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|   | þ | ANNUAL REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934  |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | For      the fiscal year ended September 30,2008 |
|--------|--------------------------------------------------|

|   | OR |
|--------|----|

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

| Delaware                                                            | 33-0732700                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (IRS      Employer Identification Number) |

| Title      of each class            |   | Name      of each exchange on which registered |
|-------------------------------------|--------|------------------------------------------------|
| Common      Stock, $0.001 Par Value |   | NASDAQ      Global Market                      |

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| Large accelerated      filer *                |  Accelerated      filer þ    |
|----------------------------------------------------|----------------------------------------|
|                                               |                                   |
| Non-accelerated      filer *             |  Smaller      reporting company * |
| (Do not check if a      smaller reporting company) |                                   |

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| Part  I     |
|-------------|
|        | Item 1.      Business |
|        | Item 1A. Risk      Factors |
|        | Item 1B. Unresolved Staff      Comments |
|        | Item 2.      Properties |
|        | Item 3. Legal      Proceedings |
|        | Item 4. Submission of Matters to      a Vote of Security Holders |
| Part  II    |
|        | Item 5. Market for the      Registrant’s Common Equity, Related Stockholder Matters and      Issuer Purchases of Equity Securities |
|        | Item 6. Selected Financial      Data |
|        | Item 7. Management’s Discussion      and Analysis of Financial Condition and Results of      Operations |
|        | Item 7A. Quantitative and      Qualitative Disclosure About Market Risk |
|        | Item 8. Financial Statements and      Supplementary Data |
|        | REPORT OF INDEPENDENT      REGISTERED PUBLIC ACCOUNTING FIRM |
|        | Item 9. Changes in and      Disagreements with Accountants on Accounting and Financial      Disclosure |
|        | Item 9A. Controls and      Procedures |
|        | Item 9B. Other      Information |
| Part    III |
|        | Item 10. Directors, Executive      Officers and Corporate Governance |
|        | Item 11. Executive      Compensation |
|        | Item 12. Security Ownership of      Certain Beneficial Owners and Management and Related Stockholder      Matters |
|        | Item 13. Certain Relationships      and Related Transactions |
|        | Item 14. Principal Accountant      Fees and Services |
| Part  IV    |
|        | Item 15.      Exhibits |
|        | SIGNATURES |
|        | INDEX TO      EXHIBITS |
|        | EXHIBIT      10.18 |
|        | EXHIBIT 10.19 |
|        | EXHIBIT      21.1 |
|        | EXHIBIT      23.1 |
|        | EXHIBIT      31.1 |
|        | EXHIBIT      31.2 |
|        | EXHIBIT      32.1 |
|        | EXHIBIT      32.2 |

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|  P A R      T  I |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Page   |
|---------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| Item      1.                    | Business                                                                                                                                                                    | 1      |
| Item      1A.                   | Risk      Factors                                                                                                                                                           | 11     |
| Item      1B.                   | Unresolved      Staff      Comments                                                                                                                                         | 20     |
| Item      2.                    | Properties                                                                                                                                                                  | 20     |
| Item      3.                    | Legal      Proceedings                                                                                                                                                      | 20     |
| Item      4.                    | Submission      of Matters to a Vote of Security      Holders                                                                                                               | 22     |

| Item      5.  |   Market      for Registrant’s Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 23 |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| Item      6.  |   Selected      Financial      Data                                                                                                                                                  | 26 |
| Item      7.  |   Management’s      Discussion and Analysis of Financial Condition and Results of      Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 27 |
| Item      7A. |   Quantitative      and Qualitative Disclosure About Market      Risk                                                                                                                | 39 |
| Item      8.  |   Financial      Statements and Supplementary      Data                                                                                                                              | 40 |
| Item      9.  |   Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 63 |
| Item      9A. |   Controls      and      Procedures                                                                                                                                                  | 63 |
| Item      9B. |   Other      Information                                                                                                                                                             | 64 |

| Item      10. |   Directors,      Executive Officers and Corporate      Governance                                                                                                                | 65 |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| Item      11. |   Executive      Compensation                                                                                                                                                     | 65 |
| Item      12. |   Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 65 |
| Item      13. |   Certain      Relationships and Related Transactions, and Director      Independence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 65 |
| Item      14. |   Principal      Accounting Fees and      Services                                                                                                                                | 65 |

| Item      15. | Exhibits                                                                                                               | 66 |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| SIGNATURES    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 68 |

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PART I

ITEM 1

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|                                                                      |   | September      30, |   |
|---------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                             |   | 2008               |   | 2007 |   | 2006 |   |
|    Cisco      Systems, Inc. and its contract manufacturers |   | 48%                |   | 53% |   | 50% |   |
|         Huawei Technologies, Inc.                               |   | 10%                |   | 12% |   | 13% |   |
|         EMC Corporation                                         |   | 11%                |   |        6% |   | 3% |   |
|                                                                      |   | 69%                |   | 71% |   | 66% |   |

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ITEM 1A

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| ·   | Capital      spending levels; |
|--------------------|-------------------------------|

| ·   | Additions      to, changes in or lack of industrystandards; |
|--------------------|-------------------------------------------------------------|

| ·   | Our      ability to demonstrate the benefits of our technology to distributors,      original equipment manufacturers and endusers; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      increased use of the Internet by businesses as replacements for, or      enhancements to, their privatenetworks; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | The      adoption of security as a necessary feature in storage      networking; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | The      adoption of compression as a necessary feature in virtual tape library      products; and |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | The      adoption of compression as a necessary feature in nearline storage      products. |
|--------------------|--------------------------------------------------------------------------------------------|

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| ·   | General      business conditions in our markets as well as global economic      uncertainty; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Increases      or reductions in demand for our customers’  products; |
|--------------------|----------------------------------------------------------------------------|

| ·   | The      timing and volume of orders we receive from our  customers; |
|--------------------|----------------------------------------------------------------------|

| ·   | Cancellations      or delays of customer productorders; |
|--------------------|---------------------------------------------------------|

| ·   | Acquisitions      or mergers involving us, our competitors or  customers; |
|--------------------|---------------------------------------------------------------------------|

| ·   | Any      new product introductions by us or our  competitors; |
|--------------------|---------------------------------------------------------------|

| ·   | Our      suppliers increasing costs or changing the delivery of products to      us; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | Increased      competition or reductions in the prices that we are able to      charge; |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | The      variety of the products that we sell as well as seasonal demand for our      products; and |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | The      availability of manufacturing capacity necessary to make our      products. |
|--------------------|--------------------------------------------------------------------------------------|

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| ·   | Adapting      our product design, if necessary, to the new manufacturer’s      process; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | Creating      a new mask set to manufacture theproduct; |
|--------------------|---------------------------------------------------------|

| ·   | Having      the new manufacturer prepare sample products so we can verify the product      specification; and |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | Providing      sample products to customers forqualification. |
|--------------------|---------------------------------------------------------------|

| ·   | Difficulties      in assimilating acquired operations, technologies and      products; |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | Diversion      of management’s attention from other business  concerns; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Risks      of entering markets in which we have little or no prior experience;      and |
|--------------------|-----------------------------------------------------------------------------------------|

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| ·   | Loss      of key employees of acquiredorganizations. |
|--------------------|------------------------------------------------------|

| ·   | Properly      identify emerging target markets and related technological      trends; |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | Develop      and maintain competitive products; |
|--------------------|-------------------------------------------------|

| ·   | Develop      end-to-end, ubiquitous systemssolutions; |
|--------------------|-------------------------------------------------------|

| ·   | Develop,      or partner with providers of, security services  processors; |
|--------------------|----------------------------------------------------------------------------|

| ·   | Develop      both hardware and software security services  solutions; |
|--------------------|-----------------------------------------------------------------------|

| ·   | Enhance      our products by adding innovative features that differentiate our products      from those of competitors; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | Bring      products to market on a timely basis at competitive prices;      and |
|--------------------|---------------------------------------------------------------------------------|

| ·   | Respond      effectively to new technological changes or new product announcements by      others. |
|--------------------|----------------------------------------------------------------------------------------------------|

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| ·   | Performance; |
|--------------------|--------------|

| ·   | Price; |
|--------------------|--------|

| ·   | The      time that is required to develop a new product or enhancements to existing      products; |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | The      ability to achieve product acceptance with major network and storage      equipment vendors; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | The      support that exists for new network and storage  standards; |
|--------------------|----------------------------------------------------------------------|

| ·   | Features      and functionality; |
|--------------------|----------------------------------|

| ·   | Adaptability      of products to specificapplications; |
|--------------------|--------------------------------------------------------|

| ·   | Reliability;      and |
|--------------------|-----------------------|

| ·   | Technical      service and support as well as effective intellectual property      protection. |
|--------------------|------------------------------------------------------------------------------------------------|

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| ·   | Rapidly      changing technologies; |
|--------------------|-------------------------------------|

| ·   | Price-performance      enhancements; and |
|--------------------|------------------------------------------|

| ·   | Product      obsolescence. |
|--------------------|----------------------------|

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| ·   | The      imposition of governmentalcontrols; |
|--------------------|----------------------------------------------|

| ·   | Export      license/technical reviewrequirements; |
|--------------------|---------------------------------------------------|

| ·   | Restrictions      on the export of technology; |
|--------------------|------------------------------------------------|

| ·   | Currency      exchange fluctuations; |
|--------------------|--------------------------------------|

| ·   | Political      instability; |
|--------------------|-----------------------------|

| ·   | Financial      and stock market dislocations; |
|--------------------|-----------------------------------------------|

| ·   | Military      and related activities; |
|--------------------|---------------------------------------|

| ·   | Trade      restrictions; and |
|--------------------|------------------------------|

| ·   | Changes      in tariffs. |
|--------------------|--------------------------|

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| ·   | Quarterly      variations in operating results; |
|--------------------|-------------------------------------------------|

| ·   | Announcements      of new products by us or ourcompetitors; |
|--------------------|-------------------------------------------------------------|

| ·   | The      gain or loss of significantcustomers; |
|--------------------|------------------------------------------------|

| ·   | Changes      in analysts’ estimates; |
|--------------------|--------------------------------------------|

| ·   | Short-selling      of our Common Stock; and |
|--------------------|---------------------------------------------|

| ·   | Events      affecting other companies that investors deems to be comparable to      us. |
|--------------------|-----------------------------------------------------------------------------------------|

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ITEM 1B

ITEM 2

|         Location                    | Ownedor      Leased | ExpirationDate                 | SquareFootage |   |
|-----------------------------------------------|---------------------|--------------------------------|---------------|--------|
|         Los Gatos, California       | Leased              | September      2009            | 19,900        |   |
|         Carlsbad, California        | Leased              | August      2009June      2010 | 17,300        |   |
|         Poway, California           | Leased              | August      2009               | 3,200         |   |
|         Framingham, Massachusetts   | Leased              | November      2011             | 4,200         |   |
|         Morrisville, North Carolina | Leased              | April      2009                | 11,300        |   |
|                                          |                |                           | 55,900        |   |

|         Location                                   | Ownedor      Leased | ExpirationDate   | SquareFootage |   |
|--------------------------------------------------------------|---------------------|------------------|---------------|--------|
|         Hangzhou, People’s Republic of China | Leased              | March      2009  | 14,200        |   |
|         Beijing, People’s Republic of China  | Leased              | April      2010  | 1,700         |   |
|         Japan                                      | Leased              | August      2009 | 100           |   |
|         Taiwan                                     | Leased              | May      2009    | 100           |   |
|                                                         |                |             | 16,100        |   |

ITEM 3.

