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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549

FORM 10-Q

|x                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|                                                               |                                                                                         
|For the quarterly period ended March 31, 2003                 
|                                                               |                                                                                         
|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 0-19654                                
|                                                               |                                                                                         
|VITESSE SEMICONDUCTOR CORPORATION                             
|(Exact name of registrant as specified in its charter)        
|                                                              
|                                                              
|                                                              
|Delaware                                                       |                                                                                         
|(State or other jurisdiction of incorporation or organization) |                                                                                         
|                                                               |                                                                                         
|741 Calle Plano Camarillo, CA 93012                           
|(Address of principal executive offices)                      
|                                                               |                                                                                         
|(805) 388-3700                                                
|(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 and (2) has been subject to such filing requirements for the past 90 days:

|Yes x | No o
|----- | ----

Indicate by
check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

|Yes x | No o
|----- | ----

As of April 30,
2003, there were 205,561,504 shares of $0.01 par value common stock outstanding.

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VITESSE SEMICONDUCTOR CORPORATION

TABLE OF CONTENTS

|        |                                                                                                                                                                                                       | Page Number
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------
|        |                                                                                                                                                                                                       |            
|        |                                                                                                                                                                                                       |            
|PART I  | FINANCIAL INFORMATION                                                                                                                                                                                 |            
|        |                                                                                                                                                                                                       |            
|Item 1  | Financial Statements:                                                                                                                                                                                 |            
|        |                                                                                                                                                                                                       |            
|        | Unaudited Condensed Consolidated Balance Sheets as of March 31, 2003 and September 30, 2002                                                                                                           | 1          
|        |                                                                                                                                                                                                       |            
|        | Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2003, March 31, 2002 and December 31, 2002, and the six months ended March 31, 2003 and March 31, 2002 | 2          
|        |                                                                                                                                                                                                       |            
|        | Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2003 and March 31, 2002                                                                                  | 3          
|        |                                                                                                                                                                                                       |            
|        | Notes to Unaudited Condensed Consolidated Financial Statements                                                                                                                                        | 4          
|        |                                                                                                                                                                                                       |            
|Item 2  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                 | 9          
|        |                                                                                                                                                                                                       |            
|Item 3  | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                                             | 19         
|        |                                                                                                                                                                                                       |            
|Item 4  | Controls and Procedures                                                                                                                                                                               | 20         
|        |                                                                                                                                                                                                       |            
|PART II | OTHER INFORMATION                                                                                                                                                                                     |            
|        |                                                                                                                                                                                                       |            
|Item 2  | Changes in Securities                                                                                                                                                                                 | 21         
|        |                                                                                                                                                                                                       |            
|Item 4  | Submission of Matters to a Vote of Security Holders                                                                                                                                                   | 21         
|        |                                                                                                                                                                                                       |            
|Item 6  | Exhibits and Reports on Form 8-K                                                                                                                                                                      | 21         
|        |                                                                                                                                                                                                       |            
|        | Signature                                                                                                                                                                                             | 22         
|        |                                                                                                                                                                                                       |            
|        | Certifications                                                                                                                                                                                        | 23         

i



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PART I FINANCIAL INFORMATION

VITESSE SEMICONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

|                                                                                                                                                                              |  | March 31, 2003 |           | September 30, 2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ------------------ | -
|                                                                                                                                                                              |  |                |           |                    |  
|ASSETS                                                                                                                                                                        |  |                |           |                    |  
|Current assets:                                                                                                                                                               |  |                |           |                    |  
|Cash and cash equivalents                                                                                                                                                     |  | $              | 49,173    |                    | $
|Short-term investments (principally marketable securities)                                                                                                                    |  |                | 184,359   |                    |  
|Accounts receivable, net                                                                                                                                                      |  |                | 34,957    |                    |  
|Inventories, net                                                                                                                                                              |  |                | 32,247    |                    |  
|Prepaid expenses and other current assets                                                                                                                                     |  |                | 7,318     |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|Total current assets                                                                                                                                                          |  |                | 308,054   |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|Property and equipment, net                                                                                                                                                   |  |                | 147,113   |                    |  
|Restricted long-term deposits                                                                                                                                                 |  |                | 57,101    |                    |  
|Goodwill, net                                                                                                                                                                 |  |                | 170,995   |                    |  
|Other intangible assets, net                                                                                                                                                  |  |                | 19,281    |                    |  
|Other assets                                                                                                                                                                  |  |                | 39,436    |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|                                                                                                                                                                              |  | $              | 741,980   |                    | $
|                                                                                                                                                                              |  |                |           |                    |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                          |  |                |           |                    |  
|Current liabilities:                                                                                                                                                          |  |                |           |                    |  
|Current portion of long-term debt                                                                                                                                             |  | $              | 1,020     |                    | $
|Current portion of convertible subordinated debt                                                                                                                              |  |                |          |                    |  
|Current portion of accrued restructuring                                                                                                                                      |  |                | 20,312    |                    |  
|Current portion of deferred gain                                                                                                                                              |  |                | 2,265     |                    |  
|Accounts payable                                                                                                                                                              |  |                | 13,741    |                    |  
|Accrued expenses and other current liabilities                                                                                                                                |  |                | 14,343    |                    |  
|Income taxes payable                                                                                                                                                          |  |                | 1,077     |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|Total current liabilities                                                                                                                                                     |  |                | 52,758    |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|Long-term debt                                                                                                                                                                |  |                | 226       |                    |  
|Long-term accrued restructuring                                                                                                                                               |  |                | 10,902    |                    |  
|Deferred gain on derivative instrument                                                                                                                                        |  |                | 6,501     |                    |  
|Other long-term liabilities                                                                                                                                                   |  |                | 7,043     |                    |  
|Convertible subordinated debt                                                                                                                                                 |  |                | 195,145   |                    |  
|Minority interest                                                                                                                                                             |  |                | 4,631     |                    |  
|Shareholders equity:                                                                                                                                                         |  |                |           |                    |  
|Common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 202,978,109 and 200,158,511 shares on March 31,
2003 and September 30, 2002, respectively |  |                | 2,040     |                    |  
|Additional paid-in capital                                                                                                                                                    |  |                | 1,404,720 |                    |  
|Deferred compensation                                                                                                                                                         |  |                | (34,460   | )                  |  
|Accumulated other comprehensive income                                                                                                                                        |  |                | 48        |                    |  
|Accumulated deficit                                                                                                                                                           |  |                | (907,574  | )                  |  
|                                                                                                                                                                              |  |                |           |                    |  
|Total shareholders equity                                                                                                                                                    |  |                | 464,774   |                    |  
|                                                                                                                                                                              |  |                |           |                    |  
|                                                                                                                                                                              |  | $              | 741,980   |                    | $
|                                                                                                                                                                              |  |                |           |                    |  

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1



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VITESSE SEMICONDUCTOR CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)(in thousands, except per share data)

|                                       |  | Three Months Ended |         | Six Months Ended |  
|-------------------------------------- |  | ------------------ | ------- | ---------------- | -
|                                       |  |                    |         |                  |  
|                                       |  | Mar. 31, 2003      |         | Mar. 31, 2002    |  
|                                       |  |                    |         |                  |  
|Revenues                               |  | $                  | 40,172  |                  | $
|Costs and expenses:                    |  |                    |         |                  |  
|Cost of revenues                       |  |                    | 19,240  |                  |  
|Engineering, research and development  |  |                    | 29,692  |                  |  
|Selling, general and administrative    |  |                    | 14,112  |                  |  
|Restructuring charge                   |  |                    | 336     |                  |  
|Amortization of intangible assets      |  |                    | 2,146   |                  |  
|                                       |  |                    |         |                  |  
|Total costs and expenses               |  |                    | 65,526  |                  |  
|                                       |  |                    |         |                  |  
|Loss from operations                   |  |                    | (25,354 | )                |  
|Interest income                        |  |                    | 1,196   |                  |  
|Interest expense                       |  |                    | (1,366  | )                |  
|Gain on extinguishment of debt         |  |                    |        |                  |  
|Other income                           |  |                    | 408     |                  |  
|                                       |  |                    |         |                  |  
|Other income, net                      |  |                    | 238     |                  |  
|                                       |  |                    |         |                  |  
|Loss before income taxes               |  |                    | (25,116 | )                |  
|Income tax expense                     |  |                    | 30      |                  |  
|                                       |  |                    |         |                  |  
|Net loss                               |  | $                  | (25,146 | )                | $
|                                       |  |                    |         |                  |  
|Net loss per share:                    |  |                    |         |                  |  
|Basic and diluted                      |  | $                  | (0.12   | )                | $
|                                       |  |                    |         |                  |  
|Shares used in per share computations: |  |                    |         |                  |  
|Basic and diluted                      |  |                    | 201,694 |                  |  
|                                       |  |                    |         |                  |  

