UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 29, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             to


Commission file number 0-02287



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

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

No. 95-1906306(I.R.S. Employer Identification No.)2300 Orchard Parkway, San Jose, California(Address of Principal Executive Offices)

95131-1017(Zip Code)Registrant's telephone number, including area code: (408) 433-0910Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which registered:Common Stock, $0.0001 Par Value

The NASDAQ Stock Market LLCSeries A Participating Preferred Stock Purchase Rights

The NASDAQ Stock Market LLCSecurities 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 o    No ý

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 o    No ý

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 ý    No o

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. o

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 o

Accelerated filer ý

Non-accelerated filer o(Do not check if a smaller reporting company)

Smaller reporting company o


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

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 30, 2007, as reported on The NASDAQ Stock Market LLC was approximately $210,229,656. This calculation does not reflect a
determination that such persons are affiliates of the Registrant for any other purpose.

As
of August 24, 2008, there were approximately 44,871,826 shares of Registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 2008 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 29, 2008
INDEX

PagePART IItem 1.

Business


3Item 1A.

Risk Factors


14Item 1B.

Unresolved Staff Comments


26Item 2.

Properties


26Item 3.

Legal Proceedings


26Item 4.

Submission of Matters to a Vote of Security Holders


27PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


28Item 6.

Selected Financial Data


30Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations


31Item 7A.

Quantitative and Qualitative Disclosures about Market Risk


50Item 8.

Consolidated Financial Statements and Supplementary Data


52Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


93Item 9A.

Controls and Procedures


93Item 9B.

Other Information


93PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


96Item 11.

Executive Compensation


96Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


96Item 13.

Certain Relationships and Related Transactions, and Director Independence


97Item 14.

Principal Accountant Fees and Services


97PART IVItem 15.

Exhibits and Financial Statement Schedules


98Signatures


103


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PART I

FORWARD-LOOKING INFORMATION

When used in this discussion, the words "expects," "anticipates," "estimates," "believes," "plans," "will,"
"may," "intend," "can," "projects" 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 competition and competitive pricing pressure, uncertainties associated with changing intellectual
property laws, developments in and expenses related to litigation, increased competition in our markets, 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, the impact on investor confidence due to material weaknesses in our controls over financial reporting,
potential short-term investment losses and other risks due to credit market dislocation, changes in accounting for convertible debt, the tax treatment of the restructuring of our Puerto
Rico subsidiary, 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 including Internet-based applications such as video streaming. We also provide
end-to-end perceptual video quality monitoring solutions for consolidated voice, data, and video next generation networks. We sell our solutions to communication service
providers, government agencies, enterprises, and research facilities. Symmetricom products were shipped to more than 90 countries in fiscal year 2008. Our products include atomic frequency references,
including 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.

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We
manufacture precision time products that allow our customers to keep accurate time 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 of our clocks in perspective, if a clock accumulates a 40 billionth of a second time error over a 24-hour period, it will
require more than 500,000 years to accumulate an error of one second.

During
fiscal 2008, we integrated our Quality of Experience Assurance Division into our Telecom Solutions Division. Our Quality of Experience Assurance business segment develops products
for use in the IPTV (Internet Protocol Television) market that search for network impairments and review video packet integrity.

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 atwww.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:



Reportable Segments

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





Information as to net revenue and gross profit margin attributable to each of these reportable segments for each year in the
three-year period ended June 29, 2008, is contained in Note 16 of the

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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 a suite of PackeTime 
technologies (IEEE 1588 (PTP), NTP, and DTI) 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 2008, we participated in the modernization of several synchronization networks with certain service providers and helped others develop future plans for such
efforts.

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 Assurance segment provides a robust perceptual quality monitoring solution that enables carriers, Internet service providers and cable multi-service operators
(MSOs) to understand actual video service quality, in real time, as experienced by end-users. During fiscal 2008, Symmetricom continued to target telecommunications carriers and cable
operators as well as other digital video service providers to monitor IP-based video service offerings. New products introduced during the fiscal year included the Q-1000
headend analyzer based on the technology acquired with certain intellectual property from Genista Corporation.

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 the aerospace,
defense, metrology and enterprise markets. 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. 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. This acquisition was fully integrated and functioning within Symmetricom in fiscal 2008.

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During
fiscal 2008, 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, DISA, Lockheed Martin, Northrop Grumman, Raytheon, General Dynamics, BAE, L3 and
various military procurement and service agencies. New products introduced during the fiscal year included a new secure SAASM GB-GRAM GPS receiver, new module capabilities for our
XLi GPS Time and Frequency Receiver family two new models in our SyncServer network time server family, the 4370A DVB SyncSource for digital video broadcast sync, a ruggedized military rubidium
and a general purpose common timing module.

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 telegraph companies
(PTTs), competitive local exchange carriers (CLECs), other telephone companies as well as cable companies. We believe that these telco 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 begun to sell 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:



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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) and the governing
standards that apply. For example, in CDMA, the standard 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:



Quality of Experience Assurance Market and Products

Quality of Experience Assurance Market:

Ensuring high quality video is a critical component of successful IP-based video offering. Managing video quality is
essential for differentiating services, reducing customer churn and enabling faster

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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, combined with a mechanism to consolidate and correlate all
information resulting in accurate and timely results.

Quality of Experience Assurance Products:

Symmetricom's Video Quality Platform has been designed to deploy into IP networks seamlessly. The solution consists of the following
parts:



Global Services Market and Products

Global Services Market:

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

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Global Services Products:

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



Timing, Test and Measurement Markets and Products

Timing, Test and Measurement Markets:

The aerospace, defense, metrology 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.

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:



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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 system 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 29, 2008, we had 56 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 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

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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 for standard products consists primarily of assembly test, configuration and logistics performed after
assembly by our manufacturing sites in Aguadilla, Puerto Rico; Beverly, Massachusetts; Tuscaloosa, Alabama; San Jose, California and Hofolding, 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
also use various contract manufacturers to build our printed board assemblies and in some cases full turnkey box builds. During fiscal 2008, we outsourced a portion of our Puerto Rico
based manufacturing to a contract manufacturer with facilities in China, in order to lower manufacturing costs and take advantage of best-in-class production processes.

Backlog

Our backlog consists of firm orders that have yet to be shipped to the customer. Our total backlog was $58.4 million as of
June 29, 2008, compared with $51.9 million as of July 1, 2007. 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 2008, both AT&T Inc. and Verizon Communications Inc., who primarily sell into our Wireline Products
business segment, each accounted for 10.8% of our net revenue. No other single customer accounted for more than 10% of our net revenue in fiscal 2008. Our export sales outside the United States
accounted for 33%, 29% and 30% of our net revenue in fiscal 2008, 2007 and 2006, 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.

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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 providing enhanced functionality to our existing products including the development of additional
software-based features and functionality. We also utilize domestic and international contractors (primarily in India) to assist us in our research and development activities. We focused our
development efforts in fiscal 2008 on the development of both hardware and software products. Our product development programs include wireline and wireless synchronization, network management
software, government communication and infrastructure, network time server, video quality of experience hardware and software, and updates and maintenance on existing products. We are developing a
number of new services that we expect to provide in the future as part of our next generation platform. In fiscal 2008, we added the network time protocol (NTP) circuit pack to our flagship TH5500 and
SSU2000 synchronization supply units. We continue to develop new protocols, including IEEE 1588, and DOCSIS Timing Interface. During fiscal 2008, we opened a research and development
("R&D") center in Beijing China and closed the R&D center in Austin, Texas. In fiscal 2008, 2007 and 2006, overall research and development expenditures were $27.9 million, $23.7 million
and $18.8 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, CO; 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.

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

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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 29, 2008, we had 952 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.

Executive Officers of Symmetricom

Following is a list of our executive officers as of June 29, 2008 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

PositionThomas W. Steipp


58

Chief Executive OfficerWilliam Slater


56

Executive Vice President Finance and Administration, Chief Financial Officer and SecretaryBruce Bromage


54

Executive Vice President and General Manager Timing Test & Measurement DivisionPaul Chermak


65

Executive Vice President Global Sales & SupportJames Armstrong


42

Executive Vice President & General Manager, Telecom Solutions Division


Mr. Steipphas served as Chief Executive Officer of Symmetricom since December 1998. Mr. Steipp served as Chief Executive
Officer and Chief Financial Officer of Symmetricom from December 1998 to October 1999. Mr. Steipp served as President and Chief Operating Officer, Telecom Solutions, a division of Symmetricom,
from March 1998 to December 1998.

Mr. Slaterhas served as Executive Vice President Finance and Administration, Chief Financial Officer and Secretary of Symmetricom
since July 2006. Mr. Slater served as Chief Financial Officer and Secretary of Symmetricom from August 2000 to June 2006. In June 2008, Mr. Slater informed us of his intention to resign.
We expect Mr. Slater's employment to end on September 30, 2008.

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.

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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.

Mr. 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.

Item 1A.Risk Factors



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:



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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.



As of June 29, 2008, we had recorded goodwill and intangible assets with a net book value of $48.1 million and
$7.2 million respectively, related to various acquisitions. We test for impairment at least annually and more frequently whenever evidence of impairment exists. When we performed our annual
impairment test for fiscal 2008, we determined that goodwill and intangibles related to our Quality of Experience Assurance business segment were impaired in full by approximately
$14.3 million. If our future financial performance or other events indicate that the value of our

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recorded
goodwill or intangibles is impaired, we may record additional impairment charges that could have a material adverse effect on our reported results.



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:



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:





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

16

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requires
our independent registered public accounting firm to attest to the effectiveness of our internal controls over financial reporting.

During
fiscal 2007, we identified two material weaknesses in our controls over financial reporting. Both material weaknesses resulted in quarterly restatements in fiscal 2007, one for
the second quarter and the other for the third quarter. One of the material weaknesses was remediated prior to year end. Since the other material weakness was not remediated prior to July 1,
2007, our management determined that our internal control over financial reporting was not effective as of July 1, 2007.

Subsequent
to filing our Form 10-K for fiscal 2007, we identified a third material weakness in our internal control environment due to an operating deficiency in the
completeness, accuracy, and existence of amounts in the accrued receipts account, and a design deficiency in the subsequent reconciliation and review process. We cannot assure you that we will not
identify other material weaknesses in our internal controls in the future. As a result, we may experience a loss of public confidence, which could have an adverse effect on our business, financial
condition and stock price.

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.



In July 2006, Symmetricom Puerto Rico, a wholly-owned subsidiary, moved its place of legal organization from Delaware to Bermuda in a
transaction intended to be a tax-free restructuring. We submitted a ruling request to the Internal Revenue Service to confirm the tax-free treatment in February 2008. Ruling
requests of this nature are considered routine and management believes that it is probable that the ruling will be granted.

If
the ruling is granted, Symmetricom Puerto Rico would be treated as a branch of Symmetricom, Inc. effective as of July 2006 and, accordingly, the profits of Symmetricom Puerto
Rico would be currently taxable for federal income tax purposes. If granted, the ruling would result in no changes to our tax provision as reported in our fiscal years 2007 and 2008 annual reports.

If
the ruling is not granted, then:



17

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The
above three items would be reported in the fiscal year and quarter in which the request for IRS confirmation of tax-free treatment of the July 2006 restructuring was
denied. The net result of such a denial would be an increased tax provision of approximately $10.7 million while our deferred tax assets would decrease by approximately the same amount.

Prior
to fiscal 2007, Symmetricom Puerto Rico had elected to report its U.S. taxes under Section 936 of the United State Internal Revenue Code. This election exempted qualified
Puerto Rico earnings from regular federal income taxes, subject to various limitations. Section 936 expired at the end of fiscal 2006.



Future losses may create uncertainty about the realizability of our $49.0 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.



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:



18

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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.



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 current balance 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.



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.

19

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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.



During fiscal 2008, 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. For instance, our Wireline revenue in 2006 decreased by $2.5 million in part because one large customer
ordered less product in fiscal 2006 than 2005 as it completed a major project. 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.



The markets for our products are characterized by:



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.

20

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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:



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 have limited 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 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.

21

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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 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 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.



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 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

22

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existing
patents will not be challenged, invalidated or circumvented, or that the rights granted will provide us with any commercial benefit.



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.



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.

23

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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.



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.

24

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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 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.



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:



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.



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.

25

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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.



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.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

The following are our principal facilities as of June 29, 2008:

Location

Primary Use

Owned/Leased

Segments Used bySan Jose , CA

Headquarters, Manufacturing

Leased

AllAguadilla, Puerto Rico

Manufacturing

Leased

All but QoEBeverly, MA

Manufacturing

Owned (no encumbrances)

All but QoESanta Rosa, CA

TT&M Division Headquarters, Manufacturing

Leased

TT&MBoulder, CO

Manufacturing

Leased

TT&M


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

26

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adjacent
properties and intend to defend this lawsuit vigorously. As of June 29, 2008, we had an accrual of $0.3 million for remediation costs and other ongoing monitoring costs.

