##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from       to       .
 Commission File Number: 000-23193
 
 APPLIED MICRO CIRCUITS CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction 
of incorporation or organization)
    
    94-2586591
(I.R.S. Employer
Identification No.)215 Moffett Park Drive, Sunnyvale, CA
(Address of principal executive offices)
    
    94089
(Zip code)
 Registrants telephone number, including area code: (408) 542-8600
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



APPLIED MICRO CIRCUITS CORPORATION
 INDEX
 PagePart I. FINANCIAL INFORMATION (unaudited)Item 1. Condensed Consolidated Balance Sheets at September 30, 2008 and March 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the three and six months
ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended
September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 3. Defaults Upon Senior Securities
    
    
    53Item 4. Submission of Matters to a Vote of Security Holders
    
    
    53Item 5. Other Information
    
    
    54Item 6. Exhibits
    
    
    54Signatures
    
    
    55EX-10.60EX-10.61EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



APPLIED MICRO CIRCUITS CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except par value)
 (unaudited)
 September 30,
    
    
    March 31,2008
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,809
    
    
    $
    42,689Short-term investments-available-for-sale
    
    
    131,839
    
    
    
    100,200Accounts receivable, net
    
    
    31,899
    
    
    
    28,800Inventories
    
    
    34,481
    
    
    
    37,966Other current assets
    
    
    9,400
    
    
    
    11,340Total current assets
    
    
    271,428
    
    
    
    220,995Marketable securities
    
    
    5,436
    
    
    
    51,919Property and equipment, net
    
    
    27,456
    
    
    
    25,995Goodwill
    
    
    264,130
    
    
    
    264,130Purchased intangibles, net
    
    
    44,221
    
    
    
    56,025Other assets
    
    
    14,673
    
    
    
    13,783Total assets
    
    $
    627,344
    
    
    $
    632,847LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    23,459
    
    
    
    25,518Accrued payroll and related expenses
    
    
    8,573
    
    
    
    6,087Other accrued liabilities
    
    
    11,925
    
    
    
    14,655Deferred revenue
    
    
    2,028
    
    
    
    1,917Total current liabilities
    
    
    45,985
    
    
    
    48,177Deferred tax liability
    
    
    4,397
    
    
    
    3,958Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par value:Authorized shares-2,000, none issued and outstandingCommon stock, $0.01 par value:Authorized shares-375,000 at September 30, 2008 and March 31, 2008Issued and outstanding shares-65,270 at September 30, 2008 and 64,779 at March 31, 2008
    
    
    653
    
    
    
    648Additional paid-in capital
    
    
    5,904,366
    
    
    
    5,896,616Accumulated other comprehensive loss
    
    
    (8,995
    )
    
    
    (4,976
    )Accumulated deficit
    
    
    (5,319,062
    )
    
    
    (5,311,576
    )Total stockholders equity
    
    
    576,962
    
    
    
    580,712Total liabilities and stockholders equity
    
    
    627,344
    
    
    
    632,847
 See Accompanying Notes to Condensed Consolidated Financial Statements
 3




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##### Table of Contents



APPLIED MICRO CIRCUITS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenues
    
    $
    76,931
    
    
    $
    58,210
    
    
    $
    150,991
    
    
    $
    108,345Cost of revenues
    
    
    35,981
    
    
    
    30,328
    
    
    
    71,831
    
    
    
    56,826Gross profit
    
    
    40,950
    
    
    
    27,882
    
    
    
    79,160
    
    
    
    51,519Operating expenses:Research and development
    
    
    24,461
    
    
    
    24,480
    
    
    
    47,942
    
    
    
    49,962Selling, general and administrative
    
    
    16,334
    
    
    
    15,850
    
    
    
    32,947
    
    
    
    31,913Amortization of purchased intangible assets
    
    
    1,320
    
    
    
    1,336
    
    
    
    2,640
    
    
    
    2,681Restructuring charges (reversal)
    
    
    140
    
    
    
    1,376
    
    
    
    (118
    )
    
    
    1,344Litigation settlement
    
    
    130
    
    
    
    
    
    
    
    130
    
    
    
    Option investigation, net
    
    
    (184
    )
    
    
    209
    
    
    
    163
    
    
    
    501Total operating expenses
    
    
    42,201
    
    
    
    43,251
    
    
    
    83,704
    
    
    
    86,401Operating loss
    
    
    (1,251
    )
    
    
    (15,369
    )
    
    
    (4,544
    )
    
    
    (34,882
    )Interest income (expense), net
    
    
    (814
    )
    
    
    2,128
    
    
    
    (2,216
    )
    
    
    5,176Other income, net
    
    
    264
    
    
    
    4,778
    
    
    
    339
    
    
    
    4,806Loss before income taxes
    
    
    (1,801
    )
    
    
    (8,463
    )
    
    
    (6,421
    )
    
    
    (24,900
    )Income tax expense (benefit)
    
    
    512
    
    
    
    (410
    )
    
    
    1,066
    
    
    
    (427
    )Net loss
    
    $
    (2,313
    )
    
    $
    (8,053
    )
    
    $
    (7,487
    )
    
    $
    (24,473
    )Basic and diluted net loss per share:Net loss per share
    
    $
    (0.04
    )
    
    $
    (0.12
    )
    
    $
    (0.12
    )
    
    $
    (0.35
    )Shares used in calculating basic and diluted net loss per share
    
    
    65,150
    
    
    
    68,783
    
    
    
    65,007
    
    
    
    69,599
 See Accompanying Notes to Condensed Consolidated Financial Statements
 4




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##### Table of Contents



APPLIED MICRO CIRCUITS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
 Six Months EndedSeptember 30,2008
    
    
    2007Operating activities:Net loss
    
    
    (7,487
    )
    
    $
    (24,473
    )Adjustments to reconcile net loss to net cash provided by (used for) operating activitiesDepreciation
    
    
    3,449
    
    
    
    3,227Amortization of purchased intangibles
    
    
    11,804
    
    
    
    11,956Investment impairment charge
    
    
    6,837
    
    
    
    Stock-based compensation expenseStock options
    
    
    3,703
    
    
    
    5,268Restricted stock units
    
    
    2,502
    
    
    
    649Net gain on sale of strategic equity investments
    
    
    
    
    
    
    (4,649
    )Net loss (gain) on disposal of property and equipment
    
    
    29
    
    
    
    (64
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,099
    )
    
    
    9,340Inventories
    
    
    3,485
    
    
    
    (9,195
    )Other assets
    
    
    1,050
    
    
    
    1,653Accounts payable
    
    
    (2,059
    )
    
    
    (12,582
    )Accrued payroll and other accrued liabilities
    
    
    (244
    )
    
    
    (4,506
    )Deferred taxes
    
    
    439
    
    
    
    Deferred revenue
    
    
    111
    
    
    
    6Net cash provided by (used for) operating activities
    
    
    20,520
    
    
    
    (23,370
    )Investing activities:Proceeds from sales and maturities of short-term investments and marketable securities
    
    
    339,602
    
    
    
    345,009Purchases of short-term investments and marketable securities
    
    
    (335,619
    )
    
    
    (286,191
    )Purchase of strategic investments
    
    
    
    
    
    
    (5,000
    )Net proceeds from the sale of strategic equity investments
    
    
    
    
    
    
    5,249Purchase of property, equipment and other assets
    
    
    (4,935
    )
    
    
    (3,314
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    1,646Net cash provided by (used for) investing activities
    
    
    (952
    )
    
    
    57,399Financing activities:Proceeds from issuance of common stock
    
    
    1,615
    
    
    
    3,286Repurchase of company stock
    
    
    
    
    
    
    (29,268
    )Funding of structured stock repurchase agreements
    
    
    
    
    
    
    (23,830
    )Funds received from structured stock repurchase agreement including gains
    
    
    
    
    
    
    13,237Other
    
    
    (63
    )
    
    
    (231
    )Net cash provided by (used for) financing activities
    
    
    1,552
    
    
    
