15.1
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    14.7Selling,
      general and administrative
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    13.6
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    15.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    41.8
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    44.8Restructuring
      charges
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    1.0
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2.8
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —Impairment
      of goodwill
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    10.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —In-process
      research and development charge
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    4.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    —
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    4.4Total
      operating expenses (1)
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    19.1
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    25.2
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    70.1
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    63.9Income
      (loss) from operations (1)
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (0.4
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2.6
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.6
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    30.9Interest
      expense, net
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.6
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.5
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (5.1
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (3.8
                                                                                                                                    )Other
      income (expense), net
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    0.0
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    0.3
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (0.6
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    2.1Total
      other expense, net (1)
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.6
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.2
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (5.7
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (1.8
                                                                                                                                    )Income
      (loss) before provision for income taxes (1)
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (2.0
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    1.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    (7.3
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    29.1Provision
      for income taxes
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    0.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    12.4
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    3.8
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    
                                                                                                                                    16.6Net
      income (loss) (1)
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (2.4
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (11.0
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    (11.1
                                                                                                                                    )
                                                                                                                                    
                                                                                                                                    $
                                                                                                                                    12.5
 ____________
 (1)  Summations
may not compute precisely due to rounding.






Three
and Nine months EndedMay 29, 2009 as Compared
to the Three and Nine months EndedMay 30, 2008




Net
Sales




Net sales
for the three months ended May 29, 2009 were $91.6 million, or a 45% decrease
from $167.6 million for the three months ended May 30, 2008. This decrease was
primarily due to a $58.9 million decrease in net sales of our memory products, a
$16.7 million decrease in net sales of our embedded and display
products.  The overall decline in sales was primarily driven by
falling average selling prices year over year and a decrease in demand for our
memory products.





Net sales
for the nine months ended May 29, 2009 were $341.5 million, or a 33% decrease
from $509.5 million for the nine months ended May 30, 2008. This decrease was
primarily due to a $149.2 million decrease in net sales of our memory products,
a $17.6 million decrease in net sales of our embedded and display
products.   The overall decline in sales was primarily driven by
falling average selling prices year over year and a decrease in demand for our
memory products.




Cost
of Sales




Cost of
sales for the three months ended May 29, 2009 was $73.0 million, or a 48%
decrease from $139.8 million for the three months ended May 30, 2008. Cost of
sales as a percent of net sales decreased to 80% for the three months ended May
29, 2009, from 83% for the three months ended May 30, 2008. The decrease in cost
of sales was principally due to a $46.3 million decline in our memory product
material cost of sales and a $4.9 million decrease in our factory overhead from
reduced manufacturing activities.





Cost of
sales for the nine months ended May 29, 2009 was $273.0 million, or a 34%
decrease from $414.7 million for the nine months ended May 30, 2008. Cost of
sales as a percent of net sales decreased to 80% for the nine months ended May
29, 2009, from 81% for the nine months ended May 30, 2008. The decrease in cost
of sales was principally due to a $116.7 million decline in our memory material
cost of sales and a $10.0 million decrease from a reduction in manufacturing
activities and salary cuts, partially offset by a net increase of $0.4 million
for inventory adjustments related to an increase in write downs for excess and
obsolete products.




26


Gross
Profit




Gross
profit for the three months ended May 29, 2009 was $18.6 million, or a 33%
decrease from $27.8 million for the three months ended May 30, 2008. Gross
margin percentage increased from 17% for the three months ended May 30, 2008 to
20% for the three months ended May 29, 2009. The decrease in gross profit was
primarily due to the lower net sales to our customers, while the increase in
gross margin percentage was principally due to a favorable mix shift towards
higher margin business.





Gross
profit for the nine months ended May 29, 2009 was $68.5 million, or a 28%
decrease from $94.8 million for the nine months ended May 30, 2008. Gross margin
percentage increased from 19% for the nine months ended May 30, 2008 to 20% for
the nine months ended May 29, 2009. The decrease in gross profit was primarily
due to the lower net sales to our customers and reduced demand for our
products.




Research
and Development Expenses
 Research
and development, or R&D, expenses for the three months ended May 29, 2009
were $4.5 million compared to $5.4 million for the three months ended May 30,
2008. This decrease was primarily due to a decrease of $0.9 million from
payroll and related employee expenses associated with reductions in salaries,
workforce and bonuses.
 