In
November 2007, we signed an Order of Consent with the United States Environmental Protection Agency ("EPA") for an offer of settlement of $27,531 for our proportionate share of the
cleanup costs incurred or to be incurred in connection with the Malone Superfund Site in Texas. The Malone Disposal Service company was previously used by Austron Datum for treatment and storage of
certain hazardous substances. In consideration for the agreement to pay the settlement amount, the EPA agreed to not sue or take further administrative actions against us unless it is later determined
by the EPA that our volume contribution of hazardous substance exceeded the de minimis amount stated by the EPA in the settlement offer. To date, the EPA has not finalized the Order of Consent.

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.

27

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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 1,018 stockholders of
record as of August 31, 2008.

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

LowYear ended July 1, 2007First Quarter

$
8.13

$
6.60Second Quarter


9.31


7.81Third Quarter


9.40


7.70Fourth Quarter


8.92


7.44Year ended June 29, 2008First Quarter

$
8.45

$
4.45Second Quarter


5.25


4.00Third Quarter


4.73


3.15Fourth Quarter


4.57


3.49


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.



On August 8, 2007, the Board of Directors authorized management to repurchase up to approximately 2.9 million shares of
Symmetricom common stock, adding 2.0 million shares to a previously authorized program with no termination date. During fiscal 2008, we repurchased 2.0 million shares of common stock
pursuant to the repurchase program for an aggregate price of approximately $9.3 million. No stock was repurchased in the fourth quarter of fiscal 2008. As of June 29, 2008, the total
number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 0.9 million.

A
further 53,729 shares were repurchased with an aggregate price of approximately $0.3 million to cover the cost of taxes on vested restricted stock. Also, upon termination of
certain employees, 126,518 shares of restricted stock were forfeited pursuant to existing agreements.

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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 Technology Sector 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).

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Symmetricom, Inc., The S&P 500 Index  And The S&P Information Technology Index

CHART

---

*$100 invested on June 30, 2003 in stock & index-including reinvestment of dividends. Fiscal year ending June 29, 2008.

Copyright © 2008 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Copyright © 2008 Dow Jones & Co. All rights reserved.

29

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Item 6.Selected Financial Data

The following selected consolidated financial data for the fiscal years ended June 29, 2008,
July 1, 2007, July 2, 2006, July 3, 2005 and June 27, 2004 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 endedJune 29, 2008

July 1, 2007

July 2, 2006

July 3, 2005

June 27, 2004(In thousands, except per share amounts)Consolidated Statement of Operations Data:Net revenue

$
208,052

$
208,380

$
176,112

$
179,388

$
163,310Operating income (loss)(1),(2),(3)


(19,603
)

9,238


(4,166
)

18,180


(5,415
)Income (loss) before income taxes and discontinued operations


(20,255
)

13,646


(1,671
)

19,288


(5,692
)Income (loss) from continuing operations(4)


(14,589
)

6,058


(857
)

17,210


(3,167
)Gain from discontinued operations, net of tax(5)


121


242


921


985


949Net earnings (loss)


(14,468
)

6,300


64


18,195


(2,218
)Basic earnings (loss) per share from continuing operations


(0.33
)

0.13


(0.02
)

0.38


(0.07
)Basic earnings per share from discontinued operations





0.01


0.02


0.02


0.02Basic net earnings (loss) per share


(0.33
)

0.14





0.40


(0.05
)Diluted earnings (loss) per share from continuing operations


(0.33
)

0.13


(0.02
)

0.37


(0.07
)Diluted earnings per share from discontinued operations





0.01


0.02


0.02


0.02Diluted net earnings (loss) per share


(0.33
)

0.14





0.39


(0.05
)




June 29, 2008

July 1, 2007

July 2, 2006

July 3, 2005

June 27, 2004(In thousands)Consolidated Balance Sheet Data:Total assets

$
378,569

$
409,187

$
392,441

$
391,751

$
247,334Long-term obligations


59,855


125,550


126,670


126,967


8,827Stockholders' equity


216,139


236,336


224,522


226,891


196,921


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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 2006 through 2008 were 52-week fiscal years.

During
the fourth quarter of fiscal 2008, we integrated our Quality of Experience Assurance business segment into our Telecom Solutions Division. In addition, during fiscal 2008, we
recorded an impairment of $6.5 million in goodwill and $7.8 million in intangibles for the Quality of Experience Assurance business segment.

On
June 30, 2008, we offered to purchase for cash, on apro ratabasis, approximately $63.1 million aggregate principal
amount of our 3.25% Contingent Convertible Subordinated Notes due 2025 ("the Notes"), at a purchase price equal to $990.00 per $1,000.00 of the principal amount of the Notes, plus accrued and unpaid
interest. On 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 includes interest of $0.3 million. After the purchase pursuant to the offer, approximately $56.9 million aggregate principal
amount of the Notes remains outstanding.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States, which requires 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.

31

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We
consider the following accounting policies to be critical accounting estimates due to their subjective nature and judgments involved in each:



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.



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 some 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. We commonly have
transactions that involve sales of both product and services to our customers. Product revenue is generated from the sale of synchronization and timing equipment with embedded software that is
essential to product functionality. We account for these transactions in accordance with the rules applicable to software revenue recognition. 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 amount of revenue equal to our estimate of returns from distributors based on a historical average of distributor
returns. We record commission expense when orders are shipped, at which time 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

32

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long-term
contracts is reviewed periodically, with adjustments recorded in the period in which the revisions are made.



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 income 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.



We maintain an allowance for doubtful accounts based on a continuous 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.



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.



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.

In
July 2006, Symmetricom Puerto Rico, a wholly-owned subsidiary, moved its place of legal organization from Delaware to Bermuda in a transaction intended to be a tax-free
restructuring. We submitted a ruling request to the Internal Revenue Service to confirm the
tax-free treatment in February 2008. Ruling requests of this nature are considered routine and management believes that it is probable that the ruling will be granted.

33

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If
the ruling is granted, Symmetricom Puerto Rico would be treated as a branch of Symmetricom, Inc. effective as of July 2006 and, accordingly, the profits of Symmetricom Puerto
Rico would be currently taxable for federal income tax purposes. If granted, the ruling would result in no changes to our tax provision as reported in our fiscal years 2007 and 2008 annual reports.

If
the ruling is not granted, then:



The
above three items would be reported in the fiscal year and quarter in which the request for IRS confirmation of tax-free treatment of the July 2006 restructuring was
denied. The net
result of such a denial would be an increased tax provision of approximately $10.7 million while our deferred tax assets would decrease by approximately the same amount.

Prior
to fiscal 2007, Symmetricom Puerto Rico had elected to report its U.S. taxes under Section 936 of the United State Internal Revenue Code. This election exempted qualified
Puerto Rico earnings from regular federal income taxes, subject to various limitations. Section 936 expired at the end of fiscal 2006.

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.



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 are classified as

34

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available-for-sale.
These securities are carried at fair value with temporary unrealized gains and losses, net of taxes, reported as a component of stockholders' equity.

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 2008, we recorded $3.7 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 29, 2008, and related subsequent events.



We perform goodwill impairment tests in accordance with Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and
Other Intangible Assets, on an annual basis, and between annual tests in certain circumstances. Potential goodwill impairment is measured based upon a two-step process. In the first step,
we compare the fair value of a reporting unit with its carrying amount using a discounted cash flow valuation methodology. If the fair value of a reporting unit exceeds its carrying amount, goodwill
of the reporting unit is not considered impaired; thus the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the
goodwill impairment test is performed to measure the amount of impairment loss, if any.

In
the fourth quarter of the fiscal 2008, as a result of our annual impairment test, we recorded a non-cash impairment charge of approximately $14.3 million for the
full write-down of the goodwill ($6.5 million) and intangible assets ($7.8 million) recorded in connection with the acquisition in January 2007 of QoSmetrics S.A. and
the acquisition of certain technology assets in June 2007 from Genista Corporation, which were integrated with the Company's Quality of Experience Assurance business segment. The impairment charge
reflects a change in business expectations which include lower than expected market acceptance for the Quality of Experience Assurance products.

In
the fourth quarter of fiscal 2008, we initiated a review of its Quality of Experience Assurance business model, resulting in the elimination of a separate Quality of Experience
Assurance Division and its integration with the Telecom Solutions Division. Subsequent to this review, during our annual impairment test, we determined that the carrying amount of our Quality of
Experience Assurance reporting unit exceeded its fair value, resulting in a goodwill impairment charge of approximately $6.5 million taken in the fourth quarter of fiscal 2008. We determined
the fair value of the Quality of
Experience Assurance reporting unit using the income approach, which requires estimates of future operating results and cash flows discounted using an estimated discount rate. Our estimates resulted
from an updated long-term financial outlook for this reporting unit as of the fourth quarter of fiscal 2008.



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

35

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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 fourth quarter of fiscal 2008, as a result of our annual impairment test of goodwill (See aboveValuation of Goodwill)
and using a non discounted cash flow method, we recorded a non-cash impairment charge of approximately $7.8 million for the write-down of the intangible assets recorded
in connection with the acquisition in January 2007 of QoSmetrics S.A. and the acquisition of certain technology assets in June 2007 from Genista Corporation, which were integrated with the
Company's Quality of Experience Assurance business segment.

Fiscal Year 2009 Outlook

During fiscal year 2008, revenue for two large customers (which each comprise more than 10% of our revenue) was lower than the prior
year in which these customers began an upgrade cycle to replace their legacy equipment. Revenue for fiscal year 2009 from these two customers may not increase or continue at the fiscal year 2008
level. We anticipate that in fiscal 2009 our cable business within the Wireline Products segment will become a greater percentage of total revenue compared to fiscal 2008. We expect fluctuations in
quarterly revenue, as the upgrade projects undertaken by our customers are not systematic.

We
anticipate that gross margin in fiscal 2009 will increase compared to fiscal 2008 due to lower manufacturing costs as a result of increased outsourcing to China, favorable product
sales mix and lower period costs.

We
expect the pace of operating expense growth for fiscal year 2009 to be consistent with the prior year due to reduced spending levels in our Quality of Experience Assurance business
segment, which we combined with our Telecom Solutions Division during fiscal 2008, and lower research and development expenses due to the elimination of our Austin, Texas facility.

We
expect revenues for fiscal year 2009 to be between $230 million and $240 million and earnings to be between $0.20 and $0.26 per share, on a fully diluted basis. For the
first quarter of fiscal 2009, we expect revenues to be between $55 million and $60 million and earnings to be in the range of $0.01 to $0.05 cents per share.

36

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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 endedJune 29, 2008

July 1, 2007

July 2, 2006Net revenueTelecom Solutions Division:Wireline Products


43.6
%

45.1
%

45.8
%Wireless/OEM Products


11.1
%

12.8
%

13.6
%Global Services


7.4
%

7.0
%

7.1
%Quality of Experience Assurance


0.8
%

0.2
%


%Timing, Test and Measurement Division


37.1
%

34.9
%

33.5
%Total net revenue


100.0
%

100.0
%

100.0
%Cost of products and services


54.7
%

52.7
%

52.0
%Amortization of purchased technology


1.6
%

1.6
%

2.1
%Impairment of intangible assets


2.7
%


%

0.7
%Integration and restructuring charges


0.3
%

0.1
%

0.6
%Gross profit


40.7
%

45.6
%

44.6
%Operating expenses:Research and development


13.4
%

11.4
%

10.7
%Selling, general and administrative


31.6
%

29.1
%

32.0
%Acquired in-process research and development



%

0.1
%


%Amortization of intangible assets


0.5
%

0.4
%

0.3
%Integration and restructuring charges


0.5
%

0.2
%


%Impairment of goodwill


3.1
%


%

4.0
%Impairment of intangible assets


1.0
%


%


%Operating income (loss)


(9.4
)%

4.4
%

(2.4
)%Gain on sale of asset


0.3
%


%


%Loss on short-term investments


(1.8
)%


%


%Interest income


3.4
%

4.4
%

4.2
%Interest expense


(2.3
)%

(2.3
)%

(2.8
)%Income (loss) before income taxes


(9.7
)%

6.5
%

(1.0
)%Income tax provision (benefit)


(2.7
)%

3.6
%

(0.5
)%Income (loss) from continuing operations


(7.0
)%

2.9
%

(0.5
)%Gain from discontinued operations, net of tax


0.1
%

0.1
%

0.5
%Net Income (loss)


(7.0
)%

3.0
%


%


37

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

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeNet 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


5.3Quality of Experience Assurance


1,666


501


1,165


232.5Timing, Test and Measurement Division


77,245


72,672


4,573


6.3Total Net Revenue

$
208,052

$
208,380

$
(328
)

(0.2
)%Percentage of Revenue


100.0
%

100.0
%


Net revenueconsists of sales of products, software licenses and services. 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 endedJune 29, 2008

July 1, 2007

$ Change

% ChangeGross 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


4.8Quality of Experience Assurance


1,226


398


828


208.0Timing, Test and Measurement Division


35,632


33,188


2,444


7.4Other cost of sales


(9,635
)

(3,542
)

(6,093
)

172.0Total 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. 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

38

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segment.
We also incurred higher costs for restructuring due to a reduction in force in our Puerto Rico manufacturing plant as a result of outsourcing production of some products to China. We
anticipate a decline in other cost of sales for fiscal 2009 due to the impairment of intangible assets for the Quality of Experience Assurance segment taken in the fourth quarter of fiscal 2008, which
will result in lower amortization costs going forward.

