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

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FORM 10-Q

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(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, 2002 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 000-30649

CENTILLIUM COMMUNICATIONS, INC.(Exact name of registrant as specified in its charter)



|Delaware                                                       | 94-3263530                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number)

47211 Lakeview BoulevardFremont, California     94538

(510) 771-3700







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 reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [  ],

On April 16, 2002, approximately 34,636,766 shares of the Registrant's Common
Stock, $.001 par value, were outstanding.









Centillium Communications, Inc.

                                TABLE OF CONTENTS



|PART I.   Financial Information                                                                                                   | Page No.
|--------------------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                                  |         
|Item 1.   Financial Statements                                                                                                    |         
|                                                                                                                                  |         
|Condensed Consolidated Balance Sheets as of
        
          March 31, 2002 (Unaudited) and December 31, 2001                   | 3       
|                                                                                                                                  |         
|Condensed Consolidated Statements of Operations
        
          for the three months ended March 31, 2002 and 2001 (Unaudited) | 4       
|                                                                                                                                  |         
|Condensed Consolidated Statements of Cash Flows
        
          for the three months ended March 31, 2002 and 2001 (Unaudited) | 5       
|                                                                                                                                  |         
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                  | 6       
|                                                                                                                                  |         
|Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations             | 10      
|                                                                                                                                  |         
|Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                                              | 19      
|                                                                                                                                  |         
|PART II.  Other Information                                                                                                       |         
|                                                                                                                                  |         
|Item 1.   Legal Proceedings                                                                                                       | 19      
|                                                                                                                                  |         
|Item 2: Changes in Securities and Use of Proceeds                                                                                 | 19      
|                                                                                                                                  |         
|Item 3: Defaults Upon Senior Securities                                                                                           | 20      
|                                                                                                                                  |         
|Item 4: Submission of Matters to a Vote of Security Holders                                                                       | 20      
|                                                                                                                                  |         
|Item 5: Other Information                                                                                                         | 20      
|                                                                                                                                  |         
|Item 6.   Exhibits and Reports on Form 8-K                                                                                        | 20      
|                                                                                                                                  |         
|Signatures                                                                                                                        | 20      

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PART I -- FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

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CENTILLIUM COMMUNICATIONS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

March 31,  December 31,
                                                            2002         2001
                                                        -----------  -----------
                                                        (unaudited)
                        ASSETS
Current assets:
  Cash and cash equivalents........................... $    94,063  $    93,724
  Short-term investments..............................      13,922       17,129
  Accounts receivable - net of allowance for doubtful
   accounts of $1,006 at March 31, 2002 and $1,026
   at December 31, 2001...............................       5,984        4,042
  Inventories.........................................       7,373        9,356
  Other current assets................................       1,986        2,147
                                                        -----------  -----------
    Total current assets..............................     123,328      126,398
Property and equipment, net...........................      11,530       11,483
Goodwill .............................................       5,835        5,190
Other acquisition intangibles, net....................         208          895
Other assets..........................................         337          242
                                                        -----------  -----------
    Total assets...................................... $   141,238  $   144,208
                                                        ===========  ===========

         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable.................................... $    10,927  $     7,854
  Accrued payroll & related expenses..................       3,893        3,272
  Accrued liabilities.................................      12,385       11,268
  Accrued taxes.......................................         102           77
  Long-term debt-current portion......................         196          264
                                                        -----------  -----------
    Total current liabilities.........................      27,503       22,735
Other liabilities.....................................         307          315
Commitments and contingencies

Stockholders' equity:
Common stock..........................................          35           35
Additional paid in capital............................     229,418      229,224
Accumulated other comprehensive income................          22           66
Deferred compensation.................................      (6,488)      (8,734)
Accumulated deficit...................................    (109,559)     (99,433)
                                                        -----------  -----------
    Total stockholders' equity........................     113,428      121,158
                                                        -----------  -----------
    Total liabilities and stockholders' equity........ $   141,238  $   144,208
                                                        ===========  ===========
See accompanying notes
CENTILLIUM COMMUNICATIONS, INC.

        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

         (Unaudited, in thousands except per share data)

Three Months Ended
                                              March 31,
                                         --------------------
                                            2002       2001
                                         --------- ----------
Net revenues........................... $  22,606  $  31,855
Cost of revenues.......................    12,066     16,171
                                         ---------  ---------
Gross profit...........................    10,540     15,684
                                         ---------  ---------
Operating expenses:
  Research and development.............    13,609     14,272
  Sales and marketing..................     4,898      4,274
  General and administrative...........     3,043      3,485
  Amortization of goodwill and other
   acquisition-related intangibles.....        42        821
  In-process research and development..        --      7,422
                                         ---------  ---------
    Total operating expenses...........    21,592     30,274
                                         ---------  ---------
Operating loss.........................   (11,052)   (14,590)
Interest income........................       523      1,183
Interest expense.......................       (13)       (21)
Gain on non-current investment.........       440         --
                                         ---------  ---------
Loss before provision for income taxes.   (10,102)   (13,428)
Provision for income taxes.............        24         29
                                         ---------  ---------
Net loss............................... $ (10,126) $ (13,457)
                                         =========  =========

Basic and diluted net loss per share... $   (0.30) $   (0.41)
                                         =========  =========
Weighted average common shares
   outstanding--basic and diluted......    34,294     32,775
                                         =========  =========
See accompanying notes
CENTILLIUM COMMUNICATIONS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (Unaudited, in thousands)
For the Three
                                                                 Months Ended March 31,
                                                               --------------------------
                                                                  2002          2001
                                                               ------------  ------------
Operating activities
Net loss..................................................... $    (10,126) $    (13,457)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Amortization of deferred compensation......................        1,811         5,521
  Depreciation and amortization expense......................        1,595         1,097
  Amortization of goodwill and other acquisition
   related intangibles.......................................           42           821
  Acquired in-process research and development...............          --          7,422
  Stock-based compensation...................................          307           --
  Amortization of warrants issued in conjunction
   with debt & other.........................................          --              1
  Changes in operating assets and liabilities:
    Accounts receivable......................................       (1,942)       (1,563)
    Inventories..............................................        1,983        (8,396)
    Other current assets.....................................          161           195
    Other assets.............................................          (95)          --
    Accounts payable.........................................        3,073         3,096
    Accrued payroll and related expenses.....................          621           201
    Deferred revenue.........................................          --            (28)
    Accrued liabilities......................................        1,117           985
    Other liabilities........................................           26            40
                                                               ------------  ------------
Net cash used in operating activities........................       (1,427)       (4,065)

