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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



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

For the fiscal year ended June 28, 2009

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 0-02287





SYMMETRICOM, INC.

(Exact name of
registrant as specified in its charter)



|                                                               |  |  |  |                                     
|-------------------------------------------------------------- |  |  |  | ------------------------------------
|Delaware                                                       |  |  |  | No. 95-1906306                      
|(State or Other Jurisdiction of Incorporation or Organization) |  |  |  | (I.R.S. Employer Identification No.)
|                                                               |  | 
|2300 Orchard Parkway, San Jose, California                     |  |  |  | 95131-1017                          
|(Address of Principal Executive Offices)                       |  |  |  | (Zip Code)                          

Registrants telephone number, including area code: (408) 433-0910



|                                                                                                              |  |                                          
|------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Securities registered pursuant to Section 12(b)                                                               |  | Name of each exchange on which registered
|Common Stock, $0.0001 Par Value (including associated Series A Participating Preferred Stock Purchase Rights) |  | The NASDAQ Stock Market LLC              

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.    Yes   ̈    No  x

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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§29.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.     ̈

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):



|                        |  |   |  |                   |  |   |  |                           |  |   |  |                       |  |  
|----------------------- |  | - |  | ----------------- |  | - |  | ------------------------- |  | - |  | --------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer |  | x |  | Smaller reporting company |  |  ̈ |  | 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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, computed by reference to the closing price
at which the Common Stock was sold on December 28, 2008, as reported on The NASDAQ Stock Market LLC was approximately $162,279,743. This calculation does not reflect a determination that such persons are affiliates of the Registrant for any other
purpose.

As of August 21, 2009, there were approximately 43,712,670 shares of Registrants Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrants 2009 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.









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SYMMETRICOM, INC.

FORM 10-K

For the Fiscal Year Ended June 28, 2009

INDEX



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I  
|Item 1.  |  | Business                                                                                                     |  | 3   
|Item 1A. |  | Risk Factors                                                                                                 |  | 14  
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  | 25  
|Item 2.  |  | Properties                                                                                                   |  | 25  
|Item 3.  |  | Legal Proceedings                                                                                            |  | 25  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 25  
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities |  | 26  
|Item 6.  |  | Selected Financial Data                                                                                      |  | 28  
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 29  
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 50  
|Item 8.  |  | Consolidated Financial Statements and Supplementary Data                                                     |  | 51  
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 89  
|Item 9A. |  | Controls and Procedures                                                                                      |  | 89  
|Item 9B. |  | Other Information                                                                                            |  | 89  
|        
|PART III
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  | 91  
|Item 11. |  | Executive Compensation                                                                                       |  | 91  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 91  
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 91  
|Item 14. |  | Principal Accountant Fees and Services                                                                       |  | 91  
|        
|PART IV 
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |  | 92  
|         |  | Signatures                                                                                                   |  | 96  



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PART I

FORWARD-LOOKING INFORMATION

When used in this discussion, the words expect,
anticipate, estimate, believe, plan, will, may, intend, can, project and similar expressions are intended to identify forward-looking
statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, risks relating to general economic conditions in the markets we address and the telecommunications market in general, risks related to the development of our new products and
services, the effects of increasing competition and competitive pricing pressure, uncertainties associated with changing intellectual property laws, developments in and expenses related to litigation, inability to obtain sufficient amounts of key
components, the rescheduling or cancellations of key customer orders, the loss of a key customer, the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations
in the rate of exchange of foreign currency, changes in our effective tax rate, potential short-term investment losses and other risks due to credit market dislocation, changes in accounting for convertible debt, market acceptance of our new
products and services, technological advancements, undetected errors or defects in our products, the risks associated with our international sales, geopolitical risks and risk of terrorist activities, the risks associated with attempting to
integrate other companies and businesses we acquire, and the risks set forth below in Item 1A, Risk Factors.

These
forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our
expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

In the
sections of this report entitled Business and Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors That May Affect Results, all references to Symmetricom,
we, us, and our mean Symmetricom, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company.

TimeSource, SMARTCLOCK, BesTime, GoLong, GoWide, TimeHub, TimePictra, TimeCesium, TimeProvider, TimeCreator, TimeScan, V-Factor, NetAdvisor,
NetWarrior and QoSmetrics are our trademarks. We also refer to trademarks of other corporations and organizations in this document.



|Item 1. | Business
|------- | --------

Overview

Symmetricom is a leading supplier of timing and synchronization hardware, software, and services. Our technology plays a critical role in network
reliability and quality of service for wireline, wireless and cable networks. We also provide end-to-end quality monitoring solutions for triple-play voice, data, and digital video. We sell our solutions to telecom and cable service providers,
government agencies, enterprises, and research facilities. Symmetricom products were shipped to more than 90 countries in fiscal year 2009. Our products include atomic frequency references, such as rubidium and cesium oscillators; hydrogen masers;
GPS time and frequency receivers, as well as time and frequency distribution systems; network management software; video quality monitoring solutions and professional services.

We manufacture precision time products that allow our customers to keep accurate time to within 40 billionths of a second over a 24-hour period. Our
clocks tell us the time of day and allow us to measure the time interval between when an event starts and when it stops. The difference between conventional time measuring devices and our precise time products lies in the accuracy of the
measurements. To place the accuracy



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or resolution of our clocks in perspective, if a clock accumulates a 40 billionth of a second time error over a 24-hour period, it would require more than
60,000 years to accumulate an error of one second.

General Information

Symmetricom was incorporated in California in 1956 and reincorporated in Delaware in 2002. Our principal executive offices are located at 2300 Orchard
Parkway, San Jose, California 95131-1017, and our telephone number is (408) 433-0910.

Our website is located at
www.symmetricom.com. We make available, free of charge on or through our website, our recorded conference calls, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained or referenced
on our website is not incorporated by reference into and does not form a part of this Form 10-K.

Industry Background

The markets we serve include:



| |  |  | Fixed-line and wireless telecom and cable markets;
| | - |  | --------------------------------------------------



| |  |  | Wireless/OEM telecommunications equipment manufacturers;
| | - |  | --------------------------------------------------------



| |  |  | Aerospace/Defense;
| | - |  | ------------------



| |  |  | Metrology; and
| | - |  | --------------



| |  |  | Enterprise
| | - |  | ----------

Reportable Segments

Symmetricom is organized into five reportable segments that are within two divisions:

(1) Telecom Solutions Division



| |  |  | Wireline Products;
| | - |  | ------------------



| |  |  | Wireless/OEM (original equipment manufacturer) Products;
| | - |  | --------------------------------------------------------



| |  |  | Quality of Experience Assurance Products; and
| | - |  | ---------------------------------------------



| |  |  | Global Services
| | - |  | ---------------

(2) Timing, Test
and Measurement Division

Information as to net revenue and gross profit margin attributable to each of these reportable segments, and
revenue for major geographic regions, for each year in the three-year period ended June 28, 2009, is contained in Note 16 of the notes to the consolidated financial statements. We do not allocate assets or specific operating expenses to these
individual reportable segments.

Telecom Solutions Division

Our Telecom Solutions Division offers a full suite of timing and synchronization products that meet global standards requirements. Products include primary reference sources; edge clocks and distribution products for
synchronization outside the network core; Building Integrated Timing Supply (BITS) and Sync Supply Unit (SSU) for the central office; network management and monitoring software; and synchronization subsystems for OEM integration. Symmetricoms
product portfolio also includes the PackeTime  product suite based on technologies such as IEEE 1588 (PTP), NTP and Data Over Cable Service Interface Specifications (DOCSIS)



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Timing Interface, addressing the timing and synchronization needs for next-generation networks (NGN). Symmetricom holds patents in advanced control
algorithms for deployments utilizing the Global Positioning System (GPS), DOCSIS Timing Interface (DTI) and Code Division Multiple Access (CDMA).

Carriers and operators are driven by network economics and competitive forces to evolve their network infrastructures toward integrated transmission and switching functions and packet-based technologies. In fiscal
2009, we participated in the modernization of several synchronization networks with certain service providers and helped others develop future plans for such efforts. Our products also enable multiple cable multi-service operators worldwide to
expand the capacity of their networks.

Our Wireless/OEM segment serves the wireless market with synchronization and timing components and
sub-system (module) products that are foundational to the operation of certain types of cellular base stations.

We continue to build a
strong portfolio of precise time and frequency solutions to address the growing synchronization requirements of all layers of existing circuit switched network and next-generation packet networks.

Our Quality of Experience triple play monitoring solution enables carriers and cable multi-service operators (MSOs) to understand and diagnose video
service quality, in real time, at the head-end when received from content providers, in the network once distributed from the head-end to subscribers and in the last mile as experienced by end-users. During fiscal 2009, Symmetricom continued to
target telecommunications carriers and cable operators to monitor IP-based video service offerings.

Our Global Services segment provides
services for Symmetricoms product lines.

Timing, Test and Measurement Division

Our Timing, Test and Measurement Division provides precision time and frequency instruments and reference standards for government and enterprise markets.
Government markets include the aerospace, defense, metrology and timekeeping sectors. Products include synchronized clocks, network time servers, network time displays, time code generators, computer plug-in cards, primary reference standards such
as rubidium and cesium oscillator standards, and ruggedized crystal oscillators, and custom Time & Frequency systems. Customer applications include synchronization of communication networks, synchronization of computer networks, reference
timing for radar, ranging, fire-control and other defense electronic systems, calibration of lab equipment, GNSS (Global Navigation Satellite Systems), and subsystem master timing. To support both a diverse customer and product base, the division
built strong application engineering capabilities that allow for the tailoring of standard product platforms to meet a customers unique system requirements. During fiscal 2007, we acquired Timing Solutions Corporation (TSC) in Boulder,
Colorado, which strengthened our timing technology and provided access to a number of new government customers. During fiscal 2009, the division continued to emphasize government program business in secure mobile, satellite, and wireline
communications, as well as other defense platform upgrades including destroyers, submarines, and Unmanned Aerial Vehicles (UAVs). Key customers of the division included Boeing, Honeywell, Lockheed Martin, Northrop Grumman, Raytheon, General
Dynamics, BAE, L3, DISA and various military procurement and service agencies. New products introduced during the fiscal year included a new high performance Rubidium oscillator (XPRO), a new 1588 enabled transparent switch (TC100), a new Syncserver
that is equipped with a SAASM GPS receiver, a new higher frequency low phase noise and Allan deviation test set, and a new time code display.

Wireline and Cable Infrastructure Markets and Products

Wireline and Cable Infrastructure Markets:

The wireline and cable infrastructure markets include local, long distance and international telecommunications service providers and carriers and cable
service providers. Customers in the wireline market include worldwide public network providers, incumbent local exchange carriers (ILECs), public telephone and



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telegraph companies (PTTs), competitive local exchange carriers (CLECs), other telephone companies as well as cable companies. We believe that these
telecommunications providers will have to replace their legacy synchronization equipment in the future. Some companies have begun the upgrade process. Based on the size of the installed base of legacy equipment, we anticipate that this cycle could
take at least several years to complete. The cable infrastructure market has an emerging requirement for synchronization within cable vendors equipment for which we have developed and are selling a line of synchronization products.

Wireline and Cable Products:

The
telecommunications network consists of a series of interconnected switching equipment and other components that route information (i.e., voice, video, data, etc.) through the network. For these networks to function efficiently it is essential that
each network be synchronized and the individual nodes within the network operate within precise tolerances. Precision synchronization equipment throughout these networks provides a frequency reference which enables digital switching, routing and
transmission systems to operate at a common, synchronized clock rate, thereby aligning time slots, which increases bandwidth utilization while minimizing signal degradation and reducing errors throughout a network.

Our core system products are built on atomic clock (such as cesium and rubidium) and GPS technologies. The products belong to one of four classes:



| |  |  | Primary Reference Sources (PRS)consists of the GPS-based TimeSource family, and the cesium-based TimeCesium.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Building Integrated Timing Supplies (BITS) or Synchronization Supply Units (SSUs)consists of the versatile SSU 2000 and the carrier-class TimeHub, both
intelligent sync distribution systems, and carrier class Network Time Protocol (NTP) & 1588 (PTP) plug-in server cards supporting critical applications for next generation networks. Other key products consists of Time Provider 1000, the
industrys first node clock (hybrid SSU & PRS), TimeCreator, the first DOCSIS Timing Interface (DTI) server qualified by CableLabs, Time Provider 5000, a standard 1588 carrier class server, and other products currently under
development to address emerging needs in the wireline and cable markets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Element Management Systemsconsists of TimePictra, the carrier class HP-UX based system, and TimeScan, the PC-based system.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Wireless/OEM Market and Products

Wireless/OEM Market:

Symmetricoms Wireless/OEM products are sold into the wireless market. Wireless
telecommunications networks consist of numerous cells located throughout a service area. In a wireless network, calls are segmented, transmitted over the air, and reassembled by a receiver within the network. Certain engineering requirements demand
a high level of synchronization at the base station. Our products are primarily sold into CDMA-based implementations throughout the world.

Wireless/OEM Products:

The primary use of our Wireless/OEM products is in wireless base stations. Base stations are
the infrastructure equipment used in all cellular and personal communication services worldwide. Many of the wireless technologies used today require high precision frequency and timing information to operate their services.

Our component and sub-system (module) products deliver stable timing to wireless base stations using a combination of GPS receivers for timing
distribution, high precision quartz oscillators and rubidium atomic oscillators. Their use depends on the specific cellular technology such as CDMA (and CDMA 2000), UMTS or WiMAX (IEEE 802.16e), LTE and the governing standards that apply. For
example, in CDMA, the standard



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requires a GPS signal for every base station with either a high performance quartz or rubidium oscillator as a backup (holdover). WiMAX, a 4G wireless
technology just starting to be deployed, also requires GPS receivers for its base stations to operate. These timing solutions are also available to other communication applications requiring high precision frequency and timing information, such as
digital television transmission, high definition television, and instrumentation.

Specific products we provide are:



| |  |  | Rubidium atomic oscillators with various performance levels.
| | - |  | ------------------------------------------------------------



| |  |  | GPS accessory components, which include receiving antennas, timing antennas, splitters, amplifiers, and lightning protectors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | Sub-system cards or modules used within another manufacturers equipment such as wireless base stations or broadband wireless solutions. These are
customized for each manufacturer, using a combination of GPS, quartz oscillators, rubidium atomic oscillators, input/output signals and control algorithms. Some of the control algorithms are contained in our BesTime technology.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Time module synchronization sub-systems, which are flexible GPS-disciplined time and frequency platforms optimized for WiMAX and other applications that
require precise frequency or time. Our Time module is designed to be integrated into existing communications and transmission equipment used in WiMAX mobile base station timing, broadcast, satellite communications equipment, and cellular base
stations (CDMA, TDMA, UMTS for GPS based timing).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 1588 soft client technologiesthat can be embedded into various generations of base stations, femto cells and network devices to provide time and frequency
capabilities to interoperate with 1588 grand masters; this packet-based protocol (PTP 1588) enables NGN-based services when telecom operators transition from legacy networks to IP-based infrastructures.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Quality of Experience Service Assurance Market and Products

Quality of Experience Service Assurance Market:

Ensuring high quality video is a critical component of successful
digital video offering. Managing video quality is essential for differentiating services, reducing customer churn and enabling faster service deployments. Most video service assurance solutions available today were originally designed with the goal
of network performance monitoring in mind. Impairments to video quality however, come from a wide range of sources (source video, encoders, network, and decoders/CPE) and monitoring only network metrics renders these solutions ineffective. Moreover,
even if network issues exist, raw network metrics do not provide accurate assessment of service quality, leaving service providers with little insight into their customers real video experience.

An effective end-to-end monitoring solution requires specialized devices for each network demarcation point, combined with a mechanism to consolidate and
correlate all information resulting in accurate and timely results.

Quality of Experience Service Assurance Products:

Symmetricoms V-Factor Platform has been designed to deploy into IP networks seamlessly. The solution consists of the following parts:



| |  |  | Q-1000 Headend Analyzerexamines the quality and integrity of source video and detects transcoding and encoding impairments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Q-1200 Probecombines the ability to monitor a large number of channels in parallel, leveraging the V-Factor technology for video coding layer analysis and
source video monitoring of specific high value channels. This unique combination and packaging provides great differentiation in the industry and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | unique value to customers who wish to make sure channels are of good quality before distribution over the transmission network.
| | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | Q-400 Network Probe is designed for IPTV and VoIP applications and deployable across backbones or large PoPs.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Q-200 Network Probe is a flexible medium-performance probe and is designed to deliver real time monitoring of video services on live IP networks.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Q-101 Network Probe is the base-level performance probe. Q-101 is ideal for core IP performance metrics (IPPM) monitoring with a gigabit UTP test port.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Software Agents can be embedded with customer premise equipment (CPE) such as a set top box (STB), PC or last mile devices to monitor and troubleshoot
network performance and/or content quality for that customer.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Q-Advisor is Symmetricoms Element Management software and offers service providers a web-based solution to verify SLAs and validate network readiness
to support triple play. Q-Advisor has been integrated with OSS/NOC systems such as HP BAC/SQM, IBM Netcool and EMC Smarts.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Global
Services Market and Products

Global Services Market:

We market our services exclusively to customers who purchase our products.

Global Services Products:

Our Global Services (Services) organization provides lifecycle services for Symmetricom product lines. Services
products fall into five main categories:



| |  |  | Engineering and installationOur engineering and installation services help customers implement new Symmetricom product purchases.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operations and support programsOur operations and support programs, such as Sync Office Audits, assist customers in maintenance of their sync networks,
help ensure power and alarm diversity to avoid service outages and identify system capacity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | MaintenanceOur maintenance offerings are designed to help customers minimize staff and expenses necessary for ongoing support of their Symmetricom
products. These include 24 x 7 technical support, traditional return-to-factory repair services, and on-site repair labor.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Training, certification programs and professional development coursesOur training courses enable customer personnel to successfully utilize and
maintain our products. These programs are also available under license for customers who maintain their own training centers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consulting and other professional servicesOur consulting services assist customers in planning new sync communications networks and developing growth
or disaster recovery plans for existing sync networks.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Timing, Test and Measurement Markets and Products

Timing, Test and Measurement Markets:

The
aerospace, defense, metrology, timekeeping, and enterprise markets require precision time and frequency instruments and reference standards. Time and frequency solutions include GPS and time code instrumentation products, bus level timing
cards, and precision frequency references (atomic standards). IP network timing products include dedicated network time servers and management and monitoring software that synchronizes the timing on enterprise networks. Space, defense, and avionics
applications include highly reliable and ruggedized components and systems designed to address specific customer requirements.



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Timing, Test and Measurement Products:

We offer a wide variety of precision time and frequency products sold primarily to the aerospace, defense, metrology and enterprise sectors. These
products can generally be divided into the following broad categories:



| |  |  | Precision Frequency ReferencesPrecision Frequency References form the basis of absolute time and frequency in many systems and applications. Our
products include active hydrogen masers, cesium frequency standards, rubidium frequency standards, and quartz frequency standards. Our primary reference source instruments provide stand-alone dependability, ease of use, and ease of installation that
make them suitable for the critical time or frequency systems found in telecommunications timing, calibration and metrology laboratories, satellite tracking stations and space-based master time standards.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Bus Level TimingWe manufacture a broad line of precision timing products in the form of plug-in cards for computers. These cards provide precise timing
capabilities to computers equipped with common bus components. We also offer software development tools to speed the integration of these cards into software applications.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Enterprise Network Time ServersWe manufacture several products for enterprise network time distribution. These bring entire networks of computers into
precise time synchronization.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GPS & Time Code Instrumentation ProductsWe manufacture a wide variety of general purpose and secure GPS receivers, time code generation,
translation, measurement, and distribution products. A time code is a data format for recording and processing time measurements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Space, Defense and AvionicsWe provide ruggedized and militarized quartz and atomic clock platforms for the most demanding military applications. Our
designs are vibration isolated with low sensitivity to acceleration. For space applications such as GPS, where there is a high degree of exposure to radiation, our products are protected by radiation-hardened designs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Test & Measurement EquipmentWe provide a line of Time and Frequency test solutions including a family of Phase Noise and Allan Deviation Test
Sets designed to measure critical performance specifications of precision time and frequency signals and sources.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Custom Time & Frequency SystemsWe design and build custom time and frequency systems to address critical applications in aerospace/defense and
government markets. Time scale system for national time keeping and two way time transfer system for GPS autonomy are examples of systems we deliver to our customers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales Operations

We sell our products directly to customers, and through domestic and international
distributors, as well as systems integrators and manufacturer sales representatives. In the United States, our wireline and cable products are primarily sold through our own sales force to ILECs, PTTs, CLECs, other telephone companies, wireless
service providers, cable operators, Internet Service Providers (ISPs) and OEMs. Our Timing Test and Measurement instrumentation products are primarily sold through manufacturer sales representatives, and our enterprise products are primarily
sold through telesales and the Internet. Internationally, we market and sell our products through our internal sales force, independent sales representatives, distributors, and systems integrators.

Licenses, Patents, Trademarks and Copyrights

We use
a combination of trademark rights, copyrights and patent rights, as well as associated registrations, contractual restrictions, and internal security to establish and protect our proprietary rights. As of June 28, 2009, we had 57
active United States patents. The active patents issued will expire between August 2009 and September 2026. We believe that our patents have value, but we rely primarily on innovation, technological expertise, and marketing competence
to maintain our competitive advantage. The telecommunications industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent



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infringement. We intend to continue our efforts to obtain patents whenever possible, but there can be no assurance that patents will be issued or that any
existing patents or patents that are obtained will not be challenged, invalidated or circumvented, or that the rights granted will provide any commercial benefit to us. Additionally, if any of our processes or designs are identified as infringing
upon patents held by others, there can be no assurance that a license will be available, or that the terms of obtaining any such license will be acceptable to us. In addition, the laws of certain countries in which our products may be developed,
manufactured or sold may not protect our products and intellectual property rights to the same extent as the laws of the United States. In addition, we use technology licensed from others.

We generally enter into confidentiality agreements with our employees, consultants, and third parties in connection with our technology. These
confidentiality agreements generally seek to control access to, and distribution of, our technology, documentation and other proprietary information. Despite these precautions, it may be possible for a third party to obtain and use our proprietary
information without authorization or to develop similar technology independently.

In addition, we use trademarks to help identify and
market our products and services. We have a number of trademark registrations and pending applications both in the United States and around the world. We rely on these trademark registrations and applications as one of the tools to protect our
rights in our trademarks and brands. We also rely on our common law trademark rights in those countries that recognize such rights, such as the United States. We can provide no assurance, however, that any of our trademark applications will be
successful, or that our existing registrations will not be challenged or invalidated. Likewise, we can provide no assurance that our registrations, applications or common law rights will enable us to stop others from infringing upon our trademarks,
or enable us to successfully defend against claims of trademark infringement. Furthermore, effective trademark protection may not be available in every country in which our products and services are distributed.

We also have copyrights on our software products, product documentation, marketing materials, and other documentation and materials. We rely on
these copyrights to protect our rights in our copyrighted materials. We can provide no assurance, however, that our copyrighted materials will not be infringed. In addition, effective copyright protection may not be available in every country in
which our products are distributed.

Manufacturing

Our manufacturing process primarily consists of assembly, test, configuration and logistics by our manufacturing sites in Aguadilla, Puerto Rico; Beverly, Massachusetts; Tuscaloosa, Alabama; San Jose, California and
Hoehenkirchen-Siegertsbrunn, Germany. In addition, custom and semi-custom instrumentation products are developed, assembled, and tested in Santa Rosa, California and Boulder, Colorado. The Boulder, Colorado and Santa Rosa, California facilities are
registered to ISO9000:2000, while our Beverly, Massachusetts; Aguadilla, Puerto Rico and San Jose, California (engineering processes) have been upgraded to meet the TL 9000 quality system standard (an advanced telecommunications standard for
manufacturing and engineering). Our Beverly, Massachusetts facility is also registered to AS9100 which certifies the design, development, and production of high precision time and frequency references for commercial military and space markets.

We use various contract manufacturers to build our printed board assemblies and in some cases full turnkey box builds. During fiscal 2008
and 2009, we outsourced all of our printed circuit board assemblies from our Puerto Rico based manufacturing to a contract manufacturer with facilities in China, US, and other regions in order to lower manufacturing costs and take advantage of
best-in-class production processes.

Seasonality

Our business tends to generate stronger revenues in the second half of the fiscal year as telecommunications and cable service providers release their capital budgets.



10



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##### Table of Contents

Backlog

Our backlog consists of firm orders that have yet to be shipped to the customer. Our total backlog was $46.9 million as of June 28, 2009, compared with $58.4 million as of June 29, 2008. The $11.5 million reduction in backlog
between June 28, 2009 and June 29, 2008 was primarily due to the ramp up in supply capacity at the end of fiscal 2008 to meet pent-up demand for our new cable timing product. Most orders included in backlog can be rescheduled or cancelled
by customers without significant penalty. Historically, a substantial portion of net revenue in any fiscal period has been derived from orders received during that fiscal period. Our backlog may also be affected by the cancellation or delay of
customer orders, the overall condition of the telecommunications industry, overall worldwide economic conditions and the cyclical nature of customer demand in each of our markets.

Key Customers and Export Sales

During fiscal 2009, no single customer accounted for more than 10% of
our net revenue. Our export sales outside the United States accounted for 36%, 33% and 29% of our net revenue in fiscal 2009, 2008 and 2007, respectively. For additional information regarding our export sales, see Note 16 to our consolidated
financial statements.

Sales and purchase obligations denominated in foreign currencies have not been significant. We do not currently
engage in currency hedging activities or derivative arrangements but may do so in the future to the extent that foreign currency transactions become more significant.

Competition

Competition in the telecommunications industry is intense. Some of our competitors or
potential competitors are well established and have significant financial, manufacturing, technical and marketing resources. Competitors of our synchronization products include Brilliant Telecommunications, Emrise Corp., Frequency
Electronics, Inc., Huawei Technologies Co. Ltd., and Oscilloquartz SA. Competitors of our Wireless/OEM products include Frequency Electronics, Inc. and Trimble Navigation, Ltd. Competitors of our Timing, Test and Measurement Division
products include Brandywine Communications, EndRun Technologies, Frequency Electronics, Inc., Meinberg, Orolia and Trak Systems, Inc. (a Veritas Corporation subsidiary). Competitors of our Quality of Experience Assurance products include
EXFO, Ineoquest, JDS Uniphase, Agilent Technologies, Tektronix and Telchemy.

Research and Development

Our development efforts include designing and developing hardware and software products, and providing enhanced functionality to our existing products. We
also do primary research in fundamental time and frequency components and systems paid for by the U.S. government. In addition to our research and development organizations listed below, we utilize domestic and international contractors (primarily
in India) to assist us in our research and development activities. Our product development programs include:



| |  |  | Wireline and wireless synchronization
| | - |  | -------------------------------------



| |  |  | Network management software
| | - |  | ---------------------------



| |  |  | Network time servers
| | - |  | --------------------



| |  |  | Video quality of experience hardware and software
| | - |  | -------------------------------------------------



| |  |  | Ruggedized time and frequency component for space, defense and avionic applications
| | - |  | -----------------------------------------------------------------------------------



| |  |  | Precision time and frequency references
| | - |  | ---------------------------------------



| |  |  | Primary frequency references
| | - |  | ----------------------------



| |  |  | GPS-based time and frequency instruments and bus cards
| | - |  | ------------------------------------------------------



11



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##### Table of Contents

| |  |  | Time and frequency distribution products
| | - |  | ----------------------------------------



| |  |  | Phase noise test sets
| | - |  | ---------------------



| |  |  | Timescale systems
| | - |  | -----------------



| |  |  | Time and frequency reference systems
| | - |  | ------------------------------------

In fiscal 2009, we developed an IEEE 1588 server and client product, TP5000 and TP500 respectively, a scalable video monitoring network probe, Q1200, as well as other products to enhance our Telecom Solutions portfolio. For Government
markets, we introduced a secure GPS network time server, high performance rubidium holdover clocks designed for harsh environments, a 1588 transparent switch, an updated PCI time and frequency card, and a high frequency phase noise test set.

In fiscal 2009, 2008 and 2007, overall research and development expenditures were $26.4 million, $27.9 million and $23.7 million,
respectively. We expensed all research and development expenditures as they were incurred. We expect to continue to support research and development efforts in order to enhance existing products and to design and develop new technologies and
products.

Our primary product development centers are in San Jose, California; Santa Rosa, California; Boulder, Colorado; Beijing, China
and Beverly, Massachusetts.

Government Regulation

The telecommunications industry is subject to domestic and foreign regulatory policies regarding pricing, taxation and tariffs, which may adversely impact the demand for our products. These policies are continuously
reviewed and subject to change by the various governmental agencies. We are also subject to government regulations and standards for our products, as well as import and export regulations. We must comply with and are affected by laws and regulations
relating to the award, administration and performance of U.S. government contracts. Government contract laws and regulations affect how we do business and, in some instances, impose added costs on our business. A violation of specific laws and
regulations could result in the imposition of fines and penalties or the termination of our contracts or debarment from bidding on contracts. See Item 1A, Risk Factors, for more information.

Environmental Regulation

Our operations are subject
to numerous foreign, federal, state and local environmental regulations related to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous chemicals and materials used in our manufacturing process and products. Failure to
comply with such regulations could result in a suspension or cessation of our operations, or could subject us to significant future liabilities. See Item 3. Legal Proceedings and Item 1A. Risk FactorsOur operating results may
be adversely affected as a result of our required compliance with the European Union Directives on Waste Electrical and Electronic Equipment and their Restriction of the Use of Hazardous Substances in electrical and electronic equipment, as well as
other regulations around the world.

Sources and Availability of Raw Materials

We endeavor to use standard parts and components, which are generally available from multiple sources. We make significant purchases of parts and
components from third-party suppliers. Certain parts used in our manufacturing process are single sourced and may have extended lead times.

Employees

At June 28, 2009, we had approximately 800 employees. None of our employees are represented by a labor union, and we have
experienced no work stoppages. We believe that our employee relations are good.



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##### Table of Contents

Executive Officers of Symmetricom

Following is a list of our executive officers as of August 31, 2009 and brief summaries of their business experience over the last five years. All officers, including executive officers, are appointed annually by
the Board of Directors at its meeting following the annual meeting of stockholders. We are not aware of any officer who was appointed to the office pursuant to any arrangement or understanding with another person.



|                |  |     |  |                                                                                
|--------------- |  | --- |  | -------------------------------------------------------------------------------
|Name            |  | Age |  | Position                                                                       
|David G. Côté   |  | 55  |  | Chief Executive Officer                                                        
|Justin Spencer  |  | 38  |  | Chief Financial Officer                                                        
|Bruce Bromage   |  | 55  |  | Executive Vice President and General Manager Timing Test & Measurement Division
|Paul Chermak    |  | 66  |  | Executive Vice President Global Sales & Support                                
|James Armstrong |  | 43  |  | Executive Vice President & General Manager, Telecom Solutions Division         

Mr. Côté was appointed Chief Executive Officer of Symmetricom on
August 3, 2009. Prior to joining Symmetricom, Mr. Côté was Chief Executive Officer and President at Packeteer, Inc., a leading provider of Internet application infrastructure systems, from 2002 to 2008.

Mr. Spencerhas served as Chief Financial Officer of Symmetricom since September 2008. Prior to joining Symmetricom, Mr. Spencer served
as Chief Financial Officer at Covad Communications from June 2007 until April 2008. From November 2002 until May 2007, Mr. Spencer served in various positions at Covad including Interim Chief Financial Officer, Vice President of Finance, and
corporate development and product management roles.

Dr. Bromagehas served as Executive Vice President and General Manager of
the Timing, Test and Measurement Division since April 2004. Dr. Bromage joined Symmetricom in April 2002 and served as Vice President, Strategic Planning and Alliances from April 2002 to April 2004.

Mr. Chermakhas served as Executive Vice President Global Sales & Support since November 2007. From April 2006 to October 2007,
Mr. Chermak was the Senior Vice President and General Manager of the High Technology Group at I2 Technologies, Inc. From March 2003 to March 2006, Mr. Chermak was the Managing DirectorInternational, for ITM Software.

Dr. Armstronghas served as Executive Vice President and General Manager, Telecom Solutions Division, since February 2008. Mr. Armstrong
joined Symmetricom in September 2006 and served as Vice President of Engineering for the Telecom Solutions Division from September 2006 to January 2008. From July 2002 to May 2006, Mr. Armstrong was the Vice President of Engineering and later
President of Movidis, Inc.



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##### Table of Contents

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

Our
quarterly and annual operating results have fluctuated in the past and will likely continue to fluctuate in the future, which could cause our stock price to be volatile and result in losses to our investors

We believe that period-to-period comparisons of our operating results may not be a good indication of our future performance. Our quarterly and annual
operating results have fluctuated in the past and will likely continue to fluctuate in the future. Some of the factors that could cause our operating results to fluctuate include:



| |  |  | the resumption of recent adverse economic conditions, particularly within the telecommunications equipment industry, which may result in revenue declines;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | restructuring and integration-related charges;
| | - |  | ----------------------------------------------



| |  |  | goodwill and intangible assets impairment charges related to acquisitions and related long-term assets;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our ability to obtain sufficient supplies of sole or limited source components at commercially reasonable prices;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | changes in our products or mix of sales to customers;
| | - |  | -----------------------------------------------------



| |  |  | the possibility that, despite our having been approved as a supplier in requests for proposals from several major wireline customers, these proposals will not
result in any purchases;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to manage fluctuations in manufacturing yields of rubidium oscillators and cesium tubes;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | our ability to manage the level and value of our inventories in relation to sales volume;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our ability to accurately anticipate the volume and timing of customer orders or customer cancellations;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | our ability to collect receivables from our customers;
| | - |  | ------------------------------------------------------



| |  |  | the gain or loss of significant customers;
| | - |  | ------------------------------------------



| |  |  | fluctuations in government spending for infrastructure investment;
| | - |  | ------------------------------------------------------------------



| |  |  | timing of purchases from customers on projects may be impacted due to spending delays, availability of resources for installation, and delays in new product
availability;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to introduce new products in new and existing markets on a timely and cost-effective basis;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | customer delays in qualification of new products;
| | - |  | -------------------------------------------------



| |  |  | market acceptance of new or enhanced versions of our products and our competitors products;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | our ability to manage increased competition and competitive pricing pressures;
| | - |  | ------------------------------------------------------------------------------



| |  |  | increased industry consolidation among our customers, which may lead to decreased demand for, and downward pricing pressure on the prices of, our products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to timely implement changes developed as a result of our process improvement projects without negatively impacting operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to manage fluctuations in the average selling prices of our products;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | our ability to manage the long sales cycle associated with our products;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ability to manage cyclical conditions in the telecommunications industry;
| | - |  | -----------------------------------------------------------------------------



| |  |  | our ability to retain key employees, which could affect our ability to sell, develop and deliver our products;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | reduced rates of growth of telecommunications services;
| | - |  | -------------------------------------------------------



| |  |  | customers may delay upgrading their old equipment with our new products;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ability to establish in a timely fashion subsidiaries in new geographic regions, which our customers or potential customers may require to do business with us
in those regions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to manage complex transactions with customers in new geographic regions;
| | - |  | ------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | customers may experience labor strikes, which could result in reduced sales volume;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | customers in the wireless market may switch from buying rubidium-based products, which we internally manufacture, to quartz-based products, which we purchase and
sell at a lower price point, which may result in lower revenue and gross margins; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a global pandemic, if not contained.
| | - |  | ------------------------------------

A significant portion of our operating and manufacturing expenses are relatively fixed in nature, and planned expenditures are based in part on anticipated orders. If we are unable to adjust spending in a timely manner to compensate for any
unexpected future sales shortfall, our operating results will be negatively impacted. Our operations entail a high level of fixed costs and require an adequate volume of production and sales to achieve and maintain reasonable gross profit margins
and net earnings. If we increase the volume of product manufacturing by outside sources and decrease our internal production, we could incur higher fixed costs (per unit) and integration and restructuring charges. Significant decreases in demand for
our products or reduction in our average selling prices, or any material delay in customer orders may negatively harm our business, financial condition and results of operations. Our future results depend in large part on growth in the markets for
our products.