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2



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VITESSE SEMICONDUCTOR CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)

|                                                                                  |  | Six Months Ended |         
|--------------------------------------------------------------------------------- |  | ---------------- | --------
|                                                                                  |  |                  |         
|                                                                                  |  | March 31, 2003   |         
|                                                                                  |  |                  |         
|Cash flows from operating activities:                                             |  |                  |         
|Net loss                                                                          |  | $                | (36,195 
|Adjustments to reconcile net loss to net cash used in operating activities:       |  |                  |         
|Depreciation and amortization                                                     |  |                  | 20,792  
|Amortization of debt issue costs                                                  |  |                  | 563     
|Amortization of deferred compensation                                             |  |                  | 12,540  
|Impairment of other long-term investments                                         |  |                  | 76      
|Property and equipment write off                                                  |  |                  |        
|Inventory write off                                                               |  |                  |        
|Prepaid maintenance write off                                                     |  |                  |        
|Gain on extinguishment of debt                                                    |  |                  | (16,550 
|Gain on derivative instruments                                                    |  |                  | (1,325  
|Change in assets and liabilities:                                                 |  |                  |         
|(Increase) decrease in:                                                           |  |                  |         
|Accounts receivable, net                                                          |  |                  | 2,209   
|Inventories, net                                                                  |  |                  | (3,286  
|Prepaid expenses and other current assets                                         |  |                  | 984     
|Other assets                                                                      |  |                  | 2,307   
|Increase (decrease) in:                                                           |  |                  |         
|Accounts payable                                                                  |  |                  | 2,054   
|Accrued expenses and other current liabilities                                    |  |                  | (5,500  
|Accrued restructuring                                                             |  |                  | (5,275  
|Deferred gain on derivative instrument                                            |  |                  | 1,200   
|Income taxes payable                                                              |  |                  | (46     
|                                                                                  |  |                  |         
|Net cash used in operating activities                                             |  |                  | (25,452 
|                                                                                  |  |                  |         
|Cash flows from investing activities:                                             |  |                  |         
|Purchases of investments                                                          |  |                  | (223,194
|Proceeds from sale of investments                                                 |  |                  | 238,903 
|Capital expenditures                                                              |  |                  | (3,278  
|Restricted long-term deposits                                                     |  |                  | 366     
|Business acquisition, net of cash acquired                                        |  |                  | (1,556  
|                                                                                  |  |                  |         
|Net cash provided by investing activities                                         |  |                  | 11,241  
|                                                                                  |  |                  |         
|Cash flows from financing activities:                                             |  |                  |         
|Principal payments under long-term debt and capital leases, net                   |  |                  | (615    
|Repurchase of convertible subordinated debt                                       |  |                  | (51,052 
|Capital contributions by minority interest limited partners                       |  |                  |        
|Proceeds from issuance of common stock, net                                       |  |                  | 3,162   
|                                                                                  |  |                  |         
|Net cash used in financing activities                                             |  |                  | (48,505 
|                                                                                  |  |                  |         
|Net increase (decrease) in cash and cash equivalents                              |  |                  | (62,716 
|Cash and cash equivalents at beginning of period                                  |  |                  | 111,889 
|                                                                                  |  |                  |         
|Cash and cash equivalents at end of period                                        |  | $                | 49,173  
|                                                                                  |  |                  |         
|Supplemental disclosures of cash flow information:                                |  |                  |         
|Cash paid during the period for:                                                  |  |                  |         
|Interest                                                                          |  | $                | 2,697   
|                                                                                  |  |                  |         
|Income taxes                                                                      |  | $                | 46      
|                                                                                  |  |                  |         
|Supplemental disclosures of non-cash transactions:                                |  |                  |         
|Acquisition of equipment under operating leases                                   |  | $                | 32,525  
|Common stock issued in business acquisition                                       |  | $                | 741     
|Stock options issued in business acquisition                                      |  | $                | 2,025   
|Minority interest limited partners share of impaired other long-term investments |  | $                | 23      
|Property and equipment financing                                                  |  | $                |        
|Cancellation of stock options                                                     |  | $                |        
|Reversal of acquisition costs                                                     |  | $                |        

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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VITESSE SEMICONDUCTOR CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    Basis of Presentation and
Significant Accounting Policies

The accompanying condensed consolidated financial statements are unaudited and include the accounts
of Vitesse Semiconductor Corporation and its subsidiaries (the Company). All intercompany accounts and transactions have been eliminated. In managements opinion, all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair presentation of financial condition and results of operations are reflected in the attached interim financial statements. This report should be read in conjunction with the audited financial statements presented in the 2002
Annual Report. Footnotes and other disclosures which would substantially duplicate the disclosures in the Companys audited financial statements for fiscal year 2002 contained in the Annual Report have been omitted. The interim financial
information herein is not necessarily representative of the results to be expected for any subsequent period.

Cash Equivalents and Investments

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments with
maturities over three months and up to one year are considered short-term investments and investments with maturities over one year are considered long-term investments. Cash equivalents and investments are principally comprised of money market
accounts, commercial paper rated A-1/P-1 and obligations of the U.S. government and its agencies. Under Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company
classifies its securities included under investments as available-for-sale or held-to-maturity at the time of purchase and re-evaluates such designation as of each balance sheet date. Investments classified as held-to-maturity securities are
recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. All maturities of debt securities classified as held-to-maturity are within three years. Marketable securities not classified as held-to-maturity are
classified as available-for-sale and reported at fair value. Unrealized gains and losses on these investments, net of any related tax effect, are included in equity as a separate component of shareholders equity. As of March 31, 2003, all
investments were classified as available-for-sale.

Derivative Instruments and Hedging Activities

The Company utilizes interest rate swap agreements to manage interest rate exposures in accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS No. 133),and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activitiesan Amendment of SFAS No. 133.The Company records all derivatives on the
balance sheet at fair value.

Computation of Net Income (Loss) per Share

Stock options and other convertible securities exercisable for 53,469,568, 43,303,153 and 51,019,489 shares that were outstanding at March 31, 2003 and 2002, and
December 31, 2002, respectively, were not included in the computation of diluted net loss per share, as the effect of their inclusion would be antidilutive. The antidilutive common stock equivalents consist of employee stock options and the
convertible subordinated debentures that are convertible into the Companys common stock at a conversion price of $112.19, and consideration for a business acquisition that is payable in stock or cash at the Companys option.

Reclassifications

Where necessary, prior periods
information has been reclassified to conform to the current period condensed consolidated financial statement presentation.

Note 2.    Restructuring Costs

In fiscal 2001 and 2002, the Company implemented several restructuring plans as a result of the continued decrease in demand for its products, a
shift in the semiconductor process technology and the need to align its cost structure with significantly reduced revenue levels. These restructuring plans included the termination of certain product lines, curtailment of certain research and
development projects, a resulting workforce reduction, and the consolidation of excess facilities. In connection with these restructuring plans, the Company also wrote down certain fixed assets which were deemed to be impaired, and accrued costs
associated with non-cancelable equipment and software contracts. Restructuring costs of $212.5 million and $3.7 million were recognized in fiscal 2002 and 2001, respectively.   The Company incurred an additional charge of $0.3 million in
the quarter ended March 31, 2003, relating to the restructuring plan implemented in the quarter ended June 30, 2002.  A rollforward of the liabilities related to these restructuring charges is outlined as follows (in thousands):

4



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|                              |  | Workforce Reduction |       | Excess Facilities |  | Contract Settlement Costs |   | Total |       
|----------------------------- |  | ------------------- | ----- | ----------------- |  | ------------------------- | - | ----- | ------
|                              |  |                     |       |                   |  |                           |   |       |       
|Balance at September 30, 2002 |  | $                   | 1,578 |                   |  | 3,404                     |   |       | 31,507
|Total charge                  |  |                     | 336   |                   |  |                          |   |       |      
|Cash payments                 |  |                     | (985  | )                 |  | (980                      | ) |       | (3,646
|                              |  |                     |       |                   |  |                           |   |       |       
|Balance at March 31, 2003     |  |                     | 929   |                   |  | 2,424                     |   |       | 27,861
|                              |  |                     |       |                   |  |                           |   |       |       

Workforce reduction included the cost of severance and
related benefits of 478 employees affected by the restructuring plans. The Company expects to complete the severance and fringe benefits payouts by March 2005.

The excess facilities charges included lease termination payments, non-cancelable lease costs and write off of leasehold improvements and office equipment related to
these leases.  These costs will be paid over the respective lease terms through February 2004.

Contract settlements costs represent
future purchase commitments related to unused licenses of non-cancelable software contracts, and the residual value guaranteed under certain equipment operating leases. The Company calculated the number of design software licenses that it would not
be using but was contractually obligated for, and accrued for such costs. The accrual will be fully utilized by March 2005. In the case of equipment under operating leases, the Company identified the underlying equipment that was not being used. For
this equipment the Company determined the estimated fair market value, and compared this amount to the guaranteed residual value. The Company recorded the charge for the difference between the estimated fair market value and the guaranteed residual
value.