Investing activities
  Purchases of short-term investments........................       (2,999)      (10,581)
  Sales and maturities of short-term investments.............        6,162        17,955
  Purchases of property and equipment........................       (1,642)       (1,117)
  Cash acquired in acquisition...............................          --            258
                                                               ------------  ------------
Net cash provided by investing activities....................        1,521         6,515

Financing activities
  Principal payments on long term debt obligations...........          (68)         (195)
  Proceeds from issuance of common stock, net of repurchases.          313           386
                                                               ------------  ------------
Net cash provided by financing activities....................          245           191
                                                               ------------  ------------
Net increase in cash and cash equivalents....................          339         2,641
Cash and cash equivalents at beginning of period.............       93,724        71,240
                                                               ------------  ------------
Cash and cash equivalents at end of period................... $     94,063  $     73,881
                                                               ============  ============
See accompanying notes
CENTILLIUM COMMUNICATIONS, INC. 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.  Nature of Business and Basis of Presentation
Nature of Operations
Centillium Communications, Inc. (Centillium or the
Company) was incorporated in California on February 21, 1997 for the purpose of
developing and marketing semiconductor devices for equipment manufacturers
serving the broadband communications markets.  The Company has focused initially
on developing products designed for the Digital Subscriber Line (DSL) and Voice
over Packet markets.
The Company's revenues currently are derived from the sale of
our DSL and Voice over Packet products, which include the CopperFlite CO,
CopperFlite CPE, Optimizer and Entropia families of products.
Centillium has incurred significant losses since inception
and, as of March 31, 2002, had an accumulated deficit of approximately $109.6
million  including a net loss for the three months ended March 31, 2002 of $10.1
million.
Unaudited Interim Financial
Statements
The accompanying unaudited condensed consolidated financial
statements 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.  Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.  Operating results for the three
month period ended March 31, 2002 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2002.
The balance sheet as of December 31, 2001 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 2001 included
in the Company's Annual Report on Form 10-K (File No. 000-30649), filed with the
Securities and Exchange Commission on March 27, 2002.
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 the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Customer Concentrations
Two customers accounted for 60% and 27% and 35% and 39% of
net revenues for the three months ended March 31, 2002 and 2001, respectively.
One additional customer accounted for 16% of net revenues for the three months
ended March 31, 2001.
Contingent Matters
The semiconductor and telecommunications industries are
characterized by substantial litigation regarding patent and other intellectual
property rights. From time to time, the Company receives various inquiries or
claims in connection with these rights and may become party to associated
claims.  In certain cases, management has accrued estimates of the amounts it
expects to pay upon resolution of such matters and such amounts are included in
accrued liabilities.  Should the Company not be able to secure the terms it
expects, these estimates may change and will be recognized in the period in
which they are identified.  Depending on the amount and timing of the
resolutions of these claims, our future cash flows could be materially adversely
affected in a particular period.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 141
(SFAS 141), "Business Combinations," which requires that the purchase
method of accounting be used for all business combinations initiated after
June 30, 2001 and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination
completed after June 30, 2001.  As of July 1, 2001, the Company adopted this
accounting standard.
In addition, as of January 1, 2002, the Company adopted SFAS 142,
"Goodwill and Other Intangible Assets," which addresses the financial
accounting and reporting standards for goodwill and other intangible assets
subsequent to their acquisition. This accounting standard requires that goodwill
no longer be amortized, and instead, be tested for impairment at least annually.
In addition, within six months of adopting the new accounting standard, a
transitional impairment test must be completed and any impairments identified
must be reported as a cumulative effect of a change in accounting principle.
For further discussion, see Note 3, "Goodwill and Other Intangible
Assets."
In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
144), which addresses financial accounting and reporting for impairment or
disposal of long-lived assets and was effective January 1, 2002.  FAS 144
supersedes FAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", and the accounting and reporting
provisions relating to the disposal of segments of a business under Accounting
Principles Board Opinion No. 30.  The adoption of SFAS 144 did not have a
significant impact on the Company's financial statements.
Reclassifications
Certain prior year balances have been reclassified to
conform to current year presentation.

2.  Inventories
The components of inventories are as follows (in
thousands):

March 31,  December 31,
                                       2002         2001
                                   -----------  -----------
  Work-in-process................ $     3,965  $     6,600
  Finished goods.................       3,408        2,756
                                   -----------  -----------
                                  $     7,373  $     9,356
                                   ===========  ===========
3.   Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standard No. 142, "Goodwill and Intangible
Assets" (SFAS 142), which was issued by the Financial Accounting Standards
Board in July 2001. Under this standard, the Company ceased amortizing goodwill
effective January 1, 2002.  In addition, the Company reclassified assembled
workforce, which is no longer defined as an acquired intangible under SFAS 141
to goodwill.  Accordingly, there was no amortization of assembled workforce
recognized during the three months ended March 31, 2002.
The following table presents a reconciliation of previously
reported net loss and net loss per share to the amounts adjusted to exclude
goodwill and acquired workforce amortization (in thousands, except per share
data):

