**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
  **Washington,
        D.C. 20549**
  **FORM
        10-Q**
  (MARK
        ONE)
  **[X] QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**
  **For
        the quarterly period ended March 31, 2007**
  **OR**
  **[   ]
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT
        OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _____________**
  **Commission
        file number 0-25699**
   
  **PLX
        Technology, Inc.**
  (Exact
        name of Registrant as Specified in its Charter)
  **Delaware**
                **94-3008334**(State
                    or Other Jurisdiction of Incorporation or
                    Organization)
                (I.R.S.
                    Employer Identification Number)
 **870
        Maude Avenue**
 **Sunnyvale,
        California  94085**
 **(408)
        774-9060**
  (Address,
        including zip code, and telephone number, including area code, of registrant's
        principal executive offices)
  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 (Check
          One):
 
 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]
  As
          of  May
          1,
          2007 there were 28,669,394 shares of common
          stock, par value $0.001 per share,
          outstanding.







**PLX
      TECHNOLOGY, INC.**


**INDEX
      TO**


**REPORT
      ON FORM 10-Q**


**FOR
      QUARTER ENDED MARCH 31, 2007**





**PART
                  I. FINANCIAL INFORMATION**
              
              
              **Page**Item
                  1.
              Financial
                Statements (Unaudited)Condensed
                Consolidated Balance Sheets at March 31, 2007 and
                December 31, 2006
              
              
              
              
              3Condensed
                Consolidated Statements of Operations for the three
                months ended March 31, 2007 and 2006
              
              
              
              
              4Condensed
                Consolidated Statements of Cash Flows for the
                three months ended March 31, 2007 and 2006
              
              
              
              
              5Notes
                to Condensed Consolidated Financial
                Statements
              
              
              
              
              6Item
                  2.
              Management's
                Discussion and Analysis of Financial
                Condition and Results of Operations
              
              
              
              
              12Item
                  3.
              Quantitative
                and Qualitative Disclosures About Market
                Risk
              
              
              
              
              18Item
                  4.
              Controls
                and Procedures
              
              
              
              
              18**PART
                  II. OTHER INFORMATION**Item
                  1A.
              Risk
                Factors
              
              
              
              
              18Item
                  6.
              Exhibits
              
              
              
              
              26Signature
              
              
              
              
              
              27









**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**PLX
      TECHNOLOGY, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(in
      thousands)





**March
                  31,**
              
              **December
                  31,****2007**
              
              **2006
                  (1)**(unaudited)ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              32,554
              
              $
              32,804Short-term
                  marketable securities
              
              
              6,096
              
              
              5,853Accounts
                  receivable, net
              
              
              8,909
              
              
              8,491Inventories
              
              
              7,272
              
              
              8,295Other
                  current assets
              
              
              2,002
              
              
              600Total
                  current assets
              
              
              56,833
              
              
              56,043Property
                  and equipment, net
              
              
              28,397
              
              
              28,744Goodwill
              
              
              34,976
              
              
              34,976Other
                  purchased intangible assets
              
              
              2,416
              
              
              2,856Long-term
                  marketable securities
              
              
              6,423
              
              
              3,666Other
                  assets
              
              
              485
              
              
              1,663Total
                  assets
              
              $
              129,530
              
              $
              127,948LIABILITIESCurrent
                  Liabilities:Accounts
                  payable
              
              $
              4,727
              
              $
              2,995Accrued
                  compensation and benefits
              
              
              1,891
              
              
              2,417Accrued
                  commissions
              
              
              437
              
              
              1,100Other
                  accrued expenses
              
              
              533
              
              
              500Total
                  current liabilities
              
              
              7,588
              
              
              7,012CommitmentsSTOCKHOLDERS'
                  EQUITYCommon
                  stock, par value
              
              
              29
              
              
              29Additional
                  paid-in capital
              
              
              130,025
              
              
              128,735Accumulated
                  other comprehensive loss
              
              
              (108
              )
              
              (96
              )Accumulated
                  deficit
              
              
              (8,004
              )
              
              (7,732
              )Total
                  stockholders' equity
              
              
              121,942
              
              
              120,936Total
                  liabilities and stockholders' equity
              
              $
              129,530
              
              $
              127,948


(1)  Derived
      from audited financial statements





See
      accompanying notes to condensed consolidated financial statements.









**PLX
      TECHNOLOGY, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**


(in
      thousands, except per share amounts)




**Three
                  Months Ended****March
                  31,****2007**
              
              
              **2006**Net
                  revenues
              
              $
              18,640
              
              $
              20,005Cost
                  of revenues
              
              
              7,263
              
              
              7,497Gross
                  margin
              
              
              11,377
              
              
              12,508Operating
                  expenses:Research
                  and development
              
              
              5,742
              
              
              5,079Selling,
                  general and administrative
              
              
              6,170
              
              
              5,675Amortization
                  of purchased intangible assets
              
              
              440
              
              
              512Total
                  operating expenses
              
              
              12,352
              
              
              11,266Income
                  (loss) from operations
              
              
              (975
              )
              
              1,242Interest
                  income and other, net
              
              
              574
              
              
              342Income
                  (loss) before provision for income taxes
              
              
              (401
              )
              
              1,584Provision
                  (benefit) for income taxes
              
              
              (129
              )
              
              43Net
                  income (loss)
              
              $
              (272
              )
              $
              1,541Basic
                  net income (loss) per share
              
              $
              (0.01
              )
              $
              0.06Shares
                  used to compute basic per share amounts
              
              
              28,645
              
              
              27,884Diluted
                  net income (loss) per share
              
              $
              (0.01
              )
              $
              0.05Shares
                  used to compute diluted per share amounts
              
              
              28,645
              
              
              28,794





See
      accompanying notes to condensed consolidated financial statements.









**PLX
      TECHNOLOGY, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


(in
      thousands)




**Three
                  Months Ended****March
                  31,****2007**
              
              **2006**Cash
                  flows from operating activitiesNet
                  income (loss)
              
              $
              (272
              )
              $
              1,541Adjustments
                  to reconcile net income (loss) to cash flows provided by (used
                  in)
                  operating activities:Depreciation
                  and amortization
              
              
              484
              
              
              484Share-based
                  compensation expense
              
              
              1,152
              
              
              1,064Amortization
                  of purchased intangible assets
              
              
              440
              
              
              512Deferred
                  margins
              
              
              -
              
              
              (1,963
              )Other
                  non-cash items
              
              
              (56
              )
              
              (84
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (418
              )
              
              (1,275
              )Inventories
              
              
              1,023
              
              
              (3,660
              )Other
                  current assets
              
              
              (1,402
              )
              
              454Other
                  assets
              
              
              1,178
              
              
              64Accounts
                  payable
              
              
              1,732
              
              
              2,075Accrued
                  compensation and benefits
              
              
              (1,189
              )
              
              306Other
                  accrued expenses
              
              
              35
              
              
              (432
              )Net
                  cash provided by (used in) operating activities
              
              
              2,707
              
              
              (914
              )Cash
                  flows provided by investing activities:Purchases
                  of marketable securities
              
              
              (6,138
              )
              
              (2,634
              )Sales
                  and maturities of marketable securities
              
              
              3,200
              
              
              9,900Purchase
                  of property and equipment
              
              
              (143
              )
              
              (335
              )Net
                  cash provided by (used in) investing activities
              
              
              (3,081
              )
              
              6,931Cash
                  flows provided by financing activities:Proceeds
                  from exercise of common stock options
              
              
              138
              
              
              1,511Net
                  cash provided by financing activities
              
              
              138
              
              
              1,511Effect
                  of exchange rate fluctuations on cash and cash equivalents
              
              
              (14
              )
              
              (2
              )Increase
                  (decrease) in cash and cash equivalents
              
              
              (250
              )
              
              7,526Cash
                  and cash equivalents at beginning of period
              
              
              32,804
              
              
              21,028Cash
                  and cash equivalents at end of period
              
              $
              32,554
              
              $
              28,554




See
      accompanying notes to condensed consolidated financial statements.









