##### 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 December 31, 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 þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



APPLIED MICRO CIRCUITS CORPORATION
 INDEX
 PagePart I. FINANCIAL INFORMATION (unaudited)Item 1. Condensed Consolidated Balance Sheets at December 31, 2008 and March 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 3. Defaults Upon Senior Securities
    
    
    52Item 4. Submission of Matters to a Vote of Security Holders
    
    
    52Item 5. Other Information
    
    
    52Item 6. Exhibits
    
    
    52Signatures
    
    
    53EX-3.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




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APPLIED MICRO CIRCUITS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
 December 31,
    
    
    March 31,2008
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    92,667
    
    
    $
    42,689Short-term investments-available-for-sale
    
    
    95,218
    
    
    
    100,200Accounts receivable, net
    
    
    20,909
    
    
    
    28,800Inventories
    
    
    38,769
    
    
    
    37,966Other current assets
    
    
    9,330
    
    
    
    11,340Total current assets
    
    
    256,893
    
    
    
    220,995Marketable securities
    
    
    
    
    
    
    51,919Property and equipment, net
    
    
    27,644
    
    
    
    25,995Goodwill
    
    
    
    
    
    
    264,130Purchased intangibles, net
    
    
    38,593
    
    
    
    56,025Other assets
    
    
    25,003
    
    
    
    13,783Total assets
    
    $
    348,133
    
    
    $
    632,847LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    17,969
    
    
    
    25,518Accrued payroll and related expenses
    
    
    6,385
    
    
    
    6,087Other accrued liabilities
    
    
    11,652
    
    
    
    14,655Deferred revenue
    
    
    2,026
    
    
    
    1,917Total current liabilities
    
    
    38,032
    
    
    
    48,177Deferred tax liability
    
    
    
    
    
    
    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 December 31, 2008 and March 31, 2008Issued and outstanding shares-65,459 at December 31, 2008 and
64,779 at March 31, 2008
    
    
    655
    
    
    
    648Additional paid-in capital
    
    
    5,906,228
    
    
    
    5,896,616Accumulated other comprehensive loss
    
    
    (3,259
    )
    
    
    (4,976
    )Accumulated deficit
    
    
    (5,593,523
    )
    
    
    (5,311,576
    )Total stockholders equity
    
    
    310,101
    
    
    
    580,712Total liabilities and stockholders equity
    
    
    348,133
    
    
    
    632,847
 See Accompanying Notes to Condensed Consolidated Financial Statements
 3




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APPLIED MICRO CIRCUITS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenues
    
    $
    57,565
    
    
    $
    66,267
    
    
    $
    208,556
    
    
    $
    174,612Cost of revenues
    
    
    27,763
    
    
    
    33,311
    
    
    
    99,594
    
    
    
    90,137Gross profit
    
    
    29,802
    
    
    
    32,956
    
    
    
    108,962
    
    
    
    84,475Operating expenses:Research and development
    
    
    21,255
    
    
    
    24,696
    
    
    
    69,197
    
    
    
    74,658Selling, general and administrative
    
    
    13,418
    
    
    
    14,125
    
    
    
    46,365
    
    
    
    46,038Amortization of purchased intangible assets
    
    
    1,320
    
    
    
    1,320
    
    
    
    3,960
    
    
    
    4,001Impairment of goodwill
    
    
    264,130
    
    
    
    
    
    
    
    264,130
    
    
    
    Restructuring charges, net
    
    
    1,150
    
    
    
    125
    
    
    
    1,032
    
    
    
    1,469Litigation settlement
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    Option investigation, net
    
    
    (79
    )
    
    
    (792
    )
    
    
    84
    
    
    
    (291
    )Total operating expenses
    
    
    301,194
    
    
    
    39,474
    
    
    
    384,898
    
    
    
    125,875Operating loss
    
    
    (271,392
    )
    
    
    (6,518
    )
    
    
    (275,936
    )
    
    
    (41,400
    )Interest income (expense), net and
other-than temporary impairment
    
    
    (7,497
    )
    
    
    2,093
    
    
    
    (9,713
    )
    
    
    7,269Other income, net
    
    
    100
    
    
    
    55
    
    
    
    439
    
    
    
    4,861Loss before income taxes
    
    
    (278,789
    )
    
    
    (4,370
    )
    
    
    (285,210
    )
    
    
    (29,270
    )Income tax benefit
    
    
    (4,329
    )
    
    
    (31
    )
    
    
    (3,263
    )
    
    
    (458
    )Net loss
    
    $
    (274,460
    )
    
    $
    (4,339
    )
    
    $
    (281,947
    )
    
    $
    (28,812
    )Basic and diluted net loss per share:Net loss per share
    
    $
    (4.20
    )
    
    $
    (0.06
    )
    
    $
    (4.33
    )
    