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|         Name                     | Age | Position      With the Company                                             | YearsWith      the Company |
|--------------------------------------------|-----|----------------------------------------------------------------------------|----------------------------|
|         Albert E. Sisto          | 59  | Chairman      and Chief Executive Officer                                  | 1                          |
|         William R. Walker        | 67  | Vice      President of Finance, Chief Financial Officer and      Secretary | 10                         |
|         Russell S. Dietz         | 45  | Vice      President and Chief Technical Officer                            | 8                          |
|         Thomas Flageollet        | 52  | Vice      President Field Operations, Americas and EMEA                    | <1                      |
|         Michael D Goldgof        | 43  | Vice      President of Product Marketing                                   | 1                          |
|         John E. G. Matze         | 50  | Vice      President of Business Development                                | 1                          |
|         Dr. Jiebing Wang, Ph. D  | 40  | Vice      President of Engineering                                         | 4                          |
|         Douglas L. Whiting, Ph.D | 52  | Chief      Scientist and Director                                          | 12                         |
|         Steven Yang              | 42  | Vice      President, Asia Pacific Field Operations                         | <1                      |

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ITEM 4.

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PART II

ITEM5

|                                       |   | High   |   |   | Low    |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|
| Fiscal      Year Ended September 30, 2008: |   |   |   |   |   |   |
|         Fourth Quarter           |   | $      | 4.57   |   |   | $      | 3.08 |   |
|        Third Quarter                  |   |   | 5.22   |   |   |   | 3.81 |   |
|         Second Quarter           |   |   | 6.49   |   |   |   | 4.76 |   |
|         First Quarter            |   |   | 9.25   |   |   |   | 5.30 |   |
|                                       |   |   |   |   |   |   |   |   |
| Fiscal      Year Ended September 30, 2007: |   |   |   |   |   |   |   |   |
|         Fourth Quarter           |   | $      | 8.59   |   |   | $      | 6.01 |   |
|         Third Quarter            |   |   | 6.83   |   |   |   | 5.74 |   |
|         Second Quarter           |   |   | 6.75   |   |   |   | 5.29 |   |
|         First Quarter            |   |   | 5.34   |   |   |   | 4.61 |   |

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|         Plan Category                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Number      of Shares to be      Issued upon Exercise      of Stock Options |   | Weighted      Average      Exercise Price      per Share |   | Shares      Available for Future      Issuance (excluding      shares reflected      in the first column) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|         Equity compensation plans            approved by security      holders                                                       |   | 1,998,403                                                                   | (1)(2) | $      8.35                                              | (3)    | 1,368,300                                                                                                 | (4)    |
|         Equity compensation plans            not approved by security holders                                                                                                                                                                                                                                                                                                                                      |   | 1,338,300                                                                   | (5)    | 7.28                                                     |   | 275,650                                                                                                   |   |
|         Total                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 3,336,703                                                                   |   | $      7.88                                              |   | 1,643,950                                                                                                 |   |

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| (1) | Relates      to options granted under our Amended and Restated 1996 Equity Incentive      Plan (the “1996 Plan”), under which 5,449,900 shares of common stock are      reserved for issuance pursuant to nonqualified and incentive stock      options, stock bonuses, restricted stock units (“RSU’s”) and stock      appreciation rights. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes      287,059 RSU’s granted under the 1996Plan. |
|-----|---------------------------------------------------------------|

| (3) | This      weighted-average exercise price does not include outstanding      RSUs. |
|-----|-----------------------------------------------------------------------------------|

| (4) | Includes      356,894 shares of the Company’s common stock available for issuance under      the Company’s 1998 Employee Stock Purchase Plan (the “ESPP”) as of      September 30, 2008, of which 83,529 were issued in connection with the      purchase on October 31, 2008. In December 1998, the Company adopted the      ESPP to provide eligible employees with the opportunity to purchase our      common stock through payroll deductions. There are 1,400,000 shares of our      common stock reserved for issuance under the ESPP. The price of shares      purchased under the ESPP is the lower of 85% of the closing sales price of      our common stock on the first day of each semi-annual offering period, or      85% of the closing sales price of our common stock on the last day of the      semi-annual offering period. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Relates      to options under the 2001 Nonstatutory Stock Option Plan (the “2001      Plan”). There are 2,000,000 shares of common stock reserved for issuance      under the 2001 Plan.  In connection with the acquisition of      Apptitude, Inc., the Company assumed the Apptitude Plan, which had a total      of 687,142 shares of common stock reserved for issuance. Options assumed      under the Apptitude Plan that were subsequently cancelled were not      eligible for reissuance. The Apptitude Plan expired on October 25, 2005      and, therefore, has no effect on the number of options available for      grant. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|         Period                                  |   | TotalNumber of SharesPurchased |    | AveragePrice Paidper Share |    | Total Number of Shares Purchased      as Part of Publicly      Announced Plans      or Programs (1) |    | Approximate Dollar Value of Shares thatMay      Yet Be Purchased      Under the Plans or Programs |
|-----------------------------------------------------------|--------|------------------------------------------|--------------|--------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------------------------------------------------------------------|
|         July 1, 2008 to July 31, 2008           |   | 26,800                                   |         |                                 | 4.44         |                                                                                                                              | 218,542 |                                                                                                                                           | 6,972,238 |
|         August 1, 2008 to August 31, 2008       |   | 125,600                                  |         |                                 | 4.28         |                                                                                                                              | 344,142 |                                                                                                                                           | 6,434,841 |
|         September 1, 2008 to September 30, 2008 |   | —                                  |         |                                 | —      |                                                                                                                              | — |                                                                                                                                           | — |
| Total                                                     |   | 152,400                                  |         | $                                    | 4.55         |                                                                                                                         | 344,142 |                                                                                                                                           |   |

| (1) | On      May 1, 2008 the Company announced a stock repurchase program under which      Hifn may repurchase up to $8.0 million of its common stock. Under this      stock repurchase program, shares may be repurchased from time to time in      the open market or through negotiated transactions. The stock repurchase      program expired on September 30,2008. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 6.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | September 30,                            |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2008                                          |    | 2007 |   | 2006 |   | 2005 |   | 2004 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (in      thousands, except per share amounts) |    |
|    Statement      of Operations Data:                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                          |    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                          |    |   |   |   |   |   |   |   |   |
|         Net      revenues                                                                                  |   | $                                             | 39,418  |   | $ | 42,967 |   | $ | 43,764 |   | $ | 46,394 |   | $ | 42,142 |   |
|         Costs and operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of      revenues                                                                                                                    |   |                                          | 13,823  |   |   | 14,232 |   |   | 15,507 |   |   | 14,798 |   |   | 11,957 |   |
| Research      and development                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                          | 13,942  |   |   | 12,925 |   |   | 20,983 |   |   | 21,721 |   |   | 22,418 |   |
| Sales      and      marketing                                                                                                                 |   |                                          | 10,570  |   |   | 8,312 |   |   | 7,382 |   |   | 7,515 |   |   | 7,324 |   |
| General      and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                          | 6,597   |   |   | 8,558 |   |   | 6,984 |   |   | 5,332 |   |   | 4,492 |   |
| Amortization      of intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                          | 2,996   |   |   | 3,038 |   |   | 3,161 |   |   | 3,296 |   |   | 3,062 |   |
| Impairment      of      assets                                                                                                                |   |                                          | — |   |   | — |   |   | 292 |   |   | — |   |   | — |   |
| Purchased      in-process research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                          | — |   |   | 159 |   |   | — |   |   | — |   |   | 4,230 |   |
|         Loss from      operations                                                                          |   |                                          | (8,510  | ) |   | (4,257 | ) |   | (10,545 | ) |   | (6,268 | ) |   | (11,341 | ) |
| Interest      income,      net                                                                                                                |   |                                          | 1,359   |   |   | 1,981 |   |   | 1,916 |   |   | 1,193 |   |   | 525 |   |
| Other      expense,      net                                                                                                                  |   |                                          | (460    | )  |   | (81 | ) |   | (54 | ) |   | (51 | ) |   | (52 | ) |
| Provision      for income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                          | 145     |   |   | 184 |   |   | 41 |   |   | 90 |   |   | — |   |
|         Net      loss                                                                                      |   | $                                             | (7,756  | )  | $ | (2,541 | ) | $ | (8,724 | ) | $ | (5,216 | ) | $ | (10,868 | ) |
|          Net loss per share, basic and      diluted                                                                                                                                                            |   | $                                             | (0.53   | )  | $ | (0.18 | ) | $ | (0.63 | ) | $ | (0.38 | ) | $ | (0.84 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Weighted average shares outstanding, basic and    diluted                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                          | 14,766  |   |   | 14,092 |   |   | 13,769 |   |   | 13,887 |   |   | 12,993 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |  September      30,  |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |  2008                |    |  2007 |   |  2006 |   |  2005 |   |  2004 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |  (in      thousands) |    |
|         Balance Sheet Data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                      |    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                      |    |   |   |   |   |   |   |   |   |
|         Cash and short-term      investments                                                                          |   | $                         | 34,371  |   | $ | 35,322 |   | $ | 38,777 |   | $ | 44,440 |   | $ | 50,032 |   |
|         Total      assets                                                                                             |   |                      | 53,287  |   |   | 58,966 |   |   | 57,476 |   |   | 66,451 |   |   | 76,242 |   |
|         Working      capital                                                                                          |   |                      | 39,113  |   |   | 41,466 |   |   | 40,199 |   |   | 42,755 |   |   | 46,711 |   |
|         Total      debt                                                                                               |   |                      | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|         Total stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                      | 47,613  |   |   | 53,448 |   |   | 50,685 |   |   | 56,756 |   |   | 64,229 |   |

