##### Table of Contents

---

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



---

FORM 10-Q



---



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

For the thirteen week period ended: March 30, 2007

OR



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



---

C-COR Incorporated

(Exact Name of Registrant as Specified in Charter)



---



|                                               |  |                          |  |                                  
|---------------------------------------------- |  | ------------------------ |  | ---------------------------------
|Pennsylvania                                   |  | 0-10726                  |  | 24-0811591                       
|(State or Other Jurisdiction of Incorporation) |  | (Commission File Number) |  | (IRS Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|60 Decibel Road State College, PA        |  | 16801     
|(Address of Principal Executive Offices) |  | (Zip Code)

(814) 238-2461

(Registrants Telephone Number, Including Area Code)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

Large accelerated filer: ̈Accelerated filer:  x            Non-accelerated filer: ̈

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

Common Stock, $.05 Par Value
 49,563,652 shares outstanding as of April 27, 2007.



---



---

##### Table of Contents

C-COR Incorporated



|                                                                                                          |  |      
|--------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                          |  | Page 
|Part I  FINANCIAL INFORMATION                                                                            |  |      
|                                                                                                          | 
|Item 1. Financial Statements                                                                              |  |      
|                                                                                                          | 
|Report of Independent Registered Public Accounting Firm                                                   |  | 2    
|                                                                                                          | 
|Condensed Consolidated Balance Sheets:As of March 30, 2007 and June 30, 2006                              |  | 3    
|                                                                                                          | 
|Condensed Consolidated Statements of Operations:Thirteen Weeks Ended March 30, 2007 and March 24, 2006    |  | 4    
|                                                                                                          | 
|Condensed Consolidated Statements of Operations:Thirty-nine Weeks Ended March 30, 2007 and March 24, 2006 |  | 5    
|                                                                                                          | 
|Condensed Consolidated Statements of Cash Flows:Thirty-nine Weeks Ended March 30, 2007 and March 24, 2006 |  | 6    
|                                                                                                          | 
|Notes to Condensed Consolidated Financial Statements                                                      |  | 7-19 
|                                                                                                          | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations             |  | 20-30
|                                                                                                          | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                        |  | 31   
|                                                                                                          | 
|Item 4. Controls and Procedures                                                                           |  | 31   
|                                                                                                          | 
|Part II  OTHER INFORMATION                                                                               |  |      
|                                                                                                          | 
|Item 1A. Risk Factors                                                                                     |  | 32   
|                                                                                                          | 
|Item 6. Exhibits                                                                                          |  | 32   
|                                                                                                          | 
|Signatures                                                                                                |  | 33   



1



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

C-COR Incorporated:

We have reviewed the condensed consolidated balance
sheet of C-COR Incorporated and subsidiaries as of March 30, 2007, the related condensed consolidated statements of operations for the thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006, and the related
condensed consolidated statements of cash flows for the thirty-nine week periods ended March 30, 2007 and March 24, 2006. These condensed consolidated financial statements are the responsibility of the Companys management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to
be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of C-COR Incorporated and subsidiaries as of June 30, 2006, and the related consolidated statements of operations, cash flows, and shareholders equity for the year
then ended (not presented herein); and in our report dated September 12, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of June 30, 2006, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



|                        
|------------------------
|                        
|/s/ KPMG LLP            
|Harrisburg, Pennsylvania
|May 8, 2007             



2



---

##### Table of Contents

PART I. FINANCIAL INFORMATION

|Item 1. | Financial Statements
|------- | --------------------

C-COR Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



|                                                                                                                                                    |  |                |          |   |               |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ------------- | - | -------- | -
|                                                                                                                                                    |  | March 30, 2007 |          |   | June 30, 2006 |  
|ASSETS                                                                                                                                              |  |                |          |   |               |   |          |  
|Current assets                                                                                                                                      |  |                |          |   |               |   |          |  
|Cash and cash equivalents                                                                                                                           |  | $              | 44,447   |   |               | $ | 44,658   |  
|Restricted cash                                                                                                                                     |  |                | 3,594    |   |               |   | 1,409    |  
|Marketable securities                                                                                                                               |  |                | 47,108   |   |               |   | 16,270   |  
|Accounts receivable, net                                                                                                                            |  |                | 58,014   |   |               |   | 49,188   |  
|Unbilled receivables                                                                                                                                |  |                | 2,908    |   |               |   | 3,308    |  
|Inventories                                                                                                                                         |  |                | 36,009   |   |               |   | 25,437   |  
|Deferred costs                                                                                                                                      |  |                | 7,848    |   |               |   | 4,555    |  
|Assets held for sale                                                                                                                                |  |                |         |   |               |   | 303      |  
|Other current assets                                                                                                                                |  |                | 3,185    |   |               |   | 4,239    |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Total current assets                                                                                                                                |  |                | 203,113  |   |               |   | 149,367  |  
|Property, plant, and equipment, net                                                                                                                 |  |                | 20,359   |   |               |   | 20,074   |  
|Goodwill                                                                                                                                            |  |                | 131,034  |   |               |   | 131,209  |  
|Other intangible assets, net                                                                                                                        |  |                | 2,648    |   |               |   | 5,135    |  
|Deferred taxes                                                                                                                                      |  |                | 424      |   |               |   | 497      |  
|Other long-term assets                                                                                                                              |  |                | 5,675    |   |               |   | 6,847    |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Total assets                                                                                                                                        |  | $              | 363,253  |   |               | $ | 313,129  |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                |  |                |          |   |               |   |          |  
|Current liabilities                                                                                                                                 |  |                |          |   |               |   |          |  
|Accounts payable                                                                                                                                    |  | $              | 27,820   |   |               | $ | 25,796   |  
|Accrued liabilities                                                                                                                                 |  |                | 32,490   |   |               |   | 26,423   |  
|Deferred revenue                                                                                                                                    |  |                | 29,984   |   |               |   | 19,674   |  
|Deferred taxes                                                                                                                                      |  |                | 1,317    |   |               |   | 374      |  
|Liabilities held for sale                                                                                                                           |  |                |         |   |               |   | 415      |  
|Current portion of long-term debt                                                                                                                   |  |                | 378      |   |               |   | 299      |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Total current liabilities                                                                                                                           |  |                | 91,989   |   |               |   | 72,981   |  
|Long-term debt, less current portion                                                                                                                |  |                | 36,064   |   |               |   | 35,966   |  
|Deferred revenue                                                                                                                                    |  |                | 4,472    |   |               |   | 2,705    |  
|Deferred taxes                                                                                                                                      |  |                | 3,078    |   |               |   | 2,986    |  
|Other long-term liabilities                                                                                                                         |  |                | 4,861    |   |               |   | 3,624    |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Total liabilities                                                                                                                                   |  |                | 140,464  |   |               |   | 118,262  |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Commitments and contingencies                                                                                                                       |  |                |          |   |               |   |          |  
|Shareholders equity                                                                                                                                |  |                |          |   |               |   |          |  
|Preferred stock, no par value; authorized shares of 2,000,000; none issued                                                                          |  |                |         |   |               |   |         |  
|Common stock, $.05 par value; authorized shares of 100,000,000; issued shares of 53,107,979 as of March 30, 2007 and 51,653,206 as of
June 30, 2006 |  |                | 2,656    |   |               |   | 2,583    |  
|Additional paid-in capital                                                                                                                          |  |                | 395,505  |   |               |   | 383,362  |  
|Accumulated other comprehensive income                                                                                                              |  |                | 6,261    |   |               |   | 5,362    |  
|Accumulated deficit                                                                                                                                 |  |                | (147,240 | ) |               |   | (162,047 | )
|Treasury stock at cost, 3,645,046 shares as of March 30, 2007 and June 30, 2006                                                                     |  |                | (34,393  | ) |               |   | (34,393  | )
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Shareholders equity                                                                                                                                |  |                | 222,789  |   |               |   | 194,867  |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  
|Total liabilities and shareholders equity                                                                                                          |  | $              | 363,253  |   |               | $ | 313,129  |  
|                                                                                                                                                    |  |                |          |   |               |   |          |  

See notes to condensed consolidated financial statements.



3



---

##### Table of Contents

C-COR Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                             |  |                      |        |   |               |   |        |  
|------------------------------------------------------------ |  | -------------------- | ------ | - | ------------- | - | ------ | -
|                                                             |  | Thirteen Weeks Ended |       
|                                                             |  | March 30, 2007       |        |   | March 24,2006 |  
|Net sales:                                                   |  |                      |        |   |               |   |        |  
|Products                                                     |  | $                    | 56,260 |   |               | $ | 35,765 |  
|Content and operations management systems                    |  |                      | 15,536 |   |               |   | 10,560 |  
|Services                                                     |  |                      | 10,897 |   |               |   | 14,057 |  
|                                                             |  |                      |        |   |               |   |        |  
|Total net sales                                              |  |                      | 82,693 |   |               |   | 60,382 |  
|                                                             |  |                      |        |   |               |   |        |  
|Cost of sales:                                               |  |                      |        |   |               |   |        |  
|Products                                                     |  |                      | 31,710 |   |               |   | 21,772 |  
|Content and operations management systems                    |  |                      | 6,564  |   |               |   | 6,105  |  
|Services                                                     |  |                      | 10,009 |   |               |   | 12,141 |  
|Excess and obsolete inventory charge                         |  |                      |       |   |               |   | 618    |  
|                                                             |  |                      |        |   |               |   |        |  
|Total cost of sales                                          |  |                      | 48,283 |   |               |   | 40,636 |  
|                                                             |  |                      |        |   |               |   |        |  
|Gross margin                                                 |  |                      | 34,410 |   |               |   | 19,746 |  
|                                                             |  |                      |        |   |               |   |        |  
|Operating expenses:                                          |  |                      |        |   |               |   |        |  
|Selling and administrative                                   |  |                      | 16,523 |   |               |   | 14,869 |  
|Research and product development                             |  |                      | 8,722  |   |               |   | 8,887  |  
|Amortization of other intangibles                            |  |                      | 829    |   |               |   | 912    |  
|Impairment of long-lived assets                              |  |                      |       |   |               |   | 1,792  |  
|Gain on sale of product line                                 |  |                      |       |   |               |   | (1,970 | )
|Restructuring charge                                         |  |                      | 870    |   |               |   | 3,287  |  
|                                                             |  |                      |        |   |               |   |        |  
|Total operating expenses                                     |  |                      | 26,944 |   |               |   | 27,777 |  
|                                                             |  |                      |        |   |               |   |        |  
|Income (loss) from operations                                |  |                      | 7,466  |   |               |   | (8,031 | )
|Other income (expense), net:                                 |  |                      |        |   |               |   |        |  
|Interest expense                                             |  |                      | (359   | ) |               |   | (341   | )
|Investment income                                            |  |                      | 928    |   |               |   | 458    |  
|Foreign exchange gain (loss)                                 |  |                      | (270   | ) |               |   | 465    |  
|Other income, net                                            |  |                      | 304    |   |               |   | 177    |  
|                                                             |  |                      |        |   |               |   |        |  
|Income (loss) before income taxes                            |  |                      | 8,069  |   |               |   | (7,272 | )
|Income tax expense                                           |  |                      | 708    |   |               |   | 676    |  
|                                                             |  |                      |        |   |               |   |        |  
|Net income (loss)                                            |  | $                    | 7,361  |   |               | $ | (7,948 | )
|                                                             |  |                      |        |   |               |   |        |  
|Net income (loss) per share:                                 |  |                      |        |   |               |   |        |  
|Basic                                                        |  | $                    | 0.15   |   |               | $ | (0.17  | )
|Diluted                                                      |  | $                    | 0.14   |   |               | $ | (0.17  | )
|Weighted average common shares and common share equivalents: |  |                      |        |   |               |   |        |  
|Basic                                                        |  |                      | 49,080 |   |               |   | 47,896 |  
|Diluted                                                      |  |                      | 53,191 |   |               |   | 47,896 |  

See notes to the condensed consolidated financial statements.