Three Months Ended
                                                  March 31,
                                             --------------------
                                                2002       2001
                                             ---------  ---------
  Net loss:
   As reported............................. $ (10,126) $ (13,457)
   Goodwill amortization...................        --        502
   Workforce amortization..................        --        278
                                             ---------  ---------
   As adjusted............................. $ (10,126) $ (12,677)
                                             =========  =========
Basic and diluted net loss per share:
   As reported............................. $   (0.30) $   (0.41)
   Goodwill amortization...................        --       0.01
   Workforce amortization..................        --       0.01
                                             ---------  ---------
   As adjusted............................. $   (0.30) $   (0.39)
                                             =========  =========
Other intangible assets subject to amortization were as
follows (in thousands):

March 31,  December 31,
                                                    2002         2001
                                                -----------  -----------
  Other purchased intangibles.................         500          500
  Less accumulated amortization...............        (292)        (250)
                                                -----------  -----------
  Other purchased intangibles, net............ $       208  $       250
                                                ===========  ===========
Amortization
expense for other intangible assets was $42,000 for the three months ended March
31, 2002.  The estimated annual amortization expense for other intangible assets
is $167,000 for the year ended December 31, 2002 and $83,000 for the year ended
December 31, 2003.
In accordance with SFAS 142, the Company will complete an
impairment test of goodwill as of January 1, 2002 in the second quarter of
fiscal 2002.  The Company will test goodwill for impairment using the two-step
process prescribed in FAS 142.  The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any.
Any impairment charge resulting from these transitional impairment tests will be
reflected as the cumulative effect of a change in accounting principle.  We have
not yet determined what the effect of these tests will have on our financial
statements.
4.  Net Loss Per Share and Comprehensive Net Loss
The following table presents the computation of
basic and diluted net loss per share (in thousands, except per share
amounts):

Three Months Ended
                                              March 31,
                                         --------------------
                                            2002       2001
                                         ---------  ---------
  Net loss............................. $ (10,126) $ (13,457)
                                         =========  =========
  Basic and diluted:
  Weighted average shares of common
   stock outstanding...................    34,571     33,725
  Less weighted average shares
   subject to repurchase...............       277        950
                                         ---------  ---------
  Weighted average shares used in
   computing basic and diluted net
   loss per share......................    34,294     32,775
                                         =========  =========

  Basic and diluted net loss per share. $   (0.30) $   (0.41)
                                         =========  =========
The Company has excluded all outstanding warrants, stock options and
shares subject to repurchase by the Company from the calculation of diluted net loss per share
because these securities are antidilutive for all periods presented. As of March 31, 2002 and
2001, there were 6,138,501 and 7,905,108, respectively, of warrants, stock options and
shares subject to repurchase excluded from the calculation of diluted net loss per
share.
Comprehensive Net Loss
The
components of comprehensive net loss were as follows (in thousands):

Three Months Ended
                                              March 31,
                                         --------------------
                                            2002       2001
                                         ---------  ---------
Net loss............................... $ (10,126) $ (13,457)

Change in unrealized gain on
  available-for-sale investments.......        44         12
                                         ---------  ---------
   Total comprehensive net loss........ $ (10,082) $ (13,445)
                                         =========  =========
6.  Provision for Income Taxes
The provision for income taxes for the three months ended
March 31, 2002 relates to current taxes payable for the Company's subsidiaries
located in foreign jurisdictions.  The provision for income taxes for the three
months ended March 31, 2001 relates to current taxes payable for the Company's
subsidiaries located in foreign jurisdictions and federal alternative minimum
taxes based on projected U.S. taxable income for the year.  Income tax expense
differs from the expected benefit that was derived by applying the applicable
U.S. federal statutory rate to the loss from operations primarily due to losses
which are not currently benefited. Due to the Company's loss position, a full
valuation allowance has been established to offset the deferred tax assets,
primarily related to net operating loss carryforwards.
7.  Related Party Transactions
In the second quarter of 2000, the Company invested $990,000 in equity
securities of Broadxent, Inc., a majority owned subsidiary of Creative
Technology Ltd.  In the second quarter of 2001, in connection with an ongoing
evaluation of this non-current equity investment, the Company wrote down the
basis of this investment to zero as a result of impairment in the value of this
asset.  In the first quarter of 2002, the Company sold this non-current equity
investment for $440,000 and reported this amount as a gain for the three months
ended March 31, 2002.
The Company sold $887,000, $53,000 and $2.0 million of products to Broadxent,
Inc. for the three month periods ended March 31, 2002 and 2001 and the year ended December
31, 2001, respectively.  As of March 31, 2002 and December 31, 2001, the Company
had $332,000 and $665,000 in accounts receivable from Broadxent, Inc.  One of
the Company's directors is also a director of Creative Technology Ltd.