Note 3.    Purchase Accounting Business Combination

On January 31, 2003, the Company acquired all of the equity interests of APT Technologies, Inc. (APT) in exchange for an aggregate of approximately $10.0
to $14.4 million in cash and stock and the assumption of stock options.  Of the total purchase price, approximately $2.3 million was paid in cash and stock at closing, and the remaining $7.7 to $12.1 million of consideration will be paid in
cash and/or stock between April 2003 and June 2007, and will be determined in part based on the future results of the acquired business.  The consideration was preliminarily allocated based on the fair values of the tangible assets and
liabilities acquired, including deferred compensation of $0.9 million, with the excess consideration of $14.9 million recorded as goodwill.  The Company is in the process of obtaining all of the necessary information to finalize the allocation
between goodwill and other intangible assets.  The operations of APT are included from the date of acquisition.  Pro forma results of operations have not been presented because the effects of this acquisition were not material.

5



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Note 4.    Goodwill and Other Intangible Assets

The following table presents detail of the Companys goodwill (in thousands):

|Balance as of September 30, 2002 |  | $ | 156,005 | 
|-------------------------------- |  | - | ------- | 
|Goodwill acquired                |  |   | 14,990  | 
|                                 |  |   |         | 
|Balance as of March 31, 2003     |  | $ | 170,995 | 
|                                 |  |   |         | 

The following table presents
details of the Companys total other intangible assets (in thousands):

|                         |  | Gross Carrying Amount |        | Accumulated Amortization |   | Net Balance |  
|------------------------ |  | --------------------- | ------ | ------------------------ | - | ----------- | -
|                         |  |                       |        |                          |   |             |  
|March 31, 2003           |  |                       |        |                          |   |             |  
|Customer relationships   |  | $                     | 813    |                          | $ | (813        | )
|Technology               |  |                       | 36,765 |                          |   | (18,737     | )
|Covenants not to compete |  |                       | 4,000  |                          |   | (2,747      | )
|                         |  |                       |        |                          |   |             |  
|Total                    |  | $                     | 41,578 |                          | $ | (22,297     | )
|                         |  |                       |        |                          |   |             |  
|September 30, 2002       |  |                       |        |                          |   |             |  
|Customer relationships   |  | $                     | 813    |                          | $ | (813        | )
|Technology               |  |                       | 36,765 |                          |   | (15,111     | )
|Covenants not to compete |  |                       | 4,000  |                          |   | (2,081      | )
|                         |  |                       |        |                          |   |             |  
|Total                    |  | $                     | 41,578 |                          | $ | (18,005     | )
|                         |  |                       |        |                          |   |             |  

The estimated future amortization
expense of other intangible assets is as follows (in thousands):

|Fiscal year |  | Amount |       
|----------- |  | ------ | ------
|            |  |        |       
|2003        |  | $      | 3,888 
|2004        |  |        | 6,513 
|2005        |  |        | 5,453 
|2006        |  |        | 3,011 
|2007        |  |        | 190   
|Thereafter  |  |        | 226   
|            |  |        |       
|Total       |  | $      | 19,281

The Company only
operates within one reporting unit as defined by SFAS No. 142, Goodwill and Other Intangible Assets(SFAS No. 142).Therefore, any allocation of goodwill is not required.

The Company is required to perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances.   In fiscal 2002, the
Company recorded goodwill and other intangible asset impairment of $403.0 million. As of March 31, 2003, there was no additional impairment of goodwill.  Future goodwill impairment tests may result in charges to earnings if the Company
determines that goodwill has become impaired.

6



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Note 5.    Inventories, net

Inventories consist of the following (in thousands):

|                                   |  | March 31, 2003 |        | September 30, 2002 |  
|---------------------------------- |  | -------------- | ------ | ------------------ | -
|                                   |  |                |        |                    |  
|Raw materials                      |  | $              | 4,591  |                    | $
|Work in process and finished goods |  |                | 27,656 |                    |  
|                                   |  |                |        |                    |  
|                                   |  | $              | 32,247 |                    | $
|                                   |  |                |        |                    |  

Note 6.    Debt

During the first quarter of fiscal 2003, the Company purchased $68.6 million principal amount of its 4% convertible subordinated debentures due March 2005 at
prevailing market prices, for an aggregate amount of approximately $51.1 million. As a result, the Company recorded a gain on early extinguishment of debt of approximately $16.5 million, net of a proportion of deferred debt issuance costs of $1.0
million.  The Company did not purchase any of its subordinated debentures during the three months ended March 31, 2003.

Note 7.    Derivative Instruments and Hedging
Activities

In the six months ended March 31, 2003, the Company entered into several interest-rate related derivative instruments to
manage its exposure on its debt instruments.  The Company does not enter into derivative instruments for trading or speculative purposes.

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is
the risk of the counter-party failing to perform under the terms of the derivative contract when the contracts value is in the Companys favor. The Company minimizes the credit risk in derivative instruments by entering into transactions
with high-quality counterparties.

Market risk is the adverse effect on the value of a financial instrument that results from a change in
interest rates. The market risk associated with the interest-rate contract is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash
flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate risk attributable to both the Companys outstanding or forecasted debt obligations as well as the Companys
offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on the Companys debt.

The Company uses fixed debt to finance its operations. The debt obligation exposes the Company to variability in the fair value of debt due to
changes in interest rates. Management believes it is prudent to limit the variability. To meet this objective, management entered into interest rate swap agreements during the first half of fiscal 2003 to manage fluctuations in debt resulting from
interest rate risk and designated these agreements as hedging instruments in a fair value hedging relationship under SFAS No. 133. These swaps changed the fixed-rate exposure on the debt to variable. Under the terms of the interest rate swaps, the
Company receives fixed interest rate payments and makes variable interest rate payments, thereby managing the value of debt.

Changes in
the fair value of the interest rate swaps designated as hedging instruments that effectively offset the fair value variability associated with fixed-rate, long-term debt are reported in interest expense as a yield adjustment of the hedged debt.

Interest expense for the six months ended March 31, 2003 includes a deminimus amount of net losses representing fair value hedge
ineffectiveness arising from slight differences between the fair value change in the interest rate swaps and the change in fair value of the hedged debt obligation.

As of March 31, 2003, the Company had terminated all of its interest rate swap agreements entered into since October 1, 2002.  Based on these terminations, the
Company recorded a deferred gain of $1.2 million.  The gain will be amortized over the remaining life of the convertible subordinated debentures due March 2005.

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Note 8.    Accounting for Stock Options

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based Compensation  Transition and Disclosure (SFAS No. 148).  SFAS No.
148 amends SFAS No. 123,  Accounting for Stock-Based Compensation (SFAS No. 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee
compensation.  In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results.

The Company applies the intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No.25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation,
an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed-plan stock options.  Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock
exceeded the exercise price.  SFAS No. 123 established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans.  As allowed by SFAS No. 123, the Company has elected
to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The following table illustrates the effect on net loss if the fair-value-based method had been
applied to all outstanding and unvested awards in each period (in thousands, except per share data).

|                                                                                                           |  | Three months ended |         | Six months ended |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ---------------- | -
|                                                                                                           |  |                    |         |                  |  
|                                                                                                           |  | March 31, 2003     |         | March 31, 2002   |  
|                                                                                                           |  |                    |         |                  |  
|Net loss as reported                                                                                       |  | $                  | (25,146 | )                | $
|Add: Stock-based employee compensation expense  included in reported net loss                              |  | $                  | 6,178   |                  | $
|Deduct: Stock based employee compensation expense determined under fair value based methods for all
awards |  | $                  | (14,876 | )                | $
|Adjusted net loss                                                                                          |  | $                  | (33,844 | )                | $
|Net loss per share as reported  basic and diluted                                                         |  | $                  | (0.12   | )                | $
|Adjusted net loss per share  basic and diluted                                                            |  | $                  | (0.17   | )                | $

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Note 9.    Significant Customers, Concentration of Credit Risk and Segment Information

In the second quarter of fiscal 2003, one customer accounted for greater than 10% of total revenues.  In the second quarter of fiscal 2002, no customer accounted
for greater than 10% of total revenues.

The Company generally sells its products to customers engaged in the design and/or manufacture of
communications and storage products.  Substantially all the Companys trade accounts receivable are due from such sources.

The
Company has one reportable operating segment as defined by SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information.  Substantially all long-lived assets are located in the United States.

Revenues from telecommunications and data communications products were $11.1 million and $29.1 million in the second quarter of fiscal 2003, and $20.9
million and $21.1 million in the second quarter of fiscal 2002, respectively. Revenues from telecommunications and data communications products were $22.2 million and $56.2 million in the six months ended March, 31, 2003, and $41.9 million and $39.1
million in the six months ended March 31, 2002, respectively

Revenues within the United States accounted for 70% and 77% of total
revenues in the second quarters of fiscal 2003 and 2002, respectively.