4



---

##### Table of Contents

C-COR Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                             |  |                         |         |   |               |   |         |  
|------------------------------------------------------------ |  | ----------------------- | ------- | - | ------------- | - | ------- | -
|                                                             |  | Thirty-nine Weeks Ended |        
|                                                             |  | March 30, 2007          |         |   | March 24,2006 |  
|Net sales:                                                   |  |                         |         |   |               |   |         |  
|Products                                                     |  | $                       | 154,213 |   |               | $ | 112,952 |  
|Content and operations management systems                    |  |                         | 44,151  |   |               |   | 38,832  |  
|Services                                                     |  |                         | 34,049  |   |               |   | 38,760  |  
|                                                             |  |                         |         |   |               |   |         |  
|Total net sales                                              |  |                         | 232,413 |   |               |   | 190,544 |  
|                                                             |  |                         |         |   |               |   |         |  
|Cost of sales:                                               |  |                         |         |   |               |   |         |  
|Products                                                     |  |                         | 91,992  |   |               |   | 72,140  |  
|Content and operations management systems                    |  |                         | 17,094  |   |               |   | 20,034  |  
|Services                                                     |  |                         | 31,401  |   |               |   | 33,731  |  
|Excess and obsolete inventory charge                         |  |                         |        |   |               |   | 8,354   |  
|                                                             |  |                         |         |   |               |   |         |  
|Total cost of sales                                          |  |                         | 140,487 |   |               |   | 134,259 |  
|                                                             |  |                         |         |   |               |   |         |  
|Gross margin                                                 |  |                         | 91,926  |   |               |   | 56,285  |  
|                                                             |  |                         |         |   |               |   |         |  
|Operating expenses:                                          |  |                         |         |   |               |   |         |  
|Selling and administrative                                   |  |                         | 47,670  |   |               |   | 50,212  |  
|Research and product development                             |  |                         | 24,230  |   |               |   | 29,459  |  
|Amortization of other intangibles                            |  |                         | 2,487   |   |               |   | 3,706   |  
|Impairment of long-lived assets                              |  |                         |        |   |               |   | 7,122   |  
|Loss (gain) on sale of product line                          |  |                         | 245     |   |               |   | (1,970  | )
|Restructuring charge                                         |  |                         | 1,731   |   |               |   | 5,037   |  
|                                                             |  |                         |         |   |               |   |         |  
|Total operating expenses                                     |  |                         | 76,363  |   |               |   | 93,566  |  
|                                                             |  |                         |         |   |               |   |         |  
|Income (loss) from operations                                |  |                         | 15,563  |   |               |   | (37,281 | )
|Other income (expense), net:                                 |  |                         |         |   |               |   |         |  
|Interest expense                                             |  |                         | (1,084  | ) |               |   | (990    | )
|Investment income                                            |  |                         | 2,423   |   |               |   | 1,081   |  
|Foreign exchange gain (loss)                                 |  |                         | (126    | ) |               |   | 218     |  
|Other income, net                                            |  |                         | 389     |   |               |   | 479     |  
|                                                             |  |                         |         |   |               |   |         |  
|Income (loss) before income taxes                            |  |                         | 17,165  |   |               |   | (36,493 | )
|Income tax expense                                           |  |                         | 2,358   |   |               |   | 1,994   |  
|                                                             |  |                         |         |   |               |   |         |  
|Net income (loss)                                            |  | $                       | 14,807  |   |               | $ | (38,487 | )
|                                                             |  |                         |         |   |               |   |         |  
|Net income (loss) per share:                                 |  |                         |         |   |               |   |         |  
|Basic                                                        |  | $                       | 0.31    |   |               | $ | (0.80   | )
|Diluted                                                      |  | $                       | 0.30    |   |               | $ | (0.80   | )
|Weighted average common shares and common share equivalents: |  |                         |         |   |               |   |         |  
|Basic                                                        |  |                         | 48,466  |   |               |   | 47,856  |  
|Diluted                                                      |  |                         | 52,203  |   |               |   | 47,856  |  

See notes to the condensed consolidated financial statements.



5



---

##### Table of Contents

C-COR Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                   |  |                         |         |   |                |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                   |  | Thirty-nine Weeks Ended |        
|                                                                                                   |  | March 30, 2007          |         |   | March 24, 2006 |  
|Operating Activities:                                                                              |  |                         |         |   |                |   |         |  
|Net income (loss)                                                                                  |  | $                       | 14,807  |   |                | $ | (38,487 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                         |         |   |                |   |         |  
|Depreciation, amortization and accretion                                                           |  |                         | 6,579   |   |                |   | 8,638   |  
|Stock-based compensation                                                                           |  |                         | 2,595   |   |                |   | 2,845   |  
|Impairment charges                                                                                 |  |                         |        |   |                |   | 7,122   |  
|Loss (gain) on sale of product line                                                                |  |                         | 245     |   |                |   | (1,970  | )
|Other, net                                                                                         |  |                         | 123     |   |                |   | 450     |  
|Changes in operating assets and liabilities, net of effect of acquisition and divestitures:        |  |                         |         |   |                |   |         |  
|Receivables                                                                                        |  |                         | (7,878  | ) |                |   | 362     |  
|Inventories                                                                                        |  |                         | (10,540 | ) |                |   | 15,298  |  
|Accounts payable                                                                                   |  |                         | 1,904   |   |                |   | (13,872 | )
|Accrued liabilities and deferred revenue                                                           |  |                         | 19,020  |   |                |   | 2,918   |  
|Deferred income tax                                                                                |  |                         | 990     |   |                |   | 1,818   |  
|Other                                                                                              |  |                         | (3,447  | ) |                |   | 982     |  
|                                                                                                   |  |                         |         |   |                |   |         |  
|Net cash provided by (used in) operating activities                                                |  |                         | 24,398  |   |                |   | (13,896 | )
|                                                                                                   |  |                         |         |   |                |   |         |  
|Investing Activities:                                                                              |  |                         |         |   |                |   |         |  
|Purchase of property, plant, and equipment                                                         |  |                         | (4,467  | ) |                |   | (4,552  | )
|Proceeds from the sale of property, plant and equipment                                            |  |                         | 30      |   |                |   | 183     |  
|Proceeds from sale and maturities of marketable securities and other investments                   |  |                         | 21,378  |   |                |   | 16,362  |  
|Purchase of marketable securities and other investments                                            |  |                         | (51,611 | ) |                |   | (12,395 | )
|Proceeds from the sale of product line                                                             |  |                         | 388     |   |                |   | 3,348   |  
|Acquisitions, net of cash acquired                                                                 |  |                         |        |   |                |   | (26     | )
|                                                                                                   |  |                         |         |   |                |   |         |  
|Net cash provided by (used in) investing activities                                                |  |                         | (34,282 | ) |                |   | 2,920   |  
|                                                                                                   |  |                         |         |   |                |   |         |  
|Financing Activities:                                                                              |  |                         |         |   |                |   |         |  
|Payment of debt and capital lease obligations                                                      |  |                         | (283    | ) |                |   | (146    | )
|Proceeds from issuance of common stock to employee stock purchase plan                             |  |                         | 59      |   |                |   | 103     |  
|Proceeds from exercise of stock options and stock warrants                                         |  |                         | 9,561   |   |                |   | 670     |  
|Purchase of treasury stock                                                                         |  |                         |        |   |                |   | (43     | )
|                                                                                                   |  |                         |         |   |                |   |         |  
|Net cash provided by financing activities                                                          |  |                         | 9,337   |   |                |   | 584     |  
|                                                                                                   |  |                         |         |   |                |   |         |  
|Effect of exchange rate changes on cash                                                            |  |                         | 336     |   |                |   | (179    | )
|                                                                                                   |  |                         |         |   |                |   |         |  
|Decrease in cash and cash equivalents                                                              |  |                         | (211    | ) |                |   | (10,571 | )
|Cash and cash equivalents at beginning of period                                                   |  |                         | 44,658  |   |                |   | 36,898  |  
|                                                                                                   |  |                         |         |   |                |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                       | 44,447  |   |                | $ | 26,327  |  
|                                                                                                   |  |                         |         |   |                |   |         |  
|Supplemental cash flow information:                                                                |  |                         |         |   |                |   |         |  
|Non-cash investing and financing activities                                                        |  |                         |         |   |                |   |         |  
|Fair value adjustment of available-for-sale securities                                             |  | $                       | 11      |   |                | $ | (13     | )
|Capital lease obligation                                                                           |  |                         |        |   |                |   | 258     |  
|Purchase of assets under equipment financing agreements                                            |  |                         | 471     |   |                |   |        |  
|Equity securities received in connection with Adelphia Communications Corporation Bankruptcy       |  |                         | 139     |   |                |   |        |  

See notes to condensed consolidated financial statements



6



---

##### Table of Contents

C-COR Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

1. BASIS OF PRESENTATION

The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, in the opinion of management of C-COR Incorporated (the Company),
contain all adjustments (consisting only of normal, recurring adjustments except as noted) necessary to fairly present the Companys consolidated financial position as of March 30, 2007 and the consolidated results of operations for the
thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006. Operating results for the thirteen week and thirty-nine week periods ended March 30, 2007 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 29, 2007 due to the cyclical nature of the industry in which the Company operates, timing of recognizing revenues from the sale of certain content and operations management systems, fluctuations in
currencies related to intercompany foreign currency transactions where settlement is anticipated, and changes in overall conditions that could affect the carrying value of the Companys assets and liabilities. For further information, refer to
the consolidated financial statements and footnotes thereto included in the Companys Form 10-K for the fiscal year ended June 30, 2006 (fiscal year 2006).

2. DESCRIPTION OF BUSINESS

The Company is a global provider of integrated, end-to-end network solutions that include access
and transport products, content and operations management systems, and technical services for broadband networks. The Company operates in two industry segments: Broadband Systems Solutions and Network Services.

The Broadband Systems Solutions segment is responsible for the development, management, production, deployment, support and sale of unified solutions for
delivering voice, video and data services over complex networks for residential and business subscribers, including:



| |  |  | Network infrastructure products, including the Companys amplitude modulation headend/hub optical platform and line of optical nodes, and a full offering of
radio frequency amplifiers, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Content and operations management systems, including software and hardware, for delivery of video on demand and digital advertising as well as application-oriented,
operational support software for managing bandwidth and resource utilization, network and service assurance, and mobile workforce automation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Network Services segment provides outsourced technical services for engineering, design, and deployment of advanced applications over broadband networks, including installation services, network design and engineering, network
integration, outside plant and construction services, and consulting to a variety of customers.

For additional information regarding the Companys
reporting segments, see Note 15.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and financial reporting policies of the Company are in conformity with U.S. generally accepted accounting principles. The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Management has discussed the development and selection of the Companys critical accounting estimates with the Audit Committee of the Companys Board of Directors and the Audit
Committee has reviewed the Companys related disclosures. A detailed description of the Companys significant accounting policies is set forth in the Notes to Consolidated Financial Statements in the Companys Form 10-K for fiscal
year 2006, and is supplemented by the information below.

Reclassifications and Revisions

Certain prior year amounts have been reclassified to conform to current year consolidated financial statement presentation.

The June 30, 2006 consolidated condensed balance sheet has been revised to reflect a reclassification of $8,621 from cash and cash equivalents to marketable
securities due to certain securities having an original maturity greater than three months. This revision affected the consolidated statement of cash flows for the thirty-nine week period ended March 24, 2006. This revision did not affect the
consolidated statement of operations for the fiscal year ended June 30, 2006.



7



---

##### Table of Contents

The impact of this reclassification and revision on the previously issued consolidated condensed balance sheet and
statement of cash flows was as follows:



|                                                                              |  |             |         |   |            |   |        |                  |  |   |         |  
|----------------------------------------------------------------------------- |  | ----------- | ------- | - | ---------- | - | ------ | ---------------- |  | - | ------- | -
|                                                                              |  | As reported |         |   | Adjustment |   |        | Adjusted Balance | 
|Balance sheet as of June 30, 2006:                                            |  |             |         |   |            |   |        |                  |  |   |         |  
|Cash and cash equivalents                                                     |  | $           | 53,279  |   |            | $ | (8,621 | )                |  | $ | 44,658  |  
|Marketable securities                                                         |  |             | 7,649   |   |            |   | 8,621  |                  |  |   | 16,270  |  
|Statement of cash flows for the thirty-nine week period ended March 24, 2006: |  |             |         |   |            |   |        |                  |  |   |         |  
|Net cash used in operating activities                                         |  | $           | (13,896 | ) |            | $ |       |                  |  | $ | (13,896 | )
|Net cash provided by investing activities                                     |  |             | 1,585   |   |            |   | 1,335  |                  |  |   | 2,920   |  
|Net cash provided by financing activities                                     |  |             | 584     |   |            |   |       |                  |  |   | 584     |  
|Effect of exchange rate changes on cash                                       |  |             | (179    | ) |            |   |       |                  |  |   | (179    | )
|                                                                              |  |             |         |   |            |   |        |                  |  |   |         |  
|Decrease in cash and cash equivalents                                         |  | $           | (11,906 | ) |            | $ | 1,335  |                  |  | $ | (10,571 | )
|Cash and cash equivalents at beginning of period                              |  |             | 43,320  |   |            |   | (6,422 | )                |  |   | 36,898  |  
|                                                                              |  |             |         |   |            |   |        |                  |  |   |         |  
|Cash and cash equivalents at end of period                                    |  | $           | 31,414  |   |            | $ | (5,087 | )                |  | $ | 26,327  |  
|                                                                              |  |             |         |   |            |   |        |                  |  |   |         |  

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sale price is fixed or determinable, and collectibility is reasonably assured.

Products:

Revenue from product sales and sales-type leases is
recognized based upon delivery terms. Revenue is recognized when the equipment has been shipped to the customer when delivery terms are origin-based (e.g., FOB Shipping Point and Ex-works). When delivery terms are destination-based (e.g., FOB
Destination, Delivery duty unpaid (DDU) and Delivery duty paid (DDP)), revenue is recognized upon the delivery of the equipment. In instances in which payments are received upon product delivery and the agreement with the customer contains a
customer acceptance clause, revenue recognition is deferred until customer acceptance is obtained. Deferred revenue recorded under these arrangements was $23 and $78 at March 30, 2007 and June 30, 2006, respectively.

Content and Operations Management Systems:

Content and operations
management systems revenue consists of equipment and application software sales of video on demand systems, digital advertising insertion systems and operational support systems. Software and associated system product revenues are recognized based
on the guidance of AICPA Statement of Position (SOP) 97-2, Software Revenue Recognition (SOP 97-2), as amended. In multiple element arrangements, the Company allocates revenue to the various elements based on vendor-specific objective
evidence (VSOE) of fair value. The Companys VSOE of fair value is determined based on the price charged when the same element is sold separately. If VSOE of fair value does not exist for all elements in a multiple element arrangement, revenue
recognition is deferred until all elements without VSOE are delivered, at which time the Company applies the residual method. Under the residual method, if VSOE exists for the undelivered element (post contract support (PCS)), the fair value of the
undelivered element is deferred and recognized ratably over the term of the PCS contract, and the remaining portion of the arrangement is recognized as revenue upon delivery, which generally occurs on completion of implementation of the system.

