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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K


|     |  |                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------
|[x]  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
|     |  |                                                                                                                                 
|     |  | OR                                                                                                                              
|     |  |                                                                                                                                 
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO     

Commission File Number 0-25699



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PLX TECHNOLOGY, INC.


(Exact Name of Registrant as Specified in its Charter)





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

870 Maude Avenue
Sunnyvale, California 94085
(408) 774-9060(Address, including zip code, and telephone number, including area code,
of registrants principal executive offices)

Securities Registered Pursuant to Section 12(g) of the Act:
Common stock, $0.001 par value per share

Indicate by check mark 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. [ X ] Yes [    ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [    ] Yes [ X ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [    ] Yes [ X ] No

The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the registrants common
stock on June 28, 2002, as reported on The Nasdaq National Market, was
approximately $66,161,327. Shares of common stock held by each executive
officer and director and by each person who to the registrants knowledge owns
5% or more of the outstanding voting stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

The number of shares of common stock outstanding at February 28, 2003 was
21,140,886.

DOCUMENTS INCORPORATED BY REFERENCE

PART III OF THIS REPORT ON FORM 10-K INCORPORATES INFORMATION BY REFERENCE FROM
THE REGISTRANTS PROXY STATEMENT FOR ITS 2003 ANNUAL MEETING OF STOCKHOLDERS
ITEMS 10, 11, 12 AND 13.





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TABLE OF CONTENTS



|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1: BUSINESS                                                                             
|              | ITEM 2: PROPERTIES                                                                           
|              | ITEM 3: LEGAL PROCEEDINGS                                                                    
|              | ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS                                  
|PART II      
|              | ITEM 5: MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|              | ITEM 6: SELECTED FINANCIAL DATA                                                              
|              | ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|              | ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|              | ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|              | ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III     
|              | ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|              | ITEM 11: EXECUTIVE COMPENSATION                                                              
|              | ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|              | ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|              | ITEM 14: CONTROLS AND PROCEDURES                                                             
|PART IV      
|              | ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 10.7 
|EXHIBIT 10.8 
|EXHIBIT 10.9 
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 99.1 
|EXHIBIT 99.2 



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and certain information incorporated herein by
reference contain forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
statements contained in this Report on Form 10-K that are not purely historical
are forward-looking statements, including, without limitation, statements
regarding our expectations, objectives, anticipations, plans, hopes, beliefs,
intentions or strategies regarding the future. Forward-looking statements are
not guarantees of future performance and are subject to risks and uncertainties
that could cause actual results to differ materially from the results
contemplated by the forward-looking statements. Forward-looking statements
include, without limitation, the statements regarding (a) the growing demand
for standards-based components such as our semiconductor devices that connect
systems together, (b) our objective to expand our advantages in data transfer
technology, under the heading Item 1, Business  Overview; our expectation
that we will support new I/O standards where appropriate, under the heading
Item 1, Business  The PLX Solution; the statements regarding (a) our
objective to continue to expand our market position as a developer and supplier
of I/O connectivity solutions for high performance systems, (b) our plan to
target those applications where we believe we can attain a leadership position,
(c) that we seek to integrate additional I/O-related functions into our
semiconductor devices, (d) our belief that our understanding of I/O technology
trends and market requirements allows us to bring to market more quickly new
products that support the latest I/O technology, under the heading Item 1,
Business  Strategy; that we continue to integrate more functionality in our
semiconductor devices and continue to enhance and expand our software
development kits under the heading Item 1, Business  Technology; the
statements regarding (a) our belief with respect to the principal factors of
competition in the business, (b) our belief that we compete favorably with
respect to each of those factors, under the heading
Item 1, Business 
Competition; the statements regarding (a) our expectation that revenues
related to sales through distributors will continue to account for a
significant portion of total revenues, (b) our belief that providing customers
with comprehensive product support is critical to remaining competitive in the
markets we serve, (c) our belief that our close contact with customer design
engineers provides valuable input into existing product enhancements and next
generation product specifications, under the heading Item 1, Business  Sales,
Marketing and Technical Support; (a) our expectation that we will continue to
make substantial investments in research and development and to participate in
the development of industry standards, (b) our expectation that we will
periodically seek to hire additional development engineers, under the heading
Item 1, Business  Research and Development; our belief that the transition
of our products to smaller geometries will be important for us to remain
competitive under the heading Item 1, Business  Manufacturing; our plan to
seek patent protection when necessary, under the heading Item 1, Business -
Intellectual Property; our belief that our current facility will be adequate
through 2003 under the heading Item 2, Properties; the statement regarding
our intention to retain earnings for use in our business and not to pay any
cash dividend in the foreseeable future under the heading Item 5, Market for
Registrants Common Equity and Related Stockholder Matters; our belief that
our long-term success will depend on our ability to introduce new products
under the heading Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations  Overview; the statement regarding our
expectation to record amortization of deferred compensation related to the
stock grants of approximately $0.5 million per quarter through September 30,
2003 under the heading Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations  Results of Operations; our
belief that our existing resources, together with cash expected to be generated
from our operations, will be sufficient to meet our capital requirements for at
least the next twelve months under the heading Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources.

All forward-looking statements included in this document are subject to
additional risks and uncertainties further discussed under Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Certain Factors That May Affect Future Operating Results and are
based on information available to us on the date hereof. We assume no
obligation to update any such forward-looking statements. It is important to
note that our actual results could differ materially from those included in
such forward-looking statements. These cautionary statements should be
considered in the context of the factors listed under the heading Item 7,
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Certain Factors That May Affect Future Operating Results, as well
as those disclosed from time to time in our reports on Forms 10-Q and 8-K and
our Annual Reports to Stockholders.

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PART I




ITEM 1: BUSINESS

Overview

PLX Technology, Inc. (PLX or the Company), a Delaware corporation
established in May 1986, develops and supplies semiconductor devices that
accelerate and manage the transfer of data in networking and
telecommunications, enterprise storage, servers, personal computers, imaging
and industrial equipment. We offer a complete solution consisting of three
related types of products: semiconductor devices, software development kits and
hardware design kits. Our semiconductor devices simplify the development of
data transfer circuits in high-performance embedded systems and computers and
are compatible with microprocessors such as Motorolas PowerPC, Intels i960
and StrongArm, Broadcoms MIPS, PMC-Sierras MIPS, and DSPs from companies such
as Texas Instruments. Our software development kits and hardware design kits
promote sales of our semiconductor devices by lowering customers development
costs and by accelerating their ability to bring new products to market.

In the last decade, demand for networking, telecommunications and other
equipment that transmits, stores and processes information rapidly has
increased due to:



| |  |  | growth of the Internet,                 
| | - |  | ----------------------------------------
|
| |  |  | deployment of high-speed networking, and
|
| |  |  | proliferation of multimedia.            

Suppliers of this equipment seek to reduce product development time and to
use their scarce engineering resources more efficiently. Until recently, these
suppliers typically developed their own system components and the connections
between the components. Now, however, they are increasingly building their
equipment based on industry standard connection methods and purchasing
components supplied by other companies that comply with these standards. By
doing so, they reduce the time and resources required for product development.
Consequently, there is a growing demand for standards-based components that
connect systems together, such as our semiconductor devices. The majority of
products we ship today are based on Peripheral Component Interconnect, or PCI,
an interconnect standard that is widely used in our markets. PLX is an active
member of many of the trade associations that define current and future
interconnect standards including PCI, Compact PCI, PCI-Express, RapidIO,
HyperTransport and Infiniband.

Our objective is to expand our advantages in data transfer technology by:



| |  |  | focusing on high-growth markets,                                                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------
|
| |  |  | delivering comprehensive solutions, including semiconductor
devices, software development kits and hardware design kits,
|
| |  |  | extending our technology advantages by incorporating new functions and technologies,                                    
|
| |  |  | driving industry standards, and                                                                                         
|
| |  |  | strengthening and expanding our industry relationships.                                                                 

Our headquarters are located at 870 Maude Avenue, Sunnyvale, California
94085. The telephone number is (408) 774-9060. Additional information about
PLX is available on our website at http://www.plxtech.com. Information
contained in the website is not part of this report.

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports, and the Proxy
Statement for our Annual Meeting of Stockholders are made available,

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free of charge, on our website, http://www.plxtech.com, as soon as
reasonably practicable after the reports have been filed with or furnished to
the Securities and Exchange Commission.

Industry Background

Embedded systems are found in many common products and offer varying
levels of performance depending on each products requirements. These products
range from low performance devices such as electronic toys and kitchen
appliances to complex, high-performance electronic equipment such as network
routers and switches. High-performance embedded systems offer increased data
processing capabilities and typically utilize one or more 32-bit or 64-bit
microprocessors, fast memories and peripherals, and sophisticated operating
systems or control code.

The growth of the communications infrastructure has increased the demand
for high performance embedded systems and communication-related server and
personal computer (PC) adapter cards. This demand has been fueled by the
growth of the Internet; the deployment of high-speed networking systems to
transmit, store, and process data; and the proliferation of data types in the
network, including voice traffic and multimedia.

Markets for electronic equipment that rely on high-performance embedded
systems include the following:



| |  | Networking and Telecommunications. Networking and telecommunications
applications include digital telephony, multimedia gateways, wireless
base stations, remote access servers, routers, switches and cable modem
equipment. This market segment has grown rapidly due to the rise of the
Internet and the proliferation of high bandwidth communication
technologies such as Fast Ethernet, Gigabit and 10 Gigabit Ethernet,
Asynchronous Transfer Mode, or ATM, cable modems, Digital Subscriber
Line, or xDSL, and Voice-over-IP, or VoIP.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Enterprise Storage. Enterprise storage applications include disk storage
subsystems, automated tape libraries and file servers. The growing use
of multimedia applications and storage networks is driving corporate
demand for increased data storage capacity.                                                                                                                                                                                                                                                                              
|
| |  | Imaging. Imaging applications include printers, copiers, medical
instrumentation and video and graphics equipment. The demand for better
image quality and higher performance, as well as connection of these
applications to high-speed networks, have increased their data processing
requirements.                                                                                                                                                                                                                                         
|
| |  | Industrial. Industrial applications include a wide range of process
control computers and factory automation equipment. These products have
high data transfer rate requirements, are used to monitor and control
complex processes in real-time and are being increasingly attached to
networks.                                                                                                                                                                                                                                             

Manufacturers of products that rely on high-performance embedded systems
seek to maximize the performance and minimize the cost of their increasingly
complex products. In addition, these manufacturers must develop and bring new
products to market quickly to keep pace with technological advancements.

The I/O Subsystem

A typical computer system can be described in terms of four primary
functions: the host microprocessor, the memory, the peripherals and the
input/output, or I/O, subsystem. The host microprocessor is the primary
control center for the system. The memory acts as a storage area for
instructions to be executed and data to be processed. The peripherals enable
connections between the system and other external devices such as network
components, printers and storage systems. The I/O subsystem is the
interconnect circuitry and software that connects these three other functions
and allows for the transfer of instructions and data among these functions.
The I/O subsystem includes the system bus or switch fabric, which is a physical
connection between these different functions.

To enable increased performance and functionality from computer systems,
semiconductor suppliers have historically focused on improving the operation of
peripherals, microprocessors and memories. The interconnect

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silicon in the I/O subsystem must also improve to keep pace with these
improvements by transferring more information at faster speeds.

In parallel with the increased performance demands of customers and their
data traffic, the reliability of these systems is under constant pressure to
improve. This is especially true as the networking and telecommunications
disciplines merge through use of the Internet to carry all types of traffic.
Highly available systems are required to meet the expectations of customers.

As data transfer requirements for the I/O subsystem have increased, so has
the complexity of its interface components such as processors, logic and
related software. Until a few years ago, most embedded systems used simple I/O
subsystems that contained limited logic and rudimentary software, if any.
Complex I/O subsystem components such as processors, elaborate control logic
and advanced software were costly, and therefore their use was confined to very
high-end equipment such as mainframe computers. Furthermore, the lack of
widely accepted I/O standards impeded the use of complex I/O subsystems in
other than high-end applications. However, advances in semiconductor
technology combined with the widespread adoption of standards in embedded
systems have enabled the development of highly integrated semiconductor devices
that can better manage I/O subsystem performance at lower cost.

Penetration of I/O Standards in Embedded Systems

Until a few years ago, embedded systems manufacturers relied on a wide
variety of proprietary solutions and a fragmented set of industry standard I/O
architectures. For example, many networking, imaging, storage and industrial
applications employed proprietary architectures to meet their specific
performance and cost requirements. A mix of standard buses such as VMEbus,
Multibus and ISA was used in some industrial, telecommunications and military
applications. Embedded system software was even more fragmented with many
proprietary and application specific software architectures in use. While
embedded developers could take advantage of many standard microprocessor,
memory and peripheral components supplied by external vendors, the lack of
acceptable I/O standards forced many to develop custom I/O subsystems
internally, placing a heavy demand on development resources.

The deployment of the PCI standard was one of the catalysts for the
widespread adoption of I/O standards in embedded systems. In the early 1990s,
PC and server manufacturers developed PCI, a new standard hardware architecture
to connect the major components of their systems at high speed. It offered up
to a one hundred times improvement in I/O data transfer rates over the previous
architectures. By the mid-1990s, PCI became the most widely used bus
architecture in the PC market. Consequently, many suppliers of peripheral
semiconductor components used in PCs adopted PCI as the standard system
interface. In addition to penetrating the PC and server market, PCI is now
established as a standard I/O architecture for many high-performance embedded
systems because it allows the use of low cost and state-of-the-art peripheral
semiconductor components developed for the PC market and provides a foundation
for embedded system interoperability. PCI also offers equivalent or superior
performance to the in-house developed standards of many embedded equipment
suppliers. Furthermore, the use of PCI enables faster time to market, lower
development cost and the ability to quickly integrate new I/O components.

New standards are emerging to meet increasing system performance needs.
PCI-X, a standard now widely used in servers, is an evolutionary improvement to
PCI. HyperTransport is an interconnect standard used in some communications
and server applications and supported in processors from AMD, Broadcom and
PMC-Sierra. Rapid I/O is an interconnect standard for some high performance
IBM PowerPC and Motorola PowerPC processors. PCI-Express is a next-generation
PCI standard now in a development phase. Other standards, such as InfiniBand
and Ethernet, are also used in varying degrees to interconnect system
components.

Although the PCI and newer interconnect standards have resolved many
development issues relating to I/O hardware architectures, software remains a
challenge. The lack of standards for I/O control software and the wide use of
proprietary operating systems place a significant demand on development
resources. Consequently, embedded developers are increasingly adopting
standard operating systems with well-defined I/O structures as opposed to
developing their own software internally. Examples include VxWorks, Linux,
pSOS, Windows CE, and Windows NT.

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Need for Standard I/O Interconnect Products and Comprehensive I/O
Solutions

Even with standard I/O specifications, design teams must still create the
circuitry and related software that implements these specifications. Designers
must also update their I/O subsystems to include frequent improvements in these
specifications.

Instead of developing all the hardware and software technology internally,
systems developers seek to focus their scarce engineering resources on the
proprietary features of their products. By using standard semiconductor
devices in the I/O subsystem instead of custom-designed devices they are able
to implement the basic framework of the system more easily and thereby reduce
the I/O subsystem design effort thereby providing faster time-to-market and
lower development cost. Standard products allow the design teams to
concentrate their efforts on differentiating hardware and software features.
In addition to standard interconnect semiconductor devices, system designers
can benefit from several other design elements, such as data control software,
hardware design kits and third-party development tools to complete their
development work in a timely manner. These additional elements simplify
development and improve time to market. They provide design teams with proven
hardware and software design examples and the tools to adapt these examples to
their needs.

Due to the availability and adoption of I/O standards by embedded system,
server and PC developers, there is now a large demand for I/O subsystem
components based on these standards.

The PLX Solution

PLX develops and supplies interconnect semiconductor devices and
supporting hardware and software platforms that accelerate and manage the
transfer of data in high-performance embedded systems and servers and PC
adapter cards.

Our solution consists of three related products:



| |  |  | interconnect semiconductor devices,                                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------
|
| |  |  | software development kits which assist in developing systems
that incorporate our semiconductor devices, and          
|
| |  |  | hardware design kits that allow development of a system using
our semiconductor devices and software development kits.

Development tools provided by third parties support these three related
products. Our products are designed for use in a variety of applications
including networking and telecommunications, enterprise storage, imaging and
industrial. Our chips are highly integrated, cost-effective semiconductor
devices that optimize the flow of data and simplify the development of
high-performance I/O subsystems. Our software development kits and hardware
design kits promote sales of our semiconductor devices by lowering customers
development costs and allowing them to bring new products to market more
quickly.

PLX products shipping today provide I/O connectivity solutions for mainly
the PCI standard. As new I/O standards evolve, we expect to support them where
appropriate. In 2002, we announced and started sampling a HyperTransport to
PCI-X interconnect chip. We are in the process of developing chips that
implement the PCI-Express standard. More than 1,000 electronic equipment
manufacturers use PLX semiconductor devices in a wide variety of embedded
systems applications.

Strategy

Our objective is to continue to expand our market position as a developer
and supplier of I/O connectivity solutions for high-performance systems. Key
elements of our strategy include the following:

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Focus on High-Growth Markets.We focus on the high-growth communications
infrastructure equipment market. Within this market, there are many highly
differentiated applications with different design criteria such as product
function, performance, cost, power consumption, software, size limitations and
design support. The requirements of many of these differentiated applications
are addressed by our products, and we target those applications where we
believe we can attain a leadership position.

Deliver Comprehensive Solutions.Our products provide embedded systems
developers with a comprehensive, proven development environment to simplify I/O
subsystem design, enhance performance, reduce development costs and accelerate
time-to-market. This solution consists of semiconductor devices, software
development kits and hardware design kits. These design elements are supported
by development tools provided by third parties.

Extend I/O Subsystem Technology.We offer our customers highly integrated
semiconductor devices and related software that incorporate many of the latest
advances in I/O interconnect technology. Our semiconductor devices and
software are designed to enable quick adoption of new I/O technologies and
enhancements to existing I/O standards. We seek to integrate additional
I/O-related functions into our semiconductor devices to provide our customers
with increasing functionality at the same or lower costs. We employ a team of
engineers with expertise in system architectures, product definition,
semiconductor and software design and engineering to maintain our I/O subsystem
technology advantages.

Drive I/O Subsystem Standards for Embedded Applications.We believe that
our understanding of I/O technology trends and market requirements allows us to
bring to market more quickly new products that support the latest I/O
technologies. Through our participation in key industry groups responsible for
standards such as the PCI Special Interest Group, the PCI Industrial Computer
Manufacturers Group (PICMG), PCI-X Manufacturers Group, HyperTransport
Consortium, and the Arapahoe Working Group (PCI-Express), we have taken an
active role in defining new I/O standards.

Strengthen and Expand Industry Relationships.We work with industry
leaders in developing hardware and software development tools and marketing
programs that promote the use of each companys products and promoting industry
standards. Partners include AMD, Broadcom, Bustronics, Intel, Jungo, Kaparel,
Microsoft, Motorola, Pigeon Point, PMC Sierra, RamBus, Texas Instruments and
Wind River. As a result of these relationships, we enable embedded systems
designers to choose the best products for their particular applications while
still employing our product as the core of their I/O subsystem design.

Customers

We supply our products to customers for a wide variety of high-performance
communications infrastructure applications including networking,
telecommunications, and enterprise storage. We also have sales in other
markets such as the imaging, industrial, personal computer, and server and
consumer markets. The typical product life cycle of a high performance
embedded system is one to two years or more of product development and initial
marketing activity followed by two to five years or more of volume production,
assuming the product is successful in the market. The embedded system design
team typically selects the sole-source hardware and software components early
in the design cycle. Generally, the embedded system will incorporate these
same components throughout its product life because changes require an
expensive re-engineering effort. Therefore, when our products are designed
into an embedded system, they are likely to be used in that system throughout
its two to five year or more production life.

Our products are standard semiconductor devices that may be incorporated
into equipment used in several of our target markets. More than 1000
electronic equipment manufacturers incorporate our semiconductor devices in
their products.

The following table lists representative customers that purchased directly
or through distributors more than $100,000 of our products in 2002.

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|                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Networking/Telecommunications
3Com
Accton Technology
Alcatel
Allied Telesyn
Artesyn Technologies
Avaya
Beijing Dong Fang
Brain Boxes
Brooktrout Technologies
Cisco Systems
Delta Electronics
Digi International
Echelon Corporation
Eicon Technology
Global Sun Technology
Hebei Shijiazhung
Hewlett-Packard
Hitachi Cable
Huawei
Intel
Lantronix
Marconi
Octal
On-Line Development
Performance Technologies
Prediwave |  | Pyxis Corporation
Quatech
Radisys
Sagem
Sea Level Systems
Siemens
Solectron
Toshiba Enterprise Storage

Hewlett-Packard
IBM
Storage Technology Imaging/Industrial/Medical

Aristocrat
EFI (Electronics For Imaging)
General Electric
Fuji Xerox
Hewlett-Packard
Kofax Image Products
Measurement Computing
Moxa Technologies
Siemens
SBS Technologies

Products

Our products consist of interconnect semiconductor devices, software
development kits and hardware design kits. Development tools provided by third
parties support these three design elements. The sales of these semiconductor
devices account for a majority of our revenues. We generate less than two
percent of our revenues from sales of our software and hardware design kits.
The other layers of our solution promote sales of our semiconductor devices by
lowering customers development costs allowing them to bring new products to
market more quickly.

I/O Accelerators. Our I/O accelerators are semiconductor devices that
accelerate movement of data across a PCI bus and between one or more devices or
subsystems that need to communicate across the PCI bus. These products
incorporate the Data Pipe Architecture technology, a set of circuits and
features that enable an efficient flow of data within systems with minimal
supervision from the system processor. Our I/O accelerators address a range of
applications and provide flexible interfaces that allow them to connect to a
wide variety of semiconductor devices, including processors such as IBMs and
Motorolas PowerPC, Intels i960 and Strong ARM, Hitachis SH, and Motorolas
68K series. Customers also use these semiconductor devices in connection with
digital signal processors, or DSPs, from Texas Instruments and others. The I/O
accelerators can be connected with a wide range of peripheral devices,
including LAN, WAN, disk control and graphics.

HyperTransport Interconnect Bridges.The HyperTransport bridge allows a
processor, typically a MIPS processor, to generate and control two PCI-X buses.
The bridge chip converts the 8 or 16 bit 800MHz HyperTransport processor
interface to two 64 bit 133MHz PCI-X buses. The bridge provides a means for
the processor to communicate efficiently with multiple I/O devices such as
Ethernet controllers. This product, now in the sampling stage, is a result of
an agreement we entered into in May 2002 with Advanced Micro Devices (AMD).

Software Development Kits. Our software development kits, or SDKs, are
designed to simplify and accelerate the development of systems that incorporate
our semiconductor devices. Support is provided for several

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industry-leading operating systems, including VxWorks from Wind River,
Linux, and Microsoft Windows as well as generic applications and other
operating systems. The SDKs include an application programming interface, or
API, that enables developers to execute complex transactions with simple
commands. This programming interface allows customers to migrate their
designs, with the same software interface, from our existing 32 bit I/O
accelerators to our 64 bit I/O accelerators. This common interface allows
customers to preserve their software investment even as their designs evolve in
complexity and as new I/O architectures are deployed.

