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

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FORM 10-Q

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[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

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

For the transition period from ________to _________

Commission file number  0-15071



Adaptec, Inc.



|Delaware                                                       | 94-2748530                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

691 S. Milpitas Blvd.
Milpitas, California     95035

(408) 945-8600

N/A(Former name, former address
and former fiscal year, if changed since last report)

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

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

Large accelerated filer      ̈ Accelerated filer    x Non-accelerated filer     ̈ (Do not check if a smaller reporting company)
          Smaller reporting company     ̈

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES     ̈ NO    x The number of shares of Adaptec's common stock outstanding as of August 1, 2008 was 120,439,824.
Note:PDF provided as a courtesy
TABLE OF CONTENTS

|Part I.  | Financial Information |                                                                                      
|-------- | --------------------- | -------------------------------------------------------------------------------------
|         | Item 1.               | Financial Statements:                                                                
|         |                       | Unaudited Condensed Consolidated Statements of Operations                            
|         |                       | Unaudited Condensed Consolidated Balance Sheets                                      
|         |                       | Unaudited Condensed Consolidated Statements of Cash Flows                            
|         |                       | Notes to Unaudited Condensed Consolidated Financial Statements                       
|         | Item 2.               | Management's Discussion and Analysis of Financial Condition and Results of Operations
|         | Item 3.               | Quantitative and Qualitative Disclosures About Market Risk                           
|         | Item 4.               | Controls and Procedures                                                              
|Part II. | Other Information     |                                                                                      
|         | Item 1.               | Legal Proceedings                                                                    
|         | Item 1A.              | Risk Factors                                                                         
|         | Item 6.               | Exhibits                                                                             
|         | Signatures            |                                                                                      

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADAPTEC, INC.
                                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (unaudited)

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                              (in thousands, except per share amounts)
Net revenues                                                                 $           31,503  $           36,102
Cost of revenues                                                                         16,821              24,593
                                                                              ------------------  ------------------
    Gross profit                                                                         14,682              11,509
                                                                              ------------------  ------------------
Operating expenses:
    Research and development                                                              5,903              10,416
    Selling, marketing and administrative                                                 9,497              13,460
    Amortization of acquisition-related intangible assets                                    --                 643
    Restructuring charges                                                                 1,837               1,526
    Other charges (gains)                                                                    --              (5,914)
                                                                              ------------------  ------------------
        Total operating expenses                                                         17,237              20,131
                                                                              ------------------  ------------------
Loss from continuing operations                                                          (2,555)             (8,622)
Interest and other income, net                                                            5,262               6,721
Interest expense                                                                           (841)             (1,014)
                                                                              ------------------  ------------------
Income (loss) from continuing operations before income taxes                              1,866              (2,915)
Provision for income taxes                                                                1,913                 214
                                                                              ------------------  ------------------
Loss from continuing operations, net of taxes                                               (47)             (3,129)
                                                                              ------------------  ------------------
Discontinued operations, net of taxes:
    Loss from discontinued operations, net of taxes                                        (734)               (506)
    Income from disposal of discontinued operations, net of taxes                         5,794                  --
                                                                              ------------------  ------------------
        Income (loss) from discontinued operations, net of taxes                          5,060                (506)
                                                                              ------------------  ------------------
Net income (loss)                                                            $            5,013  $           (3,635)
                                                                              ==================  ==================
Income (loss) per share:
Basic
    Continuing operations                                                    $            (0.00) $            (0.03)
    Discontinued operations                                                                0.04               (0.00)
    Net income (loss)                                                        $             0.04  $            (0.03)
Diluted
    Continuing operations                                                    $            (0.00) $            (0.03)
    Discontinued operations                                                                0.04               (0.00)
    Net income (loss)                                                        $             0.04  $            (0.03)

Shares used in computing income (loss) per share:
    Basic                                                                               119,192             117,897
    Diluted                                                                             119,192             117,897`

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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ADAPTEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

June 30, 2008       March 31, 2008
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Assets
Current assets:
    Cash and cash equivalents                                                $          235,943  $          239,911
    Marketable securities                                                               395,661             386,305
    Restricted marketable securities                                                        840               1,670
    Accounts receivable, net                                                             19,635              23,204
    Inventories                                                                           6,147               9,926
    Prepaid expenses and other current assets                                            22,416              20,407
                                                                              ------------------  ------------------
        Total current assets                                                            680,642             681,423
Property and equipment, net                                                              12,593              13,284
Other long-term assets                                                                    6,588               5,380
                                                                              ------------------  ------------------
Total assets                                                                 $          699,823  $          700,087
                                                                              ==================  ==================Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                         $           14,665  $           12,311
    Accrued and other liabilites                                                         15,417              19,128
    3/4% Convertible Senior Subordinated Notes ("3/4% Notes")                           225,402             225,321
                                                                              ------------------  ------------------
        Total current liabilities                                                       255,484             256,760
Other long-term liabilities                                                               7,880               9,335
Deferred income taxes                                                                    10,014               9,896
                                                                              ------------------  ------------------
        Total liabilities                                                               273,378             275,991
Commitments and contingencies (Note 13)

Stockholders' equity:
    Common stock                                                                            120                 121
    Additional paid-in capital                                                          200,736             199,289
    Accumulated other comprehensive income, net of taxes                                  2,883               6,993
    Retained earnings                                                                   222,706             217,693
                                                                              ------------------  ------------------
        Total stockholders' equity                                                      426,445             424,096
                                                                              ------------------  ------------------
Total liabilities and stockholders' equity                                   $          699,823  $          700,087
                                                                              ==================  ==================


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

ADAPTEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Cash Flows From Operating Activities:
Net income (loss)                                                            $            5,013  $           (3,635)
Less: income (loss) from discontinued operations, net of taxes                            5,060                (506)
                                                                              ------------------  ------------------
Loss from continuing operations, net of taxes                                               (47)             (3,129)
Adjustments to reconcile loss from continuing operations, net of
    taxes, to net cash provided by (used in) operating activities:
    Stock-based compensation                                                              1,386               1,444
    Inventory-related charges                                                               197               2,376
    Depreciation and amortization                                                         1,316               3,006
    Gain on sale of long-lived assets                                                        --              (6,735)
    Other non-cash items                                                                     60                  72
    Changes in assets and liabilities                                                     4,644                (742)
                                                                              ------------------  ------------------
Net Cash Provided by (Used in) Operating Activities of Continuing Operations              7,556              (3,708)
Net Cash Provided by (Used in) Operating Activities of Discontinued Operations             (151)              1,665
                                                                              ------------------  ------------------
Net Cash Provided by (Used in) Operating Activities                                       7,405              (2,043)
                                                                              ------------------  ------------------Cash Flows From Investing Activities:
Purchases of property and equipment                                                        (127)               (204)
Proceeds from sale of long-lived assets                                                      --              19,881
Purchases of marketable securities                                                     (100,075)             (5,829)
Sales of marketable securities                                                           70,863              25,290
Maturities of marketable securities                                                      15,893              19,602
Maturities of restricted marketable securities                                              844                 844
                                                                              ------------------  ------------------
Net Cash Provided by (Used in) Investing Activities of Continuing Operations            (12,602)             59,584
Net Cash Provided by (Used in) Investing Activities of Discontinued Operations            1,629                 (11)
                                                                              ------------------  ------------------
Net Cash Provided by (Used in) Investing Activities                                     (10,973)             59,573
                                                                              ------------------  ------------------Cash Flows From Financing Activities:
Proceeds from issuance of common stock                                                        3                 636
                                                                              ------------------  ------------------
Net Cash Provided by Financing Activities                                                     3                 636
                                                                              ------------------  ------------------
Effect of Foreign Currency Translation on Cash and Cash Equivalents                        (403)                187
                                                                              ------------------  ------------------
Net Increase (Decrease) in Cash and Cash Equivalents                                     (3,968)             58,353
Cash and Cash Equivalents at Beginning of Period                                        239,911              95,922
                                                                              ------------------  ------------------
Cash and Cash Equivalents at End of Period                                   $          235,943  $          154,275
                                                                              ==================  ==================



See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

ADAPTEC, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  (unaudited)



1. Basis of Presentation
In the opinion of management, the accompanying Unaudited Condensed Consolidated Interim Financial
Statements ("financial statements") of Adaptec, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") have been prepared on a consistent basis with the March 31, 2008 audited consolidated financial
statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set
forth therein. The financial statements have been prepared in accordance with the regulations of the SEC, and, therefore, omit certain
information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in
the United States of America. These financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the fiscal year ended
March 31, 2008, which was filed with the SEC on June 16, 2008. The first quarters of fiscal 2009 and 2008 ended June 27, 2008
and June 29, 2007, respectively. For presentation purposes, the accompanying financial statements have been shown as ending on
June 30. The results of operations for the first quarter of fiscal 2009 are not necessarily indicative of the results to be expected for the
entire fiscal year.

Certain reclassifications have been made to prior period reported amounts to conform to the current year
presentation, including reclassification of discontinued operations as discussed in Note 4 to the financial statements.  These
reclassifications had no impact on net income (loss), total assets or total stockholders' equity.  Unless otherwise indicated, and other
than the Company's Condensed Consolidated Balance Sheet at March 31, 2008, the Notes to the Unaudited Condensed Consolidated
Financial Statements relate to the discussion of the Company's continuing operations.

The glossary of key acronyms used in the Company's industry and accounting rules and regulations
referred to within this Quarterly Report on Form 10-Q is listed in alphabetical order in Note 19.
2. Recent Accounting Pronouncements

In February 2008, the FASB issued FSP FAS No. 157-2, which delays the effective date of
SFAS No. 157 for all non-recurring fair value measurements of non-financial assets and non-financial liabilities until fiscal years
beginning after November 15, 2008, which will be the Company's fiscal year 2010.  The Company is currently evaluating the
financial impact that FSP FAS No. 157-2 will have, but expects that the financial impact, if any, will not be material on its consolidated
financial statements.

In February 2007, the FASB issued SFAS No. 159, which permits companies to choose to measure
certain financial instruments and certain other items at fair value that are not currently required to be measured at fair value.  The
standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings.
SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is the Company's fiscal 2009.  The adoption of SFAS
No. 159 did not have an impact on the Company's consolidated financial statements as the Company did not elect the fair value option
for any of its financial assets and liabilities that were not previously measured at fair value.

In December 2007, the FASB ratified EITF No. 07-1, which defines collaborative arrangements and
establishes reporting and disclosure requirements for transactions between participants in a collaborative arrangement and between
participants in the arrangement and third parties.  EITF No. 07-1 is effective beginning with the Company's fiscal 2009.
The adoption of EITF No. 07-1 did not have an impact on the Company's consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), which establishes the principles
and requirements for how an acquirer in a business combination (1) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, (2) recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain purchase and (3) determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
 SFAS No. 141(R) is effective beginning with the Company's fiscal 2010.  The impact of the adoption of SFAS No. 141(R)
on the Company's results of operations and financial position will depend on the nature and extent of business combinations that it
completes, if any, in or after fiscal 2010; however, it is expected to change the Company's accounting treatment for any business
combinations completed after this statement is adopted.

In December 2007, the SEC issued SAB 110 to amend the SEC's views discussed in SAB 107 regarding
the use of the "simplified" method in developing an estimate of the expected term of "plain vanilla" share options
in accordance with SFAS No. 123(R).  SAB 110 allows a company, under certain circumstances, to continue to use the
"simplified" method beyond December 31, 2007.  SAB 110 is effective beginning with the Company's fiscal 2009.  As
discussed in Note 8 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K/A for
the fiscal year ended March 31, 2008, the Company has utilized the weighted average for estimating the expected term of its stock
option grants.  The Company did not use the "simplified" method in the first quarter of fiscal 2009.

In December 2007, the FASB issued SFAS No. 160, which changes the accounting and reporting for minority
interests such that minority interests will be recharacterized as non-controlling interests and will be required to be reported as a
component of equity.  SFAS No. 160 further requires that purchases or sales of equity interests that do not result in a change in control
be accounted for as equity transactions and, upon a loss of control, requires the interest sold, as well as any interest retained, to be
recorded at fair value with any gain or loss recognized in earnings.  SFAS No. 160 is effective for fiscal years beginning after December
15, 2008, which will be the Company's fiscal year 2010.  The Company is evaluating the financial impact that SFAS No. 160 will have
but expects that the financial impact, if any, will not be material on its consolidated financial statements.

In April 2008, the FASB issued FSP FAS No. 142-3, which amends the factors to be considered in
determining the useful life of intangible assets.  Its intent is to improve the consistency between the useful life of an intangible asset and
the period of expected cash flows used to measure its fair value.  FSP FAS No. 142-3 is effective for fiscal years beginning after
December 15, 2008, which will be the Company's fiscal year 2010.  The impact of the adoption of FSP FAS No. 142-3 on the
Company's results of operations and financial position will depend on the nature and extent of business combinations that it completes,
if any, in or after fiscal 2010.

In May 2008, the FASB issued FSP APB No. 14-1, which requires issuers of convertible debt that may be
settled wholly or partly in cash when converted to account for the debt and equity components separately.  FSP APB No. 14-1 is
effective for fiscal years beginning after December 15, 2008, which will be the Company's fiscal year 2010, and must be applied
retrospectively to all periods presented.  The Company is evaluating the financial impact that FSP APB No. 14-1 will have on its
consolidated financial statements.

3. Stock Benefit Plans and Stock-Based Compensation

Stock Benefit Plans

The Company grants stock options and other stock-based awards to employees, directors and consultants
under two equity incentive plans, the 2004 Equity Incentive Plan and the 2006 Director Plan.  In addition, the Company has outstanding
options issued under equity incentive plans that have terminated and equity plans that it assumed in connection with acquisitions.  For a
complete discussion of these plans, please refer to Note 8 of the Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008.