The growth in each of these markets may depend on changes in general economic and regulatory conditions, conditions related
to the markets in which we compete, changes in regulatory conditions, legislation, export rules or conditions, interest rates and fluctuations in the business cycle for any particular market segment. If our quarterly or annual operating results
do not meet the expectations of securities analysts and investors, the trading price of our common stock could decline significantly.

We may be impacted by disruptions and liquidity issues in the credit market, which may unfavorably impact our financial condition and results of operations

We invest excess funds in specific instruments and issuers approved for inclusion in our cash and short-term investment accounts. Our investment criteria
are to invest only in top tier quality investments or federally sponsored investments. Top tier quality investments are determined by our investment advisor in conjunction with ratings of those investments provided by outside ratings agencies as
well as our investment advisors internal credit specialists. Our cash consists of overnight instruments and instruments that will mature within ninety days from the date of purchase. Our short-term investment portfolio consists of instruments
that mature between ninety-one days and three years after the end of our fiscal quarter.

Based upon recent events in the credit market, we
may be impacted by the following risks:



| |  |  | We may experience temporary or permanent declines in the value of certain instruments which would be reflected in our financial statements. During fiscal 2009, we
recorded $1.4 million in losses related to short-term investments;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may experience rating agency downgrades of instruments we currently own which may degrade our portfolio quality and cause us to take impairment charges;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may not be able to reasonably value our investments if there is not a liquid resale market for those instruments;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | We may experience losses on the sale of certain instruments if we do not have sufficient operating cash to run our business and are required to sell short-term
investments to meet cash flow requirements; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our 3.25% Contingent Convertible Subordinated Notes due 2025, of which approximately $56.9 million in aggregate principal amount is currently outstanding, are
subject to repurchase in 2012 and may be convertible prior to the maturity date into cash if during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the notes for each such
trading day was less than 95% of the average of the sale price of our common stock during such five trading-day period multiplied by the then current conversion rate.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

In addition to the above risks, the recent events in the credit market may also impact our customers, and
we may be impacted by the following risks:



| |  |  | We may experience lower revenues if our customers decide to reduce their capital spending plans;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | Customers may delay payments to us reducing our operating cash flow; and
| | - |  | ------------------------------------------------------------------------



| |  |  | We may experience an increase in accounts receivable write-offs if customers are unable to pay their obligations.
| | - |  | -----------------------------------------------------------------------------------------------------------------

Public confidence and share value may be adversely impacted by material weaknesses in our internal controls over financial reporting

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal controls over
financial reporting and to include a management report assessing the effectiveness of our internal controls over financial reporting in all annual reports. Section 404 also requires our independent registered public accounting firm to attest to
the effectiveness of our internal controls over financial reporting.

In past years, we have identified material weaknesses that have led
us to restate our financial statements. Although we have since remediated these material weaknesses, we will need to continue to evaluate, upgrade and enhance our internal controls. Because of inherent limitations, our internal control over
financial reporting may not prevent or detect misstatements, errors or omissions, and any projections of any evaluation of effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with our policies or procedures may deteriorate. We cannot be certain in future periods that other control deficiencies that may constitute one or more significant deficiencies (as
defined by the relevant auditing standards), or material weaknesses in our internal control over financial reporting, will not be identified. If we fail to maintain the adequacy of our internal controls, including any failure to implement or
difficulty in implementing required new or improved controls, our business and results of operations could be harmed, the results of operations we report could be subject to adjustments, we could fail to be able to provide reasonable assurance as to
our financial results or the effectiveness of our internal controls or meet our reporting obligations, and there could be a material adverse effect on our stock price.

If we incur net losses or substantially lower profit in the future, we may have to record a valuation allowance against some of our deferred tax assets, which would significantly increase our tax expense and
harm our net earnings

Future losses or low profitability may create uncertainty about the realizability of our $47.3 million net
deferred tax assets. If we record a valuation allowance against our deferred tax assets, we would record an additional tax expense, which would reduce net earnings. In addition, uncertainties about the realizability of our deferred tax assets could
limit our ability to recognize future deferred tax assets on our balance sheet and correspondingly reduce net earnings. At the end of each fiscal quarter, our management reviews the results of operations for that quarter and forecasts for the
remainder of the fiscal year and future years to determine if it is more likely than not that a valuation allowance for the deferred tax assets is needed.

If we are unable to smoothly integrate the businesses we acquire, our operations and financial results could be harmed

As part of our business strategy we have engaged in acquisitions in the past, including the acquisitions of TrueTime, Datum, QoSmetrics, S.A. and TSC, and other smaller acquisitions, and continue to evaluate other
acquisition opportunities that could provide additional product or service offerings, technologies or additional industry expertise. Acquisitions involve risks, which include the following:



| |  |  | we may be exposed to unknown liabilities of the acquired business;
| | - |  | ------------------------------------------------------------------



| |  |  | we may incur significant write-offs;
| | - |  | ------------------------------------



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##### Table of Contents

| |  |  | we may experience problems in combining the acquired operations, technologies or products;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | we may not realize the revenue and profits that we expect the acquired businesses to generate;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | we may not achieve the cost savings we hope to obtain from combining the acquired operations with ours;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | we may experience regulatory difficulties and unbudgeted expenses in attempting to complete an acquisition;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | we may encounter unanticipated acquisition or integration costs that could cause our quarterly or annual operating results to fluctuate;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may incur substantial penalties if we do not relocate manufacturing operations as scheduled;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | our managements attention may be diverted from our core business;
| | - |  | ------------------------------------------------------------------



| |  |  | our existing business relationships with suppliers and customers may be impaired;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | we may not be successful in entering new markets in which we have no or limited experience;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | key employees of the acquired businesses may have expertise and know-how, and we may not be able to retain some of these key employees, and some of them may join or
start competing businesses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our earnings per share may be diluted if we pay for an acquisition with equity securities; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | we may not be able to repay our debt used to make acquisitions.
| | - |  | ---------------------------------------------------------------

We cannot assure you that we will be able to successfully integrate any business, products, technologies or personnel from any recent or future acquisitions. If we fail to successfully integrate acquisitions or to
achieve any anticipated benefits of an acquisition, our operations and business could be harmed. Additionally, we may experience difficulty integrating and managing the acquired business operations. For these reasons, we cannot be certain what
effect acquisitions may have on our business, financial condition and results of operations.

We may be required to record additional
intangible asset impairment charges in future quarters

As of June 28, 2009, we had recorded intangible assets with a net book
value of $5.3 million, related to various acquisitions. We test for impairment at least annually and more frequently whenever evidence of impairment exists. In the third quarter of fiscal 2009, we determined that our entire goodwill balance was
impaired and recognized a $48.1 million charge. If our future financial performance or other events indicate that the value of our recorded intangibles assets are impaired, we may record additional impairment charges that could have a material
adverse effect on our reported results.

Existing common stockholders may experience dilution in connection with our sale of
convertible notes in June 2005 and will experience immediate dilution if we sell shares of our common stock or other equity securities in future financings, and, as a result, our stock price may go down

Our common stockholders may experience dilution in connection with the sale in June 2005 of $120 million worth of convertible notes (of which $63.1
million was repurchased in July 2008, leaving a balance at June 28, 2009 of $56.9 million) if our stock price reaches $12.49 or more per share. For example, to the extent the share price exceeds $12.49, the difference would be multiplied by
4.6 million shares and then divided by the share price to determine the number of shares due to noteholders. For instance, if the stock price was $15.00, the conversion value would be $2.51 ($15.00 less $12.49) multiplied by 4.6 million
shares or $11.5 million which would be divided by the share price of $15.00 to provide 0.8 million additional shares to noteholders. These 0.8 million shares, when added to our number of shares outstanding, would dilute our earnings per
share.

In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the
issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders will experience dilution.



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##### Table of Contents

We may perform increasing amounts of research and development and manufacturing offshore to lower
cost; these efforts may impact our ability to deliver products to our customers, complete research and development projects on a timely basis, and cause potential misappropriation of our intellectual property

As a U.S. government contractor, we are subject to a number of rules and regulations

We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts.
Government contract laws and regulations affect how we do business and, in some instances, impose added costs on our business. A violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of
our contracts or debarment from bidding on contracts. In order to administer certain U.S. government contracts we are required to have employees with Top Secret Security Clearance. Because we have a limited number of employees with such clearance,
the loss of these employees could adversely affect our ability to administer these contracts. We must also have auditors from our independent registered public accounting firm with proper security clearance levels to perform an annual audit of
revenue for these transactions.

We have direct or indirect sales pursuant to contracts with U.S. government agencies, which can be
terminated at the convenience of the government, and our revenue would decline if the government terminated these contracts

Approximately 15% to 20% of our net revenue has been generated from sales to U.S. government agencies either directly or indirectly through subcontracts. Government-related contracts and subcontracts are subject to standard provisions for
termination at the convenience of the government. In such event, however, we are generally entitled to reimbursement of costs incurred on the basis of work completed plus other amounts specified in each individual contract. These contracts and
subcontracts are either fixed-price or cost reimbursable contracts. Fixed-price contracts provide fixed compensation for specified work. Under cost reimbursable contracts, we agree to perform specified work in return for reimbursement of costs (to
the extent allowable under government regulations) and a specified fee. In general, while the risk of loss is greater under fixed-price contracts than under cost reimbursable contracts, the potential for profit under fixed-price contracts is greater
than under cost reimbursable contracts. In addition, delays in approvals of the annual defense budget or supplemental funding bills may also impact government sales.

We have relied and may continue to rely on a limited number of customers for a significant portion of our net revenue, and our revenue could decline due to lower orders, the delay of customer orders or
cancellation of existing orders

During fiscal 2009, no single customer accounted for more than 10% of our revenue. During fiscal
2008 and fiscal 2007, two customers each accounted for more than 10% of our revenue. We expect that we will continue to depend on a relatively small number of customers for a substantial portion of our net revenue for the foreseeable future. The
timing and level of sales to our largest customers have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future. The loss of one or more of our significant customers, or a significant reduction or
delay in sales to any customer, may harm our business and operating results. Major customers also have significant leverage and may attempt to change the terms, including pricing, upon which we do business, which could also harm our business and
operating results.

If we are unable to develop new products, or we are delayed in production startup, our sales could decline

The markets for our products are characterized by:



| |  |  | rapidly changing technology;
| | - |  | ----------------------------



| |  |  | evolving industry standards; and
| | - |  | --------------------------------



| |  |  | changes in end-user requirements.
| | - |  | ---------------------------------



18



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##### Table of Contents

Technological advancements could render our products obsolete and unmarketable. Our success will depend
on our ability to respond to changing technologies and customer requirements, and our ability to develop and introduce new and enhanced products in a cost-effective and timely manner. The development of new or enhanced products is a complex and
uncertain process requiring the accurate anticipation of technological and market trends. We may experience design, manufacturing, marketing, and other difficulties that could delay or prevent the development, introduction or marketing of our new
products and enhancements.

The introduction of new or enhanced products also requires that we manage a smooth transition from older
products to new products. Delays in new product development or delays in production startup could reduce our sales.

The
telecommunications and government markets are highly competitive, and if we are unable to compete successfully in our markets, our revenue could decline

Competition in the telecommunications industry, in general, and in the markets we serve, is intense and likely to increase substantially. We face competition in all of our markets. Competitors of our synchronization
products include Brilliant Telecommunications, Emrise Corp., Frequency Electronics, Inc., Huawei Technologies Co. Ltd., and Oscilloquartz SA. Competitors of our Wireless/OEM products include Frequency Electronics, Inc. and Trimble
Navigation, Ltd. Competitors of our timing, test and measurement products include Brandywine Communications, EndRun Technologies, Frequency Electronics, Inc., Meinberg, Temex and Trak Systems, Inc. (a Veritas Corporation subsidiary).
Competitors of our Quality of Experience Assurance products include Brix, Ineoquest, JDS Uniphase, Agilent Technologies, Tektronix and Telchemy. In addition, the Telecommunications Act of 1996 permits ILECs to manufacture telecommunications
equipment, which may result in increased competition. Our ability to compete successfully in the future will depend on many factors including:



| |  |  | the cost-effectiveness, quality, price, service and market acceptance of our products;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our response to the entry of new competitors into our markets or the introduction of new products by our competitors;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | the average selling prices for our products;
| | - |  | --------------------------------------------



| |  |  | increased industry consolidation among our customers, which may lead to decreased demand for, and downward pricing pressure on the prices of, our products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to keep pace with changing technology and customer requirements;
| | - |  | ----------------------------------------------------------------------------



| |  |  | our continued improvement of existing products;
| | - |  | -----------------------------------------------



| |  |  | the timely development or acquisition of new or enhanced products;
| | - |  | ------------------------------------------------------------------



| |  |  | the timing of new product introductions by our competitors or us; and
| | - |  | ---------------------------------------------------------------------



| |  |  | changes in worldwide market and economic conditions.
| | - |  | ----------------------------------------------------

Some of our competitors or potential competitors are well established and have significant financial, manufacturing, technical and marketing resources. These competitors may be able to respond more quickly to new and
emerging technologies and changes in customer requirements, to devote greater resources to the development, promotion and sale of products, or to deliver competitive products at lower prices. We expect to continue to experience pricing pressures
from our competitors in all of our markets. If we are unable to compete by delivering new products or by delivering competitive products at lower prices, we could lose market share and our revenue could decline.

We purchase certain key components from single or limited sources and could lose sales if these sources fail to fulfill our needs

We have limited or single source suppliers for a number of our components. If single source components were to become unavailable
on satisfactory terms, we would be required to purchase comparable components



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from other sources. If for any reason we could not obtain comparable replacement components from other sources in a timely manner, our business, results of
operations and financial condition could be harmed. In addition, some of our suppliers require long lead times to deliver requested quantities of components. If we are unable to obtain sufficient quantities of components, we could experience delays
or reductions in product shipments, which could also have a material adverse effect on our business, results of operations and financial condition. Due to rapid changes in technology, on occasion, one or more of the components used in our products
could become unavailable, resulting in unanticipated redesign and related delays in shipments.

We cannot assure you that similar delays
will not occur in the future. Our suppliers of components may be impacted by compliance with environmental regulations, including Restriction on the use of Hazardous Substances in electrical and electronic equipment, known as the RoHS Directive, and
Waste Electrical and Electronic Equipment Directive, known as the WEEE Directive, which could affect our continued supply of components or cause additional costs for us to implement new components into our manufacturing process.

Our products are complex and may contain errors or design flaws, which could be costly to correct

Our products are complex and often use state-of-the-art components, processes and techniques. When we release new products, or new versions of existing
products, they may contain undetected or unresolved errors or defects. Despite testing, errors or defects may be found in new products or upgrades after the commencement of commercial shipments. Undetected errors and design flaws have occurred in
the past and could occur in the future. These errors could result in delays, loss of market acceptance and sales, diversion of development resources, damage to our reputation, legal action by our customers, failure to attract new customers, and
increased service and warranty costs. The occurrence of any of these factors could cause our net revenue to decline.

Our critical
business and manufacturing facilities in Puerto Rico; Beverly, Massachusetts; San Jose, California; Santa Rosa, California; Tuscaloosa, Alabama, and Boulder, Colorado, as well as many of our customers and suppliers, are located near known hurricane
zones, earthquake fault zones, and flood plains, and the occurrence of these events or other catastrophic disasters could cause damage to our facilities and equipment, which could require us, as well as our customers and suppliers to cease, curtail
or disrupt operations

Capacity constraints, systems failures or security breaches could prevent access to our computer
systems, which could interrupt our business and harm our daily operations

Our business goals of performance, reliability and
availability require that we have adequate capacity in our computer systems to support our operations. As our operations grow in size and scope, we will need to improve and upgrade our systems and infrastructure to offer internal personnel enhanced
services, capacity, features and functionality. Our ability to provide high-quality service depends on the efficient and uninterrupted operation of our computer and communications systems. Our computer system has experienced system interruptions
from time to time and could experience periodic system interruptions in the future. Our systems and operations are also vulnerable to damage or interruption from human error, natural disasters, power loss, telecommunication failures, break-ins,
sabotage, computer viruses, design defects, vandalism, denial-of-service attacks and similar events. Even though we have a formal disaster recovery plan, it may not completely prevent any system failure or security breach that causes an interruption
in our business and daily operations.

If we fail to protect our intellectual property, our competitive position could be weakened
and our revenues may decline

We believe our success will depend in a large part on our ability to protect trade secrets, obtain or
license patents, and operate without infringing on the rights of others. We rely on a combination of trademark, copyright and patent registration, contractual restrictions and internal security to establish and protect our proprietary rights. These
measures may not provide sufficient protection for our trade secrets or other proprietary



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information. We have United States and international patents and patent applications pending that cover certain technology used by our operations. However,
while we believe that our patents have value, we rely primarily on innovation, technological expertise and marketing competence to maintain our competitive position. While we intend to continue our efforts to obtain patents whenever possible, there
can be no assurance that patents will be issued, or that new, or existing patents will not be challenged, invalidated or circumvented, or that the rights granted will provide us with any commercial benefit.

Third parties may assert intellectual property infringement claims, which would be costly to defend and may result in our loss of significant
rights

The telecommunications industry is characterized by the existence of a large number of patents and frequent litigation based
on allegations of patent infringement. We are subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others. From time to time we have received claims asserting that we have infringed the
proprietary rights of others. We cannot assure you that third parties will not assert infringement claims against us in the future, or that any such claims will not result in costly litigation or require us to obtain a license for such intellectual
property rights regardless of the merit of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. In the event any necessary
licenses are not available, we may not be able to sell or distribute our products, which may have a material adverse effect on our business.

We are subject to environmental regulations that could result in costly environmental liability

Our operations are
subject to numerous international, federal, state and local environmental regulations related to the storage, use, labeling, discharge, disposal and human exposure to toxic, volatile or otherwise hazardous chemicals used in our manufacturing
process. While we have not experienced any significant effects on our operations from environmental regulations, changes in these regulations may require additional capital expenditures or restrict our ability to expand our operations. Failure to
comply with such regulations could result in suspension or cessation of our operations or could subject us to significant liabilities. We could also be subject to fines and civil or criminal sanctions, third-party property damage or personal injury
claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Liability under environmental laws can be joint and several and without regard to comparative
fault. Although, we periodically review our facilities and internal operations for compliance with applicable environmental regulations, these reviews are necessarily limited in scope and frequency and may not reveal all potential instances of
noncompliance, possible injury or possible contamination. There can be no assurance that violations of environmental laws or regulations will not occur in the future as a result of the inability to obtain permits, human error, equipment failure or
other causes. The liabilities arising from any noncompliance with environmental regulations, or liability resulting from accidental contamination or injury from toxic or hazardous chemicals could result in liability that exceeds our resources. The
risk of liabilities increases as we acquire other companies, such as Datum, which use, or have used, hazardous substances at various current or former facilities.

A manufacturing facility previously operated by Datum in Austin, Texas is undergoing remediation for known subsurface contamination at that facility and adjoining properties. We believe that we will incur monitoring
costs for years to come in connection with this subsurface contamination. Further, we have received a demand from adjoining landowner and may be subject to claims from other adjoining landowners, in addition to claims for remediation, and the amount
of these costs and the extent of our exposure to these demands and claims cannot be determined at this time.

The determination of the
existence and cost of any additional contamination could involve costly and time-consuming negotiations and litigation. Remediation activities and subsurface contamination may require us to incur additional unreimbursed costs and could harm on-site
operations and the future use and value of the property. The remediation efforts, the property owners claims and any related governmental action may expose us to material liability and could significantly harm our business.



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Our operating results may be adversely affected as a result of our required compliance with the
adopted European Union Directives on Waste Electrical and Electronic Equipment and the Restriction of the Use of Hazardous Substances in electrical and electronic equipment, as well as other standards around the world

In January 2003, the European Union enacted Directive 2002/96/EC on Waste Electrical and Electronic Equipment Directive, known as the WEEE Directive.
The WEEE Directive requires producers of certain electrical and electronic equipment to be financially responsible for the future disposal costs of this equipment. Some of our products fall within the scope of this Directive, and, as such, we will
incur some financial responsibility for the collection, recycling, treatment and disposal of both new product sold, and product already sold prior to the WEEE Directives enforcement date, to customers within the European Union.

At the same time, the European Union also enacted Directive 2002/95/EC on the Restriction of the use of Hazardous Substances in electrical and electronic
equipment, known as the RoHS Directive. This Directive restricts the use of certain hazardous substances, including mercury, lead, cadmium, hexavalent chromium and certain flame retardants, used in the construction of component parts of electrical
and electronic equipment. We may need to change our manufacturing processes, redesign or reformulate some of our products, and change some components to eliminate these hazardous substances in our products, in order to be able to continue to offer
them for sale within the European Union.

Individual European Union member states are required to transpose the Directives into national
legislation. Although not all European Union member states have enacted legislation to implement these two Directives, we continue to review the applicability and impact of both Directives on the sale of our products within the European Union. If we
fail to comply with these laws, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties. We may incur increased manufacturing costs, and some products may be subject to
production delays to comply with future legislation which implements these Directives, but we cannot currently estimate the extent of such increased costs or production delays, if any. However, to the extent that any such cost increases or delays
are substantial, our operating results could be materially adversely affected. Also, we are aware that lead times for new, compliant components are longer and that older, non-compliant components are being discontinued at a fast pace. In addition,
we are aware of similar legislation that may be enacted in other countries, such as Japan and China, and possible new federal and state legislation in the United States, the cumulative impact of which could significantly increase our operating costs
and adversely affect our operating results.

We are subject to other significant domestic and foreign regulations relating to health
and safety, packaging, product content and labor regulations

Our business is subject to various other significant international,
federal, state and local, health and safety, packaging, product content and labor regulations. These regulations are complex, change frequently and have become more stringent over time. We may be required to incur significant expenses to comply with
these regulations or to remedy past violations of these regulations. Any failure by us to comply with applicable government regulations could also result in cessation of our operations or portions of our operations, product recalls or impositions of
fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products. Our products
and operations are also often subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation of other agencies such as the United States Federal Communications Commission. If we fail to
adequately address any of these regulations, our business may suffer.

Our customers may be subject to governmental regulations,
which, if changed, could negatively impact our business results

Federal and state regulatory agencies, including the United States
Federal Communications Commission and the various state public utility commissions and public service commissions, regulate most of our domestic



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telecommunications customers. Similar government oversight also exists in the international market. While we are not directly affected by this legislation,
such regulation of our customers may negatively impact our business. For instance, the sale of our products may be affected by the imposition upon certain of our customers of common carrier tariffs and the taxation of telecommunications services.
These regulations are continuously reviewed and changed by the various governmental agencies. Changes in current or future laws or regulations, in the United States or elsewhere, could negatively impact our business results.

Sales of a significant portion of our products to customers outside of the United States subjects us to business, economic and political risks

Our export sales to Europe, Latin America, Asia, and Canada continue to account for a significant portion of our revenue. We
anticipate that sales to customers located outside of the United States will continue to be a significant part of our net revenue for the foreseeable future. Because significant portions of our sales are to customers outside of the United States we
are subject to risks, including:



| |  |  | foreign currency fluctuations;
| | - |  | ------------------------------



| |  |  | the effects of terrorist activity and armed conflict, which may disrupt general economic activity and result in revenue shortfalls;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | export restrictions;
| | - |  | --------------------



| |  |  | a global pandemic if it does not continue to be contained;
| | - |  | ----------------------------------------------------------



| |  |  | longer payment cycles;
| | - |  | ----------------------



| |  |  | unexpected changes in regulatory requirements or tariffs;
| | - |  | ---------------------------------------------------------



| |  |  | protectionist laws and business practices that favor local competition;
| | - |  | -----------------------------------------------------------------------



| |  |  | dependence on local vendors;
| | - |  | ----------------------------



| |  |  | reduced or limited protection of intellectual property rights; and
| | - |  | ------------------------------------------------------------------



| |  |  | political and economic instability.
| | - |  | -----------------------------------

To date, very few of our international revenue and cost obligations have been denominated in foreign currencies. As a result, an increase in the value of the United States dollar relative to foreign currencies could make our products more
expensive, and thus, less competitive in foreign markets. A portion of our international revenues may be denominated in foreign currencies in the future, including the Euro, which will subject us to risks associated with fluctuations in these
foreign currencies. We do not currently engage in foreign currency hedging activities or derivative arrangements, but may do so in the future to the extent that such obligations become more significant.

In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and
regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we implement policies and procedures designed to facilitate compliance with these laws, our employees, contractors and agents, as well as those companies to which we
outsource certain of our business operations, may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.

If we have significant inventories that become obsolete or cannot be sold at acceptable prices, our results may be negatively impacted

Although we believe that we currently have made adequate adjustments for inventory that has declined in value, become obsolete, or is in
excess of anticipated demand, there can be no assurance that such adjustments will be adequate. If significant inventories of our products become obsolete, or are otherwise not able to be sold at favorable prices, our results of operations could be
materially affected.



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We may be subject to additional taxes from tax reviews by foreign authorities

Although we believe that we have made adequate reserves for foreign tax provisions, there can be no assurance that such reserves will be adequate until
the foreign authorities have reviewed the foreign tax filings.

Our sales and our cost may be affected by the ongoing movement
towards environmentally friendly manufacturing (green manufacturing)

Various countries in the international marketplace
are moving towards more environmentally friendly manufacturing requirements and carbon emission standards, and some companies or countries may require us to meet new standards, which could affect the sales of our products. These standards may impact
the materials used and our manufacturing process. Changes to our materials and manufacturing process could cause delays in product availability and may increase our manufacturing costs.



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|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



|Item 2. | Properties
|------- | ----------

The following are
our principal facilities as of June 28, 2009:



|                       |  |                                           |  |                         |  |                 
|---------------------- |  | ----------------------------------------- |  | ----------------------- |  | ----------------
|Location               |  | Primary Use                               |  | Owned/Leased            |  | Segments Used by
|                       |  |                                           | 
|San Jose , CA          |  | Headquarters, Manufacturing               |  | Leased                  |  | All             
|                       |  |                                           | 
|Aguadilla, Puerto Rico |  | Manufacturing                             |  | Leased                  |  | All but QoE     
|                       |  |                                           | 
|Beverly, MA            |  | Manufacturing                             |  | Owned (no encumbrances) |  | All but QoE     
|                       |  |                                           | 
|Santa Rosa, CA         |  | TT&M Division Headquarters, Manufacturing |  | Leased                  |  | TT&M            
|                       |  |                                           | 
|Boulder, CO            |  | Manufacturing                             |  | Leased                  |  | TT&M            
|                       |  |                                           | 
|Beijing, China         |  | Research and Development, Sales           |  | Leased                  |  | TSD             

We also lease other facilities in the United States, Europe, and Asia to support research and
development, sales and customer service. We believe that our current facilities are suitable and adequate to meet our anticipated needs for the foreseeable future, and we periodically evaluate whether additional facilities are necessary.



|Item 3. | Legal Proceedings
|------- | -----------------

We
formerly leased a tract of land for our operations in Texas. Those operations involved the use of solvents and, at the end of the lease, we remediated an area where the solvents had been deposited on the ground and obtained regulatory approval for
that remedial activity. In 1996, an environmental investigation of the property detected those same contaminants in groundwater in excess of then current regulatory standards. The groundwater contamination has migrated to some adjacent properties.
We have entered into the Texas Natural Resource Conservation Commissions Voluntary Cleanup Program (the Voluntary Cleanup Program) to obtain regulatory approval for closure of this site and a release from liability to the
State of Texas for subsequent landowners and lenders. We have notified adjacent property owners affected by the contamination of our participation in the Voluntary Cleanup Program. On May 20, 2004, we received a demand from the owner of
several adjacent lots for damages in the amount of $1.3 million, as well as seeking an indemnity for the contamination and a promise to remediate the contamination. On March 14, 2006, the adjacent property owner filed suit
in Probate Court No. 1, Travis County, Texas (Anna B. Miller, Individually and as Executrix of the Estate of Robert L. Miller, et al. vs. Austron, Inc., et al.) , seeking damages. We have not yet been
served in this matter. We are continuing to work on the remediation of the formerly leased site as well as the adjacent properties and intend to defend this lawsuit vigorously. As of June 28, 2009, we had an accrual of $0.2
million for remediation costs and other ongoing monitoring costs.

We are also a party to certain other claims in the normal course of our
operations. While the results of these claims cannot be predicted with any certainty, we believe that the final outcome of these matters will not have a material adverse effect on our financial position and results of operations.



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

Not applicable.



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PART II



|Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ----------------------------------------------------------------------------------------------------------------

Our common stock is traded on The NASDAQ Stock Market LLC, under the symbol SYMM. We had approximately 1,010 stockholders of record as of
August 31, 2009.

The following table sets forth the high and low per share sale prices reported on The NASDAQ Stock Market LLC
for our common stock for the periods indicated.



|                         |  |      |      |     |   |     
|------------------------ |  | ---- | ---- | --- | - | ----
|                         |  | High |      | Low
|Year ended June 29, 2008 |  |      |      |     |   |     
|First Quarter            |  | $    | 8.45 |     | $ | 4.45
|Second Quarter           |  |      | 5.25 |     |   | 4.00
|Third Quarter            |  |      | 4.73 |     |   | 3.15
|Fourth Quarter           |  |      | 4.57 |     |   | 3.49
|                         |  |     
|Year ended June 28, 2009 |  |      |      |     |   |     
|First Quarter            |  | $    | 5.18 |     | $ | 3.84
|Second Quarter           |  |      | 4.97 |     |   | 3.00
|Third Quarter            |  |      | 4.29 |     |   | 2.58
|Fourth Quarter           |  |      | 5.99 |     |   | 3.45

Symmetricom has never declared nor paid cash dividends on its capital stock and does not
anticipate paying any cash dividends in the foreseeable future.

The information required by this item regarding equity compensation plans
is incorporated by reference to the information in Item 12 of this Form 10-K.

Stock Repurchase Program

On September 29, 2008, the Companys Board of Directors authorized management to repurchase an additional 2.0 million shares of Symmetricom
common stock. As of June 28, 2009, the total number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 1.6 million.

During fiscal 2009, we repurchased 1.3 million shares of common stock pursuant to our repurchase program for an aggregate price of approximately
$5.4 million.

A further 0.1 million shares were repurchased by us in fiscal 2009 for an aggregate price of approximately $0.4 million
to cover the cost of taxes on vested restricted stock.

The following table provides monthly detail regarding our share repurchases during
the three months ended June 28, 2009:



|                                      |  |                               |  |                            |      |                                                                             |         |                                                                               |          
|------------------------------------- |  | ----------------------------- |  | -------------------------- | ---- | --------------------------------------------------------------------------- | ------- | ----------------------------------------------------------------------------- | ---------
|Period                                |  | TotalNumberof SharesPurchased |  | AveragePrice Paidper Share |      | Total Numberof SharesPurchased
asPart of PubliclyAnnounced Plansor Programs |         | ApproximateNumber of SharesThat May YetBe
PurchasedUnder the Plansor Programs
|March 30, 2009 through April 26, 2009 |  |                              |  | $                          |     |                                                                             |        |                                                                               | 1,686,783
|April 27, 2009 through May 24, 2009   |  | 17,221                        |  | $                          | 4.60 |                                                                             | 17,221  |                                                                               | 1,669,562
|May 25, 2009 through June 28, 2009    |  | 98,692                        |  | $                          | 4.94 |                                                                             | 98,692  |                                                                               | 1,570,870
|                                      |  |                               |  |                            |      |                                                                             |         |                                                                               |          
|Total                                 |  | 115,913                       |  | $                          | 4.89 |                                                                             | 115,913 |                                                                               |          
|                                      |  |                               |  |                            |      |                                                                             |         |                                                                               |          



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Comparative Stock Performance

The graph below compares the cumulative total stockholders return on our common stock for the last five fiscal years with the total return on the
S&P 500 Index and the S&P Information Technology Index over the same period (assuming the investment of $100 in our common stock, the S&P 500 Index and the S&P Information Technology Index, and reinvestment of all dividends).

LOGO

* $100 invested on June 27, 2004 in stock or index, including reinvestment of dividends.

Fiscal year ended June 28, 2009.

Copyright© 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.