For software license arrangements where professional services are being provided and are deemed to be essential to the functionality or are for
significant production, modification, or customization of the software product, both the software and the associated professional service revenue are recognized in accordance with the provisions of ARB 45 and SOP 81-1. Many of these software and
professional services arrangements are recognized using the completed-contract method as the Company does not have the ability to reasonably estimate contract costs at the inception of the contracts. Under the completed-contract method, revenue is
recognized when the contract is complete, and all direct costs and related revenues are deferred until that time. The Company recognizes software license and associated professional services revenue for one of its software license products (mobile
workforce management) using the percentage-of-completion method of accounting as the Company believes that its estimates of costs to complete and extent of progress toward completion of such contracts are reliable. The entire amount of an estimated
loss on a contract is accrued at the time a loss on a contract is projected. Actual losses may differ from these estimates.



8



---

##### Table of Contents

Software maintenance and support services fees are generally billed and collected in advance of the associated
maintenance contract term. Maintenance and support services fees collected are recorded as deferred revenue and recognized ratably under the straight-line method over the term of the contract. Unbilled receivables totaled $127 and $534 at
March 30, 2007 and June 30, 2006, respectively.

Deferred revenue represents amounts billed and totaled $34,433 and $22,301 at March 30,
2007 and June 30, 2006, respectively. Contract costs related to deferred revenue consist primarily of direct labor and applicable benefits, travel and other direct costs, and equipment costs. Deferred costs under these contracts were $7,702 and
$4,555 as of March 30, 2007 and June 30, 2006, respectively.

Services:

Service revenues, consisting of system design, field services, and consulting engagements, are recognized as services are rendered in accordance with the terms of contracts. At times, the Company enters into multiple
element contracts that entail delivery of both products and services. These contracts are accounted for under the percentage of completion method in accordance with the provisions of Accounting Research Bulletin No. 45, Long-Term
Construction-Type Contracts (ARB No. 45) using the relevant guidance in AICPA Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP 81-1). Under the percentage
of completion method, for certain contracts the Company records revenue by reference to the costs incurred to date and the estimated costs remaining to fulfill the contracts. For other contracts accounted for under the percentage of completion
method, revenue and costs are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the product delivered during each period and the costs allocable to the delivered units as the related cost of
sales. Provisions for losses on service contracts are recognized in the period in which the loss first becomes apparent. For contracts accounted for under the percentage of completion method, the Company typically performs the service prior to
billing the customer which gives rise to unbilled receivables. In these circumstances, billings usually occur shortly after the Company performs specific increments of work, as outlined in the contract. Unbilled receivables are expected to be billed
and collected generally within three to six months. Unbilled receivables totaled $2,781 and $2,774 at March 30, 2007 and June 30, 2006, respectively. Deferred costs under units of delivery contracts were $146 and $0 at March 30, 2007
and June 30, 2006, respectively.

Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 establishes a recognition
threshold and measurement attribute for income tax positions recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a two-step
evaluation process for tax positions. The first step is recognition and the second is measurement. For recognition, an enterprise judgmentally determines whether it is more-likely-than-not that a tax position will be sustained upon
examination, including resolution of related appeals or litigation processes, based on the technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold, it is measured and recognized in the
financial statements as the largest amount of tax benefit that is greater than 50% likely of being realized. If a tax position does not meet the more-likely-than-not recognition threshold, no benefit is recognized in the financial statements.

Tax positions that meet the more-likely-than-not recognition threshold at the effective date of FIN 48 may be recognized or, continue to be recognized,
upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 is required to be reported as an adjustment to the opening balance of retained earnings for the fiscal year in which FIN 48 is adopted. FIN 48 will apply
to fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact FIN 48 will have on its consolidated financial statements when it becomes effective for the Company in its fiscal year 2008 and is unable, at
this time, to quantify the impact, if any, on the Companys retained earnings at the time of adoption.

In September 2006, the FASB issued Statement
of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and
expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Earlier application is encouraged
provided that the reporting entity has not yet issued financial statements for that fiscal year including financial statements for an interim period within that fiscal year. The Company is currently assessing SFAS No. 157 and has not yet
determined the impact that the adoption of SFAS No. 157 will have on its results of operations and financial position when it becomes effective for the Company in fiscal year 2009.

In September 2006, the Securities and Exchange Commission (SEC) released SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements, (SAB 108), which addresses how uncorrected errors in previous years should be considered when quantifying



9



---

##### Table of Contents

errors in current-year financial statements. SAB 108 requires registrants to consider the effect of all carry over and reversing effects of prior-year
misstatements when quantifying errors in current-year financial statements. SAB 108 does not change the SEC staffs previous guidance on evaluating the materiality of errors. SAB 108 allows registrants to record the effects of adopting SAB 108
guidance as a cumulative-effect adjustment to retained earnings. This adjustment must be reported in the annual financial statements of the first fiscal year ending after November 15, 2006. The Company is currently evaluating the impact SAB 108
will have on its consolidated financial statements when it becomes effective for the Company as of June 29, 2007 and is unable, at this time, to quantify the impact, if any, on the Companys result of operations, financial position and
retained earnings at the time of adoption.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. The Company is currently assessing SFAS 159 and has not yet determined the impact that the adoption of SFAS 159 will have on its results of operations and financial position.

In June 2006, the FASB ratified EITF No. 06-3, Disclosure Requirements for Taxes Assessed by a Government Authority on Revenue-Producing Transactions.
EITF 06-3 requires disclosure of a companys accounting policy with respect to presentation of taxes collected on a revenue producing transaction between a seller and a customer. For taxes that are reported on a gross basis (included in revenue
and costs), EITF 06-3 also requires disclosure of the amount of taxes included in the financial statements. The Company records taxes on a net basis. EITF 06-3 was effective for the Company beginning December 30, 2006 and it did not have a
material effect on the Companys consolidated financial statements.

4. RESTRUCTURING COSTS

During the thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006, the Company incurred restructuring costs to align its workforce,
facilities and operating costs with current business opportunities. For the thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006, restructuring costs by category were as follows:



|                                           |  |                         |       |                |   |      
|------------------------------------------ |  | ----------------------- | ----- | -------------- | - | -----
|                                           |  | Thirteen Weeks Ended   
|                                           |  | March 30, 2007          |       | March 24, 2006
|Employee severance and relocation benefits |  | $                       | 220   |                | $ | 3,246
|Contractual obligations                    |  |                         | 650   |                |   | 41   
|                                           |  |                         |       |                |   |      
|Total restructuring costs                  |  | $                       | 870   |                | $ | 3,287
|                                           |  |                         |       |                |   |      
|                                           | 
|                                           |  | Thirty-nine Weeks Ended
|                                           |  | March 30, 2007          |       | March 24, 2006
|Employee severance and relocation benefits |  | $                       | 387   |                | $ | 4,497
|Contractual obligations                    |  |                         | 1,344 |                |   | 540  
|                                           |  |                         |       |                |   |      
|Total restructuring costs                  |  | $                       | 1,731 |                | $ | 5,037
|                                           |  |                         |       |                |   |      

For the thirteen week period ended March 30, 2007, the Company recorded $870 of restructuring charges,
representing contractual obligations, including leased facility and equipment costs, employee severance and termination benefits associated with workforce reductions of nine employees, and relocation benefits. Restructuring charges associated with
our Broadband Systems Solutions operating segment for the thirteen week and thirty-nine week periods ended March 30, 2007 were $180 and $780, respectively, compared to $3,287 and $5,037 for the same periods of the prior year. Restructuring
charges associated with our Network Services operating segment for the thirteen week and thirty-nine week periods ended March 30, 2007 were $690 and $951, respectively.



10



---

##### Table of Contents

The following table provides detail on the activity and remaining restructuring accrual balance by category as of
March 30, 2007:



|                                           |  |                                        |       |                                          |   |               |  |   |                                         |   |  |   |      
|------------------------------------------ |  | -------------------------------------- | ----- | ---------------------------------------- | - | ------------- |  | - | --------------------------------------- | - |  | - | -----
|                                           |  | Restructuring Accrual at June 30, 2006 |       | RestructuringCharges in Fiscal Year 2007 |   | Net Cash Paid |  |   | Restructuring Accrual at March 30, 2007
|Employee severance and relocation benefits |  | $                                      | 1,626 |                                          | $ | 387           |  | $ | (1,866                                  | ) |  | $ | 147  
|Contractual obligations                    |  |                                        | 925   |                                          |   | 1,344         |  |   | (842                                    | ) |  |   | 1,427
|                                           |  |                                        |       |                                          |   |               |  |   |                                         |   |  |   |      
|Total                                      |  | $                                      | 2,551 |                                          | $ | 1,731         |  | $ | (2,708                                  | ) |  | $ | 1,574
|                                           |  |                                        |       |                                          |   |               |  |   |                                         |   |  |   |      

Amounts accrued as of March 30, 2007 for employee severance and termination benefits will be paid out over
bi-weekly periods through the first quarter of fiscal year 2008. Amounts related to contractual obligations relate to excess leased facilities and equipment, which will be paid over their remaining lease terms through 2014, unless terminated
earlier.

5. INVENTORIES

Inventories as of March 30,
2007 and June 30, 2006 consisted of the following:



|                  |  |                |        |               |   |       
|----------------- |  | -------------- | ------ | ------------- | - | ------
|                  |  | March 30, 2007 |        | June 30, 2006
|Finished goods    |  | $              | 8,362  |               | $ | 7,026 
|Work-in-process   |  |                | 3,625  |               |   | 1,808 
|Raw materials     |  |                | 24,022 |               |   | 16,603
|                  |  |                |        |               |   |       
|Total inventories |  | $              | 36,009 |               | $ | 25,437
|                  |  |                |        |               |   |       

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $131,034 and $131,209 as of March 30, 2007 and June 30, 2006, respectively. As of March 30, 2007 and June 30, 2006, goodwill was allocated by segment as follows:



|                            |  |                |         |               |   |        
|--------------------------- |  | -------------- | ------- | ------------- | - | -------
|                            |  | March 30, 2007 |         | June 30, 2006
|Business segment:           |  |                |         |               |   |        
|Broadband Systems Solutions |  | $              | 124,057 |               | $ | 124,232
|Network Services            |  |                | 6,977   |               |   | 6,977  
|                            |  |                |         |               |   |        
|Total                       |  | $              | 131,034 |               | $ | 131,209
|                            |  |                |         |               |   |        

During the thirty-nine week period ended March 30, 2007, goodwill decreased $175, which consisted of a
decrease of $342 related to the divestiture of certain operations in Bangalore, India, a decrease of $61 related primarily to settlement of certain income tax contingencies, resulting in a reversal of a valuation allowance associated with the
acquisition of nCUBE Corporation, and an increase of $228 related to fluctuations in foreign currency exchange rates used to translate the goodwill related to foreign subsidiaries at the balance sheet date.

Under SFAS 142, Goodwill and Other Intangible Assets, goodwill is no longer amortized. Rather, goodwill is subject to a periodic impairment test based on its
fair value. The Company has selected the end of its third fiscal quarter of each year to reassess the value of its reporting units and related goodwill balance, or at other times if events have occurred or circumstances exist that indicate the
carrying amount of goodwill may not be recoverable. The Company obtained an independent appraisal as of March 30, 2007 to assess the fair value of its reporting units, to determine whether goodwill carried on its books was impaired and the
extent of such impairment, if any. The independent appraisal used the income and market approach to measure the fair value of the Companys business units. Managements assumptions regarding estimates of operating results and expected cash
flows for each business unit were provided to the independent appraiser, along with historical operating performance. Under the income approach, fair value is dependent on the present value of future economic benefits to be derived from ownership.
Future net cash flows available for distribution are discounted at market-based rates



11



---

##### Table of Contents

of return to provide indications of the value. Based upon this independent appraisal, the Company determined that its current goodwill balances were not
impaired as of March 30, 2007.

Other intangible assets as of March 30, 2007 and June 30, 2006 consisted of the following:



|                                   |  |               |         |   |               |   |         |  
|---------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | -
|                                   |  | March 30,2007 |         |   | June 30, 2006 |  
|Cost of intangibles:               |  |               |         |   |               |   |         |  
|Purchased technology               |  | $             | 13,412  |   |               | $ | 13,412  |  
|Customer relationships             |  |               | 5,010   |   |               |   | 5,010   |  
|Covenants not-to-compete           |  |               | 860     |   |               |   | 860     |  
|Patents and trademarks             |  |               | 1,200   |   |               |   | 1,200   |  
|                                   |  |               |         |   |               |   |         |  
|Total cost of intangibles          |  |               | 20,482  |   |               |   | 20,482  |  
|                                   |  |               |         |   |               |   |         |  
|Less accumulated amortization:     |  |               |         |   |               |   |         |  
|Purchased technology               |  |               | (11,271 | ) |               |   | (9,291  | )
|Customer relationships             |  |               | (4,503  | ) |               |   | (3,996  | )
|Covenants not-to-compete           |  |               | (860    | ) |               |   | (860    | )
|Patents and trademarks             |  |               | (1,200  | ) |               |   | (1,200  | )
|                                   |  |               |         |   |               |   |         |  
|Total accumulated amortization     |  |               | (17,834 | ) |               |   | (15,347 | )
|                                   |  |               |         |   |               |   |         |  
|Total other intangible assets, net |  | $             | 2,648   |   |               | $ | 5,135   |  
|                                   |  |               |         |   |               |   |         |  

7. LONG-TERM DEBT

During the thirty-nine week period ended March 30, 2007, the Company obtained $447 of additional financing through a financing company for the purchase of machinery and equipment. The borrowings have a weighted average interest rate of
9.35%. Monthly payments of principal and interest of $9 are required through fiscal year 2012. The borrowings under the financing agreement are collateralized by the equipment. The principal balance at March 30, 2007 was $405.