Hardware Design Kits. We offer hardware design kits that support the
development of systems incorporating PLX semiconductor devices. We call our
hardware design kits rapid development kits, or RDKs. Designers use the RDKs
to evaluate our semiconductor devices and to simplify and accelerate product
development. Each hardware design kit includes a development circuit board
that designers can use to evaluate the PLX products and also design their own
system. These hardware design kits also include technical drawings,
documentation and other design assistance tools.

To offer additional design support, we work with third party companies
that provide development tools for our customers. Although we receive no
revenue directly from these development tools, they promote sales of our
semiconductor devices because these tools often make it easier to develop
systems incorporating our products. Examples include software development
tools from Jungo, Microsoft, Pigeon Point, and Wind River and software modeling
tools from Synopsys.

Our principal product offerings and functions include the following:

|                                      |  |                                                  |  |             |  |                                                                                                 
|------------------------------------- |  | ------------------------------------------------ |  | ----------- |  | ------------------------------------------------------------------------------------------------
|                                     
|Category                              |  | Product                                          |  | Description
|                                      |  |                                                  |  |            
|Semiconductor Devices                
|                                     
|32-bit/33 MHz Target I/O Accelerators |  | PCI 9030
PCI 9052
PCI 9050                       |  |            |  | Enables
connection of 8-,
16- and 32-bit
peripherals and
personal computer
adapters to PCI      
|                                     
|32-bit/33 MHz Master I/O Accelerators |  | PCI 9054
PCI 9080
PCI 9060SD
PCI 9060ES
PCI 9060 |  |            |  | Provides the
flexibility to
connect with a wide
range of
processors,
peripherals and
memory     
|                                     
|Bridges                               |  | HT 7520                                          |  |            |  | Connects
microprocessor
HyperTransport
interface to two
PCI-X buses                             
|                                     
|32 and 64-bit/66 MHz I/O Accelerators |  | PCI 9056
PCI 9656                                |  |            |  | Provides the
flexibility to
connect with a wide
range of
microprocessors,
peripherals and
memory

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|                          |  |                                     |  |   |  |                                                                                                            
|------------------------- |  | ----------------------------------- |  | - |  | -----------------------------------------------------------------------------------------------------------
|Software Development Kits
|                         
|PCI Software              |  | SDK                                 |  |  |  | Provides tools
for accelerating
design of data
transport software                                          
|                          |  |                                     |  |   |  |                                                                                                            
|                          |  |                                     |  |  |  | Includes
development and
debugging
utilities, sample
firmware and
drivers                                  
|                         
|Hardware Design Kits     
|                         
|Rapid Development Kits    |  | Kits supporting
a range
of products |  |  |  | Include
development circuit
boards, SDK
software,
documentation and
schematics to
assist system
development

Technology

We believe that supplying high-performance connectivity solutions for I/O
subsystems requires expertise in four areas:



| |  |  | semiconductor design,
| | - |  | ---------------------
|
| |  |  | software technology, 
|
| |  |  | system design, and   
|
| |  |  | industry standards.  

Semiconductor Design.Our engineers have substantial expertise in
semiconductor design and have developed a comprehensive library of complex
functional blocks for use in semiconductor devices for I/O connectivity. As a
result of this expertise, we offer both innovative architectures and high
levels of functionality. For example, our proprietary Data Pipe Architecture
technology allows the system developer a high degree of control over the PCI
bus in order to address specific design needs. In high-performance systems,
the Data Pipe Architecture technology enables data throughput that is faster
than typical approaches. We continue to integrate more functionality in our
semiconductor devices to reduce cost, improve performance, reduce size and
simplify the customers design effort.

Software Technology.We devote engineering resources to the development
of software technology used to assist the system developer in debugging
hardware and creating data control software. The quality and availability of
these tools are key differentiating factors between PLX and competing
alternatives. We continue to enhance and expand our software development kits,
which contain a set of programming interfaces that simplify the development of
software. Our software expertise provides us with valuable insights into our
customers software development issues, which aids the definition and
development of future semiconductor devices.

System Design.We employ a team of system level design engineers that
develop hardware design kits. These kits are high-performance adapters and
embedded systems that customers can use to assist development of their
products. Each of these hardware design kits is a system or adapter similar in
complexity to those built by our customers. The system design experience
provides us valuable insights which we can use to improve future semiconductor
device and software products.

Industry Standards.Through our participation in the key industry groups
responsible for interconnect standards, we take an active role in defining new
I/O standards such as PCI-X, HyperTransport, and PCI-Express.

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Competition

Competition in the semiconductor industry is intense. If our target
markets continue to grow, the number of competitors may increase significantly.
In addition, new semiconductor technologies may lead to new products that can
perform similar functions as our products.

Competition in the various markets we serve comes from companies of
various sizes, many of which are significantly larger and have greater
financial and other resources. Thus they can better withstand adverse economic
or market conditions. Our principal products compete with standard products
from companies such as Alliance Semiconductor, Applied Micro Circuits, Cypress
Semiconductor, Exar, Marvel Technology Group, Oxford Semiconductor and Tundra
Semiconductor.

In addition, two alternative devices can perform some or all of the
functions of our semiconductor devices. The first is the Application Specific
Integrated Circuit, or ASIC. With the ASIC approach, a customer creates a
custom semiconductor device for a particular application. Because the customer
buys the ASIC directly from the semiconductor foundry, this approach may lead
to lower unit production costs. However, this approach entails a large initial
time and resource investment in developing the custom device. The second
alternative device is the Field Programmable Gate Array, or FPGA. The FPGA is
a semiconductor device whose logic function can be programmed by the system
manufacturer. This requires less design effort and time than the ASIC
approach. However, because of the additional circuitry required to enable the
device to be programmed, this approach typically entails higher unit production
costs which can be prohibitive compared to ASICs or standard semiconductor
devices. Nevertheless, FPGA prices have decreased steadily and in many cases
are competitive with prices for standard semiconductor devices. Accordingly,
we also experience competition from leading ASIC suppliers, including IBM, LSI
Logic, NEC, and Toshiba as well as from FPGA suppliers, including Altera,
Atmel, Lattice, Quicklogic, and Xilinx. Many of these competitors are large
companies that have significantly greater financial, technical, marketing and
other resources than PLX.

We believe that the principal factors of competition in our business
include functionality, product performance, price, product innovation,
availability of development tools, customer service and reliability. We
believe that we compete favorably with respect to each of these factors. We
differentiate our products from those of our competitors by incorporating
innovative features that allow our customers to build systems based on industry
standards that are more efficient and higher in performance. Furthermore, in
general, our software and hardware development tools are more comprehensive
than competing solutions. However, we cannot assure you that we will be able
to compete successfully in the future against existing or new competitors, and
increased competition may adversely affect our business.

Sales, Marketing and Technical Support

Our sales and marketing strategy is to achieve design wins at leading
embedded systems companies in high-growth market segments. We market and sell
our products in the United States through a combination of direct regional
sales managers and a network of independent manufacturers representatives. We
maintain United States direct sales offices in California, Connecticut, North
Carolina, Texas and Wisconsin.

Outside the United States, we have engaged a team of manufacturers
representatives, stocking representatives and distributors to sell and market
our products. Our international network includes representatives in Australia,
Belgium, Canada, Denmark, France, Germany, Hong Kong, Ireland, Israel, Japan,
Korea, Norway, Peoples Republic of China, Singapore, South Africa, Sweden,
Taiwan, The Netherlands, and the United Kingdom. We maintain a direct sales
office in the United Kingdom to service customers in Europe and the Middle East
and in Japan and Hong Kong to service Japan, Southeast Asia, and Peoples
Republic of China.

As of December 31, 2002, we employed 26 individuals in sales and
marketing. Sales in North America represented 42%, 56%, and 61%, of product
revenues for 2002, 2001, and 2000, respectively. All sales to date have been
denominated in U.S. dollars.

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Net revenues through distributors accounted for approximately 54%, 54%,
and 65% of our net revenues for 2002, 2001, and 2000, respectively. Revenues
related to sales through distributors are expected to continue to account for a
majority of our total revenues. See Certain Factors That May Affect Future
Operating Results  A Large Portion of Our Revenues Is Derived from Sales to
Third-Party Distributors Who May Terminate Their Relationships with Us at Any
Time.

In 2002, sales to A2M, a distributor, accounted for 13% of our net
revenues. In 2001, sales to Prediwave, a direct customer and A2M and Unique,
both distributors, accounted for 18%, 14% and 11% of our net revenues,
respectively. In 2000, sales to Unique and A2M accounted for 25% and 11% of
our net revenues, respectively. No other distributor or direct customer
accounted for more than 10% of net revenues in any period presented. Cisco and
IBM have historically and continue to be significant customers. The majority
of our sales to Cisco and IBM are sold through A2M and Metatech, both
distributors, and Celestica, a contract manufacturer.

Technical support to customers is provided through field and factory
applications engineers, technical marketing personnel and, if necessary,
product design engineers. Local field support is provided in person or by
telephone. We also use our World Wide Web site to provide product
documentation and technical support information. We believe that providing
customers with comprehensive product support is critical to remaining
competitive in the markets we serve. In addition, our close contact with
customer design engineers provides valuable input into existing product
enhancements and next generation product specifications.

Research and Development

Our future success will depend to a large extent on our ability to rapidly
develop and introduce new products and enhancements to our existing products
that meet emerging industry standards and satisfy changing customer
requirements. We have made and expect to continue to make substantial
investments in research and development and to participate in the development
of new and existing industry standards.

Our research and development has focused on three main areas:
semiconductor devices, hardware design kits and software development kits. The
majority of our engineers are involved in semiconductor device development,
with the remaining engineers working on software and reference design hardware.
Before development of a new product commences, our marketing managers work
closely with research and development engineers and customers to develop a
comprehensive requirements specification. In addition, our marketing managers
and engineers review the applicable industry standards and incorporate desired
changes into the new product specification. After the product is designed and
commercially available, our engineers continue to work with various customers
on specific design issues to understand emerging requirements that may be
incorporated into future product generations or product upgrades.

Our research and development expenditures totaled $14.3 million in 2002,
$18.8 million in 2001, and $16.4 million in 2000. Research and development
expenses consist primarily of salaries and related costs of employees engaged
in research, design, and development activities. In addition, expenses for
outside engineering consultants, non-recurring engineering at our independent
foundries, and deferred compensation are included in research and development
expenses. As of December 31, 2002, there were 48 employees engaged in research
and development. We perform our research and development activities at our
headquarters in Sunnyvale, California and in Salt Lake City, Utah. We
periodically seek to hire additional skilled development engineers, who are
currently in short supply. Our business could be adversely affected if we
encounter delays in hiring additional engineers. See Certain Factors That May
Affect Future Operating Results  Failure to Hire Additional Personnel and to
Improve Our Operations Will Limit Our Growth.

Our future performance depends on a number of factors, including our
ability to identify emerging technology trends in our target markets, define
and develop competitive new products in a timely manner, enhance existing
products to differentiate them from those of competitors and bring products to
market at competitive prices. The technical innovations and product
development required for us to remain competitive are inherently complex and
require long development cycles. We typically must incur substantial research
and development costs before the technical feasibility and commercial viability
of a product can be ascertained. We must also continue to make significant
investments in research and development in order to continually enhance the
performance and functionality of our products to keep pace with competitive
products and customer demands for improved

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performance. Revenues from future products or product enhancements may
not be sufficient to recover the development costs associated with these
products or enhancements. The failure to successfully develop new products on
a timely basis could have a material adverse effect on our business. See
Certain Factors That May Affect Future Operating Results  Rapid
Technological Change Could Make Our Products Obsolete.

Manufacturing

We have adopted a fabless semiconductor manufacturing model and
outsource all of our semiconductor manufacturing, assembly and testing. This
approach allows us to focus our resources on the design, development and
marketing of products and significantly reduces our capital requirements. We
subcontract substantially all of our semiconductor manufacturing to AMD, IBM in
the United States, Samsung in Korea, Seiko-Epson Semiconductor in Japan, and
Taiwan Semiconductor Manufacturing Corporation in Taiwan. None of our products
are currently manufactured by more than one supplier, and all of our products
are expected to be single-source manufactured for the foreseeable future. We
must place orders two to four months in advance of expected delivery of
finished goods. We maintain inventory levels based on current lead times from
foundries plus safety stock to account for unanticipated fluctuations in
demand. Our inventory comprises a large portion of our working capital. As a
result, we have limited ability to react to fluctuations in demand for our
products, which could cause us to have an excess or a shortage of inventory of
a particular product and reduced product revenues.

In the event of a loss of, or a decision by us to change a key supplier or
foundry, qualifying a new supplier or foundry and commencing volume production
would likely involve delay and expenses, resulting in lost revenues, reduced
operating margins and possible detriment to customer relationships. Since we
place our orders on a purchase order basis and do not have a long-term volume
purchase agreement with any of our existing suppliers, any of these suppliers
may allocate capacity to the production of other products while reducing
deliveries to us on short notice. While we believe we currently have good
relationships with our foundries and adequate capacity to support our current
sales levels, there can be no assurance that adequate foundry capacity will be
available in the future on acceptable terms, if at all. See Certain Factors
That May Affect Future Operating Results  Our Independent Manufacturers May
Not Be Able To Meet Our Manufacturing Requirements.

Our semiconductor devices are currently fabricated using a range of
semiconductor manufacturing processes. We must continuously develop our
devices using more advanced processes to remain competitive on a cost and
performance basis. Migrating to new technologies is a challenging task
requiring new design skills, methods and tools. We believe that the transition
of our products to smaller geometries will be important for us to remain
competitive. Our business could be materially adversely affected if any
transition to new processes is delayed or inefficiently implemented. See
Certain Factors That May Affect Future Operating Results  Defects in Our
Products Could Increase Our Costs and Delay Our Product Shipments.

Intellectual Property

Our future success and competitive position depend upon our ability to
obtain and maintain the proprietary technology used in our principal products.
Most of our current products include implementations of the PCI industry
standard, which is available to other companies. We currently have no patents
on any of our I/O accelerator products and rely instead on trade secret
protection. We hold two patents on switch technology that expire in December
2016. In addition, we have two patents on I/O buffer and clock technology that
expire in September 2007 and September 2014. In the future, we plan to seek
patent protection when we believe it is necessary.

Our existing or future patents may be invalidated, circumvented,
challenged or licensed to others. The rights granted may not provide
competitive advantages to us. In addition, our future patent applications may
not be issued with the scope of the claims sought by us, if at all.
Furthermore, others may develop technologies that are similar or superior to
our technology, duplicate our technology or design around the patents owned or
licensed by us. In addition, effective patent, trademark, copyright and trade
secret protection may be unavailable or limited in foreign countries where we
may need this protection. We cannot be sure that steps taken by us to protect
our technology will prevent misappropriation of our technology.

The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions. This often results in
significant and often protracted and expensive litigation. There is no

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intellectual property litigation currently pending against us. However,
we may from time to time receive notifications of claims that we may be
infringing patents or other intellectual property rights owned by other third
parties. If it is necessary or desirable, we may seek licenses under these
third party patents or intellectual property rights. However, we cannot be
sure that licenses will be offered or that the terms of any offered licenses
will be acceptable to us.

The failure to obtain a license from a third party for technology used by
us could cause us to incur substantial liabilities and to suspend the
manufacture or shipment of products or our use of processes requiring the
technology. Litigation could result in significant expenses to us, adversely
affect sales of the challenged product or technology and divert the efforts of
our technical and management personnel, whether or not the litigation is
determined in our favor. In the event of an adverse result in any litigation,
we could be required to pay substantial damages, cease the manufacture, use,
sale or importation of infringing products, expend significant resources to
develop or acquire non-infringing technology, and discontinue the use of
processes requiring the infringing technology or obtain licenses to the
infringing technology. In addition, we may not be successful in developing or
acquiring the necessary licenses under reasonable terms. This could require
expenditures by us of substantial time and other resources. Any of these
developments would have a material adverse effect on our business. See
Certain Factors That May Affect Future Operating Results  Our Limited
Ability to Protect Our Intellectual Property and Proprietary Rights Could
Adversely Affect Our Competitive Position.

Employees

As of December 31, 2002, we employed a total of 98 full-time employees,
including 48 engaged in research and development, 26 engaged in sales and
marketing, 6 engaged in manufacturing operations and 18 engaged in general
administration activities. We also from time to time employ part-time
employees and hire contractors. Our employees are not represented by any
collective bargaining agreement, and we have never experienced a work stoppage.
We believe that our employee relations are good.

Executive Officers and Directors

Our executive officers and directors, their ages and their positions as of
December 31, 2002, are as follows:

|                   |  |     |    |          |  |                                                               
|------------------ |  | --- | -- | -------- |  | --------------------------------------------------------------
|Name               |  | Age |    | Position
|                   |  |     |    |         
|Michael J. Salameh |  |     | 48 |          |  | President and Director                                        
|Rafael Torres      |  |     | 34 |          |  | Vice President, Finance, Chief Financial
Officer and Secretary
|Lawrence Chisvin   |  |     | 48 |          |  | Vice President, Marketing                                     
|Michael A. Hopwood |  |     | 40 |          |  | Vice President, Worldwide Sales                               
|Hector A. Berardi  |  |     | 38 |          |  | Vice President, Operations                                    
|Jack Regula        |  |     | 54 |          |  | Vice President, Chief Technology Officer                      
|C. Mark Lipford    |  |     | 50 |          |  | Vice President, Engineering                                   
|D. James Guzy      |  |     | 66 |          |  | Chairman of the Board of Directors                            
|Eugene Flath       |  |     | 65 |          |  | Director                                                      
|Timothy Draper     |  |     | 44 |          |  | Director                                                      
|Young K. Sohn      |  |     | 46 |          |  | Director                                                      
|John H. Hart       |  |     | 57 |          |  | Director                                                      
|Robert H. Smith    |  |     | 65 |          |  | Director                                                      

Michael J. Salamehco-founded PLX and has served as our President and as a
member of the Board of Directors since PLXs inception in May 1986. From 1980
through 1986, Mr. Salameh was employed in various marketing management
positions with Hewlett-Packard Company. Mr. Salameh received a B.S. in
Engineering and Applied Science from Yale University and an M.B.A. from Harvard
Business School.

Rafael Torreshas served as our Vice President, Finance, Chief Financial
Officer and Secretary since November 2000. From May 1999 to November 2000, Mr.
Torres served as our Corporate Controller. From September 1998 to May 1999,
Mr. Torres was employed by OnCommand Corporation, an on demand video company,
as Accounting Manager. From June 1997 to September 1998, Mr. Torres was
employed by Silicon

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Valley Group, a semiconductor equipment company, as Manager of Financial
Reporting and Analysis. From September 1994 to June 1997, Mr. Torres was
employed with PriceWaterhouse LLP, a public accounting firm, as senior auditor.
Mr. Torres received a B.S. in Accounting from Santa Clara University. Mr.
Torres is a Certified Public Accountant.

Lawrence Chisvinhas served as our Vice President, Marketing since May
2000. From September 1998 through May 2000, Mr. Chisvin was employed by
Neomagic, a semiconductor company, as Director of Marketing. From May 1996
through September 1998, Mr. Chisvin was employed by LSI Logic, a semiconductor
company, as Director of Marketing. Prior to LSI Logic, Mr. Chisvin was
employed in a variety of marketing and engineering positions at S3, Philips,
Western Digital, and Digital Equipment Corporation. Mr. Chisvin received a
B.S. in Electrical Engineering from Northeastern University and an M.S. in
Electrical Engineering from Worcester Polytechnic Institute.

Michael A. Hopwoodhas served as our Vice President, Worldwide Sales since
1995. From 1989 to 1995, he held a variety of other sales management positions
with our Company. From 1984 until 1989, Mr. Hopwood held various sales
positions at Intel Corporation, a semiconductor manufacturer. Mr. Hopwood
received a B.S. in Physics Engineering from Pacific Lutheran University.

Hector A. Berardihas served as our Vice President, Operations since
August 2002. From April 1999 to July 2002, Mr. Berardi served as the Vice
President of Operations at Ubicom Inc., a developer of wireless network
processors and software platforms. From June 1998 to April 1999, Mr. Berardi
was a design and program manager for the advanced RISC core development group
at ST Microelectronics, a semiconductor company. From July 1987 to May 1998,
Mr. Berardi worked at National Semiconductor Corporation, a semiconductor
company, where his last position was senior product engineering manager for
microcontroller technologies. Mr. Berardi received an M.B.A. and a B.S. in
Electrical Engineering from Santa Clara University.

Jack Regulahas served as our Vice President, Chief Technology Officer
since October 2001. From May 2000 to October 2001, Mr. Regula served as our
Chief Scientist. Mr. Regula founded Sebring Systems, a semiconductor company,
in 1996 and was Sebrings Chairman and Chief Technology Officer from 1996 until
its acquisition by PLX in May 2000. Prior to Sebring Systems, Mr. Regula was
employed in a variety of engineering management positions at Sunscoop
Corporation, Force Computers, and Ironics, Inc. Mr. Regula received a B.S. in
Electrical Engineering and an M.S. in Electrical Engineering, both from
Rensselaer Polytechnic Institute.

C.     Mark Lipfordhas served as our Vice President, Engineering since
February 2002. From February 2001 to September 2001, Mr. Lipford served as the
Vice President of Engineering at IKOS Systems, Inc., a provider of hardware
assisted design verification products. From April 1989 to February 2001, Mr.
Lipford worked at Hewlett-Packard Company, where his last position was R&D Lab
Manager of Hewlett-Packards VeriFone division. Mr. Lipford received a B.S. in
Electrical Engineering at Virginia Polytechnic Institute.

D.     James Guzyhas served as our Chairman of the Board since 1986. Since
1969, Mr. Guzy has been Chairman of Arbor Company, a limited partnership
engaged in the electronics and computer industry. Mr. Guzy is also a director
of Cirrus Logic, Inc., Intel Corporation, Micro Component Technology, Inc.,
Novellus Systems, Inc., LogicVision, Davis Selected Group of Mutual Funds and
Alliance Capital Management Technology Fund, and a member of the board of
directors of several private technology companies. Mr. Guzy received a B.S.
from the University of Minnesota and an M.S. from Stanford University.

Eugene Flathhas been a director of PLX since May 1989. Mr. Flath has
been a Special General Partner of Applied Technology Investors since July 1994.
Mr. Flath also serves on the board of directors of several private companies.
Mr. Flath received a B.S. in Electrical Engineering and a B.S. in Naval Science
from the University of Wisconsin and an M.S. in Electrical Engineering from the
University of New Hampshire.

Timothy Draperhas been a director of PLX since 1986. Mr. Draper has been
a Managing Director of Draper Fisher Jurvetson, an investment company, since
1992. Mr. Draper managed Draper Associates LP from 1986 to 1992. Mr. Draper
received a B.S. in Electrical Engineering from Stanford University and an
M.B.A. from Harvard Business School.

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Young K. Sohnhas been a director of PLX since April 1999. Mr. Sohn has
served as Chief Executive Officer of Oak Technology, a semiconductor
manufacturer, since February 1999. From January 1993 until February 1999, Mr.
Sohn held various executive management positions at Quantum Corporation, a disk
drive manufacturer, including President of the Hard Disk Drive Business. Prior
to joining Quantum, Mr. Sohn was employed for nine years at Intel as a
marketing and sales executive and Director of Worldwide Channel Marketing in
Intels Reseller Channel organization. Mr. Sohn received a B.S. in Electrical
Engineering from the University of Pennsylvania and an M.B.A. from MITs Sloan
School of Management.