 R&D
expenses for the nine months ended May 29, 2009 were $15.1 million compared to
$14.7 million for the nine months ended May 30, 2008. This increase was
primarily due to $2.8 million in additional R&D expenses related to Adtron,
partially offset by a decrease of $2.4 million in payroll and related employee
expenses associated with reductions in workforce, bonuses and
salaries.
  Selling,
General and Administrative Expenses
 Selling,
general and administrative, or SG&A, expenses for the three months ended May
29, 2009 were $13.6 million, or a 12% decrease from $15.4 million for the three
months ended May 30, 2008.  Sales and marketing expenses were $4.1 million
for the three months ended May 29, 2009, down $1.1 million from $5.2 million for
the same quarter last year.  The decrease was primarily due to a decrease
of $0.8 million in payroll and employee related expenses associated with
reductions in salaries, workforce and bonuses and a decrease of $0.3 million in
travel and other sales and marketing expenses.  General and administrative
(G&A) expenses were $9.5 million for the three months ended May 29, 2009,
down $0.7 million from $10.2 million for the same quarter last year. 
Employee related expenses, facilities and equipment costs, utilities, and
insurance totaled $5.5 million of G&A expenses for the three months ended
May 29, 2009, down $1.9 million from $7.4 million for the same quarter last
year.  The decrease was primarily due to payroll and employee related
expenses associated with reductions in salaries, workforce and bonuses of $1.0
millionand a decrease of $0.9 million in telecommunication and facility related
costs.  These
decreases werepartially offset by $0.8 million in headquarter moving
expense.  Professional fees, including those related to recruitment, legal,
SOX, audit, and compliance, were $2.5 million of G&A for the three months
ended May 29, 2009, up $0.4 million from $2.1 million for the same quarter last
year.  The increase was due to increases in legal, audit and other
professional fees related to compliance matters.
  SG&A expenses for the nine months ended May 29, 2009 were $41.8 million, or
a 7% decrease from $44.8 million for the nine months ended May 30, 2008. 
Sales and marketing expenses were $13.9 million for the nine months ended May
29, 2009, down $0.9 million from $14.8 million for the same period last
year.  The decrease was due to decreases of $1.5 million in payroll and
employee related expenses associated with reductions in workforce, bonuses and
salaries, a decrease of $0.3 million in commission expenses, and a decrease of
$0.7 million in travel and other sales and marketing expenses.  These
decreases were partially offset by $1.6 million of additional sales and
marketing expense related to the Adtron acquisition. G&A expenses were
$27.9 million for the nine months ended May 29, 2009, down $2.1 million from
$30.0 million for the same period last year.  Employee related expenses,
facilities and equipment costs, utilities, and insurance totaled
$18.3 million of G&A expenses for the nine months ended May 29,
2009, down $4.8 million from $23.1 million for the same period last year.
The decrease was primarily due to a $3.0 million decrease in payroll and
employee related expenses associated with reductions in workforce, bonuses and
salaries and a decrease of $1.8 million in telecommunication and facility
related costs.  Professional fees, including those related to
recruitment, legal, SOX, audit, and compliance, were $5.7 million for the nine
months ended May 29, 2009, up $0.7 million from $5.0 million for the same period
last year.  The increase of professional fees was due to increases in
legal, audit and other professional fees related to compliance
matters.  These net decreases in G&A expenses were partially
offset by an increase of $1.2 million additional G&A expense related to the
Adtron acquisition and an increase of $0.8 million in headquarter moving
expense.
 Restructuring
and Goodwill Impairment Charges
 Starting
in 2007, DRAM prices steadily eroded as the result of worldwide
overcapacity.  This downturn was exacerbated by poor macro-economic
conditions that persisted through our third quarter of fiscal 2009.  The
erosion of DRAM prices and reduced demand for our products led to significant
declines in our net sales and profitability.  To moderate the impact, we
initiated several measures to reduce various costs and expenses as part of
several restructurings as disclosed below.
  27
 During the fourth quarter of fiscal 2008, we initiated a restructuring plan, the
FY08 Plan, to reduce operating expenses and improve cash flows by consolidating
certain operations in Asia and the Caribbean.  During the second
quarter of fiscal 2009, we initiated another restructuring plan, the FY09 Plan,
to reduce further our global workforce in order to improve our cost structure in
the continued uncertain economic environment.  In a further effort to
reduce cost in the third quarter of fiscal 2009, we initiated a third
restructuring plan to reduce our global workforce, which plan is now included in
the FY09 Plan.  All exit costs related to the FY08 Plan have been paid
as of May 29, 2009.  We expect ongoing annual savings of approximately
$11.4 million related to the FY08 Plan and approximately $8.0 to $9.0 million
related to the FY09 Plan.
  Restructuring
costs for the three months ended May 29, 2009 was $1.0 million, which was mainly
due to the FY09 restructuring plan initiated during the third quarter for fiscal
2009. We did not incur any goodwill impairment charges for the three months
ended May 29, 2009.  We did not incur any restructuring or goodwill
impairment charges for the three months ended May 30, 2008.
  Restructuring
costs for the nine months ended May 29, 2009 was $2.8 million, of which $1.0
million was related to our FY08 restructuring plan and $1.8 million related to
the FY09 restructuring plan.  Goodwill impairment charges for the nine
months ended May 29, 2009 totaled $10.4 million related to the Adtron segment.
We did not incur any restructuring or goodwill impairment charges for the nine
months ended May 30, 2008.
  Interest
Expense, Net
  Net
interest expense for the three months ended May 29, 2009 was $1.6 million,
compared to $1.5 million for the three months ended May 30, 2008.  The
increase was primarily due to approximately $0.4 million less interest income
earned because of lower interest rates on bank deposits, while interest expense
decreased $0.2 million due to a decrease in interest rate on our long-term
debt.
 