Note 10.    Subsequent Event

On April 1, 2003, the Company entered into an interest rate swap agreement to reduce its exposure to market risks from changing interest rates.

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

The information
set forth in Managements Discussion and Analysis of Financial Condition and Results of Operations below includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended
(the Securities Act), in particular, in Results of OperationsRevenues, Cost of Revenues, Interest Income and Interest Expense and Liquidity and Capital Resources,
and is subject to the safe harbor created by that section. Factors that management believes could cause results to differ materially from those projected in the forward looking statements are set forth below in Managements Discussion and
Analysis of Financial Condition and Results of Operations and Factors That May Affect Future Operating Results.

Results of Operations

Revenues

Total revenues in the second quarter of fiscal 2003 were $40.2
million, a decrease of 4.5% from the $42.1 million recorded in the second quarter of fiscal 2002 and an increase of 5.2% from the $38.2 million recorded in the prior quarter.  For the six months ended March 31, 2003, total revenues were $78.4
million, a decrease of 3.4% from the $81.2 million recorded in the six months ended March 31, 2002.  Revenues have remained relatively flat since the fourth quarter of fiscal 2001 due to continued adverse market conditions and the reduction in
demand from our communications customers that began in fiscal 2001. During fiscal 2001, original equipment manufacturers, (OEMs) (who account for a majority of our sales) started experiencing a sharp decline in demand from their
customers for several reasons. First, many financially weak telecommunication carriers either ceased operations or consolidated with other carriers, leading to a drop in demand for networking equipment. Second, due to excess fiber capacity in the
telecommunications infrastructure, network service providers spent less on networking equipment that our customers sell and which includes our products. Third, the weakening economy drove many enterprises to either cease operations or to curtail
capital expenditures, resulting in lower demand for networking equipment addressed at the enterprise market. As the overall demand for communications equipment declined, our customers began consuming a portion of the excess inventories of our
components that they had accumulated in previous years rather than placing new orders with us.

Revenues from telecommunications
products primarily targeted at the core and metro portions of the network were $11.1 million and $20.9 million in the second quarter of fiscal 2003 and 2002, respectively.  The decrease in revenues generated from these products was
primarily due to a significant reduction in orders from telecommunications customers as a result of the overbuilding of the long haul networking infrastructure, and due to the continued presence of excess inventories of these products in our
customers channels as discussed above.

Revenues from datacommunications products primarily targeted at enterprise and storage
networks were $29.1 million and $21.1 million in the second quarter of fiscal 2003 and 2002, respectively. The increase in revenues from these products was primarily due to a number of reasons.  First, we have increased our emphasis
on these markets through the introduction of new products and enhanced marketing efforts.  Second, sales of our storage products have increased during fiscal 2002 and the first

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half and storage applications in 2002 were not as severely affected as those from telecommunications applications, as enterprise and storage networks did not undergo the same
level of over-expansion as long haul networks did during prior periods.

It is customary for product prices in the semiconductor
industry to decline over time. Most of these price decreases are negotiated in advance and are usually based on increased volumes or the passage of time. In fiscal 2003 and 2002, we did not experience abnormal price decreases for the majority of our
products, as the demand for specialized semiconductors, such as those supplied by Vitesse, tends to be inelastic.

Most of our
customers clients have announced further anticipated declines in capital expenditures. Many of our customers have restructured operations, cut product development efforts and announced plans to reduce excess component inventories and to divest
parts of their operations. We expect the communications industry downturn to continue through fiscal 2003. We therefore expect the pattern of quarterly revenues to be volatile in the remaining quarters of fiscal 2003 as a result of fluctuating
customer demand forecasts and inventory levels.

Cost of Revenues

Cost of revenues as a percentage of total revenues in the second quarter of fiscal 2003 was 47.9% compared to 53.8% in the second quarter of fiscal 2002 and 49.9% in
the prior quarter.  The decrease in cost of revenues as a percentage of total revenues from the second quarter of fiscal 2002 and the prior quarter, is the result of our continued efforts to decrease fixed costs and improve manufacturing yields
for mature semiconductor products as well as optical module products. We anticipate that cost of revenues as a percentage of total revenues will continue to fluctuate in the near term based primarily on the demand for our products.

Engineering, Research and Development Costs

Engineering,
research and development expenses were $29.7 million in the second quarter of fiscal 2003 compared to $44.3 million in the second quarter of fiscal 2002 and $30.9 million in the prior quarter.  For the six months ended March 31, 2003,
engineering, research and development expenses were $60.6 million compared to $89.4 million in the six months ended March 31, 2002.  As a percentage of total revenues, engineering, research and development expenses were 73.9% in the second
quarter of fiscal 2003, 105.3% in the second quarter of fiscal 2002 and 80.8% in the prior quarter. For the six months ended March 31, 2003, engineering, research and development expenses as a percentage of total revenues decreased to 77.3 % from
110.0%, in the comparable period a year ago.  The decrease in both absolute dollars and as a percentage of revenues from the three and six months ended March 31, 2002, was principally due to the restructuring plans announced in the first and
third quarters of fiscal 2002. Our engineering, research and development costs are expensed as incurred.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $14.1 million in the second quarter of 2003, compared to
$17.0 million in the second quarter of 2002 and $14.4 million in the prior quarter.  For the six months ended March 31, 2003, SG&A expenses were $28.5 million compared to $34.5 million, in the comparable period a year ago.  As a
percentage of total revenues, SG&A expenses were 35.1 % in second quarter of fiscal 2003, compared to 40.5% in the second quarter of fiscal 2002 and 37.7% in the prior quarter. For the six months ended March 31, 2003, SG&A expenses as a
percentage of total revenues decreased to 36.4% from 42.5%, in the comparable period a year ago.  The decrease in both absolute dollars and as a percentage of revenues from the three and six months ended March 31, 2002, was primarily due to our
efforts to streamline our cost structure.

Amortization of Goodwill and Intangible Assets

We elected to adopt SFAS No.142 effective the beginning of fiscal 2002. In accordance with SFAS 142, we ceased amortizing goodwill as of October 1, 2001. There was no
transitional impairment of goodwill upon adoption of Statement 142.

Amortization of other intangible assets was $2.1 million in the
second quarter of fiscal 2003 and the prior quarter, compared to $3.1 million in the second quarter of fiscal 2002.  The decrease in the amortization of other intangible assets was due to the other intangible asset impairment charge of $7.0
million recorded in the quarter ended June 30, 2002.

Interest Income and Interest Expense

Interest income was $1.2 million in the second quarter of fiscal 2003 compared to $4.8 million in the second quarter of fiscal 2002 and $1.4 million in the prior
quarter. The decrease in interest income of $3.6 million from the second quarter of fiscal 2002 and $0.2 million from the prior quarter, was the result of lower cash balances and short term and long term investments held throughout the quarter as
well as a significant decline in interest rates paid on our cash and investment balances. The decrease in cash and investment balances was primarily the result of the repurchase of our convertible subordinated debentures in the quarters ended
September 30, 2002 and December 31, 2002, as well as a fixed operating cash outflow in a period of reduced revenues.

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Interest expense was $1.4 million in the second quarter of fiscal 2003 compared to $3.9 million in the second
quarter fiscal 2002 and $1.9 million in the prior quarter. The decrease in interest expense of $2.5 million from the second quarter of fiscal 2002 and $0.5 million from the prior quarter, was primarily the result of several interest rate swap
agreements entered into since October 1, 2002 which significantly relieved interest expense for the first and second quarter of fiscal 2003 and the result of lower principal amount of the convertible subordinated debentures outstanding during fiscal
2003. See further discussion below in Gain on Extinguishment of Debt.

As a result of the interest rate swap agreements, we
expect to record lower interest expense in future periods to the extent the variable rate is lower than the fixed rate of our debentures. However, if the adjustable rate is higher than the fixed rate of our debentures, our interest expense would be
higher.  Interest expense could further decline to the extent that we repurchase any additional debentures. For additional information regarding the interest rate swap agreement, see Note 6 Derivative Instruments and Hedging
Activities and Note 10 Subsequent Event of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Other income for the second quarter of fiscal 2003 consists principally of the amortization of deferred gains of $10.5 million related to the termination of our
interest rate swap agreements recorded in fiscal 2003 and 2002. We will amortize the gains over the remaining life of the convertible subordinated debentures due March 2005.

Gain on Extinguishment of Debt

During the first quarter of fiscal 2003, we
purchased $68.6 million principal amount of our 4% convertible subordinated debentures due March 2005 at prevailing market prices, for an aggregate amount of approximately $51.1 million. As a result, we recorded a gain on early extinguishment of
debt of approximately $16.5 million, net of a proportion of deferred debt issuance costs of $1.0 million, in the quarter ended December 31, 2002.