John H. Harthas been a director of PLX since April 1999. Mr. Hart is
currently a 3Com fellow and serves on the board of directors of two other
companies. In September of 2000, he retired as Senior Vice President and Chief
Technical Officer of 3Com Corporation, a position he had held since August
1996. From the time Mr. Hart joined 3Com in September 1990 until July 1996, he
was Vice President and Chief Technical Officer. Prior to joining 3Com, Mr.
Hart worked for Vitalink Communications Corporation for seven years, where his
most recent position was Vice President of Network Products. Mr. Hart received
a B.S. in Mathematics from the University of Georgia.

Robert H. Smithjoined the Board of Directors in November 2002. From May
1995 to August 2002, Mr. Smith worked at Novellus Systems Inc., a semiconductor
equipment manufacturer, where his last position was Executive Vice President of
Administration in the Office of the CEO and board member. From June 1994 to
September 1994, Mr. Smith held the position of chairman of the board of
directors for Micro Component Technology, Inc., a semiconductor test-equipment
manufacturer. From 1986 through 1990, Mr. Smith served as the president of
Maxwell Graphics, Inc., a printing company. From 1982 through 1986, Mr. Smith
held chief financial officer positions with Maxwell Communications of North
America Corp. and R. R. Donnelley and Sons, printing companies. He previously
held executive positions with Honeywell, Inc., Memorex Corp. and Control Data
Corp. Mr. Smith is currently a member of the board of directors for Cirrus
Logic, Inc, a semiconductor company.

Backlog

PLXs backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period. This results from expected changes in
product delivery schedules and cancellation of product orders. In addition,
PLXs sales will often reflect orders shipped in the same quarter that they are
received.




ITEM 2: PROPERTIES

We own one facility in Sunnyvale, California, which has approximately
55,000 square feet. This facility comprises our headquarters and includes our
research and development, sales and marketing and administration departments.
In addition, we have leases for an engineering design center in Utah and sales
offices in Florida and Texas as well as another facility in Sunnyvale,
California. Internationally, we lease sales offices in Hong Kong and Japan.
These leases comprise approximately 34,000 square feet and have terms expiring
on or prior to April 2006. We believe that our current facilities will be
adequate through 2003.




ITEM 3: LEGAL PROCEEDINGS

None.




ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

No matters were submitted to a vote of security holders during the three
months ended December 31, 2002.

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PART II




ITEM 5: MARKET FOR REGISTRANTS COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on The Nasdaq Stock Market and has been quoted
on The Nasdaq National Market under the symbol PLXT since its initial public
offering on April 5, 1999. The following table sets forth, for the periods
indicated, the range of quarterly high and low closing price for our common
stock as reported on The Nasdaq National Market:

|               |  |          |       |         |  |   |      | 
|-------------- |  | -------- | ----- | ------- |  | - | ---- | 
|2001           |  | High Bid |       | Low Bid
|               |  |          |       |        
|First Quarter  |  | $        | 10.56 |         |  | $ | 4.25 | 
|Second Quarter |  |          | 9.18  |         |  |   | 3.19 | 
|Third Quarter  |  |          | 10.30 |         |  |   | 4.50 | 
|Fourth Quarter |  |          | 15.77 |         |  |   | 4.91 | 

|               |  |          |       |         |  |   |       | 
|-------------- |  | -------- | ----- | ------- |  | - | ----- | 
|2002           |  | High Bid |       | Low Bid
|               |  |          |       |        
|First Quarter  |  | $        | 17.00 |         |  | $ | 11.20 | 
|Second Quarter |  |          | 11.99 |         |  |   | 3.62  | 
|Third Quarter  |  |          | 3.68  |         |  |   | 1.10  | 
|Fourth Quarter |  |          | 6.10  |         |  |   | 1.29  | 

As of February 28, 2003, there were approximately 150 holders of record of
our common stock. As of February 28, 2003, the last reported sales price of
our common stock was $3.22.

We have never paid cash dividends on our common stock. We currently
intend to retain earnings, if any, for use in our business and do not
anticipate paying any cash dividend in the foreseeable future. Any future
declaration and payment of dividends will be subject to the discretion of our
Board of Directors, will be subject to applicable law and will depend upon our
results of operations, earnings, financial condition, contractual limitations,
cash requirements, future prospects and other factors deemed relevant by our
Board of Directors.




ITEM 6: SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes
thereto and Managements Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Annual Report on Form 10-K.

|                                                         |  |                                       |        |      |  |          |        |      |  |      |        |   |  |   |        |  |  |   |        | 
|-------------------------------------------------------- |  | ------------------------------------- | ------ | ---- |  | -------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ |  |  | - | ------ | 
|                                                         |  | Years Ended December 31,             
|                                                         |  |                                      
|                                                         |  | 2002                                  |        | 2001 |  | 2000 (1) |        | 1999 |  | 1998
|                                                         |  |                                       |        |      |  |          |        |      |  |     
|                                                         |  | (In thousands, except per share data)
|Consolidated Statement of Operations Data:               |  |                                       |        |      |  |          |        |      |  |      |        |   |  |   |        |  |  |   |        | 
|Net revenues                                             |  | $                                     | 34,810 |      |  | $        | 44,128 |      |  | $    | 65,351 |   |  | $ | 40,699 |  |  | $ | 26,276 | 
|Gross margin                                             |  |                                       | 23,958 |      |  |          | 28,521 |      |  |      | 45,983 |   |  |   | 27,831 |  |  |   | 16,605 | 
|Operating income (loss)                                  |  |                                       | (3,264 | )    |  |          | (9,147 | )    |  |      | (3,108 | ) |  |   | 9,994  |  |  |   | 3,383  | 
|Net income (loss)                                        |  |                                       | (2,320 | )    |  |          | (6,537 | )    |  |      | (7,042 | ) |  |   | 7,231  |  |  |   | 2,766  | 
|Basic earnings (loss) per share                          |  | $                                     | (0.10  | )    |  | $        | (0.28  | )    |  | $    | (0.31  | ) |  | $ | 0.43   |  |  | $ | 0.77   | 
|Shares used to compute basic earnings
(loss) per share   |  |                                       | 22,785 |      |  |          | 23,258 |      |  |      | 22,560 |   |  |   | 17,007 |  |  |   | 3,601  | 
|Diluted earnings (loss) per share                        |  | $                                     | (0.10  | )    |  | $        | (0.28  | )    |  | $    | (0.31  | ) |  | $ | 0.33   |  |  | $ | 0.15   | 
|Shares used to compute diluted earnings
(loss) per share |  |                                       | 22,785 |      |  |          | 23,258 |      |  |      | 22,560 |   |  |   | 21,849 |  |  |   | 18,405 | 

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|                                 |  |                |        |      |  |      |        |      |  |      |         |  |  |   |        |  |  |   |        | 
|-------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                 |  | December 31,  
|                                 |  |               
|                                 |  | 2002           |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                 |  |                |        |      |  |      |        |      |  |     
|                                 |  | (In thousands)
|Consolidated Balance Sheet Data: |  |                |        |      |  |      |        |      |  |      |         |  |  |   |        |  |  |   |        | 
|Cash and cash equivalents        |  | $              | 5,482  |      |  | $    | 9,631  |      |  | $    | 16,621  |  |  | $ | 8,636  |  |  | $ | 5,638  | 
|Working capital                  |  |                | 23,601 |      |  |      | 21,859 |      |  |      | 21,762  |  |  |   | 32,827 |  |  |   | 6,116  | 
|Total assets                     |  |                | 71,975 |      |  |      | 75,229 |      |  |      | 113,479 |  |  |   | 52,055 |  |  |   | 11,766 | 
|Long-term debt                   |  |                |       |      |  |      |       |      |  |      | 28,500  |  |  |   |       |  |  |   |       | 
|Total stockholders equity       |  | $              | 67,964 |      |  | $    | 70,553 |      |  | $    | 73,198  |  |  | $ | 46,402 |  |  | $ | 7,760  | 

(1)  Results of operations for 2000 include a $14.3 million charge for
in-process research and development.




ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This Report on Form 10-K contains forward-looking statements within the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995, including statements regarding our expectations, hopes, intentions,
beliefs or strategies regarding the future. Actual results could differ
materially from those projected in any forward-looking statements for the
reasons noted under the sub-heading Factors That May Affect Future Operating
Results and in other sections of this Report on Form 10-K. All
forward-looking statements included in this Form 10-K are based on information
available to us on the date of this Report on Form 10-K, and we assume no
obligation to update the forward-looking statements, or to update the reasons
why actual results could differ from those projected in the forward-looking
statements. See Factors That May Affect Future Operating Results below, as
well as such other risks and uncertainties as are detailed in our Securities
and Exchange Commission reports and filings for a discussion of the factors
that could cause actual results to differ materially from the forward-looking
statements.

The following discussion should be read in conjunction with our
Consolidated Financial Statements and related notes thereto included elsewhere
in this report.

Overview

PLX was founded in 1986, and since 1994 we have focused on development of
I/O interface semiconductors and related software and development tools that
are used in systems incorporating the PCI standard. In 1994 and 1995, a
significant portion of our revenues was from the sale of semiconductor devices
that perform similar functions as our current products, except they were based
on a variety of industry standards. Our revenues since 1996 have been derived
predominantly from the sale of semiconductor devices based on the PCI standard
to a large number of customers in a variety of applications including
networking and telecommunications, enterprise storage, imaging, industrial and
other embedded applications as well as in related adapter cards. We generate
less than 2% of our revenues from sales of our software and development tools.

We utilize a fabless semiconductor business model whereby we purchase
packaged and tested semiconductor devices from independent manufacturing
foundries. This approach allows us to focus on defining, developing, and
marketing our products and eliminates the need for us to invest large amounts
of capital in manufacturing facilities and work-in-process inventory.

We rely on a combination of direct sales personnel and distributors and
manufacturers representatives throughout the world to sell a significant
portion of our products. We pay manufacturers representatives a commission on
sales while we sell products to distributors at a discount from the selling
price. We generally recognize revenue at the time of title passage.
Recognition of sales to distributors, including international distributors, is
deferred until the product is resold by the distributors to end users. See
Certain Factors That May Affect Future Operating Results  A Large Portion of
Our Revenues Is Derived From Sales to Third-Party Distributors Who May
Terminate Their Relationships with Us at Any Time.

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Our gross margins have fluctuated in the past and are expected to
fluctuate in the future due to changes in product mix, write-downs and
recoveries of excess or obsolete inventory, the position of our products in
their respective life cycles, and specific product manufacturing costs.

The time period between initial customer evaluation and design completion
can range from six to twelve months or more. Furthermore, there is typically
an additional six to twelve month or greater period after design completion
before a customer commences volume production of equipment incorporating our
products. Due to these lengthy sales cycles, we may experience significant
fluctuations in new orders from month to month. In addition, we typically make
inventory purchases prior to receiving customer orders. Consequently, if
anticipated sales and shipments in any quarter do not occur when expected,
expenses and inventory levels could be disproportionately high, and our results
for that quarter and potentially future quarters would be materially and
adversely affected.

The supply of semiconductors can quickly and unexpectedly match or exceed
demand because customer end demand can change very quickly and semiconductor
suppliers can rapidly increase production output. This can lead to a sudden
oversupply situation and a subsequent reduction in order rates and revenues as
customers adjust their inventories to true demand rates. Customers continuously
adjust their inventories resulting in frequent changes in demand for our
products.

The semiconductor industry experienced such a change in the supply and
demand situation during 2000 and 2001. In late 2000 and during 2001, customers
in the high-speed communications end market, and the contract manufacturing
firms that serve this market, adjusted their demand on component suppliers as
they coped with high levels of inventory and sharply reduced demand for their
end products. In addition, the slowing of global economic growth during 2001
led to lower order rates from customers serving the telecommunications,
industrial and computer end markets as they adjusted to lower demand for their
products. The decline in order rates resulted in a sequential decline in our
revenues for 2001 and 2002. The rapid build-up of semiconductor inventories in
global sales channels resulted in reduced lead times for components during 2001
and 2002 relative to previous years. The perceived overabundance of
semiconductors combined with uncertain demand for their end products led our
customers to move to a just-in-time order pattern as they worked to reduce
inventories. Due to the combination of excess supply, reduced demand and lower
lead times, orders rates declined during 2001 and 2002. Customers appear to be
placing orders on an as needed basis due to short supplier lead times
combined with the uncertain macroeconomic outlook. The low backlog and
uncertainty of customer demand significantly limits our ability to predict
future levels of sales and profitability.

In May 2000, we purchased Sebring Systems, a development stage company
that was developing a Switched-PCI product. In connection with this
acquisition, we issued an aggregate of 960,931 shares of our common stock in
return for the capital stock of Sebring Systems. In addition, outstanding
options of Sebring Systems were converted into options to purchase our common
stock. The transaction was accounted for using the purchase method of
accounting.

Our long-term success will depend on our ability to introduce new
products. While new products typically generate little or no revenues during
the first twelve months following their introduction, our revenues in
subsequent periods depend upon these new products. Due to the lengthy sales
cycle and additional time for customers to commence volume production,
significant revenues from our new products typically occur only twelve to
twenty-four months after product introduction. As a result, revenues from
newly introduced products have, in the past, produced a small percentage of our
total revenues in the year the product was introduced. See Certain Factors
That May Affect Future Operating Results  Our Lengthy Sales Cycle Can Result
in Uncertainty and Delays with Regard to Our Expected Revenues.

Results of Operations

The following table summarizes historical results of operations as a
percentage of net revenues for the periods shown.

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|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |      |      | 
|------------------------------------ | -------------------------------------------------------- | ------------------------ | ----- | ------------------------------ | ---- | ---- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                     |                                                          |                          |       | Fiscal Year Ended December 31,
|                                     |                                                          |                          |       |                               
|                                     |                                                          |                          |       | 2002                           |      | 2001 |       | 2000
|                                     |                                                          |                          |       |                                |      |      |       |     
|Net revenues                         |                                                          |                          | 100.0 | %                              |      |      | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenues                     |                                                          |                          | 31.2  |                                |      |      | 35.4  |      |      |  | 29.6  |     
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|Gross margin                         |                                                          |                          | 68.8  |                                |      |      | 64.6  |      |      |  | 70.4  |     
|Expenses:                            |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|                                     | Research and development                                 |                          |       | 41.0                           |      |      |       | 42.6 |      |  |       | 25.0 |     
|                                     | Selling, general and administrative                      |                          |       | 35.7                           |      |      |       | 33.3 |      |  |       | 24.3 |     
|                                     | Amortization of goodwill and purchased intangible assets |                          |       | 1.5                            |      |      |       | 9.4  |      |  |       | 3.9  |     
|                                     | In-process research and development                      |                          |       |                               |      |      |       |     |      |  |       | 21.9 |     
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|                                     |                                                          | Total operating expenses |       |                                | 78.2 |      |       |      | 85.3 |  |       |      | 75.1 | 
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|Operating loss                       |                                                          |                          | (9.4  | )                              |      |      | (20.7 | )    |      |  | (4.7  | )   
|Interest income and other, net       |                                                          |                          | 2.9   |                                |      |      | 1.7   |      |      |  | 3.0   |     
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|Loss before income taxes             |                                                          |                          | (6.5  | )                              |      |      | (19.0 | )    |      |  | (1.7  | )   
|Provision (benefit) for income taxes |                                                          |                          | 0.2   |                                |      |      | (4.2  | )    |      |  | 9.0   |     
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     
|Net loss                             |                                                          |                          | (6.7  | )%                             |      |      | (14.8 | )%   |      |  | (10.7 | )%  
|                                     |                                                          |                          |       |                                |      |      |       |      |      |  |       |     

Comparison of Years Ended December 31, 2002, 2001, and 2000

Net Revenues.Net revenues consist of product revenues generated
principally by sales of our semiconductor devices. Net revenues decreased by
$9.3 million or 21% to $34.8 million for 2002 from $44.1 million for 2001. The
decrease was primarily due to reduced demand from a significant customer,
Prediwave, as well as lower overall unit shipments in 2002. Prediwave
used our product in their set top boxes targeted for sale in China.
We completed our last shipment to Prediwave in the first quarter of 2002. In 2002 and 2001, Prediwave accounted for $1
million and $8 million, respectively, of our net revenues. Excluding sales to
Prediwave, revenues decreased to $33.8 million for 2002 from $36.1 million for
2001. Net revenues decreased by $21.3 million or 32% to $44.1 million in 2001
from $65.4 million for 2000. In 2001, the decrease was primarily due to lower
unit shipments resulting from the economic slowdown in the technology sector.

Gross Margin.Gross margin represents net revenues less the cost of
revenues. Cost of revenues includes the cost of purchasing semiconductor
devices from our independent foundries, additional assembly and testing costs,
and our operating costs associated with the procurement, storage and shipment
of products.

Gross margin decreased $4.6 million or 16% to $24.0 million for 2002 from
$28.5 million for 2001. The decrease in absolute dollars was primarily due to
reduced demand from a significant customer, Prediwave, in 2002. The increase in gross
margin to 68.8% for 2002 from 64.6% for 2001 was primarily related to the
effect of inventory write-downs of $1.2 million net of immaterial recoveries
recorded in 2001. Excluding the effect of net inventory write-downs in 2001,
gross margin was 68.8% for 2002, compared with 67.4% for 2001. The increase in
our gross margin percentage was primarily due to shifts in our product and
customer mix.

Gross margin decreased $17.5 million or 38% to $28.5 million for 2001 from
$46.0 million for 2000. The decrease in absolute dollars was primarily due to
lower unit shipments resulting from the economic slowdown in the technology
section. The decrease in gross margin to 64.6% for 2001 from 70.4% for 2000 was
primarily related to the effect of inventory write-downs of $1.2 million net of
immaterial recoveries recorded in 2001. Excluding the effect of net inventory
write-downs in 2001, gross margin was 67.4% for 2001, compared with 70.4% for
2000. The decrease in our gross margin percentage was primarily due to shifts
in our product and customer mix.

Research and Development Expenses. Research and development (R&D)
expenses consist primarily of salaries and related costs of employees engaged
in research, design, and development activities. In addition, expenses for
outside engineering consultants, non-recurring engineering at our independent
foundries, and deferred compensation are included in R&D expenses.

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R&D expenses decreased $4.5 million or 24% to $14.3 million for 2002 from
$18.8 million for 2001. R&D expenses as a percentage of revenues decreased to
41.0% for 2002 from 42.6% for 2001. The decrease in R&D expenses in absolute
dollars and as a percentage of revenues was primarily due to lower headcount
and deferred compensation expense.

R&D expenses increased $2.4 million or 15% to $18.8 million for 2001 from
$16.4 million for 2000. R&D expenses as a percentage of revenues increased to
42.6% for 2001 from 25.0% for 2000. The increase in R&D expenses in absolute
dollars was primarily due to the development of new products and the
enhancement of existing products. The increase in R&D expenses as a percentage
of revenues was due to increased R&D spending coupled with the 32% decrease in
revenues from 2000 to 2001.

Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses consist primarily of employee related expenses,
professional fees, trade show and other promotional expenses, as well as sales
commissions to manufacturers representatives. SG&A expenses decreased $2.3
million or 15% to $12.4 million for 2002 from $14.7 million for 2001. SG&A
expenses decreased $1.2 million or 7% to $14.7 million for 2001 from $15.9
million for 2000. In 2002 and 2001, the decreases in absolute dollars were
primarily due to decreases in sales commissions to manufacturers
representatives as a result of lower revenues, decreases in discretionary
spending and lower headcount. SG&A expenses as a percentage of revenues
increased to 35.7% for 2002 from 33.3% for 2001. SG&A expenses as a percentage
of revenues increased to 33.3% for 2001 from 24.3% for 2000. The increases in
SG&A expenses as a percentage of revenues were primarily due to lower revenues
in 2002 and 2001.

Amortization of Goodwill and Purchased Intangible Assets. Amortization of
goodwill and purchased intangible assets decreased by $3.6 million or 87% to
$0.5 million for 2002 from $4.2 million for 2001. In 2002, the decrease was
due to the impact of SFAS No. 142, whereby we discontinued the amortization of
goodwill and indefinite lived intangibles beginning January 1, 2002.
Amortization of goodwill and purchased intangible assets increased by $1.6
million or 65% to $4.2 million for 2001 from $2.5 million for 2000. In 2001,
the increase was due to the fact that Sebring Systems was purchased in May 2000
and therefore, a full year of amortization was recorded in 2001 compared to
seven months in 2000. Amortization of goodwill and purchased intangible assets
includes the amortization of goodwill and other purchased intangible assets
relating to the May 2000 acquisition of Sebring Systems. We will continue to
amortize the related patents acquired in connection with the Sebring
acquisition through May 2004. For a more detailed description of SFAS No. 142
and its effect on us, see Recent Accounting Pronouncements.

In-Process Research and Development. During 2000, we incurred a one-time
charge of $14.3 million for in-process research and development relating to our
acquisition of Sebring Systems, Inc. completed in 2000 (see Note 5 to the
Consolidated Financial Statements).

Deferred Compensation. We recorded deferred compensation of $12.3 million
related to stock options granted below fair market value to employees in
relation to the acquisition of Sebring Systems in May 2000. Additionally, we
recorded deferred compensation of $3.5 million in connection with the grant of
stock options below fair market value to our employees in September 2000. The
amount of deferred compensation is presented as a reduction of stockholders
equity and amortized ratably over the vesting period of the applicable stock
grants. Amortization of deferred compensation recorded in 2002, 2001, and
2000, was $2.1 million, $2.9 million, and $2.3 million, respectively. The $0.8
million decrease in deferred compensation from 2001 to 2002 is due to lower
headcount. Substantially all of these amounts are included in research and
development expenses. We expect to record compensation expenses related to
deferred compensation of approximately $0.5 million per quarter through
September 30, 2003.

Interest Income. Interest income reflects interest earned on average
cash, cash equivalents and short-term and long-term investment balances.
Interest income decreased to $0.5 million for 2002 from $1.5 million for 2001.
Interest income decreased to $1.5 million in 2001 from $2.3 million for 2000.
The decrease from 2001 to 2002 was primarily due to lower interest rates. The
decrease from 2000 to 2001 was primarily due to interest earned on lower cash
and investments balances and lower interest rates.

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Interest Expense. Interest expense reflects interest charges relating to
our November 2000 loan of $28.5 million from Wells Capital Management in
connection with our purchase of the Sunnyvale, California facility. There was
no interest expense in 2002 as this loan was repaid in full in August 2001. In
2001 and 2000, interest expense totaled $1.3 million and $0.3 million,
respectively.

Other Income (Expense). Other income (expense) remained relatively flat
at $0.5 million for 2002 and 2001 compared to an expense of $42,000 for 2000.
The increase from 2000 to 2001 was primarily due to rental income of $0.5
million from a tenant in our facilities. The lease for this tenant expired in
January 2003 and the tenant has chosen not to renew the lease. Should we fail
to find a new tenant, we expect other income to decrease by approximately $0.5
million in 2003.