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ITEM 7

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|                                                                      |   | September      30, |   |
|---------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                             |   | 2008               |   | 2007 |   | 2006 |   |
|    Cisco      Systems, Inc. and its contract manufacturers |   | 48%                |   | 53% |   | 50% |   |
|         Huawei Technologies, Inc.                               |   | 10%                |   | 12% |   | 13% |   |
|         EMC Corporation                                         |   | 11%                |   |        6% |   | 3% |   |
|                                                                      |   | 69%                |   | 71% |   | 66% |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | September      30, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2008               |    |   | 2007 |   |   | 2006 |   |
|         Net revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |    |   |   |   |   |   |   |
|         Processors                                                                                                                                                                                          |   |               | 93      | % |   |   | 94 | % |   |   | 92 | % |
|         Software licenses and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 7       |   |   |   | 6 |   |   |   | 8 |   |
|                      Total net      revenues                                                                                               |   |               | 100     |   |   |   | 100 |   |   |   | 100 |   |
|         Costs and operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |    |   |   |   |   |   |   |   |   |   |
|         Cost of revenues -      processors                                                                                                                                                                            |   |               | 34      |   |   |   | 32 |   |   |   | 34 |   |
|         Cost of revenues - software licenses and      other                                                                                                                                                           |   |               | 1       |   |   |   | 1 |   |   |   | 1 |    |
|         Research and      development                                                                                                                                                                                 |   |               | 35      |   |   |   | 30 |   |   |   | 48 |   |
|         Sales and      marketing                                                                                                                                                                                      |   |               | 27      |   |   |   | 19 |   |   |   | 17 |   |
|         General and      administrative                                                                                                                                                                               |   |               | 17      |   |   |   | 20 |   |   |   | 16 |   |
|         Amortization of      intangibles                                                                                                                                                                              |   |               | 8       |   |   |   | 7 |   |   |   | 7 |   |
|         Impairment of      assets                                                                                                                                                                                     |   |               | — |   |   |   | — |   |   |   | 1 |   |
|         Purchased in-process research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               | — |   |   |   | — |   |   |   | — |   |
|         Total costs and operating      expenses                                                                                                                                                             |   |               | 122     |   |   |   | 109 |   |   |   | 124 |   |
|         Loss from      operations                                                                                                                                                                           |   |               | (22     | ) |   |   | (9 | ) |   |   | (24 | ) |
|         Interest and other income,      net                                                                                                                                                                 |   |               | 2       |   |   |   | 4 |   |   |   | 4 |   |
|         Loss before income      taxes                                                                                                                                                                       |   |               | (20     | ) |   |   | (5 | ) |   |   | (20 | ) |
|         Provision for income      taxes                                                                                                                                                                     |   |               | — |   |   |   | — |   |   |   | — |   |
|         Net      loss                                                                                                                                                                                       |   |               | (20     | )% |   |   | (5 | )% |   |   | (20 | )% |

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|                                                                                                                                                                                                                                                       |   | September      30,    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                       |   | 2008                  |   | 2007 |   | 2006 |   | 2008 vs. |   | 2007 vs. |   |
| Years      Ended                                                                                                                                                                                                                                           |   |                  |   | %      of net revenues |   |   |   | %      of net revenues |   |   |   | %      of net revenues |   | 2007      Change |   | 2006      Change |   |
|                                                                                                                                                                                                                                                       |   | ($      in thousands) |   |
|         Processors                                      |   | $                     | 36,702 |   |        93% |   | $ | 40,191 |   |  94% |   | $ | 40,262 |   |  92% |   |  (9)% |   |         — |   |
|         Software licenses and other                                                                                                                                                                                                              |   |                  | 2,716  |   |          7% |   |   | 2,776 |   |          6% |   |   | 3,502 |   |    8% |   |  (2)% |   |  (21)% |   |
|                                                                                                                                                                                                                                                       |   | $                     | 39,418 |   | 100% |   | $ | 42,967 |   | 100% |   | $ | 43,764 |   | 100% |   |  (8)% |   |         (2)% |   |

|                                                                      |   | September      30, |   |
|---------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                             |   | 2008               |   | 2007 |   | 2006 |   |
|    Cisco      Systems, Inc. and its contract manufacturers |   | 48%                |   | 53% |   | 50% |   |
|         Huawei Technologies, Inc.                               |   | 10%                |   | 12% |   | 13% |   |
|         EMC Corporation                                         |   | 11%                |   |        6% |   | 3% |   |
|                                                                      |   | 69%                |   | 71% |   | 66% |   |

|                                                                                                                                                                                                                                                 |   | September      30,    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                 |   | 2008                  |   | 2007 |   | 2006 |   |   |   |   |   |
|         Years Ended                                                                                                                                                                                                                        |   |                  |   | %      ofrevenue      category |   |   |   | %      of revenue      category |   |   |   | %      of revenue      category |   | 2008      vs. 2007      Change |   | 2007      vs. 2006      Change |   |
|                                                                                                                                                                                                                                                 |   | ($      in thousands) |   |
|         Processors                                     |   | $                     | 13,214 |   | 36% |   | $ | 13,903 |   |  35% |   | $ | 15,001 |   | 37% |   | (5)% |   |   (7)% |   |
|         Software licenses and other                                                                                                                                                                                                        |   |                  | 609    |   | 22% |   |   | 329 |   |  12% |   |   | 506 |   | 14% |   |  85% |   | (35)% |   |
|                                                                                                                                                                                                                                                 |   | $                     | 13,823 |   | 35% |   | $ | 14,232 |   |  33% |   | $ | 15,507 |   | 35% |    | (3)% |   |        (8)% |   |

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|                                                  |   | September      30,    |   |
|-------------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                         |   | 2008                  |   | 2007 |   | 2006 |   | 2008      vs. 2007Change |   | 2007      vs. 2006Change |   |
|                                                  |   | ($      in thousands) |   |
|         Research & development expenses |   | $                     | 13,942 |   | $ | 12,925 |   | $ | 20,983 |   |   | 8% |   |   | (38)% |   |
|         As a percentage of net revenues     |   |                  | 35%    |   |   | 30% |   |   | 48% |   |   |   |   |   |   |   |

|                                              |   | September      30,    |   |
|---------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                     |   | 2008                  |   | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                              |   | ($      in thousands) |   |
|         Sales & marketing expenses  |   | $                     | 10,570 |   | $ | 8,312 |   | $ | 7,382 |   |   | 27% |   |   | 13% |   |
|         As a percentage of net revenues |   |                  | 27%    |   |   | 19% |   |   | 17% |   |   |   |   |   |   |   |

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|                                                          |   | September      30,    |   |
|---------------------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                                 |   | 2008                  |   | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                          |   | ($      in thousands) |   |
|         General & administrative expenses       |   | $                     | 6,597  |   | $ | 8,558 |   | $ | 6,984 |   |   | (23)% |   |   | 23% |   |
|         As a percentage of net revenues   |   |                  | 17%    |   |   | 20% |   |   | 16% |   |   |   |   |   |   |   |

|                                                 |   | September      30,    |   |
|------------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                        |   | 2008                  |   | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                 |   | ($      in thousands) |   |
|         Amortization of intangibles   |   | $                     | 2,996  |   | $ | 3,038 |   | $ | 3,161 |   |   | (1)% |   |   | (4)% |   |
|         As a percentage of net revenues    |   |                  | 8%     |   |   | 7% |   |   | 7% |   |   |   |   |   |   |   |

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|                                                            |   | September      30,    |    |
|-----------------------------------------------------------------|--------|-----------------------|---------|
|         Years Ended                                   |   | 2008                  |    | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                            |   | ($      in thousands) |    |
|         Purchased in-process research and development |   | $                     | — |   | $ | 159 |   | $ | — |   |   | (100)% |   |   | 100% |   |
|         As a percentage of net revenues               |   |                  | — |   | Less      than 1% |   |   | — |   |   |   |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                  |   | September      30,    |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|---------|
|         Years Ended                                                                                                                                                                                                                                                                                                         |   | 2008                  |    | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                                                                                                                                                                                                                                                                                                  |   | ($      in thousands) |    |
|         Impairment of      assets                                                |   | $                     | — |   | $ | — |   | $ | 292 |   |   | — |   |   | (100)% |   |
|         As a percentage of net revenues                                                                                                                                                                                                                                                                                     |   |                  | — |   |   | — |   |   | 1% |   |   |   |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                            |   | September      30,    |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|----------|
|         Years Ended                                                                                                                                                                                                                                                                                              |   | 2008                  |     | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                                                                                                                                                                                                                                                                                       |   | ($      in thousands) |     |
|         Interest      income                                               |   | $                     | 1,359    |   | $ | 1,981 |   | $ | 1,927 |   |   |        (31)% |   |   |          3% |   |
|         Interest expense                                                                                                                                                                                                                                                                                         |   |                  | —  |   |   | (4 | )  |   | (11 | ) |   |   (100)%  |   |   | (64)%  |   |
|         Other expense, net                                                                                                                                                                                                                                                                                       |   |                  | (460     | )  |   |  (77 | )  |   |  (54 | )  |   |     497%  |   |   |         43%  |   |
|         Interest & other income, net                                                                                                                                                                                                                                                                         |   | $                     | 899      |   | $ | 1,900 |   | $  | 1,862 |   |   |    (53)%  |   |   |           2%  |   |
|         As a percentage of net revenues                                                                                                                                                                                                                                                                          |   |                  | 2%  |   |   | 4%  |   |   | 4%  |   |   |   |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                        |   | September      30,    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                               |   | 2008                  |   | 2007 |   | 2006 |   | 2008      vs. 2007 Change |   | 2007      vs. 2006Change |   |
|                                                                                                                                                                                                                                                                                                                                        |   | ($      in thousands) |   |
|         Provision for income      taxes                                                |   | $                     | 145    |   | $ | 184 |   | $ | 41 |   |   | (21)% |   |   | 349% |   |
|         As a percentage of net revenues                                                                                                                                                                                                                                                                                           |   | Less      than 1%     |   | Less      than 1% |   | Less      than 1% |   |   |   |   |   |   |   |

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|                                                                  |   |  September      30, |   |
|-----------------------------------------------------------------------|--------|--------------------------|--------|
|         Years Ended                                         |   |  2008               |   |  2007 |   |  2006 |   |
|                                                                  |   | ($      in thousands)    |
|         Net cash provided by (used in) operating activities |   | $                        | 478    |   | $ | (1,816 | ) | $ | (5,490 | ) |
|         Net cash (used in) provided by investing activities |   |                     | (8,207 | )  |   | (4,611 | )  |   | 1,328 |   |
|         Net cash provided by financing activities           |   |                     | 172    |   |   | 3,039 |   |   | 1,420 |   |
| Net      decrease in cash and cash equivalents                        |   | $                        | (7,557 | ) | $ | (3,388 | ) | $ | (2,742 | ) |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                               |                |   | Payments      Due By Period |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|--------|-----------------------------|--------|
|         Contractual Obligations                                                                                                                                                                                                                                                                                                                                                                                                          | Total               |   | Less      than1      year   |   | 1      - 3years |   | 3      - 5years |   | More      than 5 years |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                               | (in      thousands) |   |
|         Operating lease      commitments                                                                 |                | $      | 1,931                       |   |   | $ | 1,341 |   |   | $ | 570 |   |   | $ | 20 |   |   | $ | — |   |
|         Inventory      purchases                                                                         |                |   | 2,275                       |   |   |   | 2,275 |   |   |   | — |   |   |   | — |   |   |   | — |   |
|         Non-recurring engineering expense                                                                                                                                                                                                                                                                                                                                                                                                |                |   | 765                         |   |   |   | 765 |   |   |   | — |   |   |   | — |   |   |   | — |   |
|            Totals                                                                                             |                | $      | 4,971                       |   |   | $ | 4,381 |   |   | $ | 570 |   |   | $ | 20 |   |   | $ | — |   |

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ITEM 7A

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ITEM8

| Financial      Statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Page     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Report      of Independent Registered Public Accounting      Firm                                                                                                                                                 | 41  |
| Consolidated      Balance Sheets as of September 30, 2008 and      2007                                                                                                                                           | 42  |
| Consolidated      Statements of Operations for the years ended September 30, 2008, 2007 and      2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 43  |
| Consolidated      Statements of Stockholders’ Equity for the years ended September 30, 2008,      2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 44  |
| Consolidated      Statements of Cash Flows for the years ended September 30, 2008, 2007 and      2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 45  |
| Notes      to Consolidated Financial      Statements                                                                                                                                                              | 46  |