Income Tax
Expense

For the quarter ended March 31, 2003, the effective income tax rate was 0%.  The current quarters tax expense
relates to minimum state taxes.  All current tax benefits being generated are subject to a 100% valuation allowance.

Liquidity and Capital Resources

Operating Activities

We used $25.5 million in operating activities in the
six months ended March 31, 2003. Although, we had a net loss of $36.2 million for the six months ended March 31, 2003, such amount included non-cash items aggregating $16.1 million resulting primarily from depreciation and amortization and
amortization of deferred compensation expense, partially offest by gain on extinguishment of debt and amortization of gains on derivative instruments.  In addition to the net impact of non-cash items, our operating activities for the six months
ended March 31, 2003 also reflected an increase in inventory and the decrease in accrued expenses and other current liabilities and accrued restructuring.  These were offset in part by decreases in accounts receivable, prepaid expenses and
other current assets, other assets and increases in accounts payable and deferred gain on derivative instrument.

We used $62.9 million
in operating activities in the six months ended March 31, 2002. Although, we had a net loss of $151.3 million for the six months ended March 31, 2002, such amount included non-cash items aggregating $117.4 million resulting primarily from
depreciation and amortization and amortization of deferred compensation expense and certain asset impairments, partially offset by gain on extinguishment of debt.  In addition to the net impact of non-cash items, our operating activities for
the six months ended March 31, 2003, also reflected an increase in inventory and prepaid expenses and other current assets and a decrease in accounts payable, accrued expenses and other current liabilities and accrued restructuring.  These were
offset in part by decreases in accounts receivable and other assets and an increase in income taxes payable.

Investing Activities

We generated $11.2 million and $131.5 million in investing activities during the six months ended March 31, 2003 and 2002, respectively. The cash generated
by investing activities during the first six months of fiscal 2003 was principally due to the proceeds from the sale of $238.9 million in available-for-sale debt and equity securities, offset by the purchases of $223.1 million in similar securities,
$3.3 million in capital expenditures, and $1.6 million for the purchase of APT.  The cash generated in investing activities during the first six months of fiscal 2002 was due to the maturity of investments of $372.4 million in held to maturity
debt and equity securities, offset by purchases of $199.8 million in similar securities, $36.5 million for capital expenditures and $4.6 million for payments of collateral on an equipment lease recorded in restricted long-term deposits.

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In addition, we had two non-cash transactions totaling $32.5 million in the six months ended March 31, 2003. 
One transaction related to the lease for the land and building for our wafer fabrication facility in Colorado Springs, Colorado which expired on October 30, 2002.  We exercised our option to purchase the land and building for the lessors
original cost, or $27.5 million.  This lease was fully cash-collateralized and included in restricted long-term deposits as of September 30, 2002.  The other transaction related to several equipment leases which expired on January 31,
2003.  We exercised our option to purchase the equipment for the lessors original cost, or $6.3 million.  These leases were 80% cash-collateralized and included in restricted long-term deposits as of September 30, 2002.

Financing Activities

In the six months ended
March 31, 2003, we used $48.5 million in financing activities, including the purchase of $68.6 million carrying value of our convertible subordinated debentures for $51.1 million, and the repayment of debt obligations of $0.6 million.  This was
slightly offset by proceeds of $3.2 million received from the issuance and sale of common stock pursuant to our stock option and stock purchase plans.

In the six months ended March 31, 2003, we used $61.3 million in financing activities, including the purchase of $69.8 million carrying value of our convertible
subordinated debentures for $65.1 million, and the repayment of debt obligations of $0.5 million. This was slightly offset by proceeds of $4.1 million received from the issuance and sale of common stock pursuant to our stock option and stock
purchase plans and proceeds of $0.1 million received from the limited partners of the Vitesse Venture Funds. The limited partners are officers and employees of our company and represent an insignificant portion of the investments in the Vitesse
Venture Funds.

Management believes that our cash and cash equivalents, short-term investments, and cash flow from operations are
adequate to finance our planned growth and operating needs for the next 12 months. In addition, we believe that with the continued reduction in our operating costs and projected profitability for fiscal 2004, we will have sufficient cash to satisfy
the outstanding convertible debt upon maturity in March 2005.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates,
including those related to our allowance for doubtful accounts and sales returns, inventory reserves, goodwill and purchased intangible asset valuations, asset impairments and income taxes. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under
different assumptions or conditions.

We believe the following critical accounting policies, among others, involve significant judgments
and estimates we use in the preparation of our consolidated financial statements:

Allowance for Doubtful Accounts, Sales Returns Reserve and Revenue Recognition

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of
a specific customers inability to meet its financial obligations to us, we record a specific allowance to reduce the net receivable to the amount we reasonably believe will be collected. For all other customers, we record allowances for
doubtful accounts based on the length of time the receivables are past due, the current business environment and our historical experience. If the financial condition of our customers were to deteriorate or if economic conditions were to worsen,
additional allowances may be required in the future.

We recognize product revenue when persuasive evidence of an arrangement exists, the sales price is fixed,
products are shipped to customers, which is when title and risk of loss transfers to the customers, and collectibility is reasonably assured. Revenue from development contracts is recognized upon attainment of specific milestones established under
the customer contracts. Revenue from products deliverable under development contracts, including design tools and prototype products, is recognized upon delivery. We record a provision for estimated sales returns in the same period as the related
revenues are recorded. We base these estimates on historical sales returns and other known factors. Actual returns could be different from our estimates and current provisions for sales returns and allowances, resulting in future charges to
earnings.

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Inventory Valuation

At
each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. This evaluation includes analyses of sales levels by product and projections of future demand. If inventories on hand are in excess of forecasted
demand, we provide appropriate reserves for such excess inventory. If we have previously recorded the value of such inventory determined to be in excess of projected demand, or if we determine that inventory is obsolete, we write off these
inventories in the period the determination is made. Remaining inventory balances are adjusted to approximate the lower of our standard manufacturing cost or market value. If future demand or market conditions are less favorable than our
projections, additional inventory write-downs may be required, and would be reflected in cost of revenues in the period the revision is made.

Valuation of
Goodwill, Purchased Intangible Assets and Long-Lived Assets

We perform goodwill impairment tests on an annual basis and on an
interim basis if an event or circumstance indicates that it is more likely than not that impairment has occurred. We assess the impairment of other amortizable intangible assets and long-lived assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include significant underperformance to historical or projected operating results, substantial changes in our business
strategy and significant negative industry or economic trends. If such indicators are present, we evaluate the fair value of the goodwill of our one reporting unit to its carrying value. For other intangible assets and long-lived assets we determine
whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, we recognize an impairment loss based on the excess of the carrying amount of the assets over their
respective fair values. Fair value of goodwill is determined by using a valuation model based on an income and market approach. Fair value of other intangible assets and long-lived assets is determined by discounted future cash flows, appraisals or
other methods. If the long-lived asset determined to be impaired is to be held and used, we recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset are less than the assets
carrying value. The fair value of the long-lived asset then becomes the assets new carrying value, which we depreciate over the remaining estimated useful life of the asset.  To the extent we determine there are indicators of impairment
in future periods, write-downs may be required.

In the first quarter of fiscal 2003, the land and building lease for our Colorado
Springs wafer fabrication facility expired, and we exercised our option to purchase the land and building for the lessors original cost of $27.5 million.  While we do not believe that currently there is any indication of impairment, if we
decide to sell or close down this facility, we may be required to record an impairment charge in the future to the extent that the carrying value of the assets exceeds its fair value.

Accounting for Income Taxes

As part of the process of preparing our
consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure together with assessing temporary differences
resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the
likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this
allowance in a period, we must include an expense within the tax provision in the statement of operations.

Impact of Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS No.
144), which supersedes both SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of(SFAS No. 121) and the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions(Opinion 30), for the disposal of a segment of a
business (as previously defined in that Opinion).  SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by
sale, while also resolving significant implementation issues associated with SFAS No. 121. For example, SFAS No. 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria
for when a long-lived asset is held for sale and prescribes the accounting for long-lived asset that will be disposed of other than by sale. SFAS No. 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the
income statement but broadens that presentation to include a component of an entity (rather than a segment of a business).

We adopted
the provisions of SFAS No. 144 for in the quarter ended December 31, 2002.  The adoption of SFAS No. 144 for long-lived assets held for use did not have a material impact on our consolidated financial statements because the impairment
assessment under SFAS No. 144 is largely unchanged from SFAS No. 121. The provisions of the Statement for assets held for

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sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities. Therefore, we cannot determine the
potential effects that adoption of SFAS No. 144 will have on our consolidated financial statements.

In April 2002, the FASB issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections(SFAS No. 145).  SFAS No. 145 is effective for fiscal years beginning after May 15, 2002 with early
adoption of the provisions related to the rescission of SFAS No. 4 encouraged.   SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect.  Upon adoption of SFAS No. 145, we will be required to apply the criteria in Opinion 30 in determining the classification of gains and losses resulting from the extinguishment of debt. 
Additionally, SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions.

