UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549
 ________________
  Form
10-Q
  
 þ
                QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the Quarterly Period Ended
      February 27, 2009
  or
  o
                TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the transition period
      from
                To
                .
 
 Commission
file number 000-51771
 ________________
  SMART
MODULAR TECHNOLOGIES (WWH), INC.
 (Exact
name of registrant as specified in its charter)
  Cayman
      Islands
                20-2509518(State
      or Other Jurisdiction of
                (I.R.S.
      EmployerIncorporation
      or Organization)
                Identification
      No.)4211
      Starboard DriveFremont,
      CA
                94538(Address
      of Principal Executive Offices)
                (Zip
      Code)
  (510)
623-1231
 Registrant’s
Telephone Number, Including Area Code
 ________________
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ  No o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller company. See definition
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (Check one):
  Large
      accelerated filer o
                Accelerated
      filer þNon-accelerated
      filer o
      (Do not check if a smaller reporting company)
                Smaller
      reporting company o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
  The
number of registrant’s ordinary shares outstanding as of April 6, 2009 was
61,747,162.
  1
  SMART
MODULAR TECHNOLOGIES (WWH), INC.
  INDEX
TO QUARTERLY REPORT
  TABLE
OF CONTENTS
  PagePART I. FINANCIAL INFORMATION
                          3Item 1. Financial Statements
                          3Item 2. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                          20Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
                          30Item 4. Controls and Procedures
                          30PART II. OTHER INFORMATION
                          31Item 1. Legal Proceedings
                          31Item 1A. Risk Factors
                          31Item 4.  Submission of Matters to a Vote of
      Security Holders
                          32Item 6. Exhibits
                          33SIGNATURES
                          34
  2
 PART I. FINANCIAL INFORMATION
  Item 1. Financial
Statements
  SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
  CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 
 February27,
                                                                                                2009
                                                                                              
                                                                                              
                                                                                              August
      29,
                                                                                                2008(In
      thousands)ASSETSCash
      and cash equivalents
                                                                                              
                                                                                              $
                                                                                              125,393
                                                                                              
                                                                                              
                                                                                              $
                                                                                              115,994Accounts
      receivable, net of allowances of $1,143 and $1,517 as of February 27,
      2009 and August 29, 2008, respectively
                                                                                              
                                                                                              
                                                                                              115,591
                                                                                              
                                                                                              
                                                                                              
                                                                                              193,736Inventories
                                                                                              
                                                                                              
                                                                                              84,610
                                                                                              
                                                                                              
                                                                                              
                                                                                              62,430Prepaid
      expenses and other current assets
                                                                                              
                                                                                              
                                                                                              12,889
                                                                                              
                                                                                              
                                                                                              
                                                                                              14,973Total
      current assets
                                                                                              
                                                                                              
                                                                                              338,483
                                                                                              
                                                                                              
                                                                                              
                                                                                              387,133Property
      and equipment, net
                                                                                              
                                                                                              
                                                                                              33,099
                                                                                              
                                                                                              
                                                                                              
                                                                                              39,317Goodwill
                                                                                              
                                                                                              
                                                                                              —
                                                                                              
                                                                                              
                                                                                              
                                                                                              7,210Other
      intangible assets, net
                                                                                              
                                                                                              
                                                                                              8,010
                                                                                              
                                                                                              
                                                                                              
                                                                                              8,545Other
      non-current assets
                                                                                              
                                                                                              
                                                                                              4,014
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,943Total
      assets
                                                                                              
                                                                                              $
                                                                                              383,606
                                                                                              
                                                                                              
                                                                                              $
                                                                                              447,148LIABILITIES
      AND SHAREHOLDERS’ EQUITYAccounts
      payable
                                                                                              
                                                                                              $
                                                                                              58,950
                                                                                              
                                                                                              
                                                                                              $
                                                                                              93,482Accrued
      expenses and other current liabilities
                                                                                              
                                                                                              
                                                                                              22,070
                                                                                              
                                                                                              
                                                                                              
                                                                                              23,942Total
      current liabilities
                                                                                              
                                                                                              
                                                                                              81,020
                                                                                              
                                                                                              
                                                                                              
                                                                                              117,424Long-term
      debt
                                                                                              
                                                                                              
                                                                                              81,250
                                                                                              
                                                                                              
                                                                                              
                                                                                              81,250Other
      long-term liabilities
                                                                                              
                                                                                              
                                                                                              2,171
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,568Total
      liabilities
                                                                                              
                                                                                              
                                                                                              164,441
                                                                                              
                                                                                              
                                                                                              $
                                                                                              200,242Shareholders’
      equity:Ordinary
      shares,  $0.00016667 par value; 600,000,000 shares authorized;
      61,730,661 and 61,361,137 shares issued and outstanding as of February 27,
      2009 and August 29, 2008, respectively
                                                                                              
                                                                                              
                                                                                              10
                                                                                              
                                                                                              
                                                                                              
                                                                                              10Additional
      paid-in capital
                                                                                              
                                                                                              
                                                                                              104,228
                                                                                              
                                                                                              
                                                                                              
                                                                                              100,234Deferred
      stock-based compensation
                                                                                              
                                                                                              
                                                                                              (34
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (91
                                                                                              )Accumulated
      other comprehensive income (loss)
                                                                                              
                                                                                              
                                                                                              (8,932
                                                                                              )
                                                                                              
                                                                                              
                                                                                              14,132Retained
      earnings
                                                                                              
                                                                                              
                                                                                              123,893
                                                                                              
                                                                                              
                                                                                              
                                                                                              132,621Total
      shareholders’ equity
                                                                                              
                                                                                              
                                                                                              219,165
                                                                                              
                                                                                              
                                                                                              
                                                                                              246,906Total
      liabilities and shareholders’ equity
                                                                                              
                                                                                              $
                                                                                              383,606
                                                                                              
                                                                                              
                                                                                              $
                                                                                              447,148
 
 
 See
accompanying notes to unaudited condensed consolidated financial
statements.
  3
  SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 
  Three
      Months
                                                                                                                                                                                                                                  Ended
                                                                                                                                                                                                                                  February
      27,2009
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                Three
      Months
                                                                                                                                                                                                                                  Ended
                                                                                                                                                                                                                                  February
      29,2008
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                SixMonths
                                                                                                                                                                                                                                  Ended
                                                                                                                                                                                                                                  February
      27,2009
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                SixMonths
                                                                                                                                                                                                                                  Ended
                                                                                                                                                                                                                                  February
      29,2008(In
      thousands, except per share data)Net
      sales
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                109,089
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                164,497
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                249,864
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                341,870Cost
      of sales*
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                85,022
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                131,609
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                199,981
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                274,888Gross
      profit
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                24,067
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                32,888
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                49,883
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                66,982Research
      and development*
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                5,142
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                4,624
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                10,578
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                9,309Selling,
      general and administrative*
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                13,782
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                14,331
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                28,249
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                29,392Restructuring
      charges
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                935
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                —
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,821
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                —Impairment
      of goodwill
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                3,206
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                —
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                10,416
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                —Total
      operating expenses
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                23,065
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                18,955
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                51,064
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                38,701Income
      (loss) from operations
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,002
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                13,933
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (1,181
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                28,281Interest
      expense, net
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (1,698
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (1,327
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (3,450
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (2,351
                                                                                                                                                                                                                                )Other
      (expense) income, net
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                109
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                373
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (657
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,795Total
      other expense, net
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (1,589
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (954
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (4,107
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (556
                                                                                                                                                                                                                                )Income
      (loss) before provision (benefit) for income taxes
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (587
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                12,979
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                (5,288
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                27,725Provision
      for income taxes
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,263
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,539
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                3,440
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                4,220Net
      income (loss)
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (1,850
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                11,440
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (8,728
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                23,505Net
      income (loss) per ordinary share, basic
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (0.03
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                0.19
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (0.14
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                0.39Shares
      used in computing basic net income(loss) per ordinary
share
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                61,673
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                60,869
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                61,590
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                60,782Net
      income(loss) per ordinary share, diluted
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (0.03
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                0.18
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                (0.14
                                                                                                                                                                                                                                )
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                0.37Shares
      used in computing diluted net income (loss) per ordinary
      share
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                61,673
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                63,713
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                61,590
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                63,684____________*
      Stock-based compensation
      by category:Cost
      of sales
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                187
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                197
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                388
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                $
                                                                                                                                                                                                                                375Research
      and development
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                451
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                419
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                882
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                806Selling,
      general and administrative
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,162
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                1,219
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                2,317
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                
                                                                                                                                                                                                                                2,293
 
 See
accompanying notes to unaudited condensed consolidated financial
statements.
 4
    SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (Unaudited)
  
 Three
      Months
                                                            Ended
                                                            February
      27,
                                                            2009
                                                        
                                                        
                                                        Three
      Months
                                                            Ended
                                                            February
      29,
                                                            2008
                                                        
                                                        
                                                        Six
      Months
                                                            Ended
                                                            February
      27, 2009
                                                        
                                                        
                                                        Six
      Months
                                                            Ended
                                                            February
      29,
                                                            2008(In
      thousands)Net
      income (loss)
                                                        
                                                        $
                                                        (1,850
                                                        )
                                                        
                                                        $
                                                        11,440
                                                        
                                                        
                                                        $
                                                        (8,728
                                                        )
                                                        
                                                        $
                                                        23,505Other
      comprehensive income (loss):Net
      changes in unrealized loss on derivative instruments accounted for as
      cash flow hedges
                                                        
                                                        
                                                        (6
                                                        )
                                                        
                                                        
                                                        (831
                                                        )
                                                        
                                                        
                                                        (351
                                                        )
                                                        
                                                        
                                                        (1,572
                                                        )Foreign
      currency translation adjustments
                                                        
                                                        
                                                        (4,805
                                                        )
                                                        
                                                        
                                                        (602
                                                        )
                                                        
                                                        
                                                        (22,713
                                                        )
                                                        
                                                        
                                                        2,703Comprehensive
      income (loss)
                                                        
                                                        $
                                                        (6,661
                                                        )
                                                        
                                                        $
                                                        10,007
                                                        
                                                        
                                                        $
                                                        (31,792
                                                        )
                                                        
                                                        $
                                                        24,636
 
 See
accompanying notes to unaudited condensed consolidated financial
statements.
   
  5
  
 SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 
 SixMonths
                                                                                          Ended
                                                                                          February
      27, 2009
                                                                                        
                                                                                        
                                                                                        SixMonths
                                                                                          Ended
                                                                                          February
      29,2008(In
      thousands)Cash
      flows from operating activities:Net
      income (loss)
                                                                                        
                                                                                        $
                                                                                        (8,728
                                                                                        )
                                                                                        
                                                                                        $
                                                                                        23,505Depreciation
      and amortization
                                                                                        
                                                                                        
                                                                                        6,445
                                                                                        
                                                                                        
                                                                                        
                                                                                        5,570Stock-based
      compensation
                                                                                        
                                                                                        
                                                                                        3,587
                                                                                        
                                                                                        
                                                                                        
                                                                                        3,474Amortization
      of debt issuance costs
                                                                                        
                                                                                        
                                                                                        555
                                                                                        
                                                                                        
                                                                                        
                                                                                        400Change
      in allowance for trade accounts receivable and sales
returns
                                                                                        
                                                                                        
                                                                                        (374
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (498
                                                                                        )Loss
      on sale of assets
                                                                                        
                                                                                        
                                                                                        215
                                                                                        
                                                                                        
                                                                                        
                                                                                        70Goodwill
      impairment
                                                                                        
                                                                                        
                                                                                        10,416
                                                                                        
                                                                                        
                                                                                        
                                                                                        —Excess
      tax benefits from share-based compensation
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        (81
                                                                                        )Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                                        
                                                                                        
                                                                                        73,370
                                                                                        
                                                                                        
                                                                                        
                                                                                        22,765Inventories
                                                                                        
                                                                                        
                                                                                        (26,604
                                                                                        )
                                                                                        
                                                                                        
                                                                                        3,701Prepaid
      expenses and other assets
                                                                                        
                                                                                        
                                                                                        823
                                                                                        
                                                                                        
                                                                                        
                                                                                        (879
                                                                                        )Accounts
      payable
                                                                                        
                                                                                        
                                                                                        (33,597
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (36,747
                                                                                        )Accrued
      expenses and other current liabilities
                                                                                        
                                                                                        
                                                                                        (1,527
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (1,516
                                                                                        )Net
      cash provided by operating activities
                                                                                        
                                                                                        
                                                                                        24,581
                                                                                        
                                                                                        
                                                                                        
                                                                                        19,764Cash
      flows from investing activities:Capital
      expenditures
                                                                                        
                                                                                        
                                                                                        (9,133
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (9,563
                                                                                        )Cash
      deposits on equipment
                                                                                        
                                                                                        
                                                                                        (795
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (164
                                                                                        )Proceeds
      from sale of property and equipment
                                                                                        
                                                                                        
                                                                                        60
                                                                                        
                                                                                        
                                                                                        
                                                                                        106Payment
      for contingent consideration
                                                                                        
                                                                                        
                                                                                        (1,500
                                                                                        )
                                                                                        
                                                                                        
                                                                                        —Net
      cash used in investing activities
                                                                                        
                                                                                        
                                                                                        (11,368
                                                                                        )
                                                                                        
                                                                                        
                                                                                        (9,621
                                                                                        )Cash
      flows from financing activities:Excess
      tax benefits from share-based compensation
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        81Borrowings
      under revolving line of credit
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        11,500Repayments
      on revolving line of credit
                                                                                        
                                                                                        
                                                                                        —
                                                                                        
                                                                                        
                                                                                        
                                                                                        (11,500
                                                                                        )Proceeds
      from issuance of ordinary shares from stock option
    exercises
                                                                                        
                                                                                        
                                                                                        464
                                                                                        
                                                                                        
                                                                                        
                                                                                        224Net
      cash provided by financing activities
                                                                                        
                                                                                        
                                                                                        464
                                                                                        
                                                                                        
                                                                                        
                                                                                        305Effect
      of exchange rate changes on cash and cash equivalents
                                                                                        
                                                                                        
                                                                                        (4,278
                                                                                        )
                                                                                        
                                                                                        
                                                                                        423Net
      increase in cash and cash equivalents
                                                                                        
                                                                                        
                                                                                        9,399
                                                                                        
                                                                                        
                                                                                        
                                                                                        10,871Cash
      and cash equivalents at beginning of period
                                                                                        
                                                                                        
                                                                                        115,994
                                                                                        
                                                                                        
                                                                                        
                                                                                        144,147Cash
      and cash equivalents at end of period
                                                                                        
                                                                                        $
                                                                                        125,393
                                                                                        
                                                                                        
                                                                                        $
                                                                                        155,018Supplemental
      disclosures of cash flow information:Non-cash
      activities:Decline
      in fair value of derivative instruments
                                                                                        
                                                                                        $
                                                                                        351
                                                                                        
                                                                                        
                                                                                        $
                                                                                        1,572Cash
      paid during the period for:Interest
                                                                                        
                                                                                        $
                                                                                        3,854
                                                                                        
                                                                                        
                                                                                        $
                                                                                        4,426Income
      taxes
                                                                                        
                                                                                        $
                                                                                        3,211
                                                                                        
                                                                                        
                                                                                        $
                                                                                        3,927
   6
  SMART
MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE
1 — Basis of Presentation and Principles of Consolidation
  Basis of Presentation
  The
accompanying unaudited condensed consolidated financial statements of SMART
Modular Technologies (WWH), Inc. and subsidiaries (the Company) are as of
February 27, 2009 and August 29, 2008 and for the three and six months ended
February 27, 2009 and February 29, 2008. These unaudited condensed consolidated
financial statements have been prepared by the Company in accordance with
generally accepted accounting principles in the United States. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the full fiscal year ending August 28,
2009. In the opinion of the Company’s management, the unaudited interim
financial statements reflects all adjustments, consisting only of normal,
recurring adjustments necessary for a fair statement of the financial position,
results of operations and cash flows for the periods indicated. The interim
unaudited condensed consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial statements as of
and for the year ended August 29, 2008, which are included in the Annual Report
on Form 10-K filed with the Securities and Exchange Commission
(SEC).
 