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeResearch and development expense(dollars in thousands)

$
27,887

$
23,692

$
4,195


17.7
%Percentage of Revenue


13.4
%

11.4
%


Research and development expensesconsist primarily of salaries and benefits, prototype expenses and fees paid to outside consultants. The
$4.2 million increase in research and development expense included $3.5 million which 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 endedJune 29, 2008

July 1, 2007

$ Change

% ChangeSelling, 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, consists primarily of salaries, 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. The $5.2 million or 8.5%
increase in selling, general and administrative expenses 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 endedJune 29, 2008

July 1, 2007

$ Change

% ChangeAmortization of intangible assets(dollars in thousands)

$
958

$
792

$
166


21.0
%Percentage of Revenue


0.5
%

0.4
%


Amortization of intangible assetsincreased 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. We anticipate a decline in the amortization of intangible assets for fiscal 2009 due to the

39

---



impairment
of intangible assets charge for the Quality of Experience Assurance segment taken in the fourth quarter of fiscal 2008, which will result in lower amortization costs.

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeIntegration and restructuring charges(dollars in thousands)

$
1,094

$
549

$
545


99.3
%Percentage of Revenue


0.5
%

0.3
%


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

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeImpairment of goodwill(dollars in thousands)

$
6,513

$


$
6,513


100.0
%Percentage of Revenue


3.1
%


%


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

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeImpairment of intangible assets(dollars in thousands)

$
2,104

$


$
2,104


100.0
%Percentage of Revenue


1.0
%


%


Impairment of intangible assetscharges 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 endedJune 29, 2008

July 1, 2007

$ Change

% ChangeGain 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 endedJune 29, 2008

July 1, 2007

$ Change

% ChangeLoss 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.

40

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Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeInterest income(dollars in thousands)

$
7,123

$
9,231

$
(2,108
)

(22.8
)%Percentage of Revenue


3.4
%

4.4
%


Interest incomedecreased $2.1 million in fiscal 2008 compared to the prior year due to lower interest rates and lower cash and
short term investment balances. We expect a decrease in our interest income in fiscal 2009 as a result of a lower cash balance resulting from our repurchase of $63.1 million of our Notes in the
first quarter of fiscal 2009.

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeInterest expense(dollars in thousands)

$
(4,747
)
$
(4,823
)
$
76


(1.6
)%Percentage of Revenue


(2.3
)%

(2.3
)%


Interest expenseconsists primarily of interest on our Notes and interest on our capital lease for our headquarters building in San Jose,
California. We anticipate a decline in interest expense in fiscal 2009 resulting from our repurchase of $63.1 million of our Notes in the first quarter of fiscal 2009.

Year endedJune 29, 2008

July 1, 2007

$ Change

% ChangeIncome 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 in fiscal 2008 compared to operating income 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.

As
described above under Critical Accounting EstimatesAccounting for Income Taxes, we have submitted a ruling request to the Internal Revenue Service to confirm the
tax-free treatment of our July 2006 restructuring related to our Puerto Rico subsidiary. Ruling requests of this nature are considered routine and management believes that it is probable
that the ruling will be granted.

Fiscal Years Ended July 1, 2007 and July 2, 2006

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeNet Revenue(dollars in thousands):Wireline Products

$
93,908

$
80,636

$
13,272


16.5
%Wireless/OEM Products


26,672


23,893


2,779


11.6Global Services


14,627


12,539


2,088


16.7Quality of Experience Assurance Division


501





501


100.0Timing, Test and Measurement Division


72,672


59,044


13,628


23.1Total Net Revenue

$
208,380

$
176,112

$
32,268


18.3
%Percentage of Revenue


100.0
%

100.0
%


41

---



Net revenueconsists of sales of products, software licenses and services sales. Net revenue increased by $32.3 million or 18.3% to
$208.4 million in fiscal year 2007 from $176.1 million in fiscal year 2006. The increase in net revenue was attributable to the Wireline products increase of $13.3 million or
16.5% (primarily due to increases as a result of deployments at AT&T and Verizon of our next generation sync products), the Wireless/OEM products increase of $2.8 million or 11.6% (due to
increased sales to two major customers), the Global Services increase of $2.1 million or 16.7% (due to an increase in installation services for Verizon), and the Timing, Test and Measurement
segment increase of $13.6 million or 23.1% (due primarily to the acquisition of TSC on October 2, 2006, increased sales of SAASM products and higher international sales). Net revenue for
the newly formed Quality of Experience Assurance Division was $0.5 million.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeGross Profit(dollars in thousands):Wireline Products

$
53,810

$
44,705

$
9,105


20.4
%Wireless/OEM Products


7,157


5,190


1,967


37.9Global Services


3,991


6,334


(2,343
)

(37.0
)Quality of Experience Assurance Division


398





398


100.0Timing, Test and Measurement Division


33,188


28,258


4,930


17.4Other cost of sales


(3,542
)

(5,975
)

2,433


(40.7
)Total Gross Profit

$
95,002

$
78,512

$
16,490


21.0
%Percentage of Revenue


45.6
%

44.6
%


Gross profit, excluding other cost of sales, increased $14.1 million in fiscal year 2007, or 16.6%, compared to fiscal year 2006.
Gross profit for the Wireline products increased by $9.1 million or 20.4%, which was higher than the 16.5% revenue increase for the same period. This was due primarily to increased sales of
newer higher margin products. Gross profit for the Wireless/OEM products increased by $2.0 million or 37.9%, which was higher than the revenue increase of 11.6% (due to increased sales of
higher margin products and selling price increases). Gross profit for Global Services decreased by $2.3 million or 37.0%, as compared to the revenue increase of 16.7% for the same period. This
was due primarily to the large volume increase in installation services, which has a lower margin. Also, in the prior year, a high margin repair project for a major customer occurred which was not
repeated in fiscal year 2007. Gross profit for the Timing, Test and Measurement Division increased by $4.9 million or 17.4%, which was lower than the revenue increase of 23.1% for the same
period. This was due primarily to the addition of the lower margin products acquired from TSC on October 2, 2006. Gross profit for the newly formed Quality of Experience Assurance Division was
$0.4 million.

Gross
profit due to other cost of sales, for fiscal year 2007 was $2.4 million higher than fiscal year 2006 primarily due to the $1.2 million impairment charge for the
write down of other intangibles principally related to our Wireless/OEM in fiscal 2006 and integration and restructuring charges which were $0.9 million higher in fiscal year 2006 versus fiscal
year 2007 due to the acquisition of Agilent Technologies' Frequency and Timing Standards product line.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeResearch and development expense(dollars in thousands)

$
23,692

$
18,836

$
4,856


25.8
%Percentage of Revenue


11.4
%

10.7
%


Research and development expensesconsist primarily of salaries and benefits, prototype expenses and fees paid to outside consultants.
Research and development expenses were $23.7 million during fiscal year 2007 compared to $18.8 million for fiscal year 2006. The $4.9 million increase in the research and
development expense was primarily attributable to $2.5 million for the Quality of Experience Assurance

42

---



Division
and $2.1 million for TSC, which were both acquired in fiscal year 2007. Fiscal year 2007 research and development expenditures include a partial year impact for the
QoSmetrics S.A. and TSC acquisitions.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeSelling, general and administrative(dollars in thousands)

$
60,543

$
56,357

$
4,186


7.4
%Percentage of Revenue


29.1
%

32.0
%


Selling, general and administrative expenseconsists primarily of salaries, 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. These expenses increased by 7.4% to
$60.5 million for fiscal year 2007 compared to $56.4 million for fiscal year 2006. This $4.2 million increase in selling, general and administrative expenses was attributable
primarily to $2.6 million for the newly formed Quality of Experience Assurance Division and higher compensation costs in fiscal year 2007. Fiscal year 2007 selling, general and administrative
expenses include a partial year impact for the QoSmetrics S.A. and TSC acquisitions.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeAmortization of intangible assets(dollars in thousands)

$
792

$
522

$
270


51.7
%Percentage of Revenue


0.4
%

0.3
%


Amortization of intangible assetsincreased $0.3 million in fiscal year 2007 over fiscal year 2006 due to the acquisitions of TSC
and QoSmetrics.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeIntegration and restructuring charges(dollars in thousands)

$
549

$


$
549


100.0
%Percentage of Revenue


0.3
%


%


Integration and restructuring chargeswere $0.5 million in fiscal year 2007 for the acquisitions of TSC and QoSmetrics. There were
no such charges in fiscal 2006.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeInterest income(dollars in thousands)

$
9,231

$
7,478

$
1,753


23.4
%Percentage of Revenue


4.4
%

4.2
%


Interest incomeincreased to $9.2 million in fiscal 2007 compared to $7.5 million in fiscal year 2006 due to higher average
interest rates experienced in fiscal year 2007, which was approximately 5.3%, versus fiscal year 2006, which was 4.3%. The average cash and short-term investment balance was fairly
consistent in fiscal 2007 and fiscal 2006.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeInterest expense(dollars in thousands)

$
(4,823
)
$
(4,983
)
$
160


(3.2
)%Percentage of Revenue


(2.3
)%

(2.8
)%


Interest expenseconsists primarily of interest on our capital lease for our headquarters building in San Jose, California and interest
for our 3.25% convertible notes. Interest expense decreased 3.2% to

43

---



$4.8 million
in fiscal year 2007 from $5.0 million in fiscal year 2006 due primarily to lower capital lease costs.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeIncome tax expense (benefit)(dollars in thousands)

$
7,588

$
(814
)
$
8,402


(1,032.2
)%Percentage of Revenue


3.6
%

(0.5
)%


Income tax expense (benefit),increased to $7.6 million in fiscal year 2007 compared to a benefit of ($0.8) million in fiscal year
2006. The income tax provision for fiscal year 2007 includes $3.4 million related to the planned legal entity liquidation of QoSmetrics S.A. and QoSmetrics, Inc., which were both
acquired on January 2, 2007.

Year endedJuly 1, 2007

July 2, 2006

$ Change

% ChangeGain from discontinued operations, net of tax(dollars in thousands)

$
242

$
921

$
(679
)

(73.7
)%Percentage of Revenue


0.1
%

0.5
%


Discontinued operations:During fiscal year 2007, we discontinued the operation of the Specialty Manufacturing/Other business segment and the results, net of tax,
are reflected in the results of operations for fiscal years 2007 and 2006.

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 2008 with fiscal year 2007, are listed below.



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 $58.4 million as of June 29, 2008, compared to $51.9 million as of July 1, 2007. Our
backlog, which is shippable within the next six months, was $47.1 million as of June 29, 2008, compared to $43.4 million as of July 1, 2007.



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 29, 2008, we had approximately $9.5 million in contract revenue to be performed and recognized within the next 36 months,
compared to approximately $6.3 million in contract revenue that

44

---



was
to be performed and recognized within the following 36 months as of July 1, 2007. These amounts have been accounted for as part of our sales backlog discussed above.

Liquidity and Capital Resources

As of June 29, 2008, working capital was $151.5 million, compared to $217.1 million as of July 1, 2007.
Cash and cash equivalents as of June 29, 2008 increased $104.8 million to $142.4 million from $37.6 million as of July 1, 2007. This increase was primarily the
result of a shift from short-term investments to cash and cash equivalents. As a result, short-term investments decreased from $138.6 million as of July 1, 2007
to $21.9 million as of June 29, 2008.

The
$12.2 million net cash provided by operating activities in fiscal 2008 was impacted by the following factors: net loss of $14.5 million offset by impairment of goodwill
and intangible assets of $14.3 million related to the Quality of Experience Assurance business segment, non-cash expenses related to depreciation and amortization of
$10.6 million and stock-based compensation of $5.0 million, which was partially offset by a $6.6 million increase in deferred income tax and $3.7 million decrease in
accounts payable. The $106.0 million net cash provided by investing activities in fiscal 2008 was primarily attributable to $137.3 million in maturities of short-term
investments. This was partially offset by $25.9 million in purchases of short-term investments. The $13.2 million net cash used for financing activities was primarily
attributable to $9.5 million used to repurchase common stock and $3.9 million to repay long-term obligations.

Our
total capital spending commitments outstanding as of June 29, 2008 were approximately $0.8 million. Days sales outstanding in accounts receivable was 59 days as
of June 29, 2008, unchanged from July 1, 2007.

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. As a result of our delayed filing of our Quarterly Report on
Form 10-Q for the quarter ended December 30, 2007, we will be ineligible to register our securities on Form S-3 for sale by us or resale by others until we
have timely filed all periodic reports under the Securities and Exchange Act of 1934 for a period of twelve calendar months and any portion of a month from the due date of the last untimely report. We
may use Form S-1 to raise capital or complete acquisitions, but doing so could increase transaction costs and adversely impact our ability to raise capital or complete acquisitions
of other companies in a timely manner. 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.