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and
analysis in conjunction with our consolidated financial statements and the
related notes thereto included in our Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 27, 2002. The information in this
report is not a complete description of our business or the risks associated
with an investment in our common stock. We urge you to carefully review and
consider the various disclosures made by us in this report and in our other
reports filed with the SEC.
Our discussion contains "forward-looking
statements" that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are
generally preceded by words that imply a future state such as
"expected" or "anticipated" or imply that a particular
future event or events will occur such as "will."  Investors are
cautioned that all forward-looking statements involve risks and uncertainties
and those actual results could be materially different from those discussed in
this report.
The section entitled "Risk Factors" and similar
discussions in our other SEC reports filed with the SEC discuss some of the
important risk factors that may affect our business, results of operations and
financial condition. Copies of our reports filed with the SEC are available from
us without charge and on the SEC's website at
www.sec.gov. You
should carefully consider those risks, in addition to the other information in
this report and in our other filings with the SEC, before deciding to invest in
our Company or to maintain or increase your investment.
Results of Operations for the Three Months Ended March 31, 2002 and
2001
Net Revenues.  Our net revenues were $22.6 million for the
three months ended March 31, 2002 compared to $31.9 million for the three months
ended March 31, 2001. The decrease in revenues primarily reflects a decrease in unit
volume of shipments and a decrease in average selling prices of our DSL
products. Our major customers for the three months ended March 31, 2002 were
Sumitomo Electric Industries and NEC who represented 60% and 27% of net
revenues, respectively. Revenues to international customers who were primarily
located in Japan, comprised 88% of our net revenues for the three months ended
March 31, 2002.
Cost of Revenues and Gross Profit.  Cost of revenues was $12.1
million for the three months ended March 31, 2002 resulting in a gross profit of
$10.5 million or 47% of net revenues.  This compares to a gross profit of $15.7
million or 49% of net revenues for the three months ended March 31, 2001.  The
decrease in gross profit was primarily due to a decrease in unit volume of
shipments and a decrease in average selling prices of our DSL products.  The
decrease in gross profit was partially offset by $504,000 in revenues from
cancellation fees with no associated costs.
Research and Development Expenses.  Research and
development expenditures decreased 5% to $13.6 million for the three months
ended March 31, 2002 as compared to $14.3 million for the three months ended
March 31, 2001.  This decrease was primarily due to a $1.8 million decrease in
the amortization of deferred compensation, offset by additions in engineering
personnel and related salary costs, increased usage of materials necessary to
build prototypes and increases in depreciation resulting from the additional
purchases of laboratory equipment and software development tools.
Sales and Marketing Expenses.   Sales and
marketing expenditures increased 15% to $4.9 million for the three months ended
March 31, 2002 as compared to $4.3 million for the three months ended March 31,
2001. The increase was due primarily to the addition of personnel and an
increase in marketing activity such as customer visits, offset by a $600,000
decrease in the amortization of deferred compensation.
General and Administrative Expenses.  General and
administrative expenditures decreased 13% to $3.0 million for the three months
ended March 31, 2002 from $3.5 million for the three months ended March 31,
2001.  This decrease was primarily due to a $1.1 million decrease in the
amortization of deferred compensation and was offset by increases in payroll and
related costs, professional services, and business insurance expenditures.
Amortization of Deferred Compensation.
Amortization of deferred compensation, which is allocated among the above
expense categories, decreased 67% to $1.8 million for the three months ended
March 31, 2002 from $5.5 million for the three months ended March 31, 2001.
This decrease was primarily attributable to the use of the graded vesting
method, which results in accelerated amortization of deferred compensation
expense in the earlier years of the awards' expected life.
Amortization of Goodwill and Other Acquisition Intangibles.
Amortization of goodwill and other acquisition related intangibles decreased to
$42,000 for the three months ended March 31, 2002 from $821,000 for the three
months ended March 31, 2001.  This was due to the implementation of SFAS 142,
which required us to discontinue the amortization of goodwill effective January
1, 2002.  In addition, in accordance with SFAS 142 we reclassified assembled
workforce to goodwill and consequently eliminated the amortization of assembled
workforce for the three months ended March 31, 2002.
In Process Research and Development Expense.  For the three months
ended March 31, 2001, we recorded $7.4 million in charges for in process
research and development related to the acquisition vEngines Inc. There were no
comparable amounts for the three months ended March 31, 2002.
Gain on Non-Current Investment.  In June 2001, in
connection with the ongoing evaluation and review of our non-current equity
investment, we recorded a non-cash charge of $990,000 to write down the basis of
our investment to zero as a result of this impairment.  In January 2002, we sold
this non-current equity investment for $440,000 and have included this as a gain
in the first quarter ended March 31, 2002.
Interest Income.   Interest income decreased 56%
to $523,000 in the three months ended March 31, 2002 as compared to $1.2 million
for the three months ended March 31, 2001. This decrease was primarily due to
lower interest rates obtained on our cash, cash equivalents and short-term
investment portfolio.
Provision for Income Taxes.  Income tax expense
was $24,000 for the three months ended March 31, 2002 compared to $29,000 for
the three months ended March 31, 2001.  The provision for income taxes for the
three months ended March 31, 2002 relates to current taxes payable for the
Company's subsidiaries located in foreign jurisdictions.  The provision for
income taxes for the three months ended March 31, 2001 relates to current taxes
payable for the Company's subsidiaries located in foreign jurisdictions and
federal alternative minimum taxes based on projected U.S. taxable income for the
year. Due to the Company's loss position, a full valuation allowance has been
established to offset the deferred tax assets, primarily related to net
operating loss carryforwards.
Liquidity and Capital Resources
Since our inception, we have financed our operations through
a combination of sales of equity securities and cash generated by operations.
At March 31, 2002, we had $108.0 million in cash, cash equivalents and short-term
investments as compared to $110.9 million at December 31, 2001.
Operating activities used $1.4 million in cash primarily from
the net loss of $10.1 million and an increase in accounts receivable of $1.9
million. Net cash used in operating activities was offset by the non-cash impact of $1.8 million
in amortization of deferred compensation, $1.6 million of depreciation and amortization
expense, increases in accounts payable and accrued liabilities
of $3.0 million and $1.1 million, respectively, and a decrease in
inventory of $2.0 million.
Net cash generated from investing activities was $1.5 million
and was primarily related to net sales of short-term investments, offset by
purchases of property and equipment of $1.6 million.
Net cash generated from financing activities was $245,000 and
was primarily related to the net proceeds from employee stock option
exercises.
Our principal source of liquidity as of March 31, 2002
consisted of $108.0 million of cash and cash equivalents, and short-term
investments.  We anticipate that our existing capital resources will be
sufficient to maintain our current level of operations and planned operations
and capital expenditures for at least the next 12 months.
We expect to devote capital resources to continue our
research and development efforts, to support our sales, marketing, and product
development programs, to establish additional facilities worldwide and to fund
other general corporate activities.  From time to time, we receive various
inquiries or claims in connection with intellectual property and other rights
and may become party to associated claims. In certain cases, management has
accrued estimates of the amounts it expects to pay upon resolution of such
matters.  Depending on the amount and timing of the resolutions of these claims,
our future cash flows could be materially adversely affected in a particular
period.
Risk Factors
You should carefully consider the risks described below
and all of the information contained in this Form 10-Q and on our Form 10-K,
filed with the Securities and Exchange Commission on March 27, 2002.  If any of
the following risks actually occurs, our business, financial condition and
results of operations could be harmed and the trading price of our common stock
could decline and you may lose all or part of your investment in our common
stock.
WE HAVE A HISTORY OF LOSSES AND WE MAY NOT ACHIEVE OR
MAINTAIN PROFITABILITY.
We have not reported an operating profit for any year
since our incorporation and have experienced net losses of approximately $10.1
million for the three months ended March 31, 2002 and $19.7 million and $46.0
million for the years ended December 31, 2001 and 2000, respectively.
A GENERAL ECONOMIC SLOWDOWN, AND A SLOWDOWN IN SPENDING
IN THE TELECOMMUNICATIONS INDUSTRY SPECIFICALLY, MAY NEGATIVELY AFFECT OUR
BUSINESS AND OPERATING RESULTS.
There have been announcements throughout the
worldwide telecommunications industry of current and planned reductions in
component inventory levels and equipment production volumes, and of delays in
the build-out of new infrastructure.  Any of these trends, if continued, could
result in lower than expected demand for our products, which could have a
material adverse effect on our revenues and results of operations generally, and
could cause the market price of our common stock to decline.
SEVERAL COMPANIES IN THE DSL MARKET HAVE RECENTLY
EXPERIENCED SIGNIFICANT BUSINESS DIFFICULTIES AND IF THERE IS CONTINUED SOFTNESS
IN DEMAND FOR DSL EQUIPMENT, OUR BUSINESS AND OPERATING RESULTS MAY BE ADVERSELY
AFFECTED.
Since mid-2000, a number of competitive local
exchange carriers (CLECs) in the business of installing and providing DSL
service have had difficulty in obtaining sufficient capital to build their
infrastructure and to introduce their services. These companies have reduced
their spending on DSL equipment, which has resulted in lower than expected sales
volume for DSL equipment manufacturers including some of our major customers.
In May 2001, Nortel Networks, historically one of our major customers, announced
plans to exit the DSL equipment business.  A continued or further slowdown in
sales of DSL equipment will likely result in a decline, cancellation or delay in
sales orders for our products, which are components of DSL equipment.  Any such
decline, cancellation or delay may negatively affect our business and operating
results.
OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE.
The market price of our common stock has been
extremely volatile and will likely continue to fluctuate significantly in
response to the following factors, some of which are beyond our control:

variations in our quarterly operating results;
changes in financial estimates of our revenues and
operating results by securities analysts;
changes in market valuations of integrated circuit
companies;























DUE TO OUR RECENT IMPLEMENTATION OF AN OPTION EXCHANGE
PROGRAM, OUR MANAGEMENT AND EMPLOYEES MAY HAVE A NEAR TERM INCENTIVE TO KEEP OUR
STOCK PRICE LOW.

In November 2001, we filed a statement on Schedule TO with the
Securities and Exchange Commission relating to an offer to our employees,
including our Chief Executive Officer, our President and our other executive
officers, to exchange outstanding "underwater" stock options priced at
$10 or higher for new options to be issued on a future date, currently expected
to be on or after June 4, 2002.  The exercise price for the new options is
expected to be equal to the market price of our common stock on the date of the
grant.  Since the relative value of the stock option increases as the exercise
price decreases, management and employees participating in the option exchange
would benefit from a lower market price for our common stock on June 4, 2002, or
such later date the new options are granted.

BECAUSE OUR PRINCIPAL STOCKHOLDERS AND MANAGEMENT MAY
HAVE THE ABILITY TO CONTROL STOCKHOLDER VOTES, THE PREMIUM OVER MARKET PRICE
THAT AN ACQUIRER MIGHT OTHERWISE PAY MAY BE REDUCED AND ANY MERGER OR TAKEOVER
MAY BE DELAYED.

Our officers and directors and their affiliates owned
or controlled approximately 14.4% of our common stock as of April 16, 2002.
Accordingly, our officers and directors and their affiliates, as a group, may
have the ability to control the election of a majority of the members of our
board of directors and the outcome of corporate actions requiring stockholder
approval.  This concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of us, or may impede a merger,
consolidation, takeover or other business combination involving us.  This
concentration of ownership could also adversely affect our stock's market price
or lessen any premium over market price that an acquirer might otherwise pay.

AN ECONOMIC SLOWDOWN IN JAPAN MAY ADVERSELY AFFECT OUR
BUSINESS AND OPERATING RESULTS.

Sales to customers located in Japan accounted for 88%
of net revenues for the three months ended March 31, 2002 and 87% of net
revenues for the year ended December 31, 2001.  Any slowdown in the demand for
our customers' equipment in Japan may cause our revenues to decline. Our sales
have been historically denominated in U.S. dollars and major fluctuations in
currency exchange rates could materially affect our Japanese customers' demand,
thereby forcing them to reduce their orders, which could adversely affect our
operating results.

COMPETING DSL TECHNOLOGIES MAY BE DEPLOYED IN JAPAN,
WHICH MAY ADVERSELY IMPACT THE DEMAND FOR OUR DSL PRODUCTS, MARKET SHARE AND
OPERATING RESULTS.

We have worked in partnership with local
telecommunications companies to develop the Annex C standard for the DSL market
in Japan and have been able to achieve the majority market share of DSL
equipment purchases, based on our products, in Japan.  In July 2001, a certain
service provider announced plans to deploy lower priced competing DSL
technologies in the Japanese market.  If these competing technologies are
successful, our market share in the DSL market in Japan may decline and our business and
operating results may be adversely affected.

WE DERIVE A SUBSTANTIAL AMOUNT OF OUR REVENUES FROM
INTERNATIONAL SOURCES, AND DIFFICULTIES ASSOCIATED WITH INTERNATIONAL OPERATIONS
COULD HARM OUR BUSINESS.