As of June 30, 2008, the Company had an aggregate of 28.9 million shares of its common stock reserved for
issuance under its 2004 Equity Incentive Plan, of which 7.3 million shares were subject to outstanding options and 21.6 million shares
were available for future grants of options and other stock awards.  As of June 30, 2008, the Company had an aggregate of 2.1
million shares of its common stock reserved for issuance under its 2006 Director Plan, of which 0.6 million shares were subject to
outstanding options and 1.5 million shares were available for future grants. As of June 30, 2008, the Company had 0.1 million
shares of common stock reserved that were subject to outstanding options under assumed plans.Stock-Based Compensation
The Company measured and recognized compensation expense for all stock-based awards made to its
employees and directors, including employee stock options, employee stock purchase plans, and other stock-based awards, based on
estimated fair values using a straight-line amortization method over the respective requisite service period of the awards and adjusted it
for estimated forfeitures. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for
the first quarters of fiscal 2009 and 2008 was as follows:

Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Stock-based compensation expense by caption:
Cost of revenues                                                             $              103  $               96
Research and development                                                                    435                 560
Selling, marketing and administrative                                                       848                 788
    Stock-based compensation expense effect on loss                           ------------------  ------------------
        from continuing operations, net of taxes                             $            1,386  $            1,444
                                                                              ==================  ==================Stock-based compensation expense by type of award:
Stock options                                                                $              240                 678
Restricted stock awards and restricted stock units                                        1,146                 600
Employee stock purchase plan                                                                 --                 166
                                                                              ------------------  ------------------
    Stock-based compensation expense effect on loss
        from continuing operations, net of taxes                             $            1,386               1,444
                                                                              ==================  ==================

Stock-based compensation expense in the above table does not reflect any significant income tax impact, which
is consistent with the Company's treatment of income or loss from its U.S. operations. For the first quarters of fiscal 2009 and 2008,
there was no income tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements. In
addition, there was no stock-based compensation costs capitalized as part of an asset in the first quarter of fiscal 2009 and during fiscal
2008.Valuation AssumptionsThree-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------

Expected life (in years)                                                                   4.27                 4.3
Risk-free interest rates                                                                     3.4%                4.9%
Expected volatility                                                                          37 %                 40%
Dividend yield                                                                               --                  --
Weighted average fair value                                                  $             1.15  $             1.51

The Company used the Black-Scholes option pricing model for determining the estimated fair value for
stock options and stock-based awards. The fair value of stock options and other stock-based awards granted in the first quarters of
fiscal 2009 and 2008 was estimated using the following weighted-average assumptions:
Stock Benefit Plans Activities

Equity Incentive Plans: A summary of option activity under all of the Company's equity incentive plans as
of June 30, 2008 and changes during the first quarter of fiscal 2009 was as follows:

Weighted
                                                                                          Average
                                                                            Weighted     Remaining
                                                                            Average     Contractual    Aggregate
                                                                            Exercise       Term        Intrinsic
                                                               Shares        Price        (Years)        Value
                                                            ------------  ------------  ------------  ------------
                                                       (in thousands, except exercise price and contractual terms)
Outstanding at March 31, 2008                                     8,979          6.67
    Granted                                                           6          3.29
    Exercised                                                        (2)         1.42
    Forfeited and cancelled                                      (1,144)         6.27
                                                            ------------
Outstanding at June 30, 2008                                      7,839  $       6.73          3.12  $        191
                                                            ============  ============  ============  ============
Options vested and expected to vest at June 30, 2008              7,613  $       6.82          3.03  $        176
                                                            ============  ============  ============  ============

Options exercisable at June 30, 2008                              6,711  $       7.17          2.69  $        145
                                                            ============  ============  ============  ============


The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
awards and the price of the Company's common stock on The NASDAQ Global Market for the 0.3 million shares subject to options that
were in-the-money at June 30, 2008. During the first quarters of fiscal 2009 and 2008, the aggregate intrinsic value of options exercised
under the Company's equity incentive plans was zero and $0.1 million, respectively, determined as of the date of option exercise.   As
of June 30, 2008, the total unamortized stock-based compensation expense related to non-vested stock options, net of estimated
forfeitures, was $2.1 million, and this expense is expected to be recognized over a remaining weighted-average period of 2.12 years.

Restricted Stock Awards and Restricted Stock Units: Restricted stock awards and restricted stock
units have been granted under the Company's 2004 Equity Incentive Plan and 2006 Director Plan. The restricted stock awards and
restricted stock units are converted into shares of the Company's common stock upon vesting, while the Company's right to repurchase
shares of restricted stock lapses upon vesting.  As of June 30, 2008, there were 1.1 million shares of service-based restricted stock
awards and 0.2 million shares of restricted stock units outstanding, all of which are subject to forfeiture if employment terminates prior
to the release of restrictions.  Under the 2004 Equity Incentive Plan, restrictions generally lapse either (1) 50% one year from the date
of grant and the remainder at the second anniversary or (2) 100% one year from the date of grant. Under the 2006 Director Plan,
restrictions generally lapse either (1) one year from the date of grant for existing non-employee directors or (2) one year from the date
of grant with respect to one-third of the shares and quarterly thereafter for the next two years for the balance of the shares for initial
grants to new non-employee directors. The cost of these awards, determined to be the fair market value of the shares at the date of
grant, is expensed ratably over the period the restrictions lapse.

A summary of activity for restricted stock awards and restricted stock units as of June 30, 2008 and changes
during the first quarter of fiscal 2009 was as follows:

Weighted
                                                                                                       Average
                                                                                                      Grant-Date
                                                                                                         Fair
                                                                                    Shares              Value
                                                                              ------------------  ------------------
                                                                                  (in thousands, except weighted
                                                                                   average grant-date fair value)
Nonvested stock at March 31, 2008                                                         1,985  $             3.64
Granted                                                                                      --                  --
Vested                                                                                     (189)               4.09
Forfeited                                                                                  (544)               3.64
                                                                              ------------------
Nonvested stock at June 30, 2008                                                          1,252  $             3.57
                                                                              ==================


As of June 30, 2008, the total unrecognized compensation expense related to non-vested restricted stock
awards and restricted stock units that are expected to vest, net of estimated forfeitures, was $1.9 million.  This expense is expected to
be recognized over a remaining weighted-average period of 0.6 years.

4. Business Dispositions

Snap Server NAS business:

On June 27, 2008, the Company entered into an asset purchase agreement with Overland Storage, Inc.
("Overland") for the sale of the Snap Server portion of the Company's SSG segment ("Snap Server NAS
business") for $3.3 million, of which $2.1 million was received by the Company upon the closing of the transaction and the
remaining $1.2 million is to be received on the twelve-month anniversary of the closing of the transaction.  Overland purchased all
inventory and fixed assets related to the Snap Server NAS business and assumed service and support liabilities. Under the terms of the
agreement, Overland granted the Company a nonexclusive license to certain intellectual property and the Company will be providing
Overland limited support services to help ensure a smooth transition. Expenses incurred in the transaction primarily include
approximately $0.5 million for broker, legal and accounting fees.  In addition, the Company accrued $0.1 million for lease obligations.
The Company recorded a gain of $5.8 million on the disposal of the Snap Server NAS business in the first quarter of fiscal 2009 in
"Income from disposal of discontinued operations, net of taxes," in the Condensed Consolidated Statements of Operations.

Net revenues and the components of loss related to the Snap Server NAS business included in
discontinued operations, which were previously included in the Company's SSG segment, were as follow:

Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Net revenues                                                                 $            4,308  $            6,285
                                                                              ==================  ==================
Loss from discontinued operations
    before income taxes                                                      $             (734) $             (505)
Provision for income taxes                                                                   --                   1
                                                                              ------------------  ------------------
Loss from discontinued operations, net of taxes                              $             (734) $             (506)
                                                                              ==================  ==================

The components of net liabilities, at the time of the sale of the Snap Server NAS business, were as
follows:

June 30, 2008
                                                                                                  ------------------
                                                                                                    (in thousands)
Inventories                                                                                      $            1,466
Accounts receivable, net                                                                                       (466)
                                                                                                  ------------------
   Total current assets of discontinued operations                                                            1,000
                                                                                                  ------------------
Fixed Assets                                                                                                     53
                                                                                                  ------------------
   Total assets of discontinued operations                                                                    1,053
                                                                                                  ------------------

Accrued and other liabilities                                                                                (4,067)
                                                                                                  ------------------
   Total current liabilities of discontinued operations                                                      (4,067)
                                                                                                  ------------------
      Net liabilities of discontinued operations                                                 $           (3,014)
                                                                                                  ==================

Accounts receivable and accounts payable on the Condensed Consolidated Balance Sheet at June 30,
2008, related to the Snap Server NAS business, were not included in discontinued operations as the Company retained these assets
and liabilities; however, since Overland assumed service and support liabilities for deferred revenue, deferred margin and warranty, the
Company was relieved of these liabilities as well as certain sales returns and allowances contained in accounts receivable.

5. Balance Sheet Details

Inventories

The components of net inventories at June 30, 2008 and March 31, 2008 were as follows:

June 30, 2008       March 31, 2008
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Raw materials                                                                $               32  $              107
Work-in-process                                                                             470                 760
Finished goods                                                                            5,645               9,059
                                                                              ------------------  ------------------
    Inventories                                                              $            6,147  $            9,926
                                                                              ==================  ==================

Accrued and Other Liabilities:

The components of accrued and other liabilities at June 30, 2008 and March 31, 2008 were as
follows:

June 30, 2008       March 31, 2008
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Tax related                                                                  $            2,659  $              597
Acquisition related                                                                         713               2,587
Accrued compensation and related taxes                                                    5,341               5,439
Deferred margin                                                                             322               1,829
Other                                                                                     6,382               8,676
                                                                              ------------------  ------------------
    Accrued and other liabilities                                            $           15,417  $           19,128
                                                                              ==================  ==================


Other Intangible Assets, Net

During the fourth quarter of fiscal 2008, the Company recorded an impairment charge of $2.2 million,
which was recorded in "Other charges (gains)" in the Consolidated Statements of Operations, to write-off intangible assets
related to its Elipsan acquisition due to a revision in the Company's forecasts that resulted in expected negative long-term cash flows
for these assets for the first time. This charge brought the net carrying amount of the Company's "Other intangible assets,
net" in the Consolidated Balance Sheets to zero at March 31, 2008. For a complete discussion regarding other intangible assets,
net, including the components of other intangible assets, net at March 31, 2008, please refer to Note 5 of the Notes to Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008.  Amortization
of other intangible assets was $2.1 million in the first quarter of fiscal 2008.

6. Fair Value Measurements

On April 1, 2008, the Company partially adopted SFAS No. 157, which defines fair value, establishes a
framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value
measurements.  The partial adoption of SFAS No. 157, which related to all of the Company's recurring fair value measurements of
financial assets and financial liabilities, did not have a material impact on the Company's consolidated financial statements.  The
Company chose to delay the adoption of SFAS No. 157 related to non-recurring fair value measurements of non-financial assets and
non-financial liabilities until its fiscal 2010, in accordance with FSP FAS No. 157-2. For further discussion on FSP FAS No. 157-2,
please refer to Note 2 within this Quarterly Report on Form 10-Q.

SFAS No. 157 defines fair value as the price that would be received for selling an asset or paid to transfer
a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. SFAS No. 157 establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes levels 1 and 2 to value its financial assets and liabilities.  Level 1 instruments use
quoted prices in active markets for identical assets or liabilities while level 2 instruments use quoted prices in markets that are not
active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities. As of June 30, 2008, the Company did not have any assets or liabilities utilizing level 3 to value its financial assets and
liabilities, which is supported by little or no market activity and requires a high level of judgment to determine fair value.


Financial assets measured at fair value on a recurring basis at June 30, 2008 were as follows:

`Fair Value Measurements at
                                                                                      Reporting Date Using
                                                                              ----------------------------------

                                                                                Quoted Prices
                                                                                  in Active       Significant
                                                                                 Markets for         Other
                                                                                  Identical       Observable
                                                                                   Assets           Inputs
                                                                   Total          (Level 1)        (Level 2)
                                                              ---------------  ---------------  ---------------
                                                                                (in thousands)                 
Short-term deposits (1)                                      $       211,255  $       211,255  $            --
Corporate obligations (2)                                             25,178               --           25,178
United States government securities (2)                              140,837          140,837               --
Other debt securities (3)                                            255,174           67,123          188,051
                                                              ---------------  ---------------  ---------------
Total assets                                                 $       632,444  $       419,215  $       213,229
                                                              ===============  ===============  ===============`

____________

(1)

The components of interest and other income, net, for the first quarters of fiscal 2009 and 2008 were
as follows:

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)            
Interest income                                                              $            5,366  $            6,675
Foreign currency transaction gains (losses)                                                (104)                 10
Other                                                                                        --                  36
                                                                              ------------------  ------------------
Interest and other income, net                                               $            5,262  $            6,721
                                                                              ==================  ==================`

8. Restructuring Charges

In the first quarter of fiscal 2009, management approved and initiated a restructuring plan to (1) reduce its
operating expenses due to a declining revenue base, (2) streamline its operations and (3) better align its resources with its strategic
business objectives. This restructuring plan is expected to extend to actions taken throughout fiscal 2009 and will include workforce
reductions in all functions of the organization worldwide and consolidation of its facilities.  In the first quarter of fiscal 2009, the
Company recorded a restructuring charge of $1.8 million related to severance and related benefits.  The Company expects to incur
additional restructuring charges of approximately $2.0 million for the remainder of fiscal 2009 related to this plan, for a total estimated
restructuring charge of $3.8 million. All expenses, including adjustments, associated with the Company's restructuring plans are
included in "Restructuring charges" in the Condensed Consolidated Statements of Operations and are not allocated to
segments but rather managed at the corporate level.  For a complete discussion of
all restructuring actions that were implemented prior to fiscal 2009, please refer to Note 10 of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008.

The activity in the accrued restructuring reserves was as follows for the first quarter of fiscal 2009:

`Severance          Other
                                                                       and Benefits        Charges           Total
                                                                      ---------------  ---------------  ---------------
                                                                                       (in thousands)                   
Accrual balance at March 31, 2008                                    $            21  $         2,778  $         2,799
Q1'09 Restructuring Plan charges                                               1,837               --            1,837
Cash paid                                                                     (1,547)            (404)          (1,951)
                                                                      ---------------  ---------------  ---------------
Accrual balance at June 30, 2008                                     $           311  $         2,374  $         2,685
                                                                      ===============  ===============  ===============`

The Company anticipates that the remaining restructuring severance and benefits balance of $0.3 million at
June 30, 2008 will be substantially paid out by the second quarter of fiscal 2009 while the remaining restructuring other charges
balance of $2.4 million, relating primarily to long-term leases, will be paid out through the third quarter of fiscal 2012.  Of the remaining
restructuring accrual balance, $1.7 million was reflected in "Accrued and other liabilities" and $1.0 million "Other
long-term liabilities" in the Condensed Consolidated Balance Sheets.