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|Item 6. | Selected Financial Data
|------- | -----------------------

The following selected consolidated financial data for the fiscal years ended June 28, 2009, June 29, 2008, July 1, 2007, July 2, 2006, and July 3, 2005 should be read in conjunction with our
consolidated financial statements, the related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. The historical results are not necessarily
indicative of the results to be expected for any future period.



|                                                              |  |                                          |         |   |              |   |         |             |  |             |         |  |             |         |   |  |   |        
|------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ------------ | - | ------- | ----------- |  | ----------- | ------- |  | ----------- | ------- | - |  | - | -------
|                                                              |  | Year ended                              
|                                                              |  | June 28,2009                             |         |   | June 29,2008 |   |         | July 1,2007 |  | July 2,2006 |         |  | July 3,2005
|                                                              |  | (In thousands, except per share amounts)
|Consolidated Statement of Operations Data:                    |  |                                          |         |   |              |   |         |             |  |             |         |  |             |         |   |  |   |        
|Net revenue                                                   |  | $                                        | 220,831 |   |              | $ | 208,052 |             |  | $           | 208,380 |  | $           | 176,112 |   |  | $ | 179,388
|Operating income (loss)(1),(2),(3)                            |  |                                          | (35,896 | ) |              |   | (19,603 | )           |  |             | 9,238   |  |             | (4,166  | ) |  |   | 18,180 
|Income (loss) before income taxes and discontinued operations |  |                                          | (38,331 | ) |              |   | (20,255 | )           |  |             | 13,646  |  |             | (1,671  | ) |  |   | 19,288 
|Income (loss) from continuing operations(4)                   |  |                                          | (40,671 | ) |              |   | (14,589 | )           |  |             | 6,058   |  |             | (857    | ) |  |   | 17,210 
|Gain from discontinued operations, net of tax(5)              |  |                                          |        |   |              |   | 121     |             |  |             | 242     |  |             | 921     |   |  |   | 985    
|Net earnings (loss)                                           |  |                                          | (40,671 | ) |              |   | (14,468 | )           |  |             | 6,300   |  |             | 64      |   |  |   | 18,195 
|Basic earnings (loss) per share from continuing operations    |  |                                          | (0.93   | ) |              |   | (0.33   | )           |  |             | 0.13    |  |             | (0.02   | ) |  |   | 0.38   
|Basic earnings per share from discontinued operations         |  |                                          |        |   |              |   |        |             |  |             | 0.01    |  |             | 0.02    |   |  |   | 0.02   
|Basic net earnings (loss) per share                           |  |                                          | (0.93   | ) |              |   | (0.33   | )           |  |             | 0.14    |  |             |        |   |  |   | 0.40   
|Diluted earnings (loss) per share from continuing operations  |  |                                          | (0.93   | ) |              |   | (0.33   | )           |  |             | 0.13    |  |             | (0.02   | ) |  |   | 0.37   
|Diluted earnings per share from discontinued operations       |  |                                          |        |   |              |   |        |             |  |             | 0.01    |  |             | 0.02    |   |  |   | 0.02   
|Diluted net earnings (loss) per share                         |  |                                          | (0.93   | ) |              |   | (0.33   | )           |  |             | 0.14    |  |             |        |   |  |   | 0.39   
|                                                              |  |                                          |         |   |             
|                                                              |  | June 28,2009                             |         |   | June 29,2008 |   |         | July 1,2007 |  | July 2,2006 |         |  | July 3,2005
|                                                              |  | (In thousands )                         
|Consolidated Balance Sheet Data:                              |  |                                          |         |   |              |   |         |             |  |             |         |  |             |         |   |  |   |        
|Total assets                                                  |  | $                                        | 276,442 |   |              | $ | 378,569 |             |  | $           | 409,187 |  | $           | 392,441 |   |  | $ | 391,751
|Long-term obligations                                         |  |                                          | 62,248  |   |              |   | 59,855  |             |  |             | 125,550 |  |             | 126,670 |   |  |   | 126,967
|Stockholders' equity.                                         |  |                                          | 173,104 |   |              |   | 216,139 |             |  |             | 236,336 |  |             | 224,522 |   |  |   | 226,891



|(1) | During fiscal 2009, we recorded an impairment charge of $48.1 million in goodwill and $9.7 million in integration and restructuring charges.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During fiscal 2008, we recorded an impairment charge of $6.5 million in goodwill and $7.8 million in intangible assets related to our Quality of Experience Assurance business
segment.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During fiscal 2006, we recorded an impairment charge of $7.0 million in goodwill and $1.2 million in intangible assets related to our Wireless/OEM business segment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | During fiscal 2007, we recorded an expense of $3.4 million for the income tax effect of the liquidations of QoSmetrics, S.A. and QoSmetrics, Inc., which were acquired on
January 2, 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Reflects amounts related to gains (losses) on discontinued operations. The Specialty Manufacturing /Other business segment was discontinued in the third quarter of fiscal 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying consolidated financial
statements and related notes included elsewhere in this report on Form 10-K.

Overview

Symmetricom is a leading supplier of precise timing standards to industry, government, utilities, research centers and aerospace markets. We also supply
QoE (Quality of Experience) solutions that enable communication service providers to monitor the performance, as perceived by end users, of IP-based video and other next generation network applications. Timing and synchronization products and
services include network synchronization systems and timing elements used by network operators and users, governments and professional services. Such products play an important role in the operation, bandwidth utilization, and quality of service of
wireline, wireless and cable networks enabling our customers to increase the reliability of their networks in todays evolving communications environment.

Symmetricoms customers include worldwide public network providers, incumbent local exchange carriers (ILECs), public telephone and telegraph companies (PTTs), competitive local exchange carriers (CLECs), other
telephone companies, wireless service providers, cable television operators, distributors and systems integrators, communications original equipment manufacturers (OEMs), aerospace contractors, governments and research facilities.

Our fiscal year is the 52 or 53 weeks ending on the Sunday closest to June 30. Fiscal years 2007 through 2009 were 52-week fiscal years.

Fiscal Year 2009 Summary

For the year ended
June 28, 2009, Symmetricom achieved revenues of $221 million, up 6% from the previous year, augmented by sales of our new cable timing product and continued strength in the Timing, Test and Measurement business. Fiscal 2009 was a year of
continuing innovation and progress in our growth investments and included measurable gains across many markets. We are now the leading supplier of timing products to the cable market, and have fortified our position in evolving wireless, wireline,
government and enterprise networks. In fiscal 2009 we began to realize the benefits of our outsource-manufacturing strategy as we completed the transfer of printed circuit board assemblies to our outsourcing vendor. We made additional business model
refinements during the year that further reduced costs in support of our near- and long-term profitability objectives. Our new product initiatives continued to show progress and promise with our cable timing product sales contributing meaningfully
to gross margin. Sales of PackeTime, though still emerging, are gaining traction, with nearly a dozen carriers and OEMs now customers. The Chip Scale Atomic Clock, which we believe will be an important long-term growth driver for our Timing, Test
and Measurement business, continues to make appreciable progress toward volume production.

Impairment of Goodwill

During the third quarter of fiscal 2009, due to a decline in our stock price and a lowered business outlook, we determined that indicators of a potential
goodwill impairment existed. Accordingly, we completed a step one goodwill impairment test to determine whether the decline in market capitalization and business outlook revisions indicated that the carrying value of our reporting units were in
excess of fair value. Based on the results of our step one test, we determined that the fair values of the Wireline and Timing, Test and Measurement reporting units were less than their respective carrying amounts, and therefore the second step of
the goodwill impairment test was performed to measure the amount of impairment loss for each reporting unit. As a result, we recorded a goodwill impairment charge of approximately $48.1 million in the third quarter of fiscal 2009,



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consisting of $28.0 million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting segment.

Restructuring

During the second half
of fiscal 2009, we announced two restructuring plans to further streamline manufacturing operations and improve operational efficiencies. As part of our ongoing outsourcing and operational efficiency program, we eliminated approximately 130
positions, or about 14% of our total workforce. The reductions began in January 2009 and will be completed by the third quarter of fiscal 2010. We expect to incur restructuring charges of approximately $8.8 million in connection with the plans.
Total restructuring charges are expected to include approximately $2.0 million in accelerated depreciation charges and approximately $6.8 million in one-time termination benefits and other restructuring related charges. Total charges related to
these two restructurings in fiscal 2009 were $5.7 million, including $1.2 million related to accelerated depreciation and $4.5 million in one-time termination benefits and other restructuring related charges. Upon completion, we expect the
restructuring and other actions to reduce our annual manufacturing and operating costs by approximately $9.5 million.

Over the first nine
months of fiscal 2010, we expect to incur remaining integration and restructuring charges amounting to $3.1 million, including approximately $0.9 million in accelerated depreciation charges and approximately $2.2 million in one-time termination
benefits and other restructuring related charges.

Other

On October 1, 2008, we announced Justin Spencer had been named as Chief Financial Officer and Executive Vice President, effective September 30, 2008.

On June 28, 2009, our President and Chief Executive Officer, Thomas W. Steipp, retired from Symmetricom and resigned from our Board of Directors. On
July 27, 2009, we announced that David G. Côté had been named as President and Chief Executive Officer, effective August 3, 2009. The Board of Directors has also appointed Mr. Côté to the Board of Directors.

Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions

Financial markets in the U.S. and abroad have experienced a severe downturn arising from a multitude of factors, including concerns about the systemic
impact of inflation and deflation, geopolitical issues, adverse credit conditions, higher energy costs, lower corporate profits and capital spending, and declining real estate and mortgage markets, combined with volatile oil prices, decreased
business and consumer confidence and increased unemployment. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern
about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases cease, to provide funding to borrowers.

Adverse economic conditions in the U.S. and other markets in which we operate and into which we sell our products have adversely affected and may
continue to adversely affect our liquidity and financial condition. If current economic conditions or the constrained credit environment continue, our customers may be unable to timely replace maturing liabilities and access the capital markets to
meet liquidity needs on satisfactory terms or at all, resulting in adverse effects on our results of operations. In addition, our customers may delay or reduce capital expenditures. This could result in reductions in sales of our products, longer
sales cycles, difficulties in collecting accounts receivable, additional excess and obsolete inventory, potential impairment charges related to our goodwill and intangible assets, gross margin deterioration, slower adoption of new technologies,
increased price competition and supplier difficulties.



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Fiscal Year 2010 Outlook

We believe our new product initiatives, an expanded geographic focus, and a more streamlined cost structure will enable us to continue to benefit from the modernization of communication networks worldwide and to
capitalize on promising opportunities for growth in fiscal 2010.

As communication service providers roll out next generation networks to
keep up with rising traffic and demand, we expect sales of our sync equipment and investments in next-generation timing products to contribute to our business and create opportunities for expansion. Government networks and systems are also evolving,
driving the ongoing need for reliable sync and timing, and creating demand for innovative new products to support their changing needs. We believe our Timing, Test, and Measurement business is positioned to perform well in this environment.

While we will continue our focus on efficiency in fiscal 2010, our primary efforts will be centered on maximizing existing opportunities
and bringing to market innovative new products. We also expect to identify and pursue potential new growth opportunities that leverage our strong technology platform and relationships. We are mindful that we are still in an unpredictable economic
environment and have limited visibility into our customers calendar 2010 capital spending plans.

We expect our fiscal 2010 revenue
to have a seasonal pattern similar to prior years with stronger revenues in our fiscal second half as telecommunications and cable service providers release their 2010 capital budgets. Following the successful launch of our cable product, we now
have the supply chain capabilities to meet market demand and expect revenue for this product to more closely reflect cable infrastructure spending seasonality. Profit is expected to be even more heavily weighted to the second half as we realize the
full benefit of the cost reductions we announced in June 2009.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require
us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates and judgments.
Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider the following accounting policies to be critical accounting estimates due
to their subjective nature and judgments involved in each:

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or
determinable and collectibility is reasonably assured. Our standard arrangement for our domestic and international customers includes a signed purchase order or contract and no right of return of delivered products. Revenue is recognized net of any
taxes collected from customers and subsequently remitted to governmental authorities.

We assess collectibility based on the
creditworthiness of the customer and past transaction history. We perform periodic credit evaluations of our customers and do not require collateral from our customers. However, for many of our international customers, we require an irrevocable
letter of credit to be issued by the customer before the purchase order is accepted. If we determine that collection of the invoice is not reasonably assured, we recognize the revenue at the time that collection becomes reasonably assured, which is
generally upon the receipt of cash.



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Generally, product revenue is generated from the sale of synchronization and timing equipment with
embedded software that is incidental to product functionality. For instances where embedded software is more than incidental to product functionality, we account for the transactions in accordance with the rules applicable to software revenue
recognition. We commonly have transactions that involve sales of both product and services to our customers. Service revenue is recognized as the services are performed provided collection of the related receivable is reasonably assured. Our sales
to distributors are made under agreements allowing for returns or credits under certain circumstances. Accordingly, we defer an estimate of returns from distributors based on a historical average of distributor returns. We record commission expense
both when orders are received and shipped, at which times the commission is both earned and payable.

Revenue from contracts that require
development and manufacture in accordance with customer specifications and have a lengthy development period may be categorized into two types: firm fixed price and cost-plus reimbursement. Revenue is recognized under the fixed price contracts using
the percentage of completion method (cost-to-cost basis), principally based upon the costs incurred relative to the total estimated costs at completion on the individual contracts. Any anticipated losses on contracts are charged to operations
as soon as they are determinable. Revenue recognized under cost-plus contracts is recognized on the basis of direct and indirect costs incurred plus a negotiated profit calculated as a percentage of costs or as a performance based award fee. Revenue
from long-term contracts is reviewed periodically, with adjustments recorded in the period in which the revisions are made.

Allowance
for Doubtful Accounts

We maintain an allowance for doubtful accounts based on an ongoing review of customer accounts, payment patterns
and specific collection issues. Where specific collection issues are identified, we record a specific allowance based on the amount that we believe will be uncollected. For accounts where specific collection issues are not identified, we record a
reserve based on the age of the receivable and historical collection patterns.

Inventory Valuation

Inventories are valued at the lower of cost or market, cost being determined on a first-in, first-out basis. We assess the valuation of all inventories,
including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of managements estimated usage is written down to its estimated market value less costs to sell, if less
than its cost. Inherent in the estimates of market value are managements estimates related to current economic trends, future demand and technological obsolescence. If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. If the inventory value is written down to its net realizable value, and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory
is not realized until the inventory is sold.

Warranty

Our standard warranty agreement is one year from shipment. However, our warranty agreements are contract and component specific and can range to twenty years for selected components. We offer extended warranty
contracts on products that are less than eight years old. The extended warranty contract is applicable for a maximum of nine years after the expiration of the standard one-year warranty. The revenue from extended warranty contracts is recognized
ratably over the period of contract.

We accrue for anticipated warranty costs upon shipment. Our warranty reserve is based on the number
of installed units, historical analysis of the volume of product returned to us under the warranty program, managements judgment regarding anticipated rates of warranty claims and associated repair costs. We use the historical data to forecast
our anticipated future warranty obligations. This analysis is updated on a quarterly basis.



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Accounting for Income Taxes

We provide for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be realized. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the financial statements in the period that includes the enactment
date.

The carrying value of our net deferred tax assets, which are made up of tax deductions, net operating loss carryforwards and tax
credits, assumes that we will be able to generate sufficient future income to fully realize these assets. We evaluate the weight of all available evidence in determining whether it is more likely than not that some portion of the deferred tax assets
will not be realized. If we do not generate sufficient future income, the realization of these deferred tax assets may be impaired, resulting in an additional income tax expense. A portion of our tax credits is related to stock options and has a
valuation allowance because of uncertainty regarding their realization. If these tax credits are realized, the benefit will be credited to common stock.

In fiscal 2008, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation
of FASB Statement No. 109, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from an uncertain
tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities, classification of
current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

Short-term Investments

Short-term investments consist of government securities, mutual funds and
corporate debt securities that mature between three and 36 months. All of our short-term investments, except the deferred compensation assets, are classified as available-for-sale. During fiscal 2009, we reclassified the deferred compensation assets
from available-for-sale to trading securities in order to maintain consistency with the method in which we account for the deferred compensation obligations. Available-for-sale securities are carried at fair value with temporary unrealized gains and
losses, net of taxes, reported as a component of stockholders equity. Unrealized gains and losses related to trading securities are included in earnings, net of taxes.

Short-term investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. We consult with our investment
manager and consider available quantitative and qualitative evidence in evaluating potential impairment of our investments on a quarterly basis. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market
conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost
basis in the investment is established.

During fiscal 2009, we recorded $1.4 million in losses related to short-term investments. See the
Liquidity and Capital Resources section below for additional information regarding this loss and our determination of the fair value of these investments at June 28, 2009.

During the fourth quarter of fiscal 2009, we adopted Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 115-2
and FAS 124-2, Recognition and Presentation of Other-Than-Temporary



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Impairments (FSP FAS 115-2/124-2). FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security
into two components when there are credit-related losses associated with an impaired debt security that management asserts it has no intent to sell, and it is more likely than not that management will not be required to sell the security before
recovery of the securitys cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in earnings, and the amount of the other-than-temporary impairment related to other factors is recorded in other
comprehensive loss. For fiscal 2009, the adoption of FSP FAS 115-2/124-2 did not have a material impact on our consolidated financial statements.

Business Combinations

We allocate the purchase price of acquired companies to the tangible and intangible assets acquired,
liabilities assumed, as well as in-process research and development based on their estimated fair values. We engage an independent third-party appraisal firm to assist us in determining the fair values of the assets acquired and the liabilities
assumed. Such valuations require management to make significant estimations and assumptions, especially with respect to intangible assets.

Critical estimates in valuing certain intangible assets include but are not limited to: future expected cash flows from customer contracts, customer lists, distribution agreements, acquired developed technologies and patents; expected costs
to develop the in-process research and development into commercially viable products and estimating cash flows from the projects when completed; and the brand awareness and the market position of the acquired products and assumptions about the
period of time the brand will continue to be used in the combined companys product portfolio. Managements estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

Valuation of Goodwill

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test the carrying amount of goodwill annually during the fourth fiscal quarter as well as at other times if an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.

During the third quarter of
fiscal 2009, due to a decline in our stock price and a lowered business outlook, we determined that indicators of a potential goodwill impairment existed. Accordingly, we completed a step one goodwill impairment test to determine whether the decline
in market capitalization and business outlook revisions indicated that the carrying value of our reporting units were in excess of fair value.

A step one goodwill impairment test compares the fair value of a reporting unit to its carrying value to determine if a step two test is required. We estimate our reporting units fair values using a weighted average of values
determined under an income approach and a market approach. We weighed these approaches at approximately 67% and 33% for the income approach and the market approach, respectively. We applied a lower weighting to the market approach as there are a
limited number of highly comparable companies, which are a key component of the market approach. Under the income approach, fair value is determined by discounting estimated future cash flows. The income approach is dependent on several significant
assumptions, including our earnings projections and our cost of capital. Under the market approach, we estimate the fair value of each reporting unit based on pricing multiples of certain financial parameters observed in comparable companies.

Based on the results of our step one test, we determined that the fair values of the Wireline and Timing, Test and Measurement reporting
units were less than their respective carrying amounts, and therefore the second step of the goodwill impairment test was performed to measure the amount of impairment loss for the each reporting unit. As a result, we recorded a goodwill impairment
charge of approximately $48.1 million in the third quarter



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of fiscal 2009, consisting of $28.0 million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting
segment.

Valuation of Long-Lived Assets Including Intangible Assets Subject to Amortization

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. Intangible assets primarily include purchased technology and trademarks. We review our intangible assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Factors we consider important
that could trigger an impairment review include significant under-performance relative to historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business,
or significant negative industry or economic trends. If these criteria indicate that the value of the intangible asset may be impaired, an evaluation of the recoverability of the net carrying value of the asset over its remaining useful life is
made. If this evaluation indicates that the intangible asset is not recoverable, the net carrying value of the related intangible asset will be reduced to fair value. Any such impairment charge could be significant and could have a material adverse
effect on our financial statements if and when an impairment charge is recorded. If an impairment charge were recognized, the amortization related to intangible assets would decrease during the remainder of the life of the asset.

In the third quarter of fiscal 2009, because of the identification of goodwill impairment indicators (See aboveValuation of Goodwill), we first
reviewed our other intangible and long-lived assets for impairment and determined there was no impairment.



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Results of Operations

The following table presents the percentage of total revenue for the respective line items in our consolidated statement of operations:



|                                              |  |               |    |  |               |    |  |              |   
|--------------------------------------------- |  | ------------- | -- |  | ------------- | -- |  | ------------ | --
|                                              |  | Year ended    |   
|                                              |  | June 28, 2009 |    |  | June 29, 2008 |    |  | July 1, 2007 |   
|Net revenue                                   |  |               |    |  |               |    |  |              |   
|Telecom Solutions Division:                   |  |               |    |  |               |    |  |              |   
|Wireline Products                             |  | 47.0          | %  |  | 43.6          | %  |  | 45.1         | % 
|Wireless/OEM Products                         |  | 8.3           | %  |  | 11.1          | %  |  | 12.8         | % 
|Global Services                               |  | 6.0           | %  |  | 7.4           | %  |  | 7.0          | % 
|Quality of Experience Assurance               |  | 0.5           | %  |  | 0.8           | %  |  | 0.2          | % 
|Timing, Test and Measurement Division         |  | 38.2          | %  |  | 37.1          | %  |  | 34.9         | % 
|                                              |  |               |    |  |               |    |  |              |   
|Total net revenue                             |  | 100.0         | %  |  | 100.0         | %  |  | 100.0        | % 
|Cost of products and services                 |  | 50.6          | %  |  | 54.7          | %  |  | 52.7         | % 
|Amortization of purchased technology          |  | 0.7           | %  |  | 1.6           | %  |  | 1.6          | % 
|Impairment of intangible assets               |  |              | %  |  | 2.7           | %  |  |             | % 
|Integration and restructuring charges         |  | 1.8           | %  |  | 0.3           | %  |  | 0.1          | % 
|Gross profit                                  |  | 47.0          | %  |  | 40.7          | %  |  | 45.6         | % 
|Operating expenses:                           |  |               |    |  |               |    |  |              |   
|Research and development                      |  | 12.0          | %  |  | 13.4          | %  |  | 11.4         | % 
|Selling, general and administrative           |  | 26.7          | %  |  | 31.6          | %  |  | 29.1         | % 
|Acquired in-process research and development  |  |              | %  |  |              | %  |  | 0.1          | % 
|Amortization of intangible assets             |  | 0.2           | %  |  | 0.5           | %  |  | 0.4          | % 
|Integration and restructuring charges         |  | 2.6           | %  |  | 0.5           | %  |  | 0.2          | % 
|Impairment of goodwill                        |  | 21.8          | %  |  | 3.1           | %  |  |             | % 
|Impairment of intangible assets               |  |              | %  |  | 1.0           | %  |  |             | % 
|Operating income (loss)                       |  | (16.3         | )% |  | (9.4          | )% |  | 4.4          | % 
|Gain on sale of asset                         |  |              | %  |  | 0.3           | %  |  |             | % 
|Loss on repayment of convertible notes, net . |  | (0.2          | )% |  |              | %  |  |             | % 
|Loss on short-term investments, net           |  | (0.6          | )% |  | (1.8          | )% |  |             | % 
|Interest income                               |  | 0.8           | %  |  | 3.4           | %  |  | 4.4          | % 
|Interest expense                              |  | (1.1          | )% |  | (2.3          | )% |  | (2.3         | )%
|Income (loss) before income taxes             |  | (17.4         | )% |  | (9.7          | )% |  | 6.5          | % 
|Income tax provision (benefit)                |  | 1.1           | %  |  | (2.7          | )% |  | 3.6          | % 
|Income (loss) from continuing operations      |  | (18.4         | )% |  | (7.0          | )% |  | 2.9          | % 
|Gain from discontinued operations, net of tax |  |              | %  |  | 0.1           | %  |  | 0.1          | % 
|Net Income (loss)                             |  | (18.4         | )% |  | (7.0          | )% |  | 3.0          | % 



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Fiscal Years Ended June 28, 2009 and June 29, 2008



|                                      |  |               |         |   |               |   |         |          |  |   |        |   |  |       |  
|------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | -------- |  | - | ------ | - |  | ----- | -
|                                      |  | Year ended    |         |   | $ Change      |   |         | % Change | 
|                                      |  | June 28, 2009 |         |   | June 29, 2008 |   |         |          |  |   |        |  
|Net Revenue(dollars in thousands):    |  |               |         |   |               |   |         |          |  |   |        |   |  |       |  
|Wireline Products                     |  | $             | 104,022 |   |               | $ | 90,708  |          |  | $ | 13,314 |   |  | 14.7  | %
|Wireless/OEM Products                 |  |               | 18,265  |   |               |   | 23,025  |          |  |   | (4,760 | ) |  | (20.7 | )
|Global Services                       |  |               | 13,209  |   |               |   | 15,408  |          |  |   | (2,199 | ) |  | (14.3 | )
|Quality of Experience Assurance       |  |               | 1,085   |   |               |   | 1,666   |          |  |   | (581   | ) |  | (34.9 | )
|Timing, Test and Measurement Division |  |               | 84,250  |   |               |   | 77,245  |          |  |   | 7,005  |   |  | 9.1   |  
|                                      |  |               |         |   |               |   |         |          |  |   |        |   |  |       |  
|Total Net Revenue                     |  | $             | 220,831 |   |               | $ | 208,052 |          |  | $ | 12,779 |   |  | 6.1   | %
|Percentage of Revenue                 |  |               | 100.0   | % |               |   | 100.0   | %        |  |   |        |   |  |       |  

Net revenue consists of sales of products, services and software licenses. Net
revenue increased by $12.8 million or 6.1% in fiscal 2009 compared to fiscal 2008. Revenue from Wireline Products increased $13.3 million or 14.7% primarily due to higher sales of cable products and shipments to a new international customer. Revenue
from the Timing, Test and Measurement Division increased $7.0 million or 9.1% primarily due to higher sales to the government communication and electronic system programs. Wireless/OEM Products revenue decreased by $4.8 million, or 20.7%, in fiscal
2009 due primarily to a decline in legacy technology investments by wireless carriers. Revenues from the Global Services segment decreased by $2.2 million, or 14.3%, primarily due to lower installation revenue from a major customer. Revenue for the
Quality of Experience Assurance segment decreased $0.6 million or 34.9% in fiscal 2009 due primarily to extended trial periods by potential customers and the slower rollout of new products due to a refocus on development of new features to meet
market requirements.



|                                      |  |               |         |   |               |   |        |          |  |   |        |   |  |       |  
|------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------ | -------- |  | - | ------ | - |  | ----- | -
|                                      |  | Year ended    |         |   | $ Change      |   |        | % Change | 
|                                      |  | June 28, 2009 |         |   | June 29, 2008 |   |        |          |  |   |        |  
|Gross Profit(dollars in thousands):   |  |               |         |   |               |   |        |          |  |   |        |   |  |       |  
|Wireline Products                     |  | $             | 62,017  |   |               | $ | 47,041 |          |  | $ | 14,976 |   |  | 31.8  | %
|Wireless/OEM Products                 |  |               | 4,233   |   |               |   | 6,199  |          |  |   | (1,966 | ) |  | (31.7 | )
|Global Services                       |  |               | 3,883   |   |               |   | 4,183  |          |  |   | (300   | ) |  | (7.2  | )
|Quality of Experience Assurance       |  |               | 562     |   |               |   | 1,226  |          |  |   | (664   | ) |  | (54.2 | )
|Timing, Test and Measurement Division |  |               | 38,429  |   |               |   | 35,632 |          |  |   | 2,797  |   |  | 7.8   |  
|Other cost of sales                   |  |               | (5,340  | ) |               |   | (9,635 | )        |  |   | 4,295  |   |  | (44.6 | )
|                                      |  |               |         |   |               |   |        |          |  |   |        |   |  |       |  
|Total Gross Profit.                   |  | $             | 103,784 |   |               | $ | 84,646 |          |  | $ | 19,138 |   |  | 22.6  | %
|Percentage of Revenue                 |  |               | 47.0    | % |               |   | 40.7   | %        |  |   |        |   |  |       |  

Gross profit increased $19.1 million or 22.6% during fiscal 2009 compared to the
prior year. Gross profit for Wireline Products increased by $15.0 million, or 31.8%. This increase was higher than the revenue increase of 14.7% and was primarily due to a favorable sales mix of cable products with higher gross margin. Furthermore,
Wireline Products benefited from lower costs as a result of the initial phase of outsourcing certain manufacturing capacity to a subcontractor. Gross profit for the Timing, Test and Measurement Division increased by $2.8 million or 7.8%, in line
with the 9.1% increase in revenue. Gross profit for the Wireless/OEM Products decreased by $2.0 million or 31.7%, which was higher than the revenue decrease of 20.7% due primarily to a reduction in price to a major customer. Gross profit for Global
Services decreased $0.3 million or 7.2%, which was less than the revenue decrease of 14.3% primarily due to the fact that the revenue decrease was weighted towards installations, which have lower profit margins. Gross profit for Quality of
Experience Assurance decreased by $0.7 million or 54.2%, which is higher than the revenue decrease of 34.9%, primarily due to higher manufacturing period costs. We expect gross margin to remain flat in fiscal 2010 compared to fiscal 2009, subject to
the impact of product mix.

Other cost of sales decreased $4.3 million or 44.6% primarily due to a $5.7 million charge in the fourth
quarter of fiscal 2008 for impairment of technology-related intangible assets for the Quality of Experience



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Assurance business segment. Because of this impairment, amortization of intangibles decreased by $1.9 million in fiscal 2009 when compared to fiscal 2008.
Other cost of sales for fiscal 2009 included $3.9 million in restructuring charges primarily for employee severance and accelerated depreciation compared to restructuring charges of $0.6 million in fiscal 2008.



|                                                        |  |               |        |   |               |   |        |          |  |   |        |   |  |      |   
|------------------------------------------------------- |  | ------------- | ------ | - | ------------- | - | ------ | -------- |  | - | ------ | - |  | ---- | --
|                                                        |  | Year ended    |        |   | $ Change      |   |        | % Change | 
|                                                        |  | June 28, 2009 |        |   | June 29, 2008 |   |        |          |  |   |        |  
|Research and development expense (dollars in thousands) |  | $             | 26,429 |   |               | $ | 27,887 |          |  | $ | (1,458 | ) |  | (5.2 | )%
|Percentage of Revenue                                   |  |               | 12.0   | % |               |   | 13.4   | %        |  |   |        |   |  |      |   

Research and development expenses consist primarily of salaries and benefits,
prototype expenses and fees paid to outside consultants. Research and development expense decreased $1.5 million, or 5.2%, compared to fiscal 2008, due primarily to lower headcount as a result of the fiscal 2009 restructurings and lower stock-based
compensation costs. In terms of dollar amount, we expect that research and development expenses in fiscal 2010 will be consistent with fiscal 2009.



|                                                           |  |               |        |   |              |   |        |          |  |   |        |   |  |       |   
|---------------------------------------------------------- |  | ------------- | ------ | - | ------------ | - | ------ | -------- |  | - | ------ | - |  | ----- | --
|                                                           |  | Year ended    |        |   | $ Change     |   |        | % Change | 
|                                                           |  | June 28, 2009 |        |   | July 1, 2007 |   |        |          |  |   |        |  
|Selling, general and administrative (dollars in thousands) |  | $             | 58,856 |   |              | $ | 65,693 |          |  | $ | (6,837 | ) |  | (10.4 | )%
|Percentage of Revenue                                      |  |               | 26.7   | % |              |   | 31.6   | %        |  |   |        |   |  |       |   

Selling, general and administrative expense consists primarily of salaries and
benefits, sales commissions and travel-related expenses for our sales and services, finance, human resources, information technology and related facility costs and part of the amortization expenses of our intangible assets. Selling, general and
administrative expenses decreased by 10.4% to $58.9 million compared to $65.7 million for fiscal 2008. The decrease in expenses consisted primarily of a reduction in compensation-related expenses including stock-based compensation and deferred
compensation costs, a reduction of $0.4 million for a change in estimate for the allowance for doubtful accounts to correspond to our current bad debt write-off experience, and a $1.3 million reduction in professional fees related to the restatement
of our financial statements for fiscal 2008. This decrease was partially offset by $1.0 million in CEO post-employment compensation and a $2.2 million increase in the bonus accrual. In terms of dollar amount, we expect selling, general and
administrative expenses to decline slightly in fiscal 2010 compared to fiscal 2009.



|                                                         |  |               |     |   |               |   |     |          |  |   |      |   |  |       |   
|-------------------------------------------------------- |  | ------------- | --- | - | ------------- | - | --- | -------- |  | - | ---- | - |  | ----- | --
|                                                         |  | Year ended    |     |   | $ Change      |   |     | % Change | 
|                                                         |  | June 28, 2009 |     |   | June 29, 2008 |   |     |          |  |   |      |  
|Amortization of intangible assets (dollars in thousands) |  | $             | 411 |   |               | $ | 958 |          |  | $ | (547 | ) |  | (57.1 | )%
|Percentage of Revenue                                    |  |               | 0.2 | % |               |   | 0.5 | %        |  |   |      |   |  |       |   

Amortization of intangible assets decreased in fiscal 2009 compared to fiscal 2008
due to the write-off of $2.1 million in intangible assets related to the Quality of Experience Assurance segment that were determined to be impaired in the fourth quarter of fiscal 2008.



|                                                             |  |               |       |   |               |   |          |   |  |   |       |  |       |  
|------------------------------------------------------------ |  | ------------- | ----- | - | ------------- | - | -------- | - |  | - | ----- |  | ----- | -
|                                                             |  | Year ended    |       |   | $ Change      |   | % Change |  
|                                                             |  | June 28, 2009 |       |   | June 29, 2008 |   |          |   |  |   |      
|Integration and restructuring charges (dollars in thousands) |  | $             | 5,840 |   |               | $ | 1,094    |   |  | $ | 4,746 |  | 433.8 | %
|Percentage of Revenue                                        |  |               | 2.6   | % |               |   | 0.5      | % |  |   |       |  |       |  



38



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##### Table of Contents

Integration and restructuring charges, including employee severance and lease loss,
increased due to the company-wide restructurings announced in January and June 2009.



|                                              |  |               |        |   |               |   |          |   |  |   |        |  |       |  
|--------------------------------------------- |  | ------------- | ------ | - | ------------- | - | -------- | - |  | - | ------ |  | ----- | -
|                                              |  | Year ended    |        |   | $ Change      |   | % Change |  
|                                              |  | June 28, 2009 |        |   | June 29, 2008 |   |          |   |  |   |       
|Impairment of goodwill (dollars in thousands) |  | $             | 48,144 |   |               | $ | 6,513    |   |  | $ | 41,631 |  | 639.2 | %
|Percentage of Revenue                         |  |               | 21.8   | % |               |   | 3.1      | % |  |   |        |  |       |  

Impairment of goodwill charges of $48.1 million in fiscal 2009 were related to our
Wireline and Timing, Test and Measurement reporting segments. Impairment of goodwill charges of $6.5 million in fiscal 2008 were related to the Quality of Experience Assurance business segment impairment.



|                                                       |  |               |   |   |               |   |       |          |  |   |        |   |  |       |  
|------------------------------------------------------ |  | ------------- | - | - | ------------- | - | ----- | -------- |  | - | ------ | - |  | ----- | -
|                                                       |  | Year ended    |   |   | $ Change      |   |       | % Change | 
|                                                       |  | June 28, 2009 |   |   | June 29, 2008 |   |       |          |  |   |        |  
|Impairment of intangible assets (dollars in thousands) |  | $             |  |   |               | $ | 2,104 |          |  | $ | (2,104 | ) |  | 100.0 | %
|Percentage of Revenue                                  |  |               |  | % |               |   | 1.0   | %        |  |   |        |   |  |       |  

Impairment of intangible assets charges of $2.1 million in fiscal 2008 were related
to the Quality of Experience Assurance business segment impairment for non-technology intangible assets.



|                                             |  |               |   |   |               |   |     |          |  |   |      |   |  |        |   
|-------------------------------------------- |  | ------------- | - | - | ------------- | - | --- | -------- |  | - | ---- | - |  | ------ | --
|                                             |  | Year ended    |   |   | $ Change      |   |     | % Change | 
|                                             |  | June 28, 2009 |   |   | June 29, 2008 |   |     |          |  |   |      |  
|Gain on sale of asset (dollars in thousands) |  | $             |  |   |               | $ | 700 |          |  | $ | (700 | ) |  | (100.0 | )%
|Percentage of Revenue                        |  |               |  | % |               |   | 0.3 | %        |  |   |      |   |  |        |   

Gain on sale of asset: In the second quarter of fiscal 2008 we sold a domain name,
which was not previously used, for a gain of $0.7 million.



|                                                                   |  |               |      |    |               |   |   |          |  |   |      |   |  |       |  
|------------------------------------------------------------------ |  | ------------- | ---- | -- | ------------- | - | - | -------- |  | - | ---- | - |  | ----- | -
|                                                                   |  | Year ended    |      |    | $ Change      |   |   | % Change | 
|                                                                   |  | June 28, 2009 |      |    | June 29, 2008 |   |   |          |  |   |      |  
|Loss on repayment of convertible notes, net (dollars in thousands) |  | $             | (522 | )  |               | $ |  |          |  | $ | (522 | ) |  | 100.0 | %
|Percentage of Revenue                                              |  |               | (0.2 | )% |               |   |  | %        |  |   |      |   |  |       |  

Loss on repayment of convertible notes: In the first quarter of fiscal 2009 we
repaid $62.5 million of our convertible notes and incurred a loss of $0.5 million mostly related to the write-off of a portion of capitalized bond costs that were previously being amortized. See the Liquidity and Capital Resources
section below for additional information regarding the details of this loss.



|                                                           |  |               |        |    |               |   |          |    |  |   |       |  |       |   
|---------------------------------------------------------- |  | ------------- | ------ | -- | ------------- | - | -------- | -- |  | - | ----- |  | ----- | --
|                                                           |  | Year ended    |        |    | $ Change      |   | % Change |   
|                                                           |  | June 28, 2009 |        |    | June 29, 2008 |   |          |    |  |   |      
|Loss on short-term investments, net (dollars in thousands) |  | $             | (1,368 | )  |               | $ | (3,728   | )  |  | $ | 2,360 |  | (63.3 | )%
|Percentage of Revenue                                      |  |               | (0.6   | )% |               |   | (1.8     | )% |  |   |       |  |       |   

Loss on short-term investments: The net loss on short-term investments recognized in
fiscal 2009 is attributable to an other-than-temporary loss of $1.5 million related to corporate debt securities and mutual funds related to our deferred compensation plan, partially offset by a gain of $0.1 million related to a recovery on an
investment for which we previously recognized an other-than-temporary loss in fiscal 2008. See the Liquidity and Capital Resources section below for additional information regarding our determination of the fair value of these
investments at June 28, 2009.