 The
accompanying unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and operations located
in Phoenix, Arizona; Fremont, California; Irvine, California; Tewksbury,
Massachusetts; South Korea; Scotland; Puerto Rico; Malaysia; and
Brazil.  All financial information for one of the Company’s
subsidiaries, SMART Modular Technologies Indústria de Componentes Eletrônicos
Ltda. (SMART Brazil) is included in the Company’s consolidated financial
statements on a one month lag.  The effect of the one month lag for
the operations of SMART Brazil is not significant to the Company’s financial
position and results of operations.  All intercompany balances and
transactions have been eliminated upon consolidation.
  The
preparation of unaudited condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates and assumptions.
 
 Out of Period Adjustment
  During
the second quarter of fiscal 2009, the Company recorded one adjustment to net
sales and one adjustment to cost of sales, which adjustments represented
corrections of immaterial prior period errors in current liabilities. Each
adjustment was less than $0.5 million and together resulted in a net increase to
net income of $0.2 million during the second quarter of fiscal
2009.
 Product and
Service Revenue
  The
Company recognizes revenue in accordance with the SEC Staff Accounting Bulletin
(SAB) No. 104, Revenue
Recognition (“SAB104”). Under SAB 104, product revenue is recognized when
persuasive evidence of an arrangement exists, product delivery has occurred, the
sales price is fixed or determinable, and collectibility is reasonably assured.
Product revenue typically is recognized at the time of shipment or when the
customer takes title of the goods. All amounts billed to a customer related to
shipping and handling are classified as sales, while all costs incurred by the
Company for shipping and handling are classified as cost of sales.
  In
addition, the Company has certain transactions with select customers that are
accounted for on an agency basis (that is, the Company recognizes the net profit
associated with serving as an agent with no associated cost of sales) in
accordance with Emerging Issues Task Force (EITF) Issue No. 99-19, Reporting Revenue Gross as a Principal versus
Net as an Agent. The Company provides procurement, logistics, inventory
management and temporary warehousing, kitting or packaging services for these
customers. Revenue from these arrangements is recognized as service revenue and
is based on material procurement costs plus a fee for services provided. The
Company recognizes service revenue upon the completion of the services,
typically upon shipment of the product. There are no post-shipment obligations
subsequent to shipment of the product. Gross amounts billed to customers for
service transactions totaled approximately $152.8 million and $199.1 million for
the three months ended February 27, 2009 and February 29, 2008, respectively.
Total service revenue recorded for the three months ended February 27, 2009 and
February 29, 2008 amounted to approximately $8.9 million and $10.8 million,
respectively. Gross amounts billed to customers for service transactions totaled
approximately $351.0 million and $474.2 million for the six months ended
February 27, 2009 and February 29, 2008, respectively. Total service revenue
recorded for the six months ended February 27, 2009 and February 29, 2008
amounted to approximately $20.9 million and $21.9 million,
respectively.
 
 7
 Recent
Accounting Pronouncements
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurement.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS No. 157 does
not require any new fair value measurements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. However, in February 2008, the FASB issued FASB Staff
Positions (“FSP”) 157-1 and 157-2. FSP 157-1 amends SFAS No. 157 to exclude
SFAS No. 13, Accounting
for Leases, and its related interpretive accounting pronouncements that
address leasing transactions, while FSP 157-2 delays the effective date of the
application of SFAS No. 157 to fiscal years beginning after
November 15, 2008 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).
  The
Company adopted SFAS No. 157 as of August 30, 2008, with the exception of
the application of the statement to non-recurring nonfinancial assets and
nonfinancial liabilities. The Company elected the one-year deferral option and
thus will not apply the provisions of SFAS No. 157 to nonfinancial assets
and nonfinancial liabilities that are recognized at fair value in the financial
statements on a non-recurring basis until the fiscal year beginning August 29,
2009. Non-recurring nonfinancial assets and nonfinancial liabilities for which
the Company has not applied the provisions of SFAS No. 157 include those
measured at fair value in goodwill impairment testing, intangible assets
measured at fair value for impairment, and those initially measured at fair
value in a business combination.
 
 SFAS
No. 157 establishes a valuation hierarchy for disclosure of the inputs to
valuation used to measure fair value. This hierarchy prioritizes the inputs into
three broad levels as follows.
 
 Level 1:
Quoted market prices in active markets for identical assets or
liabilities
 
 Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data
 
 Level 3:
Unobservable inputs that are not corroborated by market data
 
 The
adoption of SFAS No. 157 did not have a material impact on our consolidated
results of operations and financial condition.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”).  SFAS 159
permits companies to choose to measure certain financial instruments and certain
other items at fair value.  SFAS 159 requires that unrealized gains
and losses on items for which the fair value option has been elected be reported
in earnings.  SFAS 159 also establishes presentation and disclosure
requirements designed to draw comparisons between the different measurements
attributes the Company elects for similar types of assets and
liabilities.  The provisions of SFAS 159 are effective for financial
statements issued for fiscal years beginning after November 15,
2007.  SFAS 159 is effective for the Company beginning in the first
quarter of fiscal 2009.  The Company has elected the option not to
measure eligible financial instruments at fair value allowable under SFAS 159
and believes that this election will not have a material impact on its financial
position or results of operations.
 
 In June
2007, the FASB ratified EITF Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities. EITF 07-3 requires non-refundable advance
payments to acquire goods or pay for services that will be consumed or performed
in a future period in conducting R&D activities should be recorded as an
asset and recognized as an expense when the R&D activities are performed.
EITF 07-3 has been applied prospectively to new contractual arrangements entered
into beginning in fiscal 2009. The adoption of EITF 07-3 did not have a material
impact on our consolidated results of operations and financial
condition.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141R”).  SFAS 141R establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree.  SFAS 141R also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.  The provisions of SFAS 141R are effective for financial
statements issued for fiscal years beginning on or after December 15,
2008.  SFAS 141R will be applied to business combinations occurring
after the effective date and the Company will apply SFAS 141R as of that
time. Early adoption is not permitted.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research
Bulletin No. 51 (“SFAS 160”).  SFAS 160 will change the accounting and
reporting of minority interests, which will be recharacterized as noncontrolling
interests and classified as a component of equity.  The provisions of
SFAS 160 are effective for financial statements issued for fiscal years
beginning after December 15, 2008.  SFAS 160 is effective for the
Company beginning in the first quarter of fiscal 2010.  Early adoption
is not permitted.  The adoption of SFAS 160 is not expected to have a
significant effect on the Company’s financial position or results of
operations.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosure about Derivative
Instruments and Hedging Activities (“SFAS 161”).  SFAS 161
requires additional disclosures related to the use of derivative instruments,
the accounting for derivatives and how derivatives impact financial
statements.  The provisions of SFAS 161 are effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.  SFAS 161 is effective for the Company beginning the first
fiscal quarter of fiscal 2010 and the Company will apply SFAS 161 as of that
time.
 
 8
 In April
2008 the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible
Assets, or FSP 142-3, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142. This
pronouncement requires enhanced disclosures concerning a company’s treatment of
costs incurred to renew or extend the term of a recognized intangible asset.
FSP 142-3 is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The Company is currently evaluating the
impact of FSP 142-3, but do not expect the adoption to have a material
impact on our consolidated results of operations and financial
condition.
  In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  SFAS 162 identifies the
sources of accounting principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the U.S. (the GAAP
hierarchy). SFAS 162 is effective 60 days following the SEC approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles.  The
Company currently adheres to the GAAP hierarchy as presented in SFAS 162, and
does not expect its adoption will have a material impact on its consolidated
results of operations and financial condition.
 
 NOTE
2 - Stock-Based Compensation
 
 Stock
Options
 
 The
Company’s equity incentive plan provides for grants of options to employees and
independent directors of the Company to purchase (upon vesting) the Company’s
ordinary shares at the fair value of such shares on the grant date. The options
generally vest over a four-year period beginning on the grant date and have a
10-year term. As of February 27, 2009, there were 11,108,304 ordinary shares
reserved for issuance under this plan, of which 1,410,432 ordinary shares
represents the number of shares available for grant.
  Prior to
fiscal 2006, the Company accounted for its stock-based compensation plan using
the intrinsic value method prescribed in Accounting Principles Board (APB)
Opinion No. 25, Accounting for
Stock Issued to Employees,and related pronouncements. Under this method,
compensation expense was recorded only if the deemed fair value of the
underlying shares exceeded the exercise price on the date of grant. Deferred
stock-based compensation expense is amortized on a straight-line basis over the
vesting period of each grant, generally four years.
  On August
27, 2005 (effective date), the Company adopted the FASB’s SFAS No. 123R, Share-Based Payment, applying
the prospective method, in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of SFAS No. 123R for all
share-based payments granted or modified after the effective date and (b) based
on the requirements of the intrinsic value method as prescribed in APB 25, and
related interpretations, for all awards granted to employees prior to the
effective date of SFAS No. 123R that remain unvested on the effective date. The
Company adopted SFAS No. 123R prospectively because, prior to the period of
adoption, it was a non-public entity that used the minimum value method for pro
forma disclosure under the provisions of SFAS No. 123, and applied APB 25 for
recognition purposes.
  Restricted
Stock Units (RSUs)
 
 The
Company’s equity incentive plan also provides for grants of RSUs, and, beginning
with the first quarter of fiscal 2009, the Company began issuing
performance-based and timed-based RSUs.  Generally, under the terms of
each RSU agreement, RSUs vest over a one year period and is subject to the
employee’s continuing service to the Company.  In accordance with SFAS
No. 123R, the cost of each RSU is determined using the fair value of the
Company’s ordinary share on the date of grant and compensation cost is
recognized over a deemed vesting period of one to two years depending on when
the performance is achieved.  Performance-based RSUs are granted upon
the Company’s achievement of certain predetermined financial
goals.  The Company estimates the likelihood of such performance goals
being achieved and recognizes the related stock-based compensation cost for each
reporting period, if any.  The amount of stock-based compensation
expense recognized in any one period can vary based on the achievement or
anticipated achievement of the performance goals.  If such performance
goals are not met or are not expected to be met, then no compensation cost is
recognized and any previously recognized compensation expense is
reversed.  The weighted average grant date fair value of the 5,000
time-based RSUs granted during the three months ended November 28, 2008 was
$2.84 per RSU.  There were no time-based RSUs granted during the three
months ended February 27, 2009.  There were no stock-based
compensation cost related to the performance-based RSUs for the three and six
months ended February 27, 2009.
  Summary
of Assumptions and Activity
 
 The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model that uses the assumptions noted in the
following table. Expected volatility for the six months ended February
27, 2009 is based on the historical volatility of the Company’s ordinary
shares, as well as the common stock of comparable publicly traded companies. The
expected term of options granted represents the weighted average period of time
that options granted are expected to be outstanding giving consideration to
vesting schedules and our historical exercise patterns.The risk-free rate for the
expected term of the option is based on the average U.S. Treasury yield curve at
the date of grant.
  9
 The
following assumptions were used to value stock options:
 Six
      Months
                        Ended
                        February 27, 2009
                      
                      
                      Six
      Months
                        Ended
                        February 29, 2008Stock
      options:Expected
      term (years)
                      
                      
                      5.3
                      
                      
                      
                      5.0Expected
      volatility
                      
                      
                      57
                      %
                      
                      
                      51
                      %Risk-free
      interest rate
                      
                      
                      2.01
                      %
                      
                      
                      3.71
                      %Expected
      dividends
                      
                      
                      —
                      
                      
                      
                      —
 
 A summary
of option activity as of and for the six months ended February 27, 2009, is
presented below (dollars and shares in thousands, except per share
data):
 
 Shares
                                                                                  
                                                                                  
                                                                                  Weighted
                                                                                    Average
                                                                                    Exercise
                                                                                    Price
                                                                                  
                                                                                  
                                                                                  Weighted
                                                                                    Average
                                                                                    Remaining
                                                                                    Contractual
                                                                                    Term
                                                                                    (Years)
                                                                                  
                                                                                  
                                                                                  Aggregate
                                                                                    Intrinsic
                                                                                    ValueOptions outstanding
      at August 29, 2008
                                                                                  
                                                                                  
                                                                                  8,458
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5.72Options
      granted
                                                                                  
                                                                                  
                                                                                  2,117
                                                                                  
                                                                                  
                                                                                  
                                                                                  2.78Options
      exercised
                                                                                  
                                                                                  
                                                                                  (370
                                                                                  )
                                                                                  
                                                                                  
                                                                                  1.26Options
      forfeited
                                                                                  
                                                                                  
                                                                                  (498
                                                                                  )
                                                                                  
                                                                                  
                                                                                  8.06Options
      outstanding at February 27, 2009
                                                                                  
                                                                                  
                                                                                  9,708
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5.13
                                                                                  
                                                                                  
                                                                                  
                                                                                  7.4
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,860Options
      exercisable at February 27, 2009
                                                                                  
                                                                                  
                                                                                  4,617
                                                                                  
                                                                                  
                                                                                  $
                                                                                  4.44
                                                                                  
                                                                                  
                                                                                  
                                                                                  6.2
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,852Options
      vested and expected to vest at February 27, 2009
                                                                                  
                                                                                  
                                                                                  9,088
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5.10
                                                                                  
                                                                                  
                                                                                  
                                                                                  7.3
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,859
 The
Black-Scholes weighted average fair value of the shares underlying options
granted during the three months ended February 27, 2009 and February 29, 2008
was $0.83 and $3.45 per option, respectively.  The Black-Scholes
weighted average fair value of the shares underlying options granted during the
six months ended February 27, 2009 and February 29, 2008 was $1.44 and $3.65 per
option, respectively. The total intrinsic value of stock options exercised
during the six months ended February 27, 2009 and February 29, 2008 was
approximately $0.3 million and $2.3 million, respectively. Upon the exercise of
options, the Company issues new ordinary shares from its authorized
shares.  Total SFAS No. 123R compensation expense recognized for the
three months ended February 27, 2009 and February 29, 2008 was approximately
$1.8 million.  Total SFAS No. 123R compensation expense recognized for
the six months ended February 27, 2009 and February 29, 2008 was approximately
$3.6 million and $3.5 million, respectively.
 