8. LETTER OF CREDIT AGREEMENT

Effective November 1, 2006, the Company
amended its credit agreement of November 5, 2004 (as amended, the Agreement) with a bank for a $10,000 revolving letter of credit facility. Under the Agreement, the $10,000 may be used solely for the issuance of letters of
credit which must be fully cash collateralized at the time of issuance. The Company is required to maintain with the bank cash collateral of 102% of the amount that can be drawn on the issued letters of credit. This collateral can be drawn on upon
the occurrence of any event of default under the Agreement. The Agreement contains standard event of default provisions, but no financial covenants. The Agreement is committed through November 3, 2007. The applicable margin under the Agreement
is 0.65%, payable quarterly in arrears. In the event that a letter of credit is drawn upon, the interest rate for any unreimbursed drawing is the banks floating prime rate.

As of March 30, 2007, the aggregate amount of letters of credit issued under the Agreement was $4,049. A cash compensating balance of $4,187 (includes interest earned on account) was funded as of March 30,
2007 to secure the Companys reimbursement obligation relating to the letters of credit (see Note 13).



12



---

##### Table of Contents

9. ACCRUED LIABILITIES

Accrued liabilities as of March 30, 2007 and June 30, 2006 consisted of the following:



|                                       |  |                |        |               |   |       
|-------------------------------------- |  | -------------- | ------ | ------------- | - | ------
|                                       |  | March 30, 2007 |        | June 30, 2006
|Accrued vacation expense               |  | $              | 3,922  |               | $ | 3,541 
|Accrued salary expense                 |  |                | 3,672  |               |   | 2,170 
|Accrued incentive compensation expense |  |                | 6,366  |               |   |      
|Accrued employee benefit expense       |  |                | 266    |               |   | 1,106 
|Accrued sales tax expense              |  |                | 577    |               |   | 220   
|Accrued warranty expense               |  |                | 5,766  |               |   | 5,319 
|Accrued workers compensation expense  |  |                | 577    |               |   | 760   
|Accrued restructuring costs            |  |                | 1,574  |               |   | 2,551 
|Accrued income taxes payable           |  |                | 966    |               |   | 876   
|Accrued other                          |  |                | 8,804  |               |   | 9,880 
|                                       |  |                |        |               |   |       
|                                       |  | $              | 32,490 |               | $ | 26,423
|                                       |  |                |        |               |   |       

10. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding and potential common shares outstanding. Potential common shares result from the assumed exercise of outstanding stock options and warrants having a dilutive effect, calculated under the
treasury stock method using the average market price for the period, and from the potential conversion of the Companys 3.5% senior convertible notes, calculated under the if-converted method. In addition, in computing the dilutive effect of
the convertible debt, the net income (loss) is adjusted to add back the after-tax amount of interest and amortized debt issuance costs recognized in the period associated with the convertible debt. Any potential shares that are antidilutive are
excluded from the calculation of diluted net income (loss) per share.

Net income (loss) per share is calculated as follows:



|                                                                            |  |                      |            |                |   |            |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | -------------- | - | ---------- | -
|                                                                            |  | Thirteen Weeks Ended |           
|                                                                            |  | March 30, 2007       |            | March 24, 2006 |  
|Basic net income (loss) per share:                                          |  |                      |            |                |   |            |  
|Net income (loss)                                                           |  | $                    | 7,361      |                | $ | (7,948     | )
|                                                                            |  |                      |            |                |   |            |  
|Weighted average common shares outstanding                                  |  |                      | 49,079,596 |                |   | 47,895,832 |  
|Basic net income (loss) per share                                           |  | $                    | 0.15       |                | $ | (0.17      | )
|Diluted net income (loss) per share:                                        |  |                      |            |                |   |            |  
|Net income (loss)                                                           |  | $                    | 7,361      |                | $ | (7,948     | )
|Interest and expense related to 3.5% senior unsecured convertible debt      |  |                      | 306        |                |   |           |  
|                                                                            |  |                      |            |                |   |            |  
|Income (loss) for purposes of computing diluted net income (loss) per share |  | $                    | 7,667      |                | $ | (7,948     | )
|                                                                            |  |                      |            |                |   |            |  
|Weighted average common shares outstanding                                  |  |                      | 49,079,596 |                |   | 47,895,832 |  
|Plus effect of:                                                             |  |                      |            |                |   |            |  
|Stock options and warrants                                                  |  |                      | 1,273,389  |                |   |           |  
|3.5% senior unsecured convertible debt                                      |  |                      | 2,838,169  |                |   |           |  
|                                                                            |  |                      |            |                |   |            |  
|Weighted average common shares and common share equivalents                 |  |                      | 53,191,154 |                |   | 47,895,832 |  
|                                                                            |  |                      |            |                |   |            |  
|Diluted net income (loss) per share:                                        |  | $                    | 0.14       |                | $ | (0.17      | )

For the thirteen week periods ended March 30, 2007 and March 24, 2006, total potential common shares of
750,041 and 8,831,454, respectively, were excluded from the diluted net income (loss) per share calculation because they were antidilutive.



13



---

##### Table of Contents

|                                                                            |  |                         |            |               |   |            |  
|--------------------------------------------------------------------------- |  | ----------------------- | ---------- | ------------- | - | ---------- | -
|                                                                            |  | Thirty-nine Weeks Ended |           
|                                                                            |  | March 30, 2007          |            | March 24,2006 |  
|Basic net income (loss) per share:                                          |  |                         |            |               |   |            |  
|Net income (loss)                                                           |  | $                       | 14,807     |               | $ | (38,487    | )
|                                                                            |  |                         |            |               |   |            |  
|Weighted average common shares outstanding                                  |  |                         | 48,465,640 |               |   | 47,855,679 |  
|Basic net income (loss) per share                                           |  | $                       | 0.31       |               | $ | (0.80      | )
|Diluted net income (loss) per share:                                        |  |                         |            |               |   |            |  
|Net income (loss)                                                           |  | $                       | 14,807     |               | $ | (38,487    | )
|Interest and expense related to 3.5% senior unsecured convertible debt      |  |                         | 919        |               |   |           |  
|                                                                            |  |                         |            |               |   |            |  
|Income (loss) for purposes of computing diluted net income (loss) per share |  | $                       | 15,726     |               | $ | (38,487    | )
|                                                                            |  |                         |            |               |   |            |  
|Weighted average common shares outstanding                                  |  |                         | 48,465,640 |               |   | 47,855,679 |  
|Plus effect of:                                                             |  |                         |            |               |   |            |  
|Stock options and warrants                                                  |  |                         | 899,463    |               |   |           |  
|3.5% senior unsecured convertible debt                                      |  |                         | 2,838,169  |               |   |           |  
|                                                                            |  |                         |            |               |   |            |  
|Weighted average common shares and common share equivalents                 |  |                         | 52,203,272 |               |   | 47,855,679 |  
|                                                                            |  |                         |            |               |   |            |  
|Diluted net income (loss) per share:                                        |  | $                       | 0.30       |               | $ | (0.80      | )

For the thirty-nine week periods ended March 30, 2007 and March 24, 2006, total potential common shares
of 1,791,549 and 8,983,032, respectively, were excluded from the diluted net income (loss) per share calculation because they were antidilutive.



14



---

##### Table of Contents

11. COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income, net of tax, if applicable, are as follows:



|                                         |  |                |       |   |               |   |       |  
|---------------------------------------- |  | -------------- | ----- | - | ------------- | - | ----- | -
|                                         |  | March 30, 2007 |       |   | June 30, 2006 |  
|Unrealized loss on marketable securities |  | $              | (3    | ) |               | $ | (14   | )
|Foreign currency translation gain        |  |                | 6,264 |   |               |   | 5,376 |  
|                                         |  |                |       |   |               |   |       |  
|Accumulated other comprehensive income   |  | $              | 6,261 |   |               | $ | 5,362 |  
|                                         |  |                |       |   |               |   |       |  

The components of comprehensive income (loss) for the thirteen week and thirty-nine week periods ended
March 30, 2007 and March 24, 2006 are as follows:



|                                                |  |                         |        |   |                |   |         |  
|----------------------------------------------- |  | ----------------------- | ------ | - | -------------- | - | ------- | -
|                                                |  | Thirteen Weeks Ended    |       
|                                                |  | March 30, 2007          |        |   | March 24,2006  |  
|Net income (loss)                               |  | $                       | 7,361  |   |                | $ | (7,948  | )
|Other comprehensive income (loss):              |  |                         |        |   |                |   |         |  
|Unrealized loss on marketable securities        |  |                         | (18    | ) |                |   | (30     | )
|Foreign currency translation gain (loss)        |  |                         | 149    |   |                |   | (166    | )
|                                                |  |                         |        |   |                |   |         |  
|Other comprehensive income (loss)               |  |                         | 131    |   |                |   | (196    | )
|                                                |  |                         |        |   |                |   |         |  
|Comprehensive income (loss)                     |  | $                       | 7,492  |   |                | $ | (8,144  | )
|                                                |  |                         |        |   |                |   |         |  
|                                                | 
|                                                |  | Thirty-nine Weeks Ended |       
|                                                |  | March 30, 2007          |        |   | March 24, 2006 |  
|Net income (loss)                               |  | $                       | 14,807 |   |                | $ | (38,487 | )
|Other comprehensive income (loss):              |  |                         |        |   |                |   |         |  
|Unrealized gain (loss) on marketable securities |  |                         | 11     |   |                |   | (13     | )
|Foreign currency translation gain (loss)        |  |                         | 888    |   |                |   | (771    | )
|                                                |  |                         |        |   |                |   |         |  
|Other comprehensive income (loss)               |  |                         | 899    |   |                |   | (784    | )
|                                                |  |                         |        |   |                |   |         |  
|Comprehensive income (loss)                     |  | $                       | 15,706 |   |                | $ | (39,271 | )
|                                                |  |                         |        |   |                |   |         |  

The Company accounts for certain intercompany loans that are denominated in foreign currencies as being permanent
in nature, as settlement is not planned or anticipated in the foreseeable future. As such, foreign currency translation gains and losses related to these loans are excluded from net income (loss) and reported as a component of other comprehensive
income (loss).

12. INCOME TAXES

The Company determines
income taxes for each of the jurisdictions in which it operates. This determination involves estimating the Companys actual current income tax payable and assessing temporary differences resulting from differing treatment of items, such as
reserves and accruals, for tax and accounting purposes. Deferred taxes arise due to temporary differences in the basis of assets and liabilities and from net operating loss and tax credit carryforwards. In general, deferred tax assets represent
future tax benefits to be received when certain expenses previously recognized in the Companys statement of operations become deductible expenses under applicable income tax laws or net operating loss or tax credit carryforwards are utilized.
Accordingly, realization of deferred tax assets is dependent on future taxable income against which these deductions, net operating losses and tax credits can be utilized. In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Historical operating losses, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies
are considered in making this assessment.

In fiscal year 2006, the Company recognized deferred tax liabilities of $200 related to unremitted earnings of
foreign subsidiaries that may be repatriated in the foreseeable future. Income taxes are not provided on the unremitted earnings of the Companys foreign subsidiaries where such earnings have been indefinitely reinvested in its foreign
operations. In future periods, deferred tax liabilities for domestic income tax and foreign withholding tax will be recognized for undistributed earnings and basis differences of foreign subsidiaries when the Company no longer intends to permanently
reinvest such unremitted earnings.



15



---

##### Table of Contents

As a result of cumulative losses the Company incurred in prior years, management previously recorded a valuation
allowance against deferred tax assets. The Company expects to maintain the valuation allowance on deferred tax assets until it can sustain a level of profitability in the applicable tax jurisdictions that demonstrates its ability to utilize these
assets. As of March 30, 2007, a valuation allowance on substantially all of the deferred tax assets remains, except in certain foreign jurisdictions where the Company has been consistently profitable. Income tax expense for the thirteen week
and thirty-nine week periods ended March 30, 2007 arose primarily from the following: recognition of additional valuation allowance, current taxes paid or payable for federal alternative minimum tax (AMT), for which any AMT credit
carryforward is offset by a valuation allowance and state and foreign income tax in those jurisdictions where offsetting loss carryforwards is not available or is limited.

In November 2005, the FASB issued Staff Position (FSP) FAS123(R)-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards. This FSP requires an entity to follow
either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123(R), Share-Based Payment (SFAS 123(R)), or the alternative transition method as described in the FSP. An entity that
adopts SFAS 123(R) using the modified prospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS No. 123(R) or the
effective date of this FSP to evaluate its available transition alternatives and make its one-time election. The Company has elected the alternative transition method to establish the initial pool of excess tax benefits, which would be available to
absorb tax deficiencies recognized subsequent to the adoption of SFAS 123R. The pool of excess tax benefits was determined to be zero as of the date of adoption.