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Report of Independent Registered Public AccountingFirm

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| HIFN,      INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      BALANCE SHEETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
| ($      in thousands, except share and per share amounts)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |  September 30, |   |
| Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |  2008 |   |  2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |
| Current      Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
|          Cash and cash      equivalents                                                                                                                                                                                                                                                                                                                                                                               |   | $ | 9,492 |   | $ | 17,049 |   |
|     Short-term      investments                                                                                                                                                                                                                                                                                                                                                                   |   |   | 24,879 |   |   | 18,273 |   |
|          Trade accounts receivable, net of allowance for doubtful accounts      of $96 and $114,      respectively                                                                                                                                                                                                                                                                                                              |   |   | 6,651 |   |   | 7,450 |   |
| Inventories      (finished      goods)                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 2,283 |   |   | 2,784 |   |
|          Prepaid expenses and other current      assets                                                                                                                                                                                                                                                                                                                                                          |   |   | 1,482 |   |   | 1,428 |   |
|              Total current      assets                                                                                                                                                                                                                                                                                                                                                                 |   |   | 44,787 |   |   | 46,984 |   |
| Property and equipment,      net                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 1,927 |   |   | 1,982 |   |
| Intangible assets,      net                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 3,032 |   |   | 6,028 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 1,425 |   |   | 1,425 |   |
| Other      assets                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 2,116 |   |   | 2,547 |   |
|              Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $ | 53,287 |   | $ | 58,966 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Current      Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |
|     Accounts      payable                                                                                                                                                                                                                                                                                                                                                                                        |   | $ | 1,930 |   | $ | 1,467 |   |
|     Accrued      expenses and other current      liabilities                                                                                                                                                                                                                                                                                                                                      |   |   | 3,744 |   |   | 4,051 |   |
|         Total      current      liabilities                                                                                                                                                                                                                                                                                                                                   |   |   | 5,674 |   |   | 5,518 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Commitments      and contingencies (Note 12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| Stockholders’      Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |
|     Convertible      preferred stock, $0.001 par value; 10,000,000 shares      authorized;        none      issued and      outstanding                                                                                                                                                                                                                   |   |   | — |   |   | — |   |
|     Common      stock, $0.001 par value; 100,000,000 shares authorized;        15,661,000      and 15,277,000 shares issued; and 14,596,000 and        14,557,000      outstanding,      respectively                                                                                                             |   |   | 15 |   |   | 15 |   |
|     Additional      paid-in      capital                                                                                                                                                                                                                                                                                                                                                          |   |   | 175,164 |   |   | 171,573 |   |
|     Accumulated      other comprehensive income      (loss)                                                                                                                                                                                                                                                                                                                                       |   |   | (102 | ) |   | 3 |   |
|     Accumulated      deficit                                                                                                                                                                                                                                                                                                                                                                      |   |   | (121,472 | ) |   | (113,716 | ) |
|     Treasury      stock, 1,064,000 and 720,000 outstanding shares, respectively, at      cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | (5,992 | ) |   | (4,427 | ) |
|         Total      stockholders’      equity                                                                                                                                                                                                                                                                                                                            |   |   | 47,613 |   |   | 53,448 |   |
|  Total      Liabilities and Stockholders’ Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $ | 53,287 |   | $ | 58,966 |   |

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| HIFN,      INC.CONSOLIDATED      STATEMENTS OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | September      30, |   |
| Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 2008 |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | ($      in thousands, except per share amounts) |   |
| Net      revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Processors                                                                                                                                |   | $ | 36,702 |   | $ | 40,191 |   | $ | 40,262 |   |
| Software      licenses and      other                                                                                                          |   |   | 2,716 |   |   | 2,776 |   |   | 3,502 |   |
| Total      net      revenues                                                                                                                             |   |   | 39,418 |   |   | 42,967 |   |   | 43,764 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Costs      and operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |
| Cost      of revenues -      processors                                                                                                        |   |   | 13,214 |   |   | 13,903 |   |   | 15,001 |   |
| Cost      of revenues - software licenses and      other                                                                                       |   |   | 609 |   |   | 329 |   |   | 506 |   |
| Research      and      development                                                                                                             |   |   | 13,942 |   |   | 12,925 |   |   | 20,983 |   |
| Sales      and      marketing                                                                                                                  |   |   | 10,570 |   |   | 8,312 |   |   | 7,382 |   |
| General      and      administrative                                                                                                           |   |   | 6,597 |   |   | 8,558 |   |   | 6,984 |   |
| Amortization      of      intangibles                                                                                                          |   |   | 2,996 |   |   | 3,038 |   |   | 3,161 |   |
| Impairment      of      assets                                                                                                                 |   |   | — |   |   | — |   |   | 292 |   |
| Purchased      in-process research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | — |   |   | 159 |   |   | — |   |
| Total      costs and operating      expenses                                                                                                                  |   |   | 47,928 |   |   | 47,224 |   |   | 54,309 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Loss from      operations                                                                                             |   |   | (8,510 | ) |   | (4,257 | ) |   | (10,545 | ) |
| Interest      income                                                                                                                           |   |   | 1,359 |   |   | 1,981 |   |   | 1,927 |   |
| Interest      expense                                                                                                                          |   |   | — |   |   | (4 | ) |   | (11 | ) |
| Other      expense,      net                                                                                                                   |   |   | (460 | ) |   | (77 | ) |   | (54 | ) |
| Loss before income      taxes                                                                                         |   |   | (7,611 | ) |   | (2,357 | ) |   | (8,683 | ) |
| Provision      for income      taxes                                                                                                      |   |   | 145 |   |   | 184 |   |   | 41 |   |
| Net      loss                                                                                                         |   | $ | (7,756 | ) | $ | (2,541 | ) | $ | (8,724 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |
| Basic and      diluted                                                                                                                    |   | $ | (0.53 | ) | $ | (0.18 | ) | $ | (0.63 | ) |
| Shares      used in computing net loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| Basic      and      diluted                                                                                                               |   |   | 14,766 |   |   | 14,092 |   |   | 13,769 |   |

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| HIFN,      INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | September      30, |   |
| Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2008 |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | ($      in thousands) |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
| Net      loss                                                                                                                                                                                                                                                                            |   | $ | (7,756 | ) | $ | (2,541 | ) | $ | (8,724 | ) |
| Adjustments      to reconcile net cash provided by (used in) operatingactivities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Depreciation      and      amortization                                                                                                                                                                                                                                                                      |   |   | 1,765 |   |   | 1,732 |   |   | 1,832 |   |
| Loss      on disposal of fixed      assets                                                                                                                                                                                                                                                                   |   |   | 17 |   |   | — |   |   | 38 |   |
| Short-term      investment      impairment                                                                                                                                                                                                                                                                   |   |   | 364 |   |   | — |   |   | — |   |
| Amortization      of intangible      assets                                                                                                                                                                                                                                                                  |   |   | 2,996 |   |   | 3,038 |   |   | 3,161 |   |
| Asset      impairment                                                                                                                                                                                                                                                                                        |   |   | — |   |   | — |   |   | 292 |   |
| Stock-based      compensation      expense                                                                                                                                                                                                                                                                   |   |   | 1,854 |   |   | 2,261 |   |   | 977 |   |
| Provision      for excess and obsolete      inventory                                                                                                                                                                                                                                                        |   |   | 139 |   |   | 68 |   |   | 950 |   |
| Purchased      in-process research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | — |   |   | 159 |   |   | — |   |
| Allowance      for doubtful      accounts                                                                                                                                                                                                                                                                    |   |   | (18 | )  |   | 7 |   |   | 3 |   |
| Changes      in assets and liabilities, net of acquisition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                                                                                                                                                                                                                                     |   |   | 817 |   |   | (2,837 | )  |   | 454 |   |
| Inventories                                                                                                                                                                                                                                                                                                  |   |   | 362 |   |   | (823 | ) |   | (842 | ) |
| Prepaid      expenses and other current      assets                                                                                                                                                                                                                                                          |   |   | (54 | )  |   | 143 |   |   | (768 | ) |
| Other      assets                                                                                                                                                                                                                                                                                            |   |   | (314 | ) |   | (1,523 | ) |   | (178 | ) |
| Accounts      payable                                                                                                                                                                                                                                                                                        |   |   | 463 |   |   | (282 | ) |   | 148 |   |
| Accrued      expenses and other current      liabilities                                                                                                                                                                                                                                                     |   |   | (157 | )  |   | (1,218 | )  |   | (2,833 | ) |
| Net      cash provided by (used in) operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 478 |   |   | (1,816 | ) |   | (5,490 | ) |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |
| Maturities      of short-term      investments                                                                                                                                                                                                                                                               |   |   | 44,470 |   |   | 34,468 |   |   | 23,432 |   |
| Sales      of short-term      investments                                                                                                                                                                                                                                                                    |   |   | 998 |   |   | - |   |   | 2,527 |   |
| Purchases      of short-term      investments                                                                                                                                                                                                                                                                |   |   | (52,543 | ) |   | (34,397 | ) |   | (23,001 | ) |
| Cash      paid to acquire Siafu, net of cash      acquired                                                                                                                                                                                                                                                   |   |   | — |   |   | (4,250 | )  |   | — |   |
| Purchases      of property and      equipment                                                                                                                                                                                                                                                                |   |   | (982 | ) |   | (582 | ) |   | (1,630 | ) |
|              Funds in Escrow relating to the Siafu acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | (150 | ) |   | 150 |   |   | — |   |
| Net      cash (used in) provided by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | (8,207 | )  |   | (4,611 | )  |   | 1,328 |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |
|              Proceeds from issuance of common stock for stock option exercises                       and      employee stock purchase      plan, net                                                                              |   |   | 1,737 |   |   | 3,213 |   |   | 1,639 |   |
|              Repurchase of common stock, at      cost                                                                                                                                                                                                                     |   |   | (1,565 | ) |   | (174 | ) |   | — |   |
|              Installment payments on acquisition of software    licenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | — |   |   | — |   |   | (219 | ) |
|              Net cash provided by financing      activities                                                                                                                                                                                                                              |   |   | 172 |   |   | 3,039 |   |   | 1,420 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| Net decrease in cash and cash      equivalents                                                                                                                                                                                                                                 |   |   | (7,557 | )  |   | (3,388 | )  |   | (2,742 | ) |
| Cash and cash equivalents at      beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | 17,049 |   |   | 20,437 |   |   | 23,179 |   |
| Cash and cash equivalents at      end of      period                                                                                                                                                                                                                           |   | $ | 9,492 |   | $ | 17,049 |   | $ | 20,437 |   |