    (36,806
    )Net increase (decrease) in cash and cash equivalents
    
    
    21,120
    
    
    
    (2,777
    )Cash and cash equivalents at the beginning of the period
    
    
    42,689
    
    
    
    51,595Cash and cash equivalents at the end of the period
    
    
    63,809
    
    
    $
    48,818Supplementary cash flow disclosure:Cash paid for:Interest
    
    $
    3
    
    
    $
    9Income taxes
    
    $
    555
    
    
    $
    338
 See Accompanying Notes to Condensed Consolidated Financial Statements
 5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Use of Estimates
  1-for-4 Reverse Stock Split
  Recent Accounting Pronouncements
 Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities
 Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active.
 6




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##### Table of Contents



The Fair Value Option for
Financial Assets and Financial Liabilities
 2. CERTAIN FINANCIAL STATEMENT INFORMATION
 Accounts receivable (in thousands):
 September30,
    
    
    March 31,2008
    
    
    2008Accounts receivable
    
    $
    33,427
    
    
    $
    30,113Less: allowance for doubtful accounts
    
    
    (1,528
    )
    
    
    (1,313
    )$
    31,899
    
    
    $
    28,800
 Inventories (in thousands):
 September 30,
    
    
    March 31,2008
    
    
    2008Finished goods
    
    $
    22,026
    
    
    $
    28,753Work in process
    
    
    8,908
    
    
    
    5,338Raw materials
    
    
    3,547
    
    
    
    3,875$
    34,481
    
    
    $
    37,966
 Other current assets (in thousands):
 September 30,
    
    
    March 31,2008
    
    
    2008Prepaid expenses
    
    $
    7,843
    
    
    $
    9,819Deposits
    
    
    424
    
    
    
    469Interest receivable
    
    
    332
    
    
    
    410Other
    
    
    801
    
    
    
    642$
    9,400
    
    
    $
    11,340
 Property and equipment (in thousands):
 Useful
    
    September 30,
    
    
    March 31,Life
    
    2008
    
    
    2008(in years)Machinery and equipment
    
    57
    
    $
    35,652
    
    
    $
    35,142Leasehold improvements
    
    115
    
    
    9,191
    
    
    
    8,364Computers, office furniture and equipment
    
    37
    
    
    54,320
    
    
    
    64,386Buildings
    
    31.5
    
    
    2,756
    
    
    
    2,756Land
    
    N/A
    
    
    9,800
    
    
    
    9,800111,719
    
    
    
    120,448Less: accumulated depreciation and amortization
    
    
    
    
    (84,263
    )
    
    
    (94,453
    )$
    27,456
    
    
    $
    25,995
 7




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##### Table of Contents



Purchased intangibles (in thousands):
 September 30, 2008
    
    
    March 31, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    AmortizationGross
    
    
    and Impairments
    
    
    Net
    
    
    Gross
    
    
    and Impairments
    
    
    NetDeveloped technology
    
    $
    425,000
    
    
    $
    (392,911
    )
    
    $
    32,089
    
    
    $
    425,000
    
    
    $
    (383,745
    )
    
    $
    41,255Backlog/customer relationships
    
    
    6,330
    
    
    
    (4,831
    )
    
    
    1,499
    
    
    
    6,330
    
    
    
    (4,687
    )
    
    
    1,643Patents/core technology rights/tradenames
    
    
    62,305
    
    
    
    (51,672
    )
    
    
    10,633
    
    
    
    62,305
    
    
    
    (49,178
    )
    
    
    13,127$
    493,635
    
    
    $
    (449,414
    )
    
    $
    44,221
    
    
    $
    493,635
    
    
    $
    (437,610
    )
    
    $
    56,025
  Cost of
    
    
    OperatingRevenue
    
    
    Expenses
    
    
    TotalFiscal year 2009 (remaining)
    
    $
    8,617
    
    
    $
    2,639
    
    
    $
    11,256Fiscal year 2010
    
    
    12,097
    
    
    
    4,018
    
    
    
    16,115Fiscal year 2011
    
    
    10,500
    
    
    
    4,018
    
    
    
    14,518Fiscal year 2012
    
    
    875
    
    
    
    852
    
    
    
    1,727Fiscal year 2013
    
    
    
    
    
    
    250
    
    
    
    250Thereafter
    
    
    
    
    
    
    355
    
    
    
    355Total
    
    $
    32,089
    
    
    $
    12,132
    
    
    $
    44,221
 Other assets (in thousands):
 September 30,
    
    
    March 31,2008
    
    
    2008Non-current portion of prepaid expenses
    
    $
    4,238
    
    
    $
    4,251Strategic investments
    
    
    7,000
    
    
    
    7,000Other
    
    
    3,435
    
    
    
    2,532$
    14,673
    
    
    $
    13,783
 Short-term investments and marketable securities:
  September 30,
    
    
    March 31,2008
    
    
    2008U.S. Treasury securities and agency bonds
    
    $
    10,453
    
    
    $
    8,838Corporate bonds
    
    
    11,004
    
    
    
    13,431Mortgage-backed and asset-backed securities*
    
    
    46,818
    
    
    
    52,837Closed-end bond funds
    
    
    50,228
    
    
    
    55,621Preferred stock and options
    
    
    18,772
    
    
    
    21,392$
    137,275
    
    
    $
    152,119
 
 *
    
    At September 30, 2008 and March 31, 2008, approximately $38.4 million and
$43.1 million of the amounts presented were mortgage-backed securities,
respectively. 8




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##### Table of Contents



September 30,
    
    
    March 31,2008
    
    
    2008Reported as:Short-term investments available-for-sale
    
    $
    131,839
    
    
    $
    100,200Marketable securities
    
    
    5,436
    
    
    
    51,919$
    137,275
    
    
    $
    152,119
  Less than 12 months of
    
    
    12 months or more ofunrealized losses
    
    
    unrealized losses
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury securities and agency bonds
    
    $
    6,781
    
    
    $
    (37
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,781
    
    
    $
    (37
    )Corporate bonds
    
    
    11,139
    
    
    
    (633
    )
    
    
    
    
    
    
    
    
    
    
    11,139
    
    
    
    (633
    )Mortgage-backed and asset-backed securities
    
    
    26,904
    
    
    
    (949
    )
    
    
    243
    
    
    
    (4
    )
    
    
    27,147
    
    
    
    (953
    )Closed-end bond funds
    
    
    36,456
    
    
    
    (5,645
    )
    
    
    5,193
    
    
    
    (1,153
    )
    
    
    41,649
    
    
    
    (6,798
    )Preferred stock and options
    
    
    4,297
    
    
    
    (502
    )
    
    
    
    
    
    
    
    
    
    
    4,297
    
    
    
    (502
    )$
    85,577
    
    
    $
    (7,766
    )
    
    $
    5,436
    
    
    $
    (1,157
    )
    
    $
    91,013
    
    
    $
    (8,923
    )
   Short-term investments and marketable securities, measured at fair value:
  Fair Value Measurement as of September 30,(In thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDescriptionUS Treasury securities and agency bonds
    
    $
    10,453
    
    
    $
    
    
    
    $
    
    
    
    $
    10,453Corporate bonds
    
    
    
    
    
    
    11,004
    
    
    
    
    
    
    
    11,004Mortgage backed and asset backed securities
    
    
    
    
    
    
    46,818
    
    
    
    
    
    
    
    46,818Closed-end bond funds
    
    
    50,228
    
    
    
    
    
    
    
    
    
    
    
    50,228Preferred stock and options
    
    
    
    
    
    
    18,772
    
    
    
    
    
    
    
    18,772$
    60,681
    
    
    $
    76,594
    
    
    $
    
    
    
    $
    137,275
  Fair Value Measurement as of September 30,(In thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssetsShort-term investments available-for-sale
    
    $
    55,245
    
    
    $
    76,594
    
    
    $
    
    
    
    $
    131,839Marketable securities
    
    
    5,436
    
    
    