Provision for Income Taxes. Income tax expense for the period ended
December 31, 2002 was $60,000 on a pretax loss of $2.3 million, compared to an
income tax benefit of $1.9 million on pretax loss of $8.4 million and income
tax expense of $5.9 million on pretax loss of $1.1 million for the periods
ended December 31, 2001 and 2000, respectively. Our 2002 income tax expense
differs from the expected benefit derived by applying the applicable U.S.
federal statutory rate to the loss from operations primarily due to
non-deductible charges for the amortization of deferred compensation and the
recording of a valuation allowance for the deferred tax asset partially offset
by the benefit of research and development tax credits. Our 2001 income tax
benefit differs from the expected benefit derived by applying the applicable
U.S. federal statutory rate to the loss from operations primarily due to
non-deductible charges for the amortization of goodwill and deferred
compensation partially offset by tax benefits related to prior years of
$975,000. Our 2000 income tax expense differs from the expected benefit
derived by applying the applicable U.S. federal statutory rate to the loss from
operations primarily due to non-deductible charges for the amortization of
goodwill and purchased intangible assets partially offset by the benefit of
research and development tax credits.

Liquidity and Capital Resources

Cash and cash equivalents and short and long-term investments were $21.7
million at December 31, 2002, an increase of $3.0 million from $18.7 million at
December 31, 2001. The increase was primarily due to the following: (1) a net
loss of $2.3 million adjusted for non-cash expenses of $6.2 million, (2) a
decrease in accounts receivable and inventories of $1.5 million and $3.6
million, respectively, and (3) $1.3 million in cash received from the exercise
of stock options. Such increases were partially offset by an increase in other
assets of $1.3 million and the use of cash totaling $4.7 million in
repurchasing approximately 2.4 million shares of our common stock in accordance
with our stock repurchase program.

In January 2001, our Board of Directors approved a stock repurchase
program whereby up to 2,000,000 shares of our common stock could be purchased
in the open market or in privately negotiated transactions. As of September
30, 2002, all 2,000,000 shares had been repurchased.

In September 2002, our Board of Directors approved a second stock
repurchase program whereby an additional 2,000,000 shares of our common stock
may be purchased in the open market or in privately negotiated transactions.
As of December 31, 2002, approximately 422,000 shares had been repurchased
pursuant to this second program.

We believe that our existing resources, together with cash generated from
our operations will be sufficient to meet our capital requirements for at least
the next twelve months. Our future capital requirements will depend on many
factors, including the inventory levels we maintain, the level of investment we
make in new technologies and improvements to existing technologies and the
levels of monthly expenses required to launch new products. From time to time,
we may also evaluate potential acquisitions and equity investments
complementary to our technologies and market strategies. To the extent that
existing resources and future earnings are insufficient to fund our future
activities, we may need to raise additional funds through public or private
financings. Additional funds may not be available or, if available, we may not
be able to obtain them on terms favorable to us and our stockholders.

As of December 31, 2002, we had no off-balance sheet financing
arrangements. Significant contractual obligations and commercial commitments
as of December 31, 2002 are shown in the table below (in thousands):

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|                               |  |                 |       |      |  |             |       |      |  |   |       |  |  |   |    | 
|------------------------------ |  | --------------- | ----- | ---- |  | ----------- | ----- | ---- |  | - | ----- |  |  | - | -- | 
|                               |  | Payments due in
|                               |  |                
|                               |  | Total           |       | 2003 |  | 2004 - 2005 |       | 2006
|                               |  |                 |       |      |  |             |       |     
|Operating
leases  facilities  |  | $               | 1,204 |      |  | $           | 581   |      |  | $ | 604   |  |  | $ | 19 | 
|Software licenses              |  |                 | 1,452 |      |  |             | 726   |      |  |   | 726   |  |  |   |   | 
|Inventory purchase commitments |  |                 | 2,242 |      |  |             | 2,242 |      |  |   |      |  |  |   |   | 
|                               |  |                 |       |      |  |             |       |      |  |   |       |  |  |   |    | 
|Total cash obligations         |  | $               | 4,898 |      |  | $           | 3,549 |      |  | $ | 1,330 |  |  | $ | 19 | 
|                               |  |                 |       |      |  |             |       |      |  |   |       |  |  |   |    | 

See Note 12 to our Consolidated Financial Statements for additional
information on our contractual obligations and commercial commitments.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses and related disclosures of contingent assets
and liabilities in the consolidated financial statements and accompanying
notes. The SEC has defined a companys critical accounting policies as the ones
that are most important to the portrayal of the companys financial condition
and results of operations, and which require the company to make its most
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based on this definition,
we have identified the critical accounting policies and judgments addressed
below. We also have other key accounting policies which involve the use of
estimates, judgments and assumptions that are significant to understanding our
results. For additional information see Note 1 (Organization and Summary of
Significant Accounting Policies) of the Notes to our Consolidated Financial
Statements. Although we believe that our estimates, assumptions and judgments
are reasonable, they are based upon information presently available. Actual
results may differ significantly from these estimates under different
assumptions, judgments or conditions.

Inventory Write-downs.We evaluate the write-downs for inventory based on
a combination of factors. Based on the life of the product, sales history,
obsolescence, and sales forecast, we record write-downs ranging from 0% to
100%. Any adverse changes to our future product demand may result in increased
write-downs, resulting in decreased gross margin. In addition, future sales on
any of our previously written down inventory may result in increased gross
margin.

Allowance for Doubtful Accounts.We evaluate the collectibility of our
accounts receivable based on length of time the receivables are past due. We
record reserves for bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be collected. We have
certain customers with individually large amounts due at any given balance
sheet date. Any unanticipated change in one of those customers credit
worthiness or other matters affecting the collectibility of amounts due from
such customers could have a material affect on our results of operations in the
period in which such changes or events occur.

Goodwill.As discussed in Note 1 to our Consolidated Financial
Statements, we adopted Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible Assets on January 1, 2002. This standard
requires that goodwill and intangible assets deemed to have indefinite lives
are no longer amortized, but rather are reviewed for impairment annually, or
more frequently if certain indicators arise. Although at December 31, 2002, no
impairment of goodwill has been recognized, it is reasonably possible that
assumptions upon which the recoverability of goodwill were based could differ
in the future. In that event, impairment charges could be required.

Taxes.We account for income taxes using the liability method. Deferred
taxes are determined based on the differences between the financial statement
and tax bases of assets and liabilities, using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized. As of December 31, 2002, we recorded a
valuation allowance for the entire deferred tax asset as a result of
uncertainties regarding the realization of the asset balance (see Note 11 to
the Consolidated Financial Statements). Future taxable income and/or tax

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planning strategies may eliminate all or a portion of the need for the
valuation allowance. In the event we determine we are able to realize our
deferred tax asset, an adjustment to the valuation allowance may increase
income in the period such determination is made.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires all business combinations to be accounted for using the
purchase method of accounting and is effective for all business combinations
initiated after June 30, 2001. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. We have adopted SFAS No. 142 as of January
1, 2002. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized, but rather are reviewed for
impairment annually, or more frequently if certain indicators arise. Other
intangibles will continue to be amortized over their useful lives. We
reclassified acquired workforce, which is no longer defined as an identifiable
intangible asset under SFAS 141, to goodwill as of January 1, 2002. As of
December 31, 2002, no impairment of goodwill has been recognized.

In October 2001, the FASB issued SFAS No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of, and addresses financial accounting and reporting for the
impairment and disposal of long-lived assets. We adopted SFAS No. 144 as of
January 1, 2002. Adoption of this statement did not have a material impact on
our financial position, results of operations or cash flows.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). It requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Statement 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. We do not believe that the adoption of this
statement will have a material impact on our consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. We have adopted the disclosure requirements for our financial statements
included in this Form 10-K. Although we are currently evaluating the effects of
FIN 45, we do not expect that the adoption of FIN 45 will have a material
effect on our financial position, results of operations, or cash flows.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS
123 Accounting for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The transition guidance and annual disclosure requirements are
effective for fiscal years ending after December 15, 2002. We have adopted
the disclosure provisions for this Form 10-K. We will continue to account for
stock-based compensation under the provisions of Accounting Principles Board
Opinion No. 25 Accounting for Stock Issued to Employees using the intrinsic
value method. Accordingly, the adoption of SFAS 148 is not anticipated to
have a material effect on our financial position, results of operations, or
cash flows.

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CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

The statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including, without limitation, statements regarding the Companys
expectations, objectives, anticipations, plans, hopes, beliefs, intentions or
strategies regarding the future. Forward-looking statements include, without
limitation, the statements regarding (a) the growing demand for standards-based
components such as the Companys semiconductor devices that connect systems
together, (b) the Companys objective to expand its advantages in data transfer
technology, under the heading Item 1, Business  Overview; the Companys
expectation that it will support new I/O standards where appropriate, under the
heading Item 1, Business  The PLX Solution; the statements regarding (a) the
Companys objective to continue to expand its market position as a developer
and supplier of I/O connectivity solutions for high performance systems, (b)
the Companys plan to target those applications where the Company believes it
can attain a leadership position, (c) that the Company seeks to integrate
additional I/O-related functions into its semiconductor devices, (d) the
Companys belief that its understanding of I/O technology trends and market
requirements allows it to bring to market more quickly new products that
support the latest I/O technology, under the heading Item 1, Business -
Strategy; that the Company continues to integrate more functionality in its
semiconductor devices and continues to enhance and expand its software
development kits under the heading Item 1, Business  Technology; the
statements regarding (a) the Companys belief with respect to the principal
factors of competition in the business, (b) the Companys belief that it
competes favorably with respect to each of those factors, under the heading
Item 1, Business  Competition; the statements regarding (a) the Companys
expectation that revenues related to sales through distributors will continue
to account for a significant portion of total revenues, (b) the Companys
belief that providing customers with comprehensive product support is critical
to remaining competitive in the markets it serves, (c) the Companys belief
that its close contact with customer design engineers provides valuable input
into existing product enhancements and next generation product specifications,
under the heading Item 1, Business  Sales, Marketing and Technical Support;
(a) the Companys expectation that it will continue to make substantial
investments in research and development and to participate in the development
of industry standards, (b) the Companys expectation that it will periodically
seek to hire additional development engineers, under the heading Item 1,
Business  Research and Development; the Companys belief that the transition
of its products to smaller geometries will be important for the Company to
remain competitive under the heading Item 1, Business  Manufacturing; the
Companys plan to seek patent protection when necessary, under the heading
Item 1, Business  Intellectual Property; the Companys belief that its
current facility will be adequate through 2003 under the heading Item 2,
Properties; the statement regarding the Companys intention to retain earnings
for use in its business and not to pay any cash dividend in the foreseeable
future under the heading Item 5, Market for Registrants Common Equity and
Related Stockholder Matters; the Companys belief that its long-term success
will depend on its ability to introduce new products under the heading Item 7,
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Overview; the statement regarding the Companys expectation to
record amortization of deferred compensation related to the stock grants of
approximately $0.5 million per quarter through September 30, 2003 under the
heading Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations  Results of Operations; the Companys belief that
its existing resources, together with cash expected to be generated from its
operations, will be sufficient to meet its capital requirements for at least
the next twelve months under the heading Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources.

All forward-looking statements included in this document are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements. It is
important to note that the Companys actual results could differ materially
from those included in such forward-looking statements. These cautionary
statements should be considered in the context of the factors listed below, as
well as those disclosed from time to time in the Companys Reports on Forms
10-Q and 8-K.

Risks and uncertainties that could cause actual results to differ materially
from those described herein include the following:

Our Operating Results May Fluctuate Significantly Due To Factors Which Are Not Within Our Control

Our quarterly operating results have fluctuated significantly in the past
and are expected to fluctuate significantly in the future based on a number of
factors, many of which are not under our control. Our operating expenses,
which include product development costs and selling, general and administrative
expenses, are relatively fixed in the short-term. If our revenues are lower
than we expect because we sell fewer semiconductor devices,

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delay the release of new products or the announcement of new features, or
for other reasons, we may not be able to quickly reduce our spending in
response.

Other circumstances that can affect our operating results include:



| |  |  | the timing of significant orders, order cancellations and reschedulings,                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the loss of a significant customer(s),                                                                                                       
|
| |  |  | our significant customers could lose market share that may affect our business,                                                              
|
| |  |  | general economic conditions,                                                                                                                 
|
| |  |  | our ability to develop, introduce and market new products and technologies on a timely basis,                                                
|
| |  |  | changes in our pricing policies or those of our competitors
or suppliers, including decreases in unit average selling prices of
our products,
|
| |  |  | introduction of products and technologies by our competitors,                                                                                
|
| |  |  | shifts in our product mix toward lower margin products,                                                                                      
|
| |  |  | the availability of production capacity at the fabrication facilities that manufacture our products,                                         
|
| |  |  | the availability and cost of materials to our suppliers, and                                                                                 
|
| |  |  | political climate.                                                                                                                           

These factors are difficult to forecast, and these or other factors could
adversely affect our business. Any shortfall in our revenues would have a
direct impact on our business. In addition, fluctuations in our quarterly
results could adversely affect the market price of our common stock in a manner
unrelated to our long-term operating performance.

Our Results Of Operations Have Been Adversely Affected By The Ongoing Slowdown
In The Global Economy

Over the past year, the global economy has been experiencing a slowdown
due to many factors, including decreased consumer confidence, unemployment, the
ongoing threat and cost of terrorism and reduced corporate profits and capital
spending. As a result of these unfavorable economic conditions, we continue to
experience reduced customer order rates. If these economic conditions in the
United States continue or worsen or if a wider or global economic slowdown
occurs, our business, financial condition and results of operations may be
materially and adversely affected.

Because A Substantial Portion Of Our Net Sales Is Generated By A Small Number
Of Large Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our
Net Revenues And Earnings Will Be Harmed

Historically, a relatively small number of customers have accounted for a
significant portion of our net revenues in any particular period. In 2002,
sales to A2M, a distributor, accounted for 13% of our net revenues. In 2001, sales to
Prediwave, a direct customer, and A2M and Unique, both distributors, accounted for 18%, 14% and 11%, respectively. In
2000, sales to Unique and A2M accounted for 25% and 11%, respectively. No
other customer accounted for more than 10% of net revenues in any period
presented. Cisco and IBM have historically and continue to be significant
customers. The majority of our sales to Cisco and IBM are sold through A2M and
Metatech, our distributors, and Celestica, a contract manufacturer.

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We have no long-term volume purchase commitments from any of our
significant customers. We cannot be certain that our current customers will
continue to place orders with us, that orders by existing customers will
continue at the levels of previous periods or that we will be able to obtain
orders from new customers. For example, a major customer, Prediwave,
significantly reduced their demand in 2002. Prediwave used our
product in their set top boxes targeted for sale in China. We
completed our last shipment to Prediwave in the first quarter of 2002. In 2002 and 2001, Prediwave accounted for $1
million and $8 million, respectively, of our net revenues. In addition, some
of our customers supply products to end-market purchasers and any of these
end-market purchasers could choose to reduce or eliminate orders for our
customers products. This would in turn lower our customers orders for our
products.

We anticipate that sales of our products to a relatively small number of
customers will continue to account for a significant portion of our net sales.
Due to these factors, the following have in the past and may in the future
reduce our net sales or earnings:



| |  |  | the reduction, delay or cancellation of orders from one or more of our significant customers;  
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | the selection of competing products or in-house design by one or more of our current customers;
|
| |  |  | the loss of one or more of our current customers; or                                           
|
| |  |  | a failure of one or more of our current customers to pay our invoices.                         

Our Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our
Expected Revenues

Our customers typically perform numerous tests and extensively evaluate
our products before incorporating them into their systems. The time required
for test, evaluation and design of our products into a customers equipment can
range from six to twelve months or more. It can take an additional six to
twelve months or more before a customer commences volume shipments of equipment
that incorporates our products. Because of this lengthy sales cycle, we may
experience a delay between the time when we increase expenses for research and
development and sales and marketing efforts and the time when we generate
higher revenues, if any, from these expenditures.

In addition, the delays inherent in our lengthy sales cycle raise
additional risks of customer decisions to cancel or change product plans. When
we achieve a design win, there can be no assurance that the customer will
ultimately ship products incorporating our products. Our business could be
materially adversely affected if a significant customer curtails, reduces or
delays orders during our sales cycle or chooses not to release products
incorporating our products.

Rapid Technological Change Could Make Our Products Obsolete

We operate in an industry that is subject to evolving industry standards,
rapid technological changes, rapid changes in customer demands and the rapid
introduction of new, higher performance products with shorter product life
cycles. As a result, we expect to continue to make significant investments in
research and development. However, we may not have adequate funds from
operations or otherwise to devote to research and development, forcing us to
reduce our research and development efforts. Also, we must manage product
transitions successfully, since announcements or introductions of new products
by us or our competitors could adversely affect sales of our existing products
because these existing products can become obsolete or unmarketable for
specific purposes. There can be no assurance that we will be able to develop
and introduce new products or enhancements to our existing products on a timely
basis or in a manner which satisfies customer needs or achieves widespread
market acceptance. Any significant delay in releasing new products could
adversely affect our reputation, give a competitor a first-to-market advantage
or allow a competitor to achieve greater market share. The failure to adjust
to rapid technological change could harm our business, financial condition,
results of operations and cash flows.

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Failure Of Our Products To Gain Market Acceptance Would Adversely Affect Our
Financial Condition

We believe that our growth prospects depend upon our ability to gain
customer acceptance of our products and technology. Market acceptance of
products depends upon numerous factors, including compatibility with existing
manufacturing processes and products, perceived advantages over competing
products and the level of customer service available to support such products.
Moreover, manufacturers often rely on a limited number of equipment vendors to
meet their manufacturing equipment needs. As a result, market acceptance of
our products may be adversely affected to the extent potential customers
utilize a competitors manufacturing equipment. There can be no assurance that
growth in sales of new products will continue or that we will be successful in
obtaining broad market acceptance of our products and technology.

We expect to spend a significant amount of time and resources to develop
new products and refine existing products. In light of the long product
development cycles inherent in our industry, these expenditures will be made
well in advance of the prospect of deriving revenues from the sale of any new
products. Our ability to commercially introduce and successfully market any
new products is subject to a wide variety of challenges during this development
cycle, including start-up bugs, design defects and other matters that could
delay introduction of these products to the marketplace. In addition, since
our customers are not obligated by long-term contracts to purchase our
products, our anticipated product orders may not materialize, or orders that do
materialize may be cancelled. As a result, if we do not achieve market
acceptance of new products, we may not be able to realize sufficient sales of
our products in order to recoup research and development expenditures. The
failure of any of our new products to achieve market acceptance would harm our
business, financial condition, results of operation and cash flows.

We Must Make Significant Research And Development Expenditures Prior To
Generating Revenues From Products

To establish market acceptance of a new semiconductor device, we must
dedicate significant resources to research and development, production and
sales and marketing. We incur substantial costs in developing, manufacturing
and selling a new product, which often significantly precede meaningful
revenues from the sale of this product. Consequently, new products can require
significant time and investment to achieve profitability. Investors should
note that our efforts to introduce new semiconductor devices or other products
or services may not be successful or profitable. In addition, products or
technologies developed by others may render our products or technologies
obsolete or noncompetitive.

We record as expenses the costs related to the development of new
semiconductor devices and other products as these expenses are incurred. As a
result, our profitability from quarter to quarter and from year to year may be
adversely affected by the number and timing of our new product launches in any
period and the level of acceptance gained by these products.

Our Independent Manufacturers May Not Be Able To Meet Our Manufacturing
Requirements

We do not manufacture any of our semiconductor devices. Therefore, we are
referred to in the semiconductor industry as a fabless producer of
semiconductors. Consequently, we depend upon third party manufacturers to
produce semiconductors that meet our specifications. We currently have third
party manufacturers that can produce semiconductors which meet our needs.
However, as the semiconductor industry continues to progress towards smaller
manufacturing and design geometries, the complexities of producing
semiconductors will increase. Decreasing geometries may introduce new problems
and delays that may affect product development and deliveries. Due to the
nature of the semiconductor industry and our status as a fabless
semiconductor company, we could encounter fabrication-related problems that may
affect the availability of our semiconductor devices, delay our shipments or
may increase our costs.

Our Reliance On Single Source Manufacturers Of Our Semiconductor Devices Could
Delay Shipments And Increase Our Costs

None of our semiconductor devices are currently manufactured by more than
one supplier. We place our orders on a purchase order basis and do not have a
long term purchase agreement with any of our existing suppliers.

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In the event that the supplier of a semiconductor device was unable or
unwilling to continue to manufacture this product in the required volume, we
would have to identify and qualify a substitute supplier. Introducing new
products or transferring existing products to a new third party manufacturer or
process may result in unforeseen device specification and operating problems.
These problems may affect product shipments and may be costly to correct.
Silicon fabrication capacity may also change, or the costs per silicon wafer
may increase. Manufacturing-related problems may have a material adverse
effect on our business.

Intense Competition In The Markets In Which We Operate May Reduce The Demand
For Or Prices Of Our Products

Competition in the semiconductor industry is intense. If our main target
market, the embedded systems market, continues to grow, the number of
competitors may increase significantly. In addition, new semiconductor
technology may lead to new products that can perform similar functions as our
products. Some of our competitors and other semiconductor companies may
develop and introduce products that integrate into a single semiconductor
device the functions performed by our semiconductor devices. This would
eliminate the need for our products in some applications.

In addition, competition in our markets comes from companies of various
sizes, many of which are significantly larger and have greater financial and
other resources than we do and thus can better withstand adverse economic or
market conditions. Also, as we start to sell our processor products, we will
compete with established embedded microprocessor companies and others. Many of
these indirect competitors and microprocessor companies have significantly
greater financial, technical, marketing and other resources than PLX.
Therefore, we cannot assure you that we will be able to compete successfully in
the future against existing or new competitors, and increased competition may
adversely affect our business. See Business  Competition, and  
Products in Part I of Item I of this Form 10-K.

Failure To Have Our Products Designed Into The Products Of Electronic Equipment
Manufacturers Will Result In Reduced Sales

Our future success depends on electronic equipment manufacturers that
design our semiconductor devices into their systems. We must anticipate market
trends and the price, performance and functionality requirements of current and
potential future electronic equipment manufacturers and must successfully
develop and manufacture products that meet these requirements. In addition, we
must meet the timing requirements of these electronic equipment manufacturers
and must make products available to them in sufficient quantities. These
electronic equipment manufacturers could develop products that provide the same
or similar functionality as one or more of our products and render these
products obsolete in their applications.

We do not have purchase agreements with our customers that contain minimum
purchase requirements. Instead, electronic equipment manufacturers purchase
our products pursuant to short-term purchase orders that may be canceled
without charge. We believe that in order to obtain broad penetration in the
markets for our products, we must maintain and cultivate relationships,
directly or through our distributors, with electronic equipment manufacturers
that are leaders in the embedded systems markets. Accordingly, we will incur
significant expenditures in order to build relationships with electronic
equipment manufacturers prior to volume sales of new products. If we fail to
develop relationships with additional electronic equipment manufacturers to
have our products designed into new embedded systems or to develop sufficient
new products to replace products that have become obsolete, our business would
be materially adversely affected.

Lower Demand For Our Customers Products Will Result In Lower Demand For Our
Products

Demand for our products depends in large part on the development and
expansion of the high-performance embedded systems markets including networking
and telecommunications, enterprise storage, imaging and industrial
applications. The size and rate of growth of these embedded systems markets
may in the future fluctuate significantly based on numerous factors. These
factors include the adoption of alternative technologies, capital spending
levels and general economic conditions. Demand for products that incorporate
high-performance embedded systems may not grow.

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Defects In Our Products Could Increase Our Costs And Delay Our Product
Shipments

Our products are complex. While we test our products, these products may
still have errors, defects or bugs that we find only after commercial
production has begun. We have experienced errors, defects and bugs in the past
in connection with new products.