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 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

45

---



declined,
and that an impairment loss should be considered other than temporary based on discussions with the receiver and potential options expected to be made available to senior debt holders of
which Symmetricom was one. 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.



In the fourth quarter of fiscal 2007, we purchased corporate securities with a $3.0 million par value maturing on
March 12, 2010. In April 2008, we sold the investment for $2.5 million, rather than risk further loss, and recognized a $0.5 million loss in the fourth quarter of fiscal 2008.



On May 1, 2004, we entered into a credit agreement with Wells Fargo Bank, National Association to obtain a revolving line of
credit up to $5.0 million to be used as working capital. The line of credit contains certain financial covenants and restrictions. At the end of the first quarter of fiscal 2008, we were not in
compliance with one of the covenants under the agreement, which requires us to reflect a net profit on a quarterly basis. Subsequently, the bank issued a waiver to us on October 29, 2007
concerning this covenant for the first quarter. No borrowings under this facility were outstanding as of September 30, 2007. On November 1, 2007 the line of credit expired, and we did
not renew it because we determined it was no longer needed due to our current liquidity position.



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, including our indebtedness under our senior credit facilities. 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:



46

---





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 marketplace rule 4350(i)(1)(D). We may undertake such repurchase
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 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 apro ratabasis, $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 $63.1million aggregate principal amount of the Notes. The aggregate purchase
price for the Notes surrendered was approximately $62.5 million, which includes 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 the 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 was remaining. As a result of the tender offer, $1.2 million of
this unamortized cost was expensed in the first quarter of fiscal 2009.

47

---







In connection with the acquisition of Datum in October 2002, we assumed Datum's liability relating to an industrial development bond
that was issued by the Massachusetts Development Finance Agency on May 1, 2001, to finance the expansion by Datum of its manufacturing facility in Beverly, Massachusetts. In the second quarter
of fiscal 2008 we paid off the bond.

Contractual Obligations

On November 18, 2005, we entered into a First Amendment to Lease, effective as of October 27, 2005, which amended our
existing lease for approximately 117,739 square feet of space in an office building located in San Jose, California. The leased space serves as our corporate office. The amendment extended the
termination date of the lease from April 15, 2009 to April 15, 2016. In addition, it provides that, commencing December 1, 2005, basic annual rent (as defined in the lease) would
be reduced to $1.7 million, subject to 4% annual increases commencing on April 15, 2006. The building element of the original lease, which was accounted for from the outset as a capital
lease for a property with a cost of $9.0 million, continues to be amortized over the initial lease period ending in April 2009, in accordance with SFAS No. 13, Accounting for Leases.

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 liability for the remainder.

We
incur purchase commitments during our normal course of business. As of June 29, 2008, our principal commitments totaled $19.2 million and related primarily to
commitments to purchase inventory.

The
following table summarizes our contractual cash obligations as of June 29, 2008, and the effect such obligations are expected to have on liquidity and cash flow in future
periods.

Payments due by periodTotal

Less than
1 year

1-3 years

3-5 years

More than
5 years(In thousands)Contractual ObligationsConvertible subordinate notes

$
120,000

$
63,120

$


$
56,880

$
Operating leases obligations(1)


31,250


3,249


8,016


8,229


11,756Purchase obligations


19,280


18,983


213


78


6Capital lease obligations(2)


1,326


1,326








Post-retirement benefits liabilities(3)


281


37


68


60


116Conditional grant


109


109








Lease loss accrual


86


44


40


2


Total

$
172,332

$
86,868

$
8,337

$
65,249

$
11,878


---

48

---



Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162,
The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation
of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. We do not expect that this statement
will result in a change to any of our current accounting practices.

In
April 2008, the FASB adopted FASB Staff Position SFAS No. 142-3, Determination of the Useful Life of Intangible Assets, 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. This FASB
Staff Position is effective for intangible assets acquired on or after June 29, 2009. We are currently evaluating the impact of the implementation of FASB Staff Position SFAS
No. 142-3 on our consolidated financial statements.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS No. 133. 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. We do not believe that SFAS No. 161 will have a material impact on our consolidated
financial statements.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51. This Statement amends
ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It 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. It requires consolidated net income to be reported at amounts
that include the amounts attributable to both the parent and the noncontrolling interest. This Statement 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 our fiscal year 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) is effective for us beginning June 28, 2009. We are currently
assessing the potential impact that adoption of SFAS No. 141(R) would have on our consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure
certain financial instruments and other items at fair value. The standard requires that unrealized gains and losses be reported in earnings for items measured using the fair value option. SFAS
No. 159 will be effective for our fiscal year beginning June 30, 2008. We are currently assessing the potential impact that the adoption of SFAS No. 159 will have on our
consolidated financial statements.

49

---



In
September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87,
106, and 132(R). SFAS No. 158 requires employers to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of
defined benefit pension and other post-retirement benefit plans. Previous standards required employers to disclose the complete funded status of its plans only in the notes to the
financial statements. Additionally, SFAS No. 158 requires employers to measure plan assets and obligations at their year-end balance sheet date. Guidance relating to the recognition
of the over or under funded status of the plan and additional disclosure requirements is effective for periods ending after December 15, 2006. Guidance relating to the measurement date of the
plans is effective for the years ending after December 15, 2008. We do not believe that SFAS No. 158 will have a material impact on our consolidated financial statements.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for us beginning June 30, 2008. In December 2007, the FASB released a proposed
FASB Staff Position (FSP FAS 157-bEffective Date of FASB Statement No. 157) which, if adopted as proposed, would delay the effective date of SFAS No. 157
for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We do not
believe that SFAS No. 157 will have a material impact on our consolidated financial statements.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Exposure

As of June 29, 2008, we had short-term investments of $21.9 million. These investments are mainly in
corporate debt securities that have maturity dates of greater than three months. These corporate debt 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 29, 2008, 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

50

---



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.

51

---



Item 8.Consolidated Financial Statements and Supplementary Data



The following table shows our unaudited condensed, consolidated quarterly statements of operations data for each of the quarters in the
years ended June 29, 2008 and July 1, 2007. 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
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter(In thousands, except per share amounts)Fiscal Year 2008Net revenue

$
50,735

$
48,843

$
51,469

$
57,005Gross profit


21,900


21,796


21,970


18,980Operating 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


31Net 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
)Fiscal Year 2007Net revenue

$
47,260

$
51,761

$
51,943

$
57,416Gross profit


22,125


21,717


24,755


26,405Operating income


3,906


2,200


2,356


776Income before income taxes and discontinued operations


5,054


3,382


3,360


1,850Income (loss) from continuing operations


3,379


2,501


(1,229
)

1,407Gain (loss) on discontinued operations


474


260


(349
)

(143
)Net income (loss)


3,853


2,761


(1,578
)

1,264Basic earnings (loss) per share from continuing operations


0.07


0.05


(0.02
)

0.03Basic earnings (loss) per share from discontinued operations


0.01


0.01


(0.01
)

Basic net earnings (loss) per share


0.08


0.06


(0.03
)

0.03Diluted earnings (loss) per share from continuing operations


0.07


0.05


(0.02
)

0.03Diluted earnings (loss) per share from discontinued operations


0.01


0.01


(0.01
)

Diluted net earnings (loss) per share


0.08


0.06


(0.03
)

0.03


52

---





SYMMETRICOM, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PageReport of Independent Registered Public Accounting Firm

54Consolidated Balance Sheets at June 29, 2008 and July 1, 2007

55Consolidated Statements of Operations for the years ended June 29, 2008, July 1, 2007 and July 2, 2006

56Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the years ended June 29, 2008, July 1, 2007 and
July 2, 2006

57Consolidated Statements of Cash Flows for the years ended June 29, 2008, July 1, 2007 and July 2, 2006

58Notes to the Consolidated Financial Statements

59


53

---





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 29, 2008, and July 1, 2007, 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 29, 2008. 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 consolidated 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 the Company as of June 29, 2008, and July 1,
2007, and the results of its operations and its cash flows for each of the three years in the period ended June 29, 2008, 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, presents 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 29, 2008, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report, dated September 10, 2008, expressed an adverse opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP

San
Jose, California
September 10, 2008

54

---





SYMMETRICOM, INC.        CONSOLIDATED BALANCE SHEETS        (In thousands, except par value)

June 29, 2008

July 1, 2007ASSETSCurrent assets:Cash and cash equivalents

$
142,419

$
37,587Short-term investments


21,910


138,559Accounts receivable, net of allowance for doubtful accounts of $731 in 2008 and $1,107 in 2007


36,682


37,368Inventories, net


38,273


38,957Note receivable from employee





500Prepaids and other current assets


14,402


11,094Total current assets


253,686


264,065Property, plant and equipment, net


25,036


26,626Goodwill


48,144


54,706Other intangible assets, net


7,191


17,730Deferred taxes and other assets


44,512


46,060Total assets

$
378,569

$
409,187LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
9,018

$
12,949Accrued compensation


13,582


13,936Accrued warranty


3,801


3,374Other accrued liabilities


11,233


15,161Current maturities of long-term obligations


64,515


1,547Total current liabilities


102,149


46,967Long-term obligations


59,855


125,550Deferred income taxes


426


334Total liabilities


162,430


172,851Commitments 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, 49,395 shares issued and 44,925 outstanding in 2008; 48,959 shares issued and 46,528 outstanding in 2007


182,201


187,070Accumulated other comprehensive income (loss)


(60
)

403Retained earnings


33,998


48,863Total stockholders' equity


216,139


236,336Total liabilities and stockholders' equity

$
378,569

$
409,187


See notes to the consolidated financial statements.

55

---





SYMMETRICOM, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)

Year endedJune 29, 2008

July 1, 2007

July 2, 2006Net revenue.

$
208,052

$
208,380

$
176,112Cost of products and services


113,771


109,837


91,626Amortization of purchased technology


3,343


3,317


3,622Impairment of intangible assets


5,658





1,198Integration and restructuring charges


634


224


1,154Gross profit


84,646


95,002


78,512Operating expenses:Research and development


27,887


23,692


18,836Selling, general and administrative


65,693


60,543


56,357Acquired in-process research and development





188


Amortization of intangible assets


958


792


522Integration and restructuring charges


1,094


549


Impairment of goodwill


6,513





6,963Impairment of intangible assets


2,104





Operating income (loss)


(19,603
)

9,238


(4,166
)Gain on sale of asset (Note 18)


700





Loss on short-term investments


(3,728
)




Interest income


7,123


9,231


7,478Interest expense


(4,747
)

(4,823
)

(4,983
)Income (loss) before income taxes and discontinued operations


(20,255
)

13,646


(1,671
)Income tax provision (benefit)


(5,666
)

7,588


(814
)Income (loss) from continuing operations


(14,589
)

6,058


(857
)Gain from discontinued operations, net of tax


121


242


921Net income (loss)

$
(14,468
)
$
6,300

$
64Earnings (loss) per sharebasic:Earnings (loss) from continuing operations

$
(0.33
)
$
0.13

$
(0.02
)Earnings from discontinued operations





0.01


0.02Net earnings (loss)

$
(0.33
)
$
0.14

$
Weighted average shares outstandingbasic


44,461


45,572


45,913Earnings (loss) per sharediluted:Earnings (loss) from continuing operations

$
(0.33
)
$
0.13

$
(0.02
)Earnings from discontinued operations





0.01


0.02Net earnings (loss)

$
(0.33
)
$
0.14

$
Weighted average shares outstandingdiluted


44,461


46,389


46,791


See notes to the consolidated financial statements.

56

---





SYMMETRICOM, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        AND COMPREHENSIVE INCOME (LOSS)        (In thousands)

Common Stock

Accumulated
Other
Comprehensive
Income (loss)Retained
Earnings

Total
Stockholders'
Equity

Total
Comprehensive
Income (loss)Shares

AmountBalance at July 3, 2005


46,329

$
184,292

$
100

$
42,499

$
226,891

$
18,296Issuance of common stock:Stock option exercises, net of shares tendered upon exercise


402


1,904








1,904


Restricted stock issued


220














Repurchase of common stock


(1,172
)

(9,712
)







(9,712
)

Restricted stock canceled


(36
)













Stock option income tax benefit





592








592


Stock-based compensation





4,620








4,620


Comprehensive income:Income (loss) from continuing operations











(857
)

(857
)

(857
)Gain from discontinued operations, net of tax of $521











921


921


921Unrealized gain on short-term investments, net of taxes








67





67


67Cumulative adjustments to foreign currency translation, net of taxes








96





96


96Balance at July 2, 2006


45,743


181,696


263


42,563


224,522


227Issuance 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


6,058Gain from discontinued operations, net of tax of $167











242


242


242Unrealized gain on short-term investments, net of taxes








124





124


124Cumulative adjustments to foreign currency translation, net of taxes








16





16


16Balance at July 1, 2007


46,528


187,070


403


48,863


236,336


6,440Issuance 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


121Adjustment 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
)


See notes to the consolidated financial statements.