 A summary
of the status of the Company’s non-vested stock options as of February 27, 2009,
and changes during the six months ended February 27, 2009, is presented below
(dollars and shares in thousands, except per share data):
 Shares
                              
                              
                              Weighted
      Average
                                Grant
      Date Fair
                                Value Per ShareNon-vested
      stock options at August 29, 2008
                              
                              
                              4,328
                              
                              
                              $
                              4.38Stock
      options granted
                              
                              
                              2,117
                              
                              
                              
                              1.44Vested
      stock options
                              
                              
                              (856
                              )
                              
                              
                              3.91Forfeited
      stock options
                              
                              
                              (498
                              )
                              
                              
                              4.81Non-vested
      stock options at February 27, 2009
                              
                              
                              5,091
                              
                              
                              $
                              3.20
  As of
February 27, 2009, there was approximately $17.0 million of total unrecognized
compensation expense related to stock option compensation arrangements, which is
expected to be recognized over the weighted average period of 2.8 years. The
total fair value of shares underlying stock options vested during the six months
ended February 27, 2009 was approximately $3.3 million.
  10
 NOTE
3 — Goodwill and Other Intangible Assets, net
 
 In
accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”),
the Company performs a goodwill impairment test of its two reporting units
(Memory, Embedded, & Display reporting unit and Adtron reporting unit)
annually during the fourth quarter of its fiscal year and more frequently if an
event or circumstance indicates that an impairment may have occurred. Such
events or circumstances may include significant adverse changes in the general
business climate, among others. The test is performed by determining the fair
value of the reporting unit based on estimated discounted future cash flows and
considering the market price of the Company’s ordinary shares, and comparing the
fair value to the carrying value of the reporting unit, including
goodwill.
  If the
fair value of each reporting unit is less than its carrying value, SMART then
allocates the fair value of the unit to all the assets and liabilities of the
unit (including any unrecognized intangible assets) as if the reporting unit’s
fair value was the purchase price to acquire the reporting unit. The excess of
the fair value of the reporting unit over the amounts assigned to its assets and
liabilities is the implied fair value of the goodwill. If the carrying amount of
the reporting unit’s goodwill exceeds the implied fair value of that goodwill,
an impairment loss is recognized in an amount equal to that excess.
 
 As part
of the our purchase of Adtron Corporation on March 3, 2008,  the
Company agreed to pay earn-out consideration of up to $15.0 million to the
sellers if the Adtron Segment achieved two financial goals and one operational
goal by December 31, 2008.  In December 2008, we paid $1.5 million for
an operational goal that had been achieved.  In the second quarter of
fiscal 2009, the Company provided to the sellers a good faith calculation of the
remaining earn-out consideration that would be potentially
payable.  Based on such calculation, we recorded $4.0 million in
accrued expenses in the condensed consolidated balance sheets.  In
response to our calculation, the sellers have requested information from us, and
we have provided such information.  The matter remains under discussion
because the sellers have suggested that our calculation take into account
certain items.  Final determination of the remaining earn-out consideration
payable, which could result in the recognition of earn-out consideration that is
significantly higher than the amount we accrued in the second quarter of fiscal
2009, is expected by the end of fiscal 2009.  Of the $4.0 million
accrued, the effect of which increased the purchase price, the Company recorded
$3.2 million to impairment of goodwill and the remaining $0.8 million to general
and administrative expenses in the condensed consolidated statement of
operations for the three and six months ended February 27, 2009.
  Based on
the continued deterioration of the macroeconomic conditions, erosion of market
capitalization, the Company’s business outlook for fiscal 2009 and the broad
downward movement in equity valuations during the six months ended February 27,
2009, the Company conducted an impairment test of goodwill and determined that
goodwill from its Adtron reporting unit was impaired because the carrying amount
of the reporting unit’s goodwill exceeded its implied fair value. Accordingly, a
charge of $7.2 million of goodwill impairment was recorded during the first
quarter of fiscal 2009 and subsequently during the second quarter, the Company
recorded an additional $3.2 million of goodwill impairment.  These
amounts were recorded in the condensed consolidated statement of operations for
the three and six months ended February 27, 2009.  In addition, the
Company conducted an impairment test of its intangible and other long-lived
assets as of February 27, 2009 in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, and found no impairment of intangible and
other long-lived assets.
 
 Presented
below are the changes in the Company’s goodwill by reporting segment for the six
months ended February 27, 2009 (in thousands):
 August
      29, 2008
                                                            
                                                            
                                                            Acquisition
                                                            
                                                            (Impairment)
                                                            
                                                            February
      27, 2009Reporting
      unit:Memory,
      Embedded, & Display
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            $
                                                            —
                                                            
                                                            
                                                            $
                                                            —Adtron
                                                            
                                                            
                                                            7,210
                                                            
                                                            
                                                            
                                                            3,206
                                                            
                                                            
                                                            
                                                            (10,416
                                                            )
                                                            
                                                            
                                                            —Total
      Goodwill
                                                            
                                                            $
                                                            7,210
                                                            
                                                            
                                                            $
                                                            3,206
                                                            
                                                            
                                                            $
                                                            (10,416
                                                            )
                                                            
                                                            $
                                                            —
  The
following table summarizes the gross amounts and accumulated amortization of
other intangible assets from the Adtron acquisition by type as of August 29,
2008 and February 27, 2009 (in thousands):
  Weighted
      Avg. Life (years)
                                                                        
                                                                        
                                                                        Fair
      Value at Date of Acquisition
                                                                        
                                                                        
                                                                        Accumulated
      Amortization
                                                                        
                                                                        
                                                                        Carrying
      Value at August 29, 2008Amortized
      intangible assets:Leasehold
      interest
                                                                        
                                                                        
                                                                        3
                                                                        
                                                                        
                                                                        $
                                                                        260
                                                                        
                                                                        
                                                                        $
                                                                        41
                                                                        
                                                                        
                                                                        $
                                                                        219Product
      names
                                                                        
                                                                        
                                                                        9
                                                                        
                                                                        
                                                                        
                                                                        60
                                                                        
                                                                        
                                                                        
                                                                        3
                                                                        
                                                                        
                                                                        
                                                                        57Customer
      relationships
                                                                        
                                                                        
                                                                        10
                                                                        
                                                                        
                                                                        
                                                                        3,700
                                                                        
                                                                        
                                                                        
                                                                        185
                                                                        
                                                                        
                                                                        
                                                                        3,515Non-compete
      agreement
                                                                        
                                                                        
                                                                        2
                                                                        
                                                                        
                                                                        
                                                                        220
                                                                        
                                                                        
                                                                        
                                                                        55
                                                                        
                                                                        
                                                                        
                                                                        165Company
      trade name
                                                                        
                                                                        
                                                                        20
                                                                        
                                                                        
                                                                        
                                                                        2,040
                                                                        
                                                                        
                                                                        
                                                                        51
                                                                        
                                                                        
                                                                        
                                                                        1,989Technology
                                                                        
                                                                        
                                                                        7
                                                                        
                                                                        
                                                                        
                                                                        2,800
                                                                        
                                                                        
                                                                        
                                                                        200
                                                                        
                                                                        
                                                                        
                                                                        2,600Total
                                                                        
                                                                        
                                                                        11
                                                                        
                                                                        
                                                                        $
                                                                        9,080
                                                                        
                                                                        
                                                                        $
                                                                        535
                                                                        
                                                                        
                                                                        $
                                                                        8,545
  11
 Weighted
      Avg. Life (years)
                                                                      
                                                                      
                                                                      Fair
      Value at Date of Acquisition
                                                                      
                                                                      
                                                                      Accumulated
      Amortization
                                                                      
                                                                      
                                                                      Carrying
      Value at February 27, 2009Amortized
      intangible assets:Leasehold
      interest
                                                                      
                                                                      
                                                                      3
                                                                      
                                                                      
                                                                      $
                                                                      260
                                                                      
                                                                      
                                                                      $
                                                                      80
                                                                      
                                                                      
                                                                      $
                                                                      180Product
      names
                                                                      
                                                                      
                                                                      9
                                                                      
                                                                      
                                                                      
                                                                      60
                                                                      
                                                                      
                                                                      
                                                                      7
                                                                      
                                                                      
                                                                      
                                                                      53Customer
      relationships
                                                                      
                                                                      
                                                                      10
                                                                      
                                                                      
                                                                      
                                                                      3,700
                                                                      
                                                                      
                                                                      
                                                                      370
                                                                      
                                                                      
                                                                      
                                                                      3,330Non-compete
      agreement
                                                                      
                                                                      
                                                                      2
                                                                      
                                                                      
                                                                      
                                                                      220
                                                                      
                                                                      
                                                                      
                                                                      110
                                                                      
                                                                      
                                                                      
                                                                      110Company
      trade name
                                                                      
                                                                      
                                                                      20
                                                                      
                                                                      
                                                                      
                                                                      2,040
                                                                      
                                                                      
                                                                      
                                                                      103
                                                                      
                                                                      
                                                                      
                                                                      1,937Technology
                                                                      
                                                                      
                                                                      7
                                                                      
                                                                      
                                                                      
                                                                      2,800
                                                                      
                                                                      
                                                                      
                                                                      400
                                                                      
                                                                      
                                                                      
                                                                      2,400Total
                                                                      
                                                                      
                                                                      11
                                                                      
                                                                      
                                                                      $
                                                                      9,080
                                                                      
                                                                      
                                                                      $
                                                                      1,070
                                                                      
                                                                      
                                                                      $
                                                                      8,010
  Amortization
expense related to identifiable intangible assets totaled approximately $0.3
million and $0.5 million for the three months and six months ended February 27,
2009, respectively, there were no intangible amortization expenses for three
months and six months ended February 29, 2008. Acquired intangibles with
definite lives are amortized on a straight-line basis over the remaining
estimated economic life of the underlying intangible assets.
  Estimated
amortization expenses of these intangible assets for the next five fiscal years
and all years thereafter are as follows (in thousands):
 
 Estimated
      Amortization Expense:Remainder
      of 2009
                            
                            $
                            5352010
                            
                            
                            1,0152011
                            
                            
                            9362012
                            
                            
                            8792013
                            
                            
                            879Thereafter
                            
                            
                            3,766Total
                            
                            $
                            8,010
  NOTE
4 — Net Income (Loss) Per Share
  Basic net
income per ordinary share is calculated by dividing net income by the weighted
average of ordinary shares outstanding during the period. Diluted net income per
ordinary share is calculated by dividing the net income by the weighted average
ordinary shares and dilutive potential ordinary shares outstanding during the
period. Dilutive potential ordinary shares consist of dilutive shares issuable
upon the exercise of outstanding stock options and vesting of restricted stock
units computed using the treasury stock method.
 
 The following table sets forth for all periods presented the computation of
basic and diluted net income (loss) per ordinary share, including the
reconciliation of the numerator and denominator used in the calculation of basic
and diluted net income (loss) per share (dollars and shares in thousands, except
per share data):
 Three
      Months
                                                                                                      Ended
                                                                                                      February
      27,
                                                                                                      2009
                                                                                                    
                                                                                                    
                                                                                                    Three
      Months
                                                                                                      Ended
                                                                                                      February
      29,
                                                                                                      2008
                                                                                                    
                                                                                                    
                                                                                                    Six
      Months
                                                                                                      Ended
                                                                                                      February
      27,
                                                                                                      2009
                                                                                                    
                                                                                                    
                                                                                                    Six
      Months
                                                                                                      Ended
                                                                                                      February
       29,
                                                                                                      2008Numerator:Net
      income (loss)
                                                                                                    
                                                                                                    $
                                                                                                    (1,850
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    11,440
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    (8,728
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    23,505Denominator:Weighted
      average ordinary shares
                                                                                                    
                                                                                                    
                                                                                                    61,678
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    60,869
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    61,594
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    60,782Less:
      Weighted average unvested RSU subject to repurchase
                                                                                                    
                                                                                                    
                                                                                                    (5
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    —
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (4
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    —Shares
      used in computing basic net income (loss) per share
                                                                                                    
                                                                                                    
                                                                                                    61,673
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    60,869
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    61,590
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    60,782Effect
      of dilutive securities:Stock
      options
                                                                                                    
                                                                                                    
                                                                                                    —
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2,844
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    —
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2,902Total
      ordinary shares, diluted
                                                                                                    
                                                                                                    
                                                                                                    61,673
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    63,713
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    61,590
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    63,684Net
      income (loss) per ordinary share, basic
                                                                                                    
                                                                                                    $
                                                                                                    (0.03
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    0.19
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    (0.14
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    0.39Net
      income (loss) per ordinary share, diluted
                                                                                                    
                                                                                                    $
                                                                                                    (0.03
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    0.18
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    (0.14
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    0.37
  For the
computation of net loss per share for the three and six months ended February
27, 2009, the Company excluded 9,542,530 and 9,527,552 stock options from the
calculation of the net loss per share, respectively, as their inclusion would
have been anti-dilutive.  The Company excluded 4,359,832 and 3,978,473
stock options from the computation of diluted net income per ordinary share for
the three and six months ended February 29, 2008, respectively, as their
inclusion would have been anti-dilutive.
 12
 NOTE
5 — Inventories
  Inventories
consist of the following as of February 27, 2009 and August 29, 2008 (in
thousands):
 February
      27,
                                        2009
                                      
                                      
                                      August
      29,
                                        2008Raw
      materials
                                      
                                      $
                                      17,265
                                      
                                      
                                      $
                                      28,122Work-in
      process
                                      
                                      
                                      4,757
                                      
                                      
                                      
                                      4,899Finished
      goods
                                      
                                      
                                      62,588
                                      
                                      
                                      
                                      29,409$
                                      84,610
                                      
                                      
                                      $
                                      62,430
  NOTE
6 — Income Taxes
  The
provision for income tax expense is summarized as follows (in
thousands):
  Three
      Months
                                                              Ended
                                                              February
      27,
                                                              2009
                                                            
                                                            
                                                            Three
      Months
                                                              Ended
                                                              February
      29,
                                                              2008
                                                            
                                                            
                                                            Six
      Months
                                                              Ended
                                                              February
      27,
                                                              2009
                                                            
                                                            
                                                            Six
      Months
                                                              Ended
                                                              February 29,
                                                              2008Current
                                                            
                                                            $
                                                            1,287
                                                            
                                                            
                                                            $
                                                            1,529
                                                            
                                                            
                                                            $
                                                            3,479
                                                            
                                                            
                                                            $
                                                            4,197Deferred
                                                            
                                                            
                                                            (24
                                                            )
                                                            
                                                            
                                                            10
                                                            
                                                            
                                                            
                                                            (39
                                                            )
                                                            
                                                            
                                                            23Total
                                                            
                                                            $
                                                            1,263
                                                            
                                                            
                                                            $
                                                            1,539
                                                            
                                                            
                                                            $
                                                            3,440
                                                            
                                                            
                                                            $
                                                            4,220
  Worldwide
income (loss) before provision for income taxes for the three and six months
ended February 27, 2009 and February 29, 2008, consisted of the following
components (in thousands):
  Three
      Months
                                                                                Ended
                                                                                February
      27,
                                                                                2009
                                                                              
                                                                              
                                                                              Three
      Months
                                                                                Ended
                                                                                February
      29,
                                                                                2008
                                                                              
                                                                              
                                                                              Six
      Months
                                                                                Ended
                                                                                February
      27,
                                                                                2009
                                                                              
                                                                              
                                                                              Six
      Months
                                                                                Ended
                                                                                February 29,
                                                                                2008U.S.
      loss
                                                                              
                                                                              $
                                                                              (8,056
                                                                              )
                                                                              
                                                                              $
                                                                              (1,516
                                                                              )
                                                                              
                                                                              $
                                                                              (20,387
                                                                              )
                                                                              
                                                                              $
                                                                              (6,127
                                                                              )Non-U.S.
      income
                                                                              
                                                                              
                                                                              7,469
                                                                              
                                                                              
                                                                              
                                                                              14,495
                                                                              
                                                                              
                                                                              
                                                                              15,099
                                                                              
                                                                              
                                                                              
                                                                              33,852Total
                                                                              
                                                                              $
                                                                              (587
                                                                              )
                                                                              
                                                                              $
                                                                              12,979
                                                                              
                                                                              
                                                                              $
                                                                              (5,288
                                                                              )
                                                                              
                                                                              $
                                                                              27,725
  The
effective tax rates for the three months ended February 27, 2009 and February
29, 2008 were approximately (216%), representing tax expense and a pre-tax loss,
and 12%, respectively.  The effective tax rates for the six months ended
February 27, 2009 and February 29, 2008 were approximately (65%) and 15%
respectively.  The effective tax rates differ from the 35% U.S.
statutory tax rate principally due to losses in the United States generating no
tax benefit (due to the full valuation allowance on U.S. deferred tax assets)
and the write-downs of non-deductible goodwill of $3.2 million and $10.4 million
for the three months and the six months ended February 27, 2009
respectively.  The losses in the United States and write-downs of
non-deductible goodwill increasing the effective tax rate were partially offset
by a lower effective tax rate on profits being generated in non-U.S. tax
jurisdictions.  Excluding the impact of the charge for non-deductible
goodwill write down, and including the losses in the United States, the adjusted
effective tax rate for the three months and the six months ended February 27,
2009 were 48% and 67%, respectively.  The increase in the adjusted
effective tax rate was principally due to losses in the United States and lower
effective tax rate on profits in non-U.S. tax jurisdictions for the three months
and six months ended February 27, 2009, when compared to the three months and
six months ended February 29, 2008.
 