The activity in the accrued restructuring reserves was as follows for the first quarter of fiscal 2008:

`Severance          Other
                                                                       and Benefits        Charges           Total
                                                                      ---------------  ---------------  ---------------
                                                                                       (in thousands)                   
Accrual balance at March 31, 2007                                    $           260  $         2,631  $         2,891
Q1'08 Restructuring plan charges                                               1,526               --            1,526
Cash paid                                                                     (1,152)            (124)          (1,276)
                                                                      ---------------  ---------------  ---------------
Accrual balance at June 30, 2007                                     $           634  $         2,507  $         3,141
                                                                      ===============  ===============  ===============`

9.  Other Charges (Gains)

In May 2007, the Company completed the sale of three buildings in Milpitas, California that were previously
classified as held for sale, with proceeds aggregating to $19.9 million, which exceeded the Company's carrying value of
$12.5 million. Net of selling costs, the Company recorded a gain of $6.7 million on the sale of the properties in the first quarter of
fiscal 2008 to "Other charges (gains)" in the Condensed Consolidated Statements of Operations.

The Company also recorded a charge of $0.8 million related to costs incurred to evaluate strategic options
in the first quarter of fiscal 2008 to "Other charges (gains)" in the Condensed Consolidated Statements of Operations.

10.  Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive
common shares outstanding during the period, which include certain stock-based awards and warrants, calculated using the treasury
stock method, and convertible notes which are potentially dilutive at certain earnings levels, and are computed using the if-converted
method.

A reconciliation of the numerator and denominator of the basic and diluted income (loss) per share
computations for continuing operations, discontinued operations and net income (loss) were as follows:

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                              (in thousands, except per share amounts)
Numerators:                                                                                                           
    Loss from continuing operations - basic and diluted                      $              (47) $           (3,129)
    Income (loss) from discontinued operations - basic and diluted                        5,060                (506)
                                                                              ------------------  ------------------
    Net income (loss) - basic and diluted                                    $            5,013  $           (3,635)
                                                                              ==================  ==================

Denominators:
    Weighted average shares outstanding - basic                                         119,192             117,897
    Effect of dilutive securities: Employee stock options and other                          --                  --
                                                                              ------------------  ------------------
    Weighted average shares outstanding - diluted                                       119,192             117,897
                                                                              ==================  ==================
Income (loss) per share:
    Basic
        Continuing operations                                                $            (0.00) $            (0.03)
        Discontinued operations                                              $             0.04  $            (0.00)
        Net income (loss)                                                    $             0.04  $            (0.03)
    Diluted
        Continuing operations                                                $            (0.00) $            (0.03)
        Discontinued operations                                              $             0.04  $            (0.00)
        Net income (loss)                                                    $             0.04  $            (0.03)`

Diluted loss per share for the first quarters of fiscal 2009 and 2008 was based only on the weighted-average
number of shares outstanding during each of the periods, as the inclusion of any common stock equivalents would have been
anti-dilutive. As a result, the same weighted average number of common shares outstanding during each of the periods was used to
calculate both the basic and diluted earnings per share.  In addition, in accordance with SFAS No. 128, the weighted average number
of common shares used to calculate the diluted earnings per share for income (loss) from continuing operations, net of taxes, during
each of the periods was also used to compute all other reported diluted earnings per share, even though it could result in
anti-dilution.

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)             
Outstanding employee stock options                                                        8,327              12,841
Outstanding restricted stock awards and units                                             1,685               1,121
Warrants(1)                                                                              19,724              19,724
3/4% Notes                                                                               19,224              19,224`

____________

(1)

11. Comprehensive Income (Loss)

The Company's comprehensive income (loss), net of taxes, which consisted of net income (loss) and
the changes in net unrealized losses on marketable securities and foreign currency translation adjustments, was as follows:

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)             
Net income (loss)                                                            $            5,013  $           (3,635)
Net unrealized losses on marketable securities, net of taxes                             (3,686)             (1,243)
Foreign currency translation adjustment, net of taxes                                      (424)                228
                                                                              ------------------  ------------------
Comprehensive income (loss), net of taxes                                    $              903  $           (4,650)
                                                                              ==================  ==================`

The Company has considered all available evidence and determined that the marketable securities in which
unrealized losses were recorded in the first quarter of fiscal 2009 were not deemed to be other-than-temporary. All unrealized losses
were due to changes in interest rates and bond yields.  The Company expects to realize the full value of all its marketable securities
upon maturity or sale.

The components of accumulated other comprehensive income, net of taxes, were as follows:

`June 30, 2008       March 31, 2008
                                                                              ------------------  ------------------
                                                                                           (in thousands)           
Unrealized gains (losses) on marketable securities, net of taxes             $           (1,266) $            2,420
Foreign currency translation, net of taxes                                                4,149               4,573
                                                                              ------------------  ------------------
    Accumulated other comprehensive income, net of taxes                     $            2,883  $            6,993
                                                                              ==================  ==================`

12. Income Taxes

The Company recorded a tax provision of $1.9
million and $0.2 million for the first quarters of fiscal 2009 and 2008, respectively.Income tax provisions for interim periods
are based on the Company's estimated annual income tax rate for entities that were profitable.  Entities that had operating losses with
no tax benefit were excluded. The estimated annual tax for fiscal years 2009 and 2008 includes foreign taxes related to the Company's
foreign subsidiaries, certain state minimum taxes and interest accrued on prior years' tax disputes and refund claims. For the first
quarter of fiscal 2009, the Company's tax provision included a change in judgment related to an uncertain tax position in a foreign
jurisdiction based on new information received during the quarter. The Company has concluded its ongoing negotiations with the IRS
taxing authorities with regard to its tax disputes for its fiscal years 1994 through
2003 and for the fiscal 2004 through 2006 audit cycle, as discussed below in Note 13.

As of June 30, 2008, the Company's total gross unrecognized tax benefits were $23.8 million, of which $6.4
million, if recognized, would affect the effective tax rate. The Company's gross unrecognized tax benefits increased by $2.4 million in
the first quarter of fiscal 2009 due to a change in judgment related to a foreign audit as a result of new information that the Company
received during the quarter. This increase in the Company's gross unrecognized tax benefits was partially offset by the recording of a
receivable of $0.7 million from a third party since the Company was partially indemnified by the third party for this tax matter and the
issue arose in years prior to the Company's acquisition of the entity under audit.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and
foreign jurisdictions. As of June 30, 2008, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities, fiscal
years 1998 onward remained open to examination in Singapore and fiscal years 2001 onward remained open to examination in various
other foreign jurisdictions.  U.S. tax attributes generated in tax years 2000 onward also remain subject to adjustment in subsequent
audits when they are utilized.  Management believes that events that could occur in the next 12 months and cause a material change in
unrecognized tax benefits include, but are not limited to, the following:





The calculation of unrecognized tax benefits involves dealing with uncertainties
in the application of complex global tax regulations. Management regularly assesses the Company's tax positions in light of legislative,
bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. Management does not
believe that it is reasonably possible that there will be any material changes in the Company's unrecognized tax benefits within the next
12 months.

13. Commitments and Contingencies

The Company was previously subject to IRS audits for its fiscal years 1994 through 2003. During the third
quarter of fiscal 2007, the Company reached resolution with the United States taxing authorities on all outstanding audit issues relating
to those fiscal years. However, the Company's tax provision continues to reflect judgment and estimation regarding components of the
settlement such as interest calculations and the application of the settlements to state and local taxing jurisdictions.  Although the
Company believes its tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in its
condensed consolidated financial statements and may cause a higher effective tax rate that could materially affect its income tax
provision, results of operations or cash flows in the period or periods for which such determination is made. In the first quarter of fiscal
2009, the IRS concluded its audit of the Company's federal income tax returns for the fiscal 2004 through 2006 audit cycle. The IRS
issued a No Change Report indicating no change to the Company's tax liability; however, the IRS continues to have the ability to adjust
tax attributes relating to these years in subsequent audits. The Company believes that it has provided sufficient tax provisions for these
years and the ultimate outcome of any future IRS audits that include the tax attributes will not have a material adverse impact on its
financial position or results of operations in future periods. However, the Company cannot predict with certainty how these matters will
be resolved and whether it will be required to make additional tax payments.

The Company is a party to other litigation matters and claims, including those related to intellectual property,
which are normal in the course of its operations, and while the results of such litigation matters and claims cannot be predicted with
certainty, the Company believes that the final outcome of such matters will not have a material adverse impact on its financial position
or results of operations. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be
unfavorable, the Company's business, financial condition, results of operations and cash flows could be materially and adversely
affected.

In connection with the Company's acquisition of Eurologic, a portion of the purchase price totaling $3.8 million
was held back (the "Eurologic Holdback") for unknown liabilities that may have existed as of the acquisition date.  The
Company paid $2.3 million of the Eurologic Holdback to the Eurologic shareholders in fiscal 2005 and retained the remaining $1.5
million for claims the Company asserted against the Eurologic Holdback. In the first quarter of fiscal 2009, the Company entered into a
Deed of Indemnity with the Representative of the Eurologic shareholders and released an additional $0.5 million of the Eurologic
Holdback.  The Company also entered into a written settlement agreement with the Representative of the Eurologic shareholders,
which resolved all of the Company's remaining disputed, outstanding claims against the Eurologic Holdback, which will result in a
payment of $0.8 million in the second quarter of fiscal 2009.  The remaining Eurologic Holdback balance of $0.2 million was retained by
the Company and was recognized as a gain in the first quarter of fiscal 2009 in "Loss from discontinued operations, net of
taxes" in the Condensed Consolidated Statement of Operations.



14. Guarantees

Intellectual Property and Other Indemnification Obligations

The Company has entered into agreements with customers and suppliers that include intellectual
property indemnification obligations. These indemnification obligations generally require the Company to compensate the other party for
certain damages and costs incurred as a result of third party intellectual property claims arising from these transactions. In each of
these circumstances, payment by the Company is conditional on the other party making a claim pursuant to the procedures specified in
the particular contract, which procedures typically allow the Company to challenge the other party's claims. Further, the Company's
obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have
recourse against third parties for certain payments made by it under these agreements. In addition, the Company has agreements
whereby it indemnifies its directors and certain of its officers for certain events or occurrences while the officer or director is, or was,
serving at the Company's request in such capacity. These indemnification agreements are not subject to a maximum loss clause;
however, the Company maintains a Director and Officer insurance policy which may cover all or a portion of the liabilities arising from
its obligation to indemnify its directors and officers.

Product Warranty

The Company provides an accrual for estimated future warranty costs based upon the historical relationship
of warranty costs to sales. The estimated future warranty obligations related to product sales are recorded in the period in which the
related revenue is recognized. The estimated future warranty obligations are affected by sales volume, product failure rates, material
usage and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage or replacement costs
differ from the Company's estimates, revisions to the estimated warranty obligations would be required; however, the Company made
no adjustments to pre-existing warranty accruals in the first quarters of fiscal 2009 and 2008.

A reconciliation of the changes to the Company's warranty accrual for the first quarters of fiscal 2009 and 2008
was as follows:

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)           
Balance at beginning of period                                               $              741  $              950
Warranties provided                                                                         454                 951
Actual costs incurred                                                                      (547)               (911)
Warranties classified as accrued and other liabilities
   of discontinued operations                                                              (154)                 --
                                                                              ------------------  ------------------
Balance at end of period                                                     $              494  $              990
                                                                              ==================  ==================`

15. Settlement with Steel Partners, L.L.C. and Steel Partners II, L.P.

On October 26, 2007, the Company, Steel Partners, L.L.C. and Steel Partners II, L.P. (together,
"Steel") entered into an agreement (the "Settlement Agreement") ending the election contest that was to occur at the Company's 2007
Annual Meeting of Stockholders (the "Annual Meeting"). Steel beneficially owned approximately 15% of the Company's common stock
as of December 31, 2007.

In December 2007, the Company held the Annual Meeting, at which the Company's stockholders elected
nine directors to the Company's Board of Directors. Of these nine directors, three of the directors, Jack L. Howard, John J. Quicke and
John Mutch, were nominated for election at the Annual Meeting by the Company pursuant to the terms of the Settlement Agreement.
Steel represented to the Company in the Settlement Agreement that Mr. Howard and Mr. Quicke may be deemed to be affiliates of
Steel under the rules of the Securities Exchange Act of 1934, but that Mr. Mutch was not an affiliate of Steel. Mr. Quicke was appointed
to the Company's Compensation Committee, Mr. Howard was appointed to the Company's Nominating and Governance Committee
and Mr. Mutch was appointed to the Company's Audit Committee. The Company compensated each of these directors, including the
two directors who are affiliates of Steel, with equity awards or equity based awards in amounts that are consistent with the Company's
Non-Employee Director Compensation Policy.   As of June 30, 2008, Steel beneficially owned approximately 17% of the Company's
common stock.

16. Segment Reporting

In the first quarter of fiscal 2009, the Company revised its
internal organizational structure in conjunction with the sale of its Snap Server NAS business.The Company's former SSG
segment provided (1) Snap Server branded file-based NAS storage systems, which were sold to end users through its network of
distribution partners, solution providers, e-tailers and VARs, and (2) block-based iSCSI storage solution products. The historical
financial results relating to the block-based iSCSI storage solution products of the Company's former SSG segment, which were
minimal to the Company's overall financial results, were retained and are now included with its DPS segment.  The remainder of the
Company's former SSG segment represented results from discontinued operations.

Following the revision to its internal reporting structure, the Company operated in one segment, DPS.  DPS
provides data protection storage products and currently sells all of the Company's storage technologies, including ASICs, board-level
products, RAID controllers, internal enclosures, sub-systems and stand-alone software. The Company sells these products directly to
OEMs, ODMs that supply OEMs, system integrators, VARs and end users through its network of distribution and reseller
channels.

17. Supplemental Disclosure of Cash Flows

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
                                                                                           (in thousands)
Non-cash investing and financial activities:                                                                        
Unrealized loss on available-for-sale securities                             $           (3,686) $           (1,243)`

18. Subsequent Events

In July 2008, the Company repurchased $69.9 million of its 3/4% Notes on the open market for an
aggregate price of $68.8 million, which is expected to result in a gain on extinguishment of debt of $0.9 million (net of unamortized debt
issuance costs of $0.2 million).