57

---





SYMMETRICOM, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

Year endedJune 29, 2008

July 1, 2007

July 2, 2006Cash flows from operating activities:Net income (loss)

$
(14,468
)
$
6,300

$
64Adjustments to reconcile net income (loss) to net cash provided by operating activities:Impairment of goodwill and intangibles


14,275





8,161Acquired in-process research and development





188


Depreciation and amortization


10,649


9,605


9,966Deferred income taxes


(6,567
)

2,031


(2,136
)Loss on sale of short-term investment


479





Other than temporary impairment loss from short-term investment


3,249





Income tax expense related to QoSmetrics liquidations





3,110


Loss on disposal of fixed assets


180


10


211Gain on sale of asset


(700
)




Stock-based compensation


4,955


6,393


4,620Stock option excess income tax benefit


(2
)

(361
)

Changes in assets and liabilities, net of effects of acquisitions:Accounts receivable


686


(3,134
)

(3,966
)Inventories


684


(6,575
)

(2,662
)Prepaids and other assets


1,267


(1,397
)

1,579Accounts payable


(3,715
)

(835
)

1,873Accrued compensation


(570
)

3,000


1,265Other accrued liabilities


1,785


2,366


364Net cash provided by operating activities


12,187


20,701


19,339Cash flows from investing activities:Acquisition and related costs, net of cash acquired





(23,385
)

(8,032
)Purchase of intangible assets


(1,455
)

(2,006
)

Purchases of short-term investments


(25,945
)

(225,368
)

(175,425
)Maturities of short-term investments


137,349


193,603


158,349Purchases of plant and equipment


(5,153
)

(5,124
)

(9,443
)Proceeds from note receivable from employee


500





Proceeds from sale of asset


700





Net cash provided by (used for) investing activities


105,996


(62,280
)

(34,551
)Cash flows from financing activities:Repayment of long-term obligations


(3,884
)

(2,160
)

(1,110
)Proceeds from issuance of common stock


205


2,749


1,904Stock option excess income tax benefit


2


361


592Repurchase of common stock


(9,549
)

(3,993
)

(9,712
)Net cash provided by (used for) financing activities


(13,226
)

(3,043
)

(8,326
)Effect of exchange rate changes in cash


(125
)

16


96Net increase (decrease) in cash and cash equivalents


104,832


(44,606
)

(23,442
)Cash and cash equivalents at beginning of year


37,587


82,193


105,635Cash and cash equivalents at end of year

$
142,419

$
37,587

$
82,193Non-cash investing and financing activities:Unrealized gain (loss) on securities, net

$
(338
)
$
124

$
67Plant and equipment purchases included in accounts payable


170


329


445Cash payments for:Interest

$
4,116

$
4,266

$
5,073Income taxes


1,829


1,812


1,173


See notes to the consolidated financial statements.

58

---





SYMMETRICOM, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Summary of Significant Accounting Policies



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.



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.



Our fiscal year is the 52 or 53 weeks ending on the Sunday closest to June 30. Fiscal years 2006 through 2008 were all
52-week fiscal years.



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:



Actual
results could differ from these estimates.

59

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)



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 consist of government securities, mutual funds and corporate debt securities that mature between
three and 36 months. All of our short-term investments are classified as available-for-sale. These securities are carried at fair value with temporary
unrealized gains and losses, net of taxes, reported as a component of stockholders' equity.

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 2008, we recorded a loss of $3.7 million related to short-term investments. See Note 8Short-term Investments.



The estimated fair value of our financial instruments, which include cash and cash equivalents, short-term investments,
accounts receivable, capital lease obligations, accounts payable, notes payable, and bonds payable, approximate their carrying amount. The recorded amount of our capital lease obligation approximates
the estimated fair value based on an analysis of the present value of future lease payments.



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 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

60

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

are
management's estimates related to current economic trends, future demand and technological obsolescence. Inventories consist of:

June 29, 2008

July 1, 2007(In thousands)Raw materials

$
16,753

$
16,699Work-in-process


10,162


12,250Finished goods


11,358


10,008Inventories

$
38,273

$
38,957




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 yearsLeasehold improvements

5 - 15 years, or life of lease if shorterMachinery, equipment and computer software

3 - 7 years


Property,
plant and equipment consist of the following:

June 29, 2008

July 1, 2007(In thousands)Property, plant and equipment:Land

$
200

$
200Buildings and improvements


16,968


16,273Machinery and equipment


31,926


29,253Computer software


9,198


8,927Leasehold improvements


18,081


17,69076,373


72,343Accumulated depreciation and amortization


(51,337
)

(45,717
)$
25,036

$
26,626


Building
and improvements includes $9.0 million of costs capitalized under a capital lease for our facility in San Jose, California, which was completed in June 1997. As of
June 29, 2008 and July 1, 2007, accumulated amortization for this facility totaled $8.4 million and $7.6 million, respectively.



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

61

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

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.



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 fourth quarter of fiscal 2008, as a result an updated long-term financial outlook, we recorded a non-cash impairment charge
of approximately $14.3 million for the full write-down of the goodwill and intangible assets in connection with the acquisition in January 2007 of QoSmetrics S.A. and the
acquisition of certain technology assets in June 2007 from Genista

62

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SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

Corporation,
which were integrated with the Company's Quality of Experience Assurance business segment. See Note 9Goodwill and Intangible Assets.



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. The impairment loss is measured as the amount by which the carrying amount exceeds the fair value.

In
the fourth quarter of fiscal 2008, as a result of our annual impairment test, we recorded a non-cash impairment charge of approximately $7.8 million included above
for the write-down of the intangible assets in connection with the acquisition in January 2007 of QoSmetrics S.A. and the acquisition of certain technology assets in June 2007 from
Genista Corporation, which were integrated with the Company's Quality of Experience Assurance business segment. See Note 9Goodwill and Intangible Assets.



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 29, 2008

July 1, 2007

July 2, 2006(In thousands)Foreign currency translation adjustments, net of taxes

$
137

$
262

$
246Unrealized gain (loss) on investments, net of taxes.


(197
)

141


17Total accumulated other comprehensive income (loss)

$
(60
)
$
403

$
263




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 income from extended warranty contracts is recognized ratably over
the period of contract.

63

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SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

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.



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 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.



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, 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.



The functional currency of each of our international subsidiaries in the United Kingdom, China, France, and Hong Kong 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.

64

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)



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. We commonly have
transactions that involve sales of both product and services to our customers. Product revenue is generated from the sale of synchronization and timing equipment with embedded software that is
essential to product functionality. We account for these transactions in accordance with the rules applicable to software revenue recognition. 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 when orders are shipped, at which time 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 $3.9 million as of June 29, 2008 compared to
$3.0 million as of July 1, 2007. All of unbilled receivables as of June 29, 2008 are expected to be collected in fiscal 2009. Any anticipated losses on contracts are charged to
operations as soon as they are determinable.



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.

65

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)



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.

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

Year endedJune 29, 2008

July 1, 2007

July 2, 2006(In thousands, except per share amounts)Numerator:Net income (loss) from continuing operations

$
(14,589
)
$
6,058

$
(857
)Gain from discontinued operations


121


242


921Net income (loss)

$
(14,468
)
$
6,300

$
64Shares (Denominator):Weighted average common shares outstanding


45,512


46,208


46,080Weighted average common shares outstanding subject to repurchase


(1,051
)

(636
)

(167
)Weighted average shares outstandingbasic


44,461


45,572


45,913Weighted average dilutive share equivalents from stock options and warrants





609


824Weighted average common shares dilutive subject to repurchase





208


54Weighted average shares outstandingdiluted


44,461


46,389


46,791Earnings per sharebasic:Earnings (loss) from continuing operations

$
(0.33
)
$
0.13

$
(0.02
)Earnings from discontinued operations





0.01


0.02Net earnings (loss)

$
(0.33
)
$
0.14

$
Earnings per sharediluted:Earnings (loss) from continuing operations

$
(0.33
)
$
0.13

$
(0.02
)Earnings from discontinued operations





0.01


0.02Net earnings (loss)

$
(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.

66

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SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

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

Year endedJune 29, 2008

July 1, 2007

July 2, 2006(In thousands)Stock options and warrants


5,218


2,408


1,597Common shares subject to repurchase.


1,051





1Total shares of common stock excluded from diluted net earnings (loss) per share calculation


6,269


2,408


1,598


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. 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
2008, 2007, and 2006.

Note 2Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting
Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. We do not expect that this statement will result in a change to any of our current
accounting practices.

In
April 2008, the FASB adopted FASB Staff Position SFAS No. 142-3, Determination of the Useful Life of Intangible Assets, 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. This FASB
Staff Position is effective for intangible assets acquired on or after June 29, 2009. We are currently evaluating the impact of the implementation of FASB Staff Position SFAS
No. 142-3 on our consolidated financial statements.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS No. 133. 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. We do not believe that SFAS No. 161 will have a material impact on our consolidated
financial statements.

67

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2Recent Accounting Pronouncements (Continued)

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51. This Statement amends
ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It 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. It requires consolidated net income to be reported at amounts
that include the amounts attributable to both the parent and the noncontrolling interest. This Statement 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 our fiscal year 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) is effective for us beginning June 28, 2009. We are currently
assessing the potential impact that adoption of SFAS No. 141(R) would have on our consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure
certain financial instruments and other items at fair value. The standard requires that unrealized gains and losses be reported in earnings for items measured using the fair value option. SFAS
No. 159 will be effective for our fiscal year beginning June 30, 2008. We are currently assessing the potential impact that the adoption of SFAS No. 159 will have on our
consolidated financial statements.

In
September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87,
106, and 132(R). SFAS No. 158 requires employers to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of
defined benefit pension and other post-retirement benefit plans. Previous standards required employers to disclose the complete funded status of its plans only in the notes to the
financial statements. Additionally, SFAS No. 158 requires employers to measure plan assets and obligations at their year-end balance sheet date. Guidance relating to the recognition
of the over or under funded status of the plan and additional disclosure requirements is effective for periods ending after December 15, 2006. Guidance relating to the measurement date of the
plans is effective for the years ending after December 15, 2008. We do not believe that SFAS No. 158 will have a material impact on our consolidated financial statements.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy
used to classify the source of the information. SFAS No. 157 is effective for us beginning June 30, 2008. In December 2007, the FASB released a proposed FASB Staff Position (FSP
FAS 157-bEffective Date of FASB Statement No. 157) which, if adopted as proposed, would delay the effective date of SFAS No. 157 for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We do not believe that SFAS
No. 157 will have a material impact on our consolidated financial statements.

68

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3Acquisitions

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



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

$
172Accounts receivable


607Inventories


114Prepaids and other current assets


225Property, plant and equipment


242Intangible assets


7,229Goodwill


6,513Deferred tax assets


5,508Liabilities 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 provides 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.

69

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3Acquisitions (Continued)

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

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

Cash and cash equivalents

$
1,860Accounts receivable


612Inventories


1,551Prepaids and other current assets


301Property, plant and equipment


217In-process research and development


188Intangible assets


4,454Goodwill


2,028Deferred tax liability


(1,540
)Liabilities assumed


(1,089
)Total purchase price

$
8,582




On August 1, 2005, we acquired Agilent Technologies' Frequency and Timing Standards product line. The total purchase price of
approximately $8.0 million was paid in cash. The purchase price allocation resulted in an additional $3.7 million in goodwill and $3.4 million in intangibles assets.

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

Inventory

$
1,357Prepaid and other current assets


15Property, plant and equipment


82Intangible assets


3,354Goodwill


3,691Liabilities assumed


(467
)Total purchase price

$
8,032


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
2006, we recognized a $0.9 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.

70

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Other Accrued Liabilities

Other accrued liabilities consist of the following:

June 29, 2008

July 1, 2007(In thousands)Other accrued liabilities:Income taxes payable

$
(161
)
$
5,477Deferred revenue


2,179


2,589Accrued expenses


9,171


7,036Accrued lease loss


44


59Total

$
11,233

$
15,161


Note 6Warranties

Changes in our accrued warranty liability during fiscal 2008, 2007 and 2006 are as follows:

Year endedJune 29, 2008

July 1, 2007

July 2, 2006(In thousands)Beginning balance

$
3,374

$
3,547

$
3,338Provision for warranty for the year


3,446


2,351


3,061Accruals related to changes in estimate


(39
)

(51
)

(175
)Less: Actual warranty costs


(2,980
)

(2,473
)

(2,677
)Ending balance

$
3,801

$
3,374

$
3,547


Note 7Lease Commitments

In November 2005, we entered into a First Amendment to Lease, effective as of October 27, 2005, which amended our existing lease for approximately 117,739 square feet of space in
an office building located in San Jose, California. The leased space serves as our corporate office. The amendment extended the termination date of the lease from April 15, 2009 to
April 15, 2016. In addition, it provides that, commencing December 1, 2005, basic annual rent (as defined in the lease) would be reduced to $1.7 million, subject to 4% annual
increases commencing on April 15, 2006. The building element of the original lease, which was accounted for from the outset as a capital lease for a property with a cost of $9.0 million,
continues to be amortized over the initial lease period ending in April 2009, in accordance with SFAS No. 13, Accounting for Leases.