A substantial portion of our revenues has been
derived from customers located outside of the United States. For the three
months ended March 31, 2002 and for the year ended December 31, 2001, 88% and
87%, respectively, of our net revenues were to customers located in Asia.  We
may be unable to successfully overcome the difficulties associated with
international operations. These difficulties include:

- staffing and managing foreign operations;
- changes in regulatory requirements;
- licenses, tariffs and other trade barriers;
- political and economic instability;
- obtaining governmental approvals for products; and
- complying with a wide variety of complex foreign laws and
treaties.

WE DEPEND ON A FEW CUSTOMERS AND IF WE LOSE ANY OF THEM
OUR SALES AND OPERATIONS WILL SUFFER.

We sell our DSL products primarily to network equipment
manufacturers. Our top two customers for the three months ended March 31, 2002
were Sumitomo Electric Industries and NEC, accounting for 60% and 27% of our net
revenues.  For the year ended December 31, 2001, Sumitomo Electric Industries
and NEC accounted for 48% and 38% of our net revenues, respectively.  We do not
have formal long-term agreements with these customers, but rather sell our
products to them on an order-by-order basis.  We expect to be dependent upon a
relatively small number of large customers in future periods, although the
specific customers may vary from period to period.  If we are not successful in
maintaining relationships with key customers and winning new customers, our
business and results of operations will suffer.

OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL
TO OUR BUSINESS, AND THESE OFFICERS AND PERSONNEL MAY NOT REMAIN WITH US IN THE
FUTURE.

We depend upon the continuing contributions of our key
management, sales, customer support and product development personnel. The loss
of such personnel could seriously harm us. In addition, we have not obtained
key-man life insurance on any of our executive officers or key employees.

COMPETITION FOR QUALIFIED PERSONNEL IN THE
SEMICONDUCTOR AND TELECOMMUNICATIONS INDUSTRIES IS INTENSE, AND IF WE ARE NOT
SUCCESSFUL IN ATTRACTING AND RETAINING THESE PERSONNEL, WE WILL NOT BE ABLE TO
EXECUTE OUR BUSINESS PLAN.

Competition for qualified personnel in the semiconductor and
telecommunications industries is intense, and we may not be successful in
attracting and retaining personnel.  There may be only a limited number of
people with the requisite skills to serve in these positions, and it may become
increasingly difficult to hire these people. Also, competitors and others have
in the past, and may in the future, attempt to recruit our employees.

Furthermore, we rely, in part, on equity incentives to
attract and retain qualified personnel.  The market price of our common stock
has fluctuated substantially since our initial public offering in May 2000.  We
have granted, and may grant, additional equity and/or cash compensation to our
employees as incentive to remain with our Company. In addition, any perception
by potential employees that our equity incentives are less attractive could harm
our ability to attract qualified employees.

WE DEPEND ON SOLE SOURCE SUPPLIERS FOR SEVERAL KEY
COMPONENTS OF OUR PRODUCTS.

We obtain certain parts, components and packaging used in the
delivery of our products from sole sources of supply.  For example, we obtain
certain semiconductor wafers from Mitsubishi Electric and Taiwan Semiconductor
Manufacturing Co., Ltd.  If we fail to obtain components in sufficient
quantities when required, and are unable to meet customer demand, our business
could be harmed, as our customers would consider purchasing products from our
competitors.  We also rely on United Microelectronics Corporation to manufacture
our analog silicon wafers. Developing and maintaining these strategic
relationships with our vendors is critical for us to be successful. Any of our
sole source suppliers may:

- enter into exclusive arrangements with our competitors;
- stop selling their products or components to us at
commercially reasonable prices;
- refuse to sell their products or components to us at any
price; or
- be subject to production disruptions such as earthquakes.

SALES OF OUR PRODUCTS DEPEND ON THE WIDESPREAD ADOPTION
OF BROADBAND ACCESS SERVICES, ESPECIALLY DSL. IF THE DEMAND FOR BROADBAND ACCESS
SERVICE DOES NOT INCREASE AS EXPECTED, WE MAY NOT BE ABLE TO GENERATE
SUBSTANTIAL SALES.

Sales of our products depend on the increased use and
widespread adoption of broadband access services, and DSL services in
particular, and the ability of telecommunications service providers to market
and sell broadband access services.  Our business would be harmed, and our
results of operations and financial condition would be adversely affected, if
the use of broadband access services does not increase as anticipated.  Certain
critical factors will likely continue to affect the development of the broadband
access service market. These factors include:

- inconsistent quality and reliability of service;
- lack of availability of cost-effective, high-speed
service;
- lack of interoperability among multiple vendors' network
equipment;
- congestion in service providers' networks;
- inadequate security; and
- slow deployment of new broadband services over DSL
lines.

RAPID CHANGES IN THE MARKET FOR DSL CHIP SETS MAY
RENDER OUR CHIP SETS OBSOLETE OR UNMARKETABLE.

The market for chip sets for DSL products is
characterized by:

- intense competition;
- rapid technological change;
- frequent new product introductions by our competitors;
- changes in customer demands; and
- evolving industry standards.

Any of these factors could make our products obsolete or
unmarketable.  To compete, we must innovate and introduce new products.  If we
fail to successfully introduce new products on a timely and cost-effective basis
that meet customer requirements and are compatible with evolving industry
standards, then our business, financial condition and results of operations will
be seriously harmed.

BECAUSE OTHER BROADBAND TECHNOLOGIES MAY COMPETE
EFFECTIVELY WITH DSL SERVICES, OUR PRODUCTS MAY NOT CAPTURE MARKET SHARE.

DSL services are competing with a variety of
different broadband data transmission technologies, including cable modems,
satellite and other wireless technologies.  If any technology that is competing
with DSL technology is more reliable, faster and less expensive or has other
advantages over DSL technology, then the demand for our DSL products may
decrease.

OUR MARKETS ARE HIGHLY COMPETITIVE AND MANY OF OUR
COMPETITORS ARE ESTABLISHED AND HAVE GREATER RESOURCES THAN WE HAVE.