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| HIFN,      INC.CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY |
|---------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                          |   | Common Shares  |    | Common      Stock |   | Additional      Paid-In      Capital |   | Accumulated      Other Compre-hensive      Income/(Loss) |    | Accumulated      Deficit |   | Treasury Stock |   | Total  |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|-------------------|--------|--------------------------------------|--------|----------------------------------------------------------|---------|--------------------------|--------|----------------|--------|--------|----------|
|                                                                                                                                                                                                                                                                                                                                          |   | (in      thousands) |    |
|                                                                                                                                                                                                                                                                                                                                          |   |                |    |              |   |                                 |   |                                                     |    |                     |   |           |   |   |     |
| Balance      at September 30, 2005                                                                                                                                                                                                                                                                                                            |   |                | 13,522  |              | $      | 14                                   |   | $                                                        | 163,484 |                     | $      | (38            | )      | $      | (102,451 | ) | $ | (4,253 | ) | $ | 56,756 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                |    |              |   |                                 |   |                                                     |    |                     |   |           |   |   |     |   |   |   |   |   |   |   |
| Net      loss                                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | (8,724   | ) |   | — |   |   | (8,724 | ) |
| Unrealized      gain on financial instruments                                                                                                                                                                                                                                                                                            |   |                | — |              |   | —                              |   |                                                     | — |                     |   | 37             |   |   | —  |   |   | — |   |   | 37 |   |
| Comprehensive      loss                                                                                                          |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | —  |   |   | — |   |   | (8,687 | ) |
| Stock-based      compensation                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | 977     |                     |   | —        |   |   | —  |   |   | — |   |   | 977 |   |
| Issuance      of common stock upon    exercise      of      options                                          |   |                | 176     |              |   | —                              |   |                                                     | 705     |                     |   | —        |   |   | —  |   |   | — |   |   | 705 |   |
| Issuance      of common stock under    employee      stock purchase plan                                                                                                                                                                                                                                                  |   |                | 208     |              |   | —                              |   |                                                     | 934     |                     |   | —        |   |   | —  |   |   | — |   |   | 934 |   |
| Balance      at September 30, 2006                                                                                                                                                                                                                                                                                                            |   |                | 13,906  |              |   | 14                                   |   |                                                     | 166,100 |                     |   | (1             | )      |   | (111,175 | ) |   | (4,253 | ) |   | 50,685 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                |    |              |   |                                 |   |                                                     |    |                     |   |           |   |   |     |   |   |   |   |   |   |   |
| Net      loss                                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | (2,541   | ) |   | — |   |   | (2,541 | ) |
| Unrealized      gain on financial instruments                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | — |                     |   | 4              |   |   | —  |   |   | — |   |   | 4 |   |
| Comprehensive      loss                                                                                                          |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | —  |   |   | — |   |   | (2,537 | ) |
| Stock-based      compensation                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | 2,261   |                     |   | —        |   |   | —  |   |   | — |   |   | 2,261 |   |
| Repurchase      of common stock, at cost                                                                                                                                                                                                                                                                                                      |   |                | (27     | )                 |   | —                              |   |                                                     | — |                     |   | —        |   |   | —  |   |   | (174 | ) |   | (174 | ) |
| Issuance      of common stock upon    exercise      of      options                                          |   |                | 554     |              |   | 1                                    |   |                                                     | 2,675   |                     |   | —        |   |   | —  |   |   | — |   |   | 2,676 |   |
| Issuance      of common stock under    employee      stock purchase plan                                                                                                                                                                                                                                                  |   |                | 124     |              |   | —                              |   |                                                     | 537     |                     |   | —        |   |   | —  |   |   | — |   |   | 537 |   |
| Balance      at September 30, 2007                                                                                                                                                                                                                                                                                                            |   |                | 14,557  |              |   | 15                                   |   |                                                     | 171,573 |                     |   | 3              |   |   | (113,716 | ) |   | (4,427 | ) |   | 53,448 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                |    |              |   |                                 |   |                                                     |    |                     |   |           |   |   |     |   |   |   |   |   |   |   |
| Net      loss                                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | (7,756   | ) |   | — |   |   | (7,756 | ) |
| Unrealized      loss on financial instruments                                                                                                                                                                                                                                                                                            |   |                | — |              |   | —                              |   |                                                     | — |                     |   | (105           | )      |   | —  |   |   | — |   |   | (105 | ) |
| Comprehensive      loss                                                                                                          |   |                | — |              |   | —                              |   |                                                     | — |                     |   | —        |   |   | —  |   |   | — |   |   | (7,861 | ) |
| Stock-based      compensation                                                                                                                                                                                                                                                                                                                 |   |                | — |              |   | —                              |   |                                                     | 1,854   |                     |   | —        |   |   | —  |   |   | — |   |   | 1,854 |   |
| Repurchase      of common stock, at cost                                                                                                                                                                                                                                                                                                 |   |                | (344    | )                 |   | —                              |   |                                                     | — |                     |   | —        |   |   | —  |   |   | (1,565 | ) |   | (1,565 | ) |
| Issuance      of common stock upon    exercise      of      options                                          |   |                | 284     |              |   | —                              |   |                                                     | 1,300   |                     |   | —        |   |   | —  |   |   | — |   |   | 1,300 |   |
| Issuance      of common stock under    employee      stock purchase plan                                                                                                                                                                                                                                                  |   |                | 99      |              |   | —                              |   |                                                     | 437     |                     |   | —        |   |   | —  |   |   | — |   |   | 437 |   |
| Balance      at September 30, 2008                                                                                                                                                                                                                                                                                                            |   |                | 14,596  |              | $      | 15                                   |   | $                                                        | 175,164 |                     | $      | (102           | )      | $      | (121,472 | ) | $ | (5,992 | ) | $ | 47,613 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                |    |              |   |                                 |   |                                                     |    |                     |   |           |   |   |     |   |   |   |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|         Developed and core      technology                                                                                                                                                  |   | $      | 3,214  |   |
|         Other intellectual      property                                                                                                                                                    |   |   | 455    |   |
|         Purchased in-process research and      development                                                                                                                                  |   |   | 159    |   |
|         Net tangible      assets                                                                                                                                                            |   |   | 26     |   |
|         Goodwill                                                                                                                                                                            |   |   | 396    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $      | 4,250  |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                      |   | Balance      at beginningof      year |   | Additions      charged      to costs      and expenses |   | Write-offs      net of      recoveries |   | Balance      atendof      year |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------------------------|--------|----------------------------------------|--------|--------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                      |   | (in      thousands)                   |   |
|         Allowance for doubtful accounts:                                                                                                                                                                                                                                                                                                                                                        |   |                                  |   |                                                   |   |                                   |   |                           |    |
| Year      ended September 30,      2008                                                            |   | $                                     | 114    |                                                   | $      | (18                                    | )      | $                              | — |   | $ | 96 |   |
| Year      ended September 30,      2007                                                            |   |                                  | 107    |                                                   |   | 7                                      |   |                           | — |   |   | 114 |   |
| Year      ended September 30,      2006                                                            |   |                                  | 104    |                                                   |   | 3                                      |   |                           | — |   |   | 107 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | September      30,    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2008                  |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | ($      in thousands) |   |
|         Property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                  |   |   |   |
|         Computer      equipment                                                                                                                           |   | $                     | 6,181  |   | $ | 8,465 |   |
|         Furniture and      fixtures                                                                                                                       |   |                  | 914    |   |   | 912 |   |
|         Leasehold      improvements                                                                                                                       |   |                  | 822    |   |   | 789 |   |
|         Office      equipment                                                                                                                             |   |                  | 744    |   |   | 906 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                  | 8,661  |   |   | 11,072 |   |
|         Less: Accumulated      depreciation                                                                                                               |   |                  | (6,734 | ) |   | (9,090 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                     | 1,927  |   | $ | 1,982 |   |

|         Intangible assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |    |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|         Developed and core technology (5      years)                                                                                                                                 |   | $      | 16,771  |   | $      | 16,771 |   |
|         Less: Accumulated amortization                                                                                                                      |   |   | (13,739 | )      |   | (10,743 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | 3,032   |   |   | 6,028 |   |

|         Fiscal year ending September 30,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| 2009                                                                                                                                             |   | $      | 1,231  |   |   |   |   |   |   |   |
| 2010                                                                                                                                             |   |   | 643    |   |   |   |   |   |   |   |
| 2011                                                                                                                                             |   |   | 643    |   |   |   |   |   |   |   |
| 2012                                                                                                                                             |   |   | 515    |   |   |   |   |   |   |   |
|      Total      estimated      amortization                                                                             |   | $      | 3,032  |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |

|         Other assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|         Design tools and other licensed intellectual      property                                                                                                               |   | $      | 4,794  |   | $      | 4,235 |   |
|         Less: Accumulated amortization                                                                                                                                      |   |   | (2,981 | )      |   | (2,235 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | 1,813  |   |   | 2,000 |   |
|         Other      receivables                                                                                                                                                   |   |   | 129    |   |   | 189 |   |
|         Refundable      deposits                                                                                                                                                 |   |   | 174    |   |   | 358 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $      | 2,116  |   | $      | 2,547 |   |

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|         Accrued expenses and other current liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|         Accrued vacant facility lease      cost                                                                                                                                 |   | $      | 376    |   | $      | 713 |   |
|         Accrued non-recurring engineering services and      costs                                                                                                               |   |   | 765    |   |   | 104 |   |
|         Compensation and employee      benefits                                                                                                                                 |   |   | 1,830  |   |   | 1,606 |   |
|         Deferred income and      revenue                                                                                                                                        |   |   | 583    |   |   | 1,004 |   |
|         Income taxes      payable                                                                                                                                               |   |   | 20     |   |   | 9 |   |
|         Other                                                                                                                                                                   |   |   | 170    |   |   | 615 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $      | 3,744  |   | $      | 4,051 |   |

|         Years Ended                                                                                                                                                                                                                                                                             |                  | September      30, 2008 |   | September      30, 2007 |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|-------------------------|--------|-------------------------|------------|
|                                                                                                                                                                                                                                                                                                      |                  |                    |   |                    | Unrealized |   |   |   |   |   |   |   | Unrealized |   |   |   |   |
|                                                                                                                                                                                                                                                                                                      |                  | Cost                    |   | Gross      Gains   |       | Gross      Losses |   | Fair      Value |   | Cost |   | Gross      Gains |   | Gross      Losses |   | Fair      Value |   |
|                                                                                                                                                                                                                                                                                                      | ($      in thousands) |                    |
|         Corporate securities                                                                                                                                                                                                                                                                    |                  | $                       | 7,311  |                    | $          | 1 |   | $ | (80 | ) | $ | 7,232 |   | $ | 5,975 |   | $ | 4 |   | $ | (4 | ) | $ | 5,975 |   |
|         Government agency obligations                                                                                                                                                                                                                                                           |                  |                    | 1,020  |                    |       | — |   |   | (1 | ) |   | 1,019 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|         Agency discount notes                                                                                                                                                                                                                                                                   |                  |                    | 4,982  |                    |       | 2 |   |   | (2 | ) |   | 4,982 |   |   | — |   |   | — |   |   | — |   |   | — |   |
|         Commercial      paper                                            |                  |                    | 18,675 |                    |       | — |   |   | (22 | ) |   | 18,653 |   |   | 25,561 |   |   | 4 |   |   | — |   |   | 25,565 |   |
|         Money market funds                                                                                                                                                                                                                                                                      |                  |                    | 1,595  |                    |       | — |   |   | — |   |   | 1,595 |   |   | 168 |   |   | — |   |   | — |   |   | 168 |   |
|         Total available-for-sale securities                                                                                                                                                                                                                                                     |                  | $                       | 33,583 |                    | $          | 3 |   | $ | (105 | ) | $ | 33,481 |   | $ | 31,704 |   | $ | 8 |   | $ | (4 | ) | $ | 31,708 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | September      30,  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2008                |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (in      thousands) |   |
|         Included in:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                |   |   |   |
|         Cash and cash      equivalents                                                                                                            |   | $                   | 8,602  |   | $ | 13,435 |   |
|         Short-term      investments                                                                                                               |   |                | 24,879 |   |   | 18,273 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                   | 33,481 |   | $ | 31,708 |   |
|         Contractual maturities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                |   |   |   |   |   |
|         Due in less than one      year                                                                                                            |   | $                   | 33,481 |   | $ | 31,708 |   |

|                                                                     |   | September      30, |       |
|--------------------------------------------------------------------------|--------|--------------------|------------|
|         Years Ended                                            |   | 2008               |       | 2007 |   | 2006 |   |
|                                                                     |   |               |       |
|         Basic weighted-average common shares                   |   |               | 14,765,824 |   |   | 14,091,764 |   |   | 13,768,642 |   |
|         Stock options                                          |   |               | —    |   |   | — |   |   | — |   |
|         Restricted stock units                                 |   |               | —    |   |   | — |   |   | — |   |
|         Weighted-average common shares for diluted computation |   |               | 14,765,824 |   |   | 14,091,764 |   |   | 13,768,642 |   |