Lease
loss liabilities were created as a result of discontinuing operations and consolidations. As of June 29, 2008 and July 1, 2007 the accrued lease loss liabilities were
both approximately $0.1 million.

71

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7Lease Commitments (Continued)

In
addition, we lease certain other facilities and equipment under operating lease agreements. Rental expense charged to operations was $3.3 in 2008, $2.8 million in 2007 and
$1.7 million in 2006. Future minimum lease payments as of June 29, 2008 are as follows:

Capital Lease

Operating Lease(In thousands)For the fiscal year:2009

$
1,326

$
3,2932010





4,0472011





4,0092012





4,0582013





4,173Thereafter





11,756Total minimum lease payments


1,326

$
31,336Amount representing interest (weighted average rate of 8.5%)


(40
)Present value of total minimum lease payments


1,286Current portion


(1,286
)Capital lease obligation, net of current portion

$



The
total of minimal rentals to be received in the future under non-cancelable subleases as of June 29, 2008 was $1.3 million.

Note 8Short-term investments

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

Amortized Cost

Gross Unrealized
Gains (losses)

Fair Value(In thousands)June 29, 2008Short-term investments

$
152,934

$
(201
)
$
152,733Less amounts classified as cash equivalents


(134,250
)




(134,250
)Deferred compensation plan assets


3,579


(152
)

3,427Total short term investments

$
22,263

$
(353
)
$
21,910July 1, 2007Short-term investments

$
162,918

$
(33
)
$
162,885Less amounts classified as cash equivalents


(27,421
)




(27,421
)Deferred compensation plan assets


2,838


257


3,095Total short term investments

$
138,335

$
224

$
138,559


72

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8Short-term investments (Continued)

The
following table details Symmetricom's available-for-sale securities by type:

June 29, 2008

July 1, 2007(In thousands)Corporate securities

$
15,331

$
44,247Mutual funds


3,427


3,095Other investments


3,152


7,515Government securities





16,979Asset backed securities





40,935Commercial paper





15,456Auction rate securities





10,332$
21,910

$
138,559




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 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 an impairment loss should be considered other than temporary
based on discussions with the receiver and potential options
expected to be made available to senior debt holders of which Symmetricom was one. 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.



In the fourth quarter of fiscal 2007, we purchased corporate securities with a $3.0 million par value maturing on
March 12, 2010. In April 2008, we sold the investment for $2.5 million, rather than risk further loss, and recognized a $0.5 million loss in the fourth quarter of fiscal 2008.

73

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Goodwill and Intangible Assets



Changes in the carrying value of goodwill for the years ended June 29, 2008 and July 1, 2007 are as follows for our
reportable segments where applicable:

Wireline

Quality of
Experience
Assurance

Timing, Test
and
Measurement

Total(In thousands)Balances as of July 2, 2006

$
27,917

$


$
17,982

$
45,899Addition (see Note 3)





6,702


2,105


8,807Balances as of July 1, 2007


27,917


6,702


20,087


54,706Final fair value adjustment





(189
)




(189
)FIN 48 tax adjustment (see Note 10)


115





25


140Impairment of goodwill





(6,513
)




(6,513
)Balances as of June 29, 2008

$
28,032

$


$
20,112

$
48,144


We
conducted our annual impairment test of goodwill as of June 29, 2008 in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". As a result of this test,
we determined that the carrying amount of our Quality of Experience Assurance reporting unit exceeded its fair value and recorded a goodwill impairment charge of approximately $6.5 million in
fiscal 2008. We determined the fair value of the Quality of Experience Assurance reporting unit using the income approach, which requires estimates of future operating results and cash flows
discounted using an estimated discount rate. Our estimates resulted from an updated long-term financial outlook for this reporting unit as of the end of fiscal 2008.

Potential
goodwill impairment is measured based upon a two-step process. In the first step, we compare the fair value of a reporting unit with its carrying amount using
discounted cash flow valuation method, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second
step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of
impairment loss. The annual evaluation identified the need to record an impairment loss for the Quality of Experience Assurance reporting unit using a discounted cash flow valuation method.



In the fourth quarter of fiscal 2008, we recorded a non-cash impairment charge of approximately $7.8 million
($5.7 million that was technology related and $2.1 million of other) for the write-down of intangible assets in our Quality of Experience Assurance business segment related
to the QoSmetrics S.A. acquisition in January 2007, using a non-discounted cash flow method. During our annual impairment test for fiscal 2008, we updated our financial forecasts to
reflect our updated market view, business model revisions, and lower spending levels. We evaluated the impact of these revised forecasts on our view of the value of the Quality of Experience reporting
unit and determined that a write-off of the intangible assets was appropriate.

74

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Goodwill and Intangible Assets (Continued)

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. The impairment loss
is measured as the amount by which the carrying amount exceeds the fair value.

Other
intangible assets are recorded at cost, less accumulated amortization. Other intangible assets as of June 29, 2008 and July 1, 2007 consist of:

Gross
Carrying
Amount

Accumulated
Amortization

Net
Intangible
Assets(In thousands)Purchased technology

$
30,514

$
18,192

$
12,322Customer lists, trademarks, other


9,801


4,393


5,408Total as of July 1, 2007

$
40,315

$
22,585

$
17,730Purchased technology

$
24,357

$
19,380

$
4,977Customer lists, trademarks, other


7,025


4,811


2,214Total as of June 29, 2008

$
31,382

$
24,191

$
7,191


The
estimated future amortization expense is as follows:

(In thousands)Fiscal year:2009

$
1,8832010


1,5732011


1,3072012


7262013


502Thereafter


1,200Total amortization

$
7,191


Intangible
asset amortization expense for fiscal 2008, 2007 and 2006 was approximately $4.3 million, $4.1 million, and $4.1 million, respectively.



Increases in the other intangible assets during fiscal 2006 primarily resulted from the acquisition of Agilent Technologies' Frequency
and Timing Standards product line, which included $2.6 million in purchased technology, $0.2 million in backlog and $0.5 million in customer lists. The $0.2 million in
backlog was fully amortized in the first quarter of fiscal 2006.

75

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Goodwill and Intangible Assets (Continued)

For
the intangibles related to Agilent Technologies' Frequency and Timing Standards product line, the weighted-average amortization period in total is 8 years, 9 months.
The weighted-average amortization period by major intangible asset class is as follows:



Increases
in other intangible assets during fiscal 2007 resulted from the acquisition of TSC and the acquisition of QoSmetrics.



Increases in intangible assets related to TSC, acquired during fiscal 2007, included $1.8 million relating to customer lists,
$1.4 million relating to purchased technology, $1.0 million relating to backlog, and $0.2 million relating to trademarks. The weighted-average amortization period in total is
6 years, 6 months. The weighted-average amortization period by major intangible asset class is as follows:





Increases in intangible assets related to QoSmetrics, acquired during fiscal 2007, included $1.3 million relating to customer
lists, $4.4 million relating to purchased technology, and $1.5 million relating to trademarks. The weighted-average amortization period in total was 5 years, 6 months.

In
the fourth quarter of fiscal 2008, the entire net carrying amount of $5.3 million as of June 29, 2008, relating to these intangible assets, was determined to be impaired
and was written off as described above.



During the first quarter of fiscal 2008, we determined that the weighted-average amortization period for $2.0 million of
purchased technology purchased in the fourth quarter of fiscal 2007 was three years. An additional $1.2 million of purchase and development costs related to this intangible asset, including
$1.0 million contingent consideration under the original terms of the agreement, was recorded in the second quarter of fiscal 2008 and amortization began in the same quarter.

In
the fourth quarter of fiscal 2008, the entire net carrying amount of $2.5 million as of June 29, 2008, relating to these intangible assets, was determined to be impaired
and was written off.

76

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 29, 2008

July 1, 2007

July 2, 2006(In thousands)Income (loss) from continuing operations before income taxes:Domestic

$
(21,055
)
$
14,141

$
(2,119
)Foreign


800


(495
)

448Total

$
(20,255
)
$
13,646

$
(1,671
)Provision for income taxes:Current:Federal

$
(510
)
$
1,320

$
309State


117


116


(108
)Puerto Rico


368


322


445Foreign


210


2,820


47Total


185


4,578


693Deferred:Federal


(5,315
)

3,724


(1,288
)State


(669
)

(839
)

(419
)Puerto Rico


(15
)

96


200Foreign


148


29


Total


(5,851
)

3,010


(1,507
)Total provision (benefit)

$
(5,666
)
$
7,588

$
(814
)


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

Year ended,June 29, 2008

July 1, 2007

July 2, 2006(In thousands)Tax provision (benefit) from:Continuing operations

$
(5,666
)
$
7,588

$
(814
)Discontinued operations


63


167


521Total provision (benefit)

$
(5,603
)
$
7,755

$
(293
)


77

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10Income Taxes (Continued)

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

Year ended,June 29, 2008

July 1, 2007

July 2, 2006Federal statutory income tax (benefit) expense rate


(35.0
)%

35.0
%

(35.0
)%Federal tax benefit of Puerto Rico operations





(2.5
)

(115.0
)Puerto Rico taxes


1.7


3.1


38.6State income taxes, net of federal benefit.


(2.9
)

(5.7
)

(33.1
)Taxes on QoSmetrics liquidation


4.2


25.0


Capital Losses Not Benefited.


5.6





Goodwill








99.7Other


(1.6
)

0.7


(4.1
)Effective income tax rate.


(28.0
)%

55.6
%

(48.9
)%


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

June 29, 2008

July 1, 2007(In thousands)Deferred tax assets:Net operating loss carryforwards

$
13,566

$
18,126Tax credit carryforwards


13,926


13,767Reserves and accruals


7,590


4,798Depreciation and amortization


18,335


13,91653,417


50,607Valuation allowance


(3,958
)

(2,822
)Total deferred tax assets


49,459


47,785Deferred tax liabilities -Unremitted foreign earnings


427


530Net deferred tax assets

$
49,032

$
47,255


Net
deferred tax assets are comprised of the following:

June 29, 2008

July 1, 2007(In thousands)Current assets

$
7,501

$
4,798Non-current assets


41,958


42,791Non-current liabilities


(427
)

(334
)Net deferred tax assets

$
49,032

$
47,255


As
of June 29, 2008, for federal income tax purposes, we had regular net operating loss carryforwards of approximately $45.5 million which will expire in years 2023 through
2028. We had California regular net operating loss carryforwards of approximately $6.6 million which will expire in years 2013 through 2018.

78

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10Income Taxes (Continued)

Also, we had federal research and development tax credit carryforwards of approximately $6.7 million that will expire in the years 2009 through 2028, alternative minimum tax
credit carryforwards of approximately $3.7 million that have no expiration date, and approximately $0.8 million of foreign tax credits that will expire in 2017 through 2018.
Additionally, for state income tax purposes, we had research and development tax credit carryforwards of approximately $3.4 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 29, 2008, $2.8 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. Also, $1.1 million of the valuation allowance was attributable to fiscal 2008
short-term investment losses incurred which have a limited carryforward period.

During
fiscal 2007, Symmetricom Puerto Rico, a wholly-owned subsidiary, moved its place of legal organization from Delaware to Bermuda in a transaction intended to be a
tax-free restructuring. We have submitted a ruling request to the Internal Revenue Service to confirm the tax-free treatment. If granted, the effect of the ruling would be for
the Puerto Rico subsidiary to be treated as a branch of Symmetricom, Inc. effective as of July 2006 and, accordingly, for the profits of the Puerto Rico subsidiary to be taxable to
Symmetricom, Inc. If granted, the ruling would result in no changes to our tax provision as reported in our fiscal years 2007 and 2008 annual reports. Ruling requests of this nature are
considered routine and management believes that it is probable that the ruling will be granted.

If
the ruling is not granted, then:



The
above three items would be reported in the fiscal year and quarter in which the request for IRS confirmation of tax-free treatment of the July 2006 restructuring was
denied. The net result of such a denial would be an increased tax provision of approximately $10.7 million while our deferred tax assets would decrease by approximately the same amount.

Prior
to fiscal 2007, Symmetricom Puerto Rico had elected to report its U.S. taxes under Section 936 of the United State Internal Revenue Code. This election exempted qualified
Puerto Rico earnings from regular federal income taxes, subject to various limitations. Section 936 expired at the end of fiscal 2006.

79

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10Income Taxes (Continued)

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 July 2, 2007, we had $13.9 million of unrecognized tax benefits of which $8.4 million, if recognized, would impact our effective tax rate while
$3.3 million of the $13.9 million of unrecognized tax benefits that, if recognized, would result in a decrease to goodwill recorded in business purchase combinations. In the fourth
quarter of fiscal 2008, we corrected the total unrecognized tax benefits as of July 2, 2008, previously disclosed as $14.6 million, to $13.9 million.

As
of June 29, 2008, we had $14.3 million of unrecognized tax benefits of which $8.8 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 July 2, 2007 and June 29, 2008, we had no accrued interest or penalties on our balance sheets.