In July 2008, the Company's Board of Directors authorized a stock repurchase program to purchase
up to $40 million of the Company's common stock.

19. Glossary

The following is a list of business related acronyms that are contained within this Quarterly Report on
Form 10-Q. They are listed in alphabetical order.

- ASIC:
- ATA:
- CIFS:
- DPS:
- DSG:
- FTP:
- HTTP:
- I/O:
- IPsec:
- IRS:
- iSCSI:
- NAS:
- NFS:
- ODM:
- OEM:
- PCI:
- PCIe:
- PCI-X:
- RAID:
- SAS:
- SATA:
- SCSI:
- SMI-S:
- SSG:
- VAR:

The following is a list of accounting rules and regulations and related regulatory bodies referred to within this
Quarterly Report on Form 10-Q. They are listed in alphabetical order.

- APB:
- APB Opinion No. 25:
- ARB No. 51:
- EITF:
- EITF No. 07-1:
- FASB:
- FIN:
- FIN 48:
- FSP:
- FSP APB No. 14-1:
- FSP FAS No.
- FSP FAS No.
- SAB 107:
- SAB 110:

---



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and
uncertainties. The statements contained in this document that are not purely historical are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including,
without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding our business, including, but not
limited to, our anticipated declines in revenues from our parallel SCSI products and our serial products sold to our OEM customers, the
possibility that we might enter into strategic alliances, partnerships or acquisitions in order to scale our business, the expected impact
on our future revenues, and the timing of such impact, of our failure to receive design wins for the next generation serial products from
a significant customer, the total restructuring charges we expect to record due to our first quarter fiscal 2009 restructuring plan, the
possibility that additional significant charges may be recorded by us in the future in light of an ongoing strategic review of our business
by management, and our expected liquidity in future periods. We may identify these statements by the use of words such as
"anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "might," "plan," "potential," "predict,"
"project," "should," "will," "would" and other similar expressions. All forward-looking
statements included in this document are based on information available to us on the date hereof, and we assume no obligation to
update any such forward-looking statements, except as may otherwise be required by law.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result
of certain factors, including those set forth in the "Risk Factors" section and elsewhere in this document. In evaluating our
business, current and prospective investors should consider carefully these factors in addition to the other information set forth in this
report.

While management believes that the discussion and analysis in this report is adequate for a fair presentation of
the information presented, we recommend that you read this discussion and analysis in conjunction with our Annual Report on
Form 10-K/A for the fiscal year ended March 31, 2008.

Basis of Presentation

On June 27, 2008, we completed the sale of the Snap Server portion of our SSG segment, or Snap Server NAS
business, to Overland Storage, Inc., or Overland. This business has been accounted for as discontinued operations. Accordingly, we
have reclassified the underlying Unaudited Condensed Consolidated Statements of Operations and Cash Flows and related disclosures
for all periods presented to reflect the Snap Server NAS business as discontinued operations.  These reclassifications had no impact on
net income (loss), total assets or total stockholders' equity.  Unless otherwise indicated, and other than our Condensed Consolidated
Balance Sheet at March 31, 2008, the following discussion pertains only to our continuing operations.

We also revised our internal organizational structure in conjunction with the sale of our Snap Server NAS
business in June 2008. Our former SSG segment provided (1) Snap Server branded file-based NAS storage systems, which were sold
to end users through our network of distribution partners, solution providers, e-tailers and VARs, and (2) block-based iSCSI storage
solution products. The historical financial results relating to the block-based iSCSI storage solution products of our former SSG
segment, which were minimal to our overall financial results, were retained and are now included with our DPS segment.  The
remainder of our former SSG segment represented results from discontinued operations.  Following the revision to our internal
reporting structure, we now operate in one segment, DPS.

For your convenience, we have included, in Note 19 to the Notes to the Unaudited Condensed Consolidated
Financial Statements, a Glossary that contains a list of (1) key acronyms commonly used in our industry that are used in this
Quarterly Report and (2) accounting rules and regulations that are also referred to in this report. These key acronyms and
accounting rules and regulations are listed in alphabetical order.

Overview

In the first quarter of fiscal 2009, our net revenues decreased 13% as compared to the first quarter of fiscal
2008 primarily due to the declining revenue base of our parallel SCSI products. Our net revenues were further impacted by our inability
to obtain design wins from our OEM customers, primarily for our next generation serial products. We expect revenues from our parallel
SCSI and serial products sold to OEM customers to continue to decline in fiscal 2009. Our gross margins in the first quarter of fiscal
2009 improved to 47% compared to 32% in the first quarter of fiscal 2008 primarily due to favorable efficiencies with our suppliers and
contract manufacturer and improved standard product contributions.  In addition, we experienced a favorable product and customer mix
and had no further amortization of certain intangible assets after the second quarter of fiscal 2008. Operating expenses decreased in
the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 primarily as a result of cost reductions and restructuring
efforts that were initiated in previous quarters combined with additional attrition in our workforce.

Our future revenue growth remains largely dependent on the success of our new products addressing
unified serial technologies and growing our market share in the channel. We currently depend on a small number of large OEM
customers for a significant portion of our revenues, and we have been unsuccessful in obtaining designs wins from these customers.
We have evaluated this portion of our business, and we are only opportunistically pursuing future business from OEM customers with
our current product portfolio, as we believe the future growth opportunities for our current products are limited. As a result, we expect
the revenues obtained from large OEM customers to decline significantly in future periods.  Since the growth of our new generation of
serial products is not keeping pace with the decline in revenues from our parallel products and from our OEM customers, we may seek
growth opportunities in this market beyond those presented by our existing product lines by entering into strategic alliances,
partnerships or acquisitions in order to scale our business. This includes both strengthening our partnerships in silicon-based
technology and broadening our silicon-based intellectual property to improve our business opportunities. We also continue to review
and evaluate our existing product portfolio, operating structure and markets to determine the future viability of our existing products and
market positions.

We implemented a restructuring plan in the first quarter of fiscal 2009 that was designed to reduce our
operating expenses due to a declining revenue base, streamline our operations and better align our resources with our strategic
business objectives.  This restructuring plan is expected to extend to actions taken throughout fiscal 2009. We expect to incur additional
restructuring charges for the remainder of fiscal 2009 of approximately $2.0 million associated with this plan in "Restructuring
charges" in the Condensed Consolidated Statement of Operations. In light of an ongoing strategic review of our business by
management, additional significant charges may be recorded by us in the future.

Results of Operations

The following table sets forth the items in the Unaudited Condensed Consolidated Statements of Operations as
a percentage of net revenues (references to notes in the footnotes to this table are to the Notes to Unaudited Condensed Consolidated
Financial Statements appearing in this report):

The following actions affect the comparability of the data for the periods presented in the
above table:

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                   2008 (1)            2007 (2)
                                                                              ------------------  ------------------  
Net revenues                                                                                100 %               100 %
Cost of revenues                                                                             53                  68
                                                                              ------------------  ------------------
    Gross margin                                                                             47                  32
                                                                              ------------------  ------------------
Operating expenses:
    Research and development                                                                 19                  29
    Selling, marketing and administrative                                                    30                  37
    Amortization of acquisition-related intangible assets                                    --                   2
    Restructuring charges                                                                     6                   4
    Other charges (gains)                                                                    --                 (16)
                                                                              ------------------  ------------------
        Total operating expenses                                                             55                  56
                                                                              ------------------  ------------------
Loss from continuing operations                                                              (8)                (24)
Interest and other income, net                                                               17                  19
Interest expense                                                                             (3)                 (3)
                                                                              ------------------  ------------------
Income (loss) from continuing operations before income taxes                                  6                  (8)
Provisions for income taxes                                                                   6                   1
                                                                              ------------------  ------------------
Loss from continuing operations, net of taxes                                                (0)                 (9)
                                                                              ------------------  ------------------
Discontinued operations, net of taxes
    Loss from discontinued operations, net of taxes                                          (2)                 (1)
    Income from disposal of discontinued operations, net of taxes                            18                  --
                                                                              ------------------  ------------------
        Income (loss) from discontinued operations, net of taxes                             16                  (1)
                                                                              ------------------  ------------------
Net income (loss)                                                                            16 %               (10)%
                                                                              ==================  ==================`

____________

(1) In the first quarter of fiscal 2009, we implemented a restructuring plan and incurred restructuring
charges of $1.8 million. 

(2) In the first quarter of fiscal 2008, we recorded a gain of $6.7 million on the sale of certain properties and
implemented a restructuring plan and incurred restructuring charges of $1.5 million.

Net Revenues.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                          (in millions, except percentages)       

Net revenues                                                 $          31.5  $          36.1              (13)%`

Net revenues decreased by $4.6 million in the first quarter of fiscal 2009 compared to the first quarter of fiscal
2008, primarily due to a decline in sales volume of our parallel SCSI products of $4.8 million, and, to a lesser extent, a decline in sales
volume of our serial products sold to OEM customers of $3.1 million.  This was partially offset by an increase in average selling prices
and sales volumes of our serial products sold to channel customers of $3.7 million due to increased acceptance of these products at
our international locations.  The decline in sales volume of our parallel SCSI products was primarily attributable to the industry transition
from parallel to serial products, in which we have a lower market share.  The decline in sales volume of our serial products sold to OEM
customers was primarily attributable to the fact that certain of our OEM customers have moved to other suppliers to obtain next
generation serial technologies.  We expect net revenues for both our parallel SCSI and serial products sold to OEM customers to
continue to decline in future quarters.

`Three-Month Period Ended
                                                                                            June 30,
                                                                              --------------------------------------
                                                                                     2008                2007
                                                                              ------------------  ------------------
Geographical Revenues:                                                                                                
North America                                                                                39 %                42 %
Europe                                                                                       31 %                27 %
Pacific Rim                                                                                  30 %                31 %
                                                                              ------------------  ------------------
    Total Geographical Revenues                                                             100 %               100 %
                                                                              ==================  ==================`

Our North America revenues decreased as a percentage of our total revenues by 3% in the first quarter of fiscal
2009 compared to the first quarter of fiscal 2008 primarily due to a decline in product sales to our OEM customers.  Our combined
international revenues increased as a percentage of our total revenues by 3% in the first quarter of fiscal 2009 compared to the first
quarter of fiscal 2008 primarily due to increased sales and acceptance of our serial products sold primarily to channel and OEM
customers.

A small number of our customers account for a substantial portion of our net revenues, and we expect that
a limited number of customers will continue to represent a substantial portion of our net revenues for the foreseeable future. In the first
quarter of fiscal 2009, IBM and Ingram Micro accounted for 35% and 11% of our total net revenues, respectively.  In the first quarter of
fiscal 2008, IBM accounted for 42% of our total net revenues.

Gross Margin.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Gross Profit                                                 $          14.7  $          11.5               28 %
Gross Margin                                                              47 %             32 %`

The improvement in gross margins in the first quarter
of fiscal 2009 compared to the first quarter of fiscal 2008 was due to improved standard product contributions as a result of our
continued focus on product component costs and efficiencies gained with our contract manufacturer, our redesign of certain products to
improve cost efficiencies.  In addition, the improvement in gross margins was also due to the favorable product and customer mix we
achieved during the quarter, which was primarily driven by a shift in mix of 13% from OEM to channel customers, with channel
customers having higher average margins. In addition, our gross margins were further improved as certain intangible assets were fully
amortized by the second quarter of fiscal 2008.

Research and Development Expense.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Research and development                                     $           5.9  $          10.4              (43)%`

The decrease in research and development expense in the first quarter of fiscal 2009 compared to the first
quarter of fiscal 2008 was primarily due to reduced headcount and related expenses as a result of restructuring programs implemented
in fiscal 2008 combined with additional attrition in our workforce, which was reflected by a 46% decrease in headcount for employees
engaged in research and development.  We also decreased our infrastructure spending and had fewer engineering projects
outstanding.

Selling, Marketing and Administrative Expense.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Selling, marketing and administrative                        $           9.5  $          13.5              (29)%`

The decrease in selling, marketing and administrative expense in the first quarter of fiscal 2009 compared to the
first quarter of fiscal 2008 was primarily a result of reductions of our workforce and infrastructure spending as a result of the
restructuring plans we implemented in fiscal 2008, which resulted in a 37% decrease in our average headcount for employees engaged
in selling, marketing and administrative functions.

Amortization of Acquisition-Related Intangible Assets.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Amortization of acquisition-related intangible assets        $            --  $           0.6             (100)%`

Acquisition-related intangible assets include patents, core and existing technologies, and customer
relationships. We amortize the acquisition-related intangible assets over periods which reflect the pattern in which the economic
benefits of the assets are expected to be realized, which is primarily using the straight-line method over their estimated useful lives,
ranging from three months to five years.

The decrease in amortization of acquisition-related intangible assets in the first quarter of fiscal 2009 compared
to the first quarter of fiscal 2008 was primarily due to the fact that in the fourth quarter of fiscal 2008, we wrote off intangible assets
associated with our acquisition of Elipsan Limited due to a revision in our forecasts that resulted in expected negative long-term cash
flows for these assets for the first time.

Restructuring Charges.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Restructuring charges                                        $           1.8  $           1.5               20 %`

All expenses, including adjustments, associated with our restructuring plans are included in
"Restructuring charges" in the Condensed Consolidated Statements of Operations and are not allocated to segments but
rather managed at the corporate level.  For a complete discussion of all restructuring actions that were implemented prior to fiscal 2009,
please refer to Note 10 to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the fiscal
year ended March 31, 2008.

In the first quarter of fiscal 2009, management approved and initiated a restructuring plan to (1) reduce our
operating expenses due to a declining revenue base, (2) streamline our operations and (3) better align our resources with our strategic
business objectives.  This restructuring plan is expected to extend to actions taken throughout fiscal 2009 and will include workforce
reductions in all functions of the organization worldwide and consolidation of our facilities.  In the first quarter of fiscal 2009, we
recorded a restructuring charge of $1.8 million related to severance and related benefits. We expect to incur additional restructuring
charges of approximately $2.0 million for the remainder of fiscal 2009 related to this plan, for a total estimated restructuring charge of
$3.8 million.  By the end of the first quarter of fiscal 2009, we began to reduce our annual operating expenses by approximately $5.6
million as a result of this restructuring plan.  Approximately 14%, 26% and 60% of the restructuring cost savings were reflected as a
reduction in cost of revenues, research and development expense, and selling, marketing and administrative expense, respectively.



Other Charges (gains).