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Table of Contents

|                                                                         |   | September      30, |      |
|------------------------------------------------------------------------------|--------|--------------------|-----------|
|         Years Ended                                                |   | 2008               |      | 2007 |   | 2006 |   |
|                                                                         |   |               |      |   |   |   |   |
|         In-the-money stock options and RSU’s                 |   |               | 313,272   |   |   | 322,000 |   |   | 169,015 |   |
|         Out-of-the-money stock options                             |   |               | 2,953,409 |   |   | 3,466,259 |   |   | 3,254,026 |   |
|         Weighted outstanding options to purchase common      stock |   |               | 3,266,681 |   |   | 3,788,259 |   |   | 3,423,041 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | September      30,    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2008                  |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ($      in thousands) |   |
|         Supplemental cash flow information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  |   |   |   |   |   |   |
| Cash      paid during the year for      interest                                                                                     |                  | $      | — |   | $ | 4 |   | $ | 11 |   |
| Cash      paid during the year for income      taxes                                                                                 |                  |   | 180 |   |   | 243 |   |   | 136 |   |
| Cash      received during the year from refund of income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                  |   | 5 |   |   | — |   |   | — |   |

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Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                      | Outstanding      Options      / Quantity |      | Weighted      Average      Exercise      Price      (per share) |   | Weighted      Average      Contractual Term      (in      years) |   | Aggregate      Intrinsic      Value |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|------------------------------------------|-----------|-----------------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ($      in thousands, except per share amounts and years) |                                     |
|         Balance at September 30,      2005                                                                      |                                                 |                                     | 4,161,531 |                                                            | $      | 10.50                                                            |   |                                |   |   |   |   |   |
|         Options      granted                                                                                    |                                                      |                                     | 414,500   |                                                            |   | 6.67                                                             |   |                                |   |   |   |   |   |
|         Options      exercised                                                                                  |                                                 |                                     | (175,876  | )                                                               |   | 4.00                                                             |   |                                |   |   | $ | 419 |   |
|         Options      forfeited/cancelled                                                                        |                                                 |                                     | (860,157  | )                                                               |   | 11.67                                                            |   |                                |   |   |   |   |   |
|         Balance at September 30,      2006                                                                      |                                                      |                                     | 3,539,998 |                                                            |   | 10.09                                                            |   |                                |   |   |   |   |   |
|         Options      granted                                                                                    |                                                 |                                     | 1,528,000 |                                                            |   | 5.32                                                             |   |                                |   |   |   |   |   |
|         Options      exercised                                                                                  |                                                 |                                     | (553,701  | )                                                               |   | 4.83                                                             |   |                                |   |   |   | 1,516 |   |
|         Options      forfeited/cancelled                                                                        |                                                 |                                     | (744,886  | )                                                               |   | 9.17                                                             |   |                                |   |   |   |   |   |
|         Balance at September 30,      2007                                                                      |                                                 |                                     | 3,769,411 |                                                            |   | 9.11                                                             |   |                                |   |   |   |   |   |
|         Options      granted                                                                                    |                                                 |                                     | 501,500   |                                                            |   | 5.45                                                             |   |                                |   |   |   |   |   |
|         Options      exercised                                                                                  |                                                 |                                     | (265,087  | )                                                               |   | 4.91                                                             |   |                                |   |   |   | 466 |   |
|         Options      forfeited/cancelled                                                                        |                                                 |                                     | (956,180  | )                                                               |   | 12.29                                                            |   |                                |   |   |   |   |   |
|         Balance at September 30,      2008                                                                      |                                                      |                                     | 3,049,644 |                                                            |   | 7.88                                                             |   |                                | 5.82   |   |   | 2 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                      |                                     |      |                                                            |   |                                                             |   |                                |   |   |   |   |   |
|         Fully vested and expected to vest at September 30,    2008                                                                                                                                                                                                                                                                                                                                                                                                       |                                                      |                                     | 2,970,395 |                                                            | $      | 7.94                                                             |   |                                | 5.75   |   | $ | 2 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                      |                                     |      |                                                            |   |                                                             |   |                                |   |   |   |   |   |
|         Fully vested and exercisable at September 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                               |                                                      |                                     | 2,137,008 |                                                            | $      | 8.84                                                             |   |                                | 4.80   |   | $ | 2 |   |

|                                                        |                                | Options      Outstanding and Exercisable |   | Options      Vested and Exercisable                     |   |
|-------------------------------------------------------------|-------------------------------------|------------------------------------------|--------|---------------------------------------------------------|--------|
|         Range of        Exercise Prices |                                |   Quantity                     |   | Weighted      AverageRemaining      Life(in      years) |   | Weighted      AverageExercise      Price |   | Quantity |   | Weighted      AverageExercise      Price |   |
|                                                        |                                |                                     |   |                                                    |   |   |   |   |   |   |   |
| $                                                           |        3.00 - $4.85       |                                     |   | 520,340                                                 |   |   | 7.14 |   | $ | 4.43 |   |   | 295,932 |   | $ | 4.42 |   |
|                                                        |        4.90 -   5.00 |                                     |   | 120,787                                                 |   |   | 0.57 |   |   | 4.99 |   |   | 118,495 |   |   | 4.99 |   |
|                                                        |        5.09 -   5.10 |                                     |   | 330,709                                                 |   |   | 7.62 |   |   | 5.10 |   |   | 164,829 |   |   | 5.10 |   |
|                                                        |        5.11 -   5.93 |                                     |   | 327,763                                                 |   |   | 8.09 |   |   | 5.68 |   |   | 95,622 |   |   | 5.48 |   |
|                                                        |        5.94 -   6.33 |                                     |   | 358,278                                                 |   |   | 7.43 |   |   | 6.16 |   |   | 227,023 |   |   | 6.16 |   |
|                                                        |        6.40 -   6.71 |                                     |   | 316,709                                                 |   |   | 4.47 |   |   | 6.62 |   |   | 248,619 |   |   | 6.64 |   |
|                                                        |        6.74 -   8.01 |                                     |   | 307,017                                                 |   |   | 5.78 |   |   | 7.38 |   |   | 235,814 |   |   | 7.35 |   |
|                                                        |        8.05 - 10.76            |                                     |   | 319,650                                                 |   |   | 4.92 |   |   | 9.47 |   |   | 302,283 |   |   | 9.54 |   |
|                                                        | 11.17      - 16.00                  |                                     |   | 370,248                                                 |   |   | 3.24 |   |   | 13.81 |   |   | 370,248 |   |   | 13.81 |   |
|                                                        | 16.13      - 69.88                  |                                     |   | 78,143                                                  |   |   | 2.15 |   |   | 36.41 |   |   | 78,143 |   |   | 36.41 |   |
|                                                        |                                |                                     |   | 3,049,644                                               |   |   | 5.82 |   | $ | 7.88 |   |   | 2,137,008 |   | $ | 8.84 |   |

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Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Shares |     | Weighted      AverageFair      ValuePer      Share |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|----------------------------------------------------|--------|
|         Balance at September 30,      2006                                                                                                      |   |   | —  |                                               | $      | — |   |
|         Granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 300,000  |                                               |   | 5.82 |   |
|         Vested                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | (75,000  | )                                                  |   | 4.85 |   |
|         Forfeited/cancelled                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | (113,381 | )                                                  |   | 5.45 |   |
|         Balance at September 30,      2007                                                                                                      |   |   | 111,619  |                                               |   | 6.04 |   |
|         Granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 198,750  |                                               |   | 5.80 |   |
|         Vested                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | (18,310  | )                                                  |   | 5.44 |   |
|         Forfeited/cancelled                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | (5,000   | )                                                  |   | 5.84 |   |
|         Balance at September 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 287,059  |                                               | $      | 5.91 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | September      30,  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|
|    Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2008                     |   | 2007 |   | 2006 |   |
|         Cost of      revenues                                                                                               |   | $                        | 30     |   | $ | 31 |   | $ | 9 |   |
|         Research and      development                                                                                       |   |                     | 678    |   |   | 864 |   |   | 455 |   |
|         Sales and      marketing                                                                                            |   |                     | 551    |   |   | 374 |   |   | 172 |   |
|         General and      administrative                                                                                     |   |                     | 595    |   |   | 992 |   |   | 341 |   |
| Total      stock-based compensation      expense                                                                                                               |   | $                        | 1,854  |   | $ | 2,261 |   | $ | 977 |   |

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Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                              |   | September      30, |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
|    Years      Ended                                                                                                                                                                                                                                                                                                                                                           |   | 2008               |   | 2007 |   | 2006 |
|                                                                                                                                                                                                                                                                                                                                                                                              |   | StockOptions       |   | Purchase      Plan |   | StockOptions |   | Purchase      Plan |   | StockOptions |   | Purchase      Plan |
|    Weighted      average fair      value                                                        |   | $2.65              |   | $1.70 |   | $3.15 |   | $1.46 |   | $3.86 |   | $1.43 |
|         Estimated      life                                                                     |   | 5.61      years    |   | 0.50      years |   | 5.77      years |   | 0.49      years |   | 5.44      years |   | 0.49      years |
|         Risk-free interest      rate                                                            |   | 3.41%              |   | 1.62% |   | 4.56% |   | 4.39% |   | 4.41% |   | 4.73% |
|         Expected stock price      volatility                                                         |   | 48.4%              |   | 61.4% |   | 53.0% |   | 37.6% |   | 62.4% |   | 33.6% |
|         Dividend      yield                                                                          |   | 0.00%              |   | 0.00% |   | 0.00% |   | 0.00% |   | 0.00% |   | 0.00% |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | September      30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2008               |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |               |   |   |   |   |   |
|    Domestic                                                                                                                    |   | $                  | (8,004 | ) | $ | (2,388 | ) | $ | (9,171 | ) |
|         Foreign                                                                                                      |   |               | 393    |   |   | 31 |   |   | 488 |   |
|            Loss before income      taxes                                                                                  |   | $                  | (7,611 | ) | $ | (2,357 | ) | $ | (8,683 | ) |