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

Amount(In thousands)Balance at July 2, 2007

$
13.9Additions based on tax position related to the current year


0.4Balance at June 29, 2008

$
14.3


We
are subject to income tax in the United States and a number of state and foreign jurisdictions. The tax years ended June 2004 forward remain open to examination by major taxing
jurisdictions in which we operate which include the United States, California, Puerto Rico and Germany. We are not currently under examination by any income tax authority.

Note 11Contingencies



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

80

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Contingencies (Continued)

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 29, 2008, we had an accrual of $0.3 million for remediation costs, appraisal fees and other ongoing monitoring costs.



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 29, 2008, 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, in March 2008, new product shipments to this customer include lead solder.



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.

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. The entire principal balance was due and payable on
March 25, 2008. The note was secured by a deed of trust for the officer's personal residence. In fiscal 2008, the entire principal balance was repaid.

During
fiscal 2008, 2007 and 2006, we paid a total of $7,000, $0 and $7,500, respectively, for consulting fees to certain directors of Symmetricom in addition to their regular director
compensation for attendance at Board and Committee meetings.

During
fiscal 2006, we sold products and services to Arris Group for a total of approximately $175,000, and acquired equipment for approximately $2,000. In fiscal 2008, we sold products
and

81

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12Related Party Transactions (Continued)

services
to Arris Group for a total of approximately $29,000. The CEO of Arris Group, Mr. Robert Stanzione, is a director of the Company.

Note 13Long-Term Obligations

June 29, 2008

July 1, 2007(In thousands)Long-term obligations:Convertible subordinate notes

$
120,000

$
120,000Deferred revenue


1,297


1,089Capital lease


1,286


2,697Lease accrual


706


422Income Tax


690


Post-retirement benefits


240


262Conditional grant


109


136Lease loss accrual, net


42


86Bond payable





2,405Lesscurrent maturities


(64,515
)

(1,547
)Total

$
59,855

$
125,550




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, including our indebtedness under our senior credit facilities. 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:



82

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13Long-Term Obligations (Continued)



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 marketplace rule 4350(i)(1)(D). We may undertake such repurchase
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 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 apro ratabasis, $63.1 million aggregate principal amount, 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. On 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 includes 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 the acceleration notice received by Symmetricom on May 7, 2008.

In
connection with the issuance of these Notes, Symmetricom initially recorded bond fees of approximately $4.0 million, which were amortized using the straight-line
method over a period of seven

83

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13Long-Term Obligations (Continued)

years
ending in fiscal 2012. As of June 29, 2008, $2.2 million of unamortized costs was remaining. As a result of the tender offer, $1.2 million of this unamortized cost was
expensed in the first quarter of fiscal 2009.



In connection with the acquisition of Datum in October 2002, we assumed Datum's liability relating to an industrial development bond
that was issued by the Massachusetts Development Finance Agency on May 1, 2001, to finance the expansion by Datum of its manufacturing facility in Beverly, Massachusetts. In the second quarter
of fiscal 2008 we paid off the bond.



See Note 7Lease Commitments.

Note 14Benefit Plans



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 are not directly invested in shares of the Company's common stock. 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, $0.5 million and $0.5 million in fiscal 2008, 2007 and 2006, respectively.



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 2008, 2007, and 2006.

84

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Stockholders' Equity



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, in connection with the tender offer during the fourth quarter of 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.

Effective
August 4, 2005, the Symmetricom Board of Directors approved a change in the terms for stock options granted on and after August 4, 2005 under the employee stock
option plans to provide that the life of a new stock option will be 5 years instead of 10 years.

On
October 26, 2006 at our annual meeting of shareholders, the shareholders approved the 2006 Incentive Award Plan that included an additional 3.7 million shares for future
issuance. For the year ended June 29, 2008, we granted non performance-based options to purchase 1.1 million shares of Symmetricom's common stock, and awarded 0.5 million shares
of restricted stock. We did not grant any performance-based options to purchase during fiscal year 2008. Our right to repurchase restricted shares generally lapses over the same three-year
term as the vesting period applicable to the stock options. We received $0.2 million from the exercise of stock options during the year ended June 29, 2008.

We
recorded stock-based compensation expense of $5.0 million in fiscal 2008, $6.4 million in fiscal 2007, and $4.6 million in fiscal 2006, respectively. This
includes the net cumulative impact of 6.00% for fiscal 2008, 3.00% for fiscal 2007, and 5.94% for fiscal 2006 estimated future annual forfeitures in the determination of the expense in the period,
rather than recording forfeitures when they occur. At June 29, 2008, the total compensation cost related to unvested stock-based awards granted to employees, directors and consultants under the
Company's stock option plans but not yet recognized was approximately $4.5 million, net of estimated forfeitures of $ 0.8 million. This cost will be amortized on an accelerated method
basis over a period of approximately 1.2 years and will be adjusted for subsequent changes in estimated forfeitures.

85

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Stockholders' Equity (Continued)

The
following table details stock option and award activity for fiscal years 2008, 2007, and 2006:

Non Performance-based Options Outstanding

Performance-based Options Outstanding

Restricted Stock OutstandingShares
Available
For Grant

Number of
Shares

Weighted
Average
Exercise Price

Number of
Shares

Weighted
Average
Exercise Price

Number of
Shares

Weighted
Average
Grant-Date
Fair Value(In thousands, except per share amounts)Balances at July 3, 2005


2,014


4,325

$
6.81




$



122

$
4.63Grantedoptions


(739
)

739


9.03











Grantedrestricted shares


(220
)













220


9.31Exercised





(402
)

5.02











Vested

















(122
)

4.63Canceled


263


(263
)

9.30








(36
)

9.42Expired


(1
)
















Balances at July 2, 2006


1,317


4,399

$
7.22




$



184

$
9.282006 Plan


3,700

















Grantedoptions


(1,212
)

1,212


8.18











Grantedperformance-based options


(295
)







295


8.53





Grantedrestricted shares


(725
)













725


7.74Exercised





(556
)

4.95











Vested

















(45
)

8.37Canceled


158


(158
)

9.05








(20
)

8.59Expired


(3
)
















Balances at July 1, 2007


2,940


4,897

$
7.66


295

$
8.53


844

$
8.03Grantedoptions


(1,050
)

1,050


4.62











Grantedrestricted shares


(510
)













510


5.14Exercised





(50
)

4.14











Vested

















(234
)

8.11Canceled


1,033


(933
)

7.37


(100
)

8.53


(126
)

6.95Expired


(230
)
















Balances at June 29, 2008


2,183


4,964

$
7.10


195

$
8.53


994

$
6.62


86

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Stockholders' Equity (Continued)



The total number of in-the-money options outstanding and exercisable as of June 29, 2008 was as follows:

Option

Number of
Shares

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise Price

6/29/2008
Closing
Price

Intrinsic
Value
Per Share

Aggregate
Intrinsic
Value(In thousands)

(In years)







(In thousands)Outstanding at
June 29, 2008


271


3.93

$
3.55

$
3.90

$
0.35

$
96Exercisable at
June 29, 2008


74


2.68

$
2.71

$
3.90

$
1.19

$
88


The
aggregate intrinsic value in the preceding table represents the total pre-tax value of stock options outstanding as of June 29, 2008, based on our common stock
closing price of $3.90 on June 29, 2008, which would have been received by the option holders had all option holders exercised their options as of that date.

As
of June 29, 2008, July 1, 2007 and July 2, 2006, the number of shares and weighted average exercise prices of exercisable options were 3,170,580 at $7.47,
2,751,953 at $7.14 and 1,567,540 at $4.59, respectively.

The
total intrinsic value of options exercised during fiscal 2008, 2007, and 2006 was $0.1 million, $1.9 million and $1.6 million, respectively.

The
weighted average grant-date fair value of options granted was $1.73 in 2008, $3.00 in 2007 and $3.67 in 2006. 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 2008, 2007 and 2006:

Stock Option Plans2008

2007

2006Expected life (in years).


3.7


3.2


3.1Expected dividends








Risk-free interest rate.


3.6
%

4.7
%

4.6
%Volatility


44.9
%

46.7
%

57.3
%


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
reevaluated the volatility assumptions used to estimate the value of employee stock options granted 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.



During fiscal 2007, we granted 0.3 million shares of performance stock options to certain employees. Of this amount,
0.1 million were cancelled due to employee terminations. The number of

87

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Stockholders' Equity (Continued)

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 at June 29, 2008, none of the targets for the performance stock options outstanding
are expected to be met, and all previously recorded compensation expense has been reversed; however, the options will not be cancelled until the final target completion date of June 30, 2009.



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.



On August 8, 2007, the Board of Directors authorized management to repurchase up to approximately 2.9 million shares of
Symmetricom common stock, adding 2.0 million shares to a previously authorized program with no termination date. During fiscal 2008, we repurchased 2.0 million shares of common stock
pursuant to the repurchase program for an aggregate price of approximately $9.3 million. As of June 29, 2008, the total number of shares available for repurchase under the repurchase
program authorized by the Board of Directors was approximately 0.9 million.

A
further 53,729 shares were repurchased with an aggregate price of approximately $0.3 million to cover the cost of taxes on vested restricted stock. Also, upon termination of
certain employees, 126,518 shares of restricted stock were forfeited pursuant to existing agreements.



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. In the fourth quarter of fiscal 2008, we moved the Quality of
Experience business segment to the Telecom Solutions Division.

88

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16Business Segment Information (Continued)

The
following describes our two divisions:



There are four reportable segments within the Telecom Solutions Division:



89

---





SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16Business Segment Information (Continued)



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 endedJune 29, 2008

July 1, 2007

July 2, 2006(In thousands, except percentages)Net revenue:Telecom Solutions Division:Wireline Products

$
90,708

$
93,908

$
80,636Wireless/OEM Products


23,025


26,672


23,893Global Services


15,408


14,627


12,539Quality of Experience Assurance Division.


1,666


501


Timing, Test and Measurement Division


77,245


72,672


59,044Total net revenue

$
208,052

$
208,380

$
176,112Cost of sales:Telecom Solutions Division:Wireline Products

$
43,667

$
40,098

$
35,931Wireless/OEM Products


16,826


19,515


18,703Global Services


11,225


10,636


6,205Quality of Experience Assurance Division


440


103


Timing, Test and Measurement Division


41,613


39,484


30,786Other cost of sales*


9,635


3,542


5,975Total cost of sales

$
123,406

$
113,378

$
97,600Gross profit:Telecom Solutions Division:Wireline Products

$
47,041

$
53,810

$
44,705Wireless/OEM Products


6,199


7,157


5,190Global Services


4,183


3,991


6,334Quality of Experience Assurance Division


1,226


398


Timing, Test and Measurement Division


35,632


33,188


28,258Other cost of sales*


(9,635
)

(3,542
)

(5,975
)Total gross profit

$
84,646

$
95,002

$
78,512Gross margin:Telecom Solutions Division:Wireline Products


51.9
%

57.3
%

55.4
%Wireless/OEM Products


26.9
%

26.8
%

21.7
%Global Services


27.1
%

27.3
%

50.5
%Quality of Experience Assurance Division


73.6
%

79.4
%

NA
%Timing, Test and Measurement Division


46.1
%

45.7
%

47.9Other cost of sales as percentage of total revenue*


(4.6
)%

(1.7
)%

(3.4
)%Total gross margin


40.7
%

45.6
%

44.6
%


---

90

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16Business Segment Information (Continued)

Our export sales accounted for 33%, 29% and 30%, of our net revenue in fiscal 2008, 2007 and 2006 respectively. The geographical components of
revenue are as follows:

Year endedJune 29, 2008

July 1, 2007

July 2, 2006United States


67
%

71
%

70
%International:Asia


10
%

9
%

10
%Europe


12
%

11
%

11
%Canada


3
%

4
%

3
%Latin America


6
%

3
%

4
%Rest of the world


2
%

2
%

2
%


Two
customers each individually accounted for 10.8% of our net revenue in fiscal 2008, or revenues of $22.4 million and $22.5 million, respectively. In fiscal 2007, 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. No customer accounted for 10.0% or more of our net
revenue in fiscal 2006.

Note 17Integration and Restructuring Charges

During fiscal 2008 we recorded integration and restructuring charges totaling $0.8 million related to the shutdown of our Austin, Texas facility. During fiscal 2007 we recorded
integration and restructuring charges totaling $0.8 million related to the acquisitions of TSC and QoSmetrics. During fiscal 2006 we recorded integration and restructuring charges totaling
$1.2 million related to the acquisition of Agilent Technologies' Frequency and Timing Standards product line. These charges were recorded as cost of sales and paid out in their respective
years.