**PLX
      TECHNOLOGY, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**1.
      Basis of Presentation**




The
      accompanying unaudited condensed consolidated financial statements of PLX
      Technology, Inc. and its wholly-owned subsidiaries (collectively, “PLX” or the
“Company”) as of March 31, 2007 and for the three month period ended March 31,
      2007 and 2006 have been prepared in accordance with generally accepted
      accounting principles for interim financial information and with the
      instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of
      management, the unaudited condensed consolidated financial statements include
      all adjustments (consisting only of normal recurring accruals) that management
      considers necessary for a fair presentation of the Company’s financial position,
      operating results and cash flows for the interim periods presented. Operating
      results and cash flows for interim periods are not necessarily indicative of
      results for the entire year.




The
      unaudited condensed consolidated financial statements include all of the
      accounts of the Company and those of its wholly owned subsidiaries. All
      intercompany accounts and transactions have been eliminated.




This
      financial data should be read in conjunction with the audited consolidated
      financial statements and notes thereto included in our Annual Report on Form
      10-K for the fiscal year ended December 31, 2006.




***Use
      of Estimates***




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect various accounts, including but not limited to
      goodwill, income taxes, inventories, revenue recognition and related sales
      reserves, allowance for doubtful accounts, share-based compensation and warranty
      reserves as reported in the financial statements and accompanying notes. Actual
      results could differ from those estimates and such differences may be material
      to the financial statements.




***Comprehensive
      Net Income (Loss)***




The
      Company’s comprehensive net income (loss) for the three month periods ended
      March 31, 2007 and March 31, 2006 was as follows (in thousands):




**Three
                      Months Ended****March
                      31,****2007**
                  
                  **2006**Net
                      income (loss)
                  
                  $
                  (272
                  )
                  $
                  1,541Unrealized
                      gain on marketable securities, net
                  
                  
                  2
                  
                  
                  28Cumulative
                      translation adjustments
                  
                  
                  (14
                  )
                  
                  (2
                  )Comprehensive
                      net income (loss)
                  
                  $
                  (284
                  )
                  $
                  1,567




***Revenue
      Recognition***




The
      Company recognizes revenue when persuasive evidence of an arrangement exists,
      delivery or customer acceptance, where applicable, has occurred, the fee is
      fixed or determinable, and collection is reasonably assured.




Revenue
      from product sales to direct customers and distributors is recognized upon
      shipment and transfer of risk of loss, if the Company believes collection is
      reasonably assured and all other revenue recognition criteria are met. The
      Company assesses the probability of collection based on a number of factors,
      including past transaction history and the customer’s creditworthiness.  At
      the end of each reporting period, the sufficiency of allowances for doubtful
      accounts is assessed based on the age of the receivable and the individual
      customer’s creditworthiness.





In
      the
      first quarter ended March 31, 2006, the Company completed an evaluation of
      its
      revenue recognition methodology and concluded that it was more appropriate
      to
      recognize revenues on sales to distributors at the time of shipment to a
      distributor (also referred to as the sell-in basis of recognizing revenue).
      Prior to the first quarter, the Company recognized revenues on sales to
      distributors when the distributor resold the product to its end customer (also
      referred to as the sell-through basis of recognizing revenue). Statement of
      Financial Accounting Standards (“SFAS”) No. 48, *Revenue
      Recognition When Right of Return Exists* ,
      sets
      forth conditions that must be met to recognize revenue at the time of shipment.
      Among those conditions is that a company that provides a right of return or
      pricing concession to a buyer be able to reasonably estimate the amount of
      future returns or pricing concessions. In the past, the Company had concluded
      that it did not meet this condition and therefore used the sell-through basis
      of
      revenue recognition. In the first quarter of 2006, the Company concluded that
      it
      is able to reasonably estimate returns and pricing concessions, and therefore
      had implemented the sell-in method of accounting for sales to distributors.
      The
      Company recognized an additional $2.8 million in revenues during the first
      quarter of 2006 due to this change resulting in an increase to diluted earning
      per share of $0.06.





The
      Company offers pricing protection to a single distributor whereby the Company
      supports the distributor’s resale product margin on certain products held in the
      distributor’s inventory. In general, the Company analyzes current requests for
      credit in process, also known as ship and debits, inventory at the distributor
      and credit expectations to determine the ending sales reserve required for
      this
      program. Reserves are reduced directly from revenue and recorded as a reduction
      to accounts receivable. In addition, the Company offers stock rotation rights
      to
      several distributors such that they can return up to a total of 5% of products
      purchased every six months in exchange for other PLX products of equal value.
      In
      general, the Company analyzes current stock rotation requests and past
      experience to determine the ending sales reserve required for this
      program .





As
      of
      March 31, 2007, the Company has controls in place to monitor sales returns
      from
      and pricing concessions to its distributors. The Company uses data from a
      variety of controls, such as monthly monitoring of distributor inventory levels,
      Returns Material Authorization controls and regular monitoring of distributor
      pricing concession and product rotation requests. The Company uses this data
      to
      arrive at a reasonable estimate on sales returns from and pricing concessions
      to
      its distributors.





***Recent
      Accounting Pronouncements***




In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      (“FIN”) No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement
      No. 109* .
      This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return, and provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition. FIN 48 is effective for fiscal years beginning
      after
      December 15, 2006. The Company has determined that the effects of FIN 48
      did not have a material impact on its financial statements.




In
      September 2006, FASB issued SFAS No. 157, *Fair
      Value Measurements* . SFAS
      157 defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (“GAAP”) and expands disclosures about
      fair value measurements. SFAS 157 is effective for fiscal years beginning after
      November 15, 2007 and interim periods within those fiscal years. The
      Company is currently evaluating the effect that the adoption of SFAS 157 will
      have on its financial position and results of operations.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities-including
      an
      amendment of FASB Statement No. 115.* SFAS
      159
      permits entities to choose to measure many financial instruments and certain
      other items at fair value that are not currently required to be measured at
      fair
      value, with unrealized gains and losses related to these financial instruments
      reported in earnings at each subsequent reporting date. This Statement is
      effective for fiscal years beginning after November 15, 2007. The Company is
      currently evaluating the effect that the adoption of SFAS 159 will have on
      its
      financial position and results of operations.




**2.**  **Share-Based
      Compensation**





***Stock
      Option Plans***





In
      January 1998, the Company’s stockholders approved the 1998 Stock Incentive Plan
      (“1998 Plan”). Under the 1998 Plan, options generally vest over four years and
      have a maximum term of 10 years. The Board of Directors generally establishes
      the exercise price as the closing price quoted on NASDAQ on the date of grant.
      In addition to stock options, the 1998 Plan allows for the grant of restricted
      stock, stock appreciation rights, performance shares, performance units,
      dividends and dividend equivalents.





In
      January 1999, the Company’s stockholders approved the 1999 Stock Incentive Plan
      (“1999 Plan”). The 1999 Plan has substantially the same terms as the 1998 Plan.