Upon adoption of SFAS No. 145 in the quarter ended December 31, 2002, we recorded the gain on extinguishment of debt of $16,550,000 as an ordinary
gain.  As required, we reclassified the gain of $17,098,000 as an ordinary gain for the quarter ended December 31, 2001.

In June
2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit and Disposal Activities (SFAS No. 146). SFAS No. 146 nullifies Emerging Issues Task Force (EITF) issue 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). Under EITF issue 94-3, a liability for an exit cost is recognized at the date of an entitys commitment to an exit
plan. Under SFAS No. 146, the liabilities associated with an exit or disposal activity will be measured at fair value and recognized when the liability is incurred and meets the definition of a liability in the FASBs conceptual framework. This
statement is effective for exit or disposal activities initiated after December 31, 2002.  We believe the adoption of SFAS No. 146 will not have a material impact on our financial statements.

On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure(SFAS No. 148), which
amends SFAS No. 123.  SFAS No. 148 amends the disclosure requirements in SFAS No. 123 for stock-based compensation for annual periods ending after December 15, 2002 and for interim periods beginning after December 15, 2002.  The disclosure
requirements apply to all companies, including those that continue to recognize stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees.  Effective for financial statements for fiscal years ending
after December 15, 2002, SFAS No. 148 also provides three alternative transition methods for companies that choose to adopt the fair value measurement provisions of SFAS No. 123.  We have not adopted the fair value measurement provisions of
SFAS No. 123.

In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others(FIN 45), which addresses the disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under
guarantees.  The disclosure requirements are effective for interim and annual financial statements ending after December 15, 2002.  We do not have any guarantees that require disclosure under FIN 45.

FIN 45 also requires the recognition of a liability by a guarantor at the inception of certain guarantees.  FIN 45 requires the guarantor to recognize a
liability for the non-contingent component of a guarantee, which is the obligation to stand ready to perform in the event that specified triggering events or conditions occur.  The initial measurement of this liability is the fair value of the
guarantee at inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple
elements.  The initial recognition and measurement provisions are effective for all guarantees within the scope of FIN 45 issued or modified after December 31, 2002.

In February 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities(FIN 46), which addresses the consolidation by business enterprises of
variable interest entities, which have one or both of the following characteristics: (1) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support from other parties, or (2)
the equity investors lack one or more of the following essential characteristics of a controlling financial interest: (a) the direct or indirect ability to make decisions about the entitys activities through voting or similar rights, (b) the
obligation to absorb the expected losses of the entity if they occur, or (c) the right to receive the expected residual returns of the entity if they occur.  FIN 46 will have a significant effect on existing practice because it requires
existing variable interest entities to be consolidated if those entities do not effectively disburse risks among parties involved.

In addition, FIN 46 contains
detailed disclosure requirements.  FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the
first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable

14



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interest that it acquired before February 1, 2003.  This Interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated.

In November 2002, the FASBs Emerging Issues Task Force (EITF) issued EITF 00-21 Revenue Arrangements with Multiple Deliverables (EITF
00-21).  EITF 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities.  Specifically, EITF 00-21 addresses how to determine whether an
arrangement involving multiple deliverables contains more than one unit of accounting.  In applying EITF 00-21, separate contracts with the same entity or related parties that are entered into at or near the same time are presumed to have been
negotiated as a package and should, therefore, be evaluated as a single arrangement in considering whether there are one or more units of accounting.  That presumption may be overcome if there is sufficient evidence to the contrary.  EITF
00-21 also addresses how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement.  The guidance in this Issue is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003.  Alternatively, companies may elect to report the change in accounting as a cumulative-effect adjustment.  Early application of this consensus is permitted.

Factors That May Affect Future Operating Results

| | We Have Experienced Continuing Losses From Operations Since March 31, 2001, and We Expect That Our Operating Results Will Fluctuate in The Future Due to Reduced Demand in Our
Markets
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since our quarterly revenues and earnings per share (excluding acquisition related and non-recurring
charges) peaked in the quarter ended December 31, 2000, our revenues have declined substantially and we have experienced continuing losses from operations. While our revenues have improved slightly since the fourth quarter of fiscal 2001, they are
still not sufficient to cover our operating expenses. Further, in fiscal 2002 our operating results were materially and adversely affected by an inventory write-down, restructuring charges and impairment charges. If we are required to take
additional charges such as these in the future, the adverse effect on our operating results may again be material. Due to general economic conditions and slowdowns in purchases of networking equipment, it has become increasingly difficult for us to
predict the purchasing activities of our customers and we expect that our operating results will fluctuate substantially in the future. We cannot predict when we will again achieve profitability, if at all. Future fluctuations in operating results
may also be caused by a number of factors, many of which are outside our control. Additional factors that could affect our future operating results include the following:

| |  | The loss of major customers;                                                                 
| | - | ---------------------------------------------------------------------------------------------
| |   |                                                                                              
| |  | Variations, delays or cancellations of orders and shipments of our products;                 
| |   |                                                                                              
| |  | Reduction in the selling prices of our products;                                             
| |   |                                                                                              
| |  | Significant changes in the type and mix of products being sold;                              
| |   |                                                                                              
| |  | Delays in introducing new products;                                                          
| |   |                                                                                              
| |  | Design changes made by our customers;                                                        
| |   |                                                                                              
| |  | Our failure to manufacture and ship products on time;                                        
| |   |                                                                                              
| |  | Changes in manufacturing capacity, the utilization of this capacity and manufacturing yields;
| |   |                                                                                              
| |  | Variations in product development costs;                                                     
| |   |                                                                                              
| |  | Changes in inventory levels; and                                                             
| |   |                                                                                              
| |  | Expenses or operational disruptions resulting from acquisitions.                             

In fiscal 2002, we implemented significant cost reductions. We do not expect that these measures will be sufficient to offset lower revenues until fiscal 2004, if at
all, and as such, we expect to incur a net loss for the remainder of fiscal 2003. In the past, we have recorded significant new product development costs because our policy is to expense these costs at the time that they are incurred. We may incur
these types of expenses in the future. These additional expenses will have a material and adverse effect on our results in future periods. The occurrence of any of the above-mentioned factors could have a material adverse effect on our business and
on our financial results.

| | The Market Price for Our Common Stock Has Been Volatile and Future Volatility Could Cause the Value of Your Investment in Our Company to Decline.
| | -------------------------------------------------------------------------------------------------------------------------------------------------

15



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Our stock price has experienced significant volatility recently. In particular, our stock price declined
significantly in the context of announcements made by us and other semiconductor suppliers of reduced revenue expectations and of a general slowdown in the technology sector, particularly the optical networking equipment sector. Given these general
economic conditions and the reduced demand for our products that we have experienced recently, we expect that our stock price will continue to be volatile. In addition, the value of your investment could decline due to the impact of any of the
following factors, among others, upon the market price of our common stock:

| |  | Additional changes in financial analysts estimates of our revenues and operating results;    
| | - | ----------------------------------------------------------------------------------------------
| |   |                                                                                               
| |  | Our failure to meet financial analysts performance expectations; and                         
| |   |                                                                                               
| |  | Changes in market valuations of other companies in the semiconductor or networking industries.

In addition, many of the risks described elsewhere in this section could materially and adversely affect our stock price, as discussed in those risk factors. The
stock markets have recently experienced substantial price and volume volatility. Fluctuations such as these have affected and are likely to continue to affect the market price of our common stock.

In the past, securities class action litigation has often been instituted against companies following periods of volatility and decline in the market price of such
companies securities. If instituted against us, regardless of the outcome, such litigation could result in substantial costs and diversion of our managements attention and resources and have a material adverse effect on our business,
financial condition and results of operations. We could be required to pay substantial damages, including punitive damages, if we were to lose such a lawsuit.

| | If We are Unable to Develop and Introduce New Products Successfully or to Achieve Market Acceptance of Our New Products, Our Operating Results would be Adversely
Affected.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our future success will depend on our ability to develop new high-performance integrated circuits and
optical modules for existing and new markets, introduce these products in a cost-effective and timely manner and convince leading equipment manufacturers to select these products for design into their own new products. Our quarterly results in the
past have been, and are expected in the future to continue to be, dependent on the introduction of a relatively small number of new products and the timely completion and delivery of those products to customers. The development of new integrated
circuits is highly complex, and from time to time we have experienced delays in completing the development and introduction of new products. In addition, we only introduced optical modules since our acquisition of Versatile Optical Networks, Inc.
(Versatile), in July 2001, and only began to see significant sales of these products since the quarter ended June 30, 2002. Our ability to develop and deliver new products successfully will depend on various factors, including our
ability to:

| |  | Accurately predict market requirements and evolving industry standards;                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                            
| |  | Accurately define new products;                                                                                                                            
| |   |                                                                                                                                                            
| |  | Timely complete and introduce new products;                                                                                                                
| |   |                                                                                                                                                            
| |  | Timely qualify and obtain industry interoperability certification of our products and our customers products into which our products will be incorporated;
| |   |                                                                                                                                                            
| |  | Achieve high manufacturing yields; and                                                                                                                     
| |   |                                                                                                                                                            
| |  | Gain market acceptance of our products and our customers products.                                                                                        

If we are not able to develop and introduce new products successfully, our business, financial condition and results of operations will be materially and adversely
affected.