The market for communications semiconductor and software
solutions is intensely competitive. Given our stage of development, there is a
substantial risk that we will not have the financial resources, technical
expertise or marketing and support capabilities to compete successfully.  In
addition, a number of other semiconductor companies have announced their intent
to enter the market segments adjacent to or addressed by our products.  These
competitors have longer operating histories, greater name recognition, larger
installed customer bases and significantly greater financial, technical and
marketing resources than we have.  They may be able to introduce new
technologies, respond more quickly to changing customer requirements or devote
greater resources to the development, promotion and sale of their products than
we can.

OUR CUSTOMERS MAY DEMAND PREFERENTIAL TERMS OR DELAY
OUR SALES CYCLE, WHICH WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our customers are in most cases larger than us and
are able to exert a high degree of influence over us.  These customers may have
sufficient bargaining power to demand low prices and other terms and conditions
that may materially adversely affect our business, financial condition and
results of operations.  In addition, prior to selling our products to such
customers, we must typically undergo lengthy product approval processes, often
taking up to one year.  Accordingly, we are continually submitting successive
versions of our products as well as new products to our customers for approval.
The length of the approval process can vary and is affected by a number of
factors, including customer priorities, customer budgets and regulatory issues
affecting telecommunication service providers.  Delays in the product approval
process could materially adversely affect our business, financial condition and
results of operations.  While we have been successful in the past in obtaining
product approvals from our customers, such approvals and the ensuing sales of
such products may not continue to occur.  Delays can also be caused by late
deliveries by other vendors, changes in implementation priorities and slower
than anticipated growth in demand for the services that our products support.  A
delay in, or cancellation of, the sale of our products could adversely affect
our results from operations or cause them to significantly vary from quarter to
quarter.

FUTURE CONSOLIDATION IN THE TELECOMMUNICATIONS
EQUIPMENT INDUSTRY MAY INCREASE COMPETITION THAT COULD HARM OUR BUSINESS.

The markets in which we compete are characterized by
increasing consolidation both within the telecommunications equipment sector and
by companies combining or acquiring data communications assets and assets for
delivering voice-related services.  We cannot predict with certainty how
industry consolidation will affect our competitors.  We may not be able to
compete successfully in an increasingly consolidated industry.  Increased
competition and consolidation in our industry may require that we reduce the
prices of our products or result in a loss of market share, which could
materially adversely affect our business, financial condition and results of
operations.  Additionally, because we are now, and may in the future be,
dependent on certain strategic relationships with third parties in our industry,
any additional consolidation involving these parties could reduce the demand for
our products and otherwise harm our business prospects.

WE MAY MAKE FUTURE ACQUISITIONS AND ACQUISITIONS
INVOLVE NUMEROUS RISKS.

Our business is highly competitive and, as such, our growth
is dependent upon market growth, our ability to enhance our existing products
and our ability to introduce new products on a timely basis.  One of the ways we
have addressed and may continue to address the need to develop new products is
through acquisitions of other companies. Acquisitions involve numerous risks,
including the following:

- difficulties in integration of the operations,
technologies and products of the acquired companies;
- the risk of diverting management's attention from normal
daily operations of the business;
- potential difficulties in completing projects associated
with purchased in-process research and development;
- risks of entering markets in which we have no or limited
direct prior experience and where competitors in such markets have stronger
market positions; and
- the potential loss of key employees of the acquired
company.

Mergers and acquisitions of high-technology companies are
inherently risky, and no assurance can be given that our previous or future
acquisitions will be successful and will not materially adversely affect our
business, operating results or financial condition.

We must also maintain our ability to manage such growth
effectively.  Failure to manage growth effectively and successfully integrate
acquisitions could harm our business and operating results.

BECAUSE OUR PRODUCTS ARE COMPONENTS OF OTHER EQUIPMENT,
IF BROADBAND EQUIPMENT MANUFACTURERS DO NOT INCORPORATE OUR PRODUCTS IN THEIR
EQUIPMENT, WE MAY NOT BE ABLE TO GENERATE SALES OF OUR PRODUCTS IN VOLUME
QUANTITIES.

Our products are not sold directly to the end-user; they are
components of other products. As a result, we rely upon equipment manufacturers
to design our products into their equipment.  We further rely on the
manufacturing and deployment of the equipment to be successful.  If equipment
that incorporates our products is not accepted in the marketplace, we may not
achieve sales of our products in volume quantities, which would have a negative
impact on our results of operations.

BECAUSE MANUFACTURERS OF COMMUNICATIONS EQUIPMENT MAY
BE RELUCTANT TO CHANGE THEIR SOURCES OF COMPONENTS, IF WE DO NOT ACHIEVE DESIGN
WINS WITH SUCH MANUFACTURERS, WE MAY BE UNABLE TO SECURE SALES FROM THESE
CUSTOMERS IN THE FUTURE.

Once a manufacturer of communications equipment has designed
a supplier's semiconductor into its products, the manufacturer may be reluctant
to change its source of semiconductors due to the significant costs associated
with qualifying a new supplier.  Accordingly, our failure to achieve design wins
with equipment manufacturers, who have chosen a competitor's semiconductor could
create barriers to future sales opportunities with these manufacturers.

IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY
WILL BE HARMED, AND THE SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL
DECREASE.

Our products are complex and have contained errors, defects
and bugs when introduced.  If we deliver products with errors, defects or bugs,
our credibility and the market acceptance and sales of our products could be
harmed.  Further, if our products contain errors, defects and bugs, then we may
be required to expend significant capital and resources to alleviate such
problems.  Defects could also lead to potential liability as a result of product
liability lawsuits against us or against our customers.  We have agreed to
indemnify our customers in some circumstances against liability from defects in
our products.  A successful product liability claim could seriously harm our
business, financial condition and results of operations.