***Share-Based
      Compensation Expense***





On
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”)
      using the modified prospective transition method, which requires the measurement
      and recognition of compensation expense for all share-based payment awards
      made
      to the Company’s employees and directors including stock options. Share-based
      compensation expense for stock options granted subsequent to January 1,
      2006 was based on the grant-date fair value estimated in accordance with the
      provisions of SFAS 123(R). For awards granted prior to, but not vested, as
      of
      January 1, 2006, share-based compensation expense was based on the
      grant-date fair value, previously estimated, using the Black-Scholes valuation
      model, in accordance with the original provisions of SFAS 123. The Company
      recognizes the share-based compensation expense on a straight-line basis over
      the requisite service period of the award, which generally equals the vesting
      period of each grant.




The
      fair
      value of share-based awards to employees is calculated using the Black-Scholes
      option pricing model, even though this model was developed to estimate the
      fair
      value of freely tradable, fully transferable options without vesting
      restrictions, which differ significantly from the Company’s stock options. The
      Black-Scholes model requires subjective assumptions, including future stock
      price volatility and expected time to exercise, which greatly affect the
      calculated values. The expected term of options granted is derived from
      historical data on employee exercises and post-vesting employment termination
      behavior. The risk-free rate is based on the U.S Treasury rates in effect during
      the corresponding period of grant. The
      Company calculated its expected volatility assumption required in the
      Black-Scholes model by blending the historical volatility of its stock with
      the
      implied volatility for traded options on its stock. These
      factors could change in the future, which would affect the share-based
      compensation expense in future periods.





The
      weighted-average fair value of share-based compensation to employees is based
      on
      the multiple option valuation approach. Forfeitures are estimated and it is
      assumed no dividends will be declared. The estimated fair value of share-based
      compensation awards to employees is amortized using the straight-line method
      over the vesting period of the options. The weighted-average fair value
      calculations are based on the following average assumptions:




**Three
                  Months Ended****March
                  31,****2007**
              
              
              **2006**Risk-free
                  interest rate
              
              
              4.46
              %
              
              4.81
              %Expected
                  volatility
              
              
              0.62
              
              
              0.69Expected
                  life (years)
              
              
              4.35
              
              
              4.39
  **Risk-Free
      Interest Rate** :
      The
      risk-free interest rate is based on the U.S. Treasury yield curve in effect
      at
      the time of grant for the expected term of the option.





**Expected
      Term** :
      The
      Company’s expected term represents the weighted-average period that the
      Company’s stock options are expected to be outstanding. The expected term is
      based on the observed and expected time to post-vesting exercise of options
      by
      employees. The Company uses historical exercise patterns of previously granted
      options in relation to stock price movements to derive an employee behavioral
      pattern used to forecast expected exercise patterns.





**Expected
      Volatility** :
      The
      Company uses a blend of historical volatility and market-based implied
      volatility. The selection of the proportion of market-based volatility depends,
      among other things, on the availability of traded options on the Company’s stock
      and term of such options. Due to sufficient volume of the traded options, during
      the three months ended March 31, 2007 and 2006, the Company used, in
      accordance with SAB 107, 100% market-based implied volatility. The selection
      of
      the implied volatility approach was based upon the availability of traded
      options on the Company’s stock and the Company’s assessment that implied
      volatility is more representative of future stock price trends than historical
      volatility.





As
      share-based compensation expense recognized in the unaudited Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2007 and 2006 is based on awards ultimately expected to vest, it has been
      reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be
      estimated at the time of grant and revised, if necessary, in subsequent periods
      if actual forfeitures differ from those estimates. Our estimated forfeiture
      rate
      of 27% was based on historical experience.





The
      following table shows total share-based compensation expense described for
      the
      three months ended March 31, 2007 and 2006, included in the Condensed
      Consolidated Statements of Operations (in thousands):




**Three
                Months Ended****March
                31,****2007**
            
            **2006**Cost
                of revenues
            
            $
            18
            
            $
            10Research
                and development
            
            
            532
            
            
            477Selling,
                general and administrative
            
            
            602
            
            
            577Pre-tax
                stock-based compensation expense
            
            
            1,152
            
            
            1,064Income
                tax
            
            
            -
            
            
            -Net
                stock-based compensation expense
            
            $
            1,152
            
            $
            1,064


A
      summary
      of option activity under the Company’s stock equity plans during the three
      months ended March 31, 2007 is as follows:




**Weighted
                  Average****Remaining**
              
              **Aggregate****Options
                  Available**
              
              **Number
                  of**
              
              **Weighted
                  Average**
              
              **Contratual
                  Term**
              
              **Intrinsic****Options**
              
              **for
                  Grant**
              
              **Shares**
              
              **Exercise
                  Price**
              
              **(in
                  years)**
              
              **Value**Outstanding
                  at December 31, 2006
              
              
              1,640,010
              
              
              3,713,477
              
              $
              11.47
              
              
              5.39
              
              $
              11,718,444Granted
              
              
              (572,900
              )
              
              572,900
              
              
              10.15Exercised
              
              
              -
              
              
              (26,499
              )
              
              5.20Cancelled
              
              
              51,174
              
              
              (51,174
              )
              
              13.36Outstanding
                  at March 31, 2007
              
              
              1,118,284
              
              
              4,208,704
              
              $
              11.31
              
              
              5.38
              
              $
              4,085,919Exercisable
                  at March 31, 2007
              
              
              
              
              
              2,430,353
              
              $
              11.92
              
              
              4.76
              
              $
              3,497,536




The
      Black-Scholes weighted average fair values of options granted during the three
      months ended March 31, 2007 and 2006 were $5.34 and $7.36,
      respectively.




The
      following table summarizes ranges of outstanding and exercisable options as
      of
      March 31, 2007:


**Options
                  Outstanding**
              
              **Options
                  Exercisable****Weighted
                  Average****Remaining**
              
              **Weighted**
              
              
              
              **Weighted****Contratual
                  Term**
              
              **Average**
              
              
              
              **Average****Range
                  of Exercise Prices**
              
              **Number**
              
              **(in
                  years)**
              
              **Exercise
                  Price**
              
              **Number**
              
              **Exercise
                  Price**$0.88
                  - $7.98
              
              
              860,051
              
              
              5.00
              
              $
              5.87
              
              
              728,738
              
              $
              5.62$8.00
                  - $9.34
              
              
              851,070
              
              
              4.77
              
              
              8.92
              
              
              568,702
              
              
              8.93$9.41
                  - $10.21
              
              
              1,038,400
              
              
              6.76
              
              
              9.98
              
              
              179,902
              
              
              9.62$10.29
                  - $16.65
              
              
              1,047,000
              
              
              5.75
              
              
              13.98
              
              
              540,828
              
              
              15.01$19.37
                  - $27.00
              
              
              412,183
              
              
              3.06
              
              
              24.15
              
              
              412,183
              
              
              24.15Total
              
              
              4,208,704
              
              
              5.38
              
              $
              11.31
              
              
              2,430,353
              
              $
              11.92




The
      total
      intrinsic value of options exercised during the three months ended March 31,
      2007 and 2006 was approximately $0.2 million and $1.7 million, respectively.
      As
      of March 31, 2007, total unrecognized compensation costs related to nonvested
      stock options including estimated forfeitures was $4.7 million which is expected
      to be recognized as expense over a weighted average period of approximately
      1.49
      years.





**3.**  **Inventories**





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




**March
                  31,**
              
              **December
                  31,****2007**
              
              **2006**(in
                  thousands)Work-in-process
              
              $
              1,283
              
              $
              1,226Finished
                  goods
              
              
              5,989
              
              
              7,069Total
              
              $
              7,272
              
              $
              8,295




The
      Company evaluates the need for potential write-downs of inventory by considering
      a combination of factors. Based on the life of the product, sales history,
      obsolescence and sales forecast, the Company may record write-downs to inventory
      ranging from 0% to 100%.