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Other charges (gains)                                        $            --  $          (5.9)            (100)%`

Other charges (gains) primarily consisted of asset impairment charges related to certain assets and gain on
sale of certain properties.

In May 2007, we completed the sale of three buildings in Milpitas, California that were previously classified as
held for sale, with proceeds aggregating to $19.9 million, which exceeded our carrying value of $12.5 million. Net of selling costs,
we recorded a gain of $6.7 million on the sale of the properties in the first quarter of fiscal 2008 to "Other charges (gains)" in
the Condensed Consolidated Statements of Operations.

We also recorded a charge of $0.8 million related to costs incurred to evaluate strategic options in the first
quarter of fiscal 2008 to "Other charges (gains)" in the Condensed Consolidated Statements of Operations.

Interest and Other Income, Net.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Interest and other income:
Interest income                                              $           5.4  $           6.7              (20)%
Realized currency transaction gains (losses)                            (0.1)             0.0               n/a
                                                              ---------------  ---------------
    Total interest and other income, net                                 5.3              6.7              (22)%
                                                              ===============  ===============`

Interest and other income, net is primarily attributable to interest income earned on our cash, cash
equivalents and marketable securities, realized gains and losses on marketable securities and fluctuations in foreign currency gains or
losses.  The decrease in interest and other income, net in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008 was
primarily due to lower interest rates, which resulted in lower interest income earned on our cash, cash equivalents and marketable
securities.

Interest Expense.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Interest expense                                             $          (0.8) $          (1.0)             (17)%`

Interest expense is primarily associated with our 3/4% Convertible Senior Notes due 2023, or the 3/4%
Notes, issued in December 2003. Interest expense remained relatively flat for the first quarter of fiscal 2009 compared to the first
quarter of fiscal 2008.

Income Taxes.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          
Provision for income taxes                                   $           1.9  $           0.2              794 %`

We recorded a tax provision of $1.9 million and $0.2 million for the first quarters of fiscal 2009 and 2008,
respectively.  Income tax provisions for interim periods are based on our estimated annual income tax rate for entities that were
profitable.  Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for fiscal years 2009 and
2008 includes foreign taxes related to our foreign subsidiaries, certain state minimum taxes and interest accrued on prior years' tax
disputes and refund claims. For the first quarter of fiscal 2009, our tax provision included a change in judgment related to an uncertain
tax position in a foreign jurisdiction based on new information received during the quarter. We have concluded our ongoing negotiations
with the IRS taxing authorities with regard to our tax disputes for our fiscal years 1994 through 2003 and for the fiscal 2004 through
2006 audit cycle, as discussed in Note 13 to the Notes to the Unaudited Condensed Consolidated Financial Statements.

As of June 30, 2008, our total gross unrecognized tax benefits were $23.8 million, of which $6.4 million, if
recognized, would affect the effective tax rate. Our gross unrecognized tax benefits increased by $2.4 million in the first quarter of fiscal
2009 due to a change in judgment related to a foreign audit as a result of new information that we received during the quarter. This
increase in our gross unrecognized tax benefits was partially offset by the recording of a receivable of $0.7 million from a third party
since we were partially indemnified by the third party for this tax matter and the issue arose in years prior to our acquisition of the entity
under audit.

We are subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign
jurisdictions. As of June 30, 2008, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities, fiscal years
1998 onward remained open to examination in Singapore and fiscal years 2001 onward remained open to examination in various other
foreign jurisdictions.  U.S. tax attributes generated in tax years 2000 onward also remain subject to adjustment in subsequent audits
when they are utilized.  Management believes that events that could occur in the next 12 months and cause a material change in
unrecognized tax benefits include, but are not limited to, the following:





The calculation of unrecognized tax benefits involves dealing with uncertainties
in the application of complex global tax regulations. Management regularly assesses our tax positions in light of legislative, bilateral tax
treaty, regulatory and judicial developments in the countries in which we do business. Management does not believe that it is
reasonably possible that there will be any material changes in our unrecognized tax benefits within the next 12 months.

Discontinued Operations.

`Three-Month Period Ended
                                                                                  June 30,
                                                              -------------------------------------------------
                                                                                                  Percentage
                                                                   2008             2007            Change
                                                              ---------------  ---------------  ---------------
                                                                       (in millions, except percentages)          

Income (loss) from discontinued operations, net of taxes     $           5.1  $          (0.5)              n/a`

On June 27, 2008, we entered into an asset purchase agreement with Overland for the sale of the Snap Server
NAS business for $3.3 million, of which $2.1 million was received by us upon the closing of the transaction and the remaining $1.2
million is to be received on the twelve-month anniversary of the closing of the transaction.  Overland purchased all inventory and fixed
assets related to the Snap Server NAS business and assumed service and support liabilities. Under the terms of the agreement,
Overland granted us a nonexclusive license to certain intellectual property and we will be providing Overland limited support services to
help ensure a smooth transition. Expenses incurred in the transaction primarily include approximately $0.5 million for broker, legal and
accounting fees.  In addition, we accrued $0.1 million for lease obligations. We recorded a gain of $5.8 million on the disposal of the
Snap Server NAS business in the first quarter of fiscal 2009 in "Income from disposal of discontinued operations, net of
taxes," in the Condensed Consolidated Statements of Operations and incurred a "Loss from discontinued operations, net of
taxes" of $0.7 million.

Liquidity and Capital Resources

Key Components of Cash Flows

Working Capital:

Working capital increased by $0.4 million to $425.1 million at June 30, 2008 from $424.7 million at March
31, 2008.  The increase in working capital was attributable to an increase in cash and cash equivalents, combined with marketable
securities of $5.4 million.

During the first quarter of fiscal 2009, accounts receivable and inventory decreased by $3.6 million and $3.8
million, respectively, primarily due to lower revenue levels, combined with improved efficiencies in our inventory and operations
management.

Operating Activities:

Operating cash activities consist of loss from continuing operations, net of taxes, adjusted for certain non-cash
items and changes in assets and liabilities. Non-cash items primarily consist of gain on the sale of long-lived assets, depreciation and
amortization of intangible assets, property and equipment, marketable securities and 3/4% Notes, and stock-based compensation
expense in accordance with SFAS No. 123(R).

Net cash provided by operating activities was $7.4 million in the first quarter of fiscal 2009 compared to cash
used by operating activities of $2.0 million in the first quarter of fiscal 2008.  The improvement to cash provided by operating activities
was primarily due to a decrease of $3.1 million in loss from continuing operations, net of taxes, from the first quarter of fiscal 2009
compared to the first quarter of fiscal 2008.

These items were partially offset by a non-cash charge associated with a gain on the sale of long-lived assets of
$6.7 million, which was recorded in the first quarter of fiscal 2008, and changes to working capital assets and liabilities that improved
cash provided by operating activities from continuing operations by $5.4 million, primarily related to improved collection efforts and
efficiencies in our inventory management.

Investing Activities:

Investing cash activities primarily consist of purchases, sales and maturities of restricted marketable securities
and marketable securities, proceeds from the sale of long-lived assets and purchases of property and equipment.  Net cash used in
investing activities was $11.0 million in the first quarter of fiscal 2009 compared to cash provided by investing activities of $59.6 million
in the first quarter of fiscal 2008.  The decrease was primarily due to proceeds received in the first quarter of fiscal 2008 from the sale of
long-lived assets of $19.9 million and an increase in purchases of marketable securities of $94.2 million.  This was partially offset by
sales and maturities of marketable securities of $41.9 million.

Financing Activities:

Financing cash activities consist of employee stock option exercises.  Net cash provided by financing activities
was minimal in the first quarter of fiscal 2009 compared to $0.6 million in the first quarter of fiscal 2008 primarily due to a decline in
stock option exercises, which was attributable to a large number of options held by our employees whose exercise prices were
substantially above the current market value of our common stock, combined with a reduction in our headcount.





At June 30, 2008, we had $225.4 million of aggregate principal amount plus a premium related to our
3/4% Notes that is due in December 2023. Each holder of the 3/4% Notes may require us to purchase all or a portion of our 3/4%
Notes on December 22, 2008 at a price equal to 100.25% of the par value of the 3/4% Notes to be purchased plus accrued and
unpaid interest. In addition, each holder of the 3/4% Notes may require us to purchase all or a portion of our 3/4% Notes on
December 22, 2013, on December 22, 2018 or upon the occurrence of a change of control (as defined in the indenture
governing the 3/4% Notes) at a price equal to the principal amount of 3/4% Notes being purchased plus any accrued and unpaid
interest. Subsequent to June 30, 2008, we repurchased $69.9 million of our 3/4% Notes on the open market for an aggregate price of
$68.8 million, which is expected to result in a gain on extinguishment of debt of $0.9 million (net of unamortized debt issuance costs of
$0.2 million).We expect the remaining holders of the 3/4% Notes to exercise their put option in December 2008.  If opportunities
to do so arise, we may complete additional open market purchases of our 3/4% Notes.

We are required to maintain restricted investments to serve as collateral for the first
ten scheduled interest payments on our 3/4% Notes. As of June 30, 2008, we had $0.8 million of restricted marketable
securities, consisting of United States government securities, which were classified as short-term.

We were previously subject to IRS audits for our fiscal years 1994 through 2003. During
the third quarter of fiscal 2007, we reached resolution with the United States taxing authorities on all outstanding audit issues relating to
those fiscal years. However, our tax provision continues to reflect judgment and estimation regarding components of the settlement
such as interest calculations and the application of the settlements to state and local taxing jurisdictions.  Although we believe our tax
estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our condensed consolidated
financial statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations
or cash flows in the period or periods for which such determination is made. In the first quarter of fiscal 2009, the IRS concluded its
audit of our federal income tax returns for the fiscal 2004 through 2006 audit cycle. The IRS issued a No Change Report indicating no
change to our tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent
audits. We believe that we have provided sufficient tax provisions for these years and the ultimate outcome of any future IRS audits that
include the tax attributes will not have a material adverse impact on our financial position or results of operations in future periods.
However, we cannot predict with certainty how these matters will be resolved and whether we will be required to make additional tax
payments.



As of June 30, 2008, we did not have any material changes to our contractual
obligations that were disclosed in the Liquidity section of our Form 10-K/A for the fiscal year ended March 31, 2008.

We believe that liquidity provided by our existing working capital, together with expected cash flows from
operations and available sources of equity and equipment financing, will be sufficient to support our operations through at least the next
twelve months. However, should prevailing economic conditions and/or financial, business and other factors beyond our control
adversely affect our estimates of our future cash requirements; we would be required to fund our cash requirements by alternative
financing. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all.

Recent Accounting Pronouncements

For a discussion on the impact of recently issued accounting pronouncements, please refer to Note 2
to the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Critical Accounting Policies

Our critical accounting policies have not changed from our fiscal year ended March 31, 2008.   For a complete
description of what we believe to be the critical accounting policies that affect our more significant judgments and estimates used in the
preparation of our condensed consolidated financial statements, please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations - Critical Accounting Policies in our Annual Report on Form 10-K/A for the fiscal year ended March
31, 2008.

Dispositions

On June 27, 2008, we entered into an asset purchase agreement with Overland for the sale of the Snap
Server NAS business for $3.3 million, of which $2.1 million was received by us upon the closing of the transaction and the remaining
$1.2 million is to be received on the twelve-month anniversary of the closing of the transaction.  Overland purchased all inventory and
fixed assets related to the Snap Server NAS business and assumed service and support liabilities. Under the terms of the agreement,
Overland granted us a nonexclusive license to certain intellectual property and we will be providing Overland limited support services to
help ensure a smooth transition. Expenses incurred in the transaction primarily include approximately $0.5 million for broker, legal and
accounting fees.  In addition, we accrued $0.1 million for lease obligations. We recorded a gain of $5.8 million on the disposal of the
Snap Server NAS business in the first quarter of fiscal 2009 in "Income from disposal of discontinued operations, net of
taxes," in the Condensed Consolidated Statements of Operations.

---



Item 3. Quantitative and Qualitative Disclosures About Market Risk

For financial market risks related to changes in interest rates, equity price and foreign currency exchange
rates, reference is made to Item 7A: "Quantitative and Qualitative Disclosures About Market Risk" contained in Part II
of our Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008.  Our exposure to market risk has not
changed materially since March 31, 2008.

---



Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer
(CEO) and our Chief Financial Officer (CFO), we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon
that evaluation, our CEO and our CFO have concluded that the design and operation of our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is
recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and
forms and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form
10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or
our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Our disclosure controls and procedures and our internal controls over financial reporting have been designed to
provide reasonable assurance of achieving their objectives. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

---



PART II. OTHER INFORMATION

Item 1. Legal Proceedings



We were previously subject to IRS audits for our fiscal years 1994 through 2003. During the third quarter of
fiscal 2007, we reached resolution with the United States taxing authorities on all outstanding audit issues relating to those fiscal years.
However, our tax provision continues to reflect judgment and estimation regarding components of the settlement such as interest
calculations and the application of the settlements to state and local taxing jurisdictions.  Although we believe our tax estimates are
reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our condensed consolidated financial
statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash
flows in the period or periods for which such determination is made. In the first quarter of fiscal 2009, the IRS concluded its audit of our
federal income tax returns for the fiscal 2004 through 2006 audit cycle. The IRS issued a No Change Report indicating no change to
our tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent audits. We
believe that we have provided sufficient tax provisions for these years and the ultimate outcome of any future IRS audits that include
the tax attributes will not have a material adverse impact on our financial position or results of operations in future periods. However, we
cannot predict with certainty how these matters will be resolved and whether we will be required to make additional tax payments.

---



Item 1A. Risk Factors

Our business faces significant risks. The risks described below may not be the only risks we face.
Additional risks that we do not yet know of or that we currently think are immaterial may also impair our results of operations and
financial condition.  If any of the events or circumstances described in the following risks actually occurs, our business, financial
condition or results of operations could suffer, and the trading price of our common stock could decline.

Actions that we have taken and the actions that we are considering could adversely affect our business
and financial results in the short-term, and may not have the long-term beneficial results that we intend. Our management team
continuously reviews and evaluates all aspects of our business, including our product portfolio, our relationships with strategic partners
and our research and development focus and sales and marketing efforts to better scale our operations relative to our cost basis.