BECAUSE THE SALES CYCLE FOR OUR PRODUCTS TYPICALLY
LASTS UP TO ONE YEAR, AND MAY BE SUBJECT TO DELAYS, IT IS DIFFICULT TO FORECAST
SALES FOR ANY GIVEN PERIOD.

If we fail to realize forecasted sales for a particular
period, our stock price could decline significantly.  The sales cycle of our
products is lengthy and typically involves a detailed initial technical
evaluation of our products by our prospective customers, followed by the design,
construction and testing of prototypes incorporating our products.  Only after
these steps are complete will we receive a purchase order from a customer for
volume shipments.  This process generally takes from 9 to 12 months, and may
last longer.  Given this lengthy sales cycle, it is difficult to accurately
predict when sales to a particular customer will occur.  In addition, we may
experience unexpected delays in orders from customers, which may prevent us from
realizing forecasted sales for a particular period.  Our products are typically
sold to equipment manufacturers, who incorporate our products in the products
that they in turn sell to consumers or to network service providers.  As a
result, any delay by our customers, or by our customers' customers, in the
manufacture or distribution of their products will result in a delay in
obtaining orders for our products.

OUR FUTURE SUCCESS WILL DEPEND IN PART ON OUR ABILITY
TO PROTECT OUR PROPRIETARY RIGHTS AND THE TECHNOLOGIES USED IN OUR PRINCIPAL
PRODUCTS, AND IF WE DO NOT ENFORCE AND PROTECT OUR INTELLECTUAL PROPERTY, OUR
BUSINESS WILL BE HARMED.

We rely on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality agreements and other contractual provisions
to protect our proprietary rights.  However, these measures afford only limited
protection.  Our failure to adequately protect our proprietary rights may
adversely affect us.  Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use trade secrets or other information that we regard as proprietary.

THIRD-PARTY CLAIMS REGARDING INTELLECTUAL PROPERTY
MATTERS COULD CAUSE US TO STOP SELLING OUR PRODUCTS, PAY MONETARY DAMAGES OR
OBTAIN LICENSES ON ADVERSE TERMS.

There is a significant risk that third parties,
including current and potential competitors, will claim that our products, or
our customers' products, infringe on their intellectual property rights.  The
owners of these intellectual property rights may bring infringement claims
against us or our customers.  Any such litigation, whether or not determined in
our favor or settled by us, would be costly and divert the attention of our
management and technical personnel. Inquiries with respect to the coverage of
our intellectual property could develop into litigation.  In the event of an
adverse ruling for an intellectual property infringement claim, we could be
required to obtain a license or pay substantial damages or have the sale of our
products stopped by an injunction.  Such a license may not be available on
reasonable terms, or at all.  In addition, if a customer of our products cannot
acquire a required license on commercially reasonable terms, that customer may
choose not to use our products.  We have obligations to indemnify our customers
under some circumstances for infringement of third-party intellectual property
rights.  If any intellectual property claims from third parties against one of
our customers whom we have indemnified is held to be valid, the costs to us
could be substantial and our business could be harmed.

We have received correspondence from certain parties,
including Texas Instruments, Alcatel and Ricoh, requesting us to discuss the
potential need for non-exclusive licenses permitting us to utilize technology
covered by various patents held by these parties.  We could be subject to claims
similar to the Texas Instruments, Alcatel and Ricoh claims in the future.
Depending on the amount and timing of any unfavorable resolutions of these
claims, our future results of operations or cash flows could be materially
adversely affected in a particular period.  There can be no guaranty that the
aggregate effect of any such claims will not have a material adverse effect on
our business, financial condition or results of operations.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH MIGHT NOT
BE AVAILABLE OR WHICH, IF AVAILABLE, COULD BE ON TERMS ADVERSE TO OUR COMMON
STOCKHOLDERS.

We expect that our current cash and cash equivalents
and short-term investment balances will be adequate to meet our working capital
and capital expenditure needs for at least twelve months.  After that, we may
need to raise additional funds, and we cannot be certain that we will be able to
obtain additional financing on favorable terms, if at all.  We may also require
additional capital for the acquisition of businesses, products and technologies
that are complementary to ours.  Further, if we issue equity securities, the
ownership percentage of our stockholders would be reduced, and the new equity
securities may have rights, preferences or privileges senior to those existing
holders of our common stock.  If we cannot raise needed funds on acceptable
terms, we may not be able to develop or enhance our products, take advantage of
future opportunities or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business, operating results and
financial condition.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK



The primary objective of our cash and short-term investment
activities is to preserve principal while concurrently maximizing the income we
receive from our investments without significantly increasing risk. Some of the
securities that we may invest in may be subject to market risk. This means that
a change in prevailing interest rates may cause the principal amount of the
investment to fluctuate. For example, if we hold a security that was issued with
a fixed interest rate at the then-prevailing rate and the prevailing interest
rate later rises, the current value of the principal amount of our investment
will decline. To minimize this risk in the future, we intend to maintain our
portfolio of cash equivalents and short-term investments in a variety of
securities, including commercial paper, money market funds, government and non-government
debt securities and certificates of deposit. In general, money market
funds are not subject to market risk because the interest paid on such funds
fluctuates with the prevailing interest rate. As of March 31, 2002, all of our
investments were in money market funds, high quality commercial paper, auction
rate preferred stocks and government debt securities. A hypothetical 100 basis
point increase in interest rates would result in an approximate $57,000 decrease
in the fair value of our available-for-sale securities as of March 31, 2002.



PART II.  OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS



None





ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



None





ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None





ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS



None





ITEM 5. OTHER INFORMATION



None





ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None

(b) Reports on Form 8-K

None

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SIGNATURES



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



| |                                
| | -------------------------------
| | CENTILLIUM COMMUNICATIONS, INC.



| |             
| | ------------
| | (Registrant)

Dated: May 1, 2002

| | By:                                                                                     | 
| | --------------------------------------------------------------------------------------- | 
| | /s/ Darrel Slack                                                                       
| | Darrel Slack                                                                           
| | Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

---