39



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##### Table of Contents

The net loss on short-term investments recognized in fiscal 2008 is attributable to an
other-than-temporary loss of $3.2 million and a realized loss of $0.5 million related to the sale of a short-term investment.



|                                       |  |               |       |   |               |   |       |          |  |   |        |   |  |       |   
|-------------------------------------- |  | ------------- | ----- | - | ------------- | - | ----- | -------- |  | - | ------ | - |  | ----- | --
|                                       |  | Year ended    |       |   | $ Change      |   |       | % Change | 
|                                       |  | June 28, 2009 |       |   | June 29, 2008 |   |       |          |  |   |        |  
|Interest income (dollars in thousands) |  | $             | 1,807 |   |               | $ | 7,123 |          |  | $ | (5,316 | ) |  | (74.6 | )%
|Percentage of Revenue                  |  |               | 0.8   | % |               |   | 3.4   | %        |  |   |        |   |  |       |   

Interest income decreased $5.3 million in fiscal 2009 compared to the prior year due
to lower interest rates and lower cash and short-term investment balances.



|                                        |  |               |        |    |               |   |          |    |  |   |       |  |       |   
|--------------------------------------- |  | ------------- | ------ | -- | ------------- | - | -------- | -- |  | - | ----- |  | ----- | --
|                                        |  | Year ended    |        |    | $ Change      |   | % Change |   
|                                        |  | June 28, 2009 |        |    | June 29, 2008 |   |          |    |  |   |      
|Interest expense (dollars in thousands) |  | $             | (2,352 | )  |               | $ | (4,747   | )  |  | $ | 2,395 |  | (50.5 | )%
|Percentage of Revenue                   |  |               | (1.1   | )% |               |   | (2.3     | )% |  |   |       |  |       |   

Interest expense consists primarily of interest on our Notes. Interest expense
decreased in fiscal 2009 compared to fiscal 2008 due to the repurchase of $63.1 million aggregate principal amount of our Convertible Notes in the first quarter of fiscal 2009. We anticipate an increase in interest expense in fiscal 2010 as a result
of our adoption of Financial Accounting Standards Board (the FASB) Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB 14-1). We will adopt FSP APB 14-1 in the first quarter of fiscal 2010, and it will result in an increase in non-cash interest expense.



|                                                    |  |               |       |   |               |   |          |    |  |   |       |  |        |   
|--------------------------------------------------- |  | ------------- | ----- | - | ------------- | - | -------- | -- |  | - | ----- |  | ------ | --
|                                                    |  | Year ended    |       |   | $ Change      |   | % Change |   
|                                                    |  | June 28, 2009 |       |   | June 29, 2008 |   |          |    |  |   |      
|Income tax expense (benefit) (dollars in thousands) |  | $             | 2,340 |   |               | $ | (5,666   | )  |  | $ | 8,006 |  | (141.3 | )%
|Percentage of Revenue                               |  |               | 1.1   | % |               |   | (2.7     | )% |  |   |       |  |        |   

Income tax expense (benefit) was a $2.3 million expense in fiscal 2009, compared to
an income tax benefit of $5.7 million in fiscal 2008. The change in the provision was due to combined non tax deductible goodwill impairment charges and investment losses of $44.3 million, partially offset by operating income of $6.0 million in
fiscal 2009, compared to combined tax deductible goodwill and impairment charges of $14.3 million, a non tax deductible loss on investments of $3.7 million with an operating loss of $2.0 million in fiscal 2008. Our effective tax rate in fiscal 2009
was 6.1%, compared to an effective tax benefit rate of 28.0% in the prior year. The lower effective tax rate in fiscal 2009 was primarily attributable to the non-tax deductible nature of the goodwill impairment.

Fiscal Years Ended June 29, 2008 and July 1, 2007



|                                      |  |               |         |   |              |   |         |          |  |   |        |   |  |       |   
|------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------- | -------- |  | - | ------ | - |  | ----- | --
|                                      |  | Year ended    |         |   | $ Change     |   |         | % Change | 
|                                      |  | June 29, 2008 |         |   | July 1, 2007 |   |         |          |  |   |        |  
|Net Revenue(dollars in thousands):    |  |               |         |   |              |   |         |          |  |   |        |   |  |       |   
|Wireline Products                     |  | $             | 90,708  |   |              | $ | 93,908  |          |  | $ | (3,200 | ) |  | (3.4  | )%
|Wireless/OEM Products                 |  |               | 23,025  |   |              |   | 26,672  |          |  |   | (3,647 | ) |  | (13.7 | ) 
|Global Services                       |  |               | 15,408  |   |              |   | 14,627  |          |  |   | 781    |   |  | 5.3   |   
|Quality of Experience Assurance       |  |               | 1,666   |   |              |   | 501     |          |  |   | 1,165  |   |  | 232.5 |   
|Timing, Test and Measurement Division |  |               | 77,245  |   |              |   | 72,672  |          |  |   | 4,573  |   |  | 6.3   |   
|                                      |  |               |         |   |              |   |         |          |  |   |        |   |  |       |   
|Total Net Revenue                     |  | $             | 208,052 |   |              | $ | 208,380 |          |  | $ | (328   | ) |  | (0.2  | )%
|Percentage of Revenue                 |  |               | 100.0   | % |              |   | 100.0   | %        |  |   |        |   |  |       |   



40



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##### Table of Contents

Net revenue decreased slightly by $0.3 million or 0.2% in fiscal 2008 compared to fiscal
2007. Revenue from the Timing, Test and Measurement Division increased $4.6 million or 6.3% primarily due to higher sales to the government for communication and electronic system programs in the intelligence community. Revenue for the Quality of
Experience Assurance segment, which was formed on January 2, 2007, increased $1.2 million or 232.5% in fiscal 2008 due primarily to a field deployment to a customer in Russia. Revenues from the Global Services segment increased by $0.8 million,
or 5.3%, primarily due to higher installation service revenue. Wireless/OEM Products revenue decreased by $3.6 million, or 13.7%, in fiscal 2008 due to a reduction in purchases from two major OEM customers. Wireline Products revenue declined $3.2
million, or 3.4%, due to a reduction in purchases from two major domestic customers, which each comprise 10% of our total revenue.



|                                         |  |               |        |   |              |   |        |          |  |   |         |   |  |       |   
|---------------------------------------- |  | ------------- | ------ | - | ------------ | - | ------ | -------- |  | - | ------- | - |  | ----- | --
|                                         |  | Year ended    |        |   | $ Change     |   |        | % Change | 
|                                         |  | June 29, 2008 |        |   | July 1, 2007 |   |        |          |  |   |         |  
|Gross Profit(dollars in thousands):      |  |               |        |   |              |   |        |          |  |   |         |   |  |       |   
|Wireline Products                        |  | $             | 47,041 |   |              | $ | 53,810 |          |  | $ | (6,769  | ) |  | (12.6 | )%
|Wireless/OEM Products                    |  |               | 6,199  |   |              |   | 7,157  |          |  |   | (958    | ) |  | (13.4 | ) 
|Global Services                          |  |               | 4,183  |   |              |   | 3,991  |          |  |   | 192     |   |  | 4.8   |   
|Quality of Experience Assurance Division |  |               | 1,226  |   |              |   | 398    |          |  |   | 828     |   |  | 208.0 |   
|Timing, Test and Measurement Division    |  |               | 35,632 |   |              |   | 33,188 |          |  |   | 2,444   |   |  | 7.4   |   
|Other cost of sales                      |  |               | (9,635 | ) |              |   | (3,542 | )        |  |   | (6,093  | ) |  | 172.0 |   
|                                         |  |               |        |   |              |   |        |          |  |   |         |   |  |       |   
|Total Gross Profit                       |  | $             | 84,646 |   |              | $ | 95,002 |          |  | $ | (10,356 | ) |  | (10.9 | )%
|Percentage of Revenue                    |  |               | 40.7   | % |              |   | 45.6   | %        |  |   |         |   |  |       |   

Gross profit decreased $10.4 million or 10.9% during fiscal 2008 compared to the
prior year. Gross profit for Wireline Products decreased by $6.8 million, or 12.6%. This decrease was higher than the revenue decrease of 3.4% and was primarily due to a less favorable sales mix and higher costs for warranty and excess and obsolete
inventory write-offs. Gross profit for the Wireless/OEM Products decreased by $1.0 million, or 13.4%. This decrease was fairly consistent with the revenue decrease of 13.7% for the same period. Gross profit for Global Services increased $0.2 million
or 4.8%, which was slightly below the 5.3% revenue increase in the prior year due to unfavorable sales mix for higher cost services. Gross profit for the Quality of Experience Assurance segment increased by $0.8 million, or 208.0%. This increase was
consistent with the revenue increase. Gross profit for the Timing, Test and Measurement Division increased by $2.4 million or 7.4%. This increase was higher than the revenue increase of 6.3% and due primarily to lower manufacturing variances and
period costs related to higher volume.

Other cost of sales increased $6.1 million or 172.0% primarily due to a $5.7 million charge for
impairment of technology-related intangible assets for the Quality of Experience Assurance business segment. We also incurred higher costs for restructuring due to a reduction in workforce in our Puerto Rico manufacturing plant as a result of
outsourcing production of some products to a subcontractor.



|                                                        |  |               |        |   |              |   |          |   |  |   |       |  |      |  
|------------------------------------------------------- |  | ------------- | ------ | - | ------------ | - | -------- | - |  | - | ----- |  | ---- | -
|                                                        |  | Year ended    |        |   | $ Change     |   | % Change |  
|                                                        |  | June 29, 2008 |        |   | July 1, 2007 |   |          |   |  |   |      
|Research and development expense (dollars in thousands) |  | $             | 27,887 |   |              | $ | 23,692   |   |  | $ | 4,195 |  | 17.7 | %
|Percentage of Revenue                                   |  |               | 13.4   | % |              |   | 11.4     | % |  |   |       |  |      |  



41



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##### Table of Contents

Research and development expenses increased by $4.2 million compared to fiscal 2007 of
which $3.5 million was attributable to the full year impact of the January 2, 2007 acquisition of QoSmetrics S.A. and the formation of the Quality of Experience Assurance segment, as well as the October 2, 2006 acquisition of Timing
Solutions Corporation (TSC). Other increases related to spending for the implementation of a development facility in China as well as increases in salaries and consulting expenses.



|                                                           |  |               |        |   |              |   |          |   |  |   |       |  |     |  
|---------------------------------------------------------- |  | ------------- | ------ | - | ------------ | - | -------- | - |  | - | ----- |  | --- | -
|                                                           |  | Year ended    |        |   | $ Change     |   | % Change |  
|                                                           |  | June 29, 2008 |        |   | July 1, 2007 |   |          |   |  |   |      
|Selling, general and administrative (dollars in thousands) |  | $             | 65,693 |   |              | $ | 60,543   |   |  | $ | 5,150 |  | 8.5 | %
|Percentage of Revenue                                      |  |               | 31.6   | % |              |   | 29.1     | % |  |   |       |  |     |  

Selling, general and administrative expense increased by $5.2 million or 8.5%
compared to fiscal 2007 which was primarily attributable to the $0.6 million expense increase for the January 2, 2007 acquisition of QoSmetrics S.A. and the formation of Quality of Experience Assurance, and $2.3 million of costs for the
investigation of accounting issues and the restatement related to the raw material inventory accrual account, and severance related costs of $2.0 million. The remaining increase was due to salaries and benefits substantially offset by lower costs on
bonus compensation.



|                                                         |  |               |     |   |              |   |          |   |  |   |     |  |      |  
|-------------------------------------------------------- |  | ------------- | --- | - | ------------ | - | -------- | - |  | - | --- |  | ---- | -
|                                                         |  | Year ended    |     |   | $ Change     |   | % Change |  
|                                                         |  | June 29, 2008 |     |   | July 1, 2007 |   |          |   |  |   |    
|Amortization of intangible assets (dollars in thousands) |  | $             | 958 |   |              | $ | 792      |   |  | $ | 166 |  | 21.0 | %
|Percentage of Revenue                                    |  |               | 0.5 | % |              |   | 0.4      | % |  |   |     |  |      |  

Amortization of intangible assets increased in fiscal 2008 compared to fiscal 2007
due to the acquisitions of TSC and QoSmetrics S.A. that occurred in the second and third quarters of fiscal 2007, respectively.



|                                                             |  |               |       |   |              |   |          |   |  |   |     |  |      |  
|------------------------------------------------------------ |  | ------------- | ----- | - | ------------ | - | -------- | - |  | - | --- |  | ---- | -
|                                                             |  | Year ended    |       |   | $ Change     |   | % Change |  
|                                                             |  | June 29, 2008 |       |   | July 1, 2007 |   |          |   |  |   |    
|Integration and restructuring charges (dollars in thousands) |  | $             | 1,094 |   |              | $ | 549      |   |  | $ | 545 |  | 99.3 | %
|Percentage of Revenue                                        |  |               | 0.5   | % |              |   | 0.3      | % |  |   |     |  |      |  

Integration and restructuring charges increased $0.5 million for fiscal 2008 and
related to the shutdown of the Austin, Texas engineering facility.



|                                             |  |               |       |   |              |   |          |   |  |   |       |  |       |  
|-------------------------------------------- |  | ------------- | ----- | - | ------------ | - | -------- | - |  | - | ----- |  | ----- | -
|                                             |  | Year ended    |       |   | $ Change     |   | % Change |  
|                                             |  | June 29, 2008 |       |   | July 1, 2007 |   |          |   |  |   |      
|Impairment of goodwill(dollars in thousands) |  | $             | 6,513 |   |              | $ |         |   |  | $ | 6,513 |  | 100.0 | %
|Percentage of Revenue                        |  |               | 3.1   | % |              |   |         | % |  |   |       |  |       |  

Impairment of goodwill charges of $6.5 million in fiscal year 2008 were related to
the Quality of Experience Assurance business segment impairment.



|                                                      |  |               |       |   |              |   |          |   |  |   |       |  |       |  
|----------------------------------------------------- |  | ------------- | ----- | - | ------------ | - | -------- | - |  | - | ----- |  | ----- | -
|                                                      |  | Year ended    |       |   | $ Change     |   | % Change |  
|                                                      |  | June 29, 2008 |       |   | July 1, 2007 |   |          |   |  |   |      
|Impairment of intangible assets(dollars in thousands) |  | $             | 2,104 |   |              | $ |         |   |  | $ | 2,104 |  | 100.0 | %
|Percentage of Revenue                                 |  |               | 1.0   | % |              |   |         | % |  |   |       |  |       |  



42



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##### Table of Contents

Impairment of intangible assets charges of $2.1 million in fiscal year 2008 were related to
the Quality of Experience Assurance business segment impairment for non-technology intangible assets.



|                                            |  |               |     |   |              |   |          |   |  |   |     |  |       |  
|------------------------------------------- |  | ------------- | --- | - | ------------ | - | -------- | - |  | - | --- |  | ----- | -
|                                            |  | Year ended    |     |   | $ Change     |   | % Change |  
|                                            |  | June 29, 2008 |     |   | July 1, 2007 |   |          |   |  |   |    
|Gain on sale of asset(dollars in thousands) |  | $             | 700 |   |              | $ |         |   |  | $ | 700 |  | 100.0 | %
|Percentage of Revenue                       |  |               | 0.3 | % |              |   |         | % |  |   |     |  |       |  

Gain on sale of asset: In the second quarter of fiscal 2008 we sold a domain name,
which was not previously used, for a gain of $0.7 million.



|                                                     |  |               |        |    |              |   |   |          |  |   |        |   |  |       |  
|---------------------------------------------------- |  | ------------- | ------ | -- | ------------ | - | - | -------- |  | - | ------ | - |  | ----- | -
|                                                     |  | Year ended    |        |    | $ Change     |   |   | % Change | 
|                                                     |  | June 29, 2008 |        |    | July 1, 2007 |   |   |          |  |   |        |  
|Loss on short-term investments(dollars in thousands) |  | $             | (3,728 | )  |              | $ |  |          |  | $ | (3,728 | ) |  | 100.0 | %
|Percentage of Revenue                                |  |               | (1.8   | )% |              |   |  | %        |  |   |        |   |  |       |  

Loss on short-term investments: During fiscal 2008, we determined that a decline in
the fair value of one of our short-term investments was other than temporary. As a result, we recognized a $3.2 million other-than temporary loss for fiscal 2008. In addition, we sold a short-term investment and realized a $0.5 million loss. See the
Liquidity and Capital Resources section below for additional information regarding these losses and our determination of fair value at June 29, 2008.



|                                       |  |               |       |   |              |   |       |          |  |   |        |   |  |       |   
|-------------------------------------- |  | ------------- | ----- | - | ------------ | - | ----- | -------- |  | - | ------ | - |  | ----- | --
|                                       |  | Year ended    |       |   | $ Change     |   |       | % Change | 
|                                       |  | June 29, 2008 |       |   | July 1, 2007 |   |       |          |  |   |        |  
|Interest income (dollars in thousands) |  | $             | 7,123 |   |              | $ | 9,231 |          |  | $ | (2,108 | ) |  | (22.8 | )%
|Percentage of Revenue                  |  |               | 3.4   | % |              |   | 4.4   | %        |  |   |        |   |  |       |   

Interest income decreased $2.1 million in fiscal 2008 compared to the prior year due
to lower interest rates and lower cash and short term investment balances.



|                                        |  |               |        |    |              |   |          |    |  |   |    |  |      |   
|--------------------------------------- |  | ------------- | ------ | -- | ------------ | - | -------- | -- |  | - | -- |  | ---- | --
|                                        |  | Year ended    |        |    | $ Change     |   | % Change |   
|                                        |  | June 29, 2008 |        |    | July 1, 2007 |   |          |    |  |   |   
|Interest expense (dollars in thousands) |  | $             | (4,747 | )  |              | $ | (4,823   | )  |  | $ | 76 |  | (1.6 | )%
|Percentage of Revenue                   |  |               | (2.3   | )% |              |   | (2.3     | )% |  |   |    |  |      |   

Interest expense consists primarily of interest on our Notes and interest on our
capital lease for our headquarters building in San Jose, California.



|                                                    |  |               |        |    |              |   |       |          |  |   |         |   |  |        |   
|--------------------------------------------------- |  | ------------- | ------ | -- | ------------ | - | ----- | -------- |  | - | ------- | - |  | ------ | --
|                                                    |  | Year ended    |        |    | $ Change     |   |       | % Change | 
|                                                    |  | June 29, 2008 |        |    | July 1, 2007 |   |       |          |  |   |         |  
|Income tax expense (benefit) (dollars in thousands) |  | $             | (5,666 | )  |              | $ | 7,588 |          |  | $ | (13,254 | ) |  | (174.7 | )%
|Percentage of Revenue                               |  |               | (2.7   | )% |              |   | 3.6   | %        |  |   |         |   |  |        |   

Income tax expense (benefit) was a $5.7 million benefit in fiscal 2008, compared to
an income tax provision of $7.6 million in fiscal 2007. The changes in the provision were due to a combined goodwill and intangible impairment charge of $14.3 million taken in the fourth quarter of fiscal 2008, a loss on investments of $3.7 million
and an operating loss of $2.0 million in fiscal 2008 compared to operating income of $13.6 million in fiscal 2007. Our effective tax rate in fiscal 2008 was 28.0%, compared to an effective tax rate of 55.6% in the prior year. The higher effective
tax rate in fiscal 2007 was attributable to a tax expense of $3.4 million related to the liquidations of QoSmetrics S.A. and QoSmetrics Inc.



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Key Operating Metrics

Key operating metrics for measuring our performance include sales backlog, contract revenue, headcount and deferred revenue. These metrics, which compare fiscal year 2009 with fiscal year 2008, are listed below.

Sales backlog:

Our
backlog consists of firm orders that have yet to be shipped to the customer, or may not be shippable to a customer until a future period. Most orders included in backlog can be rescheduled or cancelled by customers without significant penalty.
Historically, a substantial portion of net revenue in any fiscal period has been derived from orders received during that fiscal period. Our total backlog amounted to $46.9 million as of June 28, 2009, compared to $58.4 million as of
June 29, 2008. The $11.5 million reduction in backlog between June 28, 2009 and June 29, 2008 was primarily due to the ramp up in supply capacity at the end of fiscal 2008 to meet pent-up demand for our new cable timing product. Our
backlog, which is shippable within the next six months, was $42.1 million as of June 28, 2009, compared to $47.1 million as of June 29, 2008.

Contract revenue:

Revenue from contracts that require development and manufacture in accordance with
customer specifications and have a lengthy development period may be categorized into two types: firm fixed price and cost-plus reimbursement. Revenue is recognized under the fixed price contracts using the percentage of completion method,
(cost-to-cost basis) principally based upon the costs incurred relative to the total estimated costs at completion on the individual contracts. Any anticipated losses on contracts are charged to operations as soon as they are determinable.
Revenue recognized under cost-plus contracts is recognized on the basis of direct and indirect costs incurred plus a negotiated profit calculated as a percentage of costs or as performance based award fee. Revenue from long-term contracts is
reviewed periodically, with adjustments recorded in the period in which the revisions are made. As of June 28, 2009, we had approximately $6.4 million in contract revenue to be performed and recognized within the next 36 months, compared to
approximately $9.5 million in contract revenue that was to be performed and recognized within the following 36 months as of June 29, 2008. These amounts have been accounted for as part of our sales backlog discussed above.

Liquidity and Capital Resources

As of June 28,
2009, working capital was $169.1 million, compared to $151.5 million as of June 29, 2008. Cash and cash equivalents as of June 28, 2009 decreased $70.4 million to $72.1 million from $142.4 million as of June 29, 2008. This decrease
was primarily the result of the repayment of $63.1 million of our convertible notes and a shift from cash and cash equivalents to short-term investments. Short-term investments increased from $21.9 million as of June 29, 2008 to $40.7 million
as of June 28, 2009.

Net cash provided by operating activities in fiscal 2009 was $21.7 million. The net cash provided by operating
activities was driven by the net loss of $40.7 million, offset by non-cash charges of: $48.1 million for impairment of goodwill, $8.9 million of depreciation and amortization expenses, $3.3 million of stock-based compensation expense, $2.6 million
of provisions for excess and obsolete inventories, $1.4 million for losses on short-term investments, $0.8 million for a loss on disposal of fixed assets, and a net $0.6 million for other non-cash adjustments to the net loss, for a total of $25.1
million of operating cash inflows. Requirements for working capital assets and liabilities drove cash usage in operations of approximately $3.4 million, comprised of a $5.4 million increase in accounts receivable, a $2.9 million increase in
inventory, a $1.2 million increase in prepaids and other assets, and a $0.8 million reduction in accounts payable, partially offset by a $5.5 million increase in accrued compensation and a $1.3 million increase in other accrued liabilities. The
$22.8 million net cash used for investing activities in fiscal 2009 was attributable to $26.4 million in purchases of short-term investments, partially offset by $7.3 million in maturities of short-term investments. The $69.1 million net cash used
for financing activities was attributable to $62.5 million used to repay a portion of our convertible notes, $5.8 million used to repurchase common stock and $1.4 million used to repay long-term obligations.



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Our total capital spending commitments outstanding as of June 28, 2009 were approximately $1.0
million. Days sales outstanding in accounts receivable was 64 days as of June 28, 2009, compared to 59 days as of June 29, 2008.

We believe that our existing cash resources will be sufficient to meet our anticipated operating and working capital expenditure needs in the ordinary course of business for at least the next 12 months and the foreseeable future. We base
our expense levels in part on our expectation of future revenue levels. If our revenue for a particular period is lower than we expect, we may take steps to reduce our operating expenses accordingly. If cash generated from operations is insufficient
to satisfy our liquidity requirements or if we require additional capital resources to grow our business or to acquire complementary technologies and businesses in the future, we may seek to issue additional equity securities or obtain additional
debt financing. Additional financing may not be available at all or on terms favorable to us. Additional financing may also be dilutive to our existing stockholders. We do not have any arrangements or relationships with entities that are not
consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of our capital resources.

Loss on Short-term Investment, Net

In the fourth quarter of fiscal 2007, we purchased
asset-backed commercial paper with a $7.8 million par value maturing on March 13, 2008, and we classified this as a short-term investment. At the time of purchase, the investments portfolio consisted primarily of triple-A rated
assets, with sub-prime loan assets making up approximately 23% of the investment. Subsequently, the structured investment vehicle (SIV) issuing the commercial paper was declared insolvent and entered receivership. On January 8,
2008, our investment manager advised us that the fair value of this investment had declined, and that the impairment loss should be considered other-than-temporary in accordance with discussions with the receiver as well as potential options that
were expected to be made available to senior debt holders including Symmetricom. Our investment manager determined the fair value of the investment using pricing levels of the underlying portfolio by three different broker/dealers. Management then
made an independent valuation assessment of similar securities using the ABX index (which is an index to track the performance of mortgage-backed securities), to confirm that the valuation results from our investment manager were reasonable. Based
on this assessment of fair value, Symmetricom recognized a loss of $3.2 million related to this investment during fiscal year 2008. After the receivers sold the SIV to an investment bank, we received a cash distribution of $1.4 million,
relating to the cash portion of the fund, in the fourth quarter of fiscal 2008. In the first quarter of fiscal 2009, the investment bank offered investors the option of cashing out of the fund or reinvesting in a new investment vehicle. We elected
to cash out and received a final capital distribution of $3.3 million in the first quarter of fiscal 2009. As a result of the final settlement with this investment, including a recovery on previously recognized losses, we recognized a $0.1
million gain in the first quarter of fiscal 2009.

In the first quarter of fiscal 2009, we determined that three corporate debt
instruments, the market values of which had declined, were other than temporarily impaired. We made this determination based on the uncertainty and volatility of the market, particularly since these debt instruments were related to financial
institutions, the failure of several other large financial institutions and the continued downgrades from credit rating agencies. As a result of this assessment, we recognized a $0.6 million other than temporary loss in the first quarter of fiscal
2009. This amount was partially offset by the previously mentioned $0.1 million gain, resulting in net loss on short-term investments of $0.5 million for the first quarter of fiscal 2009.

In the second quarter of fiscal 2009, we determined that mutual funds related to our deferred compensation plan, whose market values had declined, were
other than temporarily impaired. We made this determination based on the overall decline in the value of the mutual funds and the uncertainty as to whether they would recover. As a result of this assessment, we recognized a $0.9 million other than
temporary loss in the second quarter of fiscal 2009.



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Convertible Subordinated Notes

On June 8, 2005, we sold $120.0 million of Notes, which mature on June 15, 2025 and bear interest at the rate of 3.25% per annum. Interest
on the Notes is payable semi-annually in June and December of each year beginning on December 15, 2005. The Notes are unsecured obligations and are subordinated in right of payment to all of our existing and future senior debt. The Notes are
structurally subordinated to all indebtedness and liabilities of our subsidiaries.

The Notes are convertible, at the holders option,
prior to the maturity date into cash and, if applicable, shares of our common stock in the following circumstances:



| |  |  | Prior to June 15, 2023, if the common stock price for at least 20 trading days in the period of 30 consecutive days ending on the last trading day of the
calendar quarter preceding the quarter in which the conversion occurs is more than 125% of the conversion price of the Notes in effect on that 30th trading day;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after June 15, 2023, at all times on or after any date on which the common stock price is more than 125% of the then current conversion price;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day
was less than 95% of the average of the sale price of our common stock during such five trading-day period multiplied by the then current conversion rate;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If we have called the particular Notes for redemption and the redemption has not yet occurred; or
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Upon the occurrence of specified corporate transactions.
| | - |  | --------------------------------------------------------

Holders may convert any outstanding Notes into cash and, if applicable, shares of our common stock at an initial conversion price per share of $12.49, which was determined based on the reported closing price of our
common stock of $9.91 per share on June 2, 2005.

Also, on or after June 20, 2012, we may redeem some or all of the Notes at any
time or from time to time at a redemption price of 100% of the principal amount of the Notes, plus accrued and unpaid interest (including liquidated damages, if any) up to but not including the date of redemption, payable in cash. Holders may
require us to repurchase all or a portion of their Notes on June 15, 2012, 2015 and 2020 for a repurchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest (including liquidated damages, if any) up to
but not including the date of repurchase, payable in cash, in the event of certain change of control events related to us.

We may from
time to time repurchase or redeem all or a portion of the Notes, if necessary, to comply with NASDAQ listing rule 5635(d). We may repurchase some or all of our remaining outstanding Notes in future periods prior to the maturity date. We may
undertake such repurchases from time to time through privately negotiated or open market transactions or other available means.

On
May 7, 2008, we received a notice of acceleration from the trustee under the indenture governing the Notes. The notice stated that our failure to file our Quarterly Report on Form 10-Q for the quarter ended December 30, 2007
violated certain provisions of the indenture. The acceleration letter declared that the principal amount outstanding under the Notes, together with any accrued and unpaid interest, and fees and expenses, was immediately due and
payable. This notice of acceleration related to the trustees and certain bondholders previous notice received by the Company on or about March 3, 2008 stating that our failure to file our Quarterly Report on Form 10-Q for
the quarter ended December 30, 2007 with the Securities and Exchange Commission (SEC) violated provisions of the indenture.

On
June 17, 2008, we filed our Form 10-Q for the quarter ended December 30, 2007 and our Form 10-Q for the quarter ended March 30, 2008, as well as other filings related to our restatement of financial results for fiscal



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years and interim periods from June 30, 2002 to July 1, 2007 and for the first quarter of fiscal 2008 ended September 30, 2007.

On June 30, 2008, we offered to purchase for cash, on a pro rata basis, $63.1 million aggregate principal amount of the Notes, at a purchase
price equal to $990 per $1,000 of the principal amount of the Notes, plus accrued and unpaid interest. The tender offer cap was equal to 52.6% of the $120.0 million aggregate principal amount outstanding. As of July 30, 2008, pursuant to
the offer, Symmetricom accepted for payment $63.1 million aggregate principal amount of the Notes. The aggregate purchase price for the Notes surrendered was approximately $62.5 million, which included interest of $0.3 million. After the
purchase pursuant to the offer, approximately $56.9 million aggregate principal amount of the Notes remains outstanding. In connection with the completion of the tender offer, the holder of a majority of the outstanding notes prior to the offer
waived certain defaults alleged to have occurred under the indenture and rescinded an acceleration notice received by Symmetricom on May 7, 2008.