    
    
    
    
    
    
    
    
    5,436$
    60,681
    
    
    $
    76,594
    
    
    $
    
    
    
    $
    137,275
 9




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##### Table of Contents



Other accrued liabilities (in thousands):
 September 30,
    
    
    March 31,2008
    
    
    2008Executive deferred compensation
    
    $
    3,435
    
    
    $
    3,558Employee related liabilities
    
    
    2,239
    
    
    
    2,475Warranty
    
    
    1,320
    
    
    
    1,475Professional fees
    
    
    1,046
    
    
    
    785Restructuring liabilities
    
    
    644
    
    
    
    1,578Current income taxes
    
    
    394
    
    
    
    322Other taxes
    
    
    93
    
    
    
    317Other
    
    
    2,754
    
    
    
    4,145$
    11,925
    
    
    $
    14,655
 Warranty reserves:
   Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Beginning accrual balance
    
    $
    1,507
    
    
    $
    2,507
    
    
    $
    1,475
    
    
    $
    2,692Charged to (reduction in) costs and expenses
    
    
    (66
    )
    
    
    (548
    )
    
    
    46
    
    
    
    (309
    )Charges incurred
    
    
    (121
    )
    
    
    (77
    )
    
    
    (161
    )
    
    
    (161
    )Adjustments to estimated liability
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    (340
    )Ending accrual balance
    
    $
    1,320
    
    
    $
    1,882
    
    
    $
    1,320
    
    
    $
    1,882
 Interest income (expense), net (in thousands):
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    2,639
    
    
    $
    3,081
    
    
    $
    5,093
    
    
    $
    6,243Net realized loss on
short-term
investments and
other-than-temporary
impairment on
investment securities
    
    
    (3,452
    )
    
    
    (947
    )
    
    
    (7,306
    )
    
    
    (1,058
    )Interest expense
    
    
    (1
    )
    
    
    (6
    )
    
    
    (3
    )
    
    
    (9
    )$
    (814
    )
    
    $
    2,128
    
    
    $
    (2,216
    )
    
    $
    5,176
  10




---



##### Table of Contents



Other income, net (in thousands):
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net (loss) gain on disposals
of property and equipment
    
    $
    
    
    
    $
    58
    
    
    $
    (29
    )
    
    $
    64Foreign currency loss
    
    
    
    
    
    
    (13
    )
    
    
    (1
    )
    
    
    (51
    )Gain on strategic investment*
    
    
    
    
    
    
    4,649
    
    
    
    
    
    
    
    4,649Other
    
    
    264
    
    
    
    84
    
    
    
    369
    
    
    
    144$
    264
    
    
    $
    4,778
    
    
    $
    339
    
    
    $
    4,806
 
 *
    
    The gain on strategic investment is from the sale of the Companys equity investment
in Mellanox Technologies, Ltd., an Israeli company listed on the Nasdaq Stock
Market. Net loss per share:
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (2,313
    )
    
    $
    (8,053
    )
    
    $
    (7,487
    )
    
    $
    (24,473
    )Shares used in basic and diluted net loss per share computation (denominator):Weighted average common shares outstanding
    
    
    65,150
    
    
    
    68,783
    
    
    
    65,007
    
    
    
    69,599Dilutive effect of stock options and restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used in basic and diluted net loss per share computation
    
    
    65,150
    
    
    
    68,783
    
    
    
    65,007
    
    
    
    69,599Basic and diluted net loss per share
    
    $
    (0.04
    )
    
    $
    (0.12
    )
    
    $
    (0.12
    )
    
    $
    (0.35
    )
  3. RESTRUCTURING CHARGES
  Facilities
    
    
    PropertyConsolidation and
    
    
    andWorkforce
    
    
    Operating Lease
    
    
    EquipmentReduction
    
    
    Commitments
    
    
    Impairments
    
    
    TotalLiability, March 31, 2007
    
    $
    350
    
    
    $
    
    
    
    $
    
    
    
    $
    350Charged to expense
    
    
    1,993
    
    
    
    853
    
    
    
    316
    
    
    
    3,162Cash payments
    
    
    (1,441
    )
    
    
    
    
    
    
    
    
    
    
    (1,441
    )Noncash charges
    
    
    
    
    
    
    
    
    
    
    (316
    )
    
    
    (316
    )Reductions to estimated liability
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    (177
    )Liability, March 31, 2008
    
    
    725
    
    
    
    853
    
    
    
    
    
    
    
    1,578Charged to expense
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    140Cash payments
    
    
    (588
    )
    
    
    (228
    )
    
    
    
    
    
    
    (816
    )Noncash charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reductions to estimated liability
    
    
    (258
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Liability, September 30, 2008
    
    $
    19
    
    
    $
    625
    
    
    $
    
    
    
    $
    644
 11




---



##### Table of Contents



Facilities
    
    
    PropertyConsolidation and
    
    
    andWorkforce
    
    
    Operating Lease
    
    
    EquipmentReduction
    
    
    Commitments
    
    
    Impairments
    
    
    TotalMarch 2006 Restructuring ProgramLiability, March 31, 2007
    
    $
    300
    
    
    $
    
    
    
    $
    
    
    
    $
    300Cash payments
    
    
    (155
    )
    
    
    
    
    
    
    
    
    
    
    (155
    )Reductions to estimated liability
    
    
    (145
    )
    
    
    
    
    
    
    
    
    
    
    (145
    )Liability, March 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    June 2006 Restructuring ProgramLiability, March 31, 2007
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Cash payments
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    (18
    )Reductions to estimated liability
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Liability, June 30, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    July 2007 Restructuring ProgramCharged to expense
    
    $
    733
    
    
    $
    
    
    
    $
    
    
    
    $
    733Cash payments
    
    
    (709
    )
    
    
    
    
    
    
    
    
    
    
    (709
    )Liability, March 31, 2008
    
    $
    24
    
    
    $
    
    
    
    $
    
    
    
    $
    24Reductions to estimated liability
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    (24
    )Liability, June 30, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    September 2007 Restructuring ProgramCharged to expense
    
    $
    812
    
    
    $
    
    
    
    $
    
    
    
    $
    812Cash payments
    
    
    (459
    )
    
    
    
    
    
    
    
    
    
    
    (459
    )Liability, March 31, 2008
    
    $
    353
    
    
    $
    
    
    
    $
    
    
    
    $
    353Cash payments
    
    
    (157
    )
    
    
    
    
    
    
    
    
    
    
    (157
    )Reductions to estimated liability
    
    
    (196
    )
    
    
    
    
    
    
    
    
    
    
    (196
    )Liability, September 30, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    March 2008 Restructuring ProgramCharged to expense
    
    $
    448
    
    
    $
    853
    
    
    $
    316
    
    
    $
    1,617Cash payments
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    (100
    )Noncash charge
    
    
    
    
    
    
    
    
    
    
    (316
    )
    
    
    (316
    )Liability, March 31, 2008
    
    $
    348
    
    
    $
    853
    
    
    $
    
    
    
    $
    1,201Cash payments
    
    
    (291
    )
    
    
    (228
    )
    
    
    
    
    
    
    (519
    )Reductions to estimated liability
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    (38
    )Liability, September 30, 2008
    
    $
    19
    
    
    $
    625
    
    
    $
    
    
    
    $
    644September 2008 Restructuring ProgramCharged to expense
    
    $
    140
    
    
    $
    
    
    
    $
    
    
    
    $
    140Cash payments
    
    
    (140
    )
    
    
    
    
    
    
    
    
    
    
    (140
    )Liability, September 30, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   12




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##### Table of Contents



4. COMPREHENSIVE LOSS
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (2,313
    )
    
    $
    (8,053
    )
    
    $
    (7,487
    )
    
    $
    (24,473
    )Change in net unrealized gain (loss) on
short-term investments and marketable securities
    
    
    (4,657
    )
    
    
    (4,102
    )
    
    
    (4,025
    )
    