The actions that we have taken and the actions that we are considering could adversely affect our business
and financial results in the short-term, may not have the long-term beneficial results that we intend and could result in the following:

- Loss of customers;
- Loss of employees;
- Increased dependency on suppliers;
- Supply issues;
- Reduced revenue base;
- Impairment of our assets;
- Increased operating costs;
- Material restructuring charges; and
- Loss of liquidity.

As our revenue base continues to decline from our current operations, we may choose to exit or divest some or
a substantial portion of our current operations to focus on new opportunities. Our management team continuously reviews and
evaluates our product portfolio, operating structure and markets to determine the future viability of our existing products and market
positions.  We may determine that the infrastructure and expenses necessary to sustain an existing business or product offering is
greater than the potential contribution margin that will be obtainable in the future. As a result, we may determine that it is in our interest
to exit or divest such existing business or product offering.  For example, in the first quarter of fiscal 2009, we sold our Snap Server
NAS business, which was the majority of our segment previously known as SSG, and reclassified all historical costs as discontinued
operations.  In fiscal 2007, we also decided not to invest further in our DSG business due to OEMs incorporating other connectivity
technologies directly into their products, the increased level of competition entering the market and the complexities of the retail
channel. As a result, we wound down the DSG business throughout fiscal 2007 and exited it at March 31, 2007. However, we may seek
growth opportunities beyond those presented by our existing product lines by entering into strategic alliances, partnerships or
acquisitions in order to scale our business, and we may not succeed in these efforts.

Our operations depend on the efforts of our workforce, particularly our executives, principal engineers
and other key employees, the loss of whom could affect the growth and success of our business.    In
order to be successful, we must retain and motivate our executives, our principal engineers and other key employees, including those in
managerial, technical, marketing and information technology support positions. In particular, our product generation efforts depend on
hiring and retaining qualified engineers. Competition for experienced management, technical, marketing and support personnel such as
these remains intense. Due to the general uncertainty regarding the outlook of our company, we implemented a retention plan during
fiscal 2008 in an effort to retain some of our key employees, and may do so again in the future.  To the extent we do not implement a
retention plan, we may experience a higher level of attrition of our key employees.  Furthermore, even if we do implement a retention
plan, it may not have the desired effect of retaining our key employees.  We must also continue to motivate all of our other employees
and keep them focused on our strategies and goals, which may be particularly difficult due to morale challenges posed by continued
workforce reductions as well as the uncertainty regarding the outlook of our company as revenues continue to decline. Each of our
employees is an "at-will" employee, and, as a result, any of our employees could terminate their employment with us at any
time without penalty and may seek employment with one or more of our competitors.  The loss of any of our key employees as well as a
high level of attrition from all our other employees could have a significant impact on our operations.

In order to execute our strategies, we may enter into strategic alliances with, partner with, invest in or
acquire companies with complementary or strategic products or technologies. Costs associated with these strategic alliances,
investments or acquisitions may adversely affect our results of operations. This impact could be exacerbated if we are unable to
integrate the acquired companies, products or technologies.     We may pursue strategic
transactions, partnerships, investments and acquisitions in order to scale our business as sales of our core parallel products continue to
decline. These may include both strengthening our partnerships in silicon-based technology and broadening our silicon-based
intellectual property to improve our business opportunities. In order to be successful in the strategic alliances, partnerships, investments
or acquisitions that we may enter into or make, we must:

- Conduct strategic alliances, partnerships, investments or acquisitions that enhance our time to market with new products;
- Successfully prevail over competing bidders for target strategic alliances, partnerships, investments or acquisitions at an
acceptable price;
- Invest in companies and technologies that contribute to the profitable growth of our business;
- Integrate acquired operations into our business and maintain uniform standards, controls and procedures;
- Retain the key employees of the acquired operations; and
- Develop the capabilities necessary to exploit newly acquired technologies.



The benefits of any strategic alliances, partnerships, investments or acquisitions may prove to be less than
anticipated and may not outweigh the costs reported in our financial statements, and we may not obtain the operational leverage or
realize the improvements we intend or desire with the actions we take.

Completing any potential future strategic alliances, partnerships, investments or acquisitions could cause
significant diversions of management time and resources and divert focus from the activities of our current operations. We may
encounter difficulty in integrating and assimilating the operations and personnel of the acquired companies into our operations or the
acquired technology and rights into our services. We may also lack the experience or expertise in the new products and markets, which
may impair the relationships with customers or suppliers of the acquired business. The acquisition of new operations may require us to
develop additional internal controls to support these new operations. We may experience material deficiencies or weaknesses in our
internal control over financial reporting as a result of the addition of new operations or due to changes to our internal controls, which
could have a material impact on our results of operations when corrected. Additionally, we may not be successful in overcoming these
risks or any other problems encountered in connection with these or other acquisitions, strategic alliances or investments, which could
result in an adverse impact on our ability to develop or sustain the acquired business.

If we acquire new businesses, products or technologies in the future, we may be required to assume
warranty claims or other contingent liabilities, including liabilities unknown at the time of acquisition, and amortize significant amounts of
other intangible assets and, over time, recognize significant charges for impairment of goodwill, other intangible assets or other losses.

If we consummate any potential future acquisitions in which the consideration consists of our common
stock or other securities, our existing stockholders' ownership may be significantly diluted. If we proceed with any potential future
acquisitions in which the consideration is cash, we may be required to use a substantial portion of our available cash. If we were to use
a substantial portion of our available cash, we might need to repatriate cash from our subsidiaries, which may cause us to incur
additional income taxes at a rate up to 40%, which is our blended (federal and state) statutory rate in the United States. In addition, we
may be required to invest significant resources in order to perform under a strategic alliance or partnership, or to complete an
acquisition or investment, which could adversely affect our results of operations, at least in the short-term, even if we believe the
acquisition, strategic alliance or investment will benefit us in the long-term.

If we are not successful in completing a strategic alliance or partnerships with or acquisition of
companies with complementary or strategic products or technologies, our future growth may be hindered. In order to scale our
operations relative to our cost basis, we may need to identify attractive strategic alliance, partnership or acquisition candidates and
complete a transaction with them. If we fail to identify and complete a successful strategic alliance, partnership or acquisition, we expect
that our revenues will continue to decline and we may be at a competitive disadvantage or we may be adversely affected by negative
market perceptions, any of which may have a material adverse effect on our financial results.

We currently depend on a small number of large OEM customers for a significant portion of our revenues, and
we have been unsuccessful in obtaining designs wins, which will prevent us from sustaining or growing our revenues from OEM
customers.  A small number of large OEMs have historically been responsible for a significant percentage of our revenues.
However, we have failed to secure design wins from these OEM customers in connection with their new products, which has adversely
affected our revenues and will continue to adversely affect our future revenues. For example, in the second quarter of fiscal 2008, a
significant customer notified us that we did not receive design wins for our next generation serial products, which will have a significant
negative impact on our revenues in future quarters. We have evaluated this portion of our business, and we are only opportunistically
pursuing future business from OEM customers with our current product portfolio, as the future growth opportunities for our current
products are limited.  As a result, we expect the revenues obtained from large OEM customers to continue to decline significantly in
future periods.

We depend on a few key customers and the loss of any of them could significantly reduce our net
revenues.  Historically, a small number of our customers have accounted for a significant portion of our net
revenues, and we expect that a limited number of customers will continue to represent a substantial portion of our net revenues for the
foreseeable future.  For example, in first quarter of fiscal 2009, IBM and Ingram Micro accounted for 35% and 11% of our total net
revenues, respectively, whereas in the first quarter of fiscal 2008, IBM accounted for 42% of our total net revenues.  We believe that our
major customers continually evaluate whether or not to purchase products from alternate or additional sources. Additionally, our
customers' economic and market conditions frequently change. Accordingly, we cannot assure you that a major customer will not
reduce, delay or eliminate its purchases from us, which would likely cause our revenues to decline. For example, in the second quarter
of fiscal 2008, a significant customer notified us that we did not receive design wins for our next generation serial products, which will
have a significant negative impact on our revenues in future quarters.  As our revenues from our large OEM customers continue to
decline, we will be dependent on our channel products and customers for future revenue growth. We do not carry credit insurance on
our accounts receivables and any difficulty in collecting outstanding amounts due from our customers, particularly customers that place
larger orders or experience financial difficulties, could adversely affect our revenues and our operating results. Because our sales are
made by means of standard purchase orders rather than long-term contracts, we cannot assure you that these customers will continue
to purchase quantities of our products at current levels, or at all.

If we do not meet our expense reduction goals, we may have to continue to implement additional restructuring
plans in order to reduce our operating costs.  This may cause us to incur additional material restructuring charges and result in adverse
effects on our employee capacities.    We have implemented several restructuring plans to reduce
our operating costs and recorded related restructuring charges of $1.8 million, $6.3 million, $3.7 million and $10.4 million in the first
quarter of fiscal 2009, and in fiscal years 2008, 2007 and 2006, respectively. These restructuring plans primarily involved the reduction
of our workforce and the closure of certain facilities, which included our manufacturing operations in Singapore in fiscal 2006. The goals
of our restructuring plans that were implemented prior to fiscal 2006 were to support future growth opportunities, focus on investments
that grow revenues and increase operating margins.  Our recent goals involve better alignment of our cost structure with our anticipated
revenue stream and improving our results of operations and cash flow. We have in the past not realized, and in the future may not
realize, the anticipated benefits of the restructuring plans we initiated.  To the extent that we do not meet our expense reduction goals,
we may be required to implement further restructuring plans, which may lead us to incur material restructuring charges.  Further, our
restructuring plans could result in a potential adverse effect on employee capabilities that could harm our efficiency and our ability to act
quickly and effectively in the rapidly changing technology markets in which we sell our products.

The impact of industry technology transitions and market acceptance of our new products may cause our
revenues to continue to decline. We have experienced a significant decline in our revenues as the industry continues to
transition from parallel to serial connectivity, as the revenues we generate from sales of our serial products has not grown at a fast
enough rate to offset declines in sales of our parallel products.  We expect this trend to continue in future periods. In addition, products
that we may develop may not gain sufficient market acceptance to offset the decline in revenues from certain of our existing products or
otherwise contribute significantly to revenues.  These factors, individually or in the aggregate, could cause our revenues to continue to
decline.

Our dependence on new products may cause our net revenues to fluctuate or
decline.    Our future success significantly depends upon our completing and introducing enhanced
and new products at competitive prices and performance levels in a timely manner. The success of new product introductions depends
on several factors, including the following:

- Designing products to meet customer needs;
- Product costs;
- Timely completion and introduction of new product designs;
- Quality of new products;
- Differentiation of new products from those of our competitors; and
- Market acceptance of our products.

Our product life cycles may be as brief as 12 months. As a result, we believe that we will continue to incur
significant expenditures for research and development in the future. We may fail to identify new product opportunities and may not
develop and bring new products to market in a timely manner. In addition, products or technologies developed by others may render
our products or technologies obsolete or noncompetitive, or our targeted customers may not select our products for design or
integration into their products. The failure of any of our new product development efforts could have an adverse effect on our business
and financial results.

We have introduced RAID-enabled products based on the next generation SATA technology and delivered our
products based on SAS technology to certain major customers for testing and integration. We will not succeed in generating
significant revenues from our new SATA and SAS technology products if the market does not adapt to these new technologies, which
would, over time, adversely affect our net revenues and operating results.

If we lose the cooperation of other hardware and software producers whose products are integral to ours, our
ability to sustain or grow our revenues could be adversely affected.    We must design our products to
operate effectively with a variety of hardware and software products supplied by other manufacturers, including the following:

- I/O and RAID ASICs;
- Microprocessors;
- Peripherals;
- Operating system software;
- Server motherboards; and
- Enclosures.

We depend on significant cooperation from these manufacturers to achieve our design objectives and develop
products that operate successfully with their products. These companies could, from time to time, elect to make it more difficult for us to
design our products for successful operability with their products. For example, if one or more of these companies were to determine
that as a result of competition or other factors, our products would not be broadly accepted by the markets we target, these companies
may no longer work with us to plan for new products and new generations of our products, which would make it more difficult to
introduce products on a timely basis or at all. Further, some of these companies might decide not to continue to offer products that are
compatible with our technology and our markets could contract. If any of these events were to occur, our revenues and financial results
could be adversely affected.

If we are unable to compete effectively, our net revenues and gross margins could be adversely
affected.    The markets for all of our products are intensely competitive and are characterized by the
following:

- Rapid technological advances;
- Frequent new product introductions;
- Evolving industry standards; and
- Price erosion.

We must continue to enhance our products on a timely basis to keep pace with market demands. If we do not
do so, or if our competition is more effective in developing products that meet the needs of our existing and potential customers, we
may lose market share and not participate in the future growth of our target markets. Revenues for our SATA products sold to our OEM
customers have declined and we expect these revenues to continue to decline, as our products are at the end of their life cycles and
certain of our customers have moved to other suppliers to obtain next generation SATA technologies. We also expect a significant
negative impact on our net revenues from our serial products in future quarters as a significant customer notified us in the second
quarter of fiscal 2008 that we did not receive design wins for our next generation serial products.

Our future revenue growth remains largely dependent on the success of our new products addressing unified
serial technologies and growing our market share in the channel, and our future operating results will be influenced by our ability to
participate in the development of the network storage market in which we face intense competition from other companies that are also
focusing on networked storage products. If we experience an incremental decline in our revenues beyond the declines anticipated, and
we are unable to effectively manage our inventory levels, we may be required to record additional inventory-related charges, which
would adversely impact our gross margins.

We cannot assure you that we will have sufficient resources to accomplish all of the following:

- Satisfy any growth in demand for our products;
- Make timely introductions of new products;
- Compete successfully in the future against existing or potential competitors; or
- Prevent price competition from eroding margins.

We depend on the efforts of our distributors, which if reduced, could result in a loss of sales of our
products in favor of competitive offerings.    We derived approximately 53% of our revenues for the
first quarter of fiscal 2009 from independent distributor and reseller channels. Our financial results could be adversely affected if our
relationships with these distributors or resellers were to deteriorate or if the financial condition of these distributors or resellers were to
decline.  We continue to monitor and evaluate our distributors and may terminate distributor relationships to improve our product
placement or improve distribution channels; however, the termination of a distributor may adversely affect our financial results in the
short term.