In connection with the issuance of the Notes, Symmetricom initially recorded bond fees of approximately $4.0 million, which were amortized using the straight-line method over a period of seven years ending in
fiscal 2012. As of June 29, 2008, $2.2 million of unamortized costs remained. As a result of the tender offer, $1.1 million of this unamortized cost was expensed in the first quarter of fiscal 2009. This, combined with a $0.6 million
gain relating to difference between the principal amount and the purchase price of the Notes, resulted in a $0.5 million net loss on repayment of convertible notes recognized in the first quarter of fiscal 2009.

In the first quarter of fiscal 2010, we will adopt FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1). See Recent Accounting Pronouncements below for a discussion of the impact of FSP APB 14-1 on our consolidated financial
statements.

Contractual Obligations

We operate in multiple locations domestically and internationally. As such, certain facilities and equipment are leased under capital lease agreements or operating lease agreements. Due to excess capacity on several
non-cancelable leases as a result of the economic downturn, we subleased certain facilities and recognized lease loss liabilities for the remainder.

We incur purchase commitments during our normal course of business. As of June 28, 2009, our principal commitments totaled $23.6 million and related primarily to commitments to purchase inventory.

The following table summarizes our contractual cash obligations as of June 28, 2009, and the effect such obligations are expected to have on
liquidity and cash flow in future periods.



|                                        |  |                        |         |                 |   |           |  |           |        |                  |   |       |  |   |      
|--------------------------------------- |  | ---------------------- | ------- | --------------- | - | --------- |  | --------- | ------ | ---------------- | - | ----- |  | - | -----
|                                        |  | Payments due by period
|                                        |  | Total                  |         | Less than1 year |   | 1-3 years |  | 3-5 years |        | More than5 years
|                                        |  | (In thousands)        
|Contractual Obligations                 |  |                        |         |                 |   |           |  |           |        |                  |   |       |  |   |      
|Convertible subordinated notes          |  | $                      | 56,880  |                 | $ |          |  | $         | 56,880 |                  | $ |      |  | $ |     
|Operating leases obligations(1)         |  |                        | 27,384  |                 |   | 3,967     |  |           | 7,755  |                  |   | 8,176 |  |   | 7,486
|Purchase obligations                    |  |                        | 23,647  |                 |   | 22,058    |  |           | 1,589  |                  |   |      |  |   |     
|Post-retirement benefits liabilities(2) |  |                        | 273     |                 |   | 37        |  |           | 67     |                  |   | 59    |  |   | 110  
|Lease loss accrual                      |  |                        | 2,483   |                 |   | 759       |  |           | 868    |                  |   | 471   |  |   | 385  
|                                        |  |                        |         |                 |   |           |  |           |        |                  |   |       |  |   |      
|Total                                   |  | $                      | 110,667 |                 | $ | 26,821    |  | $         | 67,159 |                  | $ | 8,706 |  | $ | 7,981
|                                        |  |                        |         |                 |   |           |  |           |        |                  |   |       |  |   |      



|(1) | Operating lease obligation is net of the lease loss accrual
|--- | -----------------------------------------------------------



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|(2) | Relates to a post-retirement health care benefits plan, assumed during an acquisition in fiscal 2003. The plan was curtailed in fiscal 2003, and only existing retired participants
and employees of the acquired company, now employed by Symmetricom and meeting the retirement eligibility requirements by December 31, 2004, are eligible for participation. The health care plan is a contributory plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Accounting Pronouncements

In April 2009,
the Financial Accounting Standards Board (the FASB) issued FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2/124-2). FSP
FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security into two components when there are credit-related losses associated with an impaired debt security that management asserts it has no intent to sell,
and it is more likely than not that management will not be required to sell the security before recovery of the securitys cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in earnings, and the
amount of the other-than-temporary impairment related to other factors is recorded in other comprehensive loss. FSP FAS 115-2/124-2 is effective for periods ending after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FASB Staff Position SFAS No. 115-2/124-2. This adoption had no material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). Under FSP FAS 157-4, if an entity determines that there has been a significant decrease in the volume and level of activity for the asset or
the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction
for the asset or liability is not orderly, the entity shall place little, if any, weight on that transaction price as an indicator of fair value. FSP FAS 157-4 is effective for periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FSP FAS 157-4. This adoption had no material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS
107-1/APB 28-1). FSP FAS 107-1/APB 28-1 requires disclosures about fair value of financial instruments in interim and annual financial statements. FSP FAS 107-1/APB 28-1 is effective for periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FSP FAS 107-1/APB 28-1. This adoption had no material impact on our consolidated financial statements.

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
(FSP FAS 157-3). FSP FAS 157-3 clarified the application of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No. 157). FSP FAS 157-3 demonstrates how
the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this
standard did not have an impact on our consolidated financial statements.

In May 2008, the FASB issued FSP APB 14-1, Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory
or optional conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants. Additionally, FSP APB 14-1 specifies
that issuers of such instruments should separately account for the liability and equity components in a



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manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We adopted FSP APB 14-1 on June 29, 2009. We are still in the process of assessing the impact of
FSP APB 14-1 on our consolidated financial statements.

In April 2008, the FASB adopted FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets (FSP FAS 142-3), amending the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142). FSP FAS 142-3 is effective for intangible assets acquired on or after June 29, 2009. We do not believe that FSP FAS 142-3 will have a material impact on our consolidated
financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB Statement No. 133 (SFAS No. 161). This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 will require us to provide
enhanced disclosures about (a) how and why we use derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect our financial position, financial performance, and cash flows. SFAS No. 161 is effective for us beginning June 29, 2009. We do not believe that SFAS No. 161 will have a material impact on
our consolidated financial statements.

In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement
No. 157, which delays the effective date of SFAS No. 157 to June 29, 2009 for all our nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). We believe the adoption of the delayed items of SFAS No. 157 will not have a material impact on our financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160
amends ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling interest. SFAS No. 160 establishes a single method of accounting for changes in a parents ownership interest in a subsidiary that do not result in deconsolidation.
SFAS No. 160 is effective for us beginning June 29, 2009. We do not believe that SFAS No. 160 will have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)). The standard
changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the
acquirers income tax valuation allowance. SFAS No. 141(R) will become effective for us beginning June 29, 2009. We do not believe that SFAS No. 141(R) will have a material impact on our consolidated financial statements.



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|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

Interest Rate Exposure

As of June 28, 2009, we had short-term investments of $40.7 million.
These investments are mainly in government agency and corporate debt securities that have maturity dates of greater than three months. These securities are subject to interest rate risk in as much as their fair value will fall if market interest
rates increase. If market interest rates were to increase immediately and uniformly by 10% from the levels prevailing at June 28, 2009, the fair value of the portfolio would not decline by a material amount. Additionally, a 10% decrease in the
market interest rates would not materially impact the fair value of the portfolio. We do not use derivative financial instruments to mitigate the risks inherent in these securities. However, we do attempt to reduce these risks by typically limiting
the maturity date of such securities to no more than 36 months, placing our investments with high credit quality issuers and limiting the amount of credit exposure with any one issuer. The possibility exists that some of these issues may be
downgraded as a result of disruptions in the credit market; however, we believe that we currently have the ability and currently intend to hold these investments until maturity, and therefore, believe that reductions in the value of these securities
attributable to short-term fluctuations in interest rates would not materially harm our business.

On June 8, 2005, we issued
convertible subordinated notes with a fixed rate of 3.25%, which have no interest rate risk impact to our business.

Foreign Currency Exchange Rate
Exposure

Our exposure to market risk due to fluctuations in currency exchange rates relates primarily to the intercompany balances with
our subsidiaries in the United Kingdom and Germany. Although we transact business in various countries, settlement amounts are usually based on United States currency. Transaction gains or losses have not been significant in the past and we do not
presently engage in hedging activity. A hypothetical 10% adverse change in sterling or Euro against United States dollars would not result in a material foreign exchange loss. Consequently, we do not expect that a sudden or significant fluctuation
in foreign exchange rates would have a direct material impact on our business.

Notwithstanding the foregoing analysis of the direct
effects of interest rate and currency exchange rate fluctuations on the value of certain of our investments and accounts, the indirect effects of such fluctuations could have a materially harmful effect on our business. For example, international
demand for our products is affected by foreign currency exchange rates. In addition, interest rate fluctuations may affect the buying patterns of our customers. Furthermore, interest rate and currency exchange rate fluctuations have broad influence
on the general condition of the United States, foreign and global economies which could materially harm our business.



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|Item 8. | Consolidated Financial Statements and Supplementary Data
|------- | --------------------------------------------------------

Supplementary quarterly financial data (unaudited):

The following table shows our unaudited
condensed, consolidated quarterly statements of operations data for each of the quarters in the years ended June 28, 2009 and June 29, 2008. This information has been derived from our unaudited financial information, which, in the opinion
of management, has been prepared on the same basis as our audited financial statements and includes all adjustments necessary for the fair presentation of the financial information for the quarters presented.



|                                                              |         |                                          |        |         |        |   |         |       |  |         |         |   |  |   |         |  
|------------------------------------------------------------- | ------- | ---------------------------------------- | ------ | ------- | ------ | - | ------- | ----- |  | ------- | ------- | - |  | - | ------- | -
|                                                              |         | First                                    |        |         | Second |   |         | Third |  |         | Fourth  |  
|                                                              | Quarter |                                          |        | Quarter |        |   | Quarter |       |  | Quarter |        
|                                                              |         | (In thousands, except per share amounts) |       
|Fiscal Year 2009                                              |         |                                          |        |         |        |   |         |       |  |         |         |   |  |   |         |  
|Net revenue                                                   |         | $                                        | 55,898 |         |        | $ | 48,207  |       |  | $       | 56,370  |   |  | $ | 60,356  |  
|Gross profit                                                  |         |                                          | 28,921 |         |        |   | 22,867  |       |  |         | 24,657  |   |  |   | 27,339  |  
|Operating Income (loss)                                       |         |                                          | 5,250  |         |        |   | 3,233   |       |  |         | (46,118 | ) |  |   | 1,739   |  
|Income (loss) before income taxes and discontinued operations |         |                                          | 4,258  |         |        |   | 2,286   |       |  |         | (46,333 | ) |  |   | 1,458   |  
|Income (loss) from continuing operations                      |         |                                          | 2,598  |         |        |   | 1,459   |       |  |         | (46,663 | ) |  |   | 1,935   |  
|Net income (loss)                                             |         |                                          | 2,598  |         |        |   | 1,459   |       |  |         | (46,663 | ) |  |   | 1,935   |  
|Basic earnings (loss) per share from continuing operations    |         |                                          | 0.06   |         |        |   | 0.03    |       |  |         | (1.08   | ) |  |   | 0.04    |  
|Basic net earnings (loss) per share                           |         |                                          | 0.06   |         |        |   | 0.03    |       |  |         | (1.08   | ) |  |   | 0.04    |  
|Diluted earnings (loss) per share from continuing operations  |         |                                          | 0.06   |         |        |   | 0.03    |       |  |         | (1.08   | ) |  |   | 0.04    |  
|Diluted net earnings (loss) per share                         |         |                                          | 0.06   |         |        |   | 0.03    |       |  |         | (1.08   | ) |  |   | 0.04    |  
|Fiscal Year 2008                                              |         |                                          |        |         |        |   |         |       |  |         |         |   |  |   |         |  
|Net revenue                                                   |         | $                                        | 50,735 |         |        | $ | 48,843  |       |  | $       | 51,469  |   |  | $ | 57,005  |  
|Gross profit                                                  |         |                                          | 21,900 |         |        |   | 21,796  |       |  |         | 21,970  |   |  |   | 18,980  |  
|Operating loss                                                |         |                                          | (1,455 | )       |        |   | (562    | )     |  |         | (1,135  | ) |  |   | (16,451 | )
|Income (loss) before income taxes and discontinued operations |         |                                          | (440   | )       |        |   | 480     |       |  |         | (1,691  | ) |  |   | (18,604 | )
|Income (loss) from continuing operations                      |         |                                          | (311   | )       |        |   | 201     |       |  |         | (918    | ) |  |   | (13,561 | )
|Gain on discontinued operations                               |         |                                          | 68     |         |        |   | 15      |       |  |         | 7       |   |  |   | 31      |  
|Net income (loss)                                             |         |                                          | (243   | )       |        |   | 216     |       |  |         | (911    | ) |  |   | (13,530 | )
|Basic earnings (loss) per share from continuing operations    |         |                                          | (0.01  | )       |        |   |        |       |  |         | (0.02   | ) |  |   | (0.30   | )
|Basic net earnings (loss) per share                           |         |                                          | (0.01  | )       |        |   |        |       |  |         | (0.02   | ) |  |   | (0.30   | )
|Diluted earnings (loss) per share from continuing operations  |         |                                          | (0.01  | )       |        |   |        |       |  |         | (0.02   | ) |  |   | (0.30   | )
|Diluted net earnings (loss) per share                         |         |                                          | (0.01  | )       |        |   |        |       |  |         | (0.02   | ) |  |   | (0.30   | )



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SYMMETRICOM, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                   |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                   |  | Page
|                                                                                                                                                   | 
|Report of Independent Registered Public Accounting Firm                                                                                            |  | 53  
|                                                                                                                                                   | 
|Consolidated Balance Sheets at June 28, 2009 and June 29, 2008                                                                                     |  | 54  
|                                                                                                                                                   | 
|Consolidated Statements of Operations for the years ended June 28, 2009, June 29, 2008 and July 1,
2007                                            |  | 55  
|                                                                                                                                                   | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) for the years ended June 
28, 2009, June 29, 2008 and July 1, 2007 |  | 56  
|                                                                                                                                                   | 
|Consolidated Statements of Cash Flows for the years ended June 28, 2009, June 29, 2008 and July 1,
2007                                            |  | 57  
|                                                                                                                                                   | 
|Notes to the Consolidated Financial Statements                                                                                                     |  | 58  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Symmetricom, Inc.

San Jose, California

We have audited the accompanying consolidated
balance sheets of Symmetricom, Inc. and subsidiaries (the Company) as of June 28, 2009 and June 29, 2008, and the related consolidated statements of operations, stockholders equity and comprehensive income (loss), and
cash flows for each of the three years in the period ended June 28, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15, Schedule II. These consolidated financial statements and financial
statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Symmetricom Inc. and
subsidiaries as of June 28, 2009 and June 29, 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 28, 2009, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth
therein.

As described in Note 10 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board (FASB) Interpretation
No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, during fiscal 2008.

We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of June 28, 2009, based on the criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 9, 2009 expressed an unqualified opinion on the Companys internal control over financial
reporting.

/s/ Deloitte & Touche LLP

San Jose,
California

September 9, 2009



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SYMMETRICOM, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)



|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                    |  | June 28, 2009 |         |   | June 29, 2008 |  
|ASSETS                                                                                                                                                              |  |               |         |   |               |   |         |  
|Current assets:                                                                                                                                                     |  |               |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                           |  | $             | 72,064  |   |               | $ | 142,419 |  
|Short-term investments                                                                                                                                              |  |               | 40,737  |   |               |   | 21,910  |  
|Accounts receivable, net of allowance for doubtful accounts of $361 in 2009 and $731 in 2008                                                                        |  |               | 42,389  |   |               |   | 36,682  |  
|Inventories, net.                                                                                                                                                   |  |               | 38,566  |   |               |   | 38,273  |  
|Prepaids and other current assets                                                                                                                                   |  |               | 16,143  |   |               |   | 14,402  |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total current assets                                                                                                                                                |  |               | 209,899 |   |               |   | 253,686 |  
|Property, plant and equipment, net                                                                                                                                  |  |               | 20,749  |   |               |   | 25,036  |  
|Goodwill                                                                                                                                                            |  |               |        |   |               |   | 48,144  |  
|Other intangible assets, net                                                                                                                                        |  |               | 5,308   |   |               |   | 7,191   |  
|Deferred taxes and other assets                                                                                                                                     |  |               | 40,486  |   |               |   | 44,512  |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total assets                                                                                                                                                        |  | $             | 276,442 |   |               | $ | 378,569 |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|                                                                                                                                                                    |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                |  |               |         |   |               |   |         |  
|Current liabilities:                                                                                                                                                |  |               |         |   |               |   |         |  
|Accounts payable.                                                                                                                                                   |  | $             | 8,116   |   |               | $ | 9,018   |  
|Accrued compensation.                                                                                                                                               |  |               | 19,093  |   |               |   | 13,582  |  
|Accrued warranty                                                                                                                                                    |  |               | 3,737   |   |               |   | 3,801   |  
|Other accrued liabilities                                                                                                                                           |  |               | 9,810   |   |               |   | 11,233  |  
|Current maturities of long-term obligations                                                                                                                         |  |               |        |   |               |   | 64,515  |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total current liabilities.                                                                                                                                          |  |               | 40,756  |   |               |   | 102,149 |  
|Long-term obligations                                                                                                                                               |  |               | 62,248  |   |               |   | 59,855  |  
|Deferred income taxes                                                                                                                                               |  |               | 334     |   |               |   | 426     |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total liabilities                                                                                                                                                   |  |               | 103,338 |   |               |   | 162,430 |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Commitments and contingencies (Notes 11 and 13                                                                                                                      |  |               |         |   |               |   |         |  
|Stockholders equity:                                                                                                                                               |  |               |         |   |               |   |         |  
|Preferred stock, $0.0001 par value; 500 shares authorized, none issued                                                                                              |  |               |        |   |               |   |        |  
|Common stock, $0.0001 par value; 70,000 shares authorized, 49,442 shares issued and 43,556 outstanding in 2009; 49,395 shares issued and
44,925 outstanding in 2008 |  |               | 179,633 |   |               |   | 182,201 |  
|Accumulated other comprehensive income (loss)                                                                                                                       |  |               | 144     |   |               |   | (60     | )
|Retained earnings (accumulated deficit)                                                                                                                             |  |               | (6,673  | ) |               |   | 33,998  |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total stockholders equity                                                                                                                                          |  |               | 173,104 |   |               |   | 216,139 |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                          |  | $             | 276,442 |   |               | $ | 378,569 |  
|                                                                                                                                                                    |  |               |         |   |               |   |         |  

See notes to the consolidated financial statements.



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SYMMETRICOM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share
amounts)



|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------- | -
|                                                              |  | Year ended    |        
|                                                              |  | June 28, 2009 |         |   | June 29, 2008 |   |         | July 1, 2007 | 
|Net revenue                                                   |  | $             | 220,831 |   |               | $ | 208,052 |              |  | $ | 208,380 |  
|Cost of products and services                                 |  |               | 111,707 |   |               |   | 113,771 |              |  |   | 109,837 |  
|Amortization of purchased technology                          |  |               | 1,474   |   |               |   | 3,343   |              |  |   | 3,317   |  
|Impairment of intangible assets                               |  |               |        |   |               |   | 5,658   |              |  |   |        |  
|Integration and restructuring charges                         |  |               | 3,866   |   |               |   | 634     |              |  |   | 224     |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Total cost of sales                                           |  |               | 117,047 |   |               |   | 123,406 |              |  |   | 113,378 |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Gross profit                                                  |  |               | 103,784 |   |               |   | 84,646  |              |  |   | 95,002  |  
|Operating expenses:                                           |  |               |         |   |               |   |         |              |  |   |         |  
|Research and development                                      |  |               | 26,429  |   |               |   | 27,887  |              |  |   | 23,692  |  
|Selling, general and administrative                           |  |               | 58,856  |   |               |   | 65,693  |              |  |   | 60,543  |  
|Acquired in-process research and development                  |  |               |        |   |               |   |        |              |  |   | 188     |  
|Amortization of intangible assets                             |  |               | 411     |   |               |   | 958     |              |  |   | 792     |  
|Integration and restructuring charges                         |  |               | 5,840   |   |               |   | 1,094   |              |  |   | 549     |  
|Impairment of goodwill                                        |  |               | 48,144  |   |               |   | 6,513   |              |  |   |        |  
|Impairment of intangible assets                               |  |               |        |   |               |   | 2,104   |              |  |   |        |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Total operating expenses                                      |  |               | 139,680 |   |               |   | 104,249 |              |  |   | 85,764  |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Operating income (loss)                                       |  |               | (35,896 | ) |               |   | (19,603 | )            |  |   | 9,238   |  
|Gain on sale of asset .                                       |  |               |        |   |               |   | 700     |              |  |   |        |  
|Loss on repayment of convertible notes, net                   |  |               | (522    | ) |               |   |        |              |  |   |        |  
|Loss on short-term investments, net.                          |  |               | (1,368  | ) |               |   | (3,728  | )            |  |   |        |  
|Interest income                                               |  |               | 1,807   |   |               |   | 7,123   |              |  |   | 9,231   |  
|Interest expense                                              |  |               | (2,352  | ) |               |   | (4,747  | )            |  |   | (4,823  | )
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Income (loss) before income taxes and discontinued operations |  |               | (38,331 | ) |               |   | (20,255 | )            |  |   | 13,646  |  
|Income tax provision (benefit)                                |  |               | 2,340   |   |               |   | (5,666  | )            |  |   | 7,588   |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Income (loss) from continuing operations                      |  |               | (40,671 | ) |               |   | (14,589 | )            |  |   | 6,058   |  
|Gain from discontinued operations, net of tax                 |  |               |        |   |               |   | 121     |              |  |   | 242     |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Net income (loss)                                             |  | $             | (40,671 | ) |               | $ | (14,468 | )            |  | $ | 6,300   |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Earnings (loss) per sharebasic:                              |  |               |         |   |               |   |         |              |  |   |         |  
|Earnings (loss) from continuing operations                    |  | $             | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.13    |  
|Earnings from discontinued operations                         |  |               |        |   |               |   |        |              |  |   | 0.01    |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Net earnings (loss)                                           |  | $             | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.14    |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Weighted average shares outstandingbasic.                    |  |               | 43,500  |   |               |   | 44,461  |              |  |   | 45,572  |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|                                                              |  |               |        
|Earnings (loss) per sharediluted:                            |  |               |         |   |               |   |         |              |  |   |         |  
|Earnings (loss) from continuing operations                    |  | $             | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.13    |  
|Earnings from discontinued operations                         |  |               |        |   |               |   |        |              |  |   | 0.01    |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Net earnings (loss)                                           |  | $             | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.14    |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  
|Weighted average shares outstandingdiluted                   |  |               | 43,500  |   |               |   | 44,461  |              |  |   | 46,389  |  
|                                                              |  |               |         |   |               |   |         |              |  |   |         |  

See notes to the consolidated financial statements.



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SYMMETRICOM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

AND COMPREHENSIVE INCOME
(LOSS)

(In thousands)



|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | ------------ | - |  | ------------------------------------------ | ------- | - | ------------------------------------ | - | ---- | ------------------------ |  | - | ------------------------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                     |  | Common Stock |   |  | AccumulatedOtherComprehensiveIncome (loss) |         |   | RetainedEarnings(accumulateddeficit) |   |      | TotalStockholdersEquity |  |   | TotalComprehensiveIncome (loss) |  
|                                                                     |  | Shares       |   |  | Amount                                     |         |   |                                      |   |     
|Balance at July 2, 2006                                              |  | 45,743       |   |  | $                                          | 181,696 |   |                                      | $ | 263  |                          |  | $ | 42,563                          |   |  | $ | 224,522 |   |  | $ | 227     |  
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Issuance of common stock:                                            |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Stock option exercises, net of shares tendered upon exercise         |  | 556          |   |  |                                            | 2,749   |   |                                      |   |     |                          |  |   |                                |   |  |   | 2,749   |   |  |   |        |  
|Restricted stock issued                                              |  | 725          |   |  |                                            |        |   |                                      |   |     |                          |  |   |                                 |   |  |   |        |   |  |   |        |  
|Repurchase of common stock                                           |  | (512         | ) |  |                                            | (3,993  | ) |                                      |   |     |                          |  |   |                                |   |  |   | (3,993  | ) |  |   |        |  
|Restricted stock canceled                                            |  | (20          | ) |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Exercise of warrants, (net)                                          |  | 36           |   |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Stock option income tax benefit                                      |  |             |   |  |                                            | 225     |   |                                      |   |     |                          |  |   |                                |   |  |   | 225     |   |  |   |        |  
|Stock-based compensation                                             |  |             |   |  |                                            | 6,393   |   |                                      |   |     |                          |  |   |                                |   |  |   | 6,393   |   |  |   |        |  
|Comprehensive income:                                                |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Income from continuing operations                                    |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | 6,058                           |   |  |   | 6,058   |   |  |   | 6,058   |  
|Gain from discontinued operations, net of tax of $167                |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | 242                             |   |  |   | 242     |   |  |   | 242     |  
|Unrealized gain on short-term investments, net of taxes              |  |             |   |  |                                            |        |   |                                      |   | 124  |                          |  |   |                                |   |  |   | 124     |   |  |   | 124     |  
|Cumulative adjustments to foreign currency translation, net of taxes |  |             |   |  |                                            |        |   |                                      |   | 16   |                          |  |   |                                |   |  |   | 16      |   |  |   | 16      |  
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Balance at July 1, 2007                                              |  | 46,528       |   |  | $                                          | 187,070 |   |                                      | $ | 403  |                          |  | $ | 48,863                          |   |  | $ | 236,336 |   |  | $ | 6,440   |  
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Issuance of common stock:                                            |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Stock option exercises, net of shares tendered upon exercise         |  | 50           |   |  |                                            | 205     |   |                                      |   |     |                          |  |   |                                |   |  |   | 205     |   |  |   |        |  
|Restricted stock issued                                              |  | 510          |   |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Repurchase of common stock                                           |  | (2,037       | ) |  |                                            | (9,549  | ) |                                      |   |     |                          |  |   |                                |   |  |   | (9,549  | ) |  |   |        |  
|Restricted stock canceled                                            |  | (126         | ) |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Stock option income tax expense                                      |  |             |   |  |                                            | (480    | ) |                                      |   |     |                          |  |   |                                |   |  |   | (480    | ) |  |   |        |  
|Stock-based compensation.                                            |  |             |   |  |                                            | 4,955   |   |                                      |   |     |                          |  |   |                                |   |  |   | 4,955   |   |  |   |        |  
|Comprehensive income:                                                |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Loss from continuing operations                                      |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | (14,589                         | ) |  |   | (14,589 | ) |  |   | (14,589 | )
|Gain from discontinued operations, net of tax of $71                 |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | 121                             |   |  |   | 121     |   |  |   | 121     |  
|Adjustment for FIN 48 adoption (See Note 10)                         |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | (397                            | ) |  |   | (397    | ) |  |   |         |  
|Unrealized loss on short-term investments, net of taxes              |  |             |   |  |                                            |        |   |                                      |   | (338 | )                        |  |   |                                |   |  |   | (338    | ) |  |   | (338    | )
|Cumulative adjustments to foreign currency translation, net of taxes |  |             |   |  |                                            |        |   |                                      |   | (125 | )                        |  |   |                                |   |  |   | (125    | ) |  |   | (125    | )
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Balance at June 29, 2008                                             |  | 44,925       |   |  | $                                          | 182,201 |   |                                      | $ | (60  | )                        |  | $ | 33,998                          |   |  | $ | 216,139 |   |  | $ | (14,931 | )
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Issuance of common stock:                                            |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Stock option exercises, net of shares tendered upon exercise         |  | 151          |   |  |                                            | 595     |   |                                      |   |     |                          |  |   |                                |   |  |   | 595     |   |  |   |        |  
|Restricted stock issued                                              |  | 30           |   |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Repurchase of common stock                                           |  | (1,416       | ) |  |                                            | (5,785  | ) |                                      |   |     |                          |  |   |                                |   |  |   | (5,785  | ) |  |   |        |  
|Restricted stock canceled                                            |  | (134         | ) |  |                                            |        |   |                                      |   |     |                          |  |   |                                |   |  |   |        |   |  |   |        |  
|Stock option income tax expense                                      |  |             |   |  |                                            | (670    | ) |                                      |   |     |                          |  |   |                                |   |  |   | (670    | ) |  |   |        |  
|Stock-based compensation.                                            |  |             |   |  |                                            | 3,292   |   |                                      |   |     |                          |  |   |                                |   |  |   | 3,292   |   |  |   |        |  
|Comprehensive income:                                                |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Net loss                                                             |  |             |   |  |                                            |        |   |                                      |   |     |                          |  |   | (40,671                         | ) |  |   | (40,671 | ) |  |   | (40,671 | )
|Unrealized gain on short-term investments, net of taxes              |  |             |   |  |                                            |        |   |                                      |   | 372  |                          |  |   |                                |   |  |   | 372     |   |  |   | 372     |  
|Cumulative adjustments to foreign currency translation, net of taxes |  |             |   |  |                                            |        |   |                                      |   | (168 | )                        |  |   |                                |   |  |   | (168    | ) |  |   | (168    | )
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  
|Balance at June 28, 2009                                             |  | 43,556       |   |  | $                                          | 179,633 |   |                                      | $ | 144  |                          |  | $ | (6,673                          | ) |  | $ | 173,104 |   |  | $ | (40,467 | )
|                                                                     |  |              |   |  |                                            |         |   |                                      |   |      |                          |  |   |                                 |   |  |   |         |   |  |   |         |  

See notes to the consolidated financial statements.



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SYMMETRICOM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | ----------- |  | - | -------- | -
|                                                                                         |  | Year ended   |        
|                                                                                         |  | June 28,2009 |         |   | June 29,2008 |   |         | July 1,2007 | 
|Cash flows from operating activities:                                                    |  |              |         |   |              |   |         |             |  |   |          |  
|Net income (loss)                                                                        |  | $            | (40,671 | ) |              | $ | (14,468 | )           |  | $ | 6,300    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |              |         |   |              |   |         |             |  |   |          |  
|Impairment of goodwill and intangibles                                                   |  |              | 48,144  |   |              |   | 14,275  |             |  |   |         |  
|Acquired in-process research and development                                             |  |              |        |   |              |   |        |             |  |   | 188      |  
|Depreciation and amortization                                                            |  |              | 8,948   |   |              |   | 10,649  |             |  |   | 9,605    |  
|Deferred income taxes.                                                                   |  |              | 420     |   |              |   | (6,567  | )           |  |   | 2,031    |  
|Loss on investments                                                                      |  |              | 1,368   |   |              |   | 3,728   |             |  |   |         |  
|Loss on repayment of convertible notes                                                   |  |              | 522     |   |              |   |        |             |  |   |         |  
|Income tax expense related to QoSmetrics liquidations                                    |  |              |        |   |              |   |        |             |  |   | 3,110    |  
|Loss on disposal of fixed assets                                                         |  |              | 786     |   |              |   | 180     |             |  |   | 10       |  
|Allowance for doubtful accounts                                                          |  |              | (328    | ) |              |   | 173     |             |  |   | 349      |  
|Provision for excess and obsolete inventory                                              |  |              | 2,619   |   |              |   | 3,393   |             |  |   | 1,466    |  
|Gain on sale of asset                                                                    |  |              |        |   |              |   | (700    | )           |  |   |         |  
|Stock-based compensation                                                                 |  |              | 3,292   |   |              |   | 4,955   |             |  |   | 6,393    |  
|Stock option excess income tax benefit                                                   |  |              |        |   |              |   | (2      | )           |  |   | (361     | )
|Changes in assets and liabilities, net of effects of acquisitions:                       |  |              |         |   |              |   |         |             |  |   |          |  
|Accounts receivable                                                                      |  |              | (5,379  | ) |              |   | 513     |             |  |   | (3,483   | )
|Inventories                                                                              |  |              | (2,912  | ) |              |   | (2,709  | )           |  |   | (8,041   | )
|Prepaids and other assets.                                                               |  |              | (1,155  | ) |              |   | 1,267   |             |  |   | (1,397   | )
|Accounts payable                                                                         |  |              | (780    | ) |              |   | (3,715  | )           |  |   | (835     | )
|Accrued compensation                                                                     |  |              | 5,511   |   |              |   | (570    | )           |  |   | 3,000    |  
|Other accrued liabilities                                                                |  |              | 1,296   |   |              |   | 1,785   |             |  |   | 2,366    |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Net cash provided by operating activities                                                |  |              | 21,681  |   |              |   | 12,187  |             |  |   | 20,701   |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Cash flows from investing activities:                                                    |  |              |         |   |              |   |         |             |  |   |          |  
|Acquisition and related costs, net of cash acquired                                      |  |              |        |   |              |   |        |             |  |   | (23,385  | )
|Purchase of intangible assets                                                            |  |              |        |   |              |   | (1,455  | )           |  |   | (2,006   | )
|Purchases of short-term investments                                                      |  |              | (26,371 | ) |              |   | (25,945 | )           |  |   | (225,368 | )
|Maturities of short-term investments                                                     |  |              | 7,262   |   |              |   | 137,349 |             |  |   | 193,603  |  
|Purchases of plant and equipment                                                         |  |              | (3,685  | ) |              |   | (5,153  | )           |  |   | (5,124   | )
|Proceeds from note receivable from employee                                              |  |              |        |   |              |   | 500     |             |  |   |         |  
|Proceeds from sale of asset                                                              |  |              |        |   |              |   | 700     |             |  |   |         |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Net cash provided by (used for) investing activities                                     |  |              | (22,794 | ) |              |   | 105,996 |             |  |   | (62,280  | )
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Cash flows from financing activities:                                                    |  |              |         |   |              |   |         |             |  |   |          |  
|Repayment of long-term obligations                                                       |  |              | (1,395  | ) |              |   | (3,884  | )           |  |   | (2,160   | )
|Proceeds from issuance of common stock                                                   |  |              | 595     |   |              |   | 205     |             |  |   | 2,749    |  
|Stock option excess income tax benefit                                                   |  |              |        |   |              |   | 2       |             |  |   | 361      |  
|Repurchase of common stock                                                               |  |              | (5,785  | ) |              |   | (9,549  | )           |  |   | (3,993   | )
|Repayment of convertible notes                                                           |  |              | (62,489 | ) |              |   |        |             |  |   |         |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Net cash used for financing activities                                                   |  |              | (69,074 | ) |              |   | (13,226 | )           |  |   | (3,043   | )
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Effect of exchange rate changes in cash                                                  |  |              | (168    | ) |              |   | (125    | )           |  |   | 16       |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                     |  |              | (70,355 | ) |              |   | 104,832 |             |  |   | (44,606  | )
|Cash and cash equivalents at beginning of year                                           |  |              | 142,419 |   |              |   | 37,587  |             |  |   | 82,193   |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Cash and cash equivalents at end of year                                                 |  | $            | 72,064  |   |              | $ | 142,419 |             |  | $ | 37,587   |  
|                                                                                         |  |              |         |   |              |   |         |             |  |   |          |  
|Non-cash investing and financing activities:                                             |  |              |         |   |              |   |         |             |  |   |          |  
|Unrealized gain (loss) on securities, net                                                |  | $            | 371     |   |              | $ | (338    | )           |  | $ | 124      |  
|Plant and equipment purchases included in accounts payable                               |  |              | 48      |   |              |   | 170     |             |  |   | 329      |  
|Cash payments for:                                                                       |  |              |         |   |              |   |         |             |  |   |          |  
|Interest                                                                                 |  | $            | 2,125   |   |              | $ | 4,116   |             |  | $ | 4,266    |  
|Income taxes                                                                             |  |              | 1,008   |   |              |   | 1,829   |             |  |   | 1,812    |  

See notes to the consolidated financial statements.