**4.
      Net Income (Loss) Per Share**





The
      Company uses the treasury stock method to calculate the weighted average shares
      used in the diluted earnings per share in accordance with SFAS No. 128, *Earnings
      Per Share.* The
      following table sets forth the computation of basic and diluted net income
      (loss) per share (in thousands, except per share data):




**Three
                  Months Ended****March
                  31,****2007**
              
              **2006**Net
                  income (loss)
              
              $
              (272
              )
              $
              1,541Weighted
                  average shares of common stock outstanding
              
              
              28,645
              
              
              27,884Net
                  income (loss) per share - basic
              
              $
              (0.01
              )
              $
              0.06Shares
                  used in computing basic net income (loss) per share
              
              
              28,645
              
              
              27,884Dilutive
                  effect of stock options
              
              
              -
              
              
              910Shares
                  used in computing diluted net income (loss) per share
              
              
              28,645
              
              
              28,794Net
                  income (loss) per share - diluted
              
              $
              (0.01
              )
              $
              0.05
  The
        Company incurred a net loss for the three month period ended March 31, 2007.
        Therefore, the effect of dilutive securities of approximately 4.2 million
        equivalent shares was excluded from the computation of diluted loss per share
        as
        its impact would be anti-dilutive. Dilutive securities include only stock
        options.





Weighted
      average employee stock options to purchase approximately 3.7 million shares
      for
      the three month period ended March 31, 2006 were outstanding, but was
      not
      included in the computation of diluted earnings per share because the exercise
      price of the stock options was greater than the average share price of the
      common shares and, therefore, the effect would have been
      anti-dilutive.





**5.
      Segments of an Enterprise and Related Information**




The
      Company has one operating segment, the sale of semiconductor devices. The Chief
      Executive Officer has been identified as the Chief Operating Decision Maker
      (CODM) because he has final authority over resource allocation decisions and
      performance assessment. The CODM does not receive discrete financial information
      about individual components of the Company’s business. The majority of the
      Company’s assets are located in the United States.




Revenues
      by geographic region based on customer location were as follows (in
      thousands):




**Three
                  Months Ended****March
                  31,****2007**
              
              **2006**Revenues:
              
              (in
                  thousands)United
                  States
              
              $
              5,769
              
              $
              4,756China
              
              
              3,002
              
              
              1,794Singapore
              
              
              2,720
              
              
              3,141Other
                  Asia Pacific
              
              
              2,412
              
              
              3,146Europe,
                  Middle East and Africa
              
              
              2,336
              
              
              2,935Taiwan
              
              
              2,043
              
              
              3,334The
                  Americas - excluding United States
              
              
              358
              
              
              899Total
              
              $
              18,640
              
              $
              20,005




For
      the
      three months ended March 31, 2007, two distributors accounted for 31% and 11%,
      respectively, of net revenues. As of March 31, 2007, the same two distributors
      accounted for 31% and 15%, respectively, of the total accounts receivable
      balance. For the same period in 2006, two distributors accounted for 27% and
      10%, respectively, of net revenues. As of March 31, 2006, the same two
      distributors accounted for 30% and 13%, respectively, of the total accounts
      receivable balance. For both of these periods, no other individual direct
      customer or distributor represented greater than 10% of net revenues.




**6.
      Income Taxes**




Net
      income tax benefit of $129,000 has been recorded for the three month period
      ended March 31, 2007, compared to income tax expense of $43,000 for the same
      period in 2006. Income tax benefit for the three months ended March 31, 2007
      is
      a result of applying the estimated annual effective tax rate to cumulative
      loss
      before taxes. For the same period in 2006, the provision for income taxes
      related to federal alternative minimum tax, miscellaneous state income taxes
      and
      foreign income taxes currently payable.




Deferred
      tax assets are recognized when there is sufficient evidence that it is more
      likely than not that such deferred tax assets will be realized. The Company
      has
      determined that such evidence does not currently exist. Therefore, a full
      valuation allowance has been established to reserve the Company's net deferred
      tax assets. In light of current operating results, the Company is evaluating
      the
      realizability of the asset balance in conjunction with reviewing its forecasts
      for the current and future periods and upon completing this analysis, the
      Company will determine whether it is appropriate to adjust the valuation
      allowance.




The
      Company adopted FASB Interpretation 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), at the beginning of calendar year 2007. As a result of the implementation
      of FIN 48, the Company recognized no material adjustment in the liability for
      unrecognized income tax benefits. The
      Company has unrecognized tax benefits of approximately $1.9 million as of
      January 1, 2007, of which $0.1 million, if recognized would result in a
      reduction of the Company’s effective tax rate. Future changes in the remaining
      balance of unrecognized tax benefits will have no impact on the effective tax
      rate as they are subject to a full valuation allowance. The Company does not
      have any material accrued interest or penalties associated with any unrecognized
      tax benefits. Other than as discussed below, the Company does not believe it
      is
      reasonably possible that its unrecognized tax benefits will significantly change
      within the next twelve months.





There
      were no material changes in the amount of unrecognized tax benefits as of March
      31, 2007. In April 2007, the Company anticipates a reduction to unrecognized
      tax
      benefits in the amount of $0.1 million, as a result of a lapse of the applicable
      statue of limitations.





The
      Company is subject to taxation in the US and various states and foreign
      jurisdictions. The tax years 1997-2006 remain open to examination by the federal
      and most state tax authorities due certain acquired net operating loss and
      overall credit carryforward positions.





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS**





This
      Report on Form 10-Q contains forward-looking statements within the "safe
      harbor" provisions of the Private Securities Litigation Reform Act of 1995,
      including statements regarding our expectations, hopes, intentions, beliefs
      or
      strategies regarding the future. Such forward-looking statements also include
      statements regarding our future gross margin, our future research and
      development expenses, our future selling, general and administrative expenses,
      our ability to meet our capital requirements for the next twelve months, our
      future capital requirements, current high turns fill requirements and our
      anticipation that sales to a small number of customers will account for a
      significant portion of our sales. Actual results could differ materially from
      those projected in such forward-looking statements. Factors that could cause
      actual results to differ include unexpected changes in the mix of our product
      sales, unexpected pricing pressures, or unexpected capital requirements that
      may
      arise due to other possible acquisitions or other events, unanticipated changes
      in the businesses of our suppliers, and unanticipated cash shortfalls. Actual
      results could also differ for the reasons noted under the sub-heading “Factors
      That May Affect Future Operating Results” in Item 1A, Risk Factors in Part II of
      this report on Form 10-Q and in other sections of this report on Form 10-Q.
      All
      forward-looking statements included in this Form 10-Q are based on
      information available to us on the date of this report on Form 10-Q, and we
      assume no obligation to update the forward-looking statements, or to update
      the
      reasons why actual results could differ from those projected in the
      forward-looking statements.





The
      following discussion should be read in conjunction with the audited consolidated
      financial statements and the notes thereto included in our Annual Report on
      Form
      10-K for the fiscal year ended December 31, 2006.





**OVERVIEW**




PLX
      was
      founded in 1986, and between 1994 and 2002 we focused on the development of
      I/O
      interface semiconductors and related software and development tools that are
      used in systems incorporating the PCI standard. In 1994 and 1995, a significant
      portion of our revenues were derived from the sale of semiconductor devices
      that
      perform similar functions as our current products, except they were based on
      a
      variety of industry standards. Our revenues since 1996 have been derived
      predominantly from the sale of semiconductor devices based on the PCI standard
      to a large number of customers in a variety of applications including networking
      and telecommunications, enterprise storage, imaging, industrial and other
      embedded applications as well as in related adapter cards. In 2002, we shifted
      the majority of our development efforts to PCI Express. In September 2004,
      we
      began shipping products based on the PCI Express standard for next-generation
      systems.