13. COMMITMENTS AND CONTINGENCIES

Letters of Credit and Bank Guarantees:

The Company has outstanding letters of credit and bank guarantees which are collateralized by restricted cash. As of March 30, 2007, the commitments and restricted cash associated with outstanding letters of
credit and bank guarantees were as follows:



|                                                                      |  |                         |       |                 |   |      
|--------------------------------------------------------------------- |  | ----------------------- | ----- | --------------- | - | -----
|                                                                      |  | As of March 30, 2007   
|                                                                      |  | Outstanding Commitments |       | Restricted Cash
|Letters of credit issued under Agreement (see Note 8)                 |  | $                       | 4,049 |                 | $ | 4,187
|Other letters of credit and bank guarantees                           |  |                         | 646   |                 |   | 646  
|                                                                      |  |                         |       |                 |   |      
|Total                                                                 |  | $                       | 4,695 |                 | $ | 4,833
|                                                                      |  |                         |       |                 |   |      
|Restricted cash reflected in condensed consolidated balance sheet as: |  |                         |       |                 |   |      
|Restricted cash (current, as terms of commitment less than 12-months) |  |                         |       |                 | $ | 3,594
|Other long-term assets                                                |  |                         |       |                 |   | 1,239
|                                                                      |  |                         |       |                 |   |      
|Total                                                                 |  |                         |       |                 | $ | 4,833
|                                                                      |  |                         |       |                 |   |      



16



---

##### Table of Contents

14. GUARANTEES

As of
March 30, 2007, the Company did not have any outstanding guarantees, except for product warranties. The Company warrants its products against defects in materials and workmanship, generally for one to five years depending upon product lines and
geographic regions. A provision for estimated future costs related to warranty activities is recorded when the product is shipped, based upon historical experience of product failure rates and historical costs incurred in correcting product
failures. In addition, from time to time, the recorded amount is adjusted for specifically identified warranty exposures when unforeseen technical problems arise.

Changes in the Companys warranty liability during the thirty-nine week period ended March 30, 2007 are as follows:



|                                                                       |  |   |       |  
|---------------------------------------------------------------------- |  | - | ----- | -
|Balance as of June 30, 2006                                            |  | $ | 5,319 |  
|Warranties issued during the period                                    |  |   | 2,097 |  
|Settlements made during the period                                     |  |   | (845  | )
|Changes in the liability for pre-existing warranties during the period |  |   | (805  | )
|                                                                       |  |   |       |  
|Balance as of March 30, 2007                                           |  | $ | 5,766 |  
|                                                                       |  |   |       |  

In the normal course of business, the Company is party to certain off-balance sheet arrangements, including
indemnification obligations and financial instruments with off-balance sheet risk, such as bank letters of credit and performance or surety bonds (see Notes 8 and 13). The Companys Network Services segment uses surety bonds to secure
performance obligations as a contractor in various state and local jurisdictions. To the extent that surety bonds become unavailable, the Company would need to replace the surety bonds or seek to secure the bonds or the Companys obligation to
reimburse the surety with letters of credit, cash deposits, or other suitable forms of collateral. As of March 30, 2007, the Company had $2,142 of outstanding surety bonds. Liabilities related to these arrangements are not reflected in the
consolidated balance sheets, and the Company does not expect any material impact on its cash flows, results of operations or financial condition to result from these off-balance sheet arrangements.

The Companys Broadband Systems Solutions segment licenses software to its customers under written agreements. Each agreement contains the relevant terms of the
contractual arrangement with the customer, and generally includes provisions for indemnifying the customer against losses, expenses, and liabilities from damages that may be awarded against the customer in the event the software is found to infringe
upon certain intellectual property rights of a third party. Each agreement generally limits the scope of and remedies for such indemnification obligations in a variety of industry-standard respects. The Company has not identified any losses that are
probable under these provisions and, accordingly, no liability related to these indemnification provisions has been recorded.

15. SEGMENT INFORMATION

The management approach required under SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, has
been used to present the following segment information. This approach is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance.

Prior to fiscal year 2007, the Company reported its results of operations based upon three operating segments: C-COR Access and Transport, C-COR Solutions, and C-COR
Network Services. In an effort to improve operational efficiencies across the organization and reduce costs, the Company has reorganized aspects of its business and combined the C-COR Access and Transport and C-COR Solutions segment into the
Broadband Systems Solutions segment. As a result, beginning in fiscal year 2007, the Company began reporting its results of operations based upon two operating segments: Broadband Systems Solutions and Network Services. Prior year segment data has
been restated to reflect this change.

The following costs and asset categories are not allocated to segments and are reflected in the table as
unallocated items:



| |  |  | Income tax expense (benefit); and
| | - |  | ---------------------------------



| |  |  | Identifiable assets of cash and cash equivalents, marketable securities and other short-term investments, and certain other long-term corporate assets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



17



---

##### Table of Contents

Information about the Companys industry segments for the thirteen week and thirty-nine week periods ended
March 30, 2007 and March 24, 2006 is as follows:



|                                              |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ------------------------- | ------- | - | --------------- | - | ------ | ----------- |  | - | ------- | - |  | - | ------- | -
|                                              |  | BroadbandSystemsSolutions |         |   | NetworkServices |   |        | Unallocated |  |   | Total   |  
|Thirteen week period ended March 30, 2007:    |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Net sales                                     |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Products                                      |  | $                         | 56,260  |   |                 | $ |       |             |  | $ |        |   |  | $ | 56,260  |  
|Content and operation management systems      |  |                           | 15,536  |   |                 |   |       |             |  |   |        |   |  |   | 15,536  |  
|Services                                      |  |                           |        |   |                 |   | 10,897 |             |  |   |        |   |  |   | 10,897  |  
|                                              |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Total net sales                               |  |                           | 71,796  |   |                 |   | 10,897 |             |  |   |        |   |  |   | 82,693  |  
|Depreciation, amortization and accretion      |  |                           | 2,265   |   |                 |   | 100    |             |  |   | (432    | ) |  |   | 1,933   |  
|Income (loss) from operations                 |  |                           | 8,701   |   |                 |   | (1,235 | )           |  |   |        |   |  |   | 7,466   |  
|Income tax expense                            |  |                           |        |   |                 |   |       |             |  |   | 708     |   |  |   | 708     |  
|Identifiable assets at March 30, 2007         |  |                           | 246,370 |   |                 |   | 16,240 |             |  |   | 100,643 |   |  |   | 363,253 |  
|Capital expenditures                          |  |                           | 1,884   |   |                 |   | 29     |             |  |   |        |   |  |   | 1,913   |  
|Thirteen week period ended March 24, 2006:    |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Net sales                                     |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Products                                      |  | $                         | 35,765  |   |                 | $ |       |             |  | $ |        |   |  | $ | 35,765  |  
|Content and operation management systems      |  |                           | 10,560  |   |                 |   |       |             |  |   |        |   |  |   | 10,560  |  
|Services                                      |  |                           |        |   |                 |   | 14,057 |             |  |   |        |   |  |   | 14,057  |  
|                                              |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Total net sales                               |  |                           | 46,325  |   |                 |   | 14,057 |             |  |   |        |   |  |   | 60,382  |  
|Depreciation, amortization and accretion      |  |                           | 2,346   |   |                 |   | 122    |             |  |   |        |   |  |   | 2,468   |  
|Income (loss) from operations                 |  |                           | (8,849  | ) |                 |   | 818    |             |  |   |        |   |  |   | (8,031  | )
|Income tax expense                            |  |                           |        |   |                 |   |       |             |  |   | 676     |   |  |   | 676     |  
|Identifiable assets at March 24, 2006         |  |                           | 213,321 |   |                 |   | 23,986 |             |  |   | 54,865  |   |  |   | 292,172 |  
|Capital expenditures                          |  |                           | 559     |   |                 |   | 197    |             |  |   |        |   |  |   | 756     |  
|Thirty-nine week period ended March 30, 2007: |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Net sales                                     |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Products                                      |  | $                         | 154,213 |   |                 | $ |       |             |  | $ |        |   |  | $ | 154,213 |  
|Content and operation management systems      |  |                           | 44,151  |   |                 |   |       |             |  |   |        |   |  |   | 44,151  |  
|Services                                      |  |                           |        |   |                 |   | 34,049 |             |  |   |        |   |  |   | 34,049  |  
|                                              |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Total net sales                               |  |                           | 198,364 |   |                 |   | 34,049 |             |  |   |        |   |  |   | 232,413 |  
|Depreciation, amortization and accretion      |  |                           | 6,695   |   |                 |   | 316    |             |  |   | (432    | ) |  |   | 6,579   |  
|Income (loss) from operations                 |  |                           | 17,405  |   |                 |   | (1,842 | )           |  |   |        |   |  |   | 15,563  |  
|Income tax expense                            |  |                           |        |   |                 |   |       |             |  |   | 2,358   |   |  |   | 2,358   |  
|Identifiable assets at March 30, 2007         |  |                           | 246,370 |   |                 |   | 16,240 |             |  |   | 100,643 |   |  |   | 363,253 |  
|Capital expenditures                          |  |                           | 4,251   |   |                 |   | 216    |             |  |   |        |   |  |   | 4,467   |  
|Thirty-nine week period ended March 24, 2006: |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Net sales                                     |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Products                                      |  | $                         | 112,952 |   |                 | $ |       |             |  | $ |        |   |  | $ | 112,952 |  
|Content and operation management systems      |  |                           | 38,832  |   |                 |   |       |             |  |   |        |   |  |   | 38,832  |  
|Services                                      |  |                           |        |   |                 |   | 38,760 |             |  |   |        |   |  |   | 38,760  |  
|                                              |  |                           |         |   |                 |   |        |             |  |   |         |   |  |   |         |  
|Total net sales                               |  |                           | 151,784 |   |                 |   | 38,760 |             |  |   |        |   |  |   | 190,544 |  
|Depreciation, amortization and accretion      |  |                           | 8,292   |   |                 |   | 346    |             |  |   |        |   |  |   | 8,638   |  
|Income (loss) from operations                 |  |                           | (38,982 | ) |                 |   | 1,701  |             |  |   |        |   |  |   | (37,281 | )
|Income tax expense                            |  |                           |        |   |                 |   |       |             |  |   | 1,994   |   |  |   | 1,994   |  
|Identifiable assets at March 24, 2006         |  |                           | 213,321 |   |                 |   | 23,986 |             |  |   | 54,865  |   |  |   | 292,172 |  
|Capital expenditures                          |  |                           | 3,959   |   |                 |   | 593    |             |  |   |        |   |  |   | 4,552   |  



18



---

##### Table of Contents

The Company and its subsidiaries operate in various geographic areas. The table below presents the Companys sales
by geographic area:



|              |  |                         |         |               |   |        
|------------- |  | ----------------------- | ------- | ------------- | - | -------
|              |  | Thirteen Weeks Ended   
|              |  | March 30, 2007          |         | March 24,2006
|Sales:        |  |                         |         |               |   |        
|United States |  | $                       | 65,984  |               | $ | 43,394 
|Europe        |  |                         | 11,403  |               |   | 11,602 
|Asia          |  |                         | 2,702   |               |   | 2,931  
|Canada        |  |                         | 552     |               |   | 795    
|Latin America |  |                         | 2,052   |               |   | 1,660  
|              |  |                         |         |               |   |        
|Total         |  | $                       | 82,693  |               | $ | 60,382 
|              |  |                         |         |               |   |        
|              | 
|              |  | Thirty-nine Weeks Ended
|              |  | March 30, 2007          |         | March 24,2006
|Sales:        |  |                         |         |               |   |        
|United States |  | $                       | 189,840 |               | $ | 131,965
|Europe        |  |                         | 28,642  |               |   | 39,869 
|Asia          |  |                         | 6,695   |               |   | 11,453 
|Canada        |  |                         | 1,487   |               |   | 2,340  
|Latin America |  |                         | 5,749   |               |   | 4,917  
|              |  |                         |         |               |   |        
|Total         |  | $                       | 232,413 |               | $ | 190,544
|              |  |                         |         |               |   |        

16. GAIN ON LITIGATION JUDGMENT

On April 20, 2006, the Company received a payment of $8,021, as a settlement resulting from litigation against SeaChange International, Inc for patent infringement. The award included damages, enhanced damages,
interest and a percentage of attorney fees. Portions of the award are subject to contractual agreements with two third parties that provide for payment to each third party of a portion of the award amount. The Company recorded a gain of $1,238, net
of a recovery of attorney fees of $407, from the distribution as a component of other income in its consolidated statement of operations during the fourth quarter of its fiscal year ended June 30, 2006. An initial distribution of a portion of
the award was made to one of the third parties on June 30, 2006 in the amount of $3,168. The remaining $3,208 has been recorded as an accrued liability in the Companys consolidated condensed balance sheet as of March 30, 2007,
pending resolution of a dispute over which components of the award were subject to the terms of agreement with one of the third parties, which has not yet been resolved. The Company believes that the dispute will be resolved within the next 12
months. Any subsequent gain, if any, resulting from settlement of the award would be recorded by the Company at the time of resolution.



19



---

##### Table of Contents

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

General

The following discussion addresses the financial condition of C-COR Incorporated as of March 30, 2007,
and the results of our operations for the thirteen week and thirty-nine week periods ended March 30, 2007, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the Managements
Discussion and Analysis section for the fiscal year ended June 30, 2006, included in the Companys Annual Report on Form 10-K.