    
    (4,221
    )Foreign currency translation adjustment loss
    
    
    7
    
    
    
    (226
    )
    
    
    6
    
    
    
    (422
    )Comprehensive loss
    
    $
    (6,963
    )
    
    $
    (12,381
    )
    
    $
    (11,507
    )
    
    $
    (29,116
    )
 5. STOCKHOLDERS EQUITY
 Preferred Stock
  13




---



##### Table of Contents



Common Stock
  Employee Stock Purchase Plan
  Stock Repurchase Program
  Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock
   Aggregate
    
    
    Repurchased
    
    
    Average PricePrice
    
    
    Shares
    
    
    Per ShareStock repurchase programAuthorized amount
    
    $
    200,000
    
    
    
    
    
    
    $
    Open market repurchases
    
    
    103,966
    
    
    
    8,856
    
    
    
    11.74Structured stock repurchase agreements*
    
    
    90,517
    
    
    
    7,797
    
    
    
    11.61Total repurchases
    
    $
    194,483
    
    
    
    16,653
    
    
    $
    11.68Available for repurchase
    
    $
    5,517
 
 *
    
    The amounts above do not include gains of $11.3 million from structured stock repurchase
agreements which settled in cash. The average price per share for structured stock repurchase
agreements adjusted for gains from settlements in cash would have been $10.16 share and for
total repurchases would have been $11.00 per share. 14




---



##### Table of Contents



Stock Options
  Share-Based
Payment
      15




---



##### Table of Contents



Weighted AverageNumber of Shares
    
    
    Exercise Price Per(in thousands)
    
    
    ShareOutstanding at the beginning of the period
    
    
    9,214
    
    
    $
    17.57Granted
    
    
    930
    
    
    
    7.80Exercised
    
    
    (33
    )
    
    
    2.62Cancelled
    
    
    (2,762
    )
    
    
    21.26Outstanding at the end of the period
    
    
    7,349
    
    
    $
    15.02Vested at the end of the period
    
    
    4,955
    
    
    $
    17.29
    Options Outstanding
    
    Options ExercisableWeightedAverageRemainingRange of
    
    
    
    
    
    Weighted
    
    Contractual
    
    
    
    
    
    WeightedExercise
    
    Number of
    
    Average
    
    Term
    
    Number of
    
    AveragePrices
    
    Shares
    
    Exercise Price
    
    (in years)
    
    Shares
    
    Exercise Price$ 0.19  $8.31
    
    
    1,616,505
    
    
    
    $   7.18
    
    
    
    7.37
    
    
    
    334,159
    
    
    
    $   4.778.88  12.16
    
    
    1,761,671
    
    
    
    11.57
    
    
    
    4.45
    
    
    
    1,341,939
    
    
    
    11.5012.20  14.12
    
    
    1,568,212
    
    
    
    13.12
    
    
    
    6.26
    
    
    
    1,265,820
    
    
    
    13.1514.13  19.80
    
    
    1,523,324
    
    
    
    15.27
    
    
    
    5.24
    
    
    
    1,134,484
    
    
    
    15.4020.36  300.13
    
    
    879,087
    
    
    
    39.29
    
    
    
    2.76
    
    
    
    879,087
    
    
    
    39.29$ 0.19  $300.13
    
    
    7,348,799
    
    
    
    $ 15.02
    
    
    
    5.44
    
    
    
    4,955,489
    
    
    
    $ 17.29
  Restricted Stock Units
  16




---



##### Table of Contents



Restricted Stock UnitsOutstandingNumber of Shares(in thousands)Balance at beginning of period
    
    
    1,200Awarded during the period
    
    
    952Vested during the period
    
    
    (220
    )Cancelled during the period
    
    
    (142
    )Balance at end of period
    
    
    1,790
   6. STOCK-BASED COMPENSATION
 Share-Based Payment
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock-based compensation expense by type of awardsStock options
    
    $
    1,593
    
    
    $
    2,929
    
    
    $
    3,703
    
    
    $
    5,268Restricted stock units
    
    
    1,404
    
    
    
    368
    
    
    
    2,502
    
    
    
    649Total stock-based compensation expense
    
    
    2,997
    
    
    
    3,297
    
    
    
    6,205
    
    
    
    5,917Stock-based compensation capitalized to (expensed from) inventory
    
    
    (64
    )
    
    
    48
    
    
    
    (64
    )
    
    
    192Total stock-based compensation
    
    $
    2,933
    
    
    $
    3,345
    
    
    $
    6,141
    
    
    $
    6,109
  Three Months Ended September 30,Employee StockEmployee Stock Options
    
    Purchase Plans2008
    
    2007
    
    2008
    
    2007Expected life (years)
    
    
    3.9
    
    
    
    3.9
    
    
    
    0.5
    
    
    
    0.5Risk-free interest rate
    
    
    3.0
    %
    
    
    4.6
    %
    
    
    1.9
    %
    
    
    5.0
    %Volatility
    
    
    43
    %
    
    
    49
    %
    
    
    43
    %
    
    
    55
    %Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Weighted average fair value per share
    
    $
    2.79
    
    
    $
    5.08
    
    
    $
    2.13
    
    
    $
    3.44
 17




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock-based compensation included in expenses:Cost of revenues
    
    $
    182
    
    
    $
    240
    
    
    $
    396
    
    
    $
    312Research and development
    
    
    1,098
    
    
    
    1,216
    
    
    
    2,435
    
    
    
    2,271Selling, general and administrative
    
    
    1,717
    
    
    
    1,841
    
    
    
    3,374
    
    
    
    3,334Total stock-based compensation expense
    
    $
    2,997
    
    
    $
    3,297
    
    
    $
    6,205
    
    
    $
    5,917Stock-based compensation capitalized to
(expensed from) inventory
    
    
    (64
    )
    
    
    48
    
    
    
    (64
    )
    
    
    192Total stock-based compensation
    
    $
    2,933
    
    
    $
    3,345
    
    
    $
    6,141
    
    
    $
    6,109
  7. CONTINGENCIES
 Legal Proceedings
  18




---



##### Table of Contents



Segen v. Rickey, et al
 8. INCOME TAXES
 Accounting for Uncertainty
in Income Taxes
   19




---



##### Table of Contents



9. PATENT PURCHASE AGREEMENT
    10. SUBSEQUENT EVENT
  20




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    Caution concerning forward-looking statements.This section discusses how
forward-looking statements made by us in the MD&A and elsewhere in this report are based on
managements present expectations about future events and are inherently susceptible to
uncertainty and changes in circumstances.
    
    Overview.This section provides an introductory overview and context for the discussion
and analysis that follows in the MD&A.
    
    Critical accounting policies.This section discusses those accounting policies that are
both considered important to our financial condition and operating results and require
significant judgment and estimates on the part of management in their application.
    
    Results of operations.This section provides an analysis of our results of operations
for the three and six months ended September 30, 2008 and 2007. A brief description is
provided of transactions and events that impact the comparability of the results being
analyzed.
    