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




We
      rely
      on a combination of direct sales personnel, distributors and manufacturers’
representatives throughout the world to sell a significant portion of our
      products. We pay manufacturers’ representatives a commission on sales while we
      sell products to distributors at a discount from the selling price.




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





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





Our
      long-term success will depend on our ability to introduce new products. While
      new products typically generate little or no revenues during the first twelve
      months following their introduction, our revenues in subsequent periods depend
      upon these new products. Due to the lengthy sales cycle and additional time
      before our customers request volume production, significant revenues from our
      new products typically occur twelve to twenty-four months after product
      introduction. As a result, revenues from newly introduced products have, in
      the
      past, produced a small percentage of our total revenues in the year the product
      was introduced. See -“Our Lengthy Sales Cycle Can Result in Uncertainty and
      Delays with Regard to Our Expected Revenues” in Item 1A, Risk Factors, in Part
      II of this report on Form 10-Q.





**RESULTS
      OF OPERATIONS**





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


**Three
                  Months Ended****March
                  31,****2007**
              
              **2006**Net
                  revenues
              
              
              100.0
              %
              
              100.0
              %Cost
                  of revenues
              
              
              39.0
              
              
              37.5Gross
                  margin
              
              
              61.0
              
              
              62.5Operating
                  expenses:Research
                  and development
              
              
              30.8
              
              
              25.4Selling,
                  general and administrative
              
              
              33.1
              
              
              28.4Amortization
                  of purchased intangible assets
              
              
              2.4
              
              
              2.6Total
                  operating expenses
              
              
              66.3
              
              
              56.4Income
                  (loss) from operations
              
              
              (5.3
              )
              
              6.1Interest
                  income and other, net
              
              
              3.1
              
              
              1.7Income
                  (loss) before provision for income taxes
              
              
              (2.2
              )
              
              7.8Provision
                  (benefit) for income taxes
              
              
              (0.7
              )
              
              0.2Net
                  income (loss)
              
              
              (1.5
              )%
              
              7.6
              %




**Net
      Revenues**





Net
      revenues consist of product revenues generated principally by sales of our
      semiconductor devices. Net revenues for the three months ended March 31, 2007
      were $18.6 million, a decrease of 6.8% from $20.0 million for the three months
      ended March 31, 2006. The decrease was due primarily to an additional $2.8
      million in revenues recognized in the first quarter of 2006 as a result the
      change from the sell-through to the sell-in basis of revenue recognition and
      the
      decreased sales of our USB products, partially offset by increased sales of
      our
      PCI Express products and our PCI I/O devices. For the three months ended March
      31, 2007 and 2006, sales of our PCI Express products accounted for 26.9% and
      19.3%, respectively, of our total net revenues.




For
      the
      three months ended March 31, 2007, two distributors accounted for 31% and 11%
      of
      net revenues. For the same period in 2006, two distributors accounted for 27%
      and 10%, respectively, of net revenues. For both of these periods, no other
      individual direct customer or distributor represented greater than 10% of net
      revenues.




Customer
      demand for semiconductors can change quickly and unexpectedly.  Our revenue
      levels have been highly dependent on the amount of new orders that are received
      for products to be delivered to the customer within the same quarter, also
      called “turns fill” orders.  Because of the long cycle time to build our
      products and our lack of visibility into demand when turns fill orders are
      high,
      it is difficult to predict which products to build to match future demand. 
We believe the current high turns fill requirements will continue
      indefinitely.  The sustainability of improved customer demand is
      uncertain and highly dependent on economic conditions.  The high turns fill
      orders requirement together with the uncertainty of product mix and pricing,
      makes it difficult to predict future levels of sales and profitability and
      may
      require us to carry higher levels of inventory.





**Gross
      Margin**





Gross
      margin represents net revenues less the cost of revenues. Cost of revenues
      includes the cost of (1) purchasing semiconductor devices or wafers from our
      independent foundries, (2) package, assembly and test services from our
      independent foundries, assembly contractors and test contractors and (3) our
      operating costs associated with the procurement, storage, and shipment of
      products as allocated to production.





Gross
      margin for the three months ended March 31, 2007 was 61.0%, as compared to
      62.5%
      for the same period in 2006. In absolute dollars, gross margin decreased by
      $1.1
      million or 9.0% to $11.4 million for the three months ended March 31, 2007
      from
      $12.5 million for the same period in 2006. Excluding the $1.9 million increase
      in gross margin from our change in revenue recognition to distributors in the
      first quarter of 2006, gross margin would have increased in absolute dollars
      by
      $0.8 million due to higher product shipments but decreased by 0.6 percentage
      points due to shifts in our product mix.





Future
      gross profit and gross margin are highly dependent on the product and customer
      mix, write-downs and recoveries of excess or obsolete inventory, the position
      of
      our products in their respective life cycles, and specific manufacturing costs.
      Accordingly, we are not able to predict future gross profit levels or gross
      margins with certainty.





**Research
      and Development Expenses**





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





R&D
      as a percentage of net revenues increased to 30.8% for the three months ended
      March 31, 2007, as compared to 25.4% for the same period in 2006. In absolute
      dollars, R&D expenses increased by $0.6 million or 13.1% to $5.7 million for
      the three months ended March 31, 2007 from $5.1 million for the same period
      in
      2006. The increase in R&D as a percentage of revenue is due to lower
      revenues and higher R&D spending. The increase in absolute dollars is
      primarily due to additional tape-out related expenses as we successfully
      completed product designs and increased spending on external engineering tools.





We
      believe continued spending on research and development to develop new products
      is critical to our success and, consequently, expect research and development
      expenses to increase in absolute dollars in future periods.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative (“SG&A”) expenses consist primarily of salaries,
      share-based compensation and related costs of employees engaged in selling
      and
      administrative activities, professional fees, trade show and other promotional
      expenses, as well as sales commissions to manufactures’
representatives.




SG&A
      as a percentage of net revenues increased to 33.1% for the three months ended
      March 31, 2007, as compared to 28.4% for the same period in 2006. In absolute
      dollars, SG&A expenses increased by $0.5 million or 8.7% to $6.2 million for
      the three months ended March 31, 2007 from $5.7 million for the same period
      in
      2006. The increase in SG&A as a percentage of revenue is due to lower
      revenues and higher SG&A spending. The increase in absolute dollars is due
      to increases in (1) compensation and benefit expenses of approximately $0.5
      million resulting from higher headcount, (2) travel expenses of approximately
      $0.1 million and (3) professional fees of approximately $0.1 million. This
      was
      partially offset by a decrease of approximately $0.1 million in sales
      commissions to manufacturer’s representatives as a result of reduced commission
      rates.





We
      expect
      SG&A expenses in absolute dollars to likely increase in future
      periods.




**Amortization
      of Purchased Intangible Assets**





Amortization
      of purchased intangible assets consists of amortization expense related to
      developed/core technology and customer base acquired as a result of the HiNT
      Corporation acquisition in May 2003 and NetChip Technology, Inc. acquisition
      in
      May 2004. Amortization of purchased intangible assets decreased by $0.1 million
      or 14.1% to $0.4 million for the three months ended March 31, 2007 from $0.5
      million for the same period in 2006. The decrease is due to customer base
      acquired as a result of the HiNT Corporation acquisition in May 2003 becoming
      fully amortized in May 2006.





**Interest
      Income and Other, Net**





Interest
      income reflects interest earned on cash, cash equivalents and short-term and
      long-term investment balances. Interest income and other increased by $0.3
      million to $0.6 million for the three months ended March 31, 2007 from $0.3
      million from the same period in 2006. The increase was primarily due to higher
      cash and investment balances and higher interest rates.