Disclosure
Regarding Forward-Looking Statements

Some of the information presented in this report contains forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, our ability to develop and expand our product offerings, our continued investment in research and product development,
fluctuations in network upgrade activity and the level of future network upgrade activity, both domestically and internationally, future capital spending in European markets being driven by upgrades made by telecommunication providers to their
networks in response to increased competition for enhanced broadband services, fluctuations in the global demand for our products, services and software, future sales revenue of our segments, including the anticipated decline in sales revenue for
our Network Services segment in fiscal year 2008, both domestically and internationally, demand for our product line offerings in international markets, the effect of revenue levels in general, sales mix, competitive pricing, the timing of new
product introductions and the timing of deployments of our content management and operational support software systems on our future overall gross margin, our expectation to maintain valuation allowances related to net tax benefits arising from
temporary differences and operating loss carryforwards, our intention to continue our initiatives to achieve cost-effective operations, the adequacy of our cash and cash equivalent balances and our marketable securities to cover our operating cash
requirements over the next 24 months, statements relating to our business strategy and the effect of accounting pronouncements required to be adopted by the Company. Forward-looking statements represent our judgment regarding future events. Although
we believe we have a reasonable basis for these forward-looking statements, we cannot guarantee their accuracy and actual results may differ materially from those anticipated due to a number of known and unknown uncertainties. Factors that could
cause actual results to differ from expectations include, among others, capital spending patterns of the communications industry, our ability to develop new and enhanced products, the timing for scheduled completion of certain projects and customer
acceptance requirements, continued industry consolidation, the development of competing technologies, the effect of increased competition from satellite providers and telephone companies on the capital spending budgets of our cable customers,
changes in the credit profiles of major customers that would lead us to restrict new orders of products and services or record an increase in the allowance for doubtful accounts, timing of recognizing software revenues, changes in our sales mix, the
effect of competitive pricing, an impairment of goodwill recorded on our balance sheet, the success of our initiatives to achieve cost-effective operations, our ability to convert our backlog into sales, and our ability to achieve our strategic
objectives. For additional information concerning these and other important factors that may cause our actual results to differ materially from expectations and underlying assumptions, please refer to the reports filed by us with the Securities and
Exchange Commission.

Business Overview

We are a
global provider of communications equipment, software solutions and technical services for two-way hybrid fiber coax broadband networks delivering video, voice and data.

Prior to fiscal year 2007, we reported our results of operations based upon three operating segments: C-COR Access and Transport, C-COR Solutions, and C-COR Network Services. In an effort to improve operational
efficiencies across the organization and reduce costs, we have reorganized aspects of our business and combined the C-COR Access and Transport and C-COR Solutions segment into the Broadband Systems Solutions segment. As a result, beginning in fiscal
year 2007, we began reporting our results of operations based upon two operating segments: Broadband Systems Solutions and Network Services. Prior year segment data has been restated to reflect this change.

The Broadband Systems Solutions segment is responsible for the development, management, production, deployment, support and sale of unified solutions for
delivering voice, video and data services over complex networks for residential and business subscribers, including:



| |  |  | Network infrastructure products, including the Companys amplitude modulation headend/hub optical platform and line of optical nodes, and a full offering of
radio frequency amplifiers, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Content and operations management systems, including software and hardware, for delivery of video on demand and digital advertising as well as application-oriented,
operational support software for managing bandwidth and resource utilization, network and service assurance, and mobile workforce automation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20



---

##### Table of Contents

The Network Services segment provides technical services for engineering, design, and deployment of advanced
applications over broadband networks, including installation services, network design and engineering, network integration, outside plant and construction services, and consulting to a variety of customers.

Net sales for the thirteen week period ended March 30, 2007 were $82.7 million, an increase of 37% over the $60.4 million recorded in the same period of the prior
year, reflecting higher revenues from the sale of products and content and operations management systems. This increase was partially offset by a reduction in technical services revenues during the quarter. During the thirteen-week period ended
March 30, 2007, we made a strategic decision to de-emphasize certain projects of our Network Services operating segment where we cannot compete profitably, and on a going forward basis, be more selective with the types of service we provide. As
a result, we anticipate our Network Services segment sales to decline in fiscal year 2008. Our largest customers during the quarter were Time Warner Cable, Cox Communications, and Comcast Corporation accounting for 34%, 15% and 14%, respectively, of
net sales. International customers accounted for 20% of net sales. Gross margins were 41.6% during the thirteen week period ended March 30, 2007, compared to gross margins of 32.7% for the same period of the prior year. Gross margins increased
during the quarter for both products and content and operations management systems, and were partially offset by a decline in technical services gross margins during the period compared to the same period a year ago. Product gross margins for the
same period of the prior year were adversely affected by a $618,000 charge related to inventory associated with certain transport product lines due to the Companys decision to cease selling certain product lines. Selling and administrative
expense as a percent of sales were 20% for the thirteen week period ended March 30, 2007, compared to 24.6% for the same period of the prior year. Research and product development costs as a percent of sales were 10.5% for the thirteen week
period ended March 30, 2007, compared to 14.7% for the same period of the prior year.

At March 30, 2007, we had recorded $131.0 million of
goodwill and $2.6 million of other intangible assets, net. While goodwill is no longer amortized, we are required to assess whether goodwill is impaired at least annually and more frequently if circumstances warrant. Our annual assessment was
performed during the thirteen week period ended March 30, 2007, and no impairment was indicated. In the future, if an impairment of goodwill is indicated, it could result in a substantial charge to earnings, which would have a material adverse
effect on our results of operation and financial position in the period in which such impairment is recorded.



21



---

##### Table of Contents

Results of Operations

The following table contains information regarding the percentage of net sales of our condensed consolidated statements of operations for the thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006.



|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|----------------------------------------- |  | ------------------------ | - |  | ----------------------- | -- |  | -------------- | - |  | ------------- | --
|                                          |  | Percentages of Net Sales |  
|                                          |  | Thirteen Weeks Ended     |   |  | Thirty-nine Weeks Ended |   
|                                          |  | March 30, 2007           |   |  | March 24,2006           |    |  | March 30, 2007 |   |  | March 24,2006 |   
|Net sales:                                |  |                          |   |  |                         |    |  |                |   |  |               |   
|Products                                  |  | 68.0                     | % |  | 59.2                    | %  |  | 66.4           | % |  | 59.3          | % 
|Content and operations management systems |  | 18.8                     |   |  | 17.5                    |    |  | 19.0           |   |  | 20.4          |   
|Services                                  |  | 13.2                     |   |  | 23.3                    |    |  | 14.6           |   |  | 20.3          |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Total net sales                           |  | 100.0                    |   |  | 100.0                   |    |  | 100.0          |   |  | 100.0         |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Cost of sales:                            |  |                          |   |  |                         |    |  |                |   |  |               |   
|Products                                  |  | 38.4                     |   |  | 36.1                    |    |  | 39.6           |   |  | 37.9          |   
|Content and operations management systems |  | 7.9                      |   |  | 10.1                    |    |  | 7.3            |   |  | 10.5          |   
|Services                                  |  | 12.1                     |   |  | 20.1                    |    |  | 13.5           |   |  | 17.7          |   
|Excess and obsolete inventory charge      |  | 0.0                      |   |  | 1.0                     |    |  | 0.0            |   |  | 4.4           |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Total cost of sales                       |  | 58.4                     |   |  | 67.3                    |    |  | 60.4           |   |  | 70.5          |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Gross margin                              |  | 41.6                     |   |  | 32.7                    |    |  | 39.6           |   |  | 29.5          |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Operating expenses:                       |  |                          |   |  |                         |    |  |                |   |  |               |   
|Selling and administrative                |  | 20.0                     |   |  | 24.6                    |    |  | 20.5           |   |  | 26.4          |   
|Research and product development          |  | 10.5                     |   |  | 14.7                    |    |  | 10.5           |   |  | 15.5          |   
|Amortization of intangibles               |  | 1.0                      |   |  | 1.5                     |    |  | 1.1            |   |  | 1.9           |   
|Impairment charges                        |  | 0.0                      |   |  | 3.0                     |    |  | 0.0            |   |  | 3.7           |   
|Loss (gain) on sale of product line       |  | 0.0                      |   |  | (3.2                    | )  |  | 0.1            |   |  | (1.0          | ) 
|Restructuring charge                      |  | 1.1                      |   |  | 5.4                     |    |  | 0.7            |   |  | 2.6           |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Total operating expenses                  |  | 32.6                     |   |  | 46.0                    |    |  | 32.9           |   |  | 49.1          |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Income (loss) from operations             |  | 9.0                      |   |  | (13.3                   | )  |  | 6.7            |   |  | (19.6         | ) 
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Other income (expense), net:              |  |                          |   |  |                         |    |  |                |   |  |               |   
|Interest expense                          |  | (0.4                     | ) |  | (0.6                    | )  |  | (0.5           | ) |  | (0.5          | ) 
|Investment income                         |  | 1.1                      |   |  | 0.7                     |    |  | 1.0            |   |  | 0.6           |   
|Foreign exchange gain (loss)              |  | (0.3                     | ) |  | 0.8                     |    |  | 0.0            |   |  | 0.1           |   
|Other income, net                         |  | 0.4                      |   |  | 0.3                     |    |  | 0.2            |   |  | 0.2           |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Income (loss) before income taxes         |  | 9.8                      |   |  | (12.1                   | )  |  | 7.4            |   |  | (19.2         | ) 
|Income tax expense                        |  | 0.9                      |   |  | 1.1                     |    |  | 1.0            |   |  | 1.0           |   
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   
|Net income (loss)                         |  | 8.9                      | % |  | (13.2                   | )% |  | 6.4            | % |  | (20.2         | )%
|                                          |  |                          |   |  |                         |    |  |                |   |  |               |   



22



---

##### Table of Contents

The tables below set forth our net sales for the thirteen week and thirty-nine week periods ended March 30, 2007 and
March 24, 2006, for each of our reportable segments.



|                                          |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|----------------------------------------- |  | ------------------------ | ---- | -------------------------- | --- |  | -------------- | - | - | - | ---- |  | ---
|                                          |  | Thirteen Weeks Ended    
|                                          |  | (in millions of dollars)
|                                          |  | March 30, 2007           |      | Change from Prior Period % |     |  | March 24, 2006
|Operating Segment                         |  | Net Sales                |      | %                          |     |  | Net Sales      |   | %
|Broadband Systems Solutions:              |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|Products                                  |  | $                        | 56.3 |                            | 68  |  | 57             |   |   | $ | 35.8 |  | 59 
|Content and operations management systems |  |                          | 15.5 |                            | 19  |  | 46             |   |   |   | 10.6 |  | 18 
|                                          |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|Total Broadband Systems Solutions         |  |                          | 71.8 |                            | 87  |  | 55             |   |   |   | 46.4 |  | 77 
|Network Services                          |  |                          | 10.9 |                            | 13  |  | (22            | ) |   |   | 14.0 |  | 23 
|                                          |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|                                          |  | $                        | 82.7 |                            | 100 |  | 37             |   |   | $ | 60.4 |  | 100
|                                          |  |                          |      |                            |     |  |                |   |   |   |      |  |    



|                                          |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|----------------------------------------- |  | ------------------------ | ----- | -------------------------- | --- |  | -------------- | - | - | - | ----- |  | ---
|                                          |  | Thirty-nine Weeks Ended 
|                                          |  | (in millions of dollars)
|                                          |  | March 30, 2007           |       | Change from Prior Period % |     |  | March 24, 2006
|Operating Segment                         |  | Net Sales                |       | %                          |     |  | Net Sales      |   | %
|Broadband Systems Solutions:              |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|Products                                  |  | $                        | 154.2 |                            | 66  |  | 37             |   |   | $ | 112.9 |  | 59 
|Content and operations management systems |  |                          | 44.2  |                            | 19  |  | 14             |   |   |   | 38.8  |  | 21 
|                                          |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|Total Broadband Systems Solutions         |  |                          | 198.4 |                            | 85  |  | 31             |   |   |   | 151.7 |  | 80 
|Network Services                          |  |                          | 34.0  |                            | 15  |  | (12            | ) |   |   | 38.8  |  | 20 
|                                          |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|                                          |  | $                        | 232.4 |                            | 100 |  | 22             |   |   | $ | 190.5 |  | 100
|                                          |  |                          |       |                            |     |  |                |   |   |   |       |  |    

The table below sets forth our net sales for the thirteen week and thirty-nine week periods ended March 30,
2007 and March 24, 2006 by geographic region.



|                  |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|----------------- |  | ------------------------ | ---- | -------------------------- | --- |  | -------------- | - | - | - | ---- |  | ---
|                  |  | Thirteen Weeks Ended    
|                  |  | (in millions of dollars)
|                  |  | March 30, 2007           |      | Change from Prior Period % |     |  | March 24, 2006
|Geographic Region |  | Net Sales                |      | %                          |     |  | Net Sales      |   | %
|United States     |  | $                        | 66.0 |                            | 80  |  | 52             |   |   | $ | 43.4 |  | 72 
|Europe            |  |                          | 11.4 |                            | 14  |  | (2             | ) |   |   | 11.6 |  | 19 
|Asia              |  |                          | 2.7  |                            | 3   |  | (7             | ) |   |   | 2.9  |  | 5  
|Canada            |  |                          | .5   |                            | 1   |  | (38            | ) |   |   | .8   |  | 1  
|Latin America     |  |                          | 2.1  |                            | 2   |  | 24             |   |   |   | 1.7  |  | 3  
|                  |  |                          |      |                            |     |  |                |   |   |   |      |  |    
|Consolidated      |  | $                        | 82.7 |                            | 100 |  | 37             |   |   | $ | 60.4 |  | 100
|                  |  |                          |      |                            |     |  |                |   |   |   |      |  |    



23



---

##### Table of Contents

|                  |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|----------------- |  | ------------------------ | ----- | -------------------------- | --- |  | -------------- | - | - | - | ----- |  | ---
|                  |  | Thirty-nine Weeks Ended 
|                  |  | (in millions of dollars)
|                  |  | March 30, 2007           |       | Change from Prior Period % |     |  | March 24, 2006
|Geographic Region |  | Net Sales                |       | %                          |     |  | Net Sales      |   | %
|United States     |  | $                        | 189.8 |                            | 82  |  | 44             |   |   | $ | 132.0 |  | 69 
|Europe            |  |                          | 28.6  |                            | 12  |  | (28            | ) |   |   | 39.9  |  | 21 
|Asia              |  |                          | 6.7   |                            | 3   |  | (41            | ) |   |   | 11.4  |  | 6  
|Canada            |  |                          | 1.5   |                            | 1   |  | (35            | ) |   |   | 2.3   |  | 1  
|Latin America     |  |                          | 5.8   |                            | 2   |  | 18             |   |   |   | 4.9   |  | 3  
|                  |  |                          |       |                            |     |  |                |   |   |   |       |  |    
|Consolidated      |  | $                        | 232.4 |                            | 100 |  | 22             |   |   | $ | 190.5 |  | 100
|                  |  |                          |       |                            |     |  |                |   |   |   |       |  |    

Net Sales. Net sales increased 37% and 22% for the thirteen week and thirty-nine week periods ended
March 30, 2007, respectively, compared to the same periods of the prior year. The higher revenues for the thirteen week and thirty-nine week periods resulted primarily from increased sales of products and content and operations management
systems. These increases were partially offset by a decline in revenue from technical services.