We are Dependent on a Small Number of Customers in a Few Industries

We intend to continue focusing our sales effort on a small number of customers in the communications and storage markets that require high-performance integrated
circuits. Some of these customers are also our competitors. For the quarter ended March 31, 2003, one customer accounted for greater than 10% of total revenues. If any of our major customers delays orders of our products or stops buying our
products, our business and financial condition would be severely affected.

16



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There Are Risks Associated with Recent and Future Acquisitions

Since the beginning of fiscal 2000, we made four significant acquisitions. In March 2000, we completed the acquisition of Orologic, Inc. (Orologic) in
exchange for approximately 4.5 million shares of our common stock. In May 2000, we completed the acquisition of SiTera Incorporated (SiTera) for approximately 14.7 million shares of our common stock. In June 2001, we acquired Exbit
Technology A/S (Exbit) for up to approximately 2.7 million shares of our common stock and may be required to issue an additional 1.3 million shares upon the attainment of certain internal future retention and performance goals. In July
2001, we completed the acquisition of Versatile for approximately 8.8 million shares of our common stock. Most recently, we completed the acquisition of APT for approximately $10.0 to $14.4 million, depending on the performance of the acquired
business.  Also, during fiscal 2000 and  fiscal 2001, we completed smaller acquisitions for an aggregate of approximately $61.7 million consisting of approximately 0.8 million shares of common stock issued and stock options assumed and
approximately $44.6 million in cash. These acquisitions may result in the diversion of managements attention from the day-to-day operations of the Companys business. Risks of making these acquisitions include difficulties in the
integration of acquired operations, products and personnel. If we fail in our efforts to integrate recent and future acquisitions, our business and operating results could be materially and adversely affected.

Our management frequently evaluates strategic opportunities available. In the future, we may pursue additional acquisitions of complementary products, technologies or
businesses. Acquisitions we make in the future could result in dilutive issuances of equity securities, substantial debt and amortization expenses related to intangible assets. In particular, in connection with our acquisition of Orologic, we were
required to record an in-process research and development (IPR&D) charge of $45.6 million in the three months ended March 31, 2000. In addition, under the new SFAS No. 142, which we adopted as of October 1, 2001, certain intangible
assets relating to acquired businesses, including goodwill, are maintained on the balance sheet rather than being amortized. These assets must be tested at least annually for impairment, and in the year ended September 30, 2002, we recorded
impairment charges of $403.0 million associated with goodwill and other intangible assets related to past acquisitions. As of March 31, 2003, and after accounting for these impairment charges, we had an aggregate of $190.3 million of goodwill and
other intangible assets on our balance sheet. These assets may eventually be written down to the extent they are deemed to be impaired and any such write-downs would adversely affect our results.

Our Industry is Highly Competitive

The markets for our products are intensely competitive and subject to
rapid technological advancement in design tools, wafer-manufacturing techniques, process tools and alternate networking technologies. We must identify and capture future market opportunities to offset the rapid price erosion that characterizes our
industry. We may not be able to develop new products at competitive pricing and performance levels. Even if we are able to do so, we may not complete a new product and introduce it to market in a timely manner. Our customers may substitute use of
our products in their next generation equipment with those of current or future competitors. Our competitors include Agere, Applied Micro Circuits Corporation, Broadcom, Conexant Systems, IBM, Intel, Infineon, Marvell, Maxim Integrated Products and
PMC Sierra. We also compete with internal ASIC design units of systems companies such as Cisco and Nortel. Over the next few years, we expect additional competitors, some of which may have greater financial and other resources, to enter the market
with new products. In addition, we are aware of venture-backed companies that focus on specific portions of our product line. These companies, individually or collectively, could represent future competition for many design wins and subsequent
product sales.

We typically face competition at the design stage, where customers evaluate alternative design approaches that require
integrated circuits. Our competitors have increasingly frequent opportunities to supplant our products in next generation systems because of shortened product life and design-in cycles in many of our customers products.

Competition is particularly strong in the market for optical networking chips, in part due to the markets past growth rate, which attracts larger
competitors, and in part due to the number of smaller companies focused on this area. These companies, individually and collectively, represent strong competition for many design wins and subsequent product sales. Larger competitors in our market
have acquired both mature and early stage companies with advanced technologies. These acquisitions could enhance the ability of larger competitors to obtain new business that Vitesse might have otherwise won.

There are Risks Associated with Doing Business in Foreign Countries

In
second quarter of fiscal 2003, international sales accounted for 30% of our total revenues, and we expect international sales to constitute a substantial portion of our total revenues for the foreseeable future. International sales involve a variety
of risks and uncertainties, including risks related to:

| |  | Reliance on strategic alliance partners;                                                                
| | - | --------------------------------------------------------------------------------------------------------
| |   |                                                                                                         
| |  | Compliance with foreign regulatory requirements;                                                        
| |   |                                                                                                         
| |  | Variability of foreign economic conditions;                                                             
| |   |                                                                                                         
| |  | Changing restrictions imposed by U.S. export laws; and                                                  
| |   |                                                                                                         
| |  | Competition from U.S. based companies that have firmly established significant international operations.

Failure to successfully address these risks and uncertainties could adversely affect our international sales, which could in turn have a material and adverse effect
on our results of operations and financial condition.

17



---

We Must Keep Pace with Product and Process Development and Technological Change

The market for our products is characterized by rapid changes in both product and process technologies. We believe that our success to a large extent depends on our
ability to continue to improve our product and process technologies and to develop new products and technologies in order to maintain our competitive position. Further, we must adapt our products and processes to technological changes and adopt
emerging industry standards. Our failure to accomplish any of the above could have a negative impact on our business and financial results.

We Are Dependent on Key
Suppliers

We manufacture our products using a variety of components procured from third-party suppliers. All of our
high-performance integrated circuits are packaged by third parties. Other components and materials used in our manufacturing process are available from only a limited number of sources. Further, we are increasingly relying on third-party
semiconductor foundries for our supply of silicon-based products. Any difficulty in obtaining sole- or limited-sourced parts or services from third parties could affect our ability to meet scheduled product deliveries to customers. This in turn
could have a material adverse effect on our customer relationships, business and financial results.

Our Manufacturing Yields Are Subject to Fluctuation

Semiconductor fabrication is a highly complex and precise process. Defects in masks, impurities in the materials used,
contamination of the manufacturing environment and equipment failures can cause a large percentage of wafers or die to be rejected. Manufacturing yields vary among products, depending on a particular high-performance integrated circuits
complexity and on our experience in manufacturing it. In the past, we have experienced difficulties in achieving acceptable yields on some high-performance integrated circuits, which has led to shipment delays. Our overall yields are lower than
yields obtained in a mature silicon process because we manufacture a large number of different products in limited volume and our process technology is less developed. We anticipate that many of our current and future products may never be produced
in volume.

Since a majority of our manufacturing costs are relatively fixed, maintaining a number of shippable die per wafer is
critical to our operating results. Yield decreases can result in higher unit costs and may adversely affect gross profit and net income. We use estimated yields for valuing work-in-process inventory. If actual yields are materially different than
these estimates, we may need to revalue work-in-process inventory. Consequently, if any of our current or future products experience yield problems, our financial results may be adversely affected.

Our Business Is Subject to Environmental Regulations

We are subject to
various governmental regulations related to toxic, volatile and other hazardous chemicals used in our manufacturing process. If we fail to comply with these regulations, this failure could result in the imposition of fines or in the suspension or
cessation of our operations. Additionally, we may be restricted in our ability to expand operations at our present locations or we may be required to incur significant expenses to comply with these regulations.

Our Failure to Manage Growth of Operations May Adversely Affect Us

The
management of our growth requires qualified personnel, systems and other resources. We have recently established several product design centers worldwide and completed several acquisitions since the fall of 1998. We have only limited experience in
integrating the operations of acquired businesses. Failure to manage our growth or to successfully integrate new and future facilities or newly acquired businesses could have a material adverse effect on our business and financial results.

We Are Dependent on Key Personnel

Due to the
specialized nature of our business, our success depends in part upon attracting and retaining the services of qualified managerial and technical personnel. The competition for qualified personnel is intense. The loss of any of our key employees or
the failure to hire additional skilled technical personnel could have a material adverse effect on our business and financial results.