    Financial condition and liquidity.This section provides an analysis of our cash
position and cash flows, as well as a discussion of our financing arrangements and
financial commitments.
 CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
  OVERVIEW
   21




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##### Table of Contents



Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    76,931
    
    
    
    100.0
    %
    
    $
    58,210
    
    
    
    100.0
    %
    
    $
    18,721
    
    
    
    32.2
    %Cost of revenues
    
    
    35,981
    
    
    
    46.8
    
    
    
    30,328
    
    
    
    52.1
    
    
    
    5,653
    
    
    
    18.6Gross profit
    
    
    40,950
    
    
    
    53.2
    
    
    
    27,882
    
    
    
    47.9
    
    
    
    13,068
    
    
    
    46.9Total operating expenses
    
    
    42,201
    
    
    
    54.9
    
    
    
    43,251
    
    
    
    74.3
    
    
    
    (1,050
    )
    
    
    (2.4
    )Operating loss
    
    
    (1,251
    )
    
    
    (1.7
    )
    
    
    (15,369
    )
    
    
    (26.4
    )
    
    
    14,118
    
    
    
    91.9Interest and other income (expense), net
    
    
    (550
    )
    
    
    (0.7
    )
    
    
    6,906
    
    
    
    11.9
    
    
    
    (7,456
    )
    
    
    (108.0
    )Loss before income taxes
    
    
    (1,801
    )
    
    
    (2.4
    )
    
    
    (8,463
    )
    
    
    (14.5
    )
    
    
    6,662
    
    
    
    78.7Income tax expense (benefit)
    
    
    512
    
    
    
    0.7
    
    
    
    (410
    )
    
    
    (0.7
    )
    
    
    922
    
    
    
    224.9Net loss
    
    $
    (2,313
    )
    
    
    (3.1
    )%
    
    $
    (8,053
    )
    
    
    (13.8
    )%
    
    $
    5,740
    
    
    
    71.3
    %
 Six Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    150,991
    
    
    
    100
    %
    
    $
    108,345
    
    
    
    100.0
    %
    
    $
    42,646
    
    
    
    39.4
    %Cost of revenues
    
    
    71,831
    
    
    
    47.6
    
    
    
    56,826
    
    
    
    52.4
    
    
    
    15,005
    
    
    
    26.4Gross profit
    
    
    79,160
    
    
    
    52.4
    
    
    
    51,519
    
    
    
    47.6
    
    
    
    27,641
    
    
    
    53.7Total operating expenses
    
    
    83,704
    
    
    
    55.4
    
    
    
    86,401
    
    
    
    79.8
    
    
    
    (2,697
    )
    
    
    (3.1
    )Operating loss
    
    
    (4,544
    )
    
    
    (3.0
    )
    
    
    (34,882
    )
    
    
    (32.2
    )
    
    
    30,338
    
    
    
    87.0Interest and other income (expense), net
    
    
    (1,877
    )
    
    
    (1.2
    )
    
    
    9,982
    
    
    
    9.2
    
    
    
    (11,859
    )
    
    
    (118.8
    )Loss before income taxes
    
    
    (6,421
    )
    
    
    (4.2
    )
    
    
    (24,900
    )
    
    
    (23.0
    )
    
    
    18,479
    
    
    
    74.2Income tax expense (benefit)
    
    
    1,066
    
    
    
    0.7
    
    
    
    (427
    )
    
    
    (0.4
    )
    
    
    1,493
    
    
    
    349.6Net loss
    
    $
    (7,487
    )
    
    
    (4.9
    )%
    
    $
    (24,473
    )
    
    
    (22.6
    )%
    
    $
    16,986
    
    
    
    69.4
    %
 Net Revenues.
   
    
    the timing, rescheduling or cancellation of significant customer orders and our
ability, as well as the ability of our customers, to manage inventory corrections;
 22




---



##### Table of Contents




    
    the qualification, availability and pricing of competing products and technologies and
the resulting effects on sales and pricing of our products.
    
    our ability to specify, develop or acquire, complete, introduce, and market new
products and technologies in a cost effective and timely manner;
    
    the rate at which our present and future customers and end-users adopt our products and
technologies in our target markets;
    
    general economic and market conditions in the semiconductor industry and communications
markets; and
    
    combinations of companies in our customer base, resulting in the combined company
choosing our competitors IC standardization other than our supported product platforms.
   Three Months Ended
    
    Six Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Avnet Inc.
    
    
    25
    %
    
    
    23
    %
    
    
    23
    %
    
    
    23
    %
   Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    26,041
    
    
    
    33.8
    %
    
    $
    20,378
    
    
    
    35.0
    %Other North America
    
    
    7,417
    
    
    
    9.6
    
    
    
    4,454
    
    
    
    7.7Europe
    
    
    13,530
    
    
    
    17.6
    
    
    
    12,459
    
    
    
    21.4Asia
    
    
    29,673
    
    
    
    38.6
    
    
    
    20,680
    
    
    
    35.5Other
    
    
    270
    
    
    
    0.4
    
    
    
    239
    
    
    
    0.4$
    76,931
    
    
    
    100
    %
    
    $
    58,210
    
    
    
    100.0
    %
 Six Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    50,972
    
    
    
    33.8
    %
    
    $
    38,941
    
    
    
    35.9
    %Other North America
    
    
    12,786
    
    
    
    8.5
    
    
    
    8,593
    
    
    
    7.9Europe
    
    
    27,480
    
    
    
    18.2
    
    
    
    22,696
    
    
    
    20.9Asia
    
    
    59,264
    
    
    
    39.2
    
    
    
    37,654
    
    
    
    34.8Other
    
    
    489
    
    
    
    0.3
    
    
    
    461
    
    
    
    0.5$
    150,991
    
    
    
    100
    %
    
    $
    108,345
    
    
    
    100.0
    %
  23




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##### Table of Contents



Net Loss.
 
    
    stock-based compensation expense;
    
    amortization of purchased intangibles;
    
    acquired in-process research and development (IPR&D);
    
    litigation settlement costs;
    
    restructuring charges;
    
    goodwill impairment charges;
    
    combinations of companies within our customer base;
    
    purchased intangible asset impairment charges;
    
    other-than-temporary impairment of short-term investments and marketable securities;
and
    
    income tax expense (benefit).
  CRITICAL ACCOUNTING POLICIES
   24




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##### Table of Contents



Inventory Valuation and Warranty Liabilities
   Goodwill and Intangible Asset Valuation
  Goodwill and Other Intangible
Assets.
  25




---



##### Table of Contents



Investments
 Accounting for Certain Investments in Debt and Equity Securities
 Fair Value of Financial Instruments
 Fair Value Measurements
  26




---



##### Table of Contents



Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active
 Restructuring Charges
  Valuation of Deferred Income Taxes
  27




---



##### Table of Contents



Stock-Based Compensation Expense
  Revenue Recognition
 Revenue
Recognition
  Allowance for Bad Debts
  28




---



##### Table of Contents



RESULTS OF OPERATIONS
 Comparison of the Three and Six Months Ended September 30, 2008 to the Three and Six Months Ended
September 30, 2007
 Net Revenues.
 Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeProcess
    
    $
    33,297
    
    
    
    43.3
    %
    
    $
    28,924
    
    
    
    49.7
    %
    
    $
    4,373
    
    
    
    15.1
    %Transport
    
    
    30,993
    
    
    
    40.3
    
    
    
    17,057
    
    
    
    29.3
    
    
    
    13,936
    
    
    
    81.7Store
    
    
    12,641
    
    
    
    16.4
    
    
    
    12,229
    
    
    
    21.0
    
    
    
    412
    
    
    
    3.4$
    76,931
    
    
    
    100.0
    %
    
    $
    58,210
    
    
    
    100.0
    %
    
    $
    18,721
    
    
    
    32.2
    %
 Six Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeProcess
    
    $
    67,194
    
    
    
    44.5
    %
    
    $
    48,225
    
    
    
    44.5
    %
    
    $
    18,969
    
    
    
    39.3
    %Transport
    
    
    58,295
    
    
    
    38.6
    
    
    
    34,648
    
    
    
    32.0
    
    
    
    23,647
    
    
    
    68.2Store
    
    
    25,502
    
    
    
    16.9
    
    
    
    25,472
    
    
    
    23.5
    
    
    
    30
    
    
    
    0.1$
    150,991
    
    
    
    100.0
    %
    
    $
    108,345
    
    
    
    100.0
    %
    
    $
    42,646
    
    
    
    39.4
    %
  Gross Profit
 Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeNet revenues
    
    $
    76,931
    
    
    
    100.0
    %
    
    $
    58,210
    
    
    
    100.0
    %
    
    $
    18,721
    
    
    
    32.2
    %Cost of revenues
    
    
    35,981
    
    
    
    46.8
    
    
    
    30,328
    
    
    
    52.1
    
    
    
    5,653
    
    
    
    18.6Gross profit
    
    $
    40,950
    
    
    
    53.2
    %
    
    $
    27,882
    
    
    