Broadband Systems Solutions segment sales increased 55%
and 31% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to the same periods of the prior year. The sales of network products increased 57% and 37% for the thirteen week and thirty-nine week
periods ended March 30, 2007, respectively, primarily as a result of increased upgrade requirements for domestic customers. Sales of network products to international customers were up slightly during the thirteen week period ended
March 30, 2007, primarily in Europe and Latin America, but reflect a decline for the thirty-nine week period as a result of lower sales to certain customers in Europe and Asia. We believe the increased revenues for network products is related
to expansion and upgrades by Time Warner and Comcast, as a result of their acquisitions of substantially all of the assets of Adelphia Communications Corporation, and in general, upgrades by domestic cable operators to expand system bandwidth
requirements in order to provide enhanced broadband services, including high definition television, high-speed Internet, voice over Internet, voice over Internet Protocol, digital video, and interactive and on demand video services. Content and
operations management systems sales increased 46% and 14% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, due primarily to higher revenues of content and operations management systems to Time Warner, which
was partially offset by lower sales to international customers, primarily in Europe and Canada. Content and operations management systems revenues are derived from sales under multiple element arrangements whereby revenues are recognized using the
completed contract method of accounting or, in some cases, are recognized ratably over the delivery period. As a result, systems revenues are affected by the timing of new orders and customer acceptance requirements. Software license and associated
professional services revenue for our mobile workforce software product line is recognized using the percentage of completion method of accounting due to our ability to reliably estimate contract costs at the inception of the contracts.

Network Services segment sales decreased 22% and 12% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to the same
periods of the prior year. The lower sales were primarily the result of the completion of upgrade projects with a certain customer as of the end of fiscal year 2006. The Company anticipates its Network Services segment sales to decline in fiscal
year 2008, as we plan to de-emphasize certain services for which we cannot compete profitably and become more selective as we move forward with the types of service we provide.

Domestic sales increased 52% and 44% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, due primarily to increased Broadband Systems Solutions segment sales to Time Warner
Cable, Cox Communications, and Comcast Corporation, which were partially offset by lower Network Services segment sales.

International sales decreased 2%
and 27% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively. The slight decline in the quarter was a result of lower content and operations management systems sales which more than offset an increase in network
product sales during the period. The decline for the thirty-nine week period is due primarily to lower Broadband Systems Solutions segment sales of network products due to lower sales to certain customers, primarily in Europe and Asia. We believe
that future capital spending in European markets will be primarily driven by increased competition for enhanced broadband services requiring telecommunication providers to upgrade their networks to support these enhanced services. We expect demand
for our product line offerings in international markets will continue to be highly variable. The international markets represent distinct markets in which capital spending decisions for network equipment and solutions are affected by a variety of
factors, including access to financing and general economic conditions.



24



---

##### Table of Contents

Backlog: The table below sets forth our backlog by operating segment as of March 30, 2007 compared to
December 29, 2006:



|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|----------------------------------------- |  | ------------------------ | ----- | ----------------------------- | - | ------------- |  | ---------- | ----- |  | ---
|Backlog as of March 30, 2007:             |  | (in millions of dollars)
|Operating Segment                         |  | 12-month backlog         |       | Greater than 12-month backlog |   | Total Backlog |  | % of Total
|Broadband Systems Solutions:              |  |                          |       |                               |   |               |  |            |       |  |    
|Products                                  |  | $                        | 34.5  |                               | $ |              |  | $          | 34.5  |  | 29 
|Content and operations management systems |  |                          | 45.1  |                               |   | 16.6          |  |            | 61.7  |  | 53 
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|Total Broadband Systems Solutions         |  |                          | 79.6  |                               |   | 16.6          |  |            | 96.2  |  | 82 
|Network Services                          |  |                          | 20.6  |                               |   |              |  |            | 20.6  |  | 18 
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|Total contract backlog                    |  | $                        | 100.2 |                               | $ | 16.6          |  | $          | 116.8 |  | 100
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|% of total                                |  |                          | 86    |                               |   | 14            |  |            | 100   |  |    
|                                          | 
|Backlog as of December 29, 2006:          |  | (in millions of dollars)
|Operating Segment                         |  | 12-month backlog         |       | Greater than 12-month backlog |   | Total Backlog |  | % of Total
|Broadband Systems Solutions:              |  |                          |       |                               |   |               |  |            |       |  |    
|Products                                  |  | $                        | 34.5  |                               | $ |              |  | $          | 34.5  |  | 29 
|Content and operations management systems |  |                          | 43.7  |                               |   | 15.5          |  |            | 59.2  |  | 51 
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|Total Broadband Systems Solutions         |  |                          | 78.2  |                               |   | 15.5          |  |            | 93.7  |  | 80 
|Network Services                          |  |                          | 23.6  |                               |   |              |  |            | 23.6  |  | 20 
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|Total contract backlog                    |  | $                        | 101.8 |                               | $ | 15.5          |  | $          | 117.3 |  | 100
|                                          |  |                          |       |                               |   |               |  |            |       |  |    
|% of total                                |  |                          | 87    |                               |   | 13            |  |            | 100   |  |    

Our total contract backlog is defined as the revenue we expect to generate in future periods from existing
customer contracts. Our 12-month backlog is defined as the revenue we expect to generate from customer contracts over the next 12 months. For the Broadband Systems Solutions segment, the majority of orders in backlog for products typically result in
revenue over the next six months. Orders for content and operations management systems include software license fees, maintenance fees, systems and services specified in executed contracts, for which the timing of revenue can be affected by both
contract performance and the application of accounting principles to the specific terms of the contract, typically resulting in the recognition of revenues over longer periods. As a result, a portion of our content and operations management systems
backlog is expected to generate revenues in periods that extend beyond the next 12 months. Our Network Services backlog typically includes a portion that will result in revenue over the latter part of the twelve month period. During the thirteen
week period ended March 30, 2007 there was a reduction in our Network Services backlog of $3.2 million related to the Companys decision to exit a certain Network Services contract.

Our backlog methodology requires us to make judgments about the timing of implementation and deployment schedules based upon our historical experience. Backlog can
change due to a number of factors, including unforeseen changes in development and implementation schedules, contract renegotiations or terminations, or changes in customer financial conditions. In addition, changes in foreign currency exchange
rates may also affect the amount of revenue actually recognized in future periods. Accordingly, there can be no assurance that contracts included in backlog will actually generate the anticipated revenues or that the actual revenues will be
generated as indicated for the corresponding 12-month or greater than 12-month periods. We make management decisions based on our backlog, including hiring of personnel, purchasing of materials, and other matters that may increase our production
capabilities and costs. Cancellations, delays or reductions of orders or contracts could adversely affect our results of operations and financial condition.



25



---

##### Table of Contents

Gross Margin. The following table sets forth our gross margins by operating segment during the thirteen week and
thirty-nine week periods ended March 30, 2007 compared to the same periods of the prior year.



|                                          |  |                               |  |               |   |  |                              
|----------------------------------------- |  | ----------------------------- |  | ------------- | - |  | -----------------------------
|                                          |  | Thirteen Weeks Ended         
|Operating Segment                         |  | March 30, 2007 Gross Margin % |  | Change Points |   |  | March 24, 2006 Gross Margin %
|Broadband Systems Solutions:              |  |                               |  |               |   |  |                              
|Products                                  |  | 43.6                          |  | 6.2           |   |  | 37.4                         
|Content and operations management systems |  | 57.7                          |  | 15.5          |   |  | 42.2                         
|Total Broadband Systems Solutions         |  | 46.7                          |  | 8.2           |   |  | 38.5                         
|Network Services                          |  | 8.1                           |  | (5.5          | ) |  | 13.6                         
|Consolidated                              |  | 41.6                          |  | 8.9           |   |  | 32.7                         
|                                          | 
|                                          |  | Thirty-nine Weeks Ended      
|Operating Segment                         |  | March 30, 2007 Gross Margin % |  | Change Points |   |  | March 24, 2006 Gross Margin %
|Broadband Systems Solutions:              |  |                               |  |               |   |  |                              
|Products                                  |  | 40.3                          |  | 11.6          |   |  | 28.7                         
|Content and operations management systems |  | 61.3                          |  | 12.9          |   |  | 48.4                         
|Total Broadband Systems Solutions         |  | 45.0                          |  | 11.2          |   |  | 33.8                         
|Network Services                          |  | 7.8                           |  | (5.2          | ) |  | 13.0                         
|Consolidated                              |  | 39.6                          |  | 10.1          |   |  | 29.5                         

Consolidated gross margins were 41.6% and 39.6% for the thirteen week and thirty-nine week periods ended
March 30, 2007, respectively, compared to 32.7% and 29.5% for the same periods of the prior year. Broadband Systems Solutions segment gross margins increased for the thirteen week and thirty-nine week periods ended March 30, 2007, for both
products and content and operations management systems, as a result of higher volumes and changes in sales mix during the periods. Product gross margins for the thirteen week and thirty-nine week periods of the prior year were adversely affected by
charges of $618,000 and $8.4 million, respectively, related to inventory associated with certain transport product lines, based on managements assessment of market conditions for those product lines. Network Services segment gross margins
declined for the thirteen week and thirty-nine week periods due to lower sales volume and performance difficulty on certain projects. We anticipate that our future gross margins in both of our business segments will continue to be affected by many
factors, including revenue levels in general, sales mix, competitive pricing pressures, the timing of new product introductions and the timing of deployments for certain of our content management and operational support software solutions.

Selling and Administrative. Selling and administrative expenses were $16.5 million and $47.7 million for the thirteen week and thirty-nine week
periods ended March 30, 2007, respectively, compared to $14.9 million and $50.2 million for the same periods of the prior year. Selling and administrative expenses increased 11% for the thirteen week period ended March 30, 2007, primarily
as a result of higher personnel, marketing and administrative expenses. Selling and administrative expenses declined 5% for the thirty-nine week period ended March 30, 2007, primarily as a result of lower personnel and administrative expenses
resulting from restructuring initiatives implemented in order to improve our cost structure. Selling and administrative expense declined as a percent of sales to 20.0% and 20.5% for the thirteen week and thirty-nine week periods ended March 30,
2007, respectively, compared to 24.6% and 26.4% for the same periods of the prior year.

Research and Product Development.Research and product
development expenses were $8.7 million and $24.2 million for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to $8.9 million and $29.5 million for the same periods of the prior year. Research and
product development expenses decreased 2% and 18% for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, due primarily to lower personnel costs resulting from workforce reductions. Our research and product
development expenses consist primarily of the compensation of development personnel, depreciation of development and test equipment, project expenses to support product development initiatives, and program services. We believe sustained commitment
to product development efforts will be required for us to remain competitive, and anticipate continuing investments in research and product development in future periods related to network infrastructure products and content and operations
management systems.



26



---

##### Table of Contents

Operating Income (Loss) By Segment. The tables below set forth our operating income (loss), excluding unallocated
items, for the thirteen week and thirty-nine week periods ended March 30, 2007 and March 24, 2006, for each of our reportable segments.



|                            |  |                                        |      |   |                           |      |   |                                        |   |       |  
|--------------------------- |  | -------------------------------------- | ---- | - | ------------------------- | ---- | - | -------------------------------------- | - | ----- | -
|                            |  | Thirteen Weeks Ended                   |     
|                            |  | (in millions of dollars)               |     
|Operating Segment           |  | March 30, 2007 Operating Income (Loss) |      |   | Change from Prior Period$ |      |   | March 24, 2006 Operating Income (Loss) |  
|Broadband Systems Solutions |  | $                                      | 8.7  |   |                           | 17.5 |   |                                        | $ | (8.8  | )
|Network Services            |  |                                        | (1.2 | ) |                           | (2.0 | ) |                                        |   | 0.8   |  
|                            | 
|                            |  | Thirty-nine Weeks Ended                |     
|                            |  | (in millions of dollars)               |     
|Operating Segment           |  | March 30, 2007 OperatingIncome (Loss)  |      |   | Change from Prior Period$ |      |   | March 24, 2006 OperatingIncome (Loss)  |  
|Broadband Systems Solutions |  | $                                      | 17.4 |   |                           | 56.4 |   |                                        | $ | (39.0 | )
|Network Services            |  |                                        | (1.8 | ) |                           | (3.5 | ) |                                        |   | 1.7   |  

The operating income for the Broadband Systems Solutions segment for the thirteen week and thirty-nine week
periods ended March 30, 2007, compared to operating losses for the same periods of the prior year, which was attributable to higher revenues and improved gross margins. In addition, the operating losses in the prior year included the previously
discussed inventory charges as well as an impairment charge of $7.1 million, including $5.3 million associated with the decision to cease sales and marketing activities related to certain transport product lines, and $1.8 million associated with the
divestiture of our operations in Mulgrave, Australia. In addition, we recorded a gain of $2.0 million in the prior year associated with the divestiture of our digital video product line. The operating losses for the Network Services segment for the
thirteen week and thirty-nine week periods ended March 30, 2007, compared to operating income for the same periods of the prior year was due to lower revenues and gross margins, as well as restructuring charges incurred during the periods
resulting from termination of a certain technical service contract and the strategic decision to de-emphasize certain service offerings.