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Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | September      30, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
| Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2008               |    | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |    |   |   |   |   |
| Current:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |    |   |   |   |   |
| Federal                                                                                                                                                          |   | $                  | — |   | $ | — |   | $ | — |   |
| State                                                                                                                                                            |   |               | 1       |   |   | 1 |   |   | — |   |
| Foreign                                                                                                                                                          |   |               | 144     |   |   | 183 |   |   | 41 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | 145     |   |   | 184 |   |   | 41 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |    |   |   |   |   |   |   |   |
| Deferred:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |    |   |   |   |   |   |   |   |
| Federal                                                                                                                                                          |   | $                  | — |   | $ | — |   | $ | — |   |
| State                                                                                                                                                            |   |               | — |   |   | — |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | — |   |   | — |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |    |   |   |   |   |   |   |   |
|              Provision for income      taxes                                                                                  |   | $                  | 145     |   | $ | 184 |   | $ | 41 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | September      30, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|    Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2008               |    | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |    |   |   |   |   |
|         Net operating      loss                                                                                                            |   | $                  | 28,342  |   | $ | 26,361 |   | $ | 27,144 |   |
|         Property and      equipment                                                                                                        |   |               | 267     |   |   | 126 |   |   | (36 | ) |
|         Inventory valuation      accounts                                                                                                  |   |               | 269     |   |   | 360 |   |   | 417 |   |
|         Accruals and      reserves                                                                                                         |   |               | 1,754   |   |   | 1,034 |   |   | 1,435 |   |
|         Research and development credit /      other                                                                                       |   |               | 5,944   |   |   | 8,384 |   |   | 8,089 |   |
|         Amortization of intangibles and      goodwill                                                                                      |   |               | 6,489   |   |   | 6,180 |   |   | 5,932 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 43,065  |   |   | 42,445 |   |   | 42,981 |   |
|         Valuation      allowance                                                                                                           |   |               | (43,065 | ) |   | (42,445 | ) |   | (42,981 | ) |
|         Net deferred tax      assets                                                                                                       |   | $                  | — |   | $ | — |   | $ | — |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | September      30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2008               |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |   |   |   |   |   |
|         Tax at federal statutory      rate                                                                                                |   | $                  | (2,588 | ) | $ | (801 | ) | $ | (3,118 | ) |
|         State taxes, net of federal tax      benefit                                                                                      |   |               | 1      |   |   | 1 |   |   | — |   |
|         Research and development      credits                                                                                             |   |               | (39    | ) |   | (187 | ) |   | (202 | ) |
|         Deferred tax benefits not      recognized                                                                                         |   |               | 2,584  |   |   | 967 |   |   | 3,282 |   |
|         Foreign      taxes                                                                                                                |   |               | 144    |   |   | 183 |   |   | 41 |   |
|         Other                                                                                                                             |   |               | 43     |   |   | 21 |   |   | 38 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                  | 145    |   | $ | 184 |   | $ | 41 |   |

| Balance      at October 1,      2007                                                                                                                                       |   | $      | 1,997 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| Gross      increases for tax positions of current      year                                                                                                                               |   |   | 32    |   |
| Gross      decreases for tax positions of prior      years                                                                                                                                |   |   | (152  | )      |
| Balance      at September 30,      2008                                                                                                                                    |   | $      | 1,878 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | September      30,  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
| Years      Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2008                |   | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (in      thousands) |   |
| North      America:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                |   |   |   |   |   |
|              United      States                                                                                   |   | $                   | 17,280 |   | $ | 17,841 |   | $ | 16,655 |   |
|              Other                                                                                                |   |                | 981    |   |   | 799 |   |   | 1,082 |   |
|                  Total North America                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                | 18,261 |   |   | 18,640 |   |   | 17,737 |   |
|          Asia:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                |   |   |   |   |   |   |   |   |
|              Hong      Kong                                                                                       |   |                | 14,285 |   |   | 18,660 |   |   | 18,138 |   |
|              Malaysia                                                                                             |   |                | 923    |   |   | 1,424 |   |   | 1,411 |   |
|              Japan                                                                                                |   |                | 878    |   |   | 1,155 |   |   | 1,796 |   |
|              Thailand                                                                                             |   |                | 824    |   |   | 547 |   |   | 1,039 |   |
|              Singapore                                                                                            |   |                | 501    |   |   | 284 |   |   | 1,429 |   |
|              China                                                                                                |   |                | 238    |   |   | — |   |   | — |   |
|              Taiwan                                                                                               |   |                | 152    |   |   | 69 |   |   | 134 |   |
|              Other                                                                                                |   |                | 17     |   |   | 15 |   |   | 39 |   |
|                  Total      Asia                                                                                  |   |                | 17,818 |   |   | 22,154 |   |   | 23,986 |   |
|          Europe and      other                                                                                              |   |                | 3,339  |   |   | 2,173 |   |   | 2,041 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                |   |   |   |   |   |   |   |   |
|                  Total                                                                                            |   | $                   | 39,418 |   | $ | 42,967 |   | $ | 43,764 |   |

|                                                                      |   | September      30, |   |
|---------------------------------------------------------------------------|--------|--------------------|--------|
|         Years Ended                                             |   | 2008               |   | 2007 |   | 2006 |   |
|    Cisco      Systems, Inc. and its contract manufacturers |   | 48%                |   | 53% |   | 50% |   |
|         Huawei Technologies, Inc.                               |   | 10%                |   | 12% |   | 13% |   |
|         EMC Corporation                                         |   | 11%                |   |        6% |   | 3% |   |
|                                                                      |   | 69%                |   | 71% |   | 66% |   |

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Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                             | OperatingLeaseCommitments |   | InventoryPurchases |   | Non-recurringEngineeringExpenses |    | TotalContractualObligations |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|--------|--------------------|--------|----------------------------------|---------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                             | (in      thousands)       |   |
| Fiscal      year ending September 30,                                                                                                                                                                                                                                                                                                                                                                            |                      |   |               |   |                             |    |                        |   |
|          2009                                                               |                      | $      | 1,341              |   | $                                | 2,275   |                        | $      | 765 |   | $ | 4,381 |   |
|          2010                                                               |                      |   | 454                |   |                             | — |                        |   | — |   |   | 454 |   |
|          2011                                                               |                      |   | 116                |   |                             | — |                        |   | — |   |   | 116 |   |
|          2012                                                               |                      |   | 20                 |   |                             | — |                        |   | — |   |   | 20 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                             |                      | $      | 1,931              |   | $                                | 2,275   |                        | $      | 765 |   | $ | 4,971 |   |

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Table of Contents

|                                                                                                                                                      |   | Three      Months Ended                       |   |          |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|---------------|--------|
|                                                                                                                                                      |   | December      31                              |   | March      31 |   | June      30 |   | September      30 |   | Total |   |
|                                                                                                                                                      |   | (in      thousands, except per share amounts) |   |
| Fiscal      2008:                                                                                                                                         |   |                                          |   |          |   |   |   |   |   |   |   |
|              Net revenues                                                                                              |   | $                                             | 10,929 |          | $      | 9,265 |   | $ | 10,220 |   | $ | 9,004 |   | $ | 39,418 |   |
|              Gross profit                                                                                              |   |                                          | 7,457  |          |   | 6,143 |   |   | 6,551 |   |   | 5,444 |   |   | 25,595 |   |
|              Net loss                                                                                                  |   |                                          | (680   | )             |   | (2,034 | ) |   | (1,889 | ) |   | (3,153 | ) |   | (7,756 | ) |
|              Net loss per share, basic and diluted                                                                     |   |                                          | (0.05  | )             |   | (0.14 | ) |   | (0.13 | ) |   | (0.22 | ) |   | (0.53 | ) |
|                                                                                                                                                      |   |                                          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
|          Fiscal 2007:                                                                                                                      |   |                                          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |
|              Net revenues                                                                                              |   | $                                             | 9,269  |          | $      | 11,029 |   | $ | 11,671 |   | $ | 10,998 |   | $ | 42,967 |   |
|              Gross profit                                                                                              |   |                                          | 6,065  |          |   | 7,433 |   |   | 7,707 |   |   | 7,530 |   |   | 28,735 |   |
|              Net income (loss)                                                                                         |   |                                          | (2,702 | )             |   | (707 | ) |   | 284 |   |   | 584 |   |   | (2,541 | ) |
|              Net income (loss) per share:                 Basic |   |                                          | (0.19  | )             |   | (0.05 | ) |   | 0.02 |   |   | 0.04 |   |   | (0.18 | ) |
|             Diluted                                                                           |   |                                          | (0.19  | )             |   | (0.05 | ) |   | 0.02 |   |   | 0.04 |   |   | (0.18 | ) |
|                                                                                                                                                      |   |                                          |   |          |   |   |

ITEM 9

ITEM 9A

|   | (i) | pertain      to maintenance of records that, in reasonable detail, accurately and      fairly reflect the transactions and dispositions of the assets of the      company; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that receipts and expenditures of the company      are being made only in accordance with authorizations of management and      directors of the company; and |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | provide      reasonable assurance that unauthorized acquisition, use or disposition of      the company’s assets that could havea |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------|

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|  |   | material      effect on financial statements would be prevented or detected on a timely      basis. |
|--|--------|-----------------------------------------------------------------------------------------------------|

ITEM 9B

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PART III

ITEM 10

ITEM 11

ITEM 12.

ITEM 13

ITEM 14

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Table of Contents

PART IV

Item 15

| (a) | The      following documents are filed as a part of this  Report: |
|-----|-------------------------------------------------------------------|

|   | 1. | Financial Statements -      See Item 8 above. |
|--------|----|-----------------------------------------------|

|   | 2. | Exhibits - The exhibits      listed in the accompanying “Index to Exhibits” are filed as part of this      Annual Report on Form 10-K. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------|