    47.9
    %
    
    $
    13,068
    
    
    
    46.9
    %
 Six Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeNet revenues
    
    $
    150,991
    
    
    
    100.0
    %
    
    $
    108,345
    
    
    
    100.0
    %
    
    $
    42,646
    
    
    
    39.4
    %Cost of revenues
    
    
    71,831
    
    
    
    47.6
    
    
    
    56,826
    
    
    
    52.4
    
    
    
    15,005
    
    
    
    26.4Gross profit
    
    $
    79,160
    
    
    
    52.4
    %
    
    $
    51,519
    
    
    
    47.6
    %
    
    $
    27,641
    
    
    
    53.7
    %
 29




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##### Table of Contents



Research and Development and Selling, General and Administrative Expenses
 Three Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeResearch and development
    
    $
    24,461
    
    
    
    31.8
    %
    
    $
    24,480
    
    
    
    42.1
    %
    
    $
    (19
    )
    
    
    (0.1
    )%Selling, general and administrative
    
    $
    16,334
    
    
    
    21.2
    %
    
    $
    15,850
    
    
    
    27.2
    %
    
    $
    484
    
    
    
    3.1
    %
 Six Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeResearch and development
    
    $
    47,942
    
    
    
    31.8
    %
    
    $
    49,962
    
    
    
    46.1
    %
    
    $
    (2,020
    )
    
    
    (4.0
    )%Selling, general and administrative
    
    $
    32,947
    
    
    
    21.8
    %
    
    $
    31,913
    
    
    
    29.5
    %
    
    $
    1,034
    
    
    
    3.2
    %
 Research and Development.
 Selling, General and Administrative.
 30




---



##### Table of Contents



Stock-Based Compensation
 Three Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeCosts of revenues
    
    $
    182
    
    
    
    0.2
    %
    
    $
    240
    
    
    
    0.4
    %
    
    $
    (58
    )
    
    
    (24.2
    )%Research and development
    
    
    1,098
    
    
    
    1.4
    
    
    
    1,216
    
    
    
    2.1
    
    
    
    (118
    )
    
    
    (9.7
    )Selling, general and administrative
    
    
    1,717
    
    
    
    2.3
    
    
    
    1,841
    
    
    
    3.2
    
    
    
    (124
    )
    
    
    (6.7
    )$
    2,997
    
    
    
    3.9
    %
    
    $
    3,297
    
    
    
    5.7
    %
    
    $
    (300
    )
    
    
    (9.1
    )%
 Six Months Ended September 30,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeCosts of revenues
    
    $
    396
    
    
    
    0.3
    %
    
    $
    312
    
    
    
    0.3
    %
    
    $
    84
    
    
    
    26.9
    %Research and development
    
    
    2,435
    
    
    
    1.6
    
    
    
    2,271
    
    
    
    2.1
    
    
    
    164
    
    
    
    7.2Selling, general and administrative
    
    
    3,374
    
    
    
    2.2
    
    
    
    3,334
    
    
    
    3.1
    
    
    
    40
    
    
    
    1.2$
    6,205
    
    
    
    4.1
    %
    
    $
    5,917
    
    
    
    5.5
    %
    
    $
    288
    
    
    
    4.9
    %
  Restructuring Charges
 Three Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeRestructuring charges
    
    $
    140
    
    
    
    0.2
    %
    
    $
    1,376
    
    
    
    2.4
    %
    
    $
    (1,236
    )
    
    
    (89.8
    )%
 Six Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeRestructuring charges (reversal)
    
    $
    (118
    )
    
    
    (0.1
    )%
    
    $
    1,344
    
    
    
    1.2
    %
    
    $
    (1,462
    )
    
    
    (108.8
    )%
  31




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##### Table of Contents



Option investigation and related expenses
 Three Months Ended September 30.2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeOption investigation, net
    
    $
    (184
    )
    
    
    0.2
    %
    
    $
    209
    
    
    
    0.4
    %
    
    $
    (393
    )
    
    
    (188.0
    )%
 Six Months Ended September 30.2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeOption investigation, net
    
    $
    163
    
    
    
    0.1
    %
    
    $
    501
    
    
    
    0.5
    %
    
    $
    (338
    )
    
    
    (67.5
    )%
  Interest and Other Income (Expense), net
 Three Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeInterest income (expense), net
    
    $
    (814
    )
    
    
    1.1
    %
    
    $
    2,128
    
    
    
    3.7
    %
    
    $
    (2,942
    )
    
    
    (138.3
    )%Other income, net
    
    $
    264
    
    
    
    0.3
    %
    
    $
    4,778
    
    
    
    8.2
    %
    
    $
    (4,514
    )
    
    
    (94.5
    )%
 Six Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeInterest income (expense), net
    
    $
    (2,216
    )
    
    
    (1.5
    )%
    
    $
    5,176
    
    
    
    4.8
    %
    
    $
    (7,392
    )
    
    
    (142.8
    )%Other income, net
    
    $
    339
    
    
    
    0.2
    %
    
    $
    4,806
    
    
    
    4.4
    %
    
    $
    (4,467
    )
    
    
    (92.9
    )%
  32




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##### Table of Contents



Income Taxes.
 Three Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeIncome tax expense (benefit)
    
    $
    512
    
    
    
    0.7
    %
    
    $
    (410
    )
    
    
    (0.7
    )%
    
    $
    922
    
    
    
    224.9
    %
 Six Months Ended September 30,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeIncome tax expense (benefit)
    
    $
    1,066
    
    
    
    0.7
    %
    
    $
    (427
    )
    
    
    (0.4
    )%
    
    $
    1,493
    
    
    
    349.6
    %
  FINANCIAL CONDITION AND LIQUIDITY
      33




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##### Table of Contents



Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock
   Aggregate
    
    
    Repurchased
    
    
    Average PricePrice
    
    
    Shares
    
    
    Per ShareStock repurchase programAuthorized amount
    
    $
    200,000
    
    
    
    
    
    
    $
    Open market repurchases
    
    
    103,966
    
    
    
    8,856
    
    
    
    11.74Structured stock repurchase agreements*
    
    
    90,517
    
    
    
    7,797
    
    
    
    11.61Total repurchases
    
    $
    194,483
    
    
    
    16,653
    
    
    $
    11.68Available for repurchase
    
    $
    5,517
 
 *
    
    The amounts above do not include gains of $11.3 million from structured stock repurchase
agreements which settled in cash. The average price per share for structured stock repurchase
agreements adjusted for gains from settlements in cash would have been $10.16 per share and
for total repurchases would have been $11.00 per share.  OtherOperating
    
    
    PurchaseLeases
    
    
    Commitments
    
    
    TotalFiscal Years Ending March 31,2009 (remaining)
    
    $
    11,947
    
    
    $
    24,722
    
    
    $
    36,6692010
    
    
    5,978
    
    
    
    
    
    
    
    5,9782011
    
    
    1,716
    
    
    
    
    
    
    
    1,7162012
    
    
    227
    
    
    
    
    
    
    
    2272013
    
    
    
    
    
    
    
    
    
    
    Total minimum payments
    
    $
    19,868
    
    
    $
    24,722
    
    
    $
    44,590
 34




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     FairValuation of Securities Given an
    
    
    Value as
    
    
    Valuation of Securities Given anInterest Rate Decrease of
    
    
    of
    
    
    Interest Rate Increase ofX Basis Points (BPS)
    
    
    September 30, 2008
    
    
    X Basis Points (BPS)(150 BPS)
    
    
    (100 BPS)
    
    
    (50 BPS)
    
    
    
    
    
    
    50 BPS
    
    
    100 BPS
    
    
    150 BPSAvailable-for-sale
investments
    
    $
    152,796
    
    
    $
    147,494
    
    
    $
    142,303
    
    
    $
    137,274
    
    
    $
    132,486
    
    
    $
    127,875
    
    
    $
    123,143
    35




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   Changes in Internal Control Over Financial Reporting
  36