 On
September 1, 2007, the Company adopted FIN No. 48, which clarifies the
accounting for uncertainty in income tax positions recognized in accordance with
SFAS No. 109.  The adoption of FIN No. 48 had no material effect on
the financial statements.  The Company recognized a $0.2 million net
decrease in liabilities for unrecognized tax benefits, which was accounted for
as an increase to the September 1, 2007 balance of retained
earnings.  This adjustment was the cumulative effect of applying an
enhanced measurement standard in accounting for uncertainty in income taxes
under FIN No. 48 and was reported as an adjustment to the opening balance of
retained earnings in the Condensed Consolidated Balance Sheet for fiscal
2008.
 
 As of
February 27, 2009, the Company evaluated its valuation allowance in accordance
with SFAS No. 109 to determine if a change in circumstances caused a change in
judgment regarding the realization of deferred tax assets in future years. 
The Company has a cumulative loss for the current year plus the two preceding
years for the U.S.  A cumulative loss in recent years within the U.S.
represents significant evidence in evaluating the need for a valuation allowance
on U.S. net deferred tax assets.  As a result, the Company continues
to record a full valuation allowance on its U.S. deferred tax
assets.
 13
 NOTE
7 – Indebtedness
  On
November 26, 2008, the First Amendment to Second Amended and Restated Loan and
Security Agreement (the "Amendment") was entered into by and among SMART Modular
Technologies, Inc., SMART Modular Technologies (Europe) Limited, and SMART
Modular Technologies (Puerto Rico) Inc., as borrowers, and Wells Fargo Bank,
National Association, as lender, arranger, administrative agent and security
trustee. Under the Amendment, certain changes were made to the Second Amended
and Restated Loan and Security Agreement dated April 30, 2007 to, among other
things, (i) decrease the amount available for borrowing by $15 million, from $50
million to $35 million (of which $10 million instead of $30 million may be in
the form of letters of credit), (ii) modify the calculation and levels of
certain financial covenants, (iii) modify the fees payable, (iv) modify the
calculation of, and increase, the interest rates applicable to loans and other
amounts outstanding, (v) further limit Restricted Payments, and (vi) limit
voluntary repayment and/or retirement of subordinated debt issued by the
Company. The amended financial covenants require that the borrowers maintain, as
of the end of each fiscal quarter, an Adjusted Quick Ratio equal to or greater
than 1.45, and, depending on the applicable fiscal quarter and based on the
preceding four fiscal quarters then ended, (i) an Adjusted EBITDA equal to or
greater than $30 million to $45 million, and (ii) a Funded Debt to Adjusted
EBITDA Ratio equal to or less than 2.25 to 3.00. The Base Rate Margin and LIBOR
Rate Margin were increased to 2% and 3%, respectively. As of February 27, 2009,
the revolving credit facility was undrawn and had available borrowing capacity
of $35 million and the Company was in compliance with its covenants under the
revolving credit facility.  This credit facility is available until
April 30, 2010, unless earlier terminated.
 
 As of
February 27, 2009, the senior secured floating rate notes due on April 2012 (the
Notes) had a balance of $81.3 million.
  NOTE
8 — Financial Instruments
  Fair
Value of Financial Instruments
  The fair
value of the Company’s cash, cash equivalents, accounts receivable, accounts
payable and Wells Fargo credit facility approximates the carrying amount due to
the relatively short maturity of these items. Cash and cash equivalents consist
of funds held in general checking accounts, money market accounts, certificates
of deposits and investments in securities with an original maturity on the date
of purchase of three months or less.  The Company does not have
investments in variable rate demand notes or auction rate
securities.
 
 In
accordance with SFAS 157, the following table represents the Company’s fair
value hierarchy for our assets and liability measured on a recurring basis (in
millions) as of February 27, 2009:
  Quoted
      Prices in Active Markets for Identical Assets or Liabilities
                                                                Level
      1
                                                              
                                                              
                                                              Observable/
                                                                Unobservable
      Inputs Corroborated by Market Data
                                                                Level
      2
                                                              
                                                              
                                                              Significant
      Unobservable Inputs Not Corroborated by Market Data
                                                                Level
      3
                                                              
                                                              
                                                              TotalAssets:Money
      market funds *
                                                              
                                                              $
                                                              37.3
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              37.3Certificates
      of deposit *
                                                              
                                                              
                                                              59.9
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              59.9Liabilities:Non-current
      variable-to-fixed interest rate swaps
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (1.6)
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (1.6)Total
                                                              
                                                              $
                                                              97.2
                                                              
                                                              
                                                              $
                                                              (1.6)
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              95.6____________*
      Included in cash and cash equivalents on the Company’s Condensed
      Consolidated Balance
Sheet.
  Derivative
Instruments
 
 The
Company has previously entered into two interest swap agreements (the Swaps),
one of which is expired and one of which is outstanding. The expired Swap, which
expired on April 1, 2008, was for approximately $41.3 million notional amount,
and under its terms, the Company paid a fixed interest rate of 9.79% related to
such notional amount. The unexpired Swap is for approximately $40.0 million
notional amount, has an expiration date of April 28, 2010 and under its terms,
the Company pays a fixed rate of 9.97% related to such notional amount. The
Company entered into the Swaps in order to hedge a portion of its future cash
flows against interest rate exposure resulting from the Notes. In exchange, the
Company receives interest income at a variable interest rate equal to the
3-month LIBOR rate plus 5.50%. The Swaps essentially replaced the variable
interest rate on $81.3 million of the Notes with fixed interest rates through
the respective expiration dates. The Swaps were accounted for as cash flow
hedges under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The swap that expired on April 1,
2008 became ineffective as a hedge as defined under the provisions of SFAS No.
133 at the end of the first fiscal quarter of 2008. Accordingly, the Company
recorded an insignificant change in fair market value of this swap to other
expense in its consolidated statement of operations for the year ended
August 29, 2008. During the period of swap effectiveness, the changes in fair
values were reflected in other comprehensive income.
 14
 The total
fair value of the outstanding derivative instrument referred to above was a
liability of approximately $1.6 million and $1.0 million as of February 27, 2009
and August 29, 2008, respectively.
 
 For all
derivative transactions, the Company is exposed to counterparty credit risk. To
manage such risk, the Company limits its derivative transaction counterparties
to major financial institutions. The Company does not expect to experience any
material adverse financial consequences as a result of default by the Company’s
counterparties.
 
 NOTE
9 — Commitments and Contingencies
  Product
Warranty
  Product
warranty reserves are established in the same period that revenue from the sale
of the related products is recognized, or in the period that a specific issue
arises as to the functionality of a Company’s product. The amounts of the
reserves are based on established terms and the Company’s best estimate of the
amounts necessary to settle future and existing claims on products sold as of
the balance sheet date.
  The
following table reconciles the changes in the Company’s accrued warranty (in
thousands):
 Six
      Months Ended
                                          February
      27, 2009Balance
      of accrual at August 29, 2008
                                        
                                        $
                                        765Warranty
      claims
                                        
                                        
                                        (473
                                        )Provision
      for product warranties
                                        
                                        
                                        357Balance
      of accrual at February 27, 2009
                                        
                                        $
                                        649
 Product
warranty reserves are recorded in accrued expenses and other current liabilities
in the accompanying unaudited condensed consolidated balance
sheets.
  The
Company currently has in effect a number of agreements in which it has agreed to
defend, indemnify and hold harmless its customers and suppliers from damages and
costs which may arise from the infringement by its products of third-party
patents, trademarks or other proprietary rights. The Company believes its
internal development processes and other policies and practices limit its
exposure related to such indemnities. Maximum potential future payments cannot
be estimated because many of these agreements do not have a maximum stated
liability. However, to date, the Company has not had to reimburse any of its
customers or suppliers for any losses related to these indemnities. The Company
has not recorded any liability in its financial statements for such
indemnities.
 Legal
Matters
 
 From time
to time the Company is involved in disputes and litigation arising in the
ordinary course of business.  Litigation in general and intellectual
property and employment litigation in particular, can be expensive and
disruptive to normal business operations.  Moreover, the results of
complex legal proceedings are difficult to predict.  The Company
believes that it has defenses to the cases pending against it, including those
set forth below.  The Company is not currently able to estimate, with
reasonable certainty, the possible loss, or range of loss, if any, from the case
listed below, and accordingly no provision for any potential loss which may
result from the resolution of this matter has been recorded in the accompanying
unaudited condensed consolidated financial statements.  In the Company's
opinion, the estimated resolution of these disputes and litigation is not
expected to have a material impact on its consolidated financial position,
results of operation or cash flows.
 
 Tessera,
Inc.
  On
December 7, 2007, Tessera, Inc. filed a complaint under section 337 of the
Tariff Act of 1930 (“Tariff Act”), 19 U.S.C. § 1337, in the U.S.
International Trade Commission ("ITC") against the Company, as well as A-DATA
Technology Co., Ltd., A-DATA Technology (U.S.A.) Co., Ltd., Acer America Corp.,
Acer Inc., Centon Electronics, Inc., Elpida Memory, Inc., Elpida Memory (USA)
Inc., International Products Sourcing Group, Inc., Kingston Technology Co.,
Nanya Technology Corp., Nanya Technology Corp. U.S.A., Peripheral Devices &
Products Systems, Inc. d/b/a Patriot Memory, Powerchip Semiconductor Corp.,
ProMOS Technologies Inc., Ramaxel Technology Ltd., TwinMOS Technologies Inc.,
and Twin MOS Technologies USA Inc. (each a “Respondent” and collectively,
“Respondents”).  Tessera claims that "small-format Ball Grid Array
(“BGA”) semiconductor packages" and products containing such semiconductor
packages, including memory module products sold by the Company, infringe certain
claims of United States Patent Nos. 5,697,977, 6,133,627, 5,663,106 and
6,458,681 (the "Asserted Patents").  Tessera's Complaint requests that
the ITC institute an investigation into the matter.  Tessera has
requested the following relief in the ITC:
 
 -  a
permanent general exclusion order pursuant to section 337(d)(2) of the Tariff
Act, as amended, excluding from entry into the U.S. all small-format BGA
semiconductor packaged DRAM chips (“BGA chips”) and products containing the same
that are manufactured, imported or sold for importation by or on behalf of
unlicensed entities and that infringe any claim of the Asserted Patents, and all
products (e.g., personal computers or “PCs”) that contain such infringing
small-format BGA chips;
 15
 -  a permanent exclusion order pursuant to section 337(d)(1) of the Tariff
Act, as amended, excluding from entry into the U.S. all semiconductor chips with
small-format BGA semiconductor packaging which are manufactured, imported or
sold for importation by or on behalf of Respondents and which infringe any claim
of the Asserted Patents, and all products (e.g., PCs) that contain such
infringing BGA chips; and
 
 -  permanent
cease and desist orders—one per Respondent—pursuant to section 337(f) of the
Tariff Act, as amended, directing each Respondent having domestic inventories to
cease and desist from importing, marketing, advertising, demonstrating,
sampling, warehousing inventory for distribution, offering for sale, selling,
distributing, licensing, or using any semiconductor chips with small format BGA
semiconductor packaging and/or products containing such semiconductor chips,
that infringe any claim of the Asserted Patents.
  On
January 3, 2008, the ITC instituted an investigation pursuant to 19 U.S.C. §
1337, entitled In the Matter of Certain Semiconductor Chips with Minimized Chip
Package Size and Products Containing Same  (III) , Inv.
No. 337-TA-630.  On February 27, 2008, the administrative law
judge set trial for September 22, 2008, which trial has been completed, and
ordered that an Initial Determination shall be due on January 14, 2009, and that
the target date for completing the investigation shall be April 24,
2009.  On January 2, 2009, an order was entered extending the deadline
for the Initial Determination to March 6, 2009 and changing the target date for
completing the investigation to July 6, 2009.  On February 10, 2009,
an order was entered further extending the deadline for the Initial
Determination of May 22, 2009 and the target date for completing the
investigation to September 22, 2009.  We believe that we have
meritorious defenses against Tessera’s claims, including the fact that over 95%
of the packaged DRAMs that SMART uses in its memory module products are
purchased (directly or indirectly) from DRAM manufacturers that Tessera admits
are licensed under the Asserted Patents.
  In May
2008, Tessera withdrew one of the four Asserted Patents (U.S. Patent No.
6,458,681) from the ITC investigation in an effort to streamline the
case.
  Tessera
also filed a parallel patent infringement claim in the Eastern District of
Texas, alleging infringement of the same patents at issue in the ITC
action.  The district court action seeks an unspecified amount of
damages and injunctive relief.  The district court action has been
stayed pending the completion of the ITC action.
  Commitments
 
 Adtron Earn-Out
Consideration
 
 As part
of our purchase of Adtron Corporation on March 3, 2008, we agreed to pay
earn-out consideration of up to $15.0 million to the sellers if the Adtron
Segment achieved two financial goals and one operational goal by December 31,
2008.  In December, 2008, we paid $1.5 million that the parties had agreed
to for an operational goal that had been achieved.  In the second quarter
of fiscal 2009, we provided to the sellers a good faith calculation of the
remaining earn-out consideration that would be potentially payable.  Based
on such calculation, we accrued $4.0 million.  In response to our
calculation, the sellers have requested information from us, and we have
provided such information.  The matter remains under discussion because the
sellers have suggested that our calculation take into account certain items.
 Final determination of the remaining earn-out consideration payable is
expected by the end of fiscal 2009.  Such final determination could result
in the recognition of earn-out consideration that is significantly higher than
the amount we accrued in the second quarter of fiscal 2009 and may have a
material impact on our consolidated financial position, results of operations or
cash flows.
  Contingencies
  During
its third quarter of fiscal 2007, the Company identified certain discrepancies
in the invoicing of certain products that it sold in the Brazilian market in
fiscal 2006. Some of the Company’s imported products were invoiced in a manner
that may have left customers with the impression that they were manufactured in
Brazil, rather than imported, and therefore potentially impact the customers’
eligibility for tax incentives.  The Company assessed the impact arising
from these discrepancies and noted that the customers had access to other
information to determine the origin of the products and may not have relied on
the information contained in the invoices for computing their tax
liability.  Also, the revenues related to these invoices were not material
to the Company’s operations.  Therefore, the Company believes that the
likelihood of any liability arising from these discrepancies in the invoices is
remote and as such, is not likely to have a material adverse effect on its
consolidated financial position, results of operations or cash flows for any
periods impacted.
 