Our customers may not purchase our products if the products have
reliability, quality or compatibility problems. This delay in acceptance could
make it more difficult to retain our existing customers and to attract new
customers. Moreover, product errors, defects or bugs could result in
additional development costs, diversion of technical and other resources from
our other development efforts, claims by our customers or others against us, or
the loss of credibility with our current and prospective customers. In the
past, the additional time required to correct defects has caused delays in
product shipments and resulted in lower revenues. We may have to spend
significant amounts of capital and resources to address and fix problems in new
products.

We must continuously develop our products using new process technology
with smaller geometries to remain competitive on a cost and performance basis.
Migrating to new technologies is a challenging task requiring new design
skills, methods and tools and is difficult to achieve.

We Could Lose Key Personnel Due To Competitive Market Conditions And Attrition

Our success depends to a significant extent upon our senior management and
key technical and sales personnel. The loss of one or more of these employees
could have a material adverse effect on our business. We do not have
employment contracts with any of our executive officers.

Our success also depends on our ability to attract and retain qualified
technical, sales and marketing, customer support, financial and accounting, and
managerial personnel. Competition for such personnel in the semiconductor
industry is intense, and we may not be able to retain our key personnel or to
attract, assimilate or retain other highly qualified personnel in the future.
In addition, we may lose key personnel due to attrition, including health,
family and other reasons. We have experienced, and may continue to experience,
difficulty in hiring and retaining candidates with appropriate qualifications.
If we do not succeed in hiring and retaining candidates with appropriate
qualifications, our business could be materially adversely affected.

A Large Portion Of Our Revenues Is Derived From Sales To Third-Party
Distributors Who May Terminate Their Relationships With Us At Any Time

We depend on distributors to sell a significant portion of our products.
In 2002, net revenues through distributors accounted for approximately 54% of
our net revenues. Some of our distributors also market and sell competing
products. Distributors may terminate their relationships with us at any time.
Our future performance will depend in part on our ability to attract additional
distributors that will be able to market and support our products effectively,
especially in markets in which we have not previously distributed our products.
We may lose one or more of our current distributors or may not be able to
recruit additional or replacement distributors. The loss of one or more of our
major distributors could have a material adverse effect on our business as we
may not be successful in servicing our customers directly or through
manufacturers representatives.

The Demand For Our Products Depends Upon Our Ability To Support Evolving
Industry Standards

Substantially all of our revenues are derived from sales of products,
which rely on the PCI standard. If the embedded systems markets move away from
this standard and begin using new standards, we may not be able to successfully
design and manufacture new products that use these new standards. There is
also the risk that new products we develop in response to new standards may not
be accepted in the market. In addition, the PCI standard is continuously
evolving, and we may not be able to modify our products to address new PCI
specifications. Any of these events would have a material adverse effect on
our business.

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The Successful Marketing And Sales Of Our Products Depend Upon Our Third Party Relationships, Which Are Not Supported By Written Agreements

When marketing and selling our semiconductor devices, we believe we enjoy
a competitive advantage based on the availability of development tools offered
by third parties. These development tools are used principally for the design
of other parts of the embedded system but also work with our products. We will
lose this advantage if these third party tool vendors cease to provide these
tools for existing products or do not offer them for our future products. This
event could have a material adverse effect on our business. We have no written
agreements with these third parties, and these parties could choose to stop
providing these tools at any time.

Our Limited Ability To Protect Our Intellectual Property And Proprietary Rights Could Adversely Affect Our Competitive Position

Our future success and competitive position depend upon our ability to
obtain and maintain proprietary technology used in our principal products.
Currently, we have limited protection of our intellectual property in the form
of patents and rely instead on trade secret protection. Our existing or future
patents may be invalidated, circumvented, challenged or licensed to others.
The rights granted thereunder may not provide competitive advantages to us. In
addition, our future patent applications may not be issued with the scope of
the claims sought by us, if at all. Furthermore, others may develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned or licensed by us. In addition,
effective patent, trademark, copyright and trade secret protection may be
unavailable or limited in foreign countries where we may need protection. We
cannot be sure that steps taken by us to protect our technology will prevent
misappropriation of the technology.

We may from time to time receive notifications of claims that we may be
infringing patents or other intellectual property rights owned by third
parties. While there is currently no intellectual property litigation pending
against us, litigation could result in significant expenses to us and adversely
affect sales of the challenged product or technology. This litigation could
also divert the efforts of our technical and management personnel, whether or
not the litigation is determined in our favor. In addition, we may not be able
to develop or acquire non-infringing technology or procure licenses to the
infringing technology under reasonable terms. This could require expenditures
by us of substantial time and other resources. Any of these developments would
have a material adverse effect on our business.

The Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances In The Demand For Our Products

In the last few years, the semiconductor industry has been characterized
by significant downturns and wide fluctuations in supply and demand. Also,
during this time, the industry has experienced significant fluctuations in
anticipation of changes in general economic conditions. This cyclicality has
led to significant variances in product demand and production capacity. It has
also accelerated erosion of average selling prices per unit. We may experience
periodic fluctuations in our future financial results because of industry-wide
conditions.

Because We Sell Our Products To Customers Outside Of North America And Because Our Products Are Incorporated With Products Of Others That Are Sold Outside Of North America We Face Foreign Business, Political And Economic Risks

Sales outside of North America accounted for 58%, 44%, and 39%, of our
revenues in 2002, 2001, and 2000, respectively. We anticipate that sales
outside of North America will continue to account for a significant portion of
our revenues in future periods. In addition, equipment manufacturers who
incorporate our products into their products sell their products outside of
North America, thereby exposing us indirectly to foreign risks. Further, most
of our semiconductor products are manufactured outside of North America.
Accordingly, we are subject to international risks, including:



| |  |  | difficulties in managing distributors,
| | - |  | --------------------------------------

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| |  |  | difficulties in staffing and managing foreign subsidiary and branch operations,                
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | political and economic instability,                                                            
|
| |  |  | foreign currency exchange fluctuations,                                                        
|
| |  |  | difficulties in accounts receivable collections,                                               
|
| |  |  | potentially adverse tax consequences,                                                          
|
| |  |  | timing and availability of export licenses,                                                    
|
| |  |  | changes in regulatory requirements, tariffs and other barriers,                                
|
| |  |  | difficulties in obtaining governmental approvals for telecommunications and other products, and
|
| |  |  | the burden of complying with complex foreign laws and treaties.                                

Because sales of our products have been denominated to date exclusively in
United States dollars, increases in the value of the United States dollar will
increase the price of our products so that they become relatively more
expensive to customers in the local currency of a particular country, which
could lead to a reduction in sales and profitability in that country.

Our Potential Future Acquisitions May Not Be Successful Because Of Our Limited Experience With Acquisitions In The Past

There have been a significant number of mergers and acquisitions in the
semiconductor industry in the past. As part of our business strategy, we
expect to review acquisition prospects that would complement our existing
product offerings, improve market coverage or enhance our technological
capabilities. Future acquisitions could result in any or all of the following:



| |  |  | potentially dilutive issuances of equity securities,                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | large one-time write-offs,                                                                                                              
|
| |  |  | the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible
assets,             
|
| |  |  | difficulties in the assimilation of operations, personnel,
technologies, products and the information systems of the acquired
companies,
|
| |  |  | diversion of managements attention from other business
concerns,                                                                       
|
| |  |  | risks of entering geographic and business markets in which we
have no or limited prior experience, and                                  
|
| |  |  | potential loss of key employees of acquired organizations.                                                                              

We have had limited experience with acquisitions in the past and may not
be able to successfully integrate any businesses, products, technologies or
personnel that may be acquired in the future. Our failure to do so could have
a material adverse effect on our business.

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Our Principal Stockholders Have Significant Voting Power And May Take Actions That May Not Be In The Best Interests Of Our Other Stockholders

Our executive officers, directors and other principal stockholders, in the
aggregate, beneficially own a substantial amount of our outstanding common
stock. Although these stockholders do not have majority control, they
currently have, and likely will continue to have, significant influence with
respect to the election of our directors and approval or disapproval of our
significant corporate actions. This influence over our affairs might be
adverse to the interests of other stockholders. In addition, the voting power
of these stockholders could have the effect of delaying or preventing a change
in control of PLX.

The Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely Affect The Rights Of The Holders Of Our Common Stock

Anti-takeover provisions of Delaware law and our Certificate of
Incorporation may make a change in control of PLX more difficult, even if a
change in control would be beneficial to the stockholders. These provisions
may allow the Board of Directors to prevent changes in the management and
control of PLX.

As part of our anti-takeover devices, our Board of Directors has the
ability to determine the terms of preferred stock and issue preferred stock
without the approval of the holders of the common stock. Our Certificate of
Incorporation allows the issuance of up to 5,000,000 shares of preferred stock.
There are no shares of preferred stock outstanding. However, because the
rights and preferences of any series of preferred stock may be set by the Board
of Directors in its sole discretion without approval of the holders of the
common stock, the rights and preferences of this preferred stock may be
superior to those of the common stock. Accordingly, the rights of the holders
of common stock may be adversely affected. Consistent with Delaware law, our
Board of Directors may adopt additional anti-takeover measures in the future.




ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have an investment portfolio of fixed income securities, including
those classified as cash equivalents, short and long-term investments of
approximately $19.0 million at December 31, 2002. These securities are subject
to interest rate fluctuations and will decrease in market value if interest
rates increase.

The primary objective of the Companys investment activities is to
preserve principal while at the same time maximizing yields without
significantly increasing risk. The Company invests primarily in high-quality,
short-term and long-term debt instruments. A hypothetical 100 basis point
increase in interest rates would result in less than $0.1 million decrease
(less than 1%) in the fair value of the Companys available-for-sale
securities.




ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is contained in the financial
statements and schedule set forth in Item 15 (a) of this Form 10-K.




ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

There has been no change of accountants nor any disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosure required to be reported under this Item.

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##### Table of Contents






PART III




ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated herein by reference
to the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders.




ITEM 11: EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference
to the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders.




ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by reference
to the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders.




ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by reference
to the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders.




ITEM 14: CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Within the 90 days prior to the filing of this report, we carried out an
evaluation, under the supervision and with the participation of our President
and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on this evaluation, our
President and Chief Financial Officer concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
required to be included in this report on Form 10-K.

(b)  Changes in internal controls.

There have been no significant changes in our internal controls or in
other factors which could significantly affect internal controls subsequent to
our most recent evaluation of our internal controls.




PART IV




ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)        1.      Consolidated Financial Statements

For the following financial information included herein, see Index on page 34:



| |  | Report of Ernst & Young LLP, Independent Auditors.                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidated Balance Sheets as of December 31, 2002 and 2001.
Consolidated Statements of Operations for each of the three years in the period ended December
31, 2002.
Consolidated Statements of Stockholders Equity for each of the three years in the period ended
December 31, 2002.
Consolidated Statements of Cash Flows for each of the three years in the period ended December
31, 2002.
Notes to Consolidated Financial Statements.

33



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2.      Financial Statement Schedule

The financial statement schedules of the Company are included in Part IV
of this report: For the three years ended
December 31, 2002II Valuation and Qualifying Accounts. All other schedules
have been omitted because they are not applicable.

3.      Exhibit Index

See Exhibit Index immediately following the signature page for a list of
exhibits filed or incorporated by reference as a part of this report.

(b)      Reports on Form 8-K

No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 2002.

(c)      Exhibits

The Company hereby files, as exhibits to this Form 10-K, those exhibits
listed on the Exhibit Index referenced in
                           Item 15 (a) (3) above.

34



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PLX TECHNOLOGY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                  |  |      |    | 
|----------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                  |  | Page
|                                                                                                                  |  |     
|Report of Ernst & Young LLP, Independent Auditors                                                                 |  |      | 36 | 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                      |  |      | 37 | 
|Consolidated Statements of Operations for each of the three years in
the period ended December 31, 2002           |  |      | 38 | 
|Consolidated Statements of Stockholders Equity for each of the three
years in the period ended December 31, 2002 |  |      | 39 | 
|Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 2002           |  |      | 40 | 
|Notes to Consolidated Financial Statements                                                                        |  |      | 41 | 

35



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##### Table of Contents



Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and
Stockholders
PLX Technology, Inc.

We have audited the accompanying consolidated balance sheets of PLX
Technology, Inc. as of December 31, 2002 and 2001, and the related consolidated
statements of operations, stockholders equity and cash flows for each of the
three years in the period ended December 31, 2002. Our audits also included
the financial statement schedule listed in the Index at Item 15(a). These
consolidated financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of PLX Technology, Inc. as of December 31, 2002 and 2001, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, effective
January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets.

/s/ Ernst & Young LLP

San Jose, California
January 21, 2003

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PLX TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |        |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------ | ------------------------------------ | ------ | ------------------------ | ------ | ------ | ------ |  |  | 
|                                                                                              |                                                                                            |                                                            |        |                                      |        | Years Ended December 31,
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                         
|                                                                                              |                                                                                            |                                                            |        |                                      |        | 2002                     |        | 2001  
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |       
|                                                                                              |                                                                                            |                                                            |        | ASSETS                               |        |                          |        |        |        |  |  | 
|Current assets:                                                                               |                                                                                            |                                                            |        |                                      |        |                          |        |       
|                                                                                              | Cash and cash equivalents                                                                  |                                                            | $      | 5,482                                |        |                          | $      | 9,631  |       
|                                                                                              | Short-term investments                                                                     |                                                            |        | 13,131                               |        |                          |        | 6,000  |       
|                                                                                              | Accounts receivable, less allowance for doubtful accounts of $127 in 2002
and $202 in 2001 |                                                            |        | 2,568                                |        |                          |        | 4,073  |       
|                                                                                              | Inventories                                                                                |                                                            |        | 1,003                                |        |                          |        | 4,586  |       
|                                                                                              | Deferred tax assets                                                                        |                                                            |        |                                     |        |                          |        | 1,557  |       
|                                                                                              | Income tax receivable                                                                      |                                                            |        | 3,635                                |        |                          |        | 185    |       
|                                                                                              | Other current assets                                                                       |                                                            |        | 1,793                                |        |                          |        | 503    |       
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|Total current assets                                                                          |                                                                                            |                                                            | 27,612 |                                      |        |                          | 26,535 |       
|Goodwill, net of amortization of $5,730 in 2002 and $5,341 in 2001                            |                                                                                            |                                                            | 8,054  |                                      |        |                          | 7,998  |       
|Other intangible assets, net of accumulated amortization of $1,518 in 2002
and $1,374 in 2001 |                                                                                            |                                                            | 970    |                                      |        |                          | 2,097  |       
|Property and equipment, net                                                                   |                                                                                            |                                                            | 31,962 |                                      |        |                          | 33,579 |       
|Long-term investments                                                                         |                                                                                            |                                                            | 3,067  |                                      |        |                          | 3,089  |       
|Deferred tax assets                                                                           |                                                                                            |                                                            |       |                                      |        |                          | 1,637  |       
|Other assets                                                                                  |                                                                                            |                                                            | 310    |                                      |        |                          | 294    |       
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|                                                                                              |                                                                                            | Total assets                                               |        | $                                    | 71,975 |                          |        | $      | 75,229 | 
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|                                                                                              |                                                                                            |                                                            |        | LIABILITIES AND STOCKHOLDERS EQUITY |        |                          |        |        |        |  |  | 
|Current liabilities:                                                                          |                                                                                            |                                                            |        |                                      |        |                          |        |       
|                                                                                              | Accounts payable                                                                           |                                                            | $      | 1,582                                |        |                          | $      | 1,855  |       
|                                                                                              | Accrued compensation and benefits                                                          |                                                            |        | 932                                  |        |                          |        | 808    |       
|                                                                                              | Deferred revenues                                                                          |                                                            |        | 613                                  |        |                          |        | 281    |       
|                                                                                              | Accrued commissions                                                                        |                                                            |        | 201                                  |        |                          |        | 310    |       
|                                                                                              | Deferred tax liability                                                                     |                                                            |        |                                     |        |                          |        | 830    |       
|                                                                                              | Other accrued expenses                                                                     |                                                            |        | 683                                  |        |                          |        | 592    |       
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|Total current liabilities                                                                     |                                                                                            |                                                            | 4,011  |                                      |        |                          | 4,676  |       
|Commitments                                                                                   |                                                                                            |                                                            |        |                                      |        |                          |        |       
|Stockholders
equity:                                                                         |                                                                                            |                                                            |        |                                      |        |                          |        |       
|                                                                                              | Preferred stock, $.001 par value:                                                          |                                                            |        |                                      |        |                          |        |        |       
|                                                                                              |                                                                                            | Authorized
 5,000,000 shares: none issued and outstanding |        |                                     |        |                          |        |       |       
|                                                                                              | Common stock, $.001 par value: authorized  30,000,000 shares:                             |                                                            |        |                                      |        |                          |        |        |       
|                                                                                              | issued
and outstanding  21,124,192 in 2002 and 23,345,994 in
2001                         |                                                            |        | 21                                   |        |                          |        | 23     |       
|                                                                                              | Additional paid-in capital                                                                 |                                                            |        | 74,953                               |        |                          |        | 78,328 |       
|                                                                                              | Deferred compensation                                                                      |                                                            |        | (900                                 | )      |                          |        | (3,929 | )     
|                                                                                              | Notes receivable for employee stock purchases                                              |                                                            |        | (67                                  | )      |                          |        | (63    | )     
|                                                                                              | Accumulated other comprehensive income (loss)                                              |                                                            |        | 46                                   |        |                          |        | (37    | )     
|                                                                                              | Accumulated deficit                                                                        |                                                            |        | (6,089                               | )      |                          |        | (3,769 | )     
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|Total stockholders equity                                                                    |                                                                                            |                                                            | 67,964 |                                      |        |                          | 70,553 |       
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       
|Total liabilities and stockholders equity                                                    |                                                                                            | $                                                          | 71,975 |                                      |        | $                        | 75,229 |       
|                                                                                              |                                                                                            |                                                            |        |                                      |        |                          |        |        |       

See accompanying notes to consolidated financial statements.

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PLX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |        | 
|---------------------------------------------------------- | -------------------------------------------------------- | - | ------------------------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                           |                                                          |   | Years Ended December 31,
|                                                           |                                                          |   |                         
|                                                           |                                                          |   | 2002                     |        | 2001 |   | 2000  
|                                                           |                                                          |   |                          |        |      |   |       
|Net revenues                                               |                                                          | $ | 34,810                   |        |      | $ | 44,128 |        |  | $ | 65,351 |       
|Cost of revenues                                           |                                                          |   | 10,852                   |        |      |   | 15,607 |        |  |   | 19,368 |       
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Gross margin                                               |                                                          |   | 23,958                   |        |      |   | 28,521 |        |  |   | 45,983 |       
|Operating expenses                                         |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|                                                           | Research and development                                 |   |                          | 14,256 |      |   |        | 18,783 |  |   |        | 16,350 | 
|                                                           | Selling, general and administrative                      |   |                          | 12,433 |      |   |        | 14,709 |  |   |        | 15,862 | 
|                                                           | In-process research and development                      |   |                          |       |      |   |        |       |  |   |        | 14,342 | 
|                                                           | Amortization of goodwill and purchased intangible assets |   |                          | 533    |      |   |        | 4,176  |  |   |        | 2,537  | 
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Total operating expenses                                   |                                                          |   | 27,222                   |        |      |   | 37,668 |        |  |   | 49,091 |       
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Operating loss                                             |                                                          |   | (3,264                   | )      |      |   | (9,147 | )      |  |   | (3,108 | )     
|Interest income                                            |                                                          |   | 527                      |        |      |   | 1,536  |        |  |   | 2,330  |       
|Interest expense                                           |                                                          |   |                         |        |      |   | 1,270  |        |  |   | 322    |       
|Other income (expense)                                     |                                                          |   | 477                      |        |      |   | 478    |        |  |   | (42    | )     
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Loss before provision (benefit) for income taxes           |                                                          |   | (2,260                   | )      |      |   | (8,403 | )      |  |   | (1,142 | )     
|Provision (benefit) for income taxes                       |                                                          |   | 60                       |        |      |   | (1,866 | )      |  |   | 5,900  |       
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Net loss                                                   |                                                          | $ | (2,320                   | )      |      | $ | (6,537 | )      |  | $ | (7,042 | )     
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Basic and diluted net loss per share                       |                                                          | $ | (0.10                    | )      |      | $ | (0.28  | )      |  | $ | (0.31  | )     
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       
|Shares used to compute basic and diluted per share amounts |                                                          |   | 22,785                   |        |      |   | 23,258 |        |  |   | 22,560 |       
|                                                           |                                                          |   |                          |        |      |   |        |        |  |   |        |       

See accompanying notes to consolidated financial statements.