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Before deciding to invest in us or to maintain or increase your investment, you should
carefully consider the risks described below, in addition to the other information contained in
this report and in our other filings with the SEC. We update our descriptions of the risks and
uncertainties facing us in our periodic reports filed with the SEC. The risks and uncertainties
described below and in our other filings are not the only ones facing us. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also affect our
business. If any of these known or unknown risks or uncertainties actually occurs, our business,
financial condition and results of operations could be seriously harmed. In that event, the market
price for our common stock could decline and you may lose your investment. The risks and
uncertainties set forth below with an asterisk (*) next to the title contain changes to the
description of the risks and uncertainties associated with our business as previously disclosed in
Item 1A to our Annual Report on Form 10-K for the fiscal year ended March 31, 2008.
 *Our business strategy may contemplate the acquisition of other companies, products and
technologies. Merger and acquisition activities involve numerous risks and we may not be able to
address these risks successfully without substantial expense, delay or other operational or
financial problems.
  
    
    potential dilution to our stockholders;
    
    use of a significant portion of our cash reserves;
    
    diversion of managements attention;
    
    failure to retain or integrate key personnel;
    
    difficulty in completing an acquired companys in-process research or development projects;
    
    amortization of acquired intangible assets and deferred compensation;
    
    customer dissatisfaction or performance problems with an acquired companys products or
services;
    
    costs associated with acquisitions or mergers;
    
    difficulties associated with the integration of acquired companies, products or
technologies;
    
    difficulties competing in markets that are unfamiliar to us;
    
    ability of the acquired companies to meet their financial projections; and
    
    assumption of unknown liabilities, or other unanticipated events or circumstances.
   37




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*The uncertainty of the current economic and political conditions could harm our investment
portfolio, revenues and operating results.
     Our operating results may fluctuate because of a number of factors, many of which are beyond our
control.
  
    
    communications, information technology and semiconductor industry conditions;
    
    fluctuations in the timing and amount of customer requests for product shipments;
    
    the reduction, rescheduling or cancellation of orders by customers, including as a
result of slowing demand for our products or our customers products or over-ordering of
our products or our customers products;
    
    changes in the mix of products that our customers buy;
    
    the gain or loss of one or more key customers or their key customers, or significant
changes in the financial condition of one or more of our key customers or their key
customers;
    
    our ability to introduce, certify and deliver new products and technologies on a
timely basis;
    
    the announcement or introduction of products and technologies by our competitors;
 38




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##### Table of Contents




    
    competitive pressures on selling prices;
    
    the ability of our customers to obtain components from their other suppliers;
    
    market acceptance of our products and our customers products;
    
    fluctuations in manufacturing output, yields or other problems or delays in the
fabrication, assembly, testing or delivery of our products or our customers products;
    
    increases in the costs of products or discontinuance of products by suppliers;
    
    the availability of external foundry capacity, contract manufacturing services,
purchased parts and raw materials including packaging substrates;
    
    problems or delays that we and our foundries may face in shifting the design and
manufacture of our future generations of IC products to smaller geometry process
technologies and in achieving higher levels of design and device integration;
    
    the amounts and timing of costs associated with warranties and product returns;
    
    the amounts and timing of investments in research and development;
    
    the amounts and timing of the costs associated with payroll taxes related to stock
option exercises or settlement of restricted stock units;
    
    costs associated with acquisitions and the integration of acquired companies,
products and technologies;
    
    the impact of potential one-time charges related to purchased intangibles;
    
    our ability to successfully integrate acquired companies, products and technologies;
    
    the impact on interest income of a significant use of our cash for an acquisition,
stock repurchase or other purpose;
    
    the effects of changes in interest rates or credit worthiness on the value and yield
of our short-term investment portfolio;
    
    costs associated with compliance with applicable environmental, other governmental or
industry regulations including costs to redesign products to comply with those regulations
or lost revenue due to failure to comply in a timely manner;
    
    the effects of changes in accounting standards;
    
    costs associated with litigation, including without limitation, attorney fees,
litigation judgments or settlements, relating to the use or ownership of intellectual
property or our internal option review or other claims arising out of our operations;
    
    our ability to identify, hire and retain senior management and other key personnel;
    
    the effects of war, acts of terrorism or global threats, such as disruptions in
general economic activity and changes in logistics and security arrangements; and
    
    general economic and industry conditions.
 
 39




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##### Table of Contents



Our business, financial condition and operating results would be harmed if we do not achieve
anticipated revenues.
  
    
    the reduction, rescheduling or cancellation of customer orders;
    
    declines in the average selling prices of our products;
    
    delays when our customers are transitioning from old products to new products;
    
    a decrease in demand for our products or our customers products;
    
    a decline in the financial condition or liquidity of our customers or their
customers;
    
    delays in the availability of our products or our customers products;
    
    the failure of our products to be qualified in our customers systems or certified by
our customers;
    
    excess inventory of our products held by our customers, resulting in a reduction in
their order patterns as they work through the excess inventory of our products;
    
    fabrication, test, product yield, or assembly constraints for our products that
adversely affect our ability to meet our production obligations;
    
    the failure of one of our subcontract manufacturers to perform its obligations to us;
    
    our failure to successfully integrate acquired companies, products and technologies;
and
    
    shortages of raw materials or production capacity constraints that lead our suppliers
to allocate available supplies or capacity to other customers, which may disrupt our
ability to meet our production obligations.
    Our business substantially depends upon the continued growth of the technology sector and
the Internet.
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The loss of one or more key customers, the diminished demand for our products from a key
customer, or the failure to obtain certifications from a key customer or its distribution channel
could significantly reduce our revenues and profits.
   
    
    customers may stop incorporating our products into their own products with limited
notice to us and may suffer little or no penalty as a result of such action;
    
    customers or prospective customers may not incorporate our products into their
future product designs;
    
    design wins (as explained below) with customers or prospective customers may not
result in sales to such customers;
    
    the introduction of new products by customers may occur later or be less successful
in the market than planned;
    
    we may successfully design a product to customer specifications but the customer
may not be successful in the market;
    
    sales of customer product lines incorporating our products may rapidly decline or
such product lines may be phased out;
    
    our agreements with customers typically are non-exclusive and do not require them
to purchase a minimum quantity of our products;
    
    many of our customers have pre-existing relationships with our current or potential
competitors that may cause our customers to switch from using our products to using
competing products;
    
    some of our OEM customers may develop products internally that would replace our
products;
    
    we may not be able to successfully develop relationships with additional network
equipment vendors;
    
    our relationships with some of our larger customers may deter other potential
customers (who compete with these customers) from buying our products;
    
    the impact of terminating certain sales representatives or sales personnel as a
result of a Company workforce reduction or otherwise; and
    
    some of our customers and prospective customers may become less viable.
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There is no guarantee that design wins will become actual orders and sales.
  Any significant order cancellations or order deferrals could cause unplanned inventory growth
resulting in excess inventory which may adversely affect our operating results.
    Our customers products typically have lengthy design cycles. A customer may decide to cancel or
change its product plans, which could cause us to lose anticipated sales.
  *An important part of our strategy is to continue our focus on the markets for communications and
storage equipment. If we change strategy or are unable to further expand our share of these
markets or react timely or properly to emerging trends, our revenues may not grow and could
decline.
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Our industry and markets are subject to consolidation, which may result in stronger competitors,
fewer customers and reduced demand.
  Our operating results are subject to fluctuations because we rely heavily on international sales.
  
    
    foreign currency exchange fluctuations;
    
    changes in regulatory requirements;
    
    tariffs and other barriers;
    
    timing and availability of export licenses;
    
    political and economic instability;
    
    difficulties in accounts receivable collections;
    
    difficulties in staffing and managing foreign operations;
    
    difficulties in managing distributors;
    
    difficulties in obtaining governmental approvals for communications and other
products;
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
    
    reduced or uncertain protection for intellectual property rights in some countries;
    
    longer payment cycles to collect accounts receivable in some countries;
    
    burdens of complying with a wide variety of complex foreign laws and treaties; and
    
    potentially adverse tax consequences.
    *Our cash and cash equivalents and portfolio of short-term investments and long-term marketable
securities are exposed to certain market risks.
  Our restructuring activities could result in management distractions, operational disruptions and
other difficulties.
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Our markets are subject to rapid technological change, so our success depends heavily on our
ability to develop and introduce new products.
  