 Net
interest expense for the nine months ended May 29, 2009 was $5.1 million,
compared to $3.8 million for the nine months ended May 30, 2008.  The
increase was primarily due to approximately $1.9 million less interest income
earned because of significantly lower interest rates on bank deposits, while
interest expense decreased $0.6 million mainly due to a decrease in interest
rate on our long-term debt.


Other
Income (expense), net




Net other
income for the three months ended May 29, 2009 was $0.0 million compared to $0.3
million for the three months ended May 30, 2008. The decrease was mainly driven
by the non-recurrence of foreign currency transaction gains.





Net other
expense for the nine months ended May 29, 2009 was $0.6 million compared to
other income of $2.1 million for the nine months ended May 30, 2008. The
decrease was mainly driven by lower foreign currency transactions losses in our
Brazil operations.





Provision
for Income Taxes




The effective tax rates for the three months ended May 29, 2009 and May 30, 2008
were approximately (18%), representing tax expense and a pre-tax loss, and 893%
(including a $9.6 million increase in the valuation allowance on U.S. deferred
tax assets), respectively.  The effective tax rates for the nine months
ended May 29, 2009 and May 30, 2008 were approximately (52%) and 57%
respectively.  The effective tax rates differ from the 35% U.S.
statutory tax rate principally due to losses in the United States generating no
tax benefit (due to the full valuation allowance on U.S. deferred tax assets)
and the write-downs of $10.4 million in non-deductible goodwill for the
nine months ended May 29, 2009.  The losses in the United States and
write-downs of non-deductible goodwill increasing the effective tax rate were
partially offset by a lower effective tax rate on profits being generated in
non-U.S. tax jurisdictions.




Liquidity
and Capital Resources




Our
principal sources of liquidity are cash flows from operations and the current
available borrowings under our senior secured credit facility. Our principal
uses of cash are debt service requirements as described below, capital
expenditures, potential acquisitions, research and development expenditures,
shares repurchase program and working capital requirements.   Cash and
cash equivalents consist of funds held in general checking accounts, money
market accounts, certificates of deposits, and short-term investments with an
original maturity on the date of purchase of three months or
less.  The Company does not have investments in variable rate demand
notes or auction rate securities.




Debt
Service. As of May 29, 2009, (1) we had total long-term indebtedness of
$81.3 million aggregate principal amount of our senior secured floating rate
notes outstanding; and (2) our senior secured credit facility was undrawn, with
$35.0 million of borrowing capacity available, subject to customary conditions.
Any inability to meet our significant debt service obligations could have
material consequences to our security holders.


28


Senior Secured
Floating Rate Exchange Notes Due April 2012.Our senior secured
floating rate notes bear interest at a rate equal to LIBOR plus 5.50% per annum,
and are guaranteed by all of our subsidiaries, except for Estecom, and SMART
Modular Technologies (Deutschland) GmbH, and are secured by second-priority
liens on most of the assets securing our senior secured credit facility.
Interest on our notes is payable quarterly in cash. Our notes contain customary
covenants and events of default, including covenants that limit our ability to
incur debt, pay dividends and make investments. We were in compliance with such
covenants as of May 29, 2009.