 During
the fourth quarter of fiscal 2008, the Sao Paulo, Brazil, State Tax Inspector
informed the Company that certain tax credits transferred during 2004 between
two Brazilian entities may not have represented an authorized
transfer.  These transfers occurred prior to the acquisition in April
2004 of SMART from Solectron Corporation (Solectron) and the full amount of any
related tax assessment against SMART would be subject to indemnification by
Solectron to SMART pursuant to the Transaction Agreement dated February 11,
2004.   A notice was received from the Sao Paulo, Brazil Tax
Authorities (Delegacia Tributaria de Julgamento) by SMART on October 3, 2008
providing an assessment for interest and penalties, related to the transfer of
these credits.  SMART has notified Solectron and its parent company,
Flextronics International Ltd. (Flextronics) of this assessment, and under the
terms of the Transaction Agreement, Flextronics has elected to assume
responsibility for the appeals process for this case
on SMART's behalf.  The San Paolo, Brazil Tax Authorities
rejected the appeal prepared by Flextronics’ legal counsel, and the latter filed
an appeal to the Tax Administrative Court (Tribunal de Impostos e Taxas), which
appeal is still pending judgment.  As of February 27, 2009 the Company
carries both a tax liability and a corresponding indemnity receivable for
approximately $2.7 million.   The Company believes that the
likelihood of any material loss arising from this matter is not probable, and as
such, not likely to have a material adverse effect on its consolidated financial
position, results of operations or cash flows for any periods
impacted.
 16
 NOTE
10 — Segment and Geographic Information
  With the
acquisition of Adtron in fiscal 2008, based on information regularly reviewed by
the Company’s CEO and chief operating decision maker to evaluate Adtron’s
performance and to allocate resources to Adtron, the Company revised its segment
reporting to include Adtron as a separate segment.  The Company now
operates in two business segments, the Memory, Embedded, & Display Segment
and the Adtron Segment.   The accounting policies of the
operating segments are the same as those described in the summary of significant
accounting policies.  The following tables’ present summarized
information by segment or geographic area:
 Property
and equipment, net, and certain results of operations by
segment:
  February
      27,
                                        2009
                                      
                                      
                                      August
      29,
                                        2008(In
      thousands)Property
      and equipment, net:Memory,
      Embedded, & Display
                                      
                                      $
                                      32,478
                                      
                                      
                                      $
                                      38,772Adtron
                                      
                                      
                                      621
                                      
                                      
                                      
                                      545Total
      property and equipment, net
                                      
                                      $
                                      33,099
                                      
                                      
                                      $
                                      39,317
 
 Memory,
      Embedded, & Display
                          
                          Adtron
                          
                          Total(In
      thousands)Three
      Months Ended February 27, 2009Net
      sales
                          
                          $
                          103,117
                          
                          
                          $
                          5,972
                          
                          
                          $
                          109,089Gross
      profit
                          
                          
                          21,014
                          
                          
                          
                          3,053
                          
                          
                          
                          24,067Depreciation
      and amortization
                          
                          
                          2,800
                          
                          
                          
                          315
                          
                          
                          
                          3,115Impairment
      of goodwill
                          
                          
                          —
                          
                          
                          
                          3,206
                          
                          
                          
                          3,206Income
      (loss) from operations
                          
                          $
                          4,498
                          
                          
                          $
                          (3,496
                          )
                          
                          $
                          1,002Six
      Months Ended February 27, 2009Net
      sales
                          
                          $
                          240,002
                          
                          
                          $
                          9,862
                          
                          
                          $
                          249,864Gross
      profit
                          
                          
                          45,005
                          
                          
                          
                          4,878
                          
                          
                          
                          49,883Depreciation
      and amortization
                          
                          
                          5,866
                          
                          
                          
                          579
                          
                          
                          
                          6,445Impairment
      of goodwill
                          
                          
                          —
                          
                          
                          
                          10,416
                          
                          
                          
                          10,416Income
      from operations
                          
                          $
                          10,012
                          
                          
                          $
                          (11,193
                          )
                          
                          $
                          (1,181
                          )
 
 Three
      Months
                                                            Ended
                                                            February
      27,
                                                            2009
                                                          
                                                          
                                                          Three
      Months
                                                            Ended
                                                            February
      29, 2008
                                                          
                                                          
                                                          Six
      Months
                                                            Ended
                                                            February
      27, 2009
                                                          
                                                          
                                                          Six
      Months
                                                            Ended
                                                            February
      29, 2008(In
      thousands)Geographic net
      sales:U.S.A.
                                                          
                                                          $
                                                          48,988
                                                          
                                                          
                                                          $
                                                          97,090
                                                          
                                                          
                                                          $
                                                          107,956
                                                          
                                                          
                                                          $
                                                          204,470Other
      North and Latin America
                                                          
                                                          
                                                          25,853
                                                          
                                                          
                                                          
                                                          28,102
                                                          
                                                          
                                                          
                                                          67,173
                                                          
                                                          
                                                          
                                                          58,680Europe
                                                          
                                                          
                                                          14,424
                                                          
                                                          
                                                          
                                                          15,277
                                                          
                                                          
                                                          
                                                          30,733
                                                          
                                                          
                                                          
                                                          31,081Asia
                                                          
                                                          
                                                          19,824
                                                          
                                                          
                                                          
                                                          24,028
                                                          
                                                          
                                                          
                                                          44,002
                                                          
                                                          
                                                          
                                                          47,639$
                                                          109,089
                                                          
                                                          
                                                          $
                                                          164,497
                                                          
                                                          
                                                          $
                                                          249,864
                                                          
                                                          
                                                          $
                                                          341,870
  
 February
      27,
                                        2009
                                      
                                      
                                      August
      29,
                                        2008(In
      thousands)Property
      and equipment, net:U.S.A.
                                      
                                      $
                                      5,630
                                      
                                      
                                      $
                                      6,679Other
      North and Latin America
                                      
                                      
                                      21,418
                                      
                                      
                                      
                                      28,492Europe
                                      
                                      
                                      47
                                      
                                      
                                      
                                      59Asia
                                      
                                      
                                      6,004
                                      
                                      
                                      
                                      4,087$
                                      33,099
                                      
                                      
                                      $
                                      39,317
 17
 NOTE
11 — Major Customers
  A
majority of the Company’s net sales are attributable to customers operating in
the information technology industry. Major customers are defined as those with
net sales in excess of 10% of total net sales or those who have outstanding
customer accounts receivable balances at the end of the fiscal period of 10% or
more of our total net accounts receivable.
 
 Net sales
from major customers as a percentage of total net sales are as
follows:
 Three
      MonthsEnded
                            February 27, 2009
                          
                          
                          Three
      MonthsEnded
                            February 29, 2008
                          
                          
                          Six MonthsEnded
                            February 27, 2009
                          
                          
                          Six MonthsEnded
                            February 29, 2008Customer
      A
                          
                          
                          30
                          %
                          
                          
                          43
                          %
                          
                          
                          32
                          %
                          
                          
                          44
                          %Customer
      B
                          
                          
                          12
                          %
                          
                          
                          13
                          %
                          
                          
                          12
                          %
                          
                          
                          12
                          %Customer
      C
                          
                          
                          *
                          
                          
                          
                          *
                          
                          
                          
                          *
                          
                          
                          
                          *
 *Less
      than 10%
 As of
February 27, 2009, approximately 33%, 24% and 17% of accounts receivable were
concentrated with Customer A, B and C, respectively. As of August 29, 2008,
approximately 32%, 19% and 28% of accounts receivable were concentrated with
Customer A, B and C, respectively. The loss of a major customer or a significant
reduction in revenue from a major customer could have a material adverse effect
on the Company’s business, financial condition and results of
operations.
 
 NOTE
12 — Restructuring Charges
  During
the fourth quarter of fiscal 2008, the Company initiated a restructuring plan,
the FY08 Plan, to reduce operating expenses and improve cash flows by
consolidating certain operations in Asia and the Caribbean.  The
intent of the plan was to decrease the Company’s cost structure through
workforce reductions and facility and resource consolidation.  Costs
resulting from the restructuring plan include severance payments,
severance-related benefits, lease costs associated with the closure of our
Dominican Republic facility, charges for assets written off and other
costs.  These costs relate to the Memory, Embedded, & Display
segment.  All other exit costs related to the FY08 Plan accrued as of
February 27, 2009 are expected to be paid by the end of the fiscal
2009.  Total restructuring costs for this plan accrued as of February
27, 2009 were approximately $0.07 million and are recorded in accrued expenses
in the condensed consolidated balance sheets.
 During
the second quarter of fiscal 2009, the Company initiated another restructuring
plan, the FY09 Plan, to reduce further its global workforce in order to improve
the Company’s cost structure in the continued uncertain economic
environment.  The FY09 Plan consists primarily of severance payments
and other employee-related payments.  All severance payments and
severance-related benefits related to the FY09 Plan accrued as of February 27,
2009 are expected to be paid by the end of the third quarter of fiscal
2009.  Total restructuring costs accrued as of February 27, 2009 were
approximately $0.2 million and are recorded in accrued expenses in the condensed
consolidated balance sheets
  The
following table represents the activity with restructuring and other charges
related to the FY08 Plan for the three months ended February 27, 2009 (in
thousands):
 Severance
      and
                                                          Benefits
                                                        
                                                        
                                                        Assets/Facility
      Related
                                                        
                                                        
                                                        Other
                                                        
                                                        
                                                        TotalAccrual
      as of November 28, 2008
                                                        
                                                        $
                                                        43
                                                        
                                                        
                                                        $
                                                        —
                                                        
                                                        
                                                        $
                                                        14
                                                        
                                                        
                                                        $
                                                        57Provision
                                                        
                                                        
                                                        56
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        92
                                                        
                                                        
                                                        
                                                        148Cash
      payment
                                                        
                                                        
                                                        (99
                                                        )
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        (38
                                                        )
                                                        
                                                        
                                                        (137
                                                        )Accrual
      as of February 27, 2009
                                                        
                                                        $
                                                        —
                                                        
                                                        
                                                        $
                                                        —
                                                        
                                                        
                                                        $
                                                        68
                                                        
                                                        
                                                        $
                                                        68
 
 The
following table represents the activity with restructuring and other charges
related to the FY08 Plan for the six months ended February 27, 2009 (in
thousands):
  Severance
      and
                                                            Benefits
                                                          
                                                          
                                                          Assets/Facility
      Related
                                                          
                                                          
                                                          Other
                                                          
                                                          
                                                          TotalAccrual
      as of August 29, 2008
                                                          
                                                          $
                                                          572
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          258
                                                          
                                                          
                                                          $
                                                          830Provision
                                                          
                                                          
                                                          484
                                                          
                                                          
                                                          
                                                          179
                                                          
                                                          
                                                          
                                                          371
                                                          
                                                          
                                                          
                                                          1,034Cash
      payment
                                                          
                                                          
                                                          (1,056
                                                          )
                                                          
                                                          
                                                          (179
                                                          )
                                                          
                                                          
                                                          (561
                                                          )
                                                          
                                                          
                                                          (1,796
                                                          )Accrual
      as of February 27, 2009
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          68
                                                          
                                                          
                                                          $
                                                          68
 
 18
 The
following table represents the activity with restructuring and other charges
related to the FY09 Plan for the three and six months ended February 27, 2009
(in thousands):
  Severance
      and
                                                            Benefits
                                                          
                                                          
                                                          Assets/Facility
      Related
                                                          
                                                          
                                                          Other
                                                          
                                                          
                                                          TotalAccrual
      as of August 29, 2008
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —Provision
                                                          
                                                          
                                                          787
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          787Cash
      payment
                                                          
                                                          
                                                          (628
                                                          )
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (628
                                                          )Accrual
      as of February 27, 2009
                                                          
                                                          $
                                                          159
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          $
                                                          159
 
 There
were no restructuring activities for the three and six months ended February 27,
2008.
  NOTE
13 — Subsidiary Guarantors
  The
Company has not presented separate financial statements of subsidiary guarantors
of the Notes, as (1) each of the subsidiary guarantors is wholly-owned by the
Company, the issuer of the Notes, (2) the guarantees are full and unconditional,
(3) the guarantees are joint and several, and (4) the Company has no independent
assets and operations and all subsidiaries of the Company other than the
subsidiary guarantors are insignificant.
  NOTE
14 — Subsequent Events
 
 Corporate Headquarters
Lease
  On March
18, 2009, the Company entered into a seven year operating lease with Newark
Eureka Industrial Capital LLC to lease approximately 79,480 square feet of
office, manufacturing, engineering, research and development, warehouse and
distribution space located in Newark, California which will serve as our new
corporate headquarters starting the third quarter of fiscal 2009.  See
below for our contractual commitments for operating leases after execution of
our new operating lease agreement on March 18, 2009:
  Payments
      Due by Period1
      Year
                                                              
                                                              
                                                              2-3
      Years
                                                              
                                                              
                                                              4-5
      Years
                                                              
                                                              
                                                              After
      5 Years
                                                              
                                                              
                                                              Total(In
      millions)Operating
      leases
                                                              
                                                              
                                                              1.4
                                                              
                                                              
                                                              
                                                              2.6
                                                              
                                                              
                                                              
                                                              1.2
                                                              
                                                              
                                                              
                                                              1.3
                                                              
                                                              
                                                              
                                                              6.5
 Share Repurchase
Program
 
 In April
2009, the Company’s Board of Directors authorized a program to repurchase shares
of the Company’s ordinary shares in the open market or in privately negotiated
transactions with a value of up to $10.0 million in the
aggregate.  The Company intends to repurchase shares using its
available cash.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice.
 
 19
 Item 2 . 
Management’s Discussion and Analysis of Financial Condition and
Results of
Operations
  This
Quarterly Report on Form 10-Q, including this Management’s Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements regarding future events and our future results that
are subject to the safe harbors created under the Securities Act of 1933 (the
“Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).
These statements are based on current expectations, estimates, forecasts, and
projections about the industries in which we operate and the beliefs and
assumptions of our management. Words such as “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “continues,” “may,” and variations of such words and similar
expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future financial
performance, our anticipated trends in our businesses, and other
characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties, and assumptions that are
difficult to predict, including those identified below, under “Risk Factors,”
elsewhere herein, and those discussed in Part II, Item 1A, “Risk Factors” in our
Annual Report on Form 10-K for the year ended August 29, 2008 filed with the SEC
on November 12, 2008. Therefore, actual results may differ materially and
adversely from those expressed in any forward-looking statements. We undertake
no obligation to revise or update any forward-looking statements for any
reason.
 