The
following tables show the details of the restructuring cost accruals, which consist of facilities and severance costs, for the years ended June 29, 2008 and July 1,
2007. The adjustments are for reclassifications of facility and benefit accruals:

Balance at
July 2,
2006

Expense
Additions

Payments

Balance at
July 1,
2007(In thousands)Lease loss accrual (fiscal 2004)

$
254

$


$
(109
)
$
145All other integration and restructuring changes (fiscal 2004)


578





(96
)

482All other integration and restructuring changes (fiscal 2007)





773


(773
)

Total

$
832

$
773

$
(978
)
$
627


91

---



SYMMETRICOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17Integration and Restructuring Charges (Continued)



Balance at
July 1,
2007

Expense
Additions

Payments

Balance at
June 29,
2008(in thousands)Lease loss accrual (fiscal 2004)

$
145

$


$
(59
)
$
86All other integration and restructuring changes (fiscal 2004)


482





(183
)

299Austin facility shutdown (fiscal 2008)





794


(206
)

588All other integration and restructuring changes (fiscal 2008)





1,728


(1,728
)

Total

$
627

$
2,522

$
(2,176
)
$
973


The
balance of the $0.1 million lease loss accrual for facilities as of June 29, 2008 will be paid over the next four years. In fiscal 2009, we expect to incur additional
integration and restructuring charges amounting to $0.2 million related to outsourcing certain of our Puerto Rico operations to China. Also, we expect to incur additional integration and
restructuring charges amounting to $1.8 million related to shutting down our Austin, Texas facility in addition to the $0.6 million accrued as of June 29, 2008.

Note 18Gain on sale of asset

On December 28, 2007, a third party purchased an internet domain name from Symmetricom for $0.7 million. All transaction costs were incurred by the buyer and the carrying
amount of the domain name was zero. The domain name was not previously used by Symmetricom. This has been disclosed as a gain on sale of asset in the consolidated statements of operations.

92

---





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

Not applicable.

Item 9A.Controls and Procedures



Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of
our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. On June 17, 2008 we filed an amendment to our Form 10-K
for the fiscal year ended July 1, 2007 to amend and restate our consolidated balance sheets as of July 1, 2007 and July 2, 2006 and the related consolidated statements of
operations, stockholders' equity and comprehensive income (loss), and cash flows for the
fiscal years ended July 1, 2007, July 2, 2006, and July 3, 2005. Also on June 17, we filed an amendment to our Form 10-Q to amend our
Form 10-Q for the quarter ended September 30, 2007. Both of these amendments were filed to correct a misstatement in our original filings related to errors in accounting for
accrued liabilities related to inventory receipts. In the Form 10-K/A and Form 10-Q/A, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective. Because this material
weakness related to the reconciliation and review of accrued liabilities related to inventory receipts was not fully remediated as of June 29, 2008, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were not effective as of June 29, 2008, solely because of this material weakness.



There was no material change in the Company's internal control over financial reporting that occurred during the quarter ended
June 29, 2008 that has affected, or is reasonably likely to materially affect, our 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 not effective as of June 29, 2008, due to material weakness related to the reconciliation
and review of accrued liabilities related to inventory receipts.

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 Controls Over Financial Reporting as of June 29, 2008 has been audited by Deloitte & Touche LLP, our Independent Registered Public
Accounting Firm, as stated in their report dated September 10, 2008.

Item 9B.Other Information

None

93

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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 internal control over financial reporting of Symmetricom, Inc. and subsidiaries (the "Company") as of June 29, 2008, based on criteria established in Internal ControlIntegrated
Frameworkissued 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
accompanyingManagement'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.

A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in
management's assessment: a material weakness related to the reconciliation and review of accrued liabilities related to inventory receipts. This material weakness was considered in determining the
nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements and financial statement schedule as

94

---



of
and for the year ended June 29, 2008, of the Company and this report does not affect our report on such financial statements and financial statement schedule.

In
our opinion, because of the effect of the material weakness identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective
internal control over financial reporting as of June 29, 2008, based on the criteria established inInternal ControlIntegrated
Frameworkissued 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 29, 2008, of the Company and our report dated September 10, 2008 expressed an unqualified opinion on those financial statements and financial
statement schedule, and included an explanatory paragraph regarding the adoption of Financial Accounting Standards Board (FASB) Interpretation No. 48,Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, in fiscal 2008.

/s/
DELOITTE & TOUCHE LLP

San
Jose, California
September 10, 2008

95

---



PART III

Item 10.Directors, Executive Officers and Corporate Governance

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

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 2008 Annual Meeting of Shareholders to be held on
October 31, 2008 (the "Proxy Statement").

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.

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.

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.

96

---



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.

97

---





PART IV

Item 15.    Exhibits 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 29, 2008, July 1, 2007 and July 2, 2006, 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.



Exhibit No.

Description of Exhibits2.1

Agreement and Plan of Merger dated May 22, 2002, among the Registrant, Datum Inc., a Delaware corporation, and Dublin Acquisition Subsidiary, Inc., a Delaware corporation (incorporated by reference from Exhibit 2.1 to the
Registrant's current report on Form 8-K filed May 24, 2002).
The following Exhibits and schedules to the Agreement and Plan of Merger have been omitted. The Registrant will furnish copies of the omitted schedules and Exhibits to the Commission upon request:
Company Disclosure Schedule
Parent Disclosure Schedule
Schedule 1.1
Schedule 2.2(d) (if applicable)
Exhibit A-1 Form of Support AgreementCompany
Exhibit A-2 Form of Support AgreementParent
Exhibit B Form of Lockup Agreement
Exhibit C Form of Affiliate Agreement2.2

Agreement and Plan of Merger, dated January 3, 2002, among the Registrant and Symmetricom, Inc. a California corporation (incorporated by reference from Exhibit 2.1 to the Registrant's current report on Form 8-K filed
January 9, 2002).2.3

Agreement and Plan of Merger, dated as of March 27, 2002, together with the First Amendment thereto dated as of June 26, 2002, among the Registrant, TrueTime, Inc. and Sco-TRT Acquisition, Inc. (incorporated by reference from
Exhibit 2.1 to the Registrant's current report on Form 8-K filed April 1, 2002 and Annex B to the Registrant's registration statement on Form S-4 (file no. 333-92392) filed July 15, 2002).
The following Exhibits and schedules to the Agreement and Plan of Merger have been omitted. The Registrant will furnish copies of the omitted schedules and Exhibits to the Commission upon request:
Disclosure Schedule
Schedule 2.2(d) (if applicable)
Schedule 7.13(a)
Exhibit CForm of Extended Employment Agreement
Exhibit DForm of Three Month Employment Agreement


98

---



Exhibit No.

Description of Exhibits3.1(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 filed January 9, 2002).3.1(ii)

Amended and Restated Bylaws of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant's current report on Form 8-K filed August 10, 2005).4.1

Form of Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Registrant's annual report on Form 10-K 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 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 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 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 filed September 23, 1999 and Exhibit 10.1 to
the Registrant's quarterly report on Form 10-Q filed February 13, 2001).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, 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 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 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 filed August 30, 2002).


99

---



Exhibit No.

Description of Exhibits10.9#

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 filed May 15, 2001).10.10#

Promissory Note Secured by Deed of Trust issued by Thomas W. Steipp to the Registrant dated January 25, 1999 (incorporated by reference from Exhibit 10.29 to the Registrant's quarterly report on Form 10-Q filed February 4,
1999).10.11#

Rider to Deed of Trust by Thomas W. Steipp and Debra L. Steipp, as Trustor, to First American Title Insurance Company, as Trustee, for the benefit of Symmetricom, Inc., as Beneficiary (incorporated by reference from Exhibit 10.30 to the
Registrant's quarterly report on Form 10-Q filed February 4, 1999).10.12#

Employment Agreement between the Registrant and Thomas W. Steipp dated July 1, 2001 (incorporated by reference from Exhibit 10.18 to the Registrant's annual report on Form 10-K filed September 20, 2001).10.13#

Change of Control Retention Agreement between the Registrant and Thomas W. Steipp dated July 1, 2001 (incorporated by reference from Exhibit 10.19 to the Registrant's annual report on Form 10-K filed September 20,
2001).10.14#

Form of Amended and Restated Executive Severance Benefits Agreement between the Registrant and each of William Slater, Nancy J. Shemwell, Dale A. Pelletier, Bruce K. Bromage, William H. Minor, Jr. and David Cox (incorporated by reference from
Exhibit 10.1 to the Registrant's current report on Form 8-K filed October 15, 2007).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 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 filed
September 13, 2006).10.17

Standard Industrial Lease between Manor Development Co. and TrueTime, Inc. (incorporated herein by reference from Exhibit 10.9 to TrueTime, Inc.'s registration statement on Form S-1 (file no. 333-90269)).10.18

Standard Industrial/Commercial Single-Tenant LeaseNet, dated as of January 24, 2000, by and between Cooperhill Development Corporation and TrueTime, Inc. (incorporated by reference from Exhibit 10.1 to TrueTime, Inc.'s
quarterly report on Form 10-Q for the quarter ended March 30, 2000).10.19

Amendment to the Standard Industrial/Commercial Single-Tenant LeaseNet, dated as of January 24, 2000, by and between Cooperhill Development Corporation and TrueTime, Inc. (incorporated by reference from Exhibit 10.7 to TrueTime,
 Inc.'s annual report on Form 10-K for the fiscal year ended September 30, 2000).10.20

Standard Industrial Sublease dated as of December 11, 2000 by and between Innovadyne Technologies, Inc. and TrueTime, Inc. (incorporated by reference from Exhibit 10.1 to TrueTime, Inc.'s quarterly report on Form 10-Q
for the quarterly period ended December 31, 2000).


100

---



Exhibit No.

Description of Exhibits10.21

Lease Intended as Security dated as of April 30, 2001 by and between Bank of America and TrueTime, Inc. (incorporated by reference from Exhibit 10.1 to TrueTime, Inc.'s quarterly report on Form 10-Q for the quarterly period
ended June 30, 2001).10.22#

Datum Inc.'s Savings and Retirement Plan, as amended to date (incorporated by reference from Exhibit 10.19 to Datum Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 1991).10.23#

Service Agreement, by and between the Registrant and Eric van der Kaay (incorporated by reference from Exhibit 10.3 to the Registrant's quarterly report on Form 10-Q filed May 14, 2003).10.24#

2006 Incentive Award Plan and forms of agreements thereunder (incorporated by reference from Appendix A to the Registrant's 2006 Proxy Statement filed with the Commission on September 25, 2006 and Exhibit 4.4 to the Registrant's
registration statement on Form S-8 (file no. 333-138546) filed November 9, 2007).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.


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See Item 15(a)(2) above.

101

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SCHEDULE II
SYMMETRICOM, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)

Balance at
Beginning of
Year

Charged to
Costs and
Expenses

Deductions(1)

Balance at
End of YearYear ended June 29, 2008:Accrued warranty expense

$
3,374

$
3,407

$
2,980

$
3,801Allowance for doubtful accounts

$
1,107

$
173

$
549

$
731Allowance for excess and obsolete inventory

$
4,532

$
2,391

$
2,636

$
4,287Year ended July 1, 2007:Accrued warranty expense

$
3,547

$
2,300

$
2,473

$
3,374Allowance for doubtful accounts

$
888

$
349

$
130

$
1,107Allowance for excess and obsolete inventory

$
4,916

$
1,705

$
2,089

$
4,532Year ended July 2, 2006:Accrued warranty expense.

$
3,338

$
2,886

$
2,677

$
3,547Allowance for doubtful accounts

$
874

$
173

$
159

$
888Allowance for excess and obsolete inventory

$
4,913

$
1,743

$
1,740

$
4,916


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102

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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 10, 2008

By:

/s/THOMAS W. STEIPP Thomas W. Steipp
Chief Executive Officer
(Principal Executive Officer)


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Steipp and William
Slater, 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.

|                                                     |  |                                                                                                                                          |  |                   
|---------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------
|
|                                                     |  |                                                                                                                                          |  |                   
|/s/THOMAS W. STEIPP Thomas W. Steipp                 |  | Chief Executive Officer (Principal Executive Officer) and Director                                                                       |  | September 10, 2008
|/s/WILLIAM SLATER William Slater                     |  | Executive Vice President Finance and Administration, Chief Financial Officer, and Secretary (Principal Financial and Accounting Officer) |  | September 10, 2008
|/s/ROBERT T. CLARKSON Robert T. Clarkson             |  | Chairman of the Board                                                                                                                    |  | September 10, 2008
|/s/ALFRED BOSCHULTE Alfred Boschulte                 |  | Director                                                                                                                                 |  | September 10, 2008
|/s/JAMES CHIDDIX James Chiddix                       |  | Director                                                                                                                                 |  | September 10, 2008
|/s/ELIZABETH A. FETTER Elizabeth A. Fetter           |  | Director                                                                                                                                 |  | September 10, 2008
|/s/ROBERT M. NEUMEISTER JR. Robert M. Neumeister Jr. |  | Director                                                                                                                                 |  | September 10, 2008
|/s/RICHARD W. OLIVER Richard W. Oliver               |  | Director                                                                                                                                 |  | September 10, 2008
|/s/RICHARD N. SNYDER Richard N. Snyder               |  | Director                                                                                                                                 |  | September 10, 2008
|/s/ROBERT J. STANZIONE Robert J. Stanzione           |  | Director                                                                                                                                 |  | September 10, 2008

103

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