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SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Summary of Significant Accounting
Policies

Business

Symmetricom, Inc., incorporated in the state of Delaware, is a leading supplier of precise timing standards to industry, government, utilities, research centers and aerospace markets. The company also supplies QoE (Quality of Experience)
solutions that enable communication service providers to monitor the performance, as perceived by end users, of IP-based video and other next generation network applications. Timing and synchronization products and services include network
synchronization systems and timing elements used by network operators and users, governments and professional services. Such products play an important role in the operation, bandwidth utilization, and quality of service of wireline, wireless and
cable networks enabling our customers to increase the reliability of their networks in todays evolving communications environment.

Principles of Consolidation

The consolidated financial statements include the accounts of Symmetricom, Inc., and its
wholly owned subsidiaries (Symmetricom, we, our or the Company). All significant intercompany accounts and transactions are eliminated.

Fiscal Year

Our fiscal year is the
52 or 53 weeks ending on the Sunday closest to June 30. Fiscal years 2007 through 2009 were all 52-week fiscal years.

Reclassifications

Certain prior-year amounts in the Consolidated Statements of Cash Flows have been reclassified to conform
to the current periods presentation. The Consolidated Statements of Cash Flows now includes non-cash charges for the allowance for doubtful accounts and provision for excess and obsolete inventory that were previously included in the changes
in Accounts Receivable and Inventories, respectively.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include:



| |  |  | Valuation of business combinations
| | - |  | ----------------------------------



| |  |  | Revenue recognition
| | - |  | -------------------



| |  |  | Allowance for doubtful accounts
| | - |  | -------------------------------



| |  |  | Inventory valuation
| | - |  | -------------------



| |  |  | Accounting for income taxes
| | - |  | ---------------------------



| |  |  | Valuation of short-term investments
| | - |  | -----------------------------------



| |  |  | Valuation of long-lived assets including goodwill and intangible assets
| | - |  | -----------------------------------------------------------------------



| |  |  | Stock based compensation
| | - |  | ------------------------



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



| |  |  | Warranty accrual
| | - |  | ----------------



| |  |  | Accruals for contingent liabilities (including restructuring charges)
| | - |  | ---------------------------------------------------------------------

Actual results could differ from these estimates.

Cash and Cash Equivalents

We consider all highly liquid debt investments with a remaining maturity of three months or less
when purchased to be cash and cash equivalents.

Short-term Investments

Short-term investments consist of government securities, mutual funds and corporate debt securities that mature between three and 36 months. All of our
short-term investments, except the deferred compensation assets, are classified as available-for-sale. During fiscal 2009, we reclassified the deferred compensation assets from available-for-sale to trading securities in order to maintain
consistency with the method in which we account for the deferred compensation obligation. Available-for-sale securities are carried at fair value with temporary unrealized gains and losses, net of taxes, reported as a component of stockholders
equity. Unrealized gains and losses related to trading securities are included in earnings, net of taxes.

Short-term investments are
considered to be impaired when a decline in fair value is judged to be other-than-temporary. We consult with our investment manager and consider available quantitative and qualitative evidence in evaluating potential impairment of our investments on
a quarterly basis. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the
investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.

During fiscal 2009, we recorded a loss of $1.4 million related to short-term investments. See Note 8  Financial Instruments.

During the fourth quarter of fiscal 2009, we adopted Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (FSP FAS 115-2/124-2). FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security into two components when there are credit-related losses associated
with an impaired debt security that management asserts it has no intent to sell, and it is more likely than not that management will not be required to sell the security before recovery of the securitys cost basis. The amount of the
other-than-temporary impairment related to a credit loss is recognized in earnings, and the amount of the other-than-temporary impairment related to other factors is recorded in other comprehensive loss. For fiscal 2009, the adoption of FSP FAS
115-2/124-2 did not have a material impact on our consolidated financial statements.

Fair Values of Financial Instruments

The estimated fair value of our financial instruments, which include cash and cash equivalents, short-term investments, accounts
receivable, accounts payable, notes payable, and bonds payable, approximate their carrying amount.



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents, short-term
investments, and accounts receivable. We place our investments with high-credit-quality corporations and financial institutions. Accounts receivable are derived primarily from sales to telecommunications service providers, original equipment
manufacturers, government agencies, defense contractors, and distributors. Management believes that its credit evaluation, approval, and monitoring processes mitigate potential credit risks. However, we still have significant credit risks as our
customers currently tend to consolidate by mergers or acquisitions, which could impact their ability to pay.

Inventories

Inventories are stated at the lower-of-cost (first-in, first-out) or market. We assess the valuation of all inventories, including raw
materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of managements estimated usage is written down to its estimated market value less costs to sell, if less than its cost.
Inherent in the estimates of market value are managements estimates related to current economic trends, future demand and technological obsolescence. Inventories consist of:



|                |  |                |        |               |   |       
|--------------- |  | -------------- | ------ | ------------- | - | ------
|                |  | June 28, 2009  |        | June 29, 2008
|                |  | (In thousands)
|Raw materials   |  | $              | 19,992 |               | $ | 16,753
|Work-in-process |  |                | 10,231 |               |   | 10,162
|Finished goods  |  |                | 8,343  |               |   | 11,358
|                |  |                |        |               |   |       
|Inventories     |  | $              | 38,566 |               | $ | 38,273
|                |  |                |        |               |   |       

Property, Plant and Equipment, Net

Property, plant and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method based on the estimated useful
lives of the assets except for land as follows:



|                                           |  |                                          
|------------------------------------------ |  | -----------------------------------------
|Buildings and improvements                 |  | 15 - 39 years                            
|Leasehold improvements                     |  | 5 -15 years, or life of lease, if shorter
|Machinery, equipment and computer software |  | 3 - 7 years                              

Property, plant and equipment consist of the following:



|                                          |  |                |         |   |               |   |         |  
|----------------------------------------- |  | -------------- | ------- | - | ------------- | - | ------- | -
|                                          |  | June 28, 2009  |         |   | June 29, 2008 |  
|                                          |  | (In thousands) |        
|Property, plant and equipment             |  |                |         |   |               |   |         |  
|Land                                      |  | $              | 200     |   |               | $ | 200     |  
|Buildings and improvements                |  |                | 15,898  |   |               |   | 16,968  |  
|Machinery and equipment                   |  |                | 31,008  |   |               |   | 31,926  |  
|Computer software                         |  |                | 10,447  |   |               |   | 9,198   |  
|Leasehold improvements                    |  |                | 18,351  |   |               |   | 18,081  |  
|                                          |  |                |         |   |               |   |         |  
|                                          |  |                | 75,904  |   |               |   | 76,373  |  
|Accumulated depreciation and amortization |  |                | (55,155 | ) |               |   | (51,337 | )
|                                          |  |                |         |   |               |   |         |  
|                                          |  | $              | 20,749  |   |               | $ | 25,036  |  
|                                          |  |                |         |   |               |   |         |  



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Accounting for Income Taxes

We provide for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be realized. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the financial statements in the period that includes the enactment
date.

The carrying value of our net deferred tax assets, which are made up of tax deductions, net operating loss carryforwards and tax
credits, assumes that we will be able to generate sufficient future income to fully realize these assets. We evaluate the weight of all available evidence in determining whether it is more likely than not that some portion of the deferred tax assets
will not be realized. If we do not generate sufficient future income, the realization of these deferred tax assets may be impaired, resulting in an additional income tax expense. A portion of our tax credits is related to stock options and has a
valuation allowance because of uncertainty regarding their realization. If these tax credits are realized, the benefit will be credited to common stock.

On July 2, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, we may recognize the tax benefit from
an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

Goodwill and Other Intangible Assets

We allocate the purchase price of acquired companies to the
tangible and intangible assets acquired and liabilities assumed, as well as in-process research and development based on their estimated fair values. Such allocations require management to make significant estimates and assumptions, especially with
respect to intangible assets.

Our accounting policy is to perform impairment tests in accordance with the SFAS No. 142, Goodwill and Other
Intangible Assets, on an annual basis, and between annual tests in certain circumstances, for each reporting unit using a discounted cash flow valuation method. Critical estimates in valuing certain intangible assets include, but are not limited to:
future expected cash flows from customer contracts, customer lists, distribution agreements, acquired developed technologies and patents; expected costs to develop the in-process research and development into commercially viable products and
estimating cash flows from the projects when completed; and the brand awareness and the market position of the acquired products and assumptions about the period of time the brand will continue to be used in the combined companys product
portfolio. Managements estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

As discussed in Note 9, in the third quarter of fiscal 2009, due to a decline in our stock price and a lowered business outlook, we determined that indicators of a potential goodwill impairment existed. Based on the
results



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##### Table of Contents

SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



of our tests of impairment, we recorded a goodwill impairment charge of approximately $48.1 million in the third quarter of fiscal 2009, consisting of
$28.0 million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting segment. See Note 9  Goodwill and Intangible Assets.

Long-lived Assets Including Other Intangible Assets Subject to Amortization

The carrying value of long-lived assets is evaluated whenever events or changes in circumstances indicate that the carrying value of the asset may be
impaired. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset, including disposition, is less than the carrying value of the asset. An impairment loss is measured as the amount
by which the carrying amount exceeds the fair value.

In the third quarter of fiscal 2009, because of the identification of goodwill
impairment indicators (See aboveGoodwill and Other Intangible Assets), we first reviewed our other intangible and long-lived assets for impairment and determined there was no impairment. See Note 9  Goodwill and Intangible Assets.

Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting and display of comprehensive income and its component. SFAS No. 130 requires companies to report comprehensive income that includes unrealized
holding gains and losses and other items that have previously been excluded from net income and reflected instead in stockholders equity.

Accumulated other comprehensive income (loss), consists of the following:



|                                                       |  |                |     |   |               |   |      |              |  |   |    
|------------------------------------------------------ |  | -------------- | --- | - | ------------- | - | ---- | ------------ |  | - | ---
|                                                       |  | June 28, 2009  |     |   | June 29, 2008 |   |      | July 1, 2007
|                                                       |  | (in thousands)
|Foreign currency translation adjustments, net of taxes |  | $              | (31 | ) |               | $ | 137  |              |  | $ | 262
|Unrealized gain (loss) on investments, net of taxes.   |  |                | 175 |   |               |   | (197 | )            |  |   | 141
|                                                       |  |                |     |   |               |   |      |              |  |   |    
|Total accumulated other comprehensive income (loss)    |  | $              | 144 |   |               | $ | (60  | )            |  | $ | 403
|                                                       |  |                |     |   |               |   |      |              |  |   |    

Warranty

Our standard warranty agreement is one year from shipment. However, our warranty agreements are contract and component specific and can range to twenty years for selected components. We offer extended warranty
contracts to our customers. The extended warranty is offered on products that are less than eight years old. The extended warranty contract is applicable for a maximum of nine years after the expiration of the standard one-year warranty. The revenue
from extended warranty contracts is recognized ratably over the period of contract.

We accrue for anticipated warranty costs upon
shipment. Our warranty reserve is based on the number of installed units, historical analysis of the volume of product returned to us under the warranty program, managements judgment regarding anticipated rates of warranty claims and
associated repair costs. We use the historical data to forecast our anticipated future warranty obligations.

Acquired in-process
research and development expenses

Projects that qualify as in-process research and development represent those that have not yet
reached technological feasibility and have no alternative future use. Technological feasibility is defined as being



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equivalent to a beta-phase working prototype in which there is no remaining risk relating to the development. The value of these projects was determined by
estimating the discounted net cash flows from the sale of the products resulting from the completion of the projects, reduced by the portion of the revenue attributable to developed technology and the percentage of completion of the project.

The nature of the efforts to develop the purchased in-process research and development into commercially viable products principally
relates to the completion of all prototyping and testing activities that are necessary to establish that the product can meet its design specification including function, features and technical performance requirements. Therefore, the amount
allocated to in-process research and development has been charged to operations.

Software Development Costs

Costs for the development of new software and substantial enhancements to existing software are expensed as incurred until technological feasibility has
been established, at which time any additional development costs would be capitalized in accordance with SFAS No. 86, Accounting for the Cost of Computer Software to Be Sold, Leased, or Otherwise Marketed. We believe the current process for
developing software is essentially completed concurrently with the establishment of technological feasibility; accordingly, no costs have been capitalized to date.

Foreign Currency Translation

The functional currency of each of our international subsidiaries in
the United Kingdom and China is the U.S. dollar, while in Germany, it is the Euro.

For our subsidiaries in which the U.S. Dollar is
the functional currency, foreign currency denominated assets and liabilities are translated at the period-end exchange rates, except for inventories, prepaid expenses, and property and equipment, which are translated at historical exchange rates.
Statements of operations are translated at the average exchange rates during the year except for those expenses related to the balance sheet amounts, which are translated using historical exchange rates. Net gains (losses) from these foreign
exchange transactions have not been material to our operating results for any of the periods presented.

For our subsidiary in Germany,
foreign currency denominated assets and liabilities are translated at the period-end exchange rates, while revenue and expenses are translated at average rates prevailing during the year. Translation adjustments are reported in other comprehensive
income.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or determinable and collectibility is reasonably assured. Our standard arrangement for our
domestic and international customers includes a signed purchase order or contract and no right of return of delivered products. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

In rare circumstances, our customers may request that certain transactions be on a bill and hold basis. For these transactions, we
recognize revenue in accordance with Staff Accounting Bulletin (SAB) 104.

We assess collectibility based on the
creditworthiness of the customer and past transaction history. We perform periodic credit evaluations of our customers and do not require collateral from our customers. However,



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for many of our international customers, we require an irrevocable letter of credit to be issued by the customer before the purchase order is accepted. If we
determine that collection of the invoice is not reasonably assured, we recognize the revenue at the time that collection becomes reasonably assured, which is generally upon the receipt of cash.

Generally, product revenue is generated from the sale of synchronization and timing equipment with embedded software that is incidental to product
functionality. For instances where embedded software is more than incidental to product functionality, we account for the transactions in accordance with the rules applicable to software revenue recognition. We commonly have transactions that
involve sales of both product and services to our customers. Service revenue is recognized as the services are performed provided collection of the related receivable is reasonably assured. Our sales to distributors are made under agreements
allowing for returns or credits under certain circumstances. Accordingly, we defer an estimate of returns from distributors based on a historical average of distributor returns. We record commission expense both when orders are received and shipped,
at which times the commission is both earned and payable.

Revenue from contracts that require development and manufacture in accordance
with customer specifications and have a lengthy development period may be categorized into two types: firm fixed price and cost-plus reimbursement. Revenue is recognized under the fixed price contracts using the percentage of completion method
(cost-to-cost basis), principally based upon the costs incurred relative to the total estimated costs at completion on the individual contracts. Any anticipated losses on contracts are charged to operations as soon as they are determinable. Revenue
recognized under cost plus contracts is recognized on the basis of direct and indirect costs incurred plus a negotiated profit calculated as a percentage of costs or as a performance based award fee. Revenue from long-term contracts is reviewed
periodically, with adjustments recorded in the period in which the revisions are made. A contract is determined to be substantially complete when the physical deliverables are completed, shipped and accepted. Unbilled receivables totaled $5.1
million as of June 28, 2009 compared to $3.9 million as of June 29, 2008. All of unbilled receivables as of June 28, 2009 are expected to be collected in fiscal 2010. Any anticipated losses on contracts are charged to operations as
soon as they are determinable.

Stock-Based Compensation

We account for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this
statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense, net of estimated forfeitures, over the applicable vesting period of the stock award using the accelerated
method.

Net Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding and common equivalent shares from dilutive stock options, warrants, and restricted stock using the treasury method, except when antidilutive.



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A reconciliation of the denominator used in the calculation of basic and diluted net income (loss)
per share is as follows (in thousands):



|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|--------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------ | -
|                                                                            |  | Year ended                               |        
|                                                                            |  | June 28, 2009                            |         |   | June 29, 2008 |   |         | July 1, 2007 | 
|                                                                            |  | (In thousands, except per share amounts) |        
|Numerator:                                                                  |  |                                          |         |   |               |   |         |              |  |   |        |  
|Net income (loss) from continuing operations                                |  | $                                        | (40,671 | ) |               | $ | (14,589 | )            |  | $ | 6,058  |  
|Gain from discontinued operations                                           |  |                                          |        |   |               |   | 121     |              |  |   | 242    |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Net income (loss)                                                           |  | $                                        | (40,671 | ) |               | $ | (14,468 | )            |  | $ | 6,300  |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|                                                                            |  |                                          |        
|Shares (Denominator):                                                       |  |                                          |         |   |               |   |         |              |  |   |        |  
|Weighted average common shares outstanding                                  |  |                                          | 44,167  |   |               |   | 45,512  |              |  |   | 46,208 |  
|Weighted average common shares outstanding subject to repurchase            |  |                                          | (667    | ) |               |   | (1,051  | )            |  |   | (636   | )
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Weighted average shares outstandingbasic                                   |  |                                          | 43,500  |   |               |   | 44,461  |              |  |   | 45,572 |  
|Weighted average dilutive share equivalents from stock options and warrants |  |                                          |        |   |               |   |        |              |  |   | 609    |  
|Weighted average dilutive common shares subject to repurchase               |  |                                          |        |   |               |   |        |              |  |   | 208    |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Weighted average shares outstandingdiluted                                 |  |                                          | 43,500  |   |               |   | 44,461  |              |  |   | 46,389 |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Earnings per sharebasic:                                                   |  |                                          |         |   |               |   |         |              |  |   |        |  
|Earnings (loss) from continuing operations                                  |  | $                                        | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.13   |  
|Earnings from discontinued operations                                       |  |                                          |        |   |               |   |        |              |  |   | 0.01   |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Net earnings (loss)                                                         |  | $                                        | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.14   |  
|Earnings per sharediluted:                                                 |  |                                          |         |   |               |   |         |              |  |   |        |  
|Earnings (loss) from continuing operations                                  |  | $                                        | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.13   |  
|Earnings from discontinued operations                                       |  |                                          |        |   |               |   |        |              |  |   | 0.01   |  
|                                                                            |  |                                          |         |   |               |   |         |              |  |   |        |  
|Net earnings (loss)                                                         |  | $                                        | (0.93   | ) |               | $ | (0.33   | )            |  | $ | 0.14   |  

Unvested restricted stock is subject to repurchase by the Company and therefore is not included in
the calculation of the weighted-average shares outstanding for basic earnings (loss) per share.

The following common stock equivalents
were excluded from the net earnings (loss) per share calculation, as their effect would have been antidilutive:



|                                                                                             |  |                |  |               |  |             
|-------------------------------------------------------------------------------------------- |  | -------------- |  | ------------- |  | ------------
|                                                                                             |  | Year ended    
|                                                                                             |  | June 28, 2009  |  | June 29, 2008 |  | July 1, 2007
|                                                                                             |  | (In thousands)
|Stock options and warrants                                                                   |  | 5,678          |  | 5,218         |  | 2,408       
|Common shares subject to repurchase                                                          |  | 667            |  | 1,051         |  |            
|                                                                                             |  |                |  |               |  |             
|Total shares of common stock excluded from diluted net earnings (loss) per share calculation |  | 6,345          |  | 6,269         |  | 2,408       
|                                                                                             |  |                |  |               |  |             

We account for our contingent convertible notes in accordance with EITF 04-08, The Effect of
Contingently Convertible Debt on Diluted Earnings Per Share, which requires us to include the dilutive effect of the shares of our common stock issuable upon conversion of the outstanding convertible notes in our diluted earnings per share
calculation regardless of whether the market price trigger or other contingent conversion feature has been met.



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Because our contingent convertible notes include a mandatory cash settlement feature for the principal payment, we apply the treasury stock method. This
method results in incremental dilutive shares when the average fair value of our common stock for a reporting period exceeds the initial conversion price per share of $12.49. However, because our share price did not exceed $12.49, no shares
associated with the contingent convertible notes were included in our diluted earnings per share for fiscal years 2009, 2008, and 2007.

Note
2Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (the FASB) issued FASB
Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2/124-2). FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary
impairment of a debt security into two components when there are credit-related losses associated with an impaired debt security that management asserts it has no intent to sell, and it is more likely than not that management will not be required to
sell the security before recovery of the securitys cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in earnings, and the amount of the other-than-temporary impairment related to other factors
is recorded in other comprehensive loss. FSP FAS 115-2/124-2 is effective for periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FASB
Staff Position SFAS No. 115-2/124-2. This adoption had no material impact on our consolidated financial statements.

In April 2009,
the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). Under FSP
FAS 157-4, if an entity determines that there has been a significant decrease in the volume and level of activity for the asset or the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities),
then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction for the asset or liability is not orderly, the entity shall place little, if any, weight on that transaction price as an
indicator of fair value. FSP FAS 157-4 is effective for periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FSP FAS 157-4. This
adoption had no material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1/APB 28-1). FSP FAS 107-1/APB 28-1 requires disclosures about fair value of financial instruments in interim and annual financial statements. FSP FAS
107-1/APB 28-1 is effective for periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. In the fourth quarter of fiscal 2009, we adopted FSP FAS 107-1/APB 28-1. This adoption had no
material impact on our consolidated financial statements.

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active (FSP FAS 157-3). FSP FAS 157-3 clarified the application of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements (SFAS No. 157). FSP FAS 157-3 demonstrates how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS 157-3 was effective upon issuance, including prior
periods for which financial statements had not been issued. The implementation of this standard did not have an impact on our consolidated financial statements.

In May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB
14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory or optional



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conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt
issued with Stock Purchase Warrants. Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entitys nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We adopted FSP
APB 14-1 on June 29, 2009. We are still in the process of assessing the impact of FSP APB 14-1 on our consolidated financial statements.

In April 2008, the FASB adopted FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3), amending the factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). FSP FAS 142-3 is effective for intangible assets acquired on or after June 29,
2009. We do not believe that FSP FAS 142-3 will have a material impact on our consolidated financial statements.

In March 2008, the FASB
issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS No. 161). This statement changes the disclosure requirements for derivative
instruments and hedging activities. SFAS No. 161 will require us to provide enhanced disclosures about (a) how and why we use derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS
No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect our financial position, financial performance, and cash flows. SFAS No. 161 is effective for us beginning June 29, 2009.
We do not believe that SFAS No. 161 will have a material impact on our consolidated financial statements.

In February 2008, the FASB
issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157 to June 29, 2009 for all our nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We believe the adoption of the delayed items of SFAS No. 157 will not have a material impact on our financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51 (SFAS No. 160). SFAS No. 160 amends ARB No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS
No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS No. 160 establishes a single method of accounting for changes in a
parents ownership interest in a subsidiary that do not result in deconsolidation. SFAS No. 160 is effective for us beginning June 29, 2009. We do not believe that SFAS No. 160 will have a material impact on our consolidated
financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
No. 141(R)). The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for
pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the
recognition of changes in the acquirers income tax valuation allowance. SFAS No. 141(R) will become effective for us beginning June 29, 2009. We do not believe that SFAS No. 141(R) will have a material impact on our consolidated
financial statements.



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Note 3Acquisitions

During fiscal 2009 and fiscal 2008, there were no acquisitions qualifying as a business combination.

2007 Acquisitions

On January 2, 2007, we acquired QoSmetrics S.A., a privately held provider of quality of experience
(QoE) solutions for IPTV (Internet Protocol Television). The purchase price of approximately $16.8 million was paid in cash. The purchase price allocation resulted in an additional $6.5 million in goodwill and $7.2 million in intangibles assets.

The purchase price was allocated to QoSmetrics assets and liabilities as follows (in thousands):



|                                  |  |   |        |  
|--------------------------------- |  | - | ------ | -
|Cash and cash equivalents         |  | $ | 172    |  
|Accounts receivable               |  |   | 607    |  
|Inventories                       |  |   | 114    |  
|Prepaids and other current assets |  |   | 225    |  
|Property, plant and equipment     |  |   | 242    |  
|Intangible assets                 |  |   | 7,229  |  
|Goodwill                          |  |   | 6,513  |  
|Deferred tax assets               |  |   | 5,508  |  
|Liabilities assumed               |  |   | (1,634 | )
|Deferred tax liabilities          |  |   | (2,141 | )
|                                  |  |   |        |  
|Total purchase price              |  | $ | 16,835 |  
|                                  |  |   |        |  

In the fourth quarter of fiscal 2008, we determined that the goodwill and intangibles relating to
this acquisition were impaired, resulting in a combined impairment charge of $14.3 million for fiscal 2008. See Note 9  Goodwill and Intangible Assets.

On October 2, 2006, we acquired Timing Solutions Corporation (TSC), a privately held company based in Boulder, Colorado that provided high-performance time and frequency products and services for government,
aerospace and military markets. The total purchase price of approximately $8.6 million was paid in cash. The purchase price allocation resulted in an additional $2.0 million in goodwill and $4.5 million in intangibles assets.

The purchase price was allocated to TSCs assets and liabilities as follows (in thousands):



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Cash and cash equivalents           |  | $ | 1,860  |  
|Accounts receivable                 |  |   | 612    |  
|Inventories                         |  |   | 1,551  |  
|Prepaids and other current assets   |  |   | 301    |  
|Property, plant and equipment       |  |   | 217    |  
|In-process research and development |  |   | 188    |  
|Intangible assets                   |  |   | 4,454  |  
|Goodwill                            |  |   | 2,028  |  
|Deferred tax liability              |  |   | (1,540 | )
|Liabilities assumed                 |  |   | (1,089 | )
|                                    |  |   |        |  
|Total purchase price                |  | $ | 8,582  |  
|                                    |  |   |        |  



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In the third quarter of fiscal 2009, we determined that the entire balance of the Companys
goodwill, including goodwill related to this acquisition, was impaired, resulting in a goodwill impairment charge of $48.1 million for fiscal 2009. See Note 9  Goodwill and Intangible Assets.

Note 4Discontinued Operations

During the third
quarter of fiscal 2007, we discontinued the operation of our Specialty Manufacturing/Other business segment. Specialty Manufacturing/Other was part of our Telecommunications Solutions Division. This has been accounted for as a discontinued operation
and, accordingly, the results of operations have been excluded from continuing operations in the consolidated statements of operations. During fiscal 2007, we recognized a $0.2 million gain, net of taxes, all of which was attributable to income from
discontinued operations.

During fiscal 2008, we recognized a gain of approximately $0.1 million, net of taxes, attributable to
discontinued operations, and primarily due to the collection of a fully reserved receivable.

Note 5Other Accrued Liabilities

Other accrued liabilities consist of the following:



|                           |  |                |       |               |   |        |  
|-------------------------- |  | -------------- | ----- | ------------- | - | ------ | -
|                           |  | June 28, 2009  |       | June 29, 2008 |  
|                           |  | (In thousands) |      
|Other accrued liabilities: |  |                |       |               |   |        |  
|Accrued expenses           |  | $              | 4,772 |               | $ | 9,171  |  
|Deferred revenue           |  |                | 3,464 |               |   | 2,179  |  
|Accrued lease loss         |  |                | 788   |               |   | 44     |  
|Income taxes payable       |  |                | 786   |               |   | (161   | )
|                           |  |                |       |               |   |        |  
|Total                      |  | $              | 9,810 |               | $ | 11,233 |  
|                           |  |                |       |               |   |        |  

Note 6Warranties

Changes in our accrued warranty liability during fiscal 2009, 2008 and 2007 are as follows:



|                                        |  |                |        |   |               |   |        |              |  |   |        |  
|--------------------------------------- |  | -------------- | ------ | - | ------------- | - | ------ | ------------ |  | - | ------ | -
|                                        |  | Year ended     |       
|                                        |  | June 28, 2009  |        |   | June 29, 2008 |   |        | July 1, 2007 | 
|                                        |  | (In thousands) |       
|Beginning balance                       |  | $              | 3,801  |   |               | $ | 3,374  |              |  | $ | 3,547  |  
|Provision for warranty for the year     |  |                | 2,869  |   |               |   | 3,446  |              |  |   | 2,351  |  
|Accruals related to changes in estimate |  |                | (15    | ) |               |   | (39    | )            |  |   | (51    | )
|Less: Actual warranty costs             |  |                | (2,918 | ) |               |   | (2,980 | )            |  |   | (2,473 | )
|                                        |  |                |        |   |               |   |        |              |  |   |        |  
|Ending balance                          |  | $              | 3,737  |   |               | $ | 3,801  |              |  | $ | 3,374  |  
|                                        |  |                |        |   |               |   |        |              |  |   |        |  



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Note 7Lease Commitments

We lease certain other facilities and equipment under operating lease agreements. Rental expense charged to operations was $3.3 in 2009, $3.3 million in 2008 and $2.8 million in 2007. Future minimum lease payments as
of June 29, 2008 are as follows:



|                             |  |                 |       
|---------------------------- |  | --------------- | ------
|                             |  | Operating Lease
|                             |  | (In thousands) 
|For the fiscal year:         |  |                 |       
|2010                         |  | $               | 4,726 
|2011                         |  |                 | 4,382 
|2012                         |  |                 | 4,241 
|2013                         |  |                 | 4,326 
|2014                         |  |                 | 4,321 
|Thereafter                   |  |                 | 7,871 
|                             |  |                 |       
|Total minimum lease payments |  | $               | 29,867
|                             |  |                 |       

Lease loss liabilities were recorded as a result of discontinuing operations and facility
consolidations related to our restructuring activities. As of June 28, 2009 and June 29, 2008, the accrued lease loss liabilities were approximately $2.5 million and $0.1 million, respectively. The balances of accrued lease loss
liabilities are included in Other Accrued Liabilities (See Note 5) and Long-Term Obligations (See Note 13).

The total of minimal rentals
to be received in the future under non-cancelable subleases as of June 28, 2009 was $1.1 million.

Note 8Financial Instruments

We adopted SFAS No. 157 on June 30, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities
that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value
measurements.

SFAS No. 157 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a
liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants
would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, SFAS No. 157 expands the disclosure requirements around fair value and establishes a fair value hierarchy for
valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is
determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:



| |  |  | Level 1inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
| | - |  | ----------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



| |  |  | Level 2inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are
not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Level 3inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the
asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial assets measured at fair value on a recurring basis consisted of the following types of instruments as of June 28, 2009:



|                                                                |  |                           |         |                                                            |   |                                            |  |   |       
|--------------------------------------------------------------- |  | ------------------------- | ------- | ---------------------------------------------------------- | - | ------------------------------------------ |  | - | ------
|                                                                |  | Balance asof June 28,2009 |         | Quoted Prices inActive Marketsfor
IdenticalAssets(Level 1) |   | Significant OtherObservableInputs(Level
2)
|                                                                |  | (In thousands)           
|Assets:                                                         |  |                           |         |                                                            |   |                                            |  |   |       
|Cash and cash equivalents: Bank deposits and money market funds |  | $                         | 72,064  |                                                            | $ | 72,064                                     |  | $ |      
|                                                                |  |                           |         |                                                            |   |                                            |  |   |       
|Short-term investments:                                         |  |                           |         |                                                            |   |                                            |  |   |       
|Corporate debt securities                                       |  | $                         | 19,854  |                                                            | $ |                                           |  | $ | 19,854
|Government agency securities                                    |  |                           | 18,571  |                                                            |   | 18,571                                     |  |   |      
|Mutual funds                                                    |  |                           | 2,312   |                                                            |   | 1,570                                      |  |   | 742   
|                                                                |  |                           |         |                                                            |   |                                            |  |   |       
|Total short-term investments                                    |  |                           | 40,737  |                                                            |   | 20,141                                     |  |   | 20,596
|                                                                |  |                           |         |                                                            |   |                                            |  |   |       
|Total financial assets                                          |  | $                         | 112,801 |                                                            | $ | 92,205                                     |  | $ | 20,596
|                                                                |  |                           |         |                                                            |   |                                            |  |   |       

Our valuation techniques used to measure the fair values of our money market funds, government
securities and mutual funds were derived from quoted market prices as active markets for these instruments exist. Our valuation techniques used to measure the fair values of corporate debt securities were derived from non-binding market consensus
prices that are corroborated by observable market data.

During fiscal 2009, we reclassified the deferred compensation assets from
available-for-sale to trading securities in order to maintain consistency with the method in which we account for our deferred compensation obligations. As a result, all unrealized gains and losses related to the deferred compensation plan assets
have been included in earnings for fiscal 2009 since conversion to trading securities.