 Executive
Overview
  We are a leading independent designer, manufacturer and supplier of value added
subsystems sold primarily to OEMs. Our subsystem products include memory
modules, SSD, embedded computing and TFT-LCD products that we offer to customers
worldwide. We also offer our customers custom supply chain services including
procurement, logistics, inventory management and temporary warehousing, kitting
and/or packaging services. Our products and services are used for a variety of
applications in the computing, networking, communications, printer, storage and
industrial markets worldwide. Products that incorporate our subsystems include
servers, routers, switches, storage systems, workstations, PCs, portable
computers, printers and gaming machines. Generally, while increases in overall
unit demand by end users for, and increases in memory content in, products that
incorporate our subsystems should have a positive effect on our business,
financial condition and results of operations, conversely, decreases in product
unit demand and memory content can have a negative effect on our business,
financial condition and results of operations.  We offer more than 500
standard and custom products to leading OEMs, including Cisco Systems, Dell, and
Hewlett-Packard. We maintain a large global footprint with manufacturing
capabilities in the U.S., Malaysia, Brazil and Puerto Rico. Our global
operations enable us to control costs and rapidly respond to our customers’
requirements worldwide.
  In
April 2004, a group of investors led by TPG, Francisco Partners and Shah Capital
Partners acquired SMART Modular Technologies, Inc. (“SMART Modular”) from
Solectron Corporation, at which time we began to operate our business as an
independent company incorporated under the laws of the Cayman Islands. Since the
acquisition by our principal investors, we repositioned a portion of our
business by focusing on the delivery of certain higher value added products,
diversifying our end markets and extending into new vertical markets, creating
more technically engineered products and solutions, migrating manufacturing to
low cost regions and controlling expenses.  For example, in fiscal
2005 we acquired Estecom, a producer of TFT-LCD products, in fiscal 2006 we
acquired ConXtra, Inc., a product design and design manufacturing services
provider, and in fiscal 2008 we acquired Adtron Corporation, a leading designer
and global supplier for high performance and high capacity SSDs. Also, in fiscal
2006 we completed our manufacturing facility in Atibaia, Brazil into which we
import finished wafers and package them into memory integrated circuits and into
memory modules.
  Beginning fiscal 2008, we categorized our products and services into the
following two business segments, the Memory, Embedded, & Display Segment and
the Adtron Segment.  In prior fiscal years we operated under one
segment.  Since the acquisition of Adtron on March 3, 2008, SMART’s
CEO and chief operating decision maker separately evaluates Adtron’s performance
and the allocation of resources to Adtron.
  In
January 2009, the Company initiated a second restructuring plan to reduce
further its global workforce and further align our cost structure with expected
revenue in the continued uncertain economic environment.  The cost of
this plan consists primarily of severance payments and other employee-related
payments, part of which was incurred and recognized in the second fiscal
quarter, and the balance to be recognized in the third fiscal
quarter.  The plan may involve higher costs, a longer timetable, or
additional restructuring activity than we currently
anticipate.  Consequently, there is no assurance that we will be able
to successfully complete and realize the expected benefits of this plan to
decrease various Company costs and improve cash flow.
  On
March 18, 2009, the Company entered into a seven year operating lease with
Newark Eureka Industrial Capital LLC to lease approximately 79,480 square feet
of office, manufacturing, engineering, research and development, warehouse and
distribution space located in Newark, California, which will serve as our new
corporate headquarters starting the third quarter of fiscal 2009.  The
new corporate headquarters require tenant improvements to be made prior to
move-in, and such tenant improvements are subject to cost overruns and
construction delays.  Among other potential costs, a delay in vacating
our Fremont facility would result in a 50% escalation in rental expense for such
facility, in addition to the new rental expense for the Newark
facility.  Consequently, there is no assurance that our relocation
costs, which we estimate to be $0.6 million, will not exceed that
amount.
 On March
24, 2009, the Company’s Board of Directors authorized the repurchase of up to
$10.0 million of the Company’s ordinary shares.  The Company intends
to repurchase shares using its available cash.  The timing, duration,
and the exact number of shares to be purchased will be at the Company’s
discretion.  Under the repurchase program, depending on price,
regulatory requirements, market conditions and other factors, shares may be
purchased on the open market or in privately negotiated
transactions.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice.
 20
 Key
Business Metrics
 
 The
following is a brief description of the major components of the key line items
in our financial statements.
 
 Net
Sales
  We
generate our product revenues from sales of our subsystems, including memory
modules and flash memory cards, SSDs, embedded computing boards and TFT-LCD
products, principally to leading computing, networking, communications, printer,
storage and industrial OEMs. Sales of our products are generally made pursuant
to purchase orders rather than long-term commitments. We generate service
revenue from a limited number of customers by providing procurement, logistics,
inventory management and temporary warehousing, and kitting or packaging
services. Our net sales are dependent upon demand in the end markets that we
serve and fluctuations in end-user demand can have a rapid and material effect
on our net sales. Furthermore, sales to relatively few customers have accounted
for, and we expect will continue to account for, a significant percentage of our
net sales in the foreseeable future.
 
 Cost
of Sales
 
 The most
significant components of cost of sales are materials, fixed manufacturing
costs, labor and depreciation. Increases in capital expenditures may increase
our future cost of sales due to higher levels of depreciation
expense.  Cost of sales also includes any inventory write-downs. We
may write-down inventory for a variety of reasons, including obsolescence,
excess quantities and declines in market value below our cost.
 
 Research
and Development Expenses
  Research and development expenses consist primarily of the costs associated with
the design and testing of new products. These costs relate primarily to
compensation of personnel involved with development efforts, materials and
outside design and testing services. Our customers typically do not separately
compensate us for design and engineering work involved in the development of
custom products.
  Selling,
General and Administrative Expenses
  Selling, general and administrative expenses consist primarily of personnel
costs, including commissions, facilities and equipment costs, costs related to
advertising and marketing and other support costs including utilities, insurance
and professional fees.
  
 Critical
Accounting Policies
  Management’s Discussion and Analysis of Financial Condition and Results of
Operations are based on our financial statements which have been prepared in
accordance with accounting principles generally accepted in the U.S.The preparation of these
financial statements requires us to make certain estimates that affect the
reported amounts in our financial statements. We evaluate our estimates on an
ongoing basis, including those related to our net sales, accounts receivables,
inventories, asset impairments, restructuring charges, income taxes, stock-based
compensation and commitments and contingencies. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances.  Actual results may differ from
these estimates under different assumptions or conditions.  We believe
the following critical accounting policies are the most significant to the
presentation of our financial statements and they at times require the most
difficult, subjective and complex estimates.
  Revenue
Recognition
  Our product revenues are derived from the sale of value added subsystems,
including memory modules and flash memory cards, SSDs, embedded computing boards
and TFT-LCD products, which we design and manufacture. We recognize revenue
primarily upon shipment, following receipt of written purchase orders, when the
price is fixed or determinable, title has transferred, product acceptance
has occurred and collection of the resulting accounts receivable is reasonably
assured. Amounts billed to customers related to shipping and handling are
classified as sales, while costs incurred by us for shipping and handling are
classified as cost of sales.  Taxes, including value added taxes,
assessed by a government authority that are both imposed on and concurrent with
a specific revenue producing transaction are excluded from revenue.
  Our
service revenues are derived from procurement and logistics, inventory
management and temporary warehousing, and kitting or packaging services. The
terms of our contracts vary, but we generally recognize service revenue upon the
completion of the contracted services. Our service revenue is reported on a net
basis in accordance with Emerging Issues Task Force (EITF) Issue No. 99-19,
Reporting Revenue Gross as a
Principal versus Net as an Agent.  Service revenue for these
arrangements is typically based on material procurement costs plus a fee for any
services provided. We determine whether to report revenue on a net or gross
basis depending on a number of factors, including whether we are the primary
obligor in the arrangement, have general inventory risk, have the ability to set
the price, have the ability to determine who the suppliers are, can physically
change the product or have credit risk.
 21
 The
following is a summary of our net sales and gross billings (in
thousands):
 Three Months Ended
                                                                            
                                                                            
                                                                            Six Months EndedFebruary
      27,
                                                                            
                                                                            
                                                                            February
      29,
                                                                            
                                                                            
                                                                            February
      27,
                                                                            
                                                                            
                                                                            February
      29,2009
                                                                            
                                                                            
                                                                            2008
                                                                            
                                                                            
                                                                            2009
                                                                            
                                                                            
                                                                            2008Product
      net sales
                                                                            
                                                                            $
                                                                            100,190
                                                                            
                                                                            
                                                                            $
                                                                            153,724
                                                                            
                                                                            
                                                                            $
                                                                            228,990
                                                                            
                                                                            
                                                                            $
                                                                            319,956Service
      revenue
                                                                            
                                                                            
                                                                            8,899
                                                                            
                                                                            
                                                                            
                                                                            10,773
                                                                            
                                                                            
                                                                            
                                                                            20,874
                                                                            
                                                                            
                                                                            
                                                                            21,914Net
      sales
                                                                            
                                                                            
                                                                            109,089
                                                                            
                                                                            
                                                                            
                                                                            164,497
                                                                            
                                                                            
                                                                            
                                                                            249,864
                                                                            
                                                                            
                                                                            
                                                                            341,870Plus:
      Cost of sales(1)
                                                                            
                                                                            
                                                                            143,913
                                                                            
                                                                            
                                                                            
                                                                            188,284
                                                                            
                                                                            
                                                                            
                                                                            330,123
                                                                            
                                                                            
                                                                            
                                                                            452,265Gross
      billing to customers
                                                                            
                                                                            $
                                                                            253,002
                                                                            
                                                                            
                                                                            $
                                                                            352,781
                                                                            
                                                                            
                                                                            $
                                                                            579,987
                                                                            
                                                                            
                                                                            $
                                                                            794,135
 ________
 (1)
Represents cost of sales associated with service revenue reported on a net
basis.
  Accounts
Receivable
  We
evaluate the collectability of accounts receivable based on a combination of
factors. When we are aware of circumstances that may impair a specific
customer’s ability to meet its financial obligations, we record a specific
allowance against amounts due and, thereby, reduce the net recognized receivable
to the amount we reasonably believe will be collected. Increases to the
allowance for bad debt are recorded as a component of general and administrative
expenses. For all other customers, we record an allowance for doubtful accounts
based on a combination of factors including the length of time the receivables
are outstanding, industry and geographic concentrations, the current business
environment, and historical experience.
 
 As a
result of the current macroeconomic environment and associated credit market
conditions, both liquidity and access to capital have impacted some of our
customers. We have continued to closely monitor our credit exposure with our
customers to anticipate exposures and minimize our risk.
 
 Inventory
Valuation
  At each
balance sheet date, we evaluate our ending inventories for excess quantities and
obsolescence. This evaluation includes analysis of sales levels by product
family. Among other factors, we consider historical demand and forecasted demand
in relation to the inventory on hand, competitiveness of product offerings,
market conditions and product life cycles when determining obsolescence and net
realizable value. We adjust remaining balances to approximate the lower of our
manufacturing cost or net realizable value. Inventory cost is determined on a
specific identification basis and includes material, labor, and manufacturing
overhead. From time to time, our customers may request that we purchase and
maintain significant inventory of raw materials for specific programs. Such
inventory purchases are evaluated for excess quantities and potential
obsolescence and could result in a provision at the time of purchase or
subsequent to purchase. The portion, if any, of slow moving inventory estimated
to be sold beyond one year from the balance sheet date, is classified as
non-current inventory and included in non-current assets in our consolidated
balance sheets. Our provisions for excess and obsolete inventory are also
impacted by our arrangements with our customers and/or suppliers, including our
ability or inability to re-sell such inventory to them. If actual market
conditions or our customers’ product demands are less favorable than those
projected or if our customers or suppliers are unwilling or unable to comply
with any arrangements related to their purchase or sale of inventory, additional
provisions may be required and would have a negative impact on our gross margins
in that period. We have had to write-down inventory in the past for reasons such
as obsolescence, excess quantities and declines in market value below our costs,
and we may be required to do so from time to time in the future.
 
 Restructuring
Charges
  We record and account for our restructuring activities following formally
approved plans that identify the actions and timelines over which the
restructuring activities will occur. Restructuring charges include estimates
pertaining to such items as employee severance and fringe benefit costs,
facility exit costs and subleasing assumptions, among other
items.  Adjustments to these estimates are made when changes in facts
and circumstances suggest actual amounts will differ from original estimates.
These changes in estimates may result in increases or decreases to our results
of operations in future periods and would be presented on the restructuring
charge line of our consolidated statements of operations.
 
 Income
Taxes
  We use the asset and liability method of accounting for income taxes. Deferred
tax assets and liabilities are recognized for the future consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and net operating
loss and credit carry-forwards. When necessary, a valuation allowance is
recorded or reduced to value tax assets to amounts that are more likely than not
expected to be realized. The effect of changes in tax rates is recognized in the
period in which the rate change occurs.  U.S. income and foreign
withholding taxes are not provided on that portion of unremitted earnings of
foreign subsidiaries since they are expected to be reinvested
indefinitely.
 22
 After excluding ordinary losses in a tax jurisdiction for which no tax benefit
can be recognized, we estimate our annual effective tax rate and apply such rate
to year-to-date income, adjusting for unusual or infrequent items that are
treated as discrete events in the period. We also evaluate our valuation
allowance to determine if a change in circumstances causes a change in judgment
regarding realization of deferred tax assets in future years. If the valuation
allowance is adjusted as a result of a change in judgment regarding future
years, that adjustment is recorded in the period of such change affecting our
tax expense in that period.
  The
calculation of our tax liabilities involves accounting for uncertainties in the
application of complex tax rules, regulations and practices.  As a
result of the implementation of FIN No. 48, we recognize benefits for uncertain
tax positions based on a two-step process.  The first step is to
evaluate the tax position for recognition of a benefit (or the absence of a
liability) by determining if the weight of available evidence indicates that it
is more likely than not that the position taken will be sustained upon audit,
including resolution of related appeals or litigation processes, if
any.  If it is not, in our judgment, “more likely than not” that the
position will be sustained, then we do not recognize any benefit for the
position.  If it is more likely than not that the position
will  be sustained, a second step in the process is required to
estimate how much of the benefit we will ultimately receive. This second step
requires that we estimate and measure the tax benefit as the largest amount that
is more than 50 percent likely of being realized upon ultimate settlement. It is
inherently difficult and subjective to estimate such amounts.  We
reevaluate these uncertain tax positions on a quarterly basis.  This
evaluation is based on a number of factors including, but not limited to,
changes in facts or circumstances, changes in tax law, new facts, correspondence
with tax authorities during the course of an audit, effective settlement of
audit issues, and commencement of new audit activity.  Such a change
in recognition or measurement could result in the recognition of a tax benefit
or an additional charge to the tax provision in the period.
 
 Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed
  We review
our long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to the future undiscounted cash flows expected to be
generated by the asset. If such assets are found to be impaired, the impairment
loss is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed are reported at the
lower of the carrying amount or fair value, less cost to sell.
 
 Impairment
of Goodwill
  In accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets” (“SFAS 142”), the Company performs a goodwill impairment test of
its two reporting units (Memory, Embedded, & Display and Adtron) annually
during the fourth quarter of its fiscal year and more frequently if an event or
circumstance indicates that an impairment may have occurred. Such events or
circumstances may include significant adverse changes in the general business
climate, among others. The test is performed by determining the fair value of
the reporting unit based on estimated discounted future cash flows and
considering the market price of the Company’s ordinary shares, and comparing the
fair value to the carrying value of the reporting unit, including
goodwill.
 
 If the
fair value of each reporting unit is less than its carrying value, the Company
then allocates the fair value of the unit to all the assets and liabilities of
the unit (including any unrecognized intangible assets) as if the reporting
unit’s fair value was the purchase price to acquire the reporting unit. The
excess of the fair value of the reporting unit over the amounts assigned to its
assets and liabilities is the implied fair value of the goodwill. If the
carrying amount of the reporting unit’s goodwill exceeds the implied fair value
of that goodwill, an impairment loss is recognized in an amount equal to that
excess.
  Stock-Based
Compensation
  Effective
August 27, 2005, we adopted SFAS No. 123R, Share-Based Payment, using the
prospective method. The key assumptions used in applying the provisions of SFAS
No. 123R are described in Note 2 to the Unaudited Condensed Consolidated
Financial Statements.
 