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PLX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands, except share amounts)

|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |        |        |  
|---------------------------- | ---------------------------------------------------------------------------------- | ------------------------------ | ---------- | ------------ | - | ---------- | -- | -------- | - | -------------- | ------ | -------------- | - | ------------- | ------ | ------------- | - | ------ | --- | ----- | - | ----------- | --- | -------- | --- | - | ------ | - | ------ | - | ------ | ------ | ------ | -
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     | Notes |   | Accumulated |     | Retained |     |   |        |  
|                             |                                                                                    |                                |            | Common Stock |   | Additional |    |          |   |                |        | Receivable For |   | Other         |        | Earnings      |   | Total 
|                             |                                                                                    |                                |            |              |   | Paid In    |    | Deferred |   | Employee Stock |        | Comprehensive  |   | (Accumulated  |        | Stockholders'
|                             |                                                                                    |                                |            | Shares       |   | Amount     |    | Capital  |   | Compensation   |        | Purchases      |   | Income (Loss) |        | Deficit)      |   | Equity
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |       
|Balance at January 31, 2000  |                                                                                    |                                | 22,008,809 |              |   | $          | 22 |          |   | $              | 36,828 |                |   | $             | (192   | )             |   |        |    |       |   | $           | (66 | )        |     | $ | 9,810  |   |        | $ | 46,402 |       
|                             | Issuance of common stock related to
acquisition of Sebring Systems                 |                                |            | 960,931      |   |            |    | 1        |   |                |        | 28,867         |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 28,868 |       
|                             | Deferred compensation on options issued
related to acquisition of Sebring
Systems  |                                |            |             |   |            |    |         |   |                |        | 13,434         |   |               |        | (12,310       | ) |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 1,124  |       
|                             | Issuance of stock pursuant to exercise of
stock options                            |                                |            | 267,393      |   |            |    |         |   |                |        | 1,532          |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 1,532  |       
|                             | Issuance of stockholder notes receivable                                           |                                |            |             |   |            |    |         |   |                |        |               |   |               |        |              |   |        |     | (50   | ) |             |     |         |     |   |        |  |        |   |        | (50    | )     
|                             | Repurchase of common stock                                                         |                                |            | (68,238      | ) |            |    |         |   |                |        | (28            | ) |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | (28    | )     
|                             | Reversal of deferred compensation on
options associated with employee
terminations |                                |            |             |   |            |    |         |   |                |        | (4,409         | ) |               |        | 4,409         |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        |       |       
|                             | Deferred compensation on stock options
issued to employees                         |                                |            |             |   |            |    |         |   |                |        | 3,491          |   |               |        | (3,491        | ) |        |     |      |   |             |     |         |     |   |        |  |        |   |        |       |       
|                             | Amortization of deferred compensation                                              |                                |            |             |   |            |    |         |   |                |        |               |   |               |        | 2,272         |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 2,272  |       
|                             | Comprehensive loss:                                                                |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |        |       
|                             |                                                                                    | Unrealized gain on investments |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          | 120 |   |        |   |       |   |        |        | 120    |  
|                             |                                                                                    | Net loss                       |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          |    |   |        |   | (7,042 | ) |        |        | (7,042 | )
|                             |                                                                                    |                               
|                             | Total comprehensive loss                                                           |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        | (6,922 | )     
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |       
|Balance at December 31, 2000 |                                                                                    |                                | 23,168,895 |              |   |            | 23 |          |   |                | 79,715 |                |   |               | (9,312 | )             |   |        | (50 | )     |   |             | 54  |          |     |   | 2,768  |   |        |   | 73,198 |       
|                             | Issuance of stock pursuant to exercise of
stock options                            |                                |            | 192,400      |   |            |    |         |   |                |        | 883            |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 883    |       
|                             | Stockholder notes receivable interest                                              |                                |            |             |   |            |    |         |   |                |        |               |   |               |        |              |   |        |     | (13   | ) |             |     |         |     |   |        |  |        |   |        | (13    | )     
|                             | Tax benefit from employee stock option
plans                                       |                                |            |             |   |            |    |         |   |                |        | 281            |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 281    |       
|                             | Repurchase of common stock                                                         |                                |            | (15,301      | ) |            |    |         |   |                |        | (91            | ) |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | (91    | )     
|                             | Reversal of deferred compensation on
options associated with employee
terminations |                                |            |             |   |            |    |         |   |                |        | (2,477         | ) |               |        | 2,477         |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        |       |       
|                             | Deferred compensation on stock options
issued to consultants                       |                                |            |             |   |            |    |         |   |                |        | 17             |   |               |        |               |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 17     |       
|                             | Amortization of deferred compensation                                              |                                |            |             |   |            |    |         |   |                |        |               |   |               |        | 2,906         |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 2,906  |       
|                             | Comprehensive loss:                                                                |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |        |       
|                             |                                                                                    | Unrealized loss on investments |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          | (52 | ) |        |   |       |   |        |        | (52    | )
|                             |                                                                                    | Translation adjustments        |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          | (39 | ) |        |   |       |   |        |        | (39    | )
|                             |                                                                                    | Net loss                       |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          |    |   |        |   | (6,537 | ) |        |        | (6,537 | )
|                             |                                                                                    |                               
|                             | Total comprehensive loss                                                           |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        | (6,628 | )     
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |       
|Balance at December 31, 2001 |                                                                                    |                                | 23,345,994 |              |   |            | 23 |          |   |                | 78,328 |                |   |               | (3,929 | )             |   |        | (63 | )     |   |             | (37 | )        |     |   | (3,769 | ) |        |   | 70,553 |       
|                             | Issuance of stock pursuant to exercise of
stock options                            |                                |            | 199,850      |   |            |    |         |   |                |        | 1,287          |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 1,287  |       
|                             | Stockholder notes receivable interest                                              |                                |            |             |   |            |    |         |   |                |        |               |   |               |        |              |   |        |     | (4    | ) |             |     |         |     |   |        |  |        |   |        | (4     | )     
|                             | Tax benefit from employee stock option
plans                                       |                                |            |             |   |            |    |         |   |                |        | 944            |   |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 944    |       
|                             | Repurchase of common stock                                                         |                                |            | (2,421,652   | ) |            |    | (2       | ) |                |        | (4,698         | ) |               |        |              |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | (4,700 | )     
|                             | Reversal of deferred compensation on
options associated with employee
terminations |                                |            |             |   |            |    |         |   |                |        | (908           | ) |               |        | 908           |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        |       |       
|                             | Amortization of deferred compensation                                              |                                |            |             |   |            |    |         |   |                |        |               |   |               |        | 2,121         |   |        |     |      |   |             |     |         |     |   |        |  |        |   |        | 2,121  |       
|                             | Comprehensive loss:                                                                |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |        |       
|                             |                                                                                    | Unrealized gain on investments |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          | 95  |   |        |   |       |   |        |        | 95     |  
|                             |                                                                                    | Translation adjustments        |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          | (12 | ) |        |   |       |   |        |        | (12    | )
|                             |                                                                                    | Net loss                       |            |              |  |            |    |          |  |                |        |                |  |               |        |               |  |        |     |       |  |             |     |          |    |   |        |   | (2,320 | ) |        |        | (2,320 | )
|                             |                                                                                    |                               
|                             | Total comprehensive loss                                                           |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        | (2,237 | )     
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |       
|Balance at December 31, 2002 |                                                                                    |                                | 21,124,192 |              |   | $          | 21 |          |   | $              | 74,953 |                |   | $             | (900   | )             |   | $      | (67 | )     |   | $           | 46  |          |     | $ | (6,089 | ) |        | $ | 67,964 |       
|                             |                                                                                    |                                |            |              |   |            |    |          |   |                |        |                |   |               |        |               |   |        |     |       |   |             |     |          |     |   |        |   |        |   |        |       

See accompanying notes to consolidated financial statements.

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PLX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |         |        |  
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------- | ------ | ------------------------ | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|                                                                                                     |                                                        |                                   |        | Years Ended December 31,
|                                                                                                     |                                                        |                                   |        |                         
|                                                                                                     |                                                        |                                   |        | 2002                     |        | 2001 |         | 2000   
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |        
|Cash flows from operating activities:                                                                |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Net loss                                                                                             |                                                        | $                                 | (2,320 | )                        |        | $    | (6,537  | )       |        | $ | (7,042  | )      
|Adjustments required to reconcile net loss to cash flows
provided by (used in) operating activities: |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                     | Depreciation                                           |                                   |        | 2,401                    |        |      |         | 2,369   |        |   |         | 1,519   |       
|                                                                                                     | Amortization of deferred compensation                  |                                   |        | 2,121                    |        |      |         | 2,906   |        |   |         | 2,272   |       
|                                                                                                     | Compensation related to acceleration of stock options  |                                   |        |                         |        |      |         |        |        |   |         | 1,124   |       
|                                                                                                     | Compensation expense recognized                        |                                   |        |                         |        |      |         | 17      |        |   |         |        |       
|                                                                                                     | Amortization of goodwill and other intangible assets   |                                   |        | 533                      |        |      |         | 4,177   |        |   |         | 2,537   |       
|                                                                                                     | In-process research and development                    |                                   |        |                         |        |      |         |        |        |   |         | 14,342  |       
|                                                                                                     | Tax benefit from employee stock option plans           |                                   |        | 944                      |        |      |         | 281     |        |   |         |        |       
|                                                                                                     | Other non-cash items                                   |                                   |        | 172                      |        |      |         | (13     | )      |   |         |        |       
|                                                                                                     | Changes in operating assets and liabilities:           |                                   |        |                          |        |      |         |         |        |   |         |         |       
|                                                                                                     |                                                        | Accounts receivable               |        |                          | 1,505  |      |         |         | 699    |   |         |         | 667    |  
|                                                                                                     |                                                        | Inventories                       |        |                          | 3,583  |      |         |         | (65    | ) |         |         | (2,017 | )
|                                                                                                     |                                                        | Deferred tax assets               |        |                          | 3,194  |      |         |         | 905    |   |         |         | (2,720 | )
|                                                                                                     |                                                        | Income tax receivable             |        |                          | (2,912 | )    |         |         | (185   | ) |         |         |       |  
|                                                                                                     |                                                        | Other current assets              |        |                          | (1,288 | )    |         |         | 787    |   |         |         | (2,284 | )
|                                                                                                     |                                                        | Other assets                      |        |                          | (15    | )    |         |         | (153   | ) |         |         | (480   | )
|                                                                                                     |                                                        | Accounts payable                  |        |                          | (271   | )    |         |         | (3,209 | ) |         |         | 2,875  |  
|                                                                                                     |                                                        | Accrued compensation and benefits |        |                          | 124    |      |         |         | (683   | ) |         |         | (3     | )
|                                                                                                     |                                                        | Deferred revenues                 |        |                          | 332    |      |         |         | (1,149 | ) |         |         | 429    |  
|                                                                                                     |                                                        | Income tax payable                |        |                          |       |      |         |         | (552   | ) |         |         | (14    | )
|                                                                                                     |                                                        | Deferred tax liability            |        |                          | (830   | )    |         |         | (270   | ) |         |         | 1,100  |  
|                                                                                                     |                                                        | Accrued commissions               |        |                          | (109   | )    |         |         | (35    | ) |         |         | 25     |  
|                                                                                                     |                                                        | Other accrued expenses            |        |                          | 68     |      |         |         | (926   | ) |         |         | 884    |  
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Net cash provided by (used in) operating activities                                                  |                                                        |                                   | 7,232  |                          |        |      | (1,636  | )       |        |   | 13,214  |        
|                                                                                                    
|Cash flows used in investing activities:                                                             |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                     | Purchases of investments                               |                                   |        | (14,200                  | )      |      |         | (23,312 | )      |   |         | (31,882 | )     
|                                                                                                     | Sales and maturities of investments                    |                                   |        | 7,020                    |        |      |         | 46,632  |        |   |         | 30,815  |       
|                                                                                                     | Purchase of property and equipment                     |                                   |        | (784                     | )      |      |         | (4,952  | )      |   |         | (30,212 | )     
|                                                                                                     | Cash acquired in Sebring acquisition                   |                                   |        |                         |        |      |         |        |        |   |         | 33      |       
|                                                                                                     | Proceeds from sales of property and equipment          |                                   |        | 2                        |        |      |         |        |        |   |         |        |       
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Net cash provided by (used in) investing activities                                                  |                                                        |                                   | (7,962 | )                        |        |      | 18,368  |         |        |   | (31,246 | )      
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Cash flows provided by financing activities:                                                         |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                     | Proceeds from sales of common stock                    |                                   |        | 1,287                    |        |      |         | 883     |        |   |         | 1,532   |       
|                                                                                                     | Proceeds from issuance of promissory note              |                                   |        |                         |        |      |         |        |        |   |         | 28,500  |       
|                                                                                                     | Decrease (increase) in restricted cash and investments |                                   |        |                         |        |      |         | 4,025   |        |   |         | (4,025  | )     
|                                                                                                     | Repurchases of common stock                            |                                   |        | (4,700                   | )      |      |         | (91     | )      |   |         | (28     | )     
|                                                                                                     | Net repayments of stockholder notes receivable         |                                   |        |                         |        |      |         |        |        |   |         | 38      |       
|                                                                                                     | Repayment of note payable                              |                                   |        |                         |        |      |         | (28,500 | )      |   |         |        |       
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Net cash provided by (used in) financing activities                                                  |                                                        |                                   | (3,413 | )                        |        |      | (23,683 | )       |        |   | 26,017  |        
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                    
|Effect of exchange rate fluctuations on cash and cash equivalents                                    |                                                        |                                   | (6     | )                        |        |      | (39     | )       |        |   |        |        
|                                                                                                    
|Increase (decrease) in cash and cash equivalents                                                     |                                                        |                                   | (4,149 | )                        |        |      | (6,990  | )       |        |   | 7,985   |        
|Cash and cash equivalents at beginning of year                                                       |                                                        |                                   | 9,631  |                          |        |      | 16,621  |         |        |   | 8,636   |        
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|Cash and cash equivalents at end of year                                                             |                                                        | $                                 | 5,482  |                          |        | $    | 9,631   |         |        | $ | 16,621  |        
|                                                                                                     |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                    
|Supplemental disclosure of cash flow information:                                                    |                                                        |                                   |        |                          |        |      |         |         |        |   |         |        
|                                                                                                     | Cash received for income taxes                         |                                   | $      | 650                      |        |      | $       | 1,876   |        |   | $       |        |       
|                                                                                                     | Cash paid for income taxes                             |                                   | $      | 8                        |        |      | $       | 99      |        |   | $       | 7,529   |       
|                                                                                                     | Cash paid for interest                                 |                                   | $      |                         |        |      | $       | 1,363   |        |   | $       | 186     |       

See accompanying notes to consolidated financial statements.

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PLX TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Description of Business

PLX Technology, Inc. (the Company) develops and markets I/O
interconnectivity solutions that speed the transfer of data in high-performance
embedded systems. The Companys principal products are high performance
semiconductor devices, as well as related software development kits and
hardware design kits. Semiconductor devices account for substantially all of
the Companys net revenues.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All intercompany transactions and balances
have been eliminated.

Reclassifications

Certain previously reported amounts have been reclassified to conform to
the current year presentation format with no impact on net income. All
financial information has been reclassified to conform to this presentation.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (FAS 115). Under FAS 115, management determines
the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. At December 31,
2002 and 2001, all debt securities were designated as available-for-sale.
Available-for-sale securities are carried at fair value with unrealized gains
and losses reported in a separate component of stockholders equity. The fair
value of securities is based on quoted market prices. The amortized cost of
debt securities in this category is adjusted for the amortization of premiums
and the accretion of discounts to maturity. Such amortization, as well as any
interest earned on the securities, is included in interest income. Realized
gains and losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in interest income. The cost of
securities sold is based on the specific identification method.

The Company invests its excess cash in high quality, short-term and
long-term debt and equity instruments. The following is a summary of the
Companys investments by major security type at December 31, 2002 and December
31, 2001 (in thousands):

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|                                    |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|----------------------------------- |  | -------------- | ------ | ----- |  | ---------- | -- | ---------- |  | - | -- | - |  | - | ------ | 
|                                    |  |                |        |       |  | Gross      |    | Gross      |  |   |    |  
|                                    |  |                |        |       |  | Unrealized |    | Unrealized |  |   |    |  
|                                    |  | Amortized Cost |        | Gains |  | Losses     |    | Fair Value
|                                    |  |                |        |       |  |            |    |           
|2002                                |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|Operating cash                      |  | $              | 1,767  |       |  | $          |   |            |  | $ |   |   |  | $ | 1,767  | 
|Money market mutual funds           |  |                | 2,715  |       |  |            |   |            |  |   |   |   |  |   | 2,715  | 
|Municipal bonds                     |  |                | 1,000  |       |  |            |   |            |  |   |   |   |  |   | 1,000  | 
|Municipal auction rate securities   |  |                | 6,000  |       |  |            |   |            |  |   |   |   |  |   | 6,000  | 
|Corporate debt securities           |  |                | 6,076  |       |  |            | 46 |            |  |   |   |   |  |   | 6,122  | 
|Sovereign debt securities           |  |                | 1,024  |       |  |            | 22 |            |  |   |   |   |  |   | 1,046  | 
|U.S. government & agency securities |  |                | 3,001  |       |  |            | 29 |            |  |   |   |   |  |   | 3,030  | 
|                                    |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|                                    |  | $              | 21,583 |       |  | $          | 97 |            |  | $ |   |   |  | $ | 21,680 | 
|                                    |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|2001                                |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|Operating cash                      |  | $              | 2,168  |       |  | $          |   |            |  | $ |   |   |  | $ | 2,168  | 
|Money market mutual funds           |  |                | 7,462  |       |  |            |   |            |  |   |   |   |  |   | 7,462  | 
|Municipal bonds                     |  |                | 6,000  |       |  |            |   |            |  |   |   |   |  |   | 6,000  | 
|Corporate debt securities           |  |                | 2,088  |       |  |            |   |            |  |   | (1 | ) |  |   | 2,087  | 
|U.S. government & agency securities |  |                | 1,000  |       |  |            | 3  |            |  |   |   |   |  |   | 1,003  | 
|                                    |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 
|                                    |  | $              | 18,718 |       |  | $          | 3  |            |  | $ | (1 | ) |  | $ | 18,720 | 
|                                    |  |                |        |       |  |            |    |            |  |   |    |   |  |   |        | 

At December 31, 2002, the amortized cost and estimated fair values of
short-term and long-term investments (excluding cash equivalents) by
contractual maturity were as follows:

|                    |       |   |                |        |            |   |        |        | 
|------------------- | ----- | - | -------------- | ------ | ---------- | - | ------ | ------ | 
|                    |       |   | Amortized Cost |        | Fair Value
|                    |       |   |                |        |           
|                    |       |   | (in thousands)
|Less than one year  |       | $ | 16,793         |        |            | $ | 16,846 |       
|Mature in 1-2 years |       |   | 3,024          |        |            |   | 3,067  |       
|                    |       |   |                |        |            |   |        |       
|                    | Total |   | $              | 19,817 |            |   | $      | 19,913 | 
|                    |       |   |                |        |            |   |        |       

Allowance for Doubtful Accounts

The Company evaluates the collectibility of accounts receivable based on
the length of time the receivables are past due. It records reserves for bad
debts against amounts due to reduce the net recognized receivable to the amount
it reasonably believes will be collected.

Inventories

Inventories are valued at the lower of cost (first-in, first-out method)
or market (net realizable value). Inventories were as follows:

|                |       |   |                |       |      |   |       |       | 
|--------------- | ----- | - | -------------- | ----- | ---- | - | ----- | ----- | 
|                |       |   | December 31,  
|                |       |   |               
|                |       |   | 2002           |       | 2001
|                |       |   |                |       |     
|                |       |   | (in thousands)
|Work in process |       | $ | 338            |       |      | $ | 506   |      
|Finished goods  |       |   | 665            |       |      |   | 4,080 |      
|                |       |   |                |       |      |   |       |      
|                | Total |   | $              | 1,003 |      |   | $     | 4,586 | 
|                |       |   |                |       |      |   |       |      

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Inventory Write-downs

The Company evaluates the write-downs for inventory based on a combination
of factors. Based on the life of the product, sales history, obsolescence and
sales forecast, the Company records write-downs ranging from 0% to 100%.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of 39 years for buildings and three to five years for equipment,
furniture and purchased software. Leasehold improvements are amortized using
the straight-line method over the shorter of the useful lives of the assets or
the terms of the leases.

Reviews are regularly performed to determine whether facts and
circumstances exist which indicate that the carrying amount of assets may not
be recoverable. The recoverability of the carrying amount of property and
equipment is assessed based on estimated future undiscounted cash flows and if
an impairment exists a charge to operations is measured as the excess of the
carrying amount over the fair value of the assets. Based upon this method of
assessing recoverability, no asset impairment occurred in any of the years
presented.

Property and equipment are as follows:

|                           |  |                |        |      |  |   |        |  
|-------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                           |  | December 31,  
|                           |  |               
|                           |  | 2002           |        | 2001
|                           |  |                |        |     
|                           |  | (in thousands)
|Land                       |  | $              | 8,550  |      |  | $ | 8,550  |  
|Building                   |  |                | 19,333 |      |  |   | 19,333 |  
|Equipment and furniture    |  |                | 9,104  |      |  |   | 8,847  |  
|Purchased software         |  |                | 4,556  |      |  |   | 4,139  |  
|                           |  |                |        |      |  |   |        |  
|                           |  |                | 41,543 |      |  |   | 40,869 |  
|Accumulated depreciation   |  |                | (9,581 | )    |  |   | (7,290 | )
|                           |  |                |        |      |  |   |        |  
|Net property and equipment |  | $              | 31,962 |      |  | $ | 33,579 |  
|                           |  |                |        |      |  |   |        |  

Goodwill and Other Intangibles

Goodwill represents the excess of cost over the value of net assets of
businesses acquired pursuant to Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations and is carried at cost unless
write-downs for impairment are required. The Company evaluates the carrying
value of goodwill and other intangibles on an annual basis (November 1st) and
whenever events and changes in circumstances indicate that the carrying amount
may not be recoverable. Such indicators would include a significant reduction
in the Companys market capitalization, a decrease in operating results or a
deterioration in the Companys financial position. To date, no such impairment
has been recorded.

Stock-Based Compensation

The Company has employee stock plans, which are more fully described in
Note 6. The Company has elected to account for its stock option and stock
grant plans in accordance with the intrinsic value method under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB Opinion No. 25).

The Company has elected to follow APB Opinion No. 25 and related
interpretations in accounting for its stock options and grants since the
alternative fair market value accounting provided for under Statement of
Financial Accounting Standards (SFAS) No. 123 requires use of grant valuation
models that were not developed for use in valuing employee stock options and
grants. Under APB Opinion No. 25, if the exercise price of the Companys stock
grants and options equals the deemed fair value of the underlying stock on the
date of grant, no compensation expenses are recognized.

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If compensation cost for the Companys stock-based compensation plans had
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, then the Companys net
income (loss) per share would have been adjusted to the pro forma amounts
indicated below:

|                                                                                                    |  |                                       |        |      |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                    |  | Years Ended December 31,             
|                                                                                                    |  |                                      
|                                                                                                    |  | 2002                                  |        | 2001 |  | 2000
|                                                                                                    |  |                                       |        |      |  |     
|                                                                                                    |  | (in thousands, except per share data)
|Net loss as reported                                                                                |  | $                                     | (2,320 | )    |  | $    | (6,537  | ) |  | $ | (7,042  | )
|Add: Stock-based compensation included in reported net loss                                         |  |                                       | 2,121  |      |  |      | 2,923   |   |  |   | 2,272   |  
|Deduct: Stock-based compensation cost under SFAS 123                                                |  |                                       | (9,721 | )    |  |      | (9,193  | ) |  |   | (7,487  | )
|                                                                                                    |  |                                       |        |      |  |      |         |   |  |   |         |  
|Pro forma net loss                                                                                  |  | $                                     | (9,920 | )    |  | $    | (12,807 | ) |  | $ | (12,257 | )
|                                                                                                    |  |                                       |        |      |  |      |         |   |  |   |         |  
|Pro forma basic and diluted net loss per common share:                                              |  |                                       |        |      |  |      |         |   |  |   |         |  
|Pro forma shares used in the calculation of pro forma net
loss per common share  basic and diluted |  |                                       | 22,785 |      |  |      | 23,258  |   |  |   | 22,560  |  
|Pro
forma net loss per common share  basic and diluted                                             |  | $                                     | (0.44  | )    |  | $    | (0.55   | ) |  | $ | (0.54   | )
|                                                                                                    |  |                                       |        |      |  |      |         |   |  |   |         |  
|Reported
net loss per common share  basic and diluted                                              |  | $                                     | (0.10  | )    |  | $    | (0.28   | ) |  | $ | (0.31   | )
|                                                                                                    |  |                                       |        |      |  |      |         |   |  |   |         |  

See Note 7 for a discussion on the assumptions used in the option-pricing
model and estimated fair value of employee stock options.

Revenue Recognition

Sales to original equipment manufacturers are generally recognized at the
time of title passage. Recognition of sales to distributors, including
international distributors, is deferred until the product is resold by the
distributors to end users. Net revenues from the sale of software development
kits is insignificant for all years presented. Our products are warranted to
be free from defect for a period of one year. The Company provides an
allowance for estimated returns of defective products. To date, the Company has
experienced an immaterial amount of defective product returns.

Advertising

The Company accounts for advertising costs as expenses in the period in
which they are incurred. Advertising expenses for 2002, 2001, and 2000, were
$19,000, $0.2 million, and $0.3 million, respectively.

Software Development Costs

In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed, the Company is required to capitalize eligible computer software
costs upon achievement of technological feasibility subject to net realizable
value considerations. The Company has defined technological feasibility as
completion of a working model. The period between the achievement of
technological feasibility and release of the Companys software products has
been of short duration. As of December 31, 2002, 2001, and 2000 such costs
were insignificant. Accordingly, the Company has charged all such costs to
research and development expenses in the accompanying consolidated statements
of operations.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and such differences may be material to the financial statements.