Senior Secured
WellsFargoCredit
Facility.On November 26, 2008,
the First Amendment to Second Amended and Restated Loan and Security Agreement
(the "Amendment") was entered into by and among SMART Modular Technologies,
Inc., SMART Modular Technologies (Europe) Limited, and SMART Modular
Technologies (Puerto Rico) Inc., as borrowers, and Wells Fargo Bank, National
Association, as lender, arranger, administrative agent and security trustee (“WF
Credit Facility”).   The WF Credit Facility is available until
April 30, 2010, unless earlier terminated or default occurs.
  The
amended financial covenants require that the borrowers maintain, as of the end
of each fiscal quarter, an Adjusted Quick Ratio equal to or greater than 1.45,
and, depending on the applicable fiscal quarter and based on the preceding four
fiscal quarters then ended, (i) an Adjusted EBITDA equal to or greater than $30
million to $45 million, and (ii) a Funded Debt to Adjusted EBITDA Ratio equal to
or less than 2.25 to 3.00. The Base Rate Margin and LIBOR Rate Margin are 2% and
3%, respectively. As of May 29, 2009, the revolving credit facility was undrawn
and had available borrowing capacity of $35 million and we were in compliance
with its covenants under the revolving credit facility.  Based on
current projections, it is probable that we will not meet the WF Credit Facility
covenants requiring an adjusted EBITDA equal to or greater than $35 million or a
Funded Debt to adjusted EBITDA ratio equal to or lower than 2.5 as of the end of
our fourth fiscal quarter, August 28, 2009.  If we do not meet either
covenant or any other specified financial ratio or financial condition test,
then we will be unable to borrow under the WF Credit Facility, which has not
been used since November 2007, and given our cash position and our anticipated
operating cash flow, we have no plans to utilize the WF Credit Facility before
it expires on April 30, 2010.  We are in discussions with Wells Fargo
and evaluating various alternatives. Refer to updated “Risk Factors” appearing
in Part II of Form 10-Q “Item 1A”.


Capital
Expenditures




Future
capital expenditures focus on test and manufacturing equipment upgrades and/or
acquisitions, IT infrastructure and software upgrades. Our senior secured credit
facility contains restrictions on our ability to make capital expenditures.
Based on current estimates, we believe that the amount of capital expenditures
permitted to be made under the senior secured credit facility will be adequate
to implement our current plans.




Sources
of Funds




As of May
29, 2009, we had $139.2 million in unrestricted cash.  We have consistently
generated operating cash flow, including in each of the last three fiscal years
and in the current fiscal year to date, including $44.6 million for the nine
months ended May 29, 2009.  Our capital expenditures are relatively modest,
running about 3% of net sales.  Our $81.3 million of debt is not due until
April 2012 and does not require us to meet quarterly or annual financial
covenant tests.  Given the foregoing, we anticipate that we will meet our
working capital needs, and be able to fund our R&D and capital expenditures
and service requirements on our debt obligations for at least the next 12
months. Our ability to make scheduled payments of principal, to pay interest on
or to refinance our indebtedness and to satisfy our other debt obligations
beyond the next 12 months will depend upon our future operating performance,
which will be affected by general economic, financial, competitive, business and
other factors beyond our control.




From time
to time we may explore additional financing methods and other means to lower our
cost of capital, which could include additional share issuance or debt financing
and the application of the proceeds there from to repay any bank debt or other
indebtedness. In addition, in connection with any future acquisitions, we may
require additional funding in the form of additional debt or equity financing or
a combination thereof. There can be no assurance that any additional funding
will be available to us on acceptable terms.




Historical
Trends




Historically,
our financing requirements have been funded primarily through cash generated by
operating activities, credit facility borrowings, the sale of our senior secured
floating rate notes, the sale of preferred shares to and advances from our
former principal shareholder, Modular, L.L.C, and our initial public offering.
As of May 29, 2009, our cash and cash equivalents were $139.2
million.




Cash Flows from
Operating Activities.Net cash provided by
operating activities was $44.6 million for the nine months ended May 29, 2009,
compared to net cash provided by operating activities of $4.0 million for the
nine months ended May 30, 2008.