 Financial Information about
Segments
  During fiscal 2008, our corporate structure included two operating segments, the
Memory, Embedded, & Display Segment and the Adtron
Segment.  Accordingly, we report certain financial information by
segment.  We may adjust our reported segments in fiscal 2009 to
reflect changes regarding how we manage the business.  See Note 10 to
the Unaudited Condensed Consolidated Financial Statements for information
regarding our business segments.
 23
 Certain
results of operations by segment (in millions):
 
 Memory,
      Embedded, & Display
                        
                        Adtron
                        
                        TotalThree
      Months Ended February 27, 2009Net
      sales
                        
                        $
                        103.1
                        
                        
                        $
                        6.0
                        
                        
                        $
                        109.1Gross
      profit
                        
                        
                        21.0
                        
                        
                        
                        3.1
                        
                        
                        
                        24.1Depreciation
      and amortization
                        
                        
                        2.8
                        
                        
                        
                        0.3
                        
                        
                        
                        3.1Impairment
      of goodwill
                        
                        
                        —
                        
                        
                        
                        3.2
                        
                        
                        
                        3.2Income
      (loss) from operations
                        
                        $
                        4.5
                        
                        
                        $
                        (3.5
                        )
                        
                        $
                        1.0Three
      Months Ended February 29, 2008(1)Net
      sales
                        
                        $
                        164.5
                        
                        
                        $
                        —
                        
                        
                        $
                        164.5Gross
      profit
                        
                        
                        32.9
                        
                        
                        
                        —
                        
                        
                        
                        32.9Depreciation
      and amortization
                        
                        
                        3.0
                        
                        
                        
                        —
                        
                        
                        
                        3.0Income
      from operations
                        
                        $
                        13.9
                        
                        
                        $
                        —
                        
                        
                        $
                        13.9
 
 Memory,
      Embedded, & Display
                        
                        Adtron
                        
                        TotalSix
      Months Ended February 27, 2009Net
      sales
                        
                        $
                        240.0
                        
                        
                        $
                        9.9
                        
                        
                        $
                        249.9Gross
      profit
                        
                        
                        45.0
                        
                        
                        
                        4.9
                        
                        
                        
                        49.9Depreciation
      and amortization
                        
                        
                        5.9
                        
                        
                        
                        0.5
                        
                        
                        
                        6.4Impairment
      of goodwill
                        
                        
                        —
                        
                        
                        
                        10.4
                        
                        
                        
                        10.4Income
      (loss) from operations
                        
                        $
                        10.0
                        
                        
                        $
                        (11.2
                        )
                        
                        $
                        (1.2
                        )Six
      Months Ended February 29, 2008(1)Net
      sales
                        
                        $
                        341.9
                        
                        
                        $
                        —
                        
                        
                        $
                        341.9Gross
      profit
                        
                        
                        67.0
                        
                        
                        
                        —
                        
                        
                        
                        67.0Depreciation
      and amortization
                        
                        
                        5.6
                        
                        
                        
                        —
                        
                        
                        
                        5.6Income
      from operations
                        
                        $
                        28.3
                        
                        
                        $
                        —
                        
                        
                        $
                        28.3
 ____________
 (1) For
the three and six months ended February 29, 2008, the Company had only one
segment.  Adtron was acquired in March 2008.
 Out
of Period Adjustment
  During
the second quarter of fiscal 2009, the Company recorded one adjustment to net
sales and one adjustment to cost of sales, which adjustments represented
corrections of immaterial prior period errors in current liabilities. Each
adjustment was less than $0.5 million and together resulted in a net increase to
net income of $0.2 million during the second quarter of fiscal
2009.
 24
 Results
of Operations
 
 The
following is a summary of our results of operations for the three and six months
ended February 27, 2009 and February 29, 2008 (in millions):
 Three
      Months Ended
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Six
      Months EndedFebruary 27,
      2009
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        February 29,
      2008
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        February
      27, 2009
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        February
      29, 2008(In
      millions)Net
      sales
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        109.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        164.5
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        249.9
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        341.9Cost
      of sales
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        85.0
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        131.6
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        200.0
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        274.9Gross
      profit(1)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        24.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        32.9
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        49.9
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        67.0Research
      and development
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        5.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        4.6
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        10.6
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        9.3Selling,
      general and administrative
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        13.8
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        14.3
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        28.2
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        29.4Restructuring
      charges
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        0.9
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        —
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1.8
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        —Impairment
      of goodwill
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        3.2
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        —
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        10.4
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        —Total
      operating expenses(1)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        23.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        19.0
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        51.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        38.7Income
      from operations(1)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1.0
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        13.9
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1.2
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        28.3Interest
      expense, net
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1.7
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1.3
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (3.5
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (2.4
                                                                                                                                        )Other
      income (expense), net
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        0.1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        0.4
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (0.7
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1.8Total
      other expense, net(1)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1.6
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1.0
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (4.1
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (0.6
                                                                                                                                        )Income
      (loss) before provision for income taxes(1)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (0.6
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        13.0
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (5.3
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        27.7Provision
      for income taxes
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1.3
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1.5
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        3.4
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        4.2Net
      income(1)
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (1.9
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        11.4
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (8.7
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        23.5
 ____________
 (1)           Summations
may not compute precisely due to rounding.
  Three
and Six Months EndedFebruary 27, 2009 as
Compared to the Three and Six Months EndedFebruary 29,
2008
  Net
Sales
  Net sales
for the three months ended February 27, 2009 were $109.1 million, or a 34%
decrease from $164.5 million for the three months ended February 29, 2008. This
decrease was primarily due to a $54.1 million decrease in net sales of our
memory products and a $2.8 million decrease in net sales of our display
products, partially offset by an increase of $2.0 million in our embedded
products.  The overall decline in sales was primarily driven by
falling average selling prices year over year and a decrease in unit sales
volume.
 
 Net sales
for the six months ended February 27, 2009 were $249.9 million, or a 27%
decrease from $341.9 million for the six months ended February 29, 2008. This
decrease was primarily due to a $90.3 million decrease in net sales of our
memory products and a $4.3 million decrease in net sales of our display
products, partially offset by increase of $3.4 million in our embedded
products.  The overall decline in sales was primarily driven by
falling average selling prices year over year and a decrease in unit sales
volume.
 
 Cost
of Sales
  Cost of
sales for the three months ended February 27, 2009 was $85.0 million, or a 35%
decrease from $131.6 million for the three months ended February 29, 2008. Cost
of sales as a percent of net sales decreased to 78% for the three months ended
February 27, 2009, from 80% for the three months ended February 29, 2008. The
decrease in cost of sales was principally due to a $41.0 million decline in our
memory product material cost of sales and a $4.5 million decrease in our factory
overhead from reduced manufacturing activities.
 
 Cost of
sales for the six months ended February 27, 2009 was $200.0 million, or a 27%
decrease from $274.9 million for the six months ended February 29, 2008. Cost of
sales as a percent of net sales remained the same at 80% for the six months
ended February 27, 2009 and six months ended February 29, 2008. The decrease in
cost of sales was principally due to a $70.4 million decline in our memory
material cost of sales and a $5.1 million decrease in manufacturing activities,
partially offset by an increase of $1.5 million for inventory adjustments
related to increase in reserves for excess and obsolete
products.
 25
 Gross
Profit
  Gross
profit for the three months ended February 27, 2009 was $24.1 million, or a 27%
decrease from $32.9 million for the three months ended February 29, 2008. Gross
margin percentage increased from 20% for the three months ended February 29,
2008 to 22% for three months ended February 27, 2009. The decrease in gross
profit was primarily due to the lower net sales to our customers, while the
increase in gross margin percentage was principally due to a favorable mix shift
towards higher margin business.
 
 Gross
profit for the six months ended February 27, 2009 was $49.9 million, or a 26%
decrease from $67.0 million for the six months ended February 29, 2008. Gross
margin percentage remained the same at 20% for the six months ended February 29,
2008 and February 27, 2009. The decrease in gross profit was primarily due to
the lower net sales to our customers and falling average selling
prices.
  Research
and Development Expenses
  Research
and development, or R&D, expenses for the three months ended February 27,
2009 were $5.1 million compared to $4.6 million for the three months ended
February 29, 2008. This increase was primarily due to $1.3 million in additional
R&D expenses related to Adtron, partially offset by a $0.5 million reduction
in salaries expense due to a reduction in headcount.
 
 Research
and development, or R&D, expenses for the six months ended February 27, 2009
were $10.6 million compared to $9.3 million for the three months ended February
29, 2008. This increase was primarily due to $2.5 million in additional R&D
expenses related to Adtron, partially offset by a $1.3 million reduction in
salaries expense due to a reduction in headcount.
 
 Selling,
General and Administrative Expenses
  Selling,
general and administrative, or SG&A, expenses for the three months ended
February 27, 2009 were $13.8 million, or a 3% decrease from $14.3 million for
the three months ended February 29, 2008.  Sales and marketing
expenses remained the same quarter over quarter.  General and
administrative expenses decreased $0.5 million primarily due to a $0.8 million
decrease in headcount expense and a $0.5 million in bonus and other corporate
expense, partially offset by $0.8 million in earn-out expense related to the
Adtron acquisition.
 
 Selling,
general and administrative, or SG&A, expenses for the six months ended
February 27, 2009 were $28.2 million, or a 4% decrease from $29.4 million for
the six months ended February 29, 2008.  Sales and marketing expenses
remained the same year over year.  General and administrative expenses
decreased $1.4 million primarily due to a $0.9 million decrease in headcount
expense and a $1.3 million in bonus and other corporate expenses, partially
offset by $0.8 million in earn-out expense related to the Adtron
acquisition.
 
 Restructuring
and Goodwill Impairment Charges
  Restructuring
costs for the three months ended February 27, 2009 was $0.9 million, which was
mainly due to the FY09 restructuring plan initiated during the second quarter
for fiscal 2009. Goodwill impairment charges for the three months ended February
27, 2009 was $3.2 million related to the Adtron segment. We did not incur any
restructuring or goodwill impairment charges for the three months ended February
29, 2008.
  Restructuring
costs for the six months ended February 27, 2009 was $1.8 million, of which $1.0
million was related to our FY08 restructuring plan and $0.8 million related to
the FY09 restructuring plan.  Goodwill impairment charges for the six
months ended February 27, 2009 totaled $10.4 million related to the Adtron
segment. We did not incur any restructuring or goodwill impairment charges for
the six months ended February 29, 2008.
  Interest
Expense, Net
  Net
interest expense for the three months ended February 27, 2009 was $1.7 million,
compared to $1.3 million for the three months ended February 29,
2008.  The increase was primarily due to less interest income earned
because of significantly lower interest rates on bank deposits, while interest
expense decreased due to the decrease in interest rate on our long-term
debt.
 
 Net
interest expense for the six months ended February 27, 2009 was $3.5 million,
compared to $2.4 million for the six months ended February 29,
2008.  The increase was primarily due to less interest income earned
because of significantly lower interest rates on bank deposits, while interest
expense decreased due to the decrease in interest rate on our long-term
debt.
 26
 Other
Income (expense), net
  Net other
income for the three months ended February 27, 2009 was $0.1 million compared to
$0.4 million for the three months ended February 29, 2008. The decrease was
mainly driven by foreign currency transactions losses in our Brazil
operations.
 
 Net other
expense for the six months ended February 27, 2009 was $0.7 million compared to
other income of $1.8 million for the six months ended February 29, 2008. The
decrease was mainly driven by foreign currency transactions losses in our Brazil
operations.
 
 Provision
for Income Taxes
  The
effective tax rates for the three months ended February 27, 2009 and February
29, 2008 were approximately (216%), representing tax expense and a pre-tax loss,
and 12%, respectively.  The effective tax rates for the six months ended
February 27, 2009 and February 29, 2008 were approximately (65%) and 15%
respectively.  The effective tax rates differ from the 35% U.S.
statutory tax rate principally due to losses in the United States generating no
tax benefit (due to the full valuation allowance on U.S. deferred tax assets)
and the write-downs of non-deductible goodwill of $3.2 million and $10.4 million
for the three months and the six months ended February 27, 2009
respectively.  The losses in the United States and write-downs of
non-deductible goodwill increasing the effective tax rate were partially offset
by a lower effective tax rate on profits being generated in non-U.S. tax
jurisdictions.  Excluding the impact of the charge for non-deductible
goodwill write down, and including the losses in the United States, the adjusted
effective tax rate for the three months and the six months ended February 27,
2009 were 48% and 67%, respectively.  The increase in the adjusted
effective tax rate was principally due to losses in the United States and lower
effective tax rate on profits in non-U.S. tax jurisdictions for the three months
and six months ended February 27, 2009, when compared to the three months and
six months ended February 29, 2008.
  Liquidity
and Capital Resources
  Our
principal sources of liquidity are cash flow from operations and borrowings
under our senior secured credit facility. Our principal uses of cash are debt
service requirements as described below, capital expenditures, potential
acquisitions, research and development expenditures and working capital
requirements.   Cash and cash equivalents consist of funds held in
general checking accounts, money market accounts, certificates of deposits, and
short-term investments with an original maturity on the date of purchase of
three months or less.  The Company does not have investments in
variable rate demand notes or auction rate securities.
  Debt
Service. As of February 27, 2009, (1) we had total long-term indebtedness
of $81.3 million aggregate principal amount of our senior secured floating rate
notes outstanding; and (2) our senior secured credit facility was undrawn, with
$35.0 million of borrowing capacity available, subject to customary conditions.
Any inability to meet our significant debt service obligations could have
material consequences to our security holders.
  Senior Secured
Floating Rate Exchange Notes Due April 2012.Our senior secured
floating rate notes bear interest at a rate equal to LIBOR plus 5.50% per annum,
and are guaranteed by all of our subsidiaries, except for Estecom, and SMART
Modular Technologies (Deutschland) GmbH, and are secured by second-priority
liens on most of the assets securing our senior secured credit facility.
Interest on our notes is payable quarterly in cash. Our notes contain customary
covenants and events of default, including covenants that limit our ability to
incur debt, pay dividends and make investments. We were in compliance with such
covenants at February 27, 2009.
 
 Senior Secured
WellsFargoCredit
Facility.On November 26, 2008,
the First Amendment to Second Amended and Restated Loan and Security Agreement
(the "Amendment") was entered into by and among SMART Modular Technologies,
Inc., SMART Modular Technologies (Europe) Limited, and SMART Modular
Technologies (Puerto Rico) Inc., as borrowers, and Wells Fargo Bank, National
Association, as lender, arranger, administrative agent and security
trustee.   Our senior secured credit facility is available until
April 30, 2010, unless earlier terminated.
 
 The
amended financial covenants require that the borrowers maintain, as of the end
of each fiscal quarter, an Adjusted Quick Ratio equal to or greater than 1.45,
and, depending on the applicable fiscal quarter and based on the preceding four
fiscal quarters then ended, (i) an Adjusted EBITDA equal to or greater than $30
million to $45 million, and (ii) a Funded Debt to Adjusted EBITDA Ratio equal to
or less than 2.25 to 3.00. The Base Rate Margin and LIBOR Rate Margin were
increased to 2% and 3%, respectively. As of February 27, 2009, the revolving
credit facility was undrawn and had available borrowing capacity of $35 million
and we were in compliance with its covenants under the revolving credit
facility.
 