Investment
Expense and Investment Income. Interest expense was $359,000 and $1.1 million for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to $341,000 and $990,000 for the same periods of the prior year.
The increase in interest expense resulted primarily from additional financing for the purchase of machinery and equipment in the fourth quarter of fiscal year 2006 and first quarter of fiscal year 2007.

Investment income was $928,000 and $2.4 million for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to $458,000 and $1.1
million for the same periods of the prior year. The increase in investment income was a result of a higher average investment balance and improved investment returns during the periods.

Income Tax Expense. Income tax expense was $708,000 and $2.4 million for the thirteen week and thirty-nine week periods ended March 30, 2007, respectively, compared to $676,000 and $2.0 million for the
same periods of the prior year. Income taxes for the thirteen week and thirty-nine week periods ended March 30, 2007 arose primarily from the following: recognition of additional valuation allowance, current taxes paid or payable for federal
alternative minimum tax (AMT), for which any AMT credit carryforward is offset by a valuation allowance, and state and foreign income tax in those jurisdictions where offsetting loss carryforwards are not available or are limited.



27



---

##### Table of Contents

Liquidity and Capital Resources



|                                                    |  |                          |       |   |                |   |       |  
|--------------------------------------------------- |  | ------------------------ | ----- | - | -------------- | - | ----- | -
|                                                    |  | March 30, 2007           |       |   | June 30, 2006  |  
|                                                    |  | (In millions of dollars) |      
|Balance sheet data (at period end)                  |  |                          |       |   |                |   |       |  
|Cash and cash equivalents                           |  | $                        | 44.4  |   |                | $ | 44.7  |  
|Marketable securities                               |  |                          | 47.1  |   |                |   | 16.3  |  
|                                                    | 
|                                                    |  | Thirty-nine Weeks Ended  |      
|                                                    |  | March 30, 2007           |       |   | March 24, 2006 |  
|                                                    |  | (In millions of dollars) |      
|Statements of cash flows data:                      |  |                          |       |   |                |   |       |  
|Net cash provided by (used in) operating activities |  | $                        | 24.4  |   |                | $ | (13.9 | )
|Net cash provided by (used in) investing activities |  |                          | (34.3 | ) |                |   | 2.9   |  
|Net cash provided by financing activities           |  |                          | 9.3   |   |                |   | .6    |  

The aggregate of our cash and cash equivalents and marketable securities increased as of March 30, 2007,
primarily as a result of positive cash flow generated from operations during the thirty-nine week period. Working capital was $111.1 million at March 30, 2007 compared to $76.4 million at June 30, 2006.

As of March 30, 2007, we had total restricted cash of $4.8 million. Restricted cash relates to commitments under the terms of our letter of credit agreement with a
bank, where we are required to maintain cash collateral of 102% of the amount that can be drawn on issued letters of credit, as well as bank guarantees associated with certain vendor obligations. The restricted cash balances are classified in the
condensed consolidated balance sheet as either current or long-term, depending upon the expiration term associated with the commitment (see Note 13).

Net
cash provided by operating activities was $24.4 million for the thirty-nine week period ended March 30, 2007, compared with net cash used of $13.9 million for the same period of the prior year. The major elements of cash provided by operations
for the thirty-nine week period ended March 30, 2007 include net income for the period of $14.8 million, which is adjusted for non-cash items such as depreciation and amortization and stock-based compensation, and an increase in accounts
payable, accrued liabilities and deferred revenue during the period. These changes were partially offset by increased inventory, accounts receivables and other assets during the period.

Net cash used in investing activities was $34.3 million for the thirty-nine week period ended March 30, 2007 compared to cash provided by investing activities of $2.9 million for the same period of the prior
year. The cash used in investing activities during the thirty-nine week period was primarily comprised of $51.6 million for the purchase of marketable securities and $4.5 million for the purchase of property, plant and equipment, which were offset
by proceeds from sale and maturities of marketable securities of $21.4 million and $388,000 of cash proceeds from the sale of a product line. The major elements of cash provided by investing activities during the same period of the prior year were
$16.4 million of proceeds from maturities of marketable securities and $3.3 million from the sale of a product line, which were partially offset by $12.4 million for the purchase of marketable securities and $4.6 million for the purchase of
property, plant and equipment.

Net cash provided by financing activities was $9.3 million for the thirty-nine week period ended March 30, 2007,
compared to $584,000 for the same period of the prior year. Cash provided by financing activities during the thirty-nine week period ended March 30, 2007 was primarily a result of $9.6 million of proceeds from the exercise of stock options,
which were partially offset by payments of debt and capital lease obligations of $283,000. The major element of cash provided by financing activities during the same period of the prior year was $670,000 of proceeds from the exercise of stock
options which were partially offset by payments of debt and capital lease obligations of $146,000.

On November 1, 2006, we amended our credit
agreement of November 5, 2004 (as amended, the Agreement) with a bank for a $10 million revolving letter of credit facility. Under the Agreement, the $10 million may be used solely for the issuance of letters of credit which
must be fully cash collateralized at the time of issuance. We are required to maintain with the bank cash collateral of 102% of the amount that can be drawn on the issued letters of credit. This collateral can be drawn on upon the occurrence of any
event of default under the Agreement. The Agreement contains standard event of default provisions, but no financial covenants. The Agreement is committed through November 3, 2007. The applicable margin under the Agreement is 0.65%, payable
quarterly in arrears. In the event that a letter of credit is drawn upon, the interest rate for any unreimbursed drawing is the banks floating prime rate.



28



---

##### Table of Contents

Working Capital Outlook

Our main source of liquidity is our unrestricted cash on hand and marketable securities.

Our $35.0 million aggregate principal amount of notes,
issued in December 2004, requires semi-annual interest payments at an annual rate of 3.5% on June 30 and December 30. The notes mature on December 30, 2009. As of March 30, 2007, we had a restructuring accrual of $1.6 million
which includes $147,000 related to employee termination benefits to be paid out over the first quarter of fiscal year 2008, and $1.4 million related to contractual obligations for leased facilities and equipment, which will be paid over the
respective lease terms through 2014, unless terminated earlier. In addition, additional amounts may be owed to third parties related to a portion of the proceeds we received from a litigation judgment. As of March 30, 2007, we had accrued $6.4
million associated with employee incentive compensation under the Companys Fiscal Year 2007 Profit Incentive Plan which is expected to be paid in the first quarter of fiscal year 2008.

Taking into account the fixed charges associated with our long-term debt obligations, amounts which may be owed to third parties from proceeds received from the
litigation judgment, restructuring accruals, and employee incentive compensation payments, we believe remaining cash and cash equivalents balances, and our marketable securities will be adequate to cover our operating cash requirements over the next
24 months. However, we may find it necessary or desirable to seek financing to support our capital needs and provide funds for additional strategic initiatives, including acquiring or investing in complementary businesses, products, services, or
technologies. Accordingly, this may require third-party financing or equity-based financing, such as issuance of common stock, preferred stock, or subordinated convertible debt securities and warrants, which would be dilutive to existing
shareholders. We do not currently have any committed lines of credit or other available credit facilities that could be utilized for capital requirements, and it is uncertain whether such facilities could be obtained in sufficient amounts or on
acceptable terms.

Recent Accounting Pronouncements

In
June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 establishes a recognition threshold and measurement attribute
for income tax positions recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a two-step evaluation process for tax
positions. The first step is recognition and the second is measurement. For recognition, an enterprise judgmentally determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution
of related appeals or litigation processes, based on the technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold it is measured and recognized in the financial statements as the largest amount
of tax benefit that is greater than 50% likely of being realized. If a tax position does not meet the more-likely-than-not recognition threshold, no benefit is recognized in the financial statements.

Tax positions that meet the more-likely-than-not recognition threshold at the effective date of FIN 48 may be recognized, or continue to be recognized, upon adoption of
FIN 48. The cumulative effect of applying the provisions of FIN 48 shall be reported as an adjustment to the opening balance of retained earnings for the fiscal year in which FIN 48 is adopted. FIN 48 will apply to fiscal years beginning
after December 15, 2006. We are currently evaluating the impact FIN 48 will have on our consolidated financial statements when it becomes effective for us in fiscal year 2008 and are unable, at this time, to quantify the impact, if any, on
retained earnings at the time of adoption.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS 157) which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Earlier application is encouraged provided that the reporting entity has not yet issued financial
statements for that fiscal year including financial statements for an interim period within that fiscal year. We are currently assessing SFAS No. 157 and have not yet determined the impact that the adoption of SFAS No. 157 will have on our
results of operations and financial position when it becomes effective for us in fiscal year 2009.

In September 2006, the Securities and Exchange
Commission (SEC) released SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, (SAB 108), which addresses how
uncorrected errors in previous years should be considered when quantifying errors in current-year financial statements. SAB 108 requires registrants to consider the effect of all carry over and reversing effects of prior-year misstatements when
quantifying errors in current-year financial statements. SAB 108 does not change the SEC staffs previous guidance on evaluating the materiality of errors. SAB 108 allows registrants to record the effects of adopting SAB 108 as a
cumulative-effect adjustment to retained earnings. This adjustment must be reported in the annual financial statements of the first fiscal year ending after November 15, 2006. We are currently evaluating the impact SAB 108 will have on our
consolidated financial statements when it becomes effective for the Company as of June 29, 2007 and we are unable, at this time, to quantify the impact, if any, on our results of operations, financial position and retained earnings at the time
of adoption.



29



---

##### Table of Contents

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. We are currently assessing SFAS 159 and have not yet determined the impact that the adoption of SFAS 159 will have on our results of operations and financial position.

In June 2006, the FASB ratified EITF No. 06-3, Disclosure Requirements for Taxes Assessed by a Government Authority on Revenue-Producing Transactions.
EITF 06-3 requires disclosure of a companys accounting policy with respect to presentation of taxes collected on a revenue producing transaction between a seller and a customer. For taxes that are reported on a gross basis (included in revenue
and costs), EITF 06-3 also requires disclosure of the amount of taxes included in the financial statements. We record taxes on a net basis. EITF 06-3 was effective for the Company beginning December 30, 2006 and it did not have a material
effect on the Companys consolidated financial statements.



30



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

There
have been no material changes to the Companys exposure to market risk since June 30, 2006.



|Item 4. | Controls and Procedures
|------- | -----------------------



|(a) | Evaluation of disclosure controls and procedures
|--- | ------------------------------------------------

Our chief executive
officer and our chief financial officer have evaluated the effectiveness of our disclosure controls and procedures related to our reporting and disclosure obligations as of March 30, 2007, which is the end of the period covered by this
Quarterly Report on Form 10-Q. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective.



|(b) | Changes in Internal Control over Financial Reporting
|--- | ----------------------------------------------------

There were no
changes that occurred during the fiscal quarter ended March 30, 2007 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



31



---

##### Table of Contents

PART II. OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes in the
Companys risk factors from those disclosed in Part I, Item 1A of the Companys Form 10-K for fiscal year 2006.



|Item 6. | Exhibits
|------- | --------

The following exhibits are included herein:



|        |  |                                                                                                
|------- |  | -----------------------------------------------------------------------------------------------
|        | 
|(10)(1) |  | Letter of separation between C-COR Incorporated and David E. Levitan dated February 20, 2007   
|        | 
|(15)    |  | Letter re: Unaudited Interim Financial Information.                                            
|        | 
|(31)(1) |  | Rule 13a-14(a) and 15d-14(a) Certification of Chief Executive Officer                          
|        | 
|(31)(2) |  | Rule 13a-14(a) and 15d-14(a) Certification of Chief Financial Officer                          
|        | 
|(32)(1) |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|        | 
|(32)(2) |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350



32



---

##### Table of Contents

SIGNATURES

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



|                  |  |  |  |                                 
|----------------- |  |  |  | --------------------------------
|                  |  |  |  | C-COR Incorporated (Registrant) 
|                  |  | 
|Date: May 9, 2007 |  |  |  | /s/ DAVID A. WOODLE             
|                  |  |  |  | Chief Executive Officer         
|                  |  | 
|Date: May 9, 2007 |  |  |  | /s/ WILLIAM T. HANELLY          
|                  |  |  |  | Chief Financial Officer         
|                  |  |  |  | (Principal Financial Officer)   
|                  |  | 
|Date: May 9, 2007 |  |  |  | /s/ JOSEPH E. ZAVACKY           
|                  |  |  |  | Controller & Assistant Secretary
|                  |  |  |  | (Principal Accounting Officer)  



33