Net cash
provided by operating activities of $44.6 million for the nine months ended May
29, 2009 was primarily comprised of:





·
            Net
      loss, net of non-cash related expenses, of $15.0
  million;


·
            A
      decrease in accounts receivable of $67.8
  million;


·
            A
      decrease in inventories of $4.6 million;
and


·
            A
      decrease of $43.2 million in accounts payable and accrued expenses and
      other current liabilities.


29


Net cash
provided by operating activities of $4.0 million for the nine months ended May
30, 2008 was primarily comprised of:





·
            Net
      income, net of non-cash related expenses, of $31.2
  million;


·
            A
      decrease in accounts receivable of $2.7
million;


·
            A
      decrease in prepaid expenses and other assets of $5.6 million;
      and


·
            A
      decrease of $35.1 million in accounts payable and accrued expenses and
      other liabilities.




Cash Flows from
Investing Activities.Net cash used in investing activities was $18.6 million for the nine
months ended May 29, 2009, principally as a result of purchases of $11.7 million
in property and equipment, a cash deposit of $0.4 million on equipment and $6.6
million of contingent consideration payments related to the Adtron
earn-out.





For the
nine month period ended May 30, 2008, net cash used in investing activities was
$31.5 million, principally as a result of the Adtron acquisition for $20.3
million, net of cash acquired and purchases of $11.4 million in property and
equipment.





Cash Flows from
Financing Activities.Net cash provided by financing activities was $0.4 million for the nine
months ended May 29, 2009, of which $0.1 million was used to buyback
approximately forty-five thousand of our ordinary shares under our share
repurchase program, offset by $0.5 million provided by ordinary shares issuances
through option exercises.





Net cash
provided by financing activities was immaterial for the nine months ended May
30, 2008.





Share
Repurchase Program





In March
2009, our Board of Directors authorized a share repurchase program of up to
$10.0 million of our ordinary shares.  We intend to repurchase (and
have repurchased) shares using our available cash.  In April 2009, the
Company entered into a Rule 10b5−1 trading plan (“Plan”) with a broker to
repurchase ordinary shares based on pre-defined terms and
conditions.  Except as set forth in the Plan, the timing, duration,
and the exact number of additional shares to be purchased will be at the
Company’s discretion.  Under the repurchase program, depending on
price, regulatory requirements, market conditions and other factors, shares may
be purchased on the open market or in privately negotiated
transactions.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice. During the three
months ended May 29, 2009, we repurchased approximately forty-five thousand
of our ordinary shares through open market repurchases at an average price of
$1.82 per share for a total of approximately $0.1 million.  As of May
29, 2009, the remaining balance available for future share repurchases was $9.9
million under our share repurchase program.




Contractual
Obligations





There
have been no material changes from contractual obligations previously disclosed
in our Annual Report on Form 10-K for the year ended August 29, 2008, except for
our commitments under operating leases.  See below for our contractual
commitments for operating leases after execution of our new operating lease
agreement on March 18, 2009:








Payments
      Due by Period1
      Year
                                            
                                            
                                            2-3
      Years
                                            
                                            
                                            4-5
      Years
                                            
                                            
                                            After
      5 Years
                                            
                                            
                                            Total(In
      millions)Operating
      leases
                                            
                                            $
                                            1.3
                                            
                                            
                                            $
                                            2.8
                                            
                                            
                                            $
                                            1.3
                                            
                                            
                                            $
                                            1.2
                                            
                                            
                                            $
                                            6.6




Off-Balance
Sheet Arrangements




We do not
have any relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. In addition, we do not have any undisclosed borrowings or debt, and we
have not entered into any synthetic leases. We are, therefore, not materially
exposed to any financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.




Inflation




We do not
believe that inflation has had a material effect on our business, financial
condition or results of operations. If our costs were to become subject to
significant inflationary pressures, we may not be able to fully offset such
higher costs through price increases. Our inability or failure to do so could
adversely affect our business, financial condition and results of
operations.




Recent
Accounting Pronouncements




See
Note 1 of our notes to Unaudited Condensed Consolidated Financial
Statements for information regarding the effect of recent accounting
pronouncements on our financial statements.


30


Item
3. Quantitative and
Qualitative Disclosures About Market Risk




Our
exposure to market rate risk includes risk of foreign exchange rate fluctuations
and changes in interest rates.