 Capital
Expenditures
  Future
capital expenditures focus on test and manufacturing equipment upgrades and/or
acquisitions, IT infrastructure and software upgrades. Our senior secured credit
facility contains restrictions on our ability to make capital expenditures.
Based on current estimates, we believe that the amount of capital expenditures
permitted to be made under the senior secured credit facility will be adequate
to implement our current plans.
 27
 Sources
of Funds
  We
anticipate that our current cash balance, together with our operating cash flow
and available borrowings under our senior secured credit facility, will be
sufficient to meet our working capital needs, and fund our R&D and capital
expenditures and service requirements on our debt obligations for at least the
next 12 months. However, our ability to make scheduled payments of principal, to
pay interest on or to refinance our indebtedness and to satisfy our other debt
obligations will depend upon our future operating performance, which will be
affected by general economic, financial, competitive, business and other factors
beyond our control.
  From time
to time we may explore additional financing methods and other means to lower our
cost of capital, which could include additional share issuance or debt financing
and the application of the proceeds there from to repay bank debt or other
indebtedness. In addition, in connection with any future acquisitions, we may
require additional funding in the form of additional debt or equity financing or
a combination thereof. There can be no assurance that any additional funding
will be available to us on acceptable terms.
  Historical
Trends
  Historically,
our financing requirements have been funded primarily through cash generated by
operating activities, credit facility borrowings, the sale of preferred shares
to and advances from our former principal shareholder, Modular, L.L.C, and our
initial public offering. As of February 27, 2009, our cash and cash equivalents
were $125.4 million.
  Cash Flows from
Operating Activities.Net cash provided by
operating activities was $24.6 million for the six months ended February 27,
2009, compared to net cash provided by operating activities of $19.8 million for
the six months ended February 29, 2008.
  Net cash
provided by operating activities of $24.6 million for the six months ended
February 27, 2009 was primarily comprised of:
 
 ·
                  Net
      loss, net of non-cash related expenses, of $12.1
  million;
 ·
                  A
      decrease in accounts receivable of $73.4
  million;
 ·
                  An
      increase in inventories of $26.6 million;
and
 ·
                  A
      decrease of $35.1million in accounts payable and accrued expenses and
      other current liabilities.
 
 Net cash
provided by operating activities of $19.8 million for the six months ended
February 29, 2008 was primarily comprised of:
 
 ·
                  Net
      income, net of non-cash related expenses, of $32.4
  million;
 ·
                  A
      decrease in accounts receivable of $22.8
  million;
 ·
                  A
      decrease in inventories of $3.7 million;
and
 ·
                  A
      decrease of $38.3 million in accounts payable and accrued expenses and
      other current liabilities.
  Cash Flows from
Investing Activities.Net cash used in investing activities was $11.4 million for the six
months ended February 27, 2009, compared to net cash used in investing
activities of $9.6 million for the six months ended February 29, 2008. The
change was primarily due to the $1.5 million in payment for contingent
consideration related to the Adtron earn-out and an increase of $0.6 million for
cash deposits on equipment purchased, partially offset by a decreased level of
capital expenditures of $0.4 million.
 Cash Flows from
Financing Activities.Net cash provided by financing activities was $0.5 million for the six
months ended February 27, 2009, compared to $0.3 million in net cash provided by
financing activities for the six months ended February 29, 2008. The change was
mainly attributed to the proceeds from exercises of stock options during the
respective periods.
 28
 Share
Repurchase Program
 
 On March
24, 2009, the Company’s Board of Directors authorized the repurchase of up to
$10.0 million of the Company’s ordinary shares.  The Company intends
to repurchase shares using its available cash.  The timing, duration,
and the exact number of shares to be purchased will be at the Company’s
discretion.  Under the repurchase program, depending on price,
regulatory requirements, market conditions and other factors, shares may be
purchased on the open market or in privately negotiated
transactions.  Purchases under this program may be commenced,
suspended, or terminated at any time without prior notice.
  Contractual
Obligations
  There
have been no material changes from contractual obligations previously disclosed
in our Annual Report on Form 10-K for the year ended August 29, 2008, except for
our commitments under operating leases.  See below for our contractual
commitments for operating leases after execution of our new operating lease
agreement on March 18, 2009:
 Payments
      Due by Period1
      Year
                                                            
                                                            
                                                            2-3
      Years
                                                            
                                                            
                                                            4-5
      Years
                                                            
                                                            
                                                            After
      5 Years
                                                            
                                                            
                                                            Total(In
      millions)Operating
      leases
                                                            
                                                            
                                                            1.4
                                                            
                                                            
                                                            
                                                            2.6
                                                            
                                                            
                                                            
                                                            1.2
                                                            
                                                            
                                                            
                                                            1.3
                                                            
                                                            
                                                            
                                                            6.5
  
 Off-Balance
Sheet Arrangements
  We do not
have any relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. In addition, we do not have any undisclosed borrowings or debt, and we
have not entered into any synthetic leases. We are, therefore, not materially
exposed to any financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.
  Inflation
  We do not
believe that inflation has had a material effect on our business, financial
condition or results of operations. If our costs were to become subject to
significant inflationary pressures, we may not be able to fully offset such
higher costs through price increases. Our inability or failure to do so could
adversely affect our business, financial condition and results of
operations.
  Recent
Accounting Pronouncements
  See
Note 1 of our notes to Unaudited Condensed Consolidated Financial
Statements for information regarding the effect of recent accounting
pronouncements on our financial statements.
 29
 Item
3. Quantitative and
Qualitative Disclosures About Market Risk
  Our
exposure to market rate risk includes risk of foreign exchange rate fluctuations
and change in interest rates.
  Foreign
Exchange Risks
  We are
subject to inherent risks attributed to operating in a global economy. Our
international sales and our operations in foreign countries make us subject to
risks associated with fluctuating currency values and exchange rates. Because
sales of our products have been denominated to date primarily in United States
dollars, increases in the value of the United States dollar could increase the
price of our products so that they become relatively more expensive to customers
in the local currency of a particular country, leading to a reduction in sales
and profitability in that country. As a result of our foreign operations, we
have revenues, costs, assets and liabilities that are denominated in foreign
currencies. Therefore, decreases in the value of the United States dollar could
result in significant increases in our manufacturing costs that could have a
material adverse effect on our business, financial condition and results of
operations. At present, we do not purchase financial instruments to hedge
foreign exchange risk, but may do so as circumstances warrant.
  For foreign operations using the local currency as their functional currency,
assets and liabilities are translated at exchange rates in effect at the balance
sheet date and income and expenses are translated at average exchange rates
during the period. The effect of this translation is reported in other
comprehensive income (loss). For the six months ended February 27, 2009, we
recorded foreign currency translation adjustment primarily related to our Brazil
operations of $22.7 million.  This significant cumulative translation
adjustment was due to the devaluation of the Brazilian currency against the U.S.
dollar.
 
 Interest
Rate Risk
  We are
subject to interest rate risk in connection with our long-term debt, including
the remaining $81.3 million of our senior secured floating rate exchange notes.
In addition, our Wells Fargo credit facility provides for borrowings of up to
$35.0 million that will also bear interest at variable rates. Assuming the Wells
Fargo credit facility is fully drawn and holding other variables constant and
excluding the impact of any hedging arrangements, each 1.0% increase in interest
rates on our variable rate borrowings would result in an increase in annual
interest expense and a decrease in our cash flows and income before taxes of
$1.2 million per year. We have entered into two simultaneous interest rate swap
arrangements for the purpose of fixing the interest rate on the remaining
portion of our long-term debt for the specified respective interest rate swap
periods. The interest rate swaps were for notional amounts of $41.3 and $40.0
million, bearing 9.78% and 9.97% fixed annual interest rate, respectively. One
interest rate swap expired on April 1, 2008 and the other one with a notional
amount of $40.0 million remains outstanding through April 28, 2010. However, we
cannot assure you that the outstanding interest rate swap or any other interest
rate swaps that we implement will be effective.
  Item 4. Controls
and Procedures
  (a) Evaluation of Disclosure Controls
and Procedures. Our President and Chief Executive Officer and
our  Senior Vice President and Chief Financial Officer, after
evaluating the effectiveness of the Company’s “disclosure controls and
procedures” (as defined in the Securities Exchange Act Rules 13a-15(e) or
15d-15(e)) as of the end of the period covered by this quarterly report, have
concluded that our disclosure controls and procedures are effective based on
their evaluation of these controls and procedures required by paragraph (b) of
Exchange Act Rules 13a-15 or 15d-15.
  (b) Changes in Internal Control Over
Financial Reporting.  There were no changes in our internal
control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
 30
 PART II. OTHER
INFORMATION
  Item 1. Legal
Proceedings
  See Note
9 of our notes to Unaudited Condensed Consolidated Financial Statements for
information regarding legal matters.
 
 Item
1A. Risk Factors
  There
have been no material changes from risk factors previously disclosed in our
Annual Report on Form 10-K for the year ended August 29, 2008 that was filed on
November 12, 2008, except for the following:
  Risks
related to our business previously disclosed in our Annual Report on Form 10-K
for the year ended August 29, 2008 that was filed on November 12, 2008, are
updated by adding the following:
  Restrictive covenants contained in our senior
secured revolving line of credit facility (“WF Credit Facility”) and the
indenture relating to our senior secured floating rate notes (the “Notes”) may
restrict our current and future operations, particularly our ability to respond
to changes or to take some actions and our failure to comply with such
covenants, whether due to events beyond our control or otherwise, could result
in an event of default which could materially and adversely affect our operating
results and our financial condition.
  The indenture relating to our Notes contains various covenants that limit our
ability to engage in certain transactions. In addition, our WF Credit Facility
contains other and more restrictive covenants and prohibits us from voluntarily
prepaying certain of our other indebtedness. Our WF Credit Facility also
requires us to maintain specified financial ratios and satisfy other financial
condition tests. We cannot be assured that we will meet those financial ratios
and tests in the future. A breach of any of these covenants could result in a
default under our WF Credit Facility and, in the event that there is an
acceleration of more than $10 million under our WF Credit Facility, in an
acceleration of our Notes.
  If
there were an uncured event of default under our debt instruments, the holders
of the defaulted debt could cause all amounts outstanding with respect to that
debt to become due and payable immediately. We cannot be assured that our assets
or cash flow would be sufficient to fully repay borrowings under our outstanding
debt instruments, either upon maturity or acceleration upon an uncured event of
default or, if we were required to repurchase the Notes upon a change of
control, that we would be able to refinance or restructure the payments on such
debt. Further, if we are unable to repay, refinance or restructure our
indebtedness under the WF Credit Facility, the lender could
proceed against the collateral securing that indebtedness, our Notes and certain
other indebtedness. In addition, any event of default or declaration of
acceleration under one debt instrument could also result in an event of default
under one or more of our other debt instruments.
  Relocating our
corporate headquarters may potentially disrupt our business and may result in
costs substantially higher than we expect.
 
 The lease
for our 130,000 square foot facility in Fremont, California, which serves as our
principal executive offices, expires on April 30, 2009.  We are in the
process of relocating to a 79,480 square foot facility in Newark, California,
which requires tenant improvements be made prior to our move.  The
timing of obtaining building permits, landlord and/or city and other regulatory
approvals, and the construction of the tenant improvements are subject to delay
and not under our complete control.  There may also be cost overruns
in connection with the construction of the tenant improvements.  Any delay
in vacating our Fremont facility would result in a 50% escalation in rental
expense for the Fremont facility, in addition to our new rental expense for the
Newark facility.  In addition, we would be subject to liability for
damages that the landlord may incur as a result of our delay in vacating the
Fremont facility.  The relocation of our operations and employees may
create disruption and the risk of delays due to customer qualification of a new
facility to manufacture products and the start-up cost of a new facility could
negatively impact our business, financial condition and results of
operations.
 
 We
may not be able to effectively implement our restructuring plans, and our
restructuring plans may not result in the expected benefits, which would
negatively impact our future results of operations.
  In January 2009,
we initiated a second restructuring plan to further align our cost structure
with expected revenue.  This restructuring plan was intended to
decrease various Company costs and improve cash flow. We cannot assure you that
we will be able to successfully complete and realize the expected benefits of
this restructuring plan. The restructuring plan may involve higher costs, a
longer timetable, or additional restructuring activity than we currently
anticipate and could negatively impact our results of operations and cash
flow.  In addition, our restructuring plan may have other
consequences, such as attrition beyond our planned reduction in workforce or a
negative impact on employee morale.
 31
 Item 4.  Submission of Matters to a Vote of
Security Holders
  At our
Annual General Meeting of Shareholders held on January 28, 2009, the following
actions were taken:
  1.           Election
of the Board of Directors comprised of the following members:
  Nominee
                            
                            Votes
      For
                            
                            Votes
      WithheldIain
      MacKenzie
                            
                            56,057,706
                            
                            4,007,682Ajay
      Shah
                            
                            56,057,109
                            
                            4,008,279Dipanjan
      Deb
                            
                            56,133,251
                            
                            3,932,137Eugene
      Frantz
                            
                            56,044,039
                            
                            4,021,349Dennis
      McKenna
                            
                            59,474,453
                            
                            590,935Harry
      W. (Webb) McKinney
                            
                            58,092,828
                            
                            1,972,560Dr.
      C.S. Park
                            
                            56,449,375
                            
                            3,616,013Mukesh
      Patel
                            
                            56,059,559
                            
                            4,005,829Clifton
      Thomas Weatherford
                            
                            58,105,769
                            
                            1,959,619
 
  2.           Vote
to ratify the selection of KPMG LLP as independent registered public accounting
firm of the Company for the fiscal year ending August 28, 2009.
  Votes
      For
                                        
                                        Votes
      Against
                                        
                                        Abstain
                                        
                                        Non-Votes60,019,562
                                        
                                        24,178
                                        
                                        21,648
                                        
                                        0
 
 3.           Vote
to approve the option exchange program for employees, except for officers and
directors.
 Votes
      For
                                  
                                  Votes
      Against
                                  
                                  Abstain
                                  
                                  Non-Votes25,483,135
                                  
                                  30,152,693
                                  
                                  36,300
                                  
                                  4,393,260
  32
 Item 6.  Exhibits
  The
following exhibits are filed herewith:
  Exhibit
      No.
                    
                    Exhibit
      Title31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                    
                    Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
                    
                    Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200210.30
                    
                    Lease
      Agreement, dated March 18, 2009, by and between Newark Eureka Industrial
      Capital LLC and SMART Modular Technologies,
Inc.
  33
  SMART
MODULAR TECHNOLOGIES (WWH), INC.
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, SMART Modular
Technologies (WWH), Inc. has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
  SMART
MODULAR TECHNOLOGIES (WWH), INC.
 
  By:
                    /s/  IAIN
      MACKENZIEName:
                    Iain
      MacKenzieTitle:
                    President
      and Chief Executive
Officer
 
  By:
                    /s/
      BARRY ZWARENSTEINName:
                    Barry
      ZwarensteinTitle:
                    Senior
      Vice President and Chief Financial
Officer
   Date:
April 7, 2009
 34
  EXHIBIT INDEX
  Exhibit
      No.
                      
                      Exhibit
      Title31.1
                      
                      Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                      
                      Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232
                      
                      Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200210.30
                      
                      Lease
      Agreement, dated March 18, 2009, by and between Newark Eureka Industrial
      Capital LLC and SMART Modular Technologies,
Inc.
  35