18



---

Our Ability to Repurchase Our Debentures, If Required, with Cash, upon a Change of Control May Be Limited

In certain circumstances involving a change of control or the termination of public trading of our common stock, holders of our 4% convertible subordinated debentures
may require us to repurchase some or all of the debentures. We cannot assure that we will have sufficient financial resources at such time or will be able to arrange financing to pay the repurchase price of the debentures.

Our ability to repurchase the debentures in such event may be limited by law, by the indenture, by the terms of other agreements relating to our senior debt
and by such indebtedness and agreements as may be entered into, replaced, supplemented or amended from time to time. We may be required to refinance our debt in order to make such payments. We may not have the financial ability to repurchase the
debentures if payment of our debt is accelerated.

Item 3.    
Quantitative and Qualitative Disclosure About Market Risk

Cash Equivalents, Short-term and Long-term Investments

Cash equivalents and investments are principally composed of money market accounts, commercial paper rated A-1/P-1 and obligations of the U.S. government and its
agencies. Our investments are made in accordance with an investment policy approved by the Board of Directors. Maturities of these instruments are less than 30 months with the majority being within one year. We classify these securities as
held-to-maturity or available-for-sale depending on our investment intention. Held-to-maturity investments are held at amortized cost, while available-for-sale investments are held at fair value.  We do not have any held-to-maturity investments
at March 31, 2003.

Investments in fixed rate interest earning instruments carry a degree of interest rate and credit rating risk. Fixed
rate securities may have their fair market value adversely impacted because of changes in interest rates and credit ratings. Due in part to these factors, our future investment income may fall short of expectations because of changes in interest
rates or we may suffer losses in principal if we were to sell securities that have declined in market value because of changes in interest rates. Due to the nature of the issuers of the securities that we invest in, we do not believe that we have
any cash flow exposure arising from changes in credit ratings.

Based on a sensitivity analysis performed on the financial instruments
held as of March 31, 2003, an immediate 10 percent change in interest rates is not expected to have a material effect on our near term financial condition or results of operations.

Debt

In the normal course of business, our operations are exposed to risks associated with fluctuations in
interest rates. We address this risk through controlled risk management that includes the use of derivative financial instruments to economically hedge or reduce these exposures. We do not enter into financial instruments for trading or speculative
purposes. The fair value of our debt is sensitive to fluctuations in the general level of the U.S. interest rates.

We manage exposure
by entering into fixed to floating rate interest rate swaps. Therefore, changes in the U.S. interest rate affect variable cash flows on the portion of the debt that was hedged by interest rate swaps. To ensure the adequacy and effectiveness of our
interest rate hedge positions, we continually monitor our interest rate swap positions, in conjunction with our underlying interest rate exposure, from an accounting and economic perspective.

However, given the uncertainty surrounding the economic correlation of interest rates and market prices, there can be no assurance that such programs will completely
eliminate the adverse financial impact resulting from unfavorable movements in interest rates. In addition, the timing of the accounting for recognition of gains and losses related to the mark-to-market instruments for any given period may not
coincide with the timing of the gains and losses related to the underlying economic exposures and, therefore, may adversely affect our consolidated operating results and financial position. The gains and losses realized from the interest rate swap
are recorded in Interest expense in the accompanying unaudited condensed consolidated statements of operations.

19



---

In the six months ended March 31, 2003, we entered into several interest rate swap agreements. We entered into the
agreements to reduce the impact of interest rate changes on our long-term debt. The swap agreements allowed us to swap long-term borrowings at fixed rates into variable rates that are anticipated to be lower than fixed rates available to us. As a
result, the swaps effectively converted our fixed-rate debt to variable-rates and qualified for hedge accounting treatment. Since these interest rate swap agreements qualified as a fair value hedge under SFAS No. 133, changes in the fair value of
the swap agreement were recorded as interest expense and matched by changes in the designated, hedged fixed-rate debt to the extent that such changes were effective and as long as the hedge requirements were met. We have terminated these interest
rate swap agreements as of March 31, 2003.  Periodic interest payments and receipts on both the debt and the swap agreement are recorded as components of interest expense in the accompanying unaudited condensed consolidated statements of
operations, resulting in reporting interest expense at the hedged interest rate.

Item 4.    
Controls and Procedures

| | (a) | The Companys chief executive officer and chief financial officer performed an evaluation of the Companys disclosure controls and procedures (as defined in
Rule 13a-14(c) and Rule 15d-14(c) of the Securities Exchange Act of 1934, as amended) as of a date within 90 days prior to the filing of this quarterly report on Form 10-Q. Based on this evaluation, the Companys chief
executive officer and chief financial officer believe that such controls and procedures effectively insure that information required to be disclosed in this quarterly report on Form 10-Q is appropriately recorded, processed, summarized and
reported.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | There have been no significant changes in the Companys internal controls and procedures or, to our knowledge, in other factors that could significantly affect these
internal controls subsequent to the date of their evaluation.                                                                                                                                                                                                                                                                                                                                                                                                              

20



---

PART II

OTHER INFORMATION

Item
2.    
Changes in Securities

On January 31, 2003, we acquired all of the equity interests of APT Technologies, Inc.
(APT) in exchange for an aggregate of approximately $10.0 to $14.4 million in cash and stock and the assumption of stock options.  Of the total purchase price, approximately $2.3 million was paid in cash and stock at closing, of
which approximately $0.7 million consisted of 357,845 shares of our Common Stock issued into escrow to secure certain indemnification obligations of the former shareholders of APT.  The remaining $7.7 to $12.1 million of consideration will be
paid in cash and/or stock (at our option) between April 2003 and June 2007, and will be determined in part based on the future results of the acquired business.  The issuance of shares and assumption of stock options were made pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, based on the limited number of securities holders of APT, the relationship of such security holders to APT, and the lack of any advertisement or general
solicitation in connection with the acquisition.

Item 4.    
Submission of Matters to a Vote of Security Holders

On January 28, 2003, we held our regular Annual Meeting
of Stockholders.  The purpose of the meeting was to elect Directors to serve for the ensuing year, and to ratify the appointment of KPMG LLP as our independent auditors for the 2003 fiscal year.  The following individuals were elected to
serve as Directors for the ensuing year:

|Name               |  | Votes for |             | Votes Against |  | Withheld | 
|------------------ |  | --------- | ----------- | ------------- |  | -------- | 
|                   |  |           |             |               |  |          | 
|Vincent Chan       |  |           | 170,338,600 |               |  |         | 
|James A. Cole      |  |           | 169,225,342 |               |  |         | 
|Alex Daly          |  |           | 169,348,927 |               |  |         | 
|John C. Lewis      |  |           | 169,532,837 |               |  |         | 
|Louis R. Tomasetta |  |           | 172,659,262 |               |  |         | 

Additionally, the following item was voted upon and approved by the
shareholders:

|                                                                                                              |  | Votes for |             | Against or withheld |  | Abstain   | 
|------------------------------------------------------------------------------------------------------------- |  | --------- | ----------- | ------------------- |  | --------- | 
|                                                                                                              |  |           |             |                     |  |           | 
|Ratification of appointment of KPMG LLP as independent auditors for the fiscal year ending September 30,
2003 |  |           | 167,789,353 |                     |  | 5,800,205 | 

Item 6.    
Exhibits & Reports on Form 8-K

| | (a)  | Exhibits                                                                                                      
| | ---- | --------------------------------------------------------------------------------------------------------------
| |      |                                                                                                               
| | 99.1 | Certification of Chief Executive Officer and Chief Financial Officer                                          
| |      |                                                                                                               
| | (b)  | Reports on Form 8-K                                                                                           
| |      |                                                                                                               
| |      | Report on Form 8-K, dated February 7, 2003, reporting the Companys adoption of the Stockholders Rights Plan.

21



---

SIGNATURES

Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|             | VITESSE SEMICONDUCTOR CORPORATION
|------------ | ---------------------------------
|             |                                  
|             | By:                              
|             |                                  
|             |                                  
|             |                                  
|May 13, 2003 |                                  

22



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CERTIFICATIONS

Certification of Chief Executive Officer

I, Louis
Tomasetta, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Vitesse Semiconductor Corp. (the registrant);                                                                                                                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | b)                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | c)                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | b)                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|6. | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

|/s/    LOUIS R. TOMASETTA                                           | 
|------------------------------------------------------------------- | 
|                                                                    | 
|President and Chief Executive Officer (Principal Executive Officer) | 

23



---

Certification of Chief Financial Officer

I, Eugene Hovanec, certify that:

|1. | I have reviewed quarterly report on Form 10-Q of Vitesse Semiconductor Corp. (the registrant);                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | a.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | b.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | c.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | a.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|   | b.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                         
|6. | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

|/s/  EUGENE F. HOVANEC                                                                                             | 
|------------------------------------------------------------------------------------------------------------------ | 
|                                                                                                                   | 
|Vice President, Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | 

24