**Provision
      for Income Taxes**





Net
      income tax benefit of $129,000 has been recorded for the three month period
      ended March 31, 2007, compared to income tax expense of $43,000 for the same
      period in 2006. Income tax benefit for the three months ended March 31, 2007
      is
      a result of applying the estimated annual effective tax rate to cumulative
      loss
      before taxes. For the same period in 2006, the provision for income taxes
      related to federal alternative minimum tax, miscellaneous state income taxes
      and
      foreign income taxes currently payable.




Deferred
      tax assets are recognized when there is sufficient evidence that it is more
      likely than not that such deferred tax assets will be realized. We have
      determined that such evidence does not currently exist. Therefore, a full
      valuation allowance has been established to reserve our net deferred tax assets.
      In light of current operating results, we are evaluating the realizability
      of
      the asset balance in conjunction with reviewing our forecasts for the current
      and future periods and upon completing this analysis, we will determine whether
      it is appropriate to adjust the valuation allowance.





We
      adopted FASB Interpretation 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), at the beginning of calendar year 2007. As a result of the implementation
      of FIN 48, we recognized no material adjustment in the liability for
      unrecognized income tax benefits. We
      have
      unrecognized tax benefits of approximately $1.9 million as of January 1, 2007,
      of which, $0.1 million, if recognized, would result in a reduction of our
      effective tax rate. Future changes in the remaining balance of unrecognized
      tax
      benefits will have no impact on the effective tax rate as they are subject
      to a
      full valuation allowance. We do not have any material accrued interest or
      penalties associated with any unrecognized tax benefits. Other than as discussed
      below, we do not believe it is reasonably possible that our unrecognized tax
      benefits will significantly change within the next twelve months





There
      are
      no material changes in the amounts of unrecognized tax benefits as of March
      31,
      2007. In April 2007, we anticipate a reduction to unrecognized tax benefits
      in
      the amount of $0.1 million, as a result of a lapse of the applicable statue
      of
      limitations.





We
      are
      subject to taxation in the US and various states and foreign jurisdictions.
      The
      tax years 1997-2006 remain open to examination by the federal and most state
      tax
      authorities due certain net operating loss and credit carryforward
      positions.





**Liquidity
      and Capital Resources**





In
      summary, our cash flows were (in thousands):


**Three
                  Months Ended****March
                  31,****2007**
              
              **2006**Net
                  cash provided by (used in) operating activities
              
              $
              2,707
              
              $
              (914
              )Net
                  cash provided by (used in) investing activities
              
              
              (3,081
              )
              
              6,931Net
                  cash provided by financing activities
              
              
              138
              
              
              1,511Effect
                  of exchange rate fluctuations on cash and cash equivalents
              
              
              (14
              )
              
              (2
              )




We
      invest
      excess cash predominantly in debt instruments that are highly liquid, of
      high-quality investment grade, and predominantly have maturities of less than
      one year with the intent to make such funds readily available for operating
      purposes. As of March 31, 2007 cash, cash equivalents, short-term and long-term
      marketable securities were $45.1 million, an increase of $2.8 million from
      $42.3
      million at December 31, 2006.





Cash
      provided by operating activities primarily consists of net income (loss)
      adjusted for certain non-cash items including depreciation, amortization of
      purchased intangible assets, share-based compensation expense, other non-cash
      items, and the effect of changes in working capital and other activities. Cash
      provided by operating activities for the three months ended March 31, 2007
      of
      $2.7 million consisted primarily of a net loss of $0.3 million
      adjusted for non-cash items of $2.0 million and $1.0 million provided
      by working capital and other activities. Cash used in operating activities
      for
      the three months ended March 31, 2006 of $0.9 million consisted primarily
      of net income of $1.5 million adjusted for non-cash items of $13,000,
      partially offset by $2.5 million used in working capital and other
      activities.





Cash
      used
      in investing activities for the three months ended March 31, 2007 of
      $3.1 million was primarily due to cash used in purchases of marketable
      securities (net of sales and maturities of investments) of $3.0 million and
      capital expenditures of $0.1 million. Capital expenditures have generally
      comprised of purchases of computer hardware, software, server equipment and
      furniture and fixtures, and are currently expected to modestly increase in
      2007.
      Cash provided by investing activities for the three months ended March 31,
      2006
      of $6.9 million was primarily due to proceeds from sales and maturities
      (net of purchases) of investments in marketable securities of $7.2 million,
      partially offset by capital expenditures of $0.3 million.





Cash
      provided by financing activities for the three months ended March 31, 2007
      of
      $0.1 million was due to proceeds from the exercise of stock options. Cash
      provided by financing activities for the three months ended March 31, 2006
      of
      $1.5 million was due to proceeds from the exercise of stock
      options.





The
      negative effect of exchange rates on cash and cash equivalents for the three
      months ended March 31, 2007 and 2006 was due to the weakening of the U.S. dollar
      against other foreign currencies.





In
      September 2002, our Board of Directors authorized the repurchase of up
      to 2,000,000 shares of common stock.  At the discretion of the
      management, we can repurchase the shares from time to time in the open market
      or
      in privately negotiated transactions.  Approximately 774,000 shares had
      been repurchased for approximately $1.9 million in cash in 2003. We did not
      repurchase any shares in 2004, 2005 or 2006, or during the three month period
      ended March 31, 2007.





There
      were no significant changes in contractual obligations and commercial
      commitments outstanding as of March 31, 2007 when compared to December 31,
      2006.





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





**Critical
      Accounting Policies**





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





***Revenue
      Recognition***





We
      recognize revenue when persuasive evidence of an arrangement exists, delivery
      or
      customer acceptance, where applicable, has occurred, the fee is fixed or
      determinable, and collection is reasonably assured.




Revenue
      from product sales to direct customers and distributors is recognized upon
      shipment and transfer of risk of loss, if we believe collection is reasonably
      assured and all other revenue recognition criteria are met. We assess the
      probability of collection based on a number of factors, including past
      transaction history and the customer’s creditworthiness. At the end of each
      reporting period, the sufficiency of allowances for doubtful accounts is
      assessed based on the age of the receivable and the individual customer’s
      creditworthiness.





In
      the
      first quarter ended March 31, 2006, we completed an evaluation of our revenue
      recognition methodology and concluded that it was more appropriate to recognize
      revenues on sales to distributors at the time of shipment to a distributor
      (also
      referred to as the sell-in basis of recognizing revenue). Prior to the first
      quarter, we recognized revenues on sales to distributors when the distributor
      resold the product to its end customer (also referred to as the sell-through
      basis of recognizing revenue). SFAS No. 48, *Revenue
      Recognition When Right of Return Exists* ,
      sets
      forth conditions that must be met to recognize revenue at the time of shipment.
      Among those conditions is that a company that provides a right of return or
      pricing concession to a buyer be able to reasonably estimate the amount of
      future returns or pricing concessions. In the past, we had concluded that we
      did
      not meet this condition and therefore used the sell-through basis of revenue
      recognition. In the first quarter of 2006, we concluded that we are able to
      reasonably estimate returns and pricing concessions, and therefore have
      implemented the sell-in method of accounting for sales to distributors. We
      recognized an additional $2.8 million in revenues during the first quarter
      of
      2006 due to this change resulting in an increase to diluted earnings per share
      of $0.06.