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Comprehensive Income (Loss)

At December 31, 2002, the components of accumulated other comprehensive
income (loss), reflected in the Consolidated Statements of Stockholders
Equity, consisted of the following:

|                                              |  |                          |     |      |  |      |     |   |  |   |    | 
|--------------------------------------------- |  | ------------------------ | --- | ---- |  | ---- | --- | - |  | - | -- | 
|                                              |  | Years Ended December 31,
|                                              |  |                         
|                                              |  | 2002                     |     | 2001 |  | 2000
|                                              |  |                          |     |      |  |     
|                                              |  | (in thousands)          
|Unrealized gain on investments, net           |  | $                        | 97  |      |  | $    | 2   |   |  | $ | 54 | 
|Cumulative translation adjustments            |  |                          | (51 | )    |  |      | (39 | ) |  |   |   | 
|                                              |  |                          |     |      |  |     
|Accumulated other comprehensive income (loss) |  | $                        | 46  |      |  | $    | (37 | ) |  | $ | 54 | 
|                                              |  |                          |     |      |  |     

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires all business combinations to be accounted for using the
purchase method of accounting and is effective for all business combinations
initiated after June 30, 2001. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. The Company has adopted SFAS No. 142 as of
January 1, 2002. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives are no longer amortized, but rather are reviewed for
impairment annually, or more frequently if certain indicators arise. Other
intangibles will continue to be amortized over their useful lives. The Company
reclassified acquired workforce, which is no longer defined as an identifiable
intangible asset under SFAS 141, to goodwill as of January 1, 2002. As of
December 31, 2002, no impairment of goodwill has been recognized.

In October 2001, the FASB issued SFAS No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of, and addresses financial accounting and reporting for the
impairment and disposal of long-lived assets. The Company adopted SFAS No. 144
as of January 1, 2002. Adoption of this statement did not have a material
impact on the Companys financial position, results of operations or cash flows

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). It requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Statement 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company does not believe that the
adoption of this statement will have a material impact on its consolidated
financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company has adopted the disclosure requirements for the financial
statements included in this Form 10-K. Management is currently evaluating the
effects of FIN 45, however management does not expect that the adoption of FIN
45 will have a material effect on the Companys financial position, results of
operations, or cash flows.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS
123 Accounting for Stock-Based Compensation, to provide

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alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The transition guidance and annual disclosure
requirements are effective for fiscal years ending after December 15, 2002.
The Company has adopted the disclosure provisions for this Form 10-K. The
Company will continue to account for stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees using the intrinsic value method. Accordingly, the
adoption of SFAS 148 is not anticipated to have a material effect on the
Companys financial position, results of operations, or cash flows.

2. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period that are
not subject to repurchase. Diluted net loss per share is calculated using the
weighted average number of outstanding shares of common stock plus dilutive
common stock equivalents.

A reconciliation of shares used in the calculation of basic and diluted
net loss per share is as follows:

|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                   |  | Years Ended December 31,             
|                                                                   |  |                                      
|                                                                   |  | 2002                                  |        | 2001 |  | 2000
|                                                                   |  |                                       |        |      |  |     
|                                                                   |  | (in thousands, except per share data)
|Net loss                                                           |  | $                                     | (2,320 | )    |  | $    | (6,537 | ) |  | $ | (7,042 | )
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Weighted average shares of common stock outstanding                |  |                                       | 22,785 |      |  |      | 23,258 |   |  |   | 22,636 |  
|Less weighted average shares of common stock
subject to repurchase |  |                                       |       |      |  |      |       |   |  |   | (76    | )
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Shares used in computing basic net loss per share                  |  |                                       | 22,785 |      |  |      | 23,258 |   |  |   | 22,560 |  
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Net loss per share  basic                                         |  | $                                     | (0.10  | )    |  | $    | (0.28  | ) |  | $ | (0.31  | )
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Shares used in computing basic net loss per share                  |  |                                       | 22,785 |      |  |      | 23,258 |   |  |   | 22,560 |  
|Dilutive effect of stock options                                   |  |                                       |       |      |  |      |       |   |  |   |       |  
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Shares used in computing diluted net loss per share                |  |                                       | 22,785 |      |  |      | 23,258 |   |  |   | 22,560 |  
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  
|Net loss per share  diluted                                       |  | $                                     | (0.10  | )    |  | $    | (0.28  | ) |  | $ | (0.31  | )
|                                                                   |  |                                       |        |      |  |      |        |   |  |   |        |  

As the Company incurred a loss for years ended December 31, 2002, 2001 and
2000, the effect of dilutive securities, totaling 3.4 million, 3.1 million, and
3.0 million equivalent shares, respectively, have been excluded from the
computation of diluted loss per share, as their impact would be anti-dilutive.

3. Goodwill

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001. The Company has adopted SFAS No. 142 as of January 1, 2002.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives are no longer amortized, but rather are reviewed for impairment annually,
or more frequently if certain indicators arise. Other intangibles will
continue to be amortized over their useful lives. The Company reclassified
acquired workforce, which is no longer defined as an identifiable intangible
asset under SFAS 141, to goodwill as of January 1, 2002. As of December 31, 2002,
no impairment of goodwill has been recognized.

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The impact of SFAS No. 142 is summarized below (in thousands, except per
share data):

|                                                  |  |                        |        |   |                          |   |        |   |                |   |        |   |       |  | 
|------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------ | - | ------ | - | -------------- | - | ------ | - | ----- |  | 
|                                                  |  |                        |        |   | Years Ended December 31,
|                                                  |  |                        |        |   |                         
|                                                  |  |                        |        |   | 2002                     |   | 2001   |   | 2000          
|                                                  |  |                        |        |   |                          |   |        |   |               
|                                                  |  |                        |        |   |                          |   |        |   | (in thousands) |   |        |   |      
|Net loss, as reported                             |  | $                      | (2,320 | ) |                          | $ | (6,537 | ) |                | $ | (7,042 | )
|Add:                                              |  | Goodwill amortization  |        |   |                         |   |        |   | 3,310          |   |        |   | 2,031 | 
|                                                  |  | Workforce amortization |        |   |                         |   |        |   | 246            |   |        |   | 143   | 
|                                                  |  |                        |        |   |                          |   |        |   |                |   |        |   |       |  | 
|Net loss, as adjusted                             |  | $                      | (2,320 | ) |                          | $ | (2,981 | ) |                | $ | (4,868 | )
|                                                  |  |                        |        |   |                          |   |        |   |                |   |        |   |       |  | 
|Basic and diluted net loss per share, as reported |  | $                      | (0.10  | ) |                          | $ | (0.28  | ) |                | $ | (0.31  | )
|                                                  |  |                        |        |   |                          |   |        |   |                |   |        |   |       |  | 
|Basic and diluted net loss per share, as adjusted |  | $                      | (0.10  | ) |                          | $ | (0.13  | ) |                | $ | (0.22  | )
|                                                  |  |                        |        |   |                          |   |        |   |                |   |        |   |       |  | 

Changes in the carrying amount of goodwill for the years ended December
31, 2002 and 2001 are as follows (in thousands):

|                                |                                                                                                 |   |        |        |  
|------------------------------- | ----------------------------------------------------------------------------------------------- | - | ------ | ------ | -
|Balance as of December 31, 2000 |                                                                                                 | $ | 11,308 |       
|                                | Goodwill amortized during the period                                                            |   |        | (3,310 | )
|                                |                                                                                                 |   |        |       
|Balance as of December 31, 2001 |                                                                                                 |   | 7,998  |       
|                                | Workforce reclassified as goodwill during the period                                            |   |        | 594    |  
|                                | Realization of unrecorded deferred tax assets acquired
via the purchase of Sebring Systems, Inc |   |        | (538   | )
|                                |                                                                                                 |   |        |       
|Balance as of December 31, 2002 |                                                                                                 | $ | 8,054  |       
|                                |                                                                                                 |   |        |       

4. Concentrations of Credit, Customer and Supplier Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, short-term
investments, long-term investments and trade receivables. The Company
generally invests its excess money in money market funds, commercial paper of
corporations with high credit ratings, municipal bonds, and treasury bills.
The Company has not experienced any significant losses on its cash equivalents
or short and long-term investments. The Company performs ongoing credit
evaluations of its customers and generally requires no collateral. At December
31, 2002, the Companys largest receivable balance accounted for approximately
12% of net accounts receivable. Through fiscal 2002, a relatively small number
of direct customers and distributors accounted for a significant percentage of
the Companys revenues. The Company analyzes the need for reserves for
potential credit losses and records reserves when necessary.

Currently, the Company relies on single source suppliers of materials for
the significant majority of its product inventory. As a result, should the
Companys current suppliers not produce and deliver inventory for the Company
to sell on a timely basis, operating results may be adversely impacted.

5. Business Combination

On May 19, 2000, the Company purchased Sebring Systems, Inc., a
development stage company, that was developing the SebringRing, a Switched-PCI
interconnect solution, for an aggregate purchase price, including assumed
liabilities, of $32.3 million. The transaction was accounted for using
purchase accounting. Prior to the purchase, the Company owned approximately
16% of the outstanding shares of Sebring, which was accounted for using the
equity method of accounting.

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The financial results for the year ended December 31, 2000 reflect the
acquisition from the date the transaction was closed.

The purchase price of the Sebring Systems acquisition is summarized below:

|                                   |  |   |        | 
|---------------------------------- |  | - | ------ | 
|(in thousands)                     |  |   |        | 
|                                  
|Net previous investment in Sebring |  | $ | 681    | 
|Fair value of common stock issued  |  |   | 24,196 | 
|Fair value of options assumed      |  |   | 4,672  | 
|Assumed liabilities                |  |   | 2,242  | 
|Acquisition costs                  |  |   | 525    | 
|                                   |  |   |        | 
|Total consideration                |  | $ | 32,316 | 
|                                   |  |   |        | 

The Company issued an aggregate of 960,931 shares of its common stock
valued at $24.2 million. The stock options were valued using the Black-Scholes
valuation model. Additionally, the Company incurred $0.5 million in direct
fees related to the acquisition, which were capitalized as part of the purchase
price of the transaction.

The allocation of the Companys purchase price to the tangible and
identifiable intangible assets acquired and liabilities assumed is summarized
below.

The allocation was based on an independent appraisal and estimate of fair
value.

|                                      |                    |         |        |        |       | 
|------------------------------------- | ------------------ | ------- | ------ | ------ | ----- | 
|(in thousands)                        |                    |         |        |       
|                                     
|Net tangible assets                   |                    | $       | 1,165  |       
|In-process technology                 |                    |         | 14,342 |       
|Goodwill and other intangible assets: |                    |         |        |       
|                                      | Goodwill           |         |        | 13,339 |      
|                                      | Acquired employees |         |        | 983    |      
|                                      | Tradename          |         |        | 355    |      
|                                      |                    | Patents |        |        | 2,132 | 
|                                      |                    |         |        |       
|                                      |                    |         | 16,809 |       
|                                      |                    |         |        |       
|Net assets acquired                   |                    | $       | 32,316 |       
|                                      |                    |         |        |       

The net tangible assets acquired were comprised primarily of property and
equipment and accrued liabilities. The acquired in-process technology was
written-off in the second quarter of fiscal 2000. The estimated weighted
average useful life of the intangible assets for patents, tradenames, and the
residual goodwill, created as a result of the acquisition of Sebring Systems is
approximately four years.

Additionally, PLX recorded $12.3 million in deferred compensation on
options granted to employees below fair market value related to the acquisition
of Sebring. Deferred compensation is being amortized over the vesting period
of three years.

The $14.3 million allocation of the purchase price to the acquired
in-process technology was determined by identifying research projects in areas
for which technological feasibility had not been established and no alternative
future uses existed. PLX acquired technology consisting of silicon switch
fabric interconnect solutions. The value was determined by estimating the expected
cash flows from the project once commercially viable, discounting the

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net cash flows to their present value, and
then applying a percentage of completion to the calculated value as defined
below.

The net cash flows from the identified project utilized were based on
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, royalty costs and income taxes from the
project. These estimates were based on assumptions mentioned below. The
research and development costs excluded costs to bring the acquired in-process
project to technological feasibility.

The estimated revenues were based on management projections of the
acquired in-process project. The business projections were compared with and
found to be in line with industry analysts forecasts of growth in
substantially all of the relevant markets. Estimated total revenues from the
acquired in-process technology product were assumed to peak in fiscal 2003 and
decline in fiscal 2004 as other new products were expected to become available.
These projections were based on estimates of market size and growth, expected
trends in technology, and the nature and expected timing of new product
introductions, by the Company and its competitors.

Discounting the net cash flows back to their present value was based on
the cost of capital for well-managed venture capital funds which typically have
similar risks and returns on investments. The cost of capital used in
discounting the net cash flows from acquired in-process technology was 25%.

The Company estimated, as of the acquisition date, the project was 85%
complete. The percentage of completion was determined using costs incurred by
Sebring prior to the acquisition date compared to the remaining research and
development to be completed to bring the project to technological feasibility.
As of December 31, 2001, the project was completed. As of December 31, 2002,
sales from this product have been minimal. The Company does not expect the
sales from this product to be significant in future periods because the Company
believes competing standards have achieved greater acceptance in the
marketplace.

Unaudited Pro Forma Financial Results

The unaudited pro forma financial information combines the historical
statements of operations of PLX Technology, Inc. and Sebring Systems, Inc. for
the year ended December 31, 2000 and gives effect to the transaction, including
the amortization of goodwill and other intangible assets and the recognition of
deferred compensation, as if they occurred at the beginning of the period
presented. The amount of the aggregate purchase price allocated to purchased
in-process research and development has been excluded from the pro forma
information, as it is a non-recurring item.

The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results that would have
occurred if the transactions had been consummated at the dates indicated, nor
is it necessarily indicative of future operating results of the combined
companies and should not be construed as representative of these amounts for
any future periods.

|                                                          |  |                                          |        | 
|--------------------------------------------------------- |  | ---------------------------------------- | ------ | 
|                                                          |  | Year Ended December 31,                 
|                                                          |  |                                         
|                                                          |  | 2000                                    
|                                                          |  |                                         
|                                                          |  | (Unaudited)                             
|                                                          |  | (in thousands, except per share amounts)
|Net revenues                                              |  | $                                        | 65,351 | 
|Net income (loss)                                         |  | $                                        | 1,848  | 
|Net income (loss) per share  basic and diluted           |  | $                                        | 0.08   | 
|Number of shares used in per share calculations  basic   |  |                                          | 22,560 | 
|Number of shares used in per share calculations  diluted |  |                                          | 23,550 | 

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6. Employee Stock Plans

At December 31, 2002, 5,429,315 shares of the Companys common stock were
reserved for future issuance.

The Companys 1998 Stock Incentive Plan (the 1998 Plan) was approved by
the Board of Directors on January 15, 1998. The 1998 Plan provides for the
grant of both incentive and nonqualified stock options. The Companys 1999
Stock Incentive Plan was approved by the Board of Directors on January 25, 1999
and amended on May 24, 2000, May 22, 2001 and May 22, 2002 (as so amended, the
1999 Plan). The 1999 Plan provides for the grant of both incentive and
nonqualified stock options. The maximum term of any stock option granted
under the 1998 and 1999 Plans is ten years, except that with respect to
incentive stock options granted to a person possessing more than 10% of the
combined voting power of the Company (a 10% stockholder), the term of such
stock options shall be for no more than five years. The exercise price of
incentive stock options granted under the 1998 and 1999 Plan must be at least
100% of the fair market value of the common stock on the grant date except that
the exercise price of incentive stock options granted to a 10% stockholder must
be at least 110% of such fair market value on the date of grant. The options
generally vest over a period of three to four years.

Activity under the 1998 and 1999 Plans is summarized as follows:

|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   |          |       | 
|---------------------------- | ------------------ |  | ----------------- | ---------- | ----------------- |  | ----------------------------------------------- | --------- | --------- | - | ---------------- | ----------- | - | - | -------- | ----- | 
|                             |                    |  |                   |            |                   |  | Options Outstanding                            
|                             |                    |  |                   |            |                   |  |                                                
|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   | Weighted
|                             |                    |  | Options Available |            |                   |  |                                                 |           | Aggregate |   | Average Exercise
|                             |                    |  | for Grant         |            | Number of Options |  | Exercise Price                                  |           | Price    
|                             |                    |  |                   |            |                   |  |                                                 |           |          
|                             |                    |  |                   |            |                   |  | (in thousands, except share and per share data)
|Balance at January 1, 2000   |                    |  | 979,292           |            |                   |  | 1,497,758                                       |           |           | $ | 13,340,615       |             |   | $ | 8.91     |      
|                             | Options authorized |  |                   | 1,500,000  |                   |  |                                                 |          |           |   |                  |             |   |   |          |       | 
|                             | Options granted    |  |                   | (1,735,113 | )                 |  |                                                 | 2,159,774 |           |   |                  | 39,165,122  |   |   |          | 18.13 | 
|                             | Options assumed    |  |                   |           |                   |  |                                                 | 204,989   |           |   |                  | 625,374     |   |   |          | 3.05  | 
|                             | Options exercised  |  |                   |           |                   |  |                                                 | (267,393  | )         |   |                  | (1,532,701  | ) |   |          | 5.73  | 
|                             | Options canceled   |  |                   | 505,053    |                   |  |                                                 | (698,801  | )         |   |                  | (10,375,251 | ) |   |          | 14.85 | 
|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   |          |      
|Balance at December 31, 2000 |                    |  | 1,249,232         |            |                   |  | 2,896,327                                       |           |           |   | 41,223,159       |             |   |   | 14.23    |      
|                             | Options authorized |  |                   | 900,000    |                   |  |                                                 |          |           |   |                  |             |   |   |          |       | 
|                             | Options granted    |  |                   | (1,114,000 | )                 |  |                                                 | 1,114,000 |           |   |                  | 8,941,348   |   |   |          | 8.03  | 
|                             | Options exercised  |  |                   |           |                   |  |                                                 | (192,400  | )         |   |                  | (883,183    | ) |   |          | 4.59  | 
|                             | Options canceled   |  |                   | 638,679    |                   |  |                                                 | (727,744  | )         |   |                  | (10,285,923 | ) |   |          | 14.13 | 
|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   |          |      
|Balance at December 31, 2001 |                    |  | 1,673,911         |            |                   |  | 3,090,183                                       |           |           |   | 38,995,401       |             |   |   | 12.62    |      
|                             | Options authorized |  |                   | 900,000    |                   |  |                                                 |          |           |   |                  |             |   |   |          |       | 
|                             | Options granted    |  |                   | (1,073,300 | )                 |  |                                                 | 1,070,300 |           |   |                  | 14,386,905  |   |   |          | 13.40 | 
|                             | Options exercised  |  |                   |           |                   |  |                                                 | (199,850  | )         |   |                  | (1,286,976  | ) |   |          | 6.44  | 
|                             | Options canceled   |  |                   | 525,396    |                   |  |                                                 | (560,325  | )         |   |                  | (7,559,407  | ) |   |          | 13.49 | 
|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   |          |      
|Balance at December 31, 2002 |                    |  | 2,026,007         |            |                   |  | 3,403,308                                       |           |           | $ | 44,535,923       |             |   | $ | 13.09    |      
|                             |                    |  |                   |            |                   |  |                                                 |           |           |   |                  |             |   |   |          |      

Options assumed of 204,989 represent options related to the May 2000
acquisition of Sebring Systems. Options assumed from Sebring Systems are no
longer available for grant once canceled.

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The following table summarizes the information about options outstanding
at December 31, 2002:

|                |  |                     |           |                     |  |                  |  |             |       |                  |  |  |  |  |  |  |           |  |  |   |       |  |  |  |  |  |  | 
|--------------- |  | ------------------- | --------- | ------------------- |  | ---------------- |  | ----------- | ----- | ---------------- |  |  |  |  |  |  | --------- |  |  | - | ----- |  |  |  |  |  |  | 
|                |  | Options Outstanding |           | Options Exercisable
|                |  |                     |           |                    
|                |  |                     |           |                     |  | Weighted Average |  |             |       |                  |  |  |  |  |  |  |           |  |  |   |       |  |  |  |  | 
|Range of        |  | Number              |           | Remaining           |  | Weighted Average |  | Number      |       | Weighted Average
|Exercise Price  |  | Outstanding         |           | Contractual Life    |  | Exercise Price   |  | Exercisable |       | Exercise Price  
|                |  |                     |           |                     |  |                  |  |             |       |                 
|$1.50 - $6.33   |  |                     | 685,376   |                     |  | 6.96 years       |  | $           | 4.12  |                  |  |  |  |  |  |  | 537,992   |  |  | $ | 4.56  | 
|$6.65 - $8.25   |  |                     | 684,359   |                     |  | 8.26 years       |  |             | 7.77  |                  |  |  |  |  |  |  | 666,609   |  |  |   | 7.79  | 
|$8.50 - $16.65  |  |                     | 1,176,098 |                     |  | 8.20 years       |  |             | 13.69 |                  |  |  |  |  |  |  | 430,431   |  |  |   | 10.16 | 
|$17.94 - $25.94 |  |                     | 792,975   |                     |  | 7.29 years       |  |             | 23.26 |                  |  |  |  |  |  |  | 792,975   |  |  |   | 23.26 | 
|$27.00 - $40.00 |  |                     | 64,500    |                     |  | 7.37 years       |  |             | 28.72 |                  |  |  |  |  |  |  | 64,500    |  |  |   | 28.72 | 
|                |  |                     |           |                     |  |                  |  |             |       |                  |  |  |  |  |  |  |           |  |  |   |       |  |  | 
|Total           |  |                     | 3,403,308 |                     |  | 7.73 years       |  | $           | 13.09 |                  |  |  |  |  |  |  | 2,492,507 |  |  | $ | 12.97 | 
|                |  |                     |           |                     |  |                  |  |             |       |                  |  |  |  |  |  |  |           |  |  |   |       |  |  | 

As of December 31, 2002, 2001, and 2000, there were 1,686,558, 1,580,937,
and 992,469 stock options vested at weighted average exercise prices of $12.20
per share, $9.82 per share, and $7.58 per share, respectively.

During the year ended December 31, 2000, the Company recorded aggregate
deferred compensation of $15.8 million, representing the difference between the
grant price and the deemed fair value of the Companys common stock options
granted during this period. The Company recorded no deferred compensation in
2002 and 2001. The amortization of deferred compensation is charged to
operations and is amortized on a straight-line basis over the vesting period of
the options, which is typically three years. For the years ended December 31,
2002, 2001, and 2000, amortization expense was $2.1 million, $2.9 million, and
$2.3 million, respectively. In addition, for the years ended December 31, 2002,
2001, and 2000, the Company reversed aggregate deferred compensation of $0.9
million, $2.5 million and $4.4 million, respectively, on options associated
with employee terminations.