    
    rapidly changing technologies;
    
    evolving and competing industry standards;
    
    changing customer needs;
    
    frequent introductions of new products and enhancements;
    
    increased integration with other functions;
    
    long design and sales cycles;
    
    short product life cycles; and
    
    intense competition.
   The markets in which we compete are highly competitive, and we expect competition to increase in
these markets in the future.
  
    
    our ability to partner with OEM and channel partners who are successful in the
market;
    
    success in designing and subcontracting the manufacture of new products that
implement new technologies;
    
    product quality, interoperability, reliability, performance and certification;
    
    customer support;
    
    time-to-market;
    
    price;
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
    
    production efficiency;
    
    design wins;
    
    expansion of production of our products for particular systems manufacturers;
    
    end-user acceptance of the systems manufacturers products;
    
    market acceptance of competitors products; and
    
    general economic conditions.
    *Our dependence on third-party manufacturing and supply relationships increases the risk that we
will not have an adequate supply of products to meet demand or that our cost of materials will be
higher than expected.
  
    
    reduced control over delivery schedules and quality;
    
    inadequate manufacturing yields and excessive costs;
    
    difficulties selecting and integrating new subcontractors;
    
    potential lack of adequate capacity during periods of excess demand;
    
    limited warranties on products supplied to us;
    
    potential increases in prices;
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
    
    potential instability in countries where third-party manufacturers are located; and
    
    potential misappropriation of our intellectual property.
       Our operating results depend on manufacturing output and yields of our ICs and printed circuit
board assemblies, which may not meet expectations.
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We may experience difficulties in transitioning to smaller geometry process technologies or in
achieving higher levels of design integration and that may result in reduced manufacturing
yields, delays in product deliveries and increased expenses.
   We must develop or otherwise gain access to improved IC process technologies.
  The complexity of our products may lead to errors, defects and bugs, which could negatively
impact our reputation with customers and result in liability.
   
    
    additional development costs;
    
    loss of, or delays in, market acceptance;
    
    diversion of technical and other resources from our other development efforts;
    
    claims by our customers or others against us; and
    
    loss of credibility with our current and prospective customers.
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If our internal control over financial reporting is not considered effective, our business and
stock price could be adversely affected.
    Our future success depends in part on the continued service of our key senior management, design
engineering, sales, marketing, and manufacturing personnel and our ability to identify, hire and
retain additional, qualified personnel.
   Our ability to supply a sufficient number of products to meet demand could be severely hampered
by a shortage of water, electricity or other supplies, or by natural disasters or other
catastrophes.
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We could incur substantial fines or litigation costs associated with our storage, use and
disposal of hazardous materials.
  Environmental laws and regulations could cause a disruption in our business and operations.
  *Any acquisitions we make could disrupt our business and harm our results of operations and
financial condition.
  
    
    problems combining or integrating the purchased operations, technologies or
products;
 50




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
    
    unanticipated costs;
    
    diversion of managements attention from our core business;
    
    adverse effects on existing business relationships with suppliers and customers;
    
    risks associated with entering markets in which we have limited or no prior
experience; and
    
    potential loss of key employees, particularly those of the acquired organizations.
  
    
    issue stock that would dilute our current stockholders percentage ownership;
    
    incur debt;
    
    assume liabilities;
    
    incur amortization or impairment expenses related to goodwill and other intangible
assets; or
    
    incur large and immediate write-offs.
  We may not be able to protect our intellectual property adequately.
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We could be harmed by litigation involving patents, proprietary rights or other claims.
    Our stock price is volatile.
  
    
    our anticipated or actual operating results;
    
    announcements or introductions of new products by us or our competitors;
    
    anticipated or actual operating results of our customers, peers or competitors;
    
    technological innovations or setbacks by us or our competitors;
    
    conditions in the semiconductor, communications or information technology markets;
    
    the commencement or outcome of litigation or governmental investigations;
    
    changes in ratings and estimates of our performance by securities analysts;
    
    announcements of merger or acquisition transactions;
    
    management changes;
    
    our inclusion in certain stock indices; and
    
    other events or factors.
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The anti-takeover provisions of our certificate of incorporation and of the Delaware general
corporation law may delay, defer or prevent a change of control.
  If we issue additional shares of stock in the future, it may have a dilutive effect on our
stockholders.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   For
    
    
    WithheldCesar Cesaratto
    
    
    58,578,623
    
    
    
    1,049,757Donald Colvin
    
    
    58,814,381
    
    
    
    813,999Kambiz Hooshmand
    
    
    58,797,478
    
    
    
    830,902Niel Ransom
    
    
    58,816,254
    
    
    
    812,126Fred Shlapak
    
    
    58,811,439
    
    
    
    816,941Arthur B. Stabenow
    
    
    58,265,274
    
    
    
    1,363,106Julie H. Sullivan
    
    
    58,808,722
    
    
    
    819,658
  For
    
    Against
    
    Abstain58,941,548
    
    
    585,696
    
    
    
    101,136
 53




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##### Table of Contents



ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Company, as amended.3.2(2)
    
    Amended and Restated Bylaws of the Company.4.1(3)
    
    Specimen Stock Certificate.10.60(4)
    
    Qualcomm Patent Purchase Agreement dated July 11, 2008.10.61(4)
    
    Qualcomm Patent Purchase Amendment dated July 11, 2008.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to Exhibit 3.2 filed with the Companys Registration Statement (No.
333-37609) filed October 10, 1997, and as amended by Exhibit 3.3 filed with the Companys
Registration Statement (No. 333-45660) filed September 12, 2000 and Exhibit 3.1 filed with the
Companys Current Report on Form 8-K on December 11, 2007.(2)
    
    Incorporated by reference to identically numbered exhibit filed with the Companys Quarterly
Report on Form 10-Q for the quarter ended December 31, 2001.(3)
    
    Incorporated by reference to identically numbered exhibit filed with the Companys
Registration Statement (No. 333-37609) filed October 10, 1997, or with any amendments thereto,
which registration statement became effective November 24, 1997.(4)
    
    The Company has requested confidential treatment for certain portions of these agreements and
certain terms and conditions have
been redacted from the exhibits. 54




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SIGNATURES
   Applied Micro Circuits CorporationBy:
    /s/ Robert G. GargusRobert G. GargusSenior Vice President and Chief Financial Officer
(Duly Authorized Signatory and Principal Financial andAccounting Officer) 55




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Exhibit Index
 3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Company, as amended.3.2(2)
    
    Amended and Restated Bylaws of the Company.4.1(3)
    
    Specimen Stock Certificate.10.60(4)
    
    Qualcomm Patent Purchase Agreement dated July 11, 2008.10.61(4)
    
    Qualcomm Patent Purchase Amendment dated July 11, 2008.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to Exhibit 3.2 filed with the Companys Registration Statement (No.
333-37609) filed October 10, 1997, and as amended by Exhibit 3.3 filed with the Companys
Registration Statement (No. 333-45660) filed September 12, 2000 and Exhibit 3.1 filed with the
Companys Current Report on Form 8-K filed on December 11, 2007.(2)
    
    Incorporated by reference to identically numbered exhibit filed with the Companys Quarterly
Report on Form 10-Q for the quarter ended December 31, 2001.(3)
    
    Incorporated by reference to identically numbered exhibit filed with the Companys
Registration Statement (No. 333-37609) filed October 10, 1997, or with any amendments thereto,
which registration statement became effective November 24, 1997.(4)
    
    The Company has requested confidential treatment for certain portions of these agreements and
certain terms and conditions have
been redacted from the exhibits. 56