| Exhibit Number |  Exhibit                                                                                                                                                | Incorporated      by Reference |             |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------|
| Form                | File      No.                                                                                                                                                | Exhibit                        | Filing      Date | Filed      Herewith |
| 2.1                 | Acquisition      of Assets of Siafu Software, LLC, by and between hi/fn, Inc. and Siafu      Software, LLC.                                                  | 8-K                            | 0-24765          | 99.1 | 07/26/2007 |   |
| 3.1                 | Form      of Third Amended and Restated Certificate of Incorporation of hi/fn,      inc.                                                                     | 10-12G                         | 0-24765          | 3.1 | 08/08/1998 |   |
| 3.2                 | Amended      and Restated Bylaws of hi/fn, inc.                                                                                                              | 10-12G                         | 0-24765          | 3.2 | 08/08/1998 |   |
|                |                                                                                                                                                         |                           |             |   |   |   |
| 10.1                | Assignment,      Assumption and License Agreement dated as of November 21, 1996 between      Stac, Inc. and hi/fn, inc.                                      | 10-12G                         | 0-24765          | 10.2 | 08/08/1998 |   |
| 10.2                | Cross      License Agreement dated as of November 21, 1996 between Stac, Inc. and      hi/fn, inc.                                                           | 10-12G                         | 0-24765          | 10.3 | 08/08/1998 |   |
| 10.3                | Agreement      dated as of April 1, 1994 between International Business Machines      Corporation and Stac, Inc. (Program Patent License    Agreement).      | 10-12G                         | 0-24765          | 10.9 | 08/08/1998 |   |
| 10.4                | Agreement      dated as of April 1, 1994 between International Business Machines      Corporation and Stac, Inc. (Cross License Agreement).                  | 10-12G                         | 0-24765          | 10.10 | 08/08/1998 |   |
| 10.5                | License      Agreement dated as of June 20, 1994 between Microsoft Corporation and      Stac, Inc.                                                           | 10-12G                         | 0-24765          | 10.11 | 08/08/1998 |   |
| 10.6                | License      Agreement dated as of February 16, 1996 between Microsoft Corporation      and Stac, Inc.                                                  | 10-12G                         | 0-24765          | 10.12 | 08/08/1998 |   |
| 10.7                | License      Agreement dated as of December 15, 1995 between Motorola, Inc. and Stac,      Inc.                                                              | 10-12G                         | 0-24765          | 10.13 | 08/08/1998 |   |
| 10.8*               | Amended      and Restated 1998 Employee Stock Purchase Plan of hi/fn, inc., as amended      on February 21, 2008                                             | 10-Q                           | 0-24765          | 10.1 | 05/05/2008 |   |
| 10.9*               | Form      of Director Change of Control Agreement.                                                                                                           | 10-12G                         | 0-24765          | 10.16 | 08/08/1998 |   |
| 10.10*              | Form      of Employee Change of Control Agreement.                                                                                                           | 10-12G                         | 0-24765          | 10.17 | 08/08/1998 |   |
| 10.11*              | Forms      of Severance and Change of Control Agreement between the registrant and      each of Russell Dietz, William R. Walker and Douglas L.      Whiting | 8-K                            | 0-24765          | 99.1 | 05/19/2008 |   |
| 10.12†*       | Employment      Agreement dated February 6, 2007 between Albert E. Sisto and hi/fn,      inc.                                                                | 10-Q                           | 0-24765          | 10.38 | 05/05/2007 |   |
| 10.13†*       | Employment      Agreement dated July 19, 2007 between John Matze and hi/fn,      inc.                                                                        | 10-K                           | 0-24765          | 10.24 | 11/14/2007 |   |
| 10.14               | Agreement      dated May 6, 2005 between POI-Carlsbad, Inc. and hi/fn,    inc.                                                                               | 10-Q                           | 0-24765          | 10.4 | 08/03/2005 |   |
| 10.15               | Agreement      dated July 20, 2005 between 750 University, LLC and hi/fn,      inc.                                                                          | 10-Q                           | 0-24765          | 10.5 | 08/03/2005 |   |
| 10.16               | Agreement      dated July 25, 2006 between Ocean Point Tech Centre and hi/fn,      inc.                                                                      | 10-K                           | 0-24765          | 10.32 | 12/12/2006 |   |

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| 10.17  | Agreement      dated September 19, 2006 between Rreef America Reit III-Z1 LC and hi/fn,      inc.                                                           | 10-K   | 0-24765 | 10.31  | 12/12/2006 |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|------------|--------|
| 10.18* | Amended      and Restated 2001 Nonstatutory Stock Option Plan of hi/fn,      inc.                                                                           |   |    |   |       | X      |
| 10.19* | Amended      and Restated 1996 Equity Incentive Plan of hi/fn, inc.                                                                                         |   |    |   |       | X      |
|   |                                                                                                                                                        |   |    |   |       |   |
| 21.1   | Subsidiaries      of the Registrant                                                                                                                         |   |    |   |       | X      |
| 23.1   | Consent      of PricewaterhouseCoopers LLP, independent registered public accounting      firm.                                                             |   |    |   |       | X      |
|   |                                                                                                                                                        |   |    |   |       |   |
| 31.1   | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                |   |    |   |       | X      |
| 31.2   | Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                |   |    |   |       | X      |
| 32.1   | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   |    |   |       | X      |
| 32.2   | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   |    |   |       | X      |

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SIGNATURES

|                          |   | hi/fn,      inc                        |   |
|-------------------------------|--------|----------------------------------------|--------|
|                          |   |                                   |   |
| Dated:      November 14, 2008 |   | /s/      ALBERT E. SISTO               |   |
|                          |   | Albert      E. Sisto                   |   |
|                          |   | Chairman,      Chief Executive Officer |   |

| Signature                   |   | Title                                                           |   | Date                   |
|-----------------------------|--------|-----------------------------------------------------------------|--------|------------------------|
|                        |   |                                                            |   |                   |
| /s/      ALBERT E. SISTO    |   | Chairman,      Chief Executive Officer                          |   | November      14, 2008 |
| (Albert      E. Sisto)      |   | (principal      executive officer)                              |   |                   |
|                        |   |                                                            |   |                   |
| /s/      WILLIAM R. WALKER  |   | Vice      President, Finance, Chief Financial Officer           |   | November      14, 2008 |
| (William      R. Walker)    |   | and      Secretary (principal financial and accounting officer) |   |                   |
|                        |   |                                                            |   |                   |
| /s/      DOUGLAS L. WHITING |   | Chief      Scientist, Director                                  |   | November      14, 2008 |
| (Douglas      L. Whiting)   |   |                                                            |   |                   |
|                        |   |                                                            |   |                   |
| /s/      RICHARD M. NOLING  |   | Director                                                        |   | November      14, 2008 |
| (Richard      M. Noling)    |   |                                                            |   |                   |
|                        |   |                                                            |   |                   |
| /s/      TAHER ELGAMAL      |   | Director                                                        |   | November      14, 2008 |
| (Taher      Elgamal)        |   |                                                            |   |                   |
|                        |   |                                                            |   |                   |
| /s/      ROBERT W. JOHNSON  |   | Director                                                        |   | November      14, 2008 |
| (Robert      W. Johnson)    |   |                                                            |   |                   |

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Table of Contents

INDEX TO EXHIBITS

| Exhibit Number |  Exhibit                                                                                                                                                | Incorporated      by Reference |             |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------|
| Form                | File      No.                                                                                                                                                | Exhibit                        | Filing      Date | Filed      Herewith |
| 2.1                 | Acquisition      of Assets of Siafu Software, LLC, by and between hi/fn, Inc. and Siafu      Software, LLC.                                                  | 8-K                            | 0-24765          | 99.1 | 07/26/2007 |   |
| 3.1                 | Form      of Third Amended and Restated Certificate of Incorporation of hi/fn,      inc.                                                                     | 10-12G                         | 0-24765          | 3.1 | 08/08/1998 |   |
| 3.2                 | Amended      and Restated Bylaws of hi/fn, inc.                                                                                                              | 10-12G                         | 0-24765          | 3.2 | 08/08/1998 |   |
|                |                                                                                                                                                         |                           |             |   |   |   |
| 10.1                | Assignment,      Assumption and License Agreement dated as of November 21, 1996 between      Stac, Inc. and hi/fn, inc.                                      | 10-12G                         | 0-24765          | 10.2 | 08/08/1998 |   |
| 10.2                | Cross      License Agreement dated as of November 21, 1996 between Stac, Inc. and      hi/fn, inc.                                                           | 10-12G                         | 0-24765          | 10.3 | 08/08/1998 |   |
| 10.3                | Agreement      dated as of April 1, 1994 between International Business Machines      Corporation and Stac, Inc. (Program Patent License    Agreement).      | 10-12G                         | 0-24765          | 10.9 | 08/08/1998 |   |
| 10.4                | Agreement      dated as of April 1, 1994 between International Business Machines      Corporation and Stac, Inc. (Cross License Agreement).                  | 10-12G                         | 0-24765          | 10.10 | 08/08/1998 |   |
| 10.5                | License      Agreement dated as of June 20, 1994 between Microsoft Corporation and      Stac, Inc.                                                           | 10-12G                         | 0-24765          | 10.11 | 08/08/1998 |   |
| 10.6                | License      Agreement dated as of February 16, 1996 between Microsoft Corporation      and Stac, Inc.                                                  | 10-12G                         | 0-24765          | 10.12 | 08/08/1998 |   |
| 10.7                | License      Agreement dated as of December 15, 1995 between Motorola, Inc. and Stac,      Inc.                                                              | 10-12G                         | 0-24765          | 10.13 | 08/08/1998 |   |
| 10.8*               | Amended      and Restated 1998 Employee Stock Purchase Plan of hi/fn, inc., as amended      on February 21, 2008                                             | 10-Q                           | 0-24765          | 10.1 | 05/05/2008 |   |
| 10.9*               | Form      of Director Change of Control Agreement.                                                                                                           | 10-12G                         | 0-24765          | 10.16 | 08/08/1998 |   |
| 10.10*              | Form      of Employee Change of Control Agreement.                                                                                                           | 10-12G                         | 0-24765          | 10.17 | 08/08/1998 |   |
| 10.11*              | Forms      of Severance and Change of Control Agreement between the registrant and      each of Russell Dietz, William R. Walker and Douglas L.      Whiting | 8-K                            | 0-24765          | 99.1 | 05/19/2008 |   |
| 10.12†*       | Employment      Agreement dated February 6, 2007 between Albert E. Sisto and hi/fn,      inc.                                                                | 10-Q                           | 0-24765          | 10.38 | 05/05/2007 |   |
| 10.13†*       | Employment      Agreement dated July 19, 2007 between John Matze and hi/fn,      inc.                                                                        | 10-K                           | 0-24765          | 10.24 | 11/14/2007 |   |
| 10.14               | Agreement      dated May 6, 2005 between POI-Carlsbad, Inc. and hi/fn,    inc.                                                                               | 10-Q                           | 0-24765          | 10.4 | 08/03/2005 |   |
| 10.15               | Agreement      dated July 20, 2005 between 750 University, LLC and hi/fn,      inc.                                                                          | 10-Q                           | 0-24765          | 10.5 | 08/03/2005 |   |
| 10.16               | Agreement      dated July 25, 2006 between Ocean Point Tech Centre and hi/fn,      inc.                                                                      | 10-K                           | 0-24765          | 10.32 | 12/12/2006 |   |
| 10.17               | Agreement      dated September 19, 2006 between Rreef America Reit III-Z1 LC and hi/fn,      inc.                                                            | 10-K                           | 0-24765          | 10.31 | 12/12/2006 |   |
| 10.18               | Amended      and Restated 2001 Nonstatutory Stock Option Plan of hi/fn,      inc.                                                                            |                           |             |   |   | X |
| 10.19               | Amended      and Restated 1996 Equity Incentive Plan of hi/fn, inc.                                                                                          |                           |             |   |   | X |
|                |                                                                                                                                                         |                           |             |   |   |   |
| 21.1                | Subsidiaries      of the Registrant                                                                                                                          |                           |             |   |   | X |
| 23.1                | Consent      of PricewaterhouseCoopers LLP, independent registered public accounting      firm.                                                              |                           |             |   |   | X |
|                |                                                                                                                                                         |                           |             |   |   |   |
| 31.1                | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                 |                           |             |   |   | X |

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| 31.2 | Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                |   |   |   |   | X |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---|
| 32.1 | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   |   |   |   | X |
| 32.2 | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   |   |   |   | X |

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