Our distributors generally offer a diverse array of products from several different manufacturers. Accordingly, we
are at risk that these distributors may give higher priority to selling products from other suppliers. A reduction in sales efforts by our
current distributors could adversely affect our business and financial results. For example, some of our distributors threatened to stop
selling our products or make pricing of our products non-competitive if we did not agree to absorb their costs to comply with the Waste
Electrical and Electronic Equipment Directive with respect to our products.  Our distributors build inventories in anticipation of future
sales, and if such sales do not occur as rapidly as they anticipate, our distributors will decrease the size of their product orders. If we
decrease our price protection or distributor-incentive programs, our distributors may also decrease their orders from us. In addition, we
have from time to time taken actions to reduce levels of products at distributors and may do so in the future. These actions may affect
our net revenues and negatively affect our financial results.

We depend on contract manufacturers and subcontractors, and if they fail to meet our manufacturing needs, it
could delay shipments of our products and result in the loss of customers or revenues and increased manufacturing costs, which would
have an adverse effect on our results.    We rely on contract manufacturers for manufacturing our
products and subcontractors for the assembly and packaging of the integrated circuits included in our products. On December 23,
2005, we entered into a three-year contract manufacturing agreement with Sanmina-SCI. Under this agreement, Sanmina-SCI
assumed manufacturing operations for the majority of our products.  The transition of the manufacturing facilities did not go as well as
we expected, as Sanmina-SCI experienced material shortages that impacted its ability to meet delivery commitments on a consistent
basis, which negatively impacted our net revenues and operating results in the first quarter of fiscal 2007. We continued to see an
impact in our channel penetration in the second and third quarters of fiscal 2007 as a result of not meeting the demands in the first
quarter of fiscal 2007. We must work closely with Sanmina-SCI to ensure that products are delivered on a timely basis. In addition, we
must ensure that Sanmina-SCI continues to provide quality products. If Sanmina-SCI is unwilling or unable to meet our supply needs,
including timely delivery and adherence to standard quality, we could lose customers or revenues and incur increased manufacturing
costs, which would have an adverse effect on our operating results.

Due to the nature of this relationship, and the continuous changes in the prices of components and parts, we
are in ongoing negotiations with Sanmina-SCI concerning product pricing. Any adverse outcome of future disputes concerning product
pricing could adversely impact our gross margins. We have no long-term agreements with our assembly and packaging subcontractors.
We also employ SMTC to manufacture certain ServeRAID products, SuperMicro to manufacture certain products, and Amkor
Technology and Advanced Semiconductor Engineering to final assemble and test operations related to our ASIC products. We cannot
assure you that these subcontractors will continue to be able and willing to meet our requirements for these components or services.
Any significant disruption in supplies from or degradation in the quality of components or services supplied by these contract
manufacturers and subcontractors could delay shipments and result in the loss of customers or revenues, which could have an adverse
effect on our financial results.

We are currently engaged in discussions regarding our manufacturing needs with Sanmina-SCI, as well as
other contract manufacturers, since our contract manufacturing agreement with Sanmina-SCI expires in December 2008.  As we
continue to evaluate our business and operations, we must take the necessary steps to ensure that the contract manufacturer we
choose aligns with our future strategic goals.  Factors that we need to consider include, but are not limited to, transition efforts, meeting
our supply needs and providing standard quality products.  If we choose a contract manufacturer that fails to meet the above factors, it
could delay shipments of our products and result in the loss of customers or revenues and increased manufacturing costs, which would
have an adverse effect on our operating and financial results.

We currently purchase all of the finished production silicon wafers and other key components used in
our products from suppliers, and if they fail to meet our manufacturing needs, it would delay our production and our product shipments
to customers and negatively affect our operations.    Independent foundries manufacture to our
specifications all of the finished silicon wafers used for our products. We currently purchase finished production silicon wafers used in
our products from Taiwan Semiconductor Manufacturing Company, or TSMC. In addition, we purchase some of our key components
used in our products from sole-source suppliers. The manufacture of semiconductor devices and other components are sensitive to a
wide variety of factors, including the following:

- The availability of raw materials;
- The availability of manufacturing capacity;
- Transition to smaller geometries of semiconductor devices;
- The level of contaminants in the manufacturing environment;
- Impurities in the materials used; and
- The performance of personnel and equipment.

We cannot assure you that manufacturing problems may not occur in the future. A shortage of raw
materials or production capacity could lead our suppliers to allocate available capacity to other customers. Any prolonged inability to
obtain wafers and other key components with competitive performance and cost attributes, adequate yields or timely deliveries would
delay our production and our product shipments, and could have an adverse effect on our business and financial results. We expect
that our suppliers will continually seek to convert their processes for manufacturing wafers and key components to more advanced
process technologies. Such conversions entail inherent technological risks that can affect yields and delivery times. If for any reason
the suppliers we use are unable or unwilling to satisfy our wafer and other key component needs, we will be required to identify and
qualify additional suppliers. Additional suppliers for wafers and other key components may be unavailable, may take significant
amounts of time to qualify or may be unable to satisfy our requirements on a timely basis.

Because our sales are made by means of standard purchase orders rather than long-term contracts, if
demand for our customers' products declines or if our customers do not control their inventories effectively, they may cancel or
reschedule shipments previously ordered from us or reduce their levels of purchases from us.    The
volume and timing of orders received during a quarter are difficult to forecast. Our customers generally order based on their forecasts
and they frequently encounter uncertain and changing demand for their products. If demand falls below such forecasts or if our
customers do not control their inventories effectively, they may cancel or reschedule shipments previously ordered from us. Our
customers have from time to time in the past canceled or rescheduled shipments previously ordered from us, and we cannot assure
you that they will not do so in the future. For example, in the third quarter of fiscal 2007, the demand for our products from certain OEM
customers substantially declined from their initial forecasts, which adversely affected our operating results. As our sales are made by
means of standard purchase orders rather than long-term contracts, we cannot assure you that these customers will continue to
purchase quantities of our products at current levels, or at all. Historically, we have set our operating budget based on forecasts of
future revenues because we do not have significant backlog. Because much of our operating budget is relatively fixed in the short-term,
if revenues do not meet our expectations, then our financial results will be adversely affected.

If we fail to adequately forecast demand for our products, we may incur excess product inventory costs and our
financial results will be adversely affected. We have a three-year contract manufacturing agreement with Sanmina-SCI to
manufacture a majority of our products, which expires in the third quarter of fiscal 2009. As the sales of our products are completed
through standard purchase orders rather than long-term contracts, we provide our contract manufacturer forecasts based on anticipated
future demand from our customers. To the extent that our customers' demands fall below their initial forecast and we are unable to sell
the product to another customer, and because our purchase commitment lead time to manufacture products with the contract
manufacturer is longer than the lead time for a customer to cancel or reschedule an order, we may be exposed to excess product
inventory costs and our financial results will be adversely affected.  For example, in the third quarter of fiscal 2007, we incurred
significant inventory-related charges of $7.8 million due to a significant decline in our revenue stream.

Our operating results have fluctuated in the past, and are likely to continue to fluctuate, and if our future results
are below the expectations of investors or securities analysts, the market price of our common stock would likely decline
significantly.    Our quarterly operating results have fluctuated in the past, and are likely to vary
significantly in the future, based on a number of factors related to our industry and the markets for our products. Factors that are likely
to cause our operating results to fluctuate include those discussed in this Risk Factors section.

Our operating expenses are largely based on anticipated revenues, and a large portion of our expenses,
including facility costs and salaries, are fixed in the short term. As a result, lower than anticipated revenues for any reason could cause
significant variations in our operating results from quarter to quarter.

Due to the factors summarized above, and the other risks described in this section, we believe that you should
not rely on period-to-period comparisons of our financial results as an indication of our future performance. In the event that our
operating results fall below the expectations of securities analysts or investors, the market price of our common stock could decline
substantially.

Our operating results may be adversely affected by unfavorable economic and market conditions and
the uncertain geopolitical environment.    Adverse economic conditions in some markets may impact
our business, which could result in:

- Reduced demand for our products;
- Increased price competition for our products;
- Increased risk of excess and obsolete inventories; and
- Higher operating costs as a percentage of revenues.

Demand for our products would likely be negatively affected if demand in the server and network storage
markets declines. It is difficult to predict future server sales growth, if any. In addition, other technologies may replace the technologies
used in our existing products and the acceptance of our products using new technologies in the market may not be widespread, which
could adversely affect our revenues.

Recently, political turmoil in many parts of the world, including terrorist and military actions, and changes in
energy costs have put, and may continue to put, pressure on global economic conditions.  In addition, economic conditions in the
United States and Western Europe have been challenged by slowing growth and the sub-prime debt devaluation crisis.  If global
economic conditions remain uncertain or deteriorate further, we may experience material adverse impacts on our business, operating
results and financial condition.

We may be subject to a higher effective tax rate that could negatively affect our results of operations and
financial position.    We are subject to income and other taxes in the United States and in the foreign
taxing jurisdictions in which we operate.  The determination of our worldwide provision for income taxes and current and deferred tax
assets and liabilities requires judgment and estimation and is subject to audit and redetermination by the taxing authorities.  Although
we believe our tax estimates are reasonable, the following factors could cause our effective tax rate to be materially different than tax
amounts recorded in our consolidated financial statements:

- The jurisdiction in which profits are determined to be earned and taxed;
- Adjustments to estimated taxes upon finalization of various tax returns;
- Changes in available tax credits;
- Changes in share-based compensation expense;
- Changes in tax laws, the interpretation of tax laws either in the United States or abroad or the issuance of new interpretative
accounting guidance related to uncertain transactions and calculations where the tax treatment was previously uncertain; and
- The resolution of issues arising from tax audits with various tax authorities.

The factors noted above may cause a higher effective tax rate that could materially affect our income tax
provision, results of operations or cash flows in the period or periods for which such determination is made.

We held approximately $103.1 million of cash, cash equivalents and marketable securities at our
subsidiaries in Singapore and Cayman Islands at June 30, 2008. During the fourth quarter of fiscal 2005, we repatriated
$360.6 million of cash from Singapore to the United States in connection with the American Jobs Creation Act of 2004 which
provided a one-time deduction of 85% for certain dividends from controlled foreign corporations. If the amount repatriated does not
qualify for the one-time deduction, we could incur additional income taxes at up to the United States federal statutory rate of 35%, which
would negatively affect our results of operations and financial condition.

Our reliance on industry standards and technological changes in the marketplace may cause our net
revenues to fluctuate or decline.    The computer industry is characterized by various, evolving
standards and protocols. We design our products to conform to certain industry standards and protocols such as the following:

Technologies:

- ATA
- CIFS
- Fibre channel
- FTP
- HTTP
- IPsec
- iSCSI
- NFS
- PCI
- PCIe
- PCI-X
- RAID
- SAS
- SATA
- SCSI
- SMI-S

Operating Systems:

- Linux
- Macintosh
- Netware
- OS/2
- UNIX
- Windows

If user acceptance of these standards declines, or if new standards emerge, and if we do not anticipate these
changes and develop new products, these changes could adversely affect our business and financial results.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and
may adversely affect our business.   We may from time to time be subject to various state, federal, and
international laws and regulations governing the environment, including laws regulating the manufacture and distribution of chemical
substances and laws restricting the presence of certain substances in electronics products. For example, the European Parliament
enacted the Restriction of Hazardous Substances, or RoHS, directive, which restricts the sale of new electrical and electronic
equipment containing certain hazardous substances, including lead. We recorded an excess inventory expense of $1.9 million in fiscal
2006 related to the transition of our products to comply with the RoHS directive.  If any of our products that are designated to be RoHS
compliant are deemed to be non-compliant, we may suffer a loss of revenues, be unable to sell affected products in certain markets or
countries and be at a competitive disadvantage.

Similar legislation has been or may be enacted in other jurisdictions and countries.  If our products become non-
compliant with the various environmental laws and regulations, we could incur substantial costs which could negatively affect our
results of operations and financial position.

If we do not provide adequate support during our customers' design and development stage, or if we are
unable to provide such support in a timely manner, we may lose revenues to our
competitors.    Certain of our products are designed to meet our customers' specifications and, to the
extent we are not able to meet these expectations in a timely manner or provide adequate support during our customers' design and
development stage, our customers may choose to buy similar products from another company. If this were to occur, we may lose
revenues and market share to our competitors.

If there is a shortage of components used in our customers' products, our sales may decline, which could
adversely affect our results of operations and financial position.    If our customers are unable to
purchase certain components which are embedded into their products, their demand for our products may decline. In addition, we or
our customers may be impacted by component shortages if components that comply with the RoHS directive are not available. Similar
shortages of components used in our products or our customers' products could adversely affect our net revenues and financial results
in future periods.

Product quality problems could lead to reduced revenues and gross
margins.    We produce highly complex products that incorporate leading-edge technologies,
including both hardware and software. Software often contains "bugs" which can interfere with expected operations. We
cannot assure you that our pre-shipment testing programs will be adequate to detect all defects which might interfere with customer
satisfaction, reduce sales opportunities, or affect our gross margins if the costs of remedying the problems exceed reserves established
for that purpose. An inability to cure a product defect could result in the failure of a product line, and withdrawal, at least temporarily,
from a product or market segment, damage to our reputation, inventory costs, product reengineering expenses, and a material impact
on revenues and gross margins.

Our charter documents and Delaware law contain anti-takeover provisions that could prevent, discourage or
delay a change in control or management, which may affect the price of our common stock. Some provisions of our certificate
of incorporation and bylaws could have the effect of making it more difficult for a potential acquirer to acquire a majority of our
outstanding voting stock. These include completing procedural requirements for stockholders holding 5% of voting shares to take action
by written consent and restricting the ability of stockholders to call special meetings. In addition, the indenture relating to the 3/4%
Notes provides that in the event of certain changes in control, each holder of our 3/4% Notes will have the right to require us to
repurchase such holder's 3/4% Notes at a price equal to the principal amount of the 3/4% Notes being purchased, plus any accrued
and unpaid interest. We are also subject to provisions of Section 203 of the Delaware General Corporation Law which prohibits
us from engaging in any business combination with an interested stockholder for a period of three years from the date the person
became an interested stockholder, unless certain conditions are met. These restrictions could have the effect of delaying or preventing
a change of control or management.