We
      offer
      pricing protection to a single distributor whereby we support the distributor’s
      resale product margin on certain products held in the distributor’s inventory.
      In general, we analyze current requests for credit in process, also known as
      ship and debits, inventory at the distributor and credit expectations to
      determine the ending sales reserve required for this program. Reserves are
      reduced directly from revenue and recorded as a reduction to accounts
      receivable. In addition, we offer stock rotation rights to several distributors
      such that they can return up to a total of 5% of products purchased every six
      months in exchange for other PLX products of equal value. In general, we analyze
      current stock rotation requests and past experience to determine the ending
      sales reserve required for this program .





As
      of
      March 31, 2007, we have controls in place to monitor sales returns from and
      pricing concessions to our distributors. We use data from a variety of controls,
      such as monthly monitoring of distributor inventory levels, Returns Material
      Authorization controls, and regular monitoring of distributor pricing concession
      and product rotation requests. We use this data to arrive at a reasonable
      estimate on sales returns from and pricing concessions to our
      distributors.





***Inventory
      Valuation***





We
      evaluate the need for potential write-downs for inventory by considering a
      combination of factors. Based on the life of the product, sales history,
      obsolescence, and sales forecast, we may record write-downs to our inventory
      of
      up to 100%. Any adverse changes to our future product demand may result in
      increased write-downs, resulting in decreased gross margin. In addition, future
      sales on any of our previously written down inventory may result in increased
      gross margin in the period of sale.





***Allowance
      for Doubtful Accounts***





We
      evaluate the collectibility of our accounts receivable based on length of time
      the receivables are past due, generally thirty days. We record reserves for
      bad
      debts against amounts due to reduce the net recognized receivable to the amount
      we reasonably believe will be collected. Once we have exhausted collection
      efforts, we will reduce the related accounts receivable against the allowance
      established for that receivable. We have certain customers with individually
      large amounts due at any given balance sheet date. Any unanticipated change
      in
      one of those customers’ creditworthiness or other matters affecting the
      collectibility of amounts due from such customers could have a material affect
      on our results of operations in the period in which such changes or events
      occur. Historically, our write-offs have been insignificant.





***Share-Based
      Compensation***





Upon
      adoptions of SFAS 123R on January 1, 2006, we began estimating the value of
      employee stock options on the date of grant using the Black-Scholes model.
      Prior
      to the adoption of SFAS 123R, the value of each employee stock option was
      estimated on the date of grant using the Black-Scholes model for the purpose
      of
      the pro forma financial disclosure in accordance with SFAS 123. The
      determination of fair value of share-based payment awards on the date of grant
      using an option-pricing model is affected by our stock price as well as
      assumptions regarding a number of highly complex and subjective variables.
      These
      variables include, but are not limited to the expected stock price volatility
      over the term of the awards and the actual and projected employee stock option
      exercise behaviors. The expected term of options granted is derived from
      historical data on employee exercises and post-vesting employment termination
      behavior. We calculated our expected volatility assumption required in the
      Black-Scholes model by blending the historical volatility of our stock with
      the
      implied volatility for traded options on our stock. As of January 1, 2006 we
      have adopted the modified prospective transition method and its effect is
      included in our first quarter 2006 financial statements.





***Taxes***




We
      account for income taxes using the asset and liability method. Deferred taxes
      are determined based on the differences between the financial statement and
      tax
      bases of assets and liabilities, using enacted tax rates in effect for the
      year
      in which the differences are expected to reverse. Valuation allowances are
      established when necessary to reduce deferred tax assets to the amounts expected
      to be realized. As of March 31, 2007, we carried a valuation allowance for
      the
      entire deferred tax asset as a result of uncertainties regarding the realization
      of the asset balance. In light of current operating results, we
      are evaluating the realizability of the asset balance in conjunction
      with reviewing our forecasts for the current and future periods and
      upon completing this analysis, we will determine whether it is appropriate
      to
      adjust the valuation allowance.




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




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




We
      have
      an investment portfolio comprised of fixed income securities, including amounts
      classified as cash equivalents, short-term investments and long-term
      investments. Our investment portfolio totaled $41.3 million at March 31, 2007.
      These securities are subject to interest rate fluctuations and will decrease
      in
      market value if interest rates increase.





The
      primary objective of our investment activities is to preserve principal while
      at
      the same time maximizing yields without significantly increasing risk. While
      our
      investment policy allows us to invest in high quality, short-term and long-term
      debt instruments, our investment portfolio as of March 31, 2007 is comprised
      of
      cash equivalents, short-term investments and long-term investments. A
      hypothetical 100 basis point increase in interest rates would result in less
      than a $0.2 million decrease (less than 1%) in the fair value of our
      available-for-sale securities.




**ITEM
      4. CONTROLS AND PROCEDURES**




**(a)
      Evaluation of disclosure controls and procedures.**




Based
      on
      their evaluation as of March 31, 2007, our Chief Executive Officer and Chief
      Financial Officer have concluded that our disclosure controls and procedures
      (as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of 1934, as amended) were effective to ensure that the information required
      to
      be disclosed by us in this Quarterly Report on Form 10-Q was recorded,
      processed, summarized and reported within the time periods specified in the
      SEC's rules and instructions for Form 10-Q and that such disclosure
      controls and procedures were also effective to ensure that information required
      to be disclosed in the reports we file or submit under the Exchange Act is
      accumulated and communicated to our management, including our Chief Executive
      Officer and Chief Financial Officer, as appropriate to allow timely decisions
      regarding required disclosure.




**(b) Changes
      in internal controls.**




There
      has
      been no significant change in our internal control over financial reporting
      that
      occurred during our most recent fiscal quarter that has materially affected
      or
      is reasonably likely to materially affect our internal control over financial
      reporting.









**PART
      II. OTHER INFORMATION**





**ITEM
      1A. RISK FACTORS**





**FACTORS
      THAT MAY AFFECT FUTURE OPERATING RESULTS**





This
      quarterly report on Form 10-Q contains forward-looking statements which involve
      risks and uncertainties. Our actual results could differ materially from those
      anticipated by such forward-looking statements as a result of certain factors,
      including those set forth below. The following risk factors have been updated
      from those set forth in Item 1A. of Part I of our Annual Report on Form 10-K
      for
      the year ended December 31, 2006, and are restated in full.





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





Our
      quarterly operating results have fluctuated significantly in the past and are
      expected to fluctuate significantly in the future based on a number of factors,
      many of which are not under our control. Our operating expenses, which include
      product development costs and selling, general and administrative expenses,
      are
      relatively fixed in the short-term. If our revenues are lower than we expect
      because we sell fewer semiconductor devices, delay the release of new products
      or the announcement of new features, or for other reasons, we may not be able
      to
      quickly reduce our spending in response.




Other
      circumstances that can affect our operating results include:




·
            the
                timing of significant orders, order cancellations and
                reschedulings,


·
            the
                loss of a significant customer(s),


·
            introduction
                of products and technologies by our competitors,


·
            the
                availability of production capacity at the fabrication facilities
                that
                manufacture our products,


·
            our
                significant customers could lose market share that may affect our
                business,


·
            integration
                of our product functionality into our customers’
                products,


·
            our
                ability to develop, introduce and market new products and technologies
                on
                a timely basis,


·
            unexpected
                issues that may arise with devices in production


·
            shifts
                in our product mix toward lower margin
                products,


·
            changes
                in our pricing policies or those of our competitors or suppliers,
                including decreases in unit average selling prices of our
                products,


·
            the
                availability and cost of materials to our
                suppliers,


·
            general
                economic conditions, and


·
            political
                climate.




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





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





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





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




Historically,
      a relatively small number of customers have accounted for a significant portion
      of our net revenues in any particular period. For the three months ended March
      31, 2007, two distributors accounted for 31% and 11% of net revenues. For the
      same period in 2006, two distributors accounted for 27% and 10%, respectively,
      of net revenues. For both of these periods, no other individual direct customer
      or distributor represented greater than 10% of net revenues.