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes Symmetricoms available-for-sale and trading securities recorded
as cash and cash equivalents or short-term investments:



|                                            |  |                |          |   |                        |   |      |            |  |   |          |  
|------------------------------------------- |  | -------------- | -------- | - | ---------------------- | - | ---- | ---------- |  | - | -------- | -
|                                            |  | Cost Basis     |          |   | Gross UnrealizedLosses |   |      | Fair Value | 
|                                            |  | (In thousands) |         
|June 28, 2009                               |  |                |          |   |                        |   |      |            |  |   |          |  
|Short-term investments                      |  | $              | 92,270   |   |                        | $ | (273 | )          |  | $ | 91,997   |  
|Less amounts classified as cash equivalents |  |                | (53,572  | ) |                        |   |     |            |  |   | (53,572  | )
|Deferred compensation plan assets           |  |                | 4,131    |   |                        |   |     |            |  |   | 2,312    |  
|                                            |  |                |          |   |                        |   |      |            |  |   |          |  
|Total short-term investments                |  | $              | 42,829   |   |                        | $ | (273 | )          |  | $ | 40,737   |  
|                                            |  |                |          |   |                        |   |      |            |  |   |          |  
|June 29, 2008                               |  |                |          |   |                        |   |      |            |  |   |          |  
|Short-term investments                      |  | $              | 152,934  |   |                        | $ | (201 | )          |  | $ | 152,733  |  
|Less amounts classified as cash equivalents |  |                | (134,250 | ) |                        |   |     |            |  |   | (134,250 | )
|Deferred compensation plan assets           |  |                | 3,579    |   |                        |   | (152 | )          |  |   | 3,427    |  
|                                            |  |                |          |   |                        |   |      |            |  |   |          |  
|Total short-term investments                |  | $              | 22,263   |   |                        | $ | (353 | )          |  | $ | 21,910   |  
|                                            |  |                |          |   |                        |   |      |            |  |   |          |  

The following table details Symmetricoms available-for-sale and trading securities by type:



|                             |  |                |        |              |   |       
|---------------------------- |  | -------------- | ------ | ------------ | - | ------
|                             |  | June 28,2009   |        | June 29,2008
|                             |  | (In thousands)
|Corporate securities         |  | $              | 19,854 |              | $ | 15,331
|Government agency securities |  |                | 18,571 |              |   |      
|Mutual funds                 |  |                | 2,312  |              |   | 3,427 
|Other investments            |  |                |       |              |   | 3,152 
|                             |  |                |        |              |   |       
|                             |  | $              | 40,737 |              | $ | 21,910
|                             |  |                |        |              |   |       

Loss on Investments

In the fourth quarter of fiscal 2007, we purchased asset-backed commercial paper with a $7.8 million par value maturing on March 13, 2008, and
we classified this as a short-term investment. At the time of purchase, the investments portfolio consisted primarily of triple-A rated assets, with sub-prime loan assets making up approximately 23% of the investment. Subsequently, the
structured investment vehicle (SIV) issuing the commercial paper was declared insolvent and entered receivership. On January 8, 2008, our investment manager advised us that the fair value of this investment had declined, and that
the impairment loss should be considered other-than-temporary in accordance with discussions with the receiver as well as potential options that were expected to be made available to senior debt holders including Symmetricom. Our investment manager
determined the fair value of the investment using pricing levels of the underlying portfolio by three different broker/dealers. Management then made an independent valuation assessment of similar securities using the ABX index (which is an index to
track the performance of mortgage-backed securities), to confirm that the valuation results from our investment manager were reasonable. Based on this assessment of fair value, Symmetricom recognized a loss of $3.2 million related to this
investment during fiscal year 2008. After the receivers sold the SIV to an investment bank, we received a cash distribution of $1.4 million, relating to the cash portion of the fund, in the fourth quarter of fiscal 2008. In the first quarter of
fiscal 2009, the investment bank offered investors the option of cashing out of the fund or reinvesting in a new investment vehicle. We elected to cash out and received a final capital distribution of $3.3 million in the first quarter of fiscal
2009. As a result of the final



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



settlement with this investment, including a recovery on previously recognized losses, we recognized a $0.1 million gain in the first quarter of fiscal 2009.

In the first quarter of fiscal 2009, we determined that three corporate debt instruments, the market values of which had declined, were
other than temporarily impaired. We made this determination based on the uncertainty and volatility of the market, particularly since these debt instruments were related to financial institutions, the failure of several other large financial
institutions and the continued downgrades from credit rating agencies. As a result of this assessment, we recognized a $0.6 million other than temporary loss in the first quarter of fiscal 2009. This amount was partially offset by the previously
mentioned $0.1 million gain, resulting in net loss on short-term investments of $0.5 million for the first quarter of fiscal 2009.

In the
second quarter of fiscal 2009, we determined that mutual funds related to our deferred compensation plan, whose market values had declined, were other than temporarily impaired. We made this determination based on the overall decline in the value of
the mutual funds and the uncertainty as to whether they would recover. As a result of this assessment, we recognized a $0.9 million other than temporary loss in the second quarter of fiscal 2009.

During the fourth quarter of fiscal 2009, we adopted Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 115-2
and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2/124-2). FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security into two
components when there are credit-related losses associated with an impaired debt security that management asserts it has no intent to sell, and it is more likely than not that management will not be required to sell the security before recovery of
the securitys cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in earnings, and the amount of the other-than-temporary impairment related to other factors is recorded in other comprehensive
loss. For fiscal 2009, the adoption of FSP FAS 115-2/124-2 did not have a material impact on our consolidated financial statements.

Note
9Goodwill and Intangible Assets

Goodwill

Changes in the carrying value of goodwill for the years ended June 28, 2009 and June 29, 2008 are as follows for our reportable segments where applicable:



|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  
|----------------------------------- |  | -------------- | ------- | - | ----------------------------- | - | ------ | -------------------------- |  | - | ------- | - |  | - | ------- | -
|                                    |  | Wireline       |         |   | Quality ofExperienceAssurance |   |        | Timing,Test andMeasurement |  |   | Total   |  
|                                    |  | (In thousands) |        
|Balances as of July 1, 2007         |  | $              | 27,917  |   |                               | $ | 6,702  |                            |  | $ | 20,087  |   |  | $ | 54,706  |  
|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  
|Final fair value adjustment         |  |                |        |   |                               |   | (189   | )                          |  |   |        |   |  |   | (189    | )
|FIN 48 tax adjustment (see Note 10) |  |                | 115     |   |                               |   |       |                            |  |   | 25      |   |  |   | 140     |  
|Impairment of goodwill              |  |                |        |   |                               |   | (6,513 | )                          |  |   |        |   |  |   | (6,513  | )
|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  
|Balances as of June 29, 2008        |  | $              | 28,032  |   |                               | $ |       |                            |  | $ | 20,112  |   |  | $ | 48,144  |  
|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  
|Impairment of goodwill              |  |                | (28,032 | ) |                               |   |        |                            |  |   | (20,112 | ) |  |   | (48,144 | )
|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  
|Balances as of June 28, 2009        |  | $              |        |   |                               | $ |       |                            |  | $ |        |   |  | $ |        |  
|                                    |  |                |         |   |                               |   |        |                            |  |   |         |   |  |   |         |  



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test the carrying
amount of goodwill annually during the fourth fiscal quarter as well as at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, including
goodwill.

During the third quarter of fiscal 2009, due to a decline in our stock price and a lowered business outlook, we determined that
indicators of a potential goodwill impairment existed. Accordingly, we completed a step one goodwill impairment test to determined whether the decline in market capitalization and business outlook revisions indicated that the carrying value of our
reporting units were in excess of fair value.

A step one goodwill impairment test compares the fair value of a reporting unit to its
carrying value to determine if a step two test is required. We estimate our reporting units fair values using a weighted average of values determined under an income approach and a market approach. We weighed these approaches at approximately
67% and 33% for the income approach and the market approach, respectively. We applied a lower weighting to the market approach as there are a limited number of highly comparable companies, which are a key component of the market approach. Under the
income approach, fair value is determined by discounting estimated future cash flows. The income approach is dependent on several significant assumptions, including our earnings projections and our cost of capital. Under the market approach, we
estimate the fair value of each reporting unit based on pricing multiples of certain financial parameters observed in comparable companies.

Based on the results of our step one test, we determined that the fair values of the Wireline and Timing, Test and Measurement reporting units were less than their respective carrying amounts, and therefore the second step of the goodwill
impairment test was performed to measure the amount of impairment loss for the each reporting unit. As a result, we recorded a goodwill impairment charge of approximately $48.1 million in the third quarter of fiscal 2009, consisting of $28.0
million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting segment.

Other Intangible Assets, net

Because of the identification of the goodwill impairment indicators mentioned above, we first
reviewed our other intangible and long-lived assets for impairment and determined there was no impairment. We will continue to monitor the carrying value of intangible assets and perform impairment tests when necessary. If, in the future, we
determine that other intangible assets are impaired, we may incur a material impairment charge.

Other intangible assets are recorded at
cost, less accumulated amortization. Other intangible assets as of June 28, 2009 and June 29, 2008 consist of:



|                              |  |                     |        |                         |   |         |                     |  |   |      
|----------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ------------------- |  | - | -----
|                              |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | NetIntangibleAssets
|                              |  | (in thousands)     
|Purchased technology          |  | $                   | 24,357 |                         | $ | (19,380 | )                   |  | $ | 4,977
|Customer lists and trademarks |  |                     | 7,025  |                         |   | (4,811  | )                   |  |   | 2,214
|                              |  |                     |        |                         |   |         |                     |  |   |      
|Total as of June 29, 2008     |  | $                   | 31,382 |                         | $ | (24,191 | )                   |  | $ | 7,191
|                              |  |                     |        |                         |   |         |                     |  |   |      
|Purchased technology          |  | $                   | 24,357 |                         | $ | (20,861 | )                   |  | $ | 3,496
|Customer lists and trademarks |  |                     | 7,025  |                         |   | (5,213  | )                   |  |   | 1,812
|                              |  |                     |        |                         |   |         |                     |  |   |      
|Total as of June 28, 2009     |  | $                   | 31,382 |                         | $ | (26,074 | )                   |  | $ | 5,308
|                              |  |                     |        |                         |   |         |                     |  |   |      



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The estimated future amortization expense is as follows:



|                   |  |                |      
|------------------ |  | -------------- | -----
|                   |  | (in thousands)
|Fiscal year:       |  |                |      
|2010               |  | $              | 1,572
|2011               |  |                | 1,307
|2012               |  |                | 726  
|2013               |  |                | 502  
|2014               |  |                | 502  
|Thereafter         |  |                | 699  
|                   |  |                |      
|Total amortization |  | $              | 5,308
|                   |  |                |      

Intangible asset amortization expense for fiscal 2009, 2008 and 2007 was approximately $1.9
million, $4.3 million, and $4.1 million, respectively.

Note 10Income Taxes

The provision of federal, state and foreign income tax expense on income from continuing operations consists of the following:

|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------- | ----------- |  | - | ------ | -
|                                                              |  | Year ended,    |        
|                                                              |  | June 28,2009   |         |   | June 29,2008 |   |         | July 1,2007 | 
|                                                              |  | (In thousands) |        
|Income (loss) from continuing operations before income taxes: |  |                |         |   |              |   |         |             |  |   |        |  
|Domestic                                                      |  | $              | (39,331 | ) |              | $ | (21,055 | )           |  | $ | 14,141 |  
|Foreign                                                       |  |                | 1,000   |   |              |   | 800     |             |  |   | (495   | )
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|Total                                                         |  | $              | (38,331 | ) |              | $ | (20,255 | )           |  | $ | 13,646 |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|                                                              |  |                |        
|Provision for income taxes:                                   |  |                |         |   |              |   |         |             |  |   |        |  
|Current:                                                      |  |                |         |   |              |   |         |             |  |   |        |  
|Federal                                                       |  | $              | (460    | ) |              | $ | (510    | )           |  | $ | 1,320  |  
|State                                                         |  |                | 206     |   |              |   | 117     |             |  |   | 116    |  
|Puerto Rico                                                   |  |                | 593     |   |              |   | 368     |             |  |   | 322    |  
|Foreign                                                       |  |                | 667     |   |              |   | 210     |             |  |   | 2,820  |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|Total                                                         |  |                | 1,006   |   |              |   | 185     |             |  |   | 4,578  |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|Deferred:                                                     |  |                |         |   |              |   |         |             |  |   |        |  
|Federal                                                       |  |                | 1,001   |   |              |   | (5,315  | )           |  |   | 3,724  |  
|State                                                         |  |                | 186     |   |              |   | (669    | )           |  |   | (839   | )
|Puerto Rico                                                   |  |                | 58      |   |              |   | (15     | )           |  |   | 96     |  
|Foreign                                                       |  |                | 89      |   |              |   | 148     |             |  |   | 29     |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|Total                                                         |  |                | 1,334   |   |              |   | (5,851  | )           |  |   | 3,010  |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  
|Total provision (benefit)                                     |  | $              | 2,340   |   |              | $ | (5,666  | )           |  | $ | 7,588  |  
|                                                              |  |                |         |   |              |   |         |             |  |   |        |  



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The tax provision (benefit) attributable to continuing operations and discontinued operations,
included in the consolidated statements of operations, is as follows:



|                              |  |                |       |              |   |        |             |  |   |      
|----------------------------- |  | -------------- | ----- | ------------ | - | ------ | ----------- |  | - | -----
|                              |  | Year ended,   
|                              |  | June 28,2009   |       | June 29,2008 |   |        | July 1,2007
|                              |  | (In thousands)
|Tax provision (benefit) from: |  |                |       |              |   |        |             |  |   |      
|Continuing operations         |  | $              | 2,340 |              | $ | (5,666 | )           |  | $ | 7,588
|Discontinued operations       |  |                |      |              |   | 63     |             |  |   | 167  
|                              |  |                |       |              |   |        |             |  |   |      
|Total provision (benefit)     |  | $              | 2,340 |              | $ | (5,603 | )           |  | $ | 7,755
|                              |  |                |       |              |   |        |             |  |   |      

The effective income tax rate differs from the federal statutory income tax rate as follows:



|                                                    |  |              |    |  |              |    |  |             |  
|--------------------------------------------------- |  | ------------ | -- |  | ------------ | -- |  | ----------- | -
|                                                    |  | Year ended,  |   
|                                                    |  | June 28,2009 |    |  | June 29,2008 |    |  | July 1,2007 |  
|Federal statutory income tax (benefit) expense rate |  | (35.0        | )% |  | (35.0        | )% |  | 35.0        | %
|Federal tax benefit of Puerto Rico operations       |  |             |    |  |             |    |  | (2.5        | )
|Puerto Rico taxes                                   |  | 1.7          |    |  | 1.7          |    |  | 3.1         |  
|State income taxes, net of federal benefit          |  | 0.8          |    |  | (2.9         | )  |  | (5.7        | )
|Taxes on QoSmetrics liquidation                     |  |             |    |  | 4.2          |    |  | 25.0        |  
|Capital losses not benefited                        |  | 1.2          |    |  | 5.6          |    |  |            |  
|Goodwill                                            |  | 38.3         |    |  |             |    |  |            |  
|Other                                               |  | (0.9         | )  |  | (1.6         | )  |  | 0.7         |  
|                                                    |  |              |    |  |              |    |  |             |  
|Effective income tax rate                           |  | 6.1          | %  |  | (28.0        | )% |  | 55.6        | %
|                                                    |  |              |    |  |              |    |  |             |  

The principal components of deferred tax assets and liabilities are as follows:



|                                 |  |                |        |   |              |   |        |  
|-------------------------------- |  | -------------- | ------ | - | ------------ | - | ------ | -
|                                 |  | June 28,2009   |        |   | June 29,2008 |  
|                                 |  | (In thousands) |       
|Deferred tax assets:             |  |                |        |   |              |   |        |  
|Net operating loss carryforwards |  | $              | 10,344 |   |              | $ | 13,566 |  
|Tax credit carryforwards         |  |                | 14,871 |   |              |   | 13,926 |  
|Reserves and accruals            |  |                | 8,334  |   |              |   | 7,590  |  
|Depreciation and amortization    |  |                | 18,428 |   |              |   | 18,335 |  
|                                 |  |                |        |   |              |   |        |  
|                                 |  |                | 51,977 |   |              |   | 53,417 |  
|Valuation allowance              |  |                | (4,337 | ) |              |   | (3,958 | )
|                                 |  |                |        |   |              |   |        |  
|Total deferred tax assets        |  |                | 47,640 |   |              |   | 49,459 |  
|Deferred tax liabilities        |  |                |        |   |              |   |        |  
|Unremitted foreign earnings      |  |                | 334    |   |              |   | 427    |  
|                                 |  |                |        |   |              |   |        |  
|Net deferred tax assets          |  | $              | 47,306 |   |              | $ | 49,032 |  
|                                 |  |                |        |   |              |   |        |  



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net deferred tax assets are comprised of the following:



|                        |  |                |        |   |              |   |        |  
|----------------------- |  | -------------- | ------ | - | ------------ | - | ------ | -
|                        |  | June 28,2009   |        |   | June 29,2008 |  
|                        |  | (In thousands) |       
|Current assets          |  | $              | 8,334  |   |              | $ | 7,501  |  
|Non-current assets      |  |                | 39,306 |   |              |   | 41,958 |  
|Non-current liabilities |  |                | (334   | ) |              |   | (427   | )
|                        |  |                |        |   |              |   |        |  
|Net deferred tax assets |  | $              | 47,306 |   |              | $ | 49,032 |  
|                        |  |                |        |   |              |   |        |  

As of June 28, 2009, for federal income tax purposes, we had regular net operating loss
carryforwards of approximately $34.8 million which will expire in years 2023 through 2028. We had California regular net operating loss carryforwards of approximately $5.0 million which will expire in years 2013 through 2018.

Also, we had federal research and development tax credit carryforwards of approximately $7.0 million that will expire in the years 2010 through 2029,
alternative minimum tax credit carryforwards of approximately $3.7 million that have no expiration date, and approximately $1.1 million of foreign tax credits that will expire in 2017 through 2019. Additionally, for state income tax purposes, we had
research and development tax credit carryforwards of approximately $3.8 million that have no expiration date.

We have provided a valuation
allowance for certain deferred tax assets because we have determined that it is more likely than not that we will not have sufficient taxable income to realize these tax assets. At June 28, 2009, $2.5 million of the valuation allowance was
attributable to the tax benefit of potentially expiring tax credits stemming from stock option transactions, which will be credited to common stock if realized rather than as a reduction of the tax provision. We have $0.2 million of the valuation
allowance attributable to other potentially expiring tax credits. Also, $1.6 million of the valuation allowance was attributable to fiscal 2008 and fiscal 2009 short-term investment losses incurred which have a limited carryforward period.

On July 2, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109, which had the following impact on our financial statements: increased goodwill by $0.1 million, increased long-term liabilities
by $1.1 million, decreased long-term assets (non-current deferred tax assets) by $4.1 million, decreased retained earnings by $0.4 million and decreased our income taxes payable by $4.7 million.

As of June 28, 2009, we had $14.3 million of unrecognized tax benefits, of which $12.1 million, if recognized, would impact our effective tax rate.
We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months. Our policy is to include material interest and penalties related to unrecognized tax benefits in income tax expense. As
of June 29, 2008 and June 28, 2009, we had no accrued interest or penalties on our balance sheet.

The aggregate changes in the
balance of unrecognized tax benefits were as follows:



|                                                            |  |                |      |  
|----------------------------------------------------------- |  | -------------- | ---- | -
|                                                            |  | Amount         |     
|                                                            |  | (in thousands) |     
|Balance at June 29, 2008                                    |  | $              | 14.3 |  
|Additions based on tax position related to the current year |  |                | 0.2  |  
|Additions for tax positions of prior years                  |  |                | 0.1  |  
|Settlements                                                 |  |                | (0.3 | )
|                                                            |  |                |      |  
|Balance at June 28, 2009                                    |  | $              | 14.3 |  
|                                                            |  |                |      |  



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We are subject to income tax in the United States and a number of state and foreign jurisdictions.
The tax years ended June 2005 forward remain open to examination by major taxing jurisdictions in which we operate which include the United States, The State of California, Puerto Rico and Germany.

Note 11Contingencies

Former Texas Facility
Environmental Cleanup

We formerly leased a tract of land in Texas for our operations. Those operations involved the use of
solvents and, at the end of the lease, we remediated an area where the solvents had been deposited on the ground and obtained regulatory approval for that remedial activity. In 1996, an environmental investigation of the property detected those
same contaminants in groundwater in excess of then current regulatory standards. The groundwater contamination has migrated to some adjacent properties. We have entered into the Texas Natural Resource Conservation Commissions
Voluntary Cleanup Program (the Voluntary Cleanup Program) to obtain regulatory approval for closure of this site and a release from liability to the State of Texas for subsequent landowners and lenders. We have notified adjacent property
owners affected by the contamination of participation in the Voluntary Cleanup Program. On May 20, 2004, we received a demand from the owner of several adjacent lots for damages in the amount of $1.3 million, as well as seeking an
indemnity for the contamination and a promise to remediate the contamination. On March 14, 2006, the adjacent property owner filed suit in Probate Court No. 1, Travis County, Texas (Anna B. Miller, Individually and as
Executrix of the Estate of Robert L. Miller, et al. vs. Austron, Inc., et al.), seeking damages. Symmetricom has not yet been served in this matter, but we intend to defend this lawsuit vigorously. We are continuing to
work on the remediation of the formerly leased site as well as the adjacent properties, and have also taken steps to begin work on the Miller property. As of June 28, 2009, we had an accrual of $0.2 million for remediation
costs, appraisal fees and other ongoing monitoring costs.

Shipments of Product with Lead-free Solder

In the fourth quarter of fiscal 2007 until the third quarter of fiscal 2008, we inadvertently shipped certain products that included lead-free solder in
the product backplanes to two customers whose contracts specified that the products would be made with lead solder. As of June 28, 2009, we have received a waiver from one customer to use lead-free solder but not the other. The total
sales value of product shipped with lead-free solder to the customer that has not as yet granted us the waiver is $1.2 million. Management believes that this customer will not request that the parts be replaced and that our existing warranty
accrual is adequate to cover any potential product failures. Also, since March 2008, new product shipments to this customer include lead solder.

Other

Under the indemnification provisions of our standard sales contracts, we agree to defend the
customer against third party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the reseller/customer.
The exposure to us under these indemnification provisions is generally limited to the total amount paid by the customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in
excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions. We believe the estimated fair value of these indemnification agreements is not material.

We are also a party to certain other claims in the normal course of our operations. While the results of these claims cannot be predicted with any
certainty, we believe that the final outcome of these matters will not have a material adverse effect on our financial position and results of operations.



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Note 12Related Party Transactions

In March 1998, we loaned an officer $500,000 in the form of an interest-free full-recourse promissory note, secured by a deed of trust for the
officers personal residence. In fiscal 2008, the entire principal balance was repaid.

During fiscal 2008, we paid a total of $7,000
for consulting fees to certain directors of Symmetricom in addition to their regular director compensation for attendance at Board and Committee meetings.

In fiscal 2008, we sold products and services to Arris Group for a total of approximately $29,000. The CEO of Arris Group is a director of the Company.

Note 13Long-Term Obligations



|                               |  |                |        |              |   |         |  
|------------------------------ |  | -------------- | ------ | ------------ | - | ------- | -
|                               |  | June 28,2009   |        | June 29,2008 |  
|                               |  | (In thousands) |       
|Long-term obligations:         |  |                |        |              |   |         |  
|Convertible subordinated notes |  | $              | 56,880 |              | $ | 120,000 |  
|Deferred revenue               |  |                | 2,125  |              |   | 1,297   |  
|Lease loss accrual, net        |  |                | 1,749  |              |   | 42      |  
|Lease accrual                  |  |                | 966    |              |   | 706     |  
|Income tax                     |  |                | 300    |              |   | 690     |  
|Post-retirement benefits       |  |                | 228    |              |   | 240     |  
|Capital lease                  |  |                |       |              |   | 1,286   |  
|Conditional grant              |  |                |       |              |   | 109     |  
|Lesscurrent maturities        |  |                |       |              |   | (64,515 | )
|                               |  |                |        |              |   |         |  
|Total                          |  | $              | 62,248 |              | $ | 59,855  |  
|                               |  |                |        |              |   |         |  

Convertible Subordinated Notes

On June 8, 2005, we sold $120.0 million of contingent convertible subordinated notes (the Notes), which mature on June 15, 2025 and
bear interest at the rate of 3.25% per annum. Interest on the Notes is payable semi-annually in June and December of each year beginning on December 15, 2005. The Notes are unsecured obligations and are subordinated in right of payment to
all of our existing and future senior debt. The Notes are structurally subordinated to all indebtedness and liabilities of our subsidiaries.

The Notes are convertible, at the holders option, prior to the maturity date into cash and, if applicable, shares of our common stock in the following circumstances:



| |  |  | Prior to June 15, 2023, if the common stock price for at least 20 trading days in the period of 30 consecutive days ending on the last trading day of the
calendar quarter preceding the quarter in which the conversion occurs is more than 125% of the conversion price of the Notes in effect on that 30th trading day;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after June 15, 2023, at all times on or after any date on which the common stock price is more than 125% of the then current conversion price;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day
was less than 95% of the average of the
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | sale price of our common stock during such five trading-day period multiplied by the then current conversion rate;
| | ------------------------------------------------------------------------------------------------------------------



| |  |  | If we have called the particular Notes for redemption and the redemption has not yet occurred; or
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Upon the occurrence of specified corporate transactions.
| | - |  | --------------------------------------------------------

Holders may convert any outstanding Notes into cash and, if applicable, shares of our common stock at an initial conversion price per share of $12.49, which was determined based on the reported closing price of our
common stock of $9.91 per share on June 2, 2005.

Also, on or after June 20, 2012, we may redeem some or all of the Notes at any
time or from time to time at a redemption price of 100% of the principal amount of the Notes, plus accrued and unpaid interest (including liquidated damages, if any) up to but not including the date of redemption, payable in cash. Holders may
require us to repurchase all or a portion of their Notes on June 15, 2012, 2015 and 2020 for a repurchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest (including liquidated damages, if any) up to
but not including the date of repurchase, payable in cash, in the event of certain change of control events related to us.

We may from
time to time repurchase or redeem all or a portion of the Notes, if necessary, to comply with NASDAQ listing rule 5635(d). We may repurchase some or all of our remaining outstanding Notes in future periods prior to the maturity date. We may
undertake such repurchases from time to time through privately negotiated or open market transactions or other available means.

Convertible Subordinated NotesRedemption

On May 7, 2008, we received a notice of acceleration from the trustee
under the indenture governing the Notes. The notice stated that our failure to file our Quarterly Report on Form 10-Q for the quarter ended December 30, 2007 violated certain provisions of the indenture. The acceleration letter
declared that the principal amount outstanding under the Notes, together with any accrued and unpaid interest, and fees and expenses, was immediately due and payable. This notice of acceleration related to the trustees and certain
bondholders previous notice received by the Company on or about March 3, 2008 stating that our failure to file our Quarterly Report on Form 10-Q for the quarter ended December 30, 2007 with the Securities and Exchange Commission
(SEC) violated provisions of the indenture.

On June 17, 2008, we filed our Form 10-Q for the quarter ended December 30, 2007 and
our Form 10-Q for the quarter ended March 30, 2008, as well as other filings related to our restatement of financial results for fiscal years and interim periods from June 30, 2002 to July 1, 2007 and for the first quarter of fiscal
2008 ended September 30, 2007.

On June 30, 2008, we offered to purchase for cash, on a pro rata basis, $63.1 million
aggregate principal amount of the Notes, at a purchase price equal to $990 per $1,000 of the principal amount of the Notes, plus accrued and unpaid interest. The tender offer cap was equal to 52.6% of the $120.0 million aggregate principal
amount outstanding. As of July 30, 2008, pursuant to the offer, Symmetricom accepted for payment $63.1 million aggregate principal amount of the Notes. The aggregate purchase price for the Notes surrendered was approximately $62.5 million,
which included interest of $0.3 million. After the purchase pursuant to the offer, approximately $56.9 million aggregate principal amount of the Notes remains outstanding. In connection with the completion of the tender offer, the holder
of a majority of the outstanding notes prior to the offer waived certain defaults alleged to have occurred under the indenture and rescinded an acceleration notice received by Symmetricom on May 7, 2008.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In connection with the issuance of the Notes, Symmetricom initially recorded bond fees of
approximately $4.0 million, which were amortized using the straight-line method over a period of seven years ending in fiscal 2012. As of June 29, 2008, $2.2 million of unamortized costs remained. As a result of the tender offer,
$1.1 million of this unamortized cost was expensed in the first quarter of fiscal 2009. This, combined with a $0.6 million gain relating to difference between the principal amount and the purchase price of the Notes, resulted in a $0.5 million
net loss on repayment of convertible notes recognized in the first quarter of fiscal 2009.

In the first quarter of fiscal 2010, we will
adopt Financial Accounting Standards Board (the FASB) Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
(FSP APB 14-1). See the above section, Recent Accounting Pronouncements, for a discussion of the impact of FSP APB 14-1 on our consolidated financial statements.

Note 14Benefit Plans

401(k) Plan

The Company has a 401(k) plan (the Plan) that allows eligible U.S. and Puerto Rico employees to contribute up to 50 percent of their
annual compensation to the Plan, subject to certain limitations. The employees funds can be directly invested in shares of the Companys common stock, at the election of each employee. Each employee directs the investment of the funds
across a series of mutual funds. Effective in fiscal 2004, Symmetricom matched up to $0.50 per $1.00 deferred up to 3% of eligible compensation. An additional match of $1.00 per $1.00 deferred up to 1% of eligible compensation will be made based
upon achievement of company profit performance goals. Employee contributions vest immediately. Employer matching contributions vest ratably over three years. Symmetricom made matching contribution payments of $0.7 million, $0.7 million and $0.5
million in fiscal 2009, 2008 and 2007, respectively.

Deferred Compensation Plan

The Company has a deferred compensation plan that allows outside directors and certain U.S. employees to contribute up to 100% of their compensation,
provided that their contribution does not reduce their salary to an amount that is less than the amount necessary to pay applicable employment taxes and other withholding obligations. The Board of Directors is authorized to make discretionary
contributions to the accounts of participants. No discretionary contributions were made in fiscal 2009, 2008, and 2007.

Note 15Stockholders
Equity

Stock Options and Awards

Symmetricom has equity benefit plans under which employees, directors and consultants may be granted non-qualified and incentive options to purchase shares of our common stock and restricted stock. One of these plans
was amended in fiscal 2003 to effectively provide that restricted stock could be granted and repurchased for no cash purchase price. Stock appreciation rights may also be granted under this plan; however, none have been granted to date. All
options have been granted at the fair market value of our common stock on the date of grant and generally vest over three years.

On
October 31, 2008 at our annual meeting of shareholders, the shareholders approved an update to the 2006 Incentive Award Plan that included an additional 5.5 million shares for future issuance. For the year ended June 28, 2009, we
granted non performance-based options to purchase 1.5 million shares of Symmetricoms common stock, and awarded 30,000 shares of restricted stock. We did not grant any performance-based options during fiscal year 2009. Our right
to repurchase restricted shares generally lapses over the same three-year term



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as the vesting period applicable to the stock options. We received $0.6 million from the exercise of stock options during the year ended June 28, 2009.

In the second quarter of fiscal 2009 we changed the contractual life of future option grants from five years to seven years.

We recorded stock-based compensation expense of $3.3 million in fiscal 2009, $5.0 million in fiscal 2008, and $6.4 million in fiscal 2007,
respectively. The estimated future annual forfeiture rate used to record stock-based compensation expense was 10.00%, 6.00%, and 3.00% for fiscal 2009, 2008 and 2007, respectively. At June 28, 2009, the total future compensation cost related to
unvested stock-based awards granted to employees, directors and consultants under the Companys stock option plans was approximately $2.4 million, net of estimated forfeitures of $ 0.8 million. This cost will be amortized on an accelerated
basis over a period of approximately 1.2 years and will be adjusted for subsequent changes in estimated forfeitures.