Some of our products contain "open source" software, and any failure to comply with the terms of
one or more of these open source licenses could negatively affect our business.    Some of our
products are distributed with software licensed by its authors or other third parties under so-called "open source" licenses,
including, for example, the GNU General Public License, or GPL, GNU Lesser General Public License, or LGPL, the Mozilla Public
License, the BSD License and the Apache License. Some of those licenses may require as a condition of the license that we make
available source code for modifications or derivative works we create based upon, incorporating, or using the open source software,
that we provide notices with our products, and/or that we license such modifications or derivative works under the terms of a particular
open source license or other license granting third parties certain rights of further use. If an author or other third party that distributes
such open source software were to allege that we had not complied with the conditions of one or more of those open source licenses,
we could be required to incur legal expenses in defending against such allegations, and if our defenses were not successful we could
be enjoined from distribution of the products that contained the open source software and required to either make the source code for
the open source software available, to grant third parties certain rights of further use of our software, or to remove the open source
software from our products, which could disrupt our distribution and sale of some of our products. In addition, if we combine our
proprietary software with open source software in a certain manner, we could under some of the open source licenses, be required to
release the source code of our proprietary software. If an author or other third party that distributes open source software were to obtain
a judgment against us based on allegations that we had not complied with the terms of any such open source licenses, we could also
be subject to liability for copyright infringement damages and breach of contract for our past distribution of such open source software.

Our international operations involve a number of political, economic and other risks that could adversely affect
our ability to sell our products in certain countries, create local economic conditions that reduce demand for our products among our
target markets and expose us to potential disruption in the supply of necessary components.   Our international operations and
sales are subject to political and economic risks, including political instability, currency controls, and changes in import/export
regulations, tariffs and freight rates. Many of our subcontractors are primarily located in Asia and we have sales offices and customers
located throughout Europe, Japan and other countries.  In addition, because our primary wafer supplier, TSMC, is located in
Taiwan, we may be subject to certain risks resulting from political instability in Taiwan, including conflicts between Taiwan and the
People's Republic of China. These and other international risks could result in the creation of political or other non-economic barriers to
our being able to sell our products in certain countries, create local economic conditions that reduce demand for our products among
our target markets, expose us to potential disruption in the supply of necessary components or otherwise adversely affect our ability to
generate revenues and operate effectively.  In addition, the operations of our remote locations are subject to management oversight
and control. If our business practices and corporate controls are not adhered to worldwide, our business and financial results could be
adversely affected.

We depend on third parties to transport our products.    We rely on
independent freight forwarders to move our products between manufacturing plants and our customers. Any transport or delivery
problems because of their errors, or because of unforeseen interruptions in their activities due to factors such as strikes, political
instability, terrorism, natural disasters and accidents, could adversely affect our business, financial condition and results of operations
and ultimately impact our relationship with our customers.

If actual results or events differ materially from those contemplated by us in making estimates and
assumptions, our reported financial condition and results of operations for future periods could be materially
affected.    The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. For example, we have identified key accounting estimates in our
Critical Accounting Policies in this Annual Report on Form 10-K/A, which include revenue recognition, inventory, stock-based
compensation and income taxes. Furthermore, Note 1 to the Consolidated Financial Statements in this Annual Report on Form
10-K/A describes the significant accounting policies essential to preparing our consolidated financial statements. The preparation of
these financial statements requires estimates and assumptions that affect the reported amounts and disclosures. Although we believe
that our judgments and estimates are appropriate and correct, actual future results may differ materially from our estimates.

If we are unable to protect and enforce our intellectual property rights, we may be unable to compete
effectively.    Although we actively maintain and defend our intellectual property rights, we may be
unable to adequately protect our proprietary rights. In addition, the laws of certain territories in which our products are or may be
developed, manufactured or sold, including Asia and Europe, may not protect our products and intellectual property rights to the same
extent as the laws of the United States. Because we conduct a substantial portion of our operations outside of the United States and
sell to a worldwide customer base, we are more dependent on our ability to protect our intellectual property in international
environments than would be the case if a larger portion of our operations were domestic.

Despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our
intellectual property, which could harm our business and ability to compete effectively. We have from time to time discovered counterfeit
copies of our products being manufactured or sold by others. Although we have programs to detect and deter the counterfeiting of our
products, significant availability of counterfeit products could reduce our revenues and damage our reputation and goodwill with
customers.

Third parties may assert infringement claims against us, which may be expensive to defend and could
divert our resources.    From time to time, third parties assert exclusive patent, copyright and other
intellectual property rights to our key technologies, and we expect to continue to receive such claims in the future. The risks of receiving
additional claims from third parties may be increased in periods when we begin to offer product lines employing new technologies
relative to our existing products.

We cannot assure you that third parties will not assert other infringement claims against us, directly or indirectly,
in the future, that assertions by third parties will not result in costly litigation or that we would prevail in such litigation or be able to
license any valid and infringed intellectual property from third parties on commercially reasonable terms. These claims may be asserted
in respect of intellectual property that we own or that we license from others. In addition to claims brought against us by third parties, we
may also bring litigation against others to protect our rights. Intellectual property litigation, regardless of the outcome, could result in
substantial costs to us and diversion of our resources and management time and attention, and could adversely affect our business and
financial results.

We may be required to pay additional federal income taxes which could negatively affect our results of
operations and financial position.     We were previously subject to IRS audits for our fiscal years
1994 through 2003. During the third quarter of fiscal 2007, we reached resolution with the United States taxing authorities relating to
those fiscal years. However, our tax provision continues to reflect judgment and estimation regarding components of the settlement
such as interest calculations and the application of the settlements to state and local taxing jurisdictions.  Although we believe our tax
estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our condensed consolidated
financial statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations
or cash flows in the period or periods for which such determination is made. In the first quarter of fiscal 2009, the IRS concluded its
audit of our federal income tax returns for the fiscal 2004 through 2006 audit cycle. The IRS issued a No Change Report indicating no
change to our tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent
audits. We believe that we have provided sufficient tax provisions for these years and that the ultimate outcome of any future IRS audits
that include the tax attributes will not have a material adverse impact on our financial position or results of operations in future periods.
However, we cannot predict with certainty how these matters will be resolved and whether we will be required to make additional tax
payments.

Future changes in financial accounting standards or practices or existing taxation rules or practices may
cause adverse unexpected revenue fluctuations and affect our reported results of operations.  A change in accounting
standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may
even affect our reporting of transactions completed before the change is effective.  New accounting pronouncements and taxation rules
and varying interpretations of accounting pronouncements and taxation practices have occurred and may occur in the future.  For
example, upon our adoption of FIN 48 on April 1, 2007, we revised our policy in conformity with the liability classification requirements
of FIN 48, which clarifies the accounting for uncertainty in income tax positions.  This interpretation requires that we recognize in our
financial statements the impact of a tax position if that position is more likely than not to be sustained on audit, based on the technical
merits of the position.  At June 30, 2008, we had recorded $6.9 million in "Other long-term liabilities" for uncertain tax
positions related to FIN 48 and we continue to recognize interest expense for, and or penalties related to, these uncertain tax positions
in the Condensed Consolidated Statement of Operations within "Provision for (benefit from) income taxes."

We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy
a significant amount of our management's time and attention.    From time to time we are subject to
litigation or claims that could negatively affect our business operations and financial position. Such disputes could cause us to incur
unforeseen expenses, could occupy a significant amount of our management's time and attention, and could negatively affect our
business operations and financial position.

We are exposed to fluctuations in foreign currency exchange
rates.    Because a significant portion of our business is conducted outside the United States, we face
exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices
evolve and could have an adverse impact on our financial results and cash flows. Historically, our exposures have related to
non-dollar-denominated operating expenses in Europe and Asia. We began Euro-denominated sales to our distribution customers in the European
Union in the fourth quarter of fiscal 2003. An increase in the value of the dollar could increase the real cost to our customers of our
products in markets outside the United States where we sell in dollars, and a weakened dollar could increase the cost of local operating
expenses and procurement.

We hold minority interests in privately held venture funds, and if these venture funds face financial
difficulties in their operations, our investments could be impaired.    We continue to hold minority
interests in privately held venture funds. At June 30, 2008, the carrying value of such investments aggregated $1.6 million. These
investments are inherently risky because these venture funds invest in companies that may still be in the development stage or depend
on third parties for financing to support their ongoing operations. In addition, the markets for the technologies or products of these
companies are typically in the early stages and may never develop. If these companies do not have adequate cash funding to support
their operations, or if they encounter difficulties developing their technologies or products, the venture funds' investments in these
companies may be impaired, which in turn, could result in impairment of our investment in these venture funds. For example, in fiscal
2007, we recorded a charge of $0.9 million relating to other-than-temporary decline in value of a minority investment.

Changes in securities laws and regulations have increased and may continue to increase our
costs.    Changes in the laws and regulations affecting public companies, including the provisions of
the Sarbanes-Oxley Act of 2002 and rules promulgated by the Securities and Exchange Commission, have increased and may
continue to increase our expenses as we devote resources to respond to their requirements. In particular, we incurred additional
administrative expense to implement Section 404 of the Sarbanes-Oxley Act, which requires management to report on, and our
independent registered public accounting firm to attest to, our internal control over financial reporting.

In addition, the NASDAQ Global Market, on which our common stock is listed, has also adopted comprehensive
rules and regulations relating to corporate governance. These laws, rules and regulations have increased and may continue to increase
the scope, complexity and cost of our corporate governance, reporting and disclosure practices. We also expect these developments
may make it more difficult and more expensive for us to obtain director and officer liability insurance in the future, and we may be
required to accept reduced coverage or incur substantially higher costs to obtain coverage. Further, our board members, Chief
Executive Officer and Chief Financial Officer could face an increased risk of personal liability in connection with the performance of their
duties. As a result, we may have difficultly attracting and retaining qualified board members and executive officers, which would
adversely affect our business.

Internal control deficiencies or weaknesses that are not yet identified could
emerge.    Over time we may identify and correct deficiencies or weaknesses in our internal control
over financial reporting and, where and when appropriate, report on the identification and correction of these deficiencies or
weaknesses. However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or
weaknesses are identified. Deficiencies or weaknesses that are not yet identified could emerge, and the identification and corrections of
these deficiencies or weaknesses could have a material impact on our results of operations.

Internal control issues that appear minor now may later become material
weaknesses.    We are required to publicly report on deficiencies or weaknesses in our internal
control over financial reporting that meet a materiality standard as required by law and related regulations and interpretations.
Management may, at a point in time, accurately categorize a deficiency or weakness as immaterial or minor and therefore not be
required to publicly report such deficiency or weakness. Such determination, however, does not preclude a change in circumstances
such that the deficiency or weakness could, at a later time, become a material weakness that could have a material impact on our
results of operations.

We may encounter natural disasters, which could cause disruption to our employees or interrupt the
manufacturing process for our products.    Our operations could be subject to natural disasters and
other business disruptions, which could seriously harm our revenues and financial condition and increase our costs and expenses. Our
corporate headquarters are located in California, near major earthquake faults. Additionally, our primary wafer supplier, TSMC, is
located in Taiwan, which has experienced significant earthquakes in the past. A severe earthquake could cause disruption to our
employees or interrupt the manufacturing process, which could affect TSMC's ability to supply wafers to us, which would negatively
affect our business and financial results. The ultimate impact on us and our general infrastructure of being located near major
earthquake faults is unknown, but our net revenues and financial condition and our costs and expenses could be significantly impacted
in the event of a major earthquake.

Manmade problems such as computer viruses or terrorism may disrupt our operations and harm our operating
results.    Despite our implementation of network security measures, our servers are vulnerable to
computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could
have an adverse effect on our business, operating results, and financial condition. In addition, the effects of war or acts of terrorism
could have an adverse effect on our business, operating results, and financial condition. In addition, as a company with headquarters
and significant operations located in the United States, we may be impacted by actions against the United States. We are
predominantly uninsured for losses and interruptions caused by terrorist acts and acts of war.

We may experience significant fluctuations in our stock price, which may, in turn, significantly affect the trading
price of our convertible notes.    Our stock has experienced substantial price volatility, particularly as
a result of quarterly variations in our operating results, the published expectations of securities analysts and as a result of
announcements by our competitors and us. In addition, the stock market has experienced price and volume fluctuations that have
affected the market price of many technology companies, in particular, and that have often been unrelated to the operating performance
of such companies. In addition, the price of our securities may also be affected by general global, economic and market conditions and
the cost of operations in one or more of our product markets. While we cannot predict the individual effect that these factors may have
on the price or our securities, these factors, either individually or in the aggregate, could result in significant variations in the price of our
common stock during any given period of time. These fluctuations in our stock price also impact the price of our outstanding 3/4%
Notes, and the likelihood of the 3/4% Notes being converted into our common stock.



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Item 6. Exhibits



|Exhibit
No. | Exhibit | Filed with
This 10-Q                                                                                 | Form | File No. | Filing Date | Exhibit
No. as
Filed
|----------- | ------- | ---------------------------------------------------------------------------------------------------- | ---- | -------- | ----------- | --------------------
|2.1         |         | Asset Purchase Agreement, dated June 27, 2008, by and between Overland Storage, Inc. and the
Company |      | 8-K      | 000-15071   | July 3, 2008        
|10.1        |         | Separation Agreement of Manoj Goyal, effective April 21, 2008                                        |      | 8-K      | 000-15071   | April 23, 2008      
|31.1        |         | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |                     
|31.2        |         | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |                     
|32.1        |         | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |                     
|            |         |                                                                                                      |      |          |             |                     

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SIGNATURES

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

|ADAPTEC, INC. |                                                                       
|------------- | ----------------------------------------------------------------------
|By:           | /s/ MARY L. DOTZ                                                      
|              | Mary L. Dotz                                                          
|              | Chief Financial Officer
(principal financial officer)                 
|By:           | /s/ JOHN M. WESTFIELD                                                 
|              | John M. Westfield                                                     
|              | Vice President and Corporate Controller
(principal accounting officer)

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EXHIBIT INDEX

|Exhibit
No. | Exhibit | Filed with
This 10-Q                                                                                 | Form | File No. | Filing Date | Exhibit
No. as
Filed
|----------- | ------- | ---------------------------------------------------------------------------------------------------- | ---- | -------- | ----------- | --------------------
|2.1         |         | Asset Purchase Agreement, dated June 27, 2008, by and between Overland Storage, Inc. and the Company |      | 8-K      | 000-15071   | July 3, 2008        
|10.1        |         | Separation Agreement of Manoj Goyal, effective April 21, 2008                                        |      | 8-K      | 000-15071   | April 23, 2008      
|31.1        |         | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |                     
|31.2        |         | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |                     
|32.1        |         | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                             | X    |          |             |