7. FAS 123 Assumptions

Pro forma information regarding net income (loss) is required by FAS 123,
which also requires that the information be determined as if the Company had
accounted for grants subsequent to December 31, 1994 under a method specified
by FAS 123. Options granted were estimated using the Black-Scholes valuation
model. The following weighted average assumptions were used for 2002, 2001,
and 2000:

|                                    |  |                          |      |      |  |      |      |   |  |  |      |  
|----------------------------------- |  | ------------------------ | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                    |  | Years Ended December 31,
|                                    |  |                         
|                                    |  | 2002                     |      | 2001 |  | 2000
|                                    |  |                          |      |      |  |     
|Volatility                          |  |                          | 1.00 |      |  |      | 1.00 |   |  |  | 0.84 |  
|Expected life of options (in years) |  |                          | 4.05 |      |  |      | 4.00 |   |  |  | 4.00 |  
|Dividend yield                      |  |                          | 0.00 | %    |  |      | 0.00 | % |  |  | 0.00 | %
|Risk-free interest rate             |  |                          | 4.05 | %    |  |      | 4.66 | % |  |  | 6.29 | %

The weighted average grant date fair value of options granted during 2002,
2001, and 2000 was $13.40, $8.03, and $21.90, respectively.

8. Other Intangible Assets

Information regarding the Companys other identified intangible assets
subject to amortization is as follows (in thousands):

|                                |  |                          |       |      |  |   |       | 
|------------------------------- |  | ------------------------ | ----- | ---- |  | - | ----- | 
|                                |  | Years Ended December 31,
|                                |  |                         
|                                |  | 2002                     |       | 2001
|                                |  |                          |       |     
|Gross carrying amount  patents |  | $                        | 2,132 |      |  | $ | 2,132 | 
|Accumulated amortization        |  |                          | 1,377 |      |  |   | 844   | 
|                                |  |                          |       |      |  |   |       | 
|Net                             |  | $                        | 755   |      |  | $ | 1,288 | 
|                                |  |                          |       |      |  |   |       | 

Estimated amortization expenses for the fiscal years ending December 31 are as
follows:

| |      |  |             
| | ---- |  | ------------
| | 2003 |  | $0.5 million
| | 2004 |  | $0.3 million

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The carrying amount of indefinite lived intangibles (Tradename) as of
December 31, 2002 was approximately $0.2 million.

9. Stock Repurchase

In January 2001, the Board of Directors of the Company approved a stock
repurchase program whereby up to 2,000,000 shares of the Companys common stock
could be purchased in the open market or in privately negotiated transactions.
As of December 31, 2002, all 2,000,000 shares had been repurchased.

In September 2002, the Board of Directors of the Company approved a second
stock repurchase program whereby an additional 2,000,000 shares of the
Companys common stock may be purchased in the open market or in privately
negotiated transactions. As of December 31, 2002, approximately 422,000 shares
had been repurchased.

10. Retirement Savings Plan

The Company has a retirement savings plan, commonly known as a 401(k)
plan, that allows all full-time employees to contribute from 1% to 15% of their
pretax salary, subject to IRS limits. Beginning in 1996, the Company made a
matching contribution calculated at 50 cents on each dollar of the first 6% of
participant contributions. The Companys contributions to the 401(k) plan were
$0.2 million, $0.3 million, and $0.3 million for 2002, 2001, and 2000,
respectively.

11. Income Taxes

The provision (benefit) for income taxes consists of the following:

|         |          |       |     |                          |    |      |        |                |        |   |       |        |       | 
|-------- | -------- | ----- | --- | ------------------------ | -- | ---- | ------ | -------------- | ------ | - | ----- | ------ | ----- | 
|         |          |       |     | Years Ended December 31,
|         |          |       |     |                         
|         |          |       |     | 2002                     |    | 2001 |        | 2000          
|         |          |       |     |                          |    |      |        |               
|         |          |       |     |                          |    |      |        | (in thousands) |        |   |       |       
|Federal: |          |       |     |                          |    |      |        |                |        |   |       |       
|         | Current  |       | $   | (2,842                   | )  |      | $      | (2,382         | )      |   | $     | 6,650  |      
|         | Deferred |       |     | 2,764                    |    |      |        | 600            |        |   |       | (1,461 | )    
|         |          |       |     |                          |    |      |        |                |        |   |       |        |      
|         |          |       | (78 | )                        |    |      | (1,782 | )              |        |   | 5,189 |       
|State:   |          |       |     |                          |    |      |        |                |        |   |       |       
|         | Current  |       |     |                         |    |      |        | (119           | )      |   |       | 870    |      
|         | Deferred |       |     | 138                      |    |      |        | 35             |        |   |       | (159   | )    
|         |          |       |     |                          |    |      |        |                |        |   |       |        |      
|         |          |       | 138 |                          |    |      | (84    | )              |        |   | 711   |       
|         |          |       |     |                          |    |      |        |                |        |   |       |        |      
|         |          | Total |     | $                        | 60 |      |        | $              | (1,866 | ) |       | $      | 5,900 | 
|         |          |       |     |                          |    |      |        |                |        |   |       |        |      

The provision (benefit) for income taxes differs from the amount of income
taxes determined by applying the U.S. statutory federal income tax rate as
follows:

|                                                                        |  |                          |      |      |  |                |        |   |  |   |       |  
|----------------------------------------------------------------------- |  | ------------------------ | ---- | ---- |  | -------------- | ------ | - |  | - | ----- | -
|                                                                        |  | Years Ended December 31,
|                                                                        |  |                         
|                                                                        |  | 2002                     |      | 2001 |  | 2000          
|                                                                        |  |                          |      |      |  |               
|                                                                        |  |                          |      |      |  | (in thousands) |        |   |  |  
|Tax benefit at the U.S. statutory rate                                  |  | $                        | (791 | )    |  | $              | (2,941 | ) |  | $ | (400  | )
|State taxes (net of federal benefit)                                    |  |                          | (99  | )    |  |                | (55    | ) |  |   | 462   |  
|Tax exempt interest income                                              |  |                          | (379 | )    |  |                | (87    | ) |  |   | (157  | )
|Non-deductible in-process R&D write off                                 |  |                          |     |      |  |                |       |   |  |   | 5,020 |  
|Non-deductible amortization of deferred
compensation                    |  |                          | 835  |      |  |                | 1,017  |   |  |   |      |  
|Non-deductible amortization of goodwill and
purchased intangible assets |  |                          |     |      |  |                | 1,158  |   |  |   | 808   |  

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|                                    |  |                          |        |      |  |                |        |   |  |   |       |  
|----------------------------------- |  | ------------------------ | ------ | ---- |  | -------------- | ------ | - |  | - | ----- | -
|                                    |  | Years Ended December 31,
|                                    |  |                         
|                                    |  | 2002                     |        | 2001 |  | 2000          
|                                    |  |                          |        |      |  |               
|                                    |  |                          |        |      |  | (in thousands) |        |   |  |  
|Research and development credit     |  |                          | (1,786 | )    |  |                | (600   | ) |  |   | (305  | )
|Tax benefits from prior years       |  |                          |       |      |  |                | (975   | ) |  |   |      |  
|Change in valuation allowance       |  |                          | 2,242  |      |  |                | 600    |   |  |   |      |  
|Other individually immaterial items |  |                          | 38     |      |  |                | 17     |   |  |   | 472   |  
|                                    |  |                          |        |      |  |                |        |   |  |   |       |  
|                                    |  | $                        | 60     |      |  | $              | (1,866 | ) |  | $ | 5,900 |  
|                                    |  |                          |        |      |  |                |        |   |  |   |       |  

During the year ended December 31, 2002, the Companys deferred tax asset
valuation allowance increased by $4.7 million. Approximately $2.5 million of
this amount resulted from the establishment of deferred tax assets related to
the net operating losses and start-up costs associated with the Companys
acquisition of Sebring Systems, Inc. These assets will be reflected as an
adjustment to goodwill if and when they are realized.

The Company increased its benefit in fiscal 2001 by $1.0 million or $0.04
per share due to the recognition of tax benefits from prior years. This change
in estimated taxes was reflected in the federal tax return for 2000 filed in
September 2001.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax assets and liabilities are as follows:

|                          |                                               |                               |      |                          |   |      |       |       |       | 
|------------------------- | --------------------------------------------- | ----------------------------- | ---- | ------------------------ | - | ---- | ----- | ----- | ----- | 
|                          |                                               |                               |      | Years Ended December 31,
|                          |                                               |                               |      |                         
|                          |                                               |                               |      | 2002                     |   | 2001
|                          |                                               |                               |      |                          |   |     
|                          |                                               |                               |      | (in thousands)          
|Deferred tax assets:      |                                               |                               |      |                          |   |      |       |      
|                          | Accrued expenses and reserves                 |                               | $    | 1,367                    |   |      | $     | 1,422 |      
|                          | Net operating loss carryforwards              |                               |      | 2,653                    |   |      |       | 1,100 |      
|                          | Research and development credit carryforwards |                               |      | 1,621                    |   |      |       | 600   |      
|                          | Costs capitalized for tax purposes            |                               |      | 489                      |   |      |       | 537   |      
|                          | Other                                         |                               |      |                         |   |      |       | 135   |      
|                          |                                               |                               |      |                          |   |      |       |       |      
|                          | Gross deferred tax assets                     |                               |      | 6,130                    |   |      |       | 3,794 |      
|                          | Valuation allowance                           |                               |      | (5,321                   | ) |      |       | (600  | )    
|                          |                                               |                               |      |                          |   |      |       |       |      
|                          |                                               |                               | 809  |                          |   |      | 3,194 |      
|Deferred tax liabilities: |                                               |                               |      |                          |   |      |       |      
|                          | Acquisition related intangibles               |                               |      | (616                     | ) |      |       | (830  | )    
|                          | Other                                         |                               |      | (193                     | ) |      |       |      |      
|                          |                                               |                               |      |                          |   |      |       |       |      
|                          |                                               |                               | (809 | )                        |   |      | (830  | )    
|                          |                                               |                               |      |                          |   |      |       |       |      
|                          |                                               | Total net deferred tax assets |      | $                        |  |      |       | $     | 2,364 | 
|                          |                                               |                               |      |                          |   |      |       |       |      

At December 31, 2002, the Company had federal and state net operating loss
carryforwards of $7.4 million and $0.8 million, respectively. These
carryforwards will expire at various dates beginning in 2004 through 2020, if
not utilized. In addition, as of December 31, 2002, the Company had research
and development credit carryforwards of approximately $1.6 million, which
expire at various dates beginning in 2013.

Utilization of the net operating loss carryforwards may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state provisions.
The annual limitation may result in the expiration of net operating loss
carryforwards before utilization.

A valuation allowance has been recorded for the entire deferred tax asset
as a result of uncertainties regarding the realization of the asset balance due
to the history of losses and the variability of operating results. The
valuation allowance increased by $4.7 million, $0.6 million, and $0 for the
years ended December 31, 2002, 2001 and 2000, respectively.

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12. Commitments

On October 31, 2002, the Company entered into a software license agreement
with an unrelated party totaling $2.2 million. The Company paid approximately
$0.8 million upon execution of the agreement and is obligated to pay $0.7
million and $0.7 million in 2003 and 2004, respectively.

The Company uses several contract manufacturers and suppliers to provide
manufacturing services for its products. As of December 31, 2002, the Company
has purchase commitments for inventory with these contract manufacturers and
suppliers of approximately $2.2 million. These inventory
purchase commitments are placed on a sales order basis with lead
times ranging from 8 to 13 weeks to meet estimated customer demand
requirements.

The Company leases facilities and equipment under non-cancelable operating
lease agreements. Future minimum lease payments at December 31, 2002 are as
follows:

|                             |  |                |       | 
|---------------------------- |  | -------------- | ----- | 
|                             |  | (in thousands)
|2003                         |  | $              | 581   | 
|2004                         |  |                | 546   | 
|2005                         |  |                | 58    | 
|2006                         |  |                | 19    | 
|                             |  |                |       | 
|Total minimum lease payments |  | $              | 1,204 | 
|                             |  |                |       | 

Rental expense for all leases aggregated approximately $0.1 million, $0.5
million, and $0.8 million, net of sublease income of $0.4 million, $0 and $0
for the years ended December 31, 2002, 2001, and 2000, respectively.

13. Segments of an Enterprise and Related Information

The Company has one operating segment, the sale of semiconductor devices.
The President has been identified as the Chief Operating Decision Maker (CODM)
because he has final authority over resource allocation decisions and
performance assessment. The CODM does not receive discrete financial
information about individual components of the Companys business.

Revenues by geographic region based on customer location were as follows:

|          |                           |   |                          |        |      |   |        |        |  |   |        |        | 
|--------- | ------------------------- | - | ------------------------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|          |                           |   | Years Ended December 31,
|          |                           |   |                         
|          |                           |   | 2002                     |        | 2001 |   | 2000  
|          |                           |   |                          |        |      |   |       
|          |                           |   | (in thousands)          
|Revenues: |                           |   |                          |        |      |   |        |        |  |   |        |       
|          | North America             |   | $                        | 14,497 |      |   | $      | 24,864 |  |   | $      | 39,658 | 
|          | France                    |   |                          | 4,609  |      |   |        | 6,373  |  |   |        | 7,232  | 
|          | Europe
 excluding France |   |                          | 4,955  |      |   |        | 5,092  |  |   |        | 9,858  | 
|          | Asia                      |   |                          | 10,749 |      |   |        | 7,799  |  |   |        | 8,603  | 
|          |                           |   |                          |        |      |   |        |        |  |   |        |        | 
|Total     |                           | $ | 34,810                   |        |      | $ | 44,128 |        |  | $ | 65,351 |       
|          |                           |   |                          |        |      |   |        |        |  |   |        |        | 

Sales to the following distributors or direct customers accounted for 10%
or more of net revenues:

|                    |  |      |    |      |  |      |    |   |  |  |    |  
|------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                    |  | 2002 |    | 2001 |  | 2000
|                    |  |      |    |      |  |     
|A2M                 |  |      | 13 | %    |  |      | 14 | % |  |  | 11 | %
|Prediwave           |  |      | 3  | %    |  |      | 18 | % |  |  |   |  
|Unique Technologies |  |      |   |      |  |      | 11 | % |  |  | 25 | %

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|14. |  | Related Party Transactions
|--- |  | --------------------------

The Company and a customer are related parties because the chairman of the
Companys Board of Directors also serves on the customers Board of Directors.
For the years ended December 31, 2002, 2001, and 2000, net revenues from sales
to this customer, which were transacted at arms length prices, were
approximately $0.7 million, $0.8 million, and $1.0 million, respectively.



|15. |  | Quarterly Summaries                                
|--- |  | ---------------------------------------------------
|   
|    |  | (In thousands, except per share amounts, unaudited)

|                           |  |              |        |              |  |                    |        |              |  |   |       |   |  |   |       |  
|-------------------------- |  | ------------ | ------ | ------------ |  | ------------------ | ------ | ------------ |  | - | ----- | - |  | - | ----- | -
|                           |  |              |        |              |  | Three Months Ended |        |              |  |  
|                           |  |              |       
|                           |  | Mar 31, 2002 |        | Jun 30, 2002 |  | Sep 30, 2002       |        | Dec 31, 2002
|                           |  |              |        |              |  |                    |        |             
|Net revenues               |  | $            | 10,118 |              |  | $                  | 7,797  |              |  | $ | 8,339 |   |  | $ | 8,556 |  
|Gross profit               |  | $            | 6,757  |              |  | $                  | 5,416  |              |  | $ | 5,904 |   |  | $ | 5,881 |  
|Net loss                   |  | $            | (271   | )            |  | $                  | (1,160 | )            |  | $ | (688  | ) |  | $ | (201  | )
|Net loss per basic share   |  | $            | (0.01  | )            |  | $                  | (0.05  | )            |  | $ | (0.03 | ) |  | $ | (0.01 | )
|Net loss per diluted share |  | $            | (0.01  | )            |  | $                  | (0.05  | )            |  | $ | (0.03 | ) |  | $ | (0.01 | )

|                           |  |              |        |              |  |                    |        |              |  |   |        |   |  |   |        |  
|-------------------------- |  | ------------ | ------ | ------------ |  | ------------------ | ------ | ------------ |  | - | ------ | - |  | - | ------ | -
|                           |  |              |        |              |  | Three Months ended |        |              |  |  
|                           |  |              |       
|                           |  | Mar 31, 2001 |        | Jun 30, 2001 |  | Sep 30, 2001       |        | Dec 31, 2001
|                           |  |              |        |              |  |                    |        |             
|Net revenues               |  | $            | 12,429 |              |  | $                  | 9,463  |              |  | $ | 10,513 |   |  | $ | 11,723 |  
|Gross profit               |  | $            | 8,365  |              |  | $                  | 5,071  |              |  | $ | 6,846  |   |  | $ | 8,239  |  
|Net loss                   |  | $            | (1,467 | )            |  | $                  | (3,381 | )            |  | $ | (1,132 | ) |  | $ | (557   | )
|Net loss per basic share   |  | $            | (0.06  | )            |  | $                  | (0.15  | )            |  | $ | (0.05  | ) |  | $ | (0.02  | )
|Net loss per diluted share |  | $            | (0.06  | )            |  | $                  | (0.15  | )            |  | $ | (0.05  | ) |  | $ | (0.02  | )

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

|                                                             |  |                     |     |              |  |                   |     |                    |  |   |      |   |  |   |     | 
|------------------------------------------------------------ |  | ------------------- | --- | ------------ |  | ----------------- | --- | ------------------ |  | - | ---- | - |  | - | --- | 
|                                                             |  |                     |     |              |  | ADDITIONS CHARGED |     | DEDUCTIONS AMOUNTS |  |   |      |  
|                                                             |  | BALANCE AT          |     | TO COSTS AND |  | RECOVERED         |     | BALANCE AT        
|                                                             |  | BEGINNING OF PERIOD |     | EXPENSES     |  | (WRITTEN OFF)     |     | END OF PERIOD     
|                                                             |  |                     |     |              |  |                   |     |                   
|Year
ended December 31, 2002
Allowance for doubtful accounts |  | $                   | 202 |              |  | $                 | 103 |                    |  | $ | (178 | ) |  | $ | 127 | 
|Year
ended December 31, 2001
Allowance for doubtful accounts |  | $                   | 318 |              |  | $                 | 49  |                    |  | $ | (165 | ) |  | $ | 202 | 
|Year
ended December 31, 2000
Allowance for doubtful accounts |  | $                   | 240 |              |  | $                 | 150 |                    |  | $ | (72  | ) |  | $ | 318 | 

55



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|               |  |                      |  |                                                                  
|-------------- |  | -------------------- |  | -----------------------------------------------------------------
|March 13, 2003 |  | PLX Technology, Inc.
|               |  |                      |  |                                                                  
|               |  | by:                  |  |                                                                  
|               |  |                      |  | /s/ Michael J. Salameh

Name: Michael J. Salameh
Title: President

56



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##### Table of Contents



POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael J. Salameh and Rafael Torres,
and each of them, his attorneys-in-fact, each with the power of substitution,
for him in any and all capacities, to sign any amendments to this Report on
Form 10-K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                                         |  |                                                                                                             |  |               
|---------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | --------------
|Name and Signature                       |  | Title(s)                                                                                                    |  | Date          
|                                         |  |                                                                                                             |  |               
|/s/ Michael J. SalamehMichael J. Salameh |  | President and Director
(Principal Executive Officer)                                                        |  | March 13, 2003
|                                        
|/s/ Rafael TorresRafael Torres           |  | Vice President, Finance, Chief Financial Officer and
Secretary (Principal Financial and Accounting Officer) |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/ D. James GuzyD. James Guzy           |  | Director and Chairman of the Board of Directors                                                             |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/ Eugene FlathEugene Flath             |  | Director                                                                                                    |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/ Timothy DraperTimothy Draper         |  | Director                                                                                                    |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/ Young K. SohnYoung K. Sohn           |  | Director                                                                                                    |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/ Robert H. SmithRobert H. Smith       |  | Director                                                                                                    |  | March 13, 2003
|                                        
|                                         |  |                                                                                                             |  |               
|                                        
|/s/   John H. HartJohn H. Hart           |  | Director                                                                                                    |  | March 13, 2003

57



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##### Table of Contents



PLX TECHNOLOGY, INC.

CERTIFICATION

I, Michael J. Salameh, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of PLX Technology, Inc.;                                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 13, 2003

|    |  |                             
|--- |  | ----------------------------
|By: |  | /s/ Michael J. Salameh      
|    |  |                             
|    |  | Michael J. Salameh
President

58



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##### Table of Contents



PLX TECHNOLOGY, INC.

CERTIFICATION

I, Rafael Torres, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of PLX Technology, Inc.;                                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 13, 2003

|    |  |                                      
|--- |  | -------------------------------------
|By: |  | /s/ Rafael Torres                    
|    |  |                                      
|    |  | Rafael Torres
Chief Financial Officer

59



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##### Table of Contents






EXHIBIT INDEX

|              |  |                                                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit       |  |                                                                                                                                                                                     
|Number        |  | Description                                                                                                                                                                         
|              |  |                                                                                                                                                                                     
|2.1 (2)       |  | Agreement and Plan of Merger dated April 19, 2000 by and among PLX
Technology, Inc., OKW Technology Acquisition Corporation and
Sebring Systems, Inc.                               
|3.1 (1)       |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                
|3.2 (1)       |  | Registrants Amended and Restated Bylaws.                                                                                                                                           
|4.1           |  | Reference is made to Exhibit 3.1.                                                                                                                                                   
|10.1 (1)*     |  | Form of Indemnification Agreement between PLX and each of its
Officers and Directors.                                                                                               
|10.2 (1)*     |  | 1998 Stock Incentive Plan.                                                                                                                                                          
|10.3 (1) (5)* |  | 1999 Stock Incentive Plan, As Amended.                                                                                                                                              
|10.4 (1)      |  | Lease Agreement dated October 17, 1997 between The Arrillaga
Foundation and The Perry Foundation as Landlords and PLX as Tenant,
as amended.                                        
|10.5 (3)      |  | PLX Technology, Inc. Stock Restriction, Information Rights and
Registration Rights Agreement dated April 19, 1989.                                                                  
|10.6(4)       |  | PLX Technology, Inc. Stock Restriction, Information Rights and
Registration Rights Agreement dated July 3, 1991.                                                                    
|10.7*         |  | Note Secured By Stock Pursuant to Stock Pledge Agreement dated
June 18, 1997, between Jack Regula and Sebring Systems, Inc.                                                         
|10.8*         |  | Stock Pledge Agreement dated June 18, 1997 between Jack Regula
and Sebring Systems, Inc.                                                                                            
|10.9*         |  | Amendment to Stock Pledge Agreement dated May 19, 2000 between Sebring Systems, Inc. and Jack Regula.                                                                               
|21.1          |  | Subsidiaries of the Company.                                                                                                                                                        
|23.1          |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                                                                 
|99.1          |  | Certification of President Pursuant to Section 1350, Chapter 63 of
Title 18, United States Code, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.              
|99.2          |  | Certification of Chief Financial Officer Pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



---

|(1) |  | Incorporated by reference to the same numbered exhibit previously filed with the Companys Registration
Statement on Form S-1 (Registration No. 333-71795).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to Exhibit 2.1 to Form 8-K as filed on June 2, 2000.                                                                             
|   
|(3) |  | Incorporated by reference to Exhibit 10.9 to the Companys Registration Statement on Form S-1 (Registration No.
333-71795).                                
|   
|(4) |  | Incorporated by reference to Exhibit 10.10 to the Companys Registration Statement on Form S-1 (Registration
No. 333-71795).                               
|   
|(5) |  | Incorporated by reference to Exhibit 10.1 to the Companys quarterly report on Form 10-Q for the quarter ended
June 30, 2002.                              
|   
|*   |  | Management contract or compensatory plan or arrangement.                                                                                                   

60