We
      have
      no long-term volume purchase commitments from any of our significant customers.
      We cannot be certain that our current customers will continue to place orders
      with us, that orders by existing customers will continue at the levels of
      previous periods or that we will be able to obtain orders from new customers.
      In
      addition, some of our customers supply products to end-market purchasers and
      any
      of these end-market purchasers could choose to reduce or eliminate orders for
      our customers' products. This would in turn lower our customers' orders for
      our
      products.





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




·
            the
                reduction, delay or cancellation of orders from one or more of our
                significant customers;


·
            the
                selection of competing products or in-house design by one or more
                of our
                current customers;


·
            the
                loss of one or more of our current customers;
                or


·
            a
                failure of one or more of our current customers to pay our
                invoices.




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




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




In
      addition, competition in our markets comes from companies of various sizes,
      many
      of which are significantly larger and have greater financial and other resources
      than we do and thus can better withstand adverse economic or market conditions.
      Therefore, we cannot assure you that we will be able to compete successfully
      in
      the future against existing or new competitors, and increased competition may
      adversely affect our business. See “Business -- Competition,” and “-- Products”
in Part I of Item I of our Form 10-K for the year ended December 31,
      2006.





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





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





None
      of
      our semiconductor devices are currently manufactured by more than one supplier.
      We place our orders on a purchase order basis and do not have a long term
      purchase agreement with any of our existing suppliers. In the event that the
      supplier of a semiconductor device was unable or unwilling to continue to
      manufacture this product in the required volume, we would have to identify
      and
      qualify a substitute supplier. Introducing new products or transferring existing
      products to a new third party manufacturer or process may result in unforeseen
      device specification and operating problems. These problems may affect product
      shipments and may be costly to correct. Silicon fabrication capacity may also
      change, or the costs per silicon wafer may increase. Manufacturing-related
      problems may have a material adverse effect on our business.





**Customers
      Are Requiring That We Offer Our Products In Lead-Free
      Packages**





Governmental
      regulations in certain countries and customers' intention to produce products
      that are less harmful to the environment has resulted in a requirement from
      many
      of our customers to purchase integrated circuits that do not contain lead.
      We
      have responded by offering our products in lead-free versions. While the
      lead-free versions of our products are expected to be more friendly to the
      environment, the ultimate impact is uncertain. The transition to lead-free
      products may produce sudden changes in demand depending on the packaging method
      used, which may result in excess inventory of products packaged using
      traditional methods. This may have an adverse affect on our results of
      operations. In addition, the quality, cost and manufacturing yields of the
      lead-free products may be less favorable compared to the products packaged
      using
      more traditional materials which may result in higher costs to us.





**Lower
      Demand For Our Customers’ Products Will Result In Lower Demand For Our
      Products**





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





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




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




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





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





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





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





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





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





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




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





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





We
      believe that our growth prospects depend upon our ability to gain customer
      acceptance of our products and technology. Market acceptance of products depends
      upon numerous factors, including compatibility with other products, adoption
      of
      relevant interconnect standards, perceived advantages over competing products
      and the level of customer service available to support such products. There
      can
      be no assurance that growth in sales of new products will continue or that
      we
      will be successful in obtaining broad market acceptance of our products and
      technology.





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





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





We
      depend
      on distributors to sell a significant portion of our products. For the three
      months ended March 31, 2007 and 2006, sales through distributors accounted
      for
      approximately 69% and 71%, respectively, of our net revenues. Some of our
      distributors also market and sell competing products. Distributors may terminate
      their relationships with us at any time. Our future performance will depend
      in
      part on our ability to attract additional distributors that will be able to
      market and support our products effectively, especially in markets in which
      we
      have not previously distributed our products. We may lose one or more of our
      current distributors or may not be able to recruit additional or replacement
      distributors. The loss of one or more of our major distributors could have
      a
      material adverse effect on our business, as we may not be successful in
      servicing our customers directly or through manufacturers’
representatives.





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





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





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





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





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





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





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





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





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





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




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




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





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





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




As
      part
      of our business strategy, we expect to review acquisition prospects that would
      complement our existing product offerings, improve market coverage or enhance
      our technological capabilities. Future acquisitions could result in any or
      all
      of the following:




·
            potentially
                dilutive issuances of equity
                securities,


·
            large
                acquisition-related write-offs,


·
            the
                incurrence of debt and contingent liabilities or amortization expenses
                related to other intangible assets,


·
            difficulties
                in the assimilation of operations, personnel, technologies, products
                and
                the information systems of the acquired
                companies,


·
            diversion
                of management’s attention from other business
                concerns,


·
            risks
                of entering geographic and business markets in which we have no or
                limited
                prior experience, and


·
            potential
                loss of key employees of acquired
                organizations.




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





**Because
      We Sell Our Products To Customers Outside Of** **The
      United States And Because Our Products Are Incorporated With Products Of Others
      That Are Sold Outside Of The United States We Face Foreign Business, Political
      And Economic Risks**





Sales
      outside of The United States accounted for approximately 69% of our revenues
      for
      the three months ended March 31, 2007. In 2006, 2005, and 2004, sales outside
      of
      The United States accounted for approximately 75%, 72%, and 71% of our revenues,
      respectively. Sales outside of The United States may fluctuate in future periods
      and may continue to account for a large portion of our revenues. In addition,
      equipment manufacturers who incorporate our products into their products sell
      their products outside of The United States, thereby exposing us indirectly
      to
      foreign risks. Further, most of our semiconductor products are manufactured
      outside of The United States. Accordingly, we are subject to international
      risks, including:




·
            difficulties
                in managing distributors,


·
            difficulties
                in staffing and managing foreign subsidiary and branch
                operations,


·
            political
                and economic instability,


·
            foreign
                currency exchange fluctuations,


·
            difficulties
                in accounts receivable collections,


·
            potentially
                adverse tax consequences,


·
            timing
                and availability of export
                licenses,


·
            changes
                in regulatory requirements, tariffs and other
                barriers,


·
            difficulties
                in obtaining governmental approvals for telecommunications and other
                products, and


·
            the
                burden of complying with complex foreign laws and
                treaties.




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




**A
      Downturn In The Global Economy May Adversely Affect Our Revenues, Results Of
      Operations And Financial Condition**




Demand
      for semiconductor components is increasingly dependent upon the rate of growth
      in the global economy. If the rate of global economic growth slows, or
      contracts, customer demand for products could be adversely affected, which
      in
      turn could adversely affect revenues, results of operations and financial
      condition. Many factors could adversely affect regional or global economic
      growth. Some of the factors that could slow global economic growth include:
      rising interest rates in the United States, a slowdown in the rate of growth
      of
      the Chinese economy, a significant act of terrorism which disrupts global trade
      or consumer confidence, and geopolitical tensions including war and civil
      unrest. Reduced levels of economic activity, or disruptions of international
      transportation, could adversely affect sales on either a global basis or in
      specific geographic regions.




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





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





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





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




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










**ITEM
      6. EXHIBITS**




**Exhibit****Number**
              
              **Description**31.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  of Chief Financial Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.32.2
              
              Certification
                  of Chief Finanical Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.









**SIGNATURE**





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.





**PLX
      TECHNOLOGY, INC.**




Date: May 7,
      2007  By  /s/
      Arthur O. Whipple


Arthur
      O. Whipple


Chief
      Financial Officer


(*Principal
      Financial Officer)*











**EXHIBIT
      INDEX**





**Exhibit****Number**
              
              **Description**31.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  of Chief Financial Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.32.2
              
              Certification
                  of Chief Finanical Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.