Foreign
Exchange Risks




We are
subject to inherent risks attributed to operating in a global economy. Our
international sales and our operations in foreign countries make us subject to
risks associated with fluctuating currency values and exchange rates. Because
sales of our products have been denominated to date primarily in United States
dollars, increases in the value of the United States dollar could increase the
price of our products so that they become relatively more expensive to customers
in the local currency of a particular country, leading to a reduction in sales
and profitability in that country. As a result of our foreign operations, we
have revenues, costs, assets and liabilities that are denominated in foreign
currencies. Therefore, decreases in the value of the United States dollar could
result in significant increases in our manufacturing costs that could have a
material adverse effect on our business, financial condition and results of
operations. At present, we do not purchase financial instruments to hedge
foreign exchange risk, but may do so as circumstances warrant.




For foreign operations using the local currency as their functional currency,
assets and liabilities are translated at exchange rates in effect at the balance
sheet date and income and expenses are translated at average exchange rates
during the period. The effect of this translation is reported in other
comprehensive income (loss). For the nine months ended May 29, 2009, we recorded
foreign currency translation adjustments primarily related to our Brazil
operations of $19.0 million.  This significant cumulative translation
adjustment was due to the devaluation of the Brazilian currency against the U.S.
dollar.





Interest
Rate Risk




We are
subject to interest rate risk in connection with our long-term debt, including
the remaining $81.3 million of our senior secured floating rate exchange notes.
In addition, our Wells Fargo credit facility currently provides for borrowings
of up to $35.0 million that will also bear interest at variable rates. Assuming
the Wells Fargo credit facility is fully drawn and holding other variables
constant and excluding the impact of any hedging arrangements, each 1.0%
increase in interest rates on our variable rate borrowings would result in an
increase in annual interest expense and a decrease in our cash flows and income
before taxes of $1.2 million per year. We have entered into two simultaneous
interest rate swap arrangements for the purpose of fixing the interest rate on
the remaining portion of our long-term debt for the specified respective
interest rate swap periods. The interest rate swaps were for notional amounts of
$41.3 and $40.0 million, bearing 9.78% and 9.97% fixed annual interest rate,
respectively. One interest rate swap expired on April 1, 2008 and the other one
with a notional amount of $40.0 million remains outstanding through April 28,
2010. However, we cannot assure that the outstanding interest rate swap or any
other interest rate swaps that we implement will be effective.




Item 4. Controls
and Procedures




(a) Evaluation of Disclosure Controls
and Procedures. Our President and Chief Executive Officer and
our Senior Vice President and Chief Financial Officer, after evaluating the
effectiveness of the Company’s “disclosure controls and procedures” (as defined
in the Exchange Act Rules 13a-15(e) or 15d-15(e)) as of the end of the period
covered by this quarterly report, have concluded that our disclosure controls
and procedures were effective based on their evaluation of these controls and
procedures required by paragraph (b) of Exchange Act Rules 13a-15 or
15d-15.




(b) Changes in Internal Control Over
Financial Reporting.  There were no changes in our internal
control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.




31


PART II. OTHER
INFORMATION




Item 1. Legal
Proceedings




See Note
9 of our notes to Unaudited Condensed Consolidated Financial Statements for
information regarding legal matters.





Item 1A. Risk
Factors




There
have been no material changes from risk factors related to our business
previously disclosed in our Annual Report on Form 10-K for the year ended August
29, 2008 that was filed on November 12, 2008 and/or Form 10-Q for the quarter
ended February 27, 2009 that was filed on April 7, 2009, except for amending and
restating the following:
 