The following table
shows total stock-based compensation expense included in the Consolidated Statements of Operations:



|                                    |  |                |       |              |   |             |  |   |      
|----------------------------------- |  | -------------- | ----- | ------------ | - | ----------- |  | - | -----
|                                    |  | Year ended    
|                                    |  | June 28,2009   |       | June 29,2008 |   | July 1,2007
|                                    |  | (In thousands)
|Cost of sales                       |  | $              | 630   |              | $ | 823         |  | $ | 1,034
|Research and development            |  |                | 627   |              |   | 1,446       |  |   | 1,345
|Selling, general and administrative |  |                | 2,035 |              |   | 2,686       |  |   | 4,014
|                                    |  |                |       |              |   |             |  |   |      
|Total                               |  | $              | 3,292 |              | $ | 4,955       |  | $ | 6,393
|                                    |  |                |       |              |   |             |  |   |      



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table details stock option and award activity for fiscal years 2009, 2008, and 2007:



|                                  |  |                                          |                |  |                                          |                              |                                      |                |                             |  |                              |   |                |   |      |                                     |      |   |  |   |     
|--------------------------------- |  | ---------------------------------------- | -------------- |  | ---------------------------------------- | ---------------------------- | ------------------------------------ | -------------- | --------------------------- |  | ---------------------------- | - | -------------- | - | ---- | ----------------------------------- | ---- | - |  | - | ----
|                                  |  | SharesAvailableFor Grant                 |                |  | Non Performance-based OptionsOutstanding |                              | Performance-basedOptions Outstanding |                | Restricted StockOutstanding
|                                  |  |                                          | NumberofShares |  |                                          | WeightedAverageExercisePrice |                                      | NumberofShares |                             |  | WeightedAverageExercisePrice |   | NumberofShares |   |      | WeightedAverageGrant-DateFair Value
|                                  |  | (In thousands, except per share amounts)
|Balances at July 2, 2006          |  | 1,317                                    |                |  | 4,399                                    |                              |                                      | $              | 7.22                        |  |                             |   |                | $ |     |                                     | 184  |   |  | $ | 9.28
|2006 Plan                         |  | 3,700                                    |                |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Grantedoptions                   |  | (1,212                                   | )              |  | 1,212                                    |                              |                                      |                | 8.18                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Grantedperformance-based options |  | (295                                     | )              |  |                                         |                              |                                      |                |                            |  | 295                          |   |                |   | 8.53 |                                     |     |   |  |   |    
|Grantedrestricted shares         |  | (725                                     | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | 725  |   |  |   | 7.74
|Exercised                         |  |                                         |                |  | (556                                     | )                            |                                      |                | 4.95                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Vested                            |  |                                         |                |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | (45  | ) |  |   | 8.37
|Canceled                          |  | 158                                      |                |  | (158                                     | )                            |                                      |                | 9.05                        |  |                             |   |                |   |     |                                     | (20  | ) |  |   | 8.59
|Expired                           |  | (3                                       | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     |     |   |  |   |    
|                                  |  |                                          |                |  |                                          |                              |                                      |                |                             |  |                              |   |                |   |      |                                     |      |   |  |   |     
|Balances at July 1, 2007          |  | 2,940                                    |                |  | 4,897                                    |                              |                                      | $              | 7.66                        |  | 295                          |   |                | $ | 8.53 |                                     | 844  |   |  | $ | 8.03
|Grantedoptions                   |  | (1,050                                   | )              |  | 1,050                                    |                              |                                      |                | 4.62                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Grantedrestricted shares         |  | (510                                     | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | 510  |   |  |   | 5.14
|Exercised                         |  |                                         |                |  | (50                                      | )                            |                                      |                | 4.14                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Vested                            |  |                                         |                |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | (234 | ) |  |   | 8.11
|Canceled                          |  | 1,033                                    |                |  | (933                                     | )                            |                                      |                | 7.37                        |  | (100                         | ) |                |   | 8.53 |                                     | (126 | ) |  |   | 6.95
|Expired                           |  | (230                                     | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     |     |   |  |   |    
|                                  |  |                                          |                |  |                                          |                              |                                      |                |                             |  |                              |   |                |   |      |                                     |      |   |  |   |     
|Balances at June 29, 2008         |  | 2,183                                    |                |  | 4,964                                    |                              |                                      | $              | 7.10                        |  | 195                          |   |                | $ | 8.53 |                                     | 994  |   |  | $ | 6.62
|Update of 2006 Plan               |  | 5,500                                    |                |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Grantedoptions                   |  | (1,486                                   | )              |  | 1,486                                    |                              |                                      |                | 4.58                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Grantedrestricted shares         |  | (30                                      | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | 30   |   |  |   | 3.80
|Exercised                         |  |                                         |                |  | (151                                     | )                            |                                      |                | 3.95                        |  |                             |   |                |   |     |                                     |     |   |  |   |    
|Vested                            |  |                                         |                |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     | (350 | ) |  |   | 6.92
|Canceled                          |  | 1,079                                    |                |  | (1,009                                   | )                            |                                      |                | 6.88                        |  | (70                          | ) |                |   | 8.53 |                                     | (134 | ) |  |   | 6.84
|Expired                           |  | (65                                      | )              |  |                                         |                              |                                      |                |                            |  |                             |   |                |   |     |                                     |     |   |  |   |    
|                                  |  |                                          |                |  |                                          |                              |                                      |                |                             |  |                              |   |                |   |      |                                     |      |   |  |   |     
|Balances at June 28, 2009         |  | 7,181                                    |                |  | 5,290                                    |                              |                                      | $              | 6.53                        |  | 125                          |   |                | $ | 8.53 |                                     | 540  |   |  | $ | 6.22
|                                  |  |                                          |                |  |                                          |                              |                                      |                |                             |  |                              |   |                |   |      |                                     |      |   |  |   |     

Stock Options

The total number of in-the-money options outstanding and exercisable as of June 28, 2009 was as follows:



|                             |  |                 |  |                                         |  |                              |      |                       |   |                         |  |                         |      |  |   |      
|---------------------------- |  | --------------- |  | --------------------------------------- |  | ---------------------------- | ---- | --------------------- | - | ----------------------- |  | ----------------------- | ---- |  | - | -----
|Option                       |  | Number ofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |      | 6/28/2009ClosingPrice |   | IntrinsicValuePer Share |  | AggregateIntrinsicValue
|                             |  | (In thousands)  |  | (In years)                              |  |                              |      |                       |   |                         |  | (In thousands)         
|Outstanding at June 28, 2009 |  | 2,659           |  | 3.52                                    |  | $                            | 4.54 |                       | $ | 5.90                    |  | $                       | 1.36 |  | $ | 3,624
|                             |  |                 |  |                                         |  |                             
|Exercisable at June 28, 2009 |  | 886             |  | 2.13                                    |  | $                            | 4.62 |                       | $ | 5.90                    |  | $                       | 1.28 |  | $ | 1,132



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The aggregate intrinsic value in the preceding table represents the total pre-tax value of stock
options outstanding as of June 28, 2009, based on our common stock closing price of $5.90 on June 28, 2009, which would have been received by the option holders had all option holders exercised their options as of that date.

As of June 28, 2009, June 29, 2008 and July 1, 2007, the number of shares and weighted average exercise prices of exercisable options
were 3.2 million at $7.49, 3.2 million at $7.47, and 2.8 million at $7.14, respectively.

The total intrinsic value of
options exercised during fiscal 2009, 2008, and 2007 was $0.2 million, $0.1 million and $1.9 million, respectively.

The weighted average
grant-date fair value of options granted was $1.87 in 2009, $1.73 in 2008 and $3.00 in 2007. Our calculations were made using the Black-Scholes option-pricing model. The fair value of our stock-based awards to employees was estimated assuming no
expected dividend and the following weighted-average assumptions for fiscal 2009, 2008 and 2007:



|                         |  |                    |   |  |      |   |  |      |  
|------------------------ |  | ------------------ | - |  | ---- | - |  | ---- | -
|                         |  | Stock Option Plans |  
|                         |  | 2009               |   |  | 2008 |   |  | 2007 |  
|Expected life (in years) |  | 3.8                |   |  | 3.7  |   |  | 3.2  |  
|Expected dividends       |  |                   |   |  |     |   |  |     |  
|Risk-free interest rate  |  | 1.7                | % |  | 3.6  | % |  | 4.7  | %
|Volatility               |  | 52.3               | % |  | 44.9 | % |  | 46.7 | %

Prior to July 3, 2005, we used our historical volatility as the basis to estimate expected
volatility. In light of recent accounting guidance related to stock options, we re-evaluated the volatility assumptions used to estimate the value of employee stock options granted beginning in fiscal 2006. We determined that historical and implied
volatility related to publicly traded options is more reflective of market conditions and a better indicator of expected volatility than historical volatility only.

Performance Awards

During fiscal 2007, we granted 0.3 million shares of performance stock
options to certain employees. Of this amount, 0.2 million were cancelled due to employee terminations. The number of stock options that will ultimately vest depends on actual business performance measured against certain targets such as
backlog, revenue, and profitability for specific areas of the Companys business. Should any target be met, the options in the related performance tranche would vest immediately. As of June 28, 2009, none of the targets for the
performance stock options outstanding were expected to be met, and all previously recorded compensation expense has been reversed. In the first quarter of fiscal 2010, the options were cancelled.

Restricted Stock Awards

Our
restricted stock awards are grants that entitle the holder to acquire shares of restricted common stock with certain designated prices or at no cost on a time or performance basis. The shares of restricted stock cannot be sold, pledged, or otherwise
disposed of until the award vests and any unvested shares may be reacquired by us following the awardees termination of service. The restricted stock awards typically vest on the first, second or third anniversary of the grant date or on a
graded vesting schedule over the designated service period with certain conditions and restrictions.



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Stock Repurchase Program

On September 29, 2008, the Companys Board of Directors authorized management to repurchase an additional 2.0 million shares of Symmetricom
common stock. As of June 28, 2009, the total number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 1.6 million.

During fiscal 2009, we repurchased 1.3 million shares of common stock pursuant to our repurchase program for an aggregate price of approximately
$5.4 million.

A further 0.1 million shares were repurchased by us in fiscal 2009 for an aggregate price of approximately $0.4 million
to cover the cost of taxes on vested restricted stock.

Preferred Stock

We have 500,000 shares of $0.0001 par value preferred stock authorized, of which 200,000 shares have been reserved for issuance in connection with our
preferred stock rights plan. The right entitles the holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock at a price of $72.82. The rights were distributed at the rate of one right for each
share of common stock as a non-taxable dividend and will expire August 2011. The rights will be exercisable only in the event that a person or group acquires 15% or more of our outstanding common stock.

Note 16Business Segment Information

Symmetricom is organized into five reportable segments that are within two divisions. For each of our segments, we have separate financial information, including gross profit amounts, which are evaluated regularly by the Chief Operating
Decision Maker in deciding how to allocate resources and in assessing performance. We do not allocate assets or specific operating expenses to these individual operating segments. Therefore, the segment information reported here includes only net
revenue and gross profit.

The following describes our two divisions:

Telecom Solutions Division

There are
four reportable segments within the Telecom Solutions Division:



| |  |  | Wireline Products consist principally of Building Integrated Timing Supply, or BITS, based on quartz, rubidium and Global Positioning System (GPS)
technologies. Our Wireline Products provide highly accurate and uninterruptible timing to meet the synchronization requirements of telecommunication networks.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wireless/OEM (original equipment manufacturer) Products includes our OEM base station timing products that are designed to deliver stable timing to
cellular/PCS base stations through a GPS receiver to capture cesium-based time signals produced by GPS satellites.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Quality of Experience (QoE) Assurance products are hardware and software-based probes (and/or embedded agents) that are distributed throughout an IP
(Internet Protocol) network in order to monitor network and application performance, and particularly to correlate how those factors impact end users QoE. The primary application for these system-level solutions is for IPTV (Internet Protocol
Television), VoD (video on demand), ITV (Internet television), and other IP-based video delivery mechanisms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Global Servicesoffers a broad portfolio of services for our customers around the world.
| | - |  | ---------------------------------------------------------------------------------------



85



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Timing, Test and Measurement Division

The Timing, Test and Measurement Division products are precision time and frequency systems that are important to communications systems of wireline,
wireless, satellite and computer network technologies for government, power utilities, aerospace, defense, and enterprise markets.



|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|--------------------------------------------------- |  | ---------------------------------- | ------- | -- | ------------- | - | ------- | ------------ |  | - | ------- | --
|                                                    |  | Year ended                         |        
|                                                    |  | June 28, 2009                      |         |    | June 29, 2008 |   |         | July 1, 2007 | 
|                                                    |  | (In thousands, except percentages) |        
|Net revenue:                                        |  |                                    |         |    |               |   |         |              |  |   |         |   
|Telecom Solutions Division:                         |  |                                    |         |    |               |   |         |              |  |   |         |   
|Wireline Products                                   |  | $                                  | 104,022 |    |               | $ | 90,708  |              |  | $ | 93,908  |   
|Wireless/OEM Products                               |  |                                    | 18,265  |    |               |   | 23,025  |              |  |   | 26,672  |   
|Global Services                                     |  |                                    | 13,209  |    |               |   | 15,408  |              |  |   | 14,627  |   
|Quality of Experience Assurance Division            |  |                                    | 1,085   |    |               |   | 1,666   |              |  |   | 501     |   
|Timing, Test and Measurement Division               |  |                                    | 84,250  |    |               |   | 77,245  |              |  |   | 72,672  |   
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|Total net revenue                                   |  | $                                  | 220,831 |    |               | $ | 208,052 |              |  | $ | 208,380 |   
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|Cost of sales:                                      |  |                                    |         |    |               |   |         |              |  |   |         |   
|Telecom Solutions Division:                         |  |                                    |         |    |               |   |         |              |  |   |         |   
|Wireline Products                                   |  | $                                  | 42,005  |    |               | $ | 43,667  |              |  | $ | 40,098  |   
|Wireless/OEM Products                               |  |                                    | 14,032  |    |               |   | 16,826  |              |  |   | 19,515  |   
|Global Services                                     |  |                                    | 9,326   |    |               |   | 11,225  |              |  |   | 10,636  |   
|Quality of Experience Assurance Division            |  |                                    | 523     |    |               |   | 440     |              |  |   | 103     |   
|Timing, Test and Measurement Division               |  |                                    | 45,821  |    |               |   | 41,613  |              |  |   | 39,484  |   
|Other cost of sales*                                |  |                                    | 5,340   |    |               |   | 9,635   |              |  |   | 3,542   |   
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|Total cost of sales                                 |  | $                                  | 117,047 |    |               | $ | 123,406 |              |  | $ | 113,378 |   
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|Gross profit:                                       |  |                                    |         |    |               |   |         |              |  |   |         |   
|Telecom Solutions Division:                         |  |                                    |         |    |               |   |         |              |  |   |         |   
|Wireline Products                                   |  | $                                  | 62,017  |    |               | $ | 47,041  |              |  | $ | 53,810  |   
|Wireless/OEM Products                               |  |                                    | 4,233   |    |               |   | 6,199   |              |  |   | 7,157   |   
|Global Services                                     |  |                                    | 3,883   |    |               |   | 4,183   |              |  |   | 3,991   |   
|Quality of Experience Assurance Division            |  |                                    | 562     |    |               |   | 1,226   |              |  |   | 398     |   
|Timing, Test and Measurement Division               |  |                                    | 38,429  |    |               |   | 35,632  |              |  |   | 33,188  |   
|Other cost of sales*                                |  |                                    | (5,340  | )  |               |   | (9,635  | )            |  |   | (3,542  | ) 
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|Total gross profit                                  |  | $                                  | 103,784 |    |               | $ | 84,646  |              |  | $ | 95,002  |   
|                                                    |  |                                    |         |    |               |   |         |              |  |   |         |   
|                                                    |  |                                    |        
|Gross margin:                                       |  |                                    |         |    |               |   |         |              |  |   |         |   
|Telecom Solutions Division:                         |  |                                    |         |    |               |   |         |              |  |   |         |   
|Wireline Products                                   |  |                                    | 59.6    | %  |               |   | 51.9    | %            |  |   | 57.3    | % 
|Wireless/OEM Products                               |  |                                    | 23.2    | %  |               |   | 26.9    | %            |  |   | 26.8    | % 
|Global Services                                     |  |                                    | 29.4    | %  |               |   | 27.1    | %            |  |   | 27.3    | % 
|Quality of Experience Assurance Division            |  |                                    | 51.8    | %  |               |   | 73.6    | %            |  |   | 79.4    | % 
|Timing, Test and Measurement Division               |  |                                    | 45.6    | %  |               |   | 46.1    | %            |  |   | 45.7    | % 
|Other cost of sales as percentage of total revenue* |  |                                    | (2.4    | )% |               |   | (4.6    | )%           |  |   | (1.7    | )%
|Total gross margin                                  |  |                                    | 47.0    | %  |               |   | 40.7    | %            |  |   | 45.6    | % 



|* | Includes amortization of purchased technology, impairment of intangible assets and applicable integration, and restructuring charges
|- | ------------------------------------------------------------------------------------------------------------------------------------



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Our export sales, based on the location of the customer, accounted for 36%, 33% and 29%, of our net
revenue in fiscal 2009, 2008 and 2007, respectively. The geographical components of revenue are as follows:



|                  |  |               |   |  |               |   |  |              |  
|----------------- |  | ------------- | - |  | ------------- | - |  | ------------ | -
|                  |  | Year ended    |  
|                  |  | June 28, 2009 |   |  | June 29, 2008 |   |  | July 1, 2007 |  
|United States     |  | 64            | % |  | 67            | % |  | 71           | %
|International:    |  |               |   |  |               |   |  |              |  
|Asia              |  | 10            | % |  | 10            | % |  | 9            | %
|Europe            |  | 16            | % |  | 12            | % |  | 11           | %
|Canada            |  | 4             | % |  | 3             | % |  | 4            | %
|Latin America     |  | 4             | % |  | 6             | % |  | 3            | %
|Rest of the world |  | 2             | % |  | 2             | % |  | 2            | %

In fiscal 2009, we had no customers that accounted for 10% or more of our net revenue. In fiscal
2008, two customers each accounted for 10.8% of our net revenue, or revenues of $22.4 million and $22.5 million, respectively. The same two customers each accounted for 13.7% and 12.7% of our net revenue, or revenues of $28.5 million and $26.5
million, respectively in fiscal 2007.

Note 17Integration and Restructuring Charges

The following tables show the details of the restructuring cost accruals, which consist of facilities and severance costs, for the years ended
June 28, 2009 and June 29, 2008:



|                                                              |  |                         |     |                  |   |          |  |   |                         |   |  |   |      
|------------------------------------------------------------- |  | ----------------------- | --- | ---------------- | - | -------- |  | - | ----------------------- | - |  | - | -----
|                                                              |  | Balance atJuly 1, 2007  |     | ExpenseAdditions |   | Payments |  |   | Balance atJune 29, 2008
|                                                              |  | (in thousands)         
|Lease loss accrual (fiscal 2004)                              |  | $                       | 145 |                  | $ |         |  | $ | (59                     | ) |  | $ | 86   
|All other integration and restructuring changes (fiscal 2004) |  |                         | 482 |                  |   |         |  |   | (183                    | ) |  |   | 299  
|Austin facility shutdown (fiscal 2008)                        |  |                         |     |                  |   | 794      |  |   | (206                    | ) |  |   | 588  
|All other integration and restructuring changes (fiscal 2008) |  |                         |    |                  |   | 1,728    |  |   | (1,728                  | ) |  |   |     
|                                                              |  |                         |     |                  |   |          |  |   |                         |   |  |   |      
|Total                                                         |  | $                       | 627 |                  | $ | 2,522    |  | $ | (2,176                  | ) |  | $ | 973  
|                                                              |  |                         |     |                  |   |          |  |   |                         |   |  |   |      
|                                                              |  |                         |     |                 
|                                                              |  | Balance atJune 29, 2008 |     | ExpenseAdditions |   | Payments |  |   | Balance atJune 28, 2009
|                                                              |  | (in thousands)         
|Lease loss accrual (fiscal 2004)                              |  | $                       | 86  |                  | $ | 377      |  | $ | (247                    | ) |  | $ | 216  
|All other integration and restructuring changes (fiscal 2004) |  |                         | 299 |                  |   |         |  |   | (118                    | ) |  |   | 181  
|Austin facility shutdown (fiscal 2008)                        |  |                         | 588 |                  |   | 1,051    |  |   | (1,639                  | ) |  |   |     
|Lease loss accrual (fiscal 2009)                              |  |                         |    |                  |   | 2,449    |  |   | (182                    | ) |  |   | 2,267
|Accelerated depreciation charges (fiscal 2009)                |  |                         |    |                  |   | 1,294    |  |   | (1,294                  | ) |  |   |     
|All other integration and restructuring changes (fiscal 2009) |  |                         |    |                  |   | 4,535    |  |   | (1,635                  | ) |  |   | 2,900
|                                                              |  |                         |     |                  |   |          |  |   |                         |   |  |   |      
|Total                                                         |  | $                       | 973 |                  | $ | 9,706    |  | $ | (5,115                  | ) |  | $ | 5,564
|                                                              |  |                         |     |                  |   |          |  |   |                         |   |  |   |      

During the second half of fiscal 2009, we announced two restructuring plans to further streamline
manufacturing operations and improve operational efficiencies. As part of our ongoing outsourcing and operational efficiency program, we eliminated approximately 130 positions, or about 14% of our total workforce. The reductions began in January
2009 and will be completed by the third quarter of fiscal 2010. We expect to incur restructuring charges of approximately $8.8 million in connection with the plans. Total restructuring charges are expected to include approximately $2.0 million in
accelerated depreciation charges and



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SYMMETRICOM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



approximately $6.8 million in one-time termination benefits and other restructuring related charges. Upon completion, we expect the restructuring and other
actions to reduce our annual manufacturing and operating costs by approximately $9.5 million.

For fiscal 2009, we incurred total
restructuring charges of $9.7 million. Total charges related to the two restructurings announced in fiscal 2009 were $5.7 million, including $1.2 million related to accelerated depreciation and $4.5 million in one-time termination benefits and other
restructuring related charges. Additionally, in fiscal 2009, we incurred $2.4 million of integration and restructuring charges after determining that portions of three existing facilities would no longer be utilized. We are currently attempting to
sublease them. The balance of the $2.3 million lease loss accrual for fiscal 2009 related to these facilities as of June 28, 2009 will be paid over the next seven years. During fiscal 2009, we incurred an additional $1.1 million of integration
and restructuring charges related to the Austin facility shutdown. As of June 28, 2009, all activities related to this shutdown have been completed and no other integrated and restructuring charges are anticipated.

Over the next nine months, we expect to incur remaining integration and restructuring charges amounting to $3.1 million, including approximately $0.9
million in accelerated depreciation charges and approximately $2.2 million in one-time termination benefits and other restructuring related charges.

Note 18Subsequent Events

We have evaluated subsequent events through September 9, 2009, the day our consolidated
financial statements for the year ended June 28, 2009 were issued and concluded there are no additional adjustments to the consolidated financial statements or disclosures required.



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##### Table of Contents

|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

Not applicable.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of this period, our disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed in the reports that we file or submit under the Exchange Act.

Changes in Internal Control Over Financial Reporting

There were no material changes in the Companys internal control over financial reporting that occurred during the quarter ended June 28, 2009 that has affected, or is reasonably likely to materially affect,
our internal control over financial reporting.

Managements Report on Internal Control Over Financial Reporting

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of the Companys management, including our principal executive officer and principal financial officer, the Company conducted
an evaluation of the effectiveness of its internal control over financial reporting based on criteria established in the framework in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, the Companys management concluded that its internal control over financial reporting was effective as of June 28, 2009.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of our Internal Control Over Financial Reporting as of June 28, 2009 has been audited by Deloitte & Touche LLP, our
Independent Registered Public Accounting Firm, as stated in their report dated September 9, 2009.



|Item 9B. | Other Information
|-------- | -----------------

None



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Symmetricom, Inc.

San Jose, California

We have audited the internal control over financial
reporting of Symmetricom, Inc. and subsidiaries (the Company) as of June 28, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed
by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control
over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 28, 2009, based on the criteria
established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 28, 2009 of the Company
and our report dated September 9, 2009 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/
Deloitte & Touche LLP

San Jose, California

September 9, 2009



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##### Table of Contents

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------



|(a) | Executive Officers
|--- | ------------------

See the section entitled
Executive Officers of Symmetricom in Part I of this report.



|(b) | Directors
|--- | ---------

The information required by this item is
incorporated by reference from the information under the caption Election of DirectorsNominees contained in the Companys Proxy Statement to be filed with the Securities and Exchange Commission (the SEC) in
connection with the solicitation of proxies for the Companys 2009 Annual Meeting of Shareholders to be held on November 6, 2009 (the Proxy Statement).



|(c) | Section 16(a) Beneficial Ownership Reporting Compliance
|--- | -------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires a companys directors, officers and beneficial owners of more than 10% of any class of equity securities of the company
registered pursuant to Section 12 of the Exchange Act to file with the SEC initial reports of beneficial ownership and reports of changes in ownership of Common Stock and other equity securities of Symmetricom registered pursuant to
Section 12 of the Exchange Act. Information regarding Section 16 reporting compliance is contained in the section called Other InformationSection 16(a) Beneficial Ownership Reporting Compliance in the Proxy
Statement and is incorporated herein by reference.



|(d) | Code of Ethics
|--- | --------------

We have adopted a written code of ethics
that applies to all of our employees and to our Board of Directors. A copy of the code is available on our website at http://www.symmetricom.com.



|(e) | Corporate Governance
|--- | --------------------

The information required by this
item is incorporated by reference from the information under the captions Election of DirectorsAudit Committee and Election of DirectorsNominating and Governance Committee contained in the Proxy Statement.



|Item 11. | Executive Compensation
|-------- | ----------------------

The
information required by this item is incorporated by reference from the information under the captions Election of DirectorsNominees, Election of DirectorsDirector Compensation, Executive Compensation and
Related Information, Report of the Compensation Committee of the Board of Directors, Employment Contracts, Termination of Employment, Change-in-Control Arrangements and Certain Relationships and Related Party
Transactions contained in the Proxy Statement.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
|-------- | -----------------------------------------------------------------------------------------------

The information required by this item is incorporated by reference from the information under the caption Other InformationShare Ownership by
Principal Stockholders and Management and Securities Authorized for Issuance Under Equity Compensation Plans contained in the Proxy Statement.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

The information required by this item is incorporated by reference from the information under the captions Certain Relationships and Related Party
Transactions and Election of DirectorsThe Board of Directors and its Committees contained in the Proxy Statement.



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

The information required by this item is included in Ratification of Appointment of Independent Registered Public Accounting Firm of the Company in our Proxy Statement.



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



| | (a) | Financial Statements and Financial Statement Schedules
| | --- | ------------------------------------------------------

1.    Financial Statements.Reference is made to the Index to Consolidated Statements of Symmetricom, Inc. under Item 8 of Part II hereof.

2.    Financial Statement Schedules.    The following financial statement schedule of Symmetricom for the
years ended June 28, 2009, June 29, 2008 and July 1, 2007 is filed as part of this report on Form 10-K and should be read in conjunction with the financial statements: Schedule IIValuation and Qualifying Accounts and
Reserves. All other schedules have been omitted because they are not applicable, not required, or the required information is included in the Consolidated Financial Statements or notes thereto.

3.    Exhibits.See Item 15(b) below. Each management contract or compensatory plan or
arrangement required to be filed has been identified.



| | (b) | Exhibits
| | --- | --------



|            |  |                                                                                                                                                                                                                                                                                                                                                          
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                  
|3.1(i)      |  | Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrants current report on Form 8-K (file no. 000-02287)
filed January 9, 2002).                                                                                                                                              
|            | 
|3.1(ii)     |  | Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 99.1 to the Registrants current report on Form 8-K (file no. 000-02287) filed February 9,
2009).                                                                                                                                                                 
|            | 
|4.1         |  | Form of Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Registrants annual report on Form 10-K (file no. 000-02287) filed August 30, 2002).                                                                                                                                                                                 
|            | 
|4.2         |  | Rights Agreement dated as of August 9, 2001 between the Registrant and Mellon Investor Services (incorporated by reference from Exhibit 4.1 to the Registrants registration
statement on Form 8-A (file no. 000-02287) filed August 9, 2001).                                                                                                           
|            | 
|4.3         |  | Indenture, dated as of June 8, 2005, between the Registrant and Wells Fargo Bank, National Association, as Trustee (incorporated by reference from Exhibit 4.1 to the Registrants
current report on the Form 8-K (file no. 000-02287) filed June 8, 2005).                                                                                              
|            | 
|4.4         |  | Form of 31/4% Contingent Convertible Subordinated Notes due 2025 (incorporated by reference to Exhibit A to Exhibit 4.3 hereof).                                                                                                                                                                                                                         
|            | 
|10.1#       |  | 1999 Director Stock Option Plan, as amended through December 28, 2005 and forms of agreements thereunder (incorporated by reference from Exhibit 99.3 to the Registrants 1999
proxy statement filed September 23, 1999 and Exhibit 10.2 to the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 13, 2001).                
|            | 
|10.2#       |  | Amendment to the Symmetricom, Inc. 1999 Director Stock Option Plan effective December 28, 2005 and form of option agreement thereunder (incorporated by reference from Exhibits 10.1 and
10.2 to the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 8, 2006).                                                            
|            | 
|10.3#       |  | 1999 Employee Stock Option Plan, as amended through October 23, 2001, and forms of agreements thereunder (incorporated by reference from Exhibit 99.1 to the Registrants proxy
statement (file no. 000-02287) filed September 23, 1999 and Exhibit 10.1 to the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 13, 2001).



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                            
|            | 
|10.4#       |  | Amendment to the Symmetricom, Inc. 1999 Employee Stock Option Plan effective May 28, 2003 (incorporated by reference from Exhibit (d)(6) to the Registrants tender offer
statement on Schedule TO (file no. 000-02287) filed May 28, 2003).                                                                                                                                       
|            | 
|10.5#       |  | 2002 Stock Option Plan (incorporated by reference from Exhibit 4.1 to Registrants registration statement on Form S-8 (file no. 333-97599) filed August 2,
2002).                                                                                                                                                                                                                  
|10.6        |  | Lease Agreement by and between the Registrant and Nexus Equity, Inc. dated June 10, 1996 (incorporated by reference from Exhibit 10.14 to the Registrants annual report on
Form 10-K (file no. 000-02287) filed September 17, 1996).                                                                                                                                              
|            | 
|10.7        |  | First Amendment to Lease by and between the Registrant and Nexus Equity II LLC, as successor in interest to Nexus Equity, Inc., dated November 18, 2005, effective as of
October 27, 2005 (incorporated by reference from Exhibit 10.2 to the Registrants current report on Form 8-K (file no. 000-02287) filed November 22, 2005).                                               
|            | 
|10.8        |  | Form of Indemnification Agreement (incorporated by reference from Exhibit 10.6 to the Registrants annual report on Form 10-K (file no. 000-02287) filed August 30,
2002).                                                                                                                                                                                                         
|            | 
|10.9#       |  | Symmetricom, Inc. Deferred Compensation Plan effective October 1, 1999 (incorporated by reference from Exhibit 10.4 to the Registrants quarterly report on Form 10-Q
(file no. 000-02287) filed May 15, 2001).                                                                                                                                                                    
|            | 
|10.10#      |  | Amended and Restated Employment and Executive Severance Agreement between the Registrant and Thomas W. Steipp dated October 30, 2008 (incorporated by reference from Exhibit 10.3 to the
Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 6, 2009).                                                                                                  
|            | 
|10.11#      |  | Separation Agreement between the Registrant and Thomas W. Steipp dated June 26, 2009 (incorporated by reference from Exhibit 10.1 to the Registrants current report on Form 8-K
(file no. 000-02287) filed June 29, 2009).                                                                                                                                                        
|            | 
|10.12#      |  | Employment Offer Letter between the Registrant and Justin Spencer dated September 25, 2008 (incorporated by reference from Exhibit 10.1 to the Registrants current report on Form 8-K (file
no. 000-02287) filed October 2, 2008).                                                                                                                                                
|            | 
|10.13#      |  | Form of Second Amended and Restated Executive Severance Benefits Agreement between the Registrant and executive officers party to those certain Amended and Restated Executive Severance
Benefits Agreements, dated September 11, 2007 (incorporated by reference from Exhibit 10.1 to the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 6, 2009).
|            | 
|10.14#      |  | Form of Second Amended and Restated Executive Severance Benefits Agreement between the Registrant and certain executive officers of the Registrant (incorporated by reference from
Exhibit 10.1 to the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed February 6, 2009).                                                                                    
|            | 
|10.15#      |  | Form of Restricted Stock Award Agreement (incorporated by reference from Schedule A to Exhibit (a)(1)(ii) to the Registrants tender offer statement on Schedule TO (file no.
000-02287) filed May 28, 2003).                                                                                                                                                                      
|            | 
|10.16#      |  | Form of Restricted Stock Award Agreement under Symmetricom, Inc. 1999 Employee Stock Option Plan, amended effective August 4, 2005 (incorporated by reference from Exhibit 10.21 to
the Registrants annual report on Form 10-K (file no. 000-02287) filed September 13, 2006).                                                                                                    
|            | 
|10.24#      |  | Amended and Restated 2006 Incentive Award Plan (incorporated by reference from the Registrants quarterly report on Form 10-Q (file no. 000-02287) filed November 6, 2008) and forms of
agreements thereunder (incorporated by reference from Exhibit 4.4 to the Registrants registration statement on Form S-8 (file no. 333-155566) filed November 21, 2008).                   



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|            |  |                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibits                                                                                                        
|            | 
|21.1        |  | Subsidiaries of the Registrant.                                                                                                
|            | 
|23.1        |  | Consent of Independent Registered Public Accounting Firm.                                                                      
|            | 
|24.1        |  | Power of Attorney (see signature page to this annual report on Form 10-K).                                                     
|            | 
|31          |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|            | 
|32          |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                       



|# | Management contract or compensatory plan or arrangement
|- | -------------------------------------------------------



| | (c) | Financial Statement Schedules
| | --- | -----------------------------

See
Item 15(a)(2) above.



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SCHEDULE II

SYMMETRICOM, INC.

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)



|                                |  |                            |       |                             |   |       |               |  |                      |       |  |   |      
|------------------------------- |  | -------------------------- | ----- | --------------------------- | - | ----- | ------------- |  | -------------------- | ----- |  | - | -----
|                                |  | Balance atBeginningof Year |       | Charged toCosts andExpenses |   |       | Deductions(1) |  | Balance atEnd ofYear
|Year ended June 28, 2009:       |  |                            |       |                             |   |       |               |  |                      |       |  |   |      
|Accrued warranty expense        |  | $                          | 3,801 |                             | $ | 2,854 |               |  | $                    | 2,918 |  | $ | 3,737
|Allowance for doubtful accounts |  | $                          | 731   |                             | $ | (328  | )             |  | $                    | 42    |  | $ | 361  
|Year ended June 29, 2008:       |  |                            |       |                             |   |       |               |  |                      |       |  |   |      
|Accrued warranty expense        |  | $                          | 3,374 |                             | $ | 3,407 |               |  | $                    | 2,980 |  | $ | 3,801
|Allowance for doubtful accounts |  | $                          | 1,107 |                             | $ | 173   |               |  | $                    | 549   |  | $ | 731  
|Year ended July 1, 2007:        |  |                            |       |                             |   |       |               |  |                      |       |  |   |      
|Accrued warranty expense        |  | $                          | 3,547 |                             | $ | 2,300 |               |  | $                    | 2,473 |  | $ | 3,374
|Allowance for doubtful accounts |  | $                          | 888   |                             | $ | 349   |               |  | $                    | 130   |  | $ | 1,107



|(1) | Deductions represent costs charged or amounts written off against the reserve or allowance.
|--- | -------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



|                        |  |  |  |     |  |                                                                    
|----------------------- |  |  |  | --- |  | -------------------------------------------------------------------
|                        |  |  |  |     |  | SYMMETRICOM, INC.                                                  
|                        |  |  | 
|Date: September 9, 2009 |  |  |  | By: |  | /S/    DAVID G.
CÔTÉ                                               
|                        |  |  |  |     |  | David G. Côté Chief Executive
Officer (Principal Executive Officer)

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints David G. Côté and Justin Spencer, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K
and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                         |  |                                                                                                                                          |  |                  
|-------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|Signatures                                               |  | Title                                                                                                                                    |  | Date             
|                                                         |  |                                                                                                                                         
|/S/    DAVID G.
CÔTÉ David G. Côté                       |  | Chief Executive Officer (Principal Executive Officer) and Director                                                                       |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    JUSTIN
SPENCER Justin Spencer                     |  | Executive Vice President Finance and Administration, Chief Financial Officer, and Secretary (Principal Financial and Accounting
Officer) |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    ROBERT T.
CLARKSON Robert T. Clarkson             |  | Chairman of the Board                                                                                                                    |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    ALFRED
BOSCHULTE Alfred Boschulte                 |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    JAMES
CHIDDIX James Chiddix                       |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    ELIZABETH A.
FETTER Elizabeth A. Fetter           |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    ROBERT M. NEUMEISTER
JR. Robert M. Neumeister Jr. |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    RICHARD W.
OLIVER Richard W. Oliver               |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    RICHARD N.
SNYDER Richard N. Snyder               |  | Director                                                                                                                                 |  | September 9, 2009
|                                                         |  |                                                                                                                                         
|/S/    ROBERT J.
STANZIONE Robert J. Stanzione           |  | Director                                                                                                                                 |  | September 9, 2009



96