 Restrictive
covenants contained in our senior secured revolving line of credit facility
(“WF Credit Facility”) and the indenture relating to our senior secured floating
rate notes (the “Notes”) may restrict our current and future operations,
particularly our ability to respond to changes or to take some actions, and our
failure to comply with such covenants, whether due to events beyond our control
or otherwise, could result in an event of default which could materially and
adversely affect our operating results and our financial condition.
  The indenture relating to
our Notes contains various covenants that limit our ability to engage in certain
transactions. In addition, our WF Credit Facility contains other and more
restrictive covenants and prohibits us from voluntarily prepaying certain of our
other indebtedness. Our WF Credit Facility also requires us to maintain
specified financial ratios and satisfy other financial condition tests. We
cannot be assured that we will meet these financial ratios and tests in the
future. A breach of any of these covenants could result in a default under our
WF Credit Facility and, in the event that there is an acceleration of more
than $10 million under our WF Credit Facility, in an acceleration of our
Notes. Based on current projections, it is probable that we will not meet
the WF Credit Facility covenants requiring an adjusted EBITDA equal to or
greater than $35 million or a Funded Debt to adjusted EBITDA ratio equal to or
lower than 2.5 as of the end of our fourth fiscal quarter, August 28,
2009. If we do not meet either covenant or any other specified financial
ratio or financial condition test, then we will be unable to borrow under the WF
Credit Facility.  We have not borrowed under the WF Credit Facility since
November 2007 and,
given our cash position and our anticipated operating cash flow, we have no
plans to utilize the WF Credit Facility before it expires on April 30,
2010. We are in discussions with Wells Fargo and evaluating
various alternatives.
  If there were an uncured event of default under our debt instruments, the
holders of the defaulted debt could cause all amounts outstanding with respect
to that debt to become due and payable immediately. We cannot be assured that
our assets or cash flow would be sufficient to fully repay borrowings under our
outstanding debt instruments, either upon maturity or acceleration upon an
uncured event of default or, if we were required to repurchase the Notes upon a
change of control, that we would be able to refinance or restructure the
payments on such debt. Further, if we are unable to repay, refinance or
restructure our indebtedness under the WF Credit Facility, the lender could
proceed against the collateral securing that indebtedness, our Notes and certain
other indebtedness. In addition, any event of default or declaration of
acceleration under one debt instrument could also result in an event of default
under one or more of our other debt instruments.
  We
may not be able to effectively implement our restructuring plans, and our
restructuring plans may not result in the expected benefits, which would
negatively impact our future results of operations.
  During
the third quarter of fiscal 2009, we initiated a third restructuring plan to
reduce further our work force and reduce our cost structure to combat the
continued challenging macroeconomic conditions.  This most recent
restructuring plan was intended to decrease various Company costs and improve
cash flow. We cannot assure you that we will be able to successfully complete
and realize the expected benefits of this restructuring plan or the others
previously announced. These restructuring plans may involve higher costs, fewer
benefits, a longer timetable, or additional restructuring activity than we
currently anticipate and could negatively impact our results of operations and
cash flow.  In addition, our restructuring plans and other cost-saving
measures that we adopted in the third quarter of fiscal 2009, such as salary
reductions in the U.S., shortened work weeks internationally, and a suspension
of our 401(k) matching program, may have other consequences, such as attrition
beyond our planned reduction in workforce or a negative impact on employee
morale.


32


Item
2. Unregistered Sales of Equity Securities




The
following table provides the specified information about the repurchase of
shares under the Company’s share repurchase program.





Total number
                                                  of
      shares
                                                  purchased
                                                
                                                
                                                Average
                                                  Price paid per
                                                  share
                                                
                                                
                                                Total number
                                                  of
      shares
                                                  purchased
      as
                                                  part
      of
                                                  publicly
                                                  announced
                                                  plans
      or
                                                  programs
                                                
                                                
                                                Maximum
                                                  approximate
                                                  dollar
      value of
                                                  shares that may
                                                  yet
      be
                                                  purchased
                                                  under
      the plans
                                                  or
      programsApril
      2009
                                                
                                                
                                                45,250
                                                
                                                
                                                $
                                                1.82
                                                
                                                
                                                
                                                45,250
                                                
                                                
                                                $
                                                9,916,000





In March
2009, the Board of Directors authorized a share repurchase program to purchase
up to $10 million of the Company’s ordinary shares in the open market or
negotiated transactions. See Note 2 of our notes to Unaudited Condensed
Consolidated Financial Statements for information regarding Share Repurchase
Program.




Item 6.  Exhibits




The
following exhibits are filed herewith:




Exhibit
      No.
                
                Exhibit
      Title31.1
                
                Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002




33







SMART
MODULAR TECHNOLOGIES (WWH), INC.




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, SMART Modular
Technologies (WWH), Inc. has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.




SMART
MODULAR TECHNOLOGIES (WWH), INC.







By:
                /s/  IAIN
      MACKENZIEName:
                Iain
      MacKenzieTitle:
                President
      and Chief Executive
Officer







By:
                /s/
      BARRY ZWARENSTEINName:
                Barry
      ZwarensteinTitle:
                Senior
      Vice President and Chief Financial
Officer






Date:
July 7, 2009








34


EXHIBIT INDEX




Exhibit
      No.
                
                Exhibit
      Title31.1
                
                Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002








35