    $
    (0.42
    )Shares used in calculating basic and
diluted net loss per share
    
    
    65,366
    
    
    
    67,015
    
    
    
    65,127
    
    
    
    68,737
 See Accompanying Notes to Condensed Consolidated Financial Statements
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APPLIED MICRO CIRCUITS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine months endedDecember 31,2008
    
    
    2007Operating activities:Net loss
    
    
    (281,947
    )
    
    $
    (28,812
    )Adjustments to reconcile net loss to net cash provided by (used for) operating activitiesDepreciation
    
    
    5,148
    
    
    
    4,891Amortization of purchased intangibles
    
    
    17,432
    
    
    
    17,858Impairment of goodwill
    
    
    264,130
    
    
    
    Stock-based compensation expenseStock options
    
    
    4,135
    
    
    
    7,029Restricted stock units
    
    
    3,975
    
    
    
    1,199Impairment of short-term investments and marketable securities
    
    
    16,941
    
    
    
    846Net gain on sale of strategic equity investments
    
    
    
    
    
    
    (4,649
    )Noncash restructuring charge
    
    
    57
    
    
    
    Net loss (gain) on disposal of property and equipment
    
    
    15
    
    
    
    (8
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    7,891
    
    
    
    813Inventories
    
    
    (803
    )
    
    
    (8,534
    )Other assets
    
    
    (9,210
    )
    
    
    1,106Accounts payable
    
    
    (7,549
    )
    
    
    (1,019
    )Accrued payroll and other accrued liabilities
    
    
    (2,705
    )
    
    
    (5,660
    )Deferred taxes
    
    
    (3,958
    )
    
    
    Deferred revenue
    
    
    109
    
    
    
    429Net cash provided by (used for) operating activities
    
    
    13,661
    
    
    
    (14,511
    )Investing activities:Proceeds from sales and maturities of short-term investments and marketable securities
    
    
    897,153
    
    
    
    490,932Purchases of short-term investments and marketable securities
    
    
    (855,263
    )
    
    
    (416,517
    )Purchase of strategic investments
    
    
    
    
    
    
    (5,000
    )Net proceeds from the sale of strategic equity investment
    
    
    
    
    
    
    5,249Purchase of property, equipment and other assets
    
    
    (6,812
    )
    
    
    (4,943
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    1,646Net cash
provided by investing activities
    
    
    35,078
    
    
    
    71,367Financing activities:Proceeds from issuance of common stock
    
    
    1,570
    
    
    
    3,785Repurchase of company stock
    
    
    
    
    
    
    (56,950
    )Funding of structured stock repurchase agreements
    
    
    
    
    
    
    (41,830
    )Funds received from structured stock repurchase agreement including gains
    
    
    
    
    
    
    21,112Other
    
    
    (331
    )
    
    
    (77
    )Net cash provided by (used for) financing activities
    
    
    1,239
    
    
    
    (73,960
    )Net increase (decrease) in cash and cash equivalents
    
    
    49,978
    
    
    
    (17,104
    )Cash and cash equivalents at the beginning of the period
    
    
    42,689
    
    
    
    51,595Cash and cash equivalents at the end of the period
    
    
    92,667
    
    
    $
    34,491Supplementary cash flow disclosure:Cash paid for:Interest
    
    $
    4
    
    
    $
    11Income taxes
    
    $
    578
    
    
    $
    164
 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
  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.
 The Fair Value Option
for Financial Assets and Financial Liabilities
 6




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2. CERTAIN FINANCIAL STATEMENT INFORMATION
 Accounts receivable (in thousands):
 December 31,
    
    
    March 31,2008
    
    
    2008Accounts receivable
    
    $
    22,337
    
    
    $
    30,113Less: allowance for doubtful accounts
    
    
    (1,428
    )
    
    
    (1,313
    )$
    20,909
    
    
    $
    28,800
 Inventories (in thousands):
 December 31,
    
    
    March 31,2008
    
    
    2008Finished goods
    
    $
    27,064
    
    
    $
    28,753Work in process
    
    
    7,871
    
    
    
    5,338Raw materials
    
    
    3,834
    
    
    
    3,875$
    38,769
    
    
    $
    37,966
 Other current assets (in thousands):
 December 31,
    
    
    March 31,2008
    
    
    2008Prepaid expenses
    
    $
    7,879
    
    
    $
    9,819Deposits
    
    
    618
    
    
    
    469Interest receivable
    
    
    97
    
    
    
    410Other
    
    
    736
    
    
    
    642$
    9,330
    
    
    $
    11,340
 Property and equipment (in thousands):
 Useful
    
    
    December 31,
    
    
    March 31,Life
    
    
    2008
    
    
    2008(in years)Machinery and equipment
    
    
    57
    
    
    $
    35,948
    
    
    $
    35,142Leasehold improvements
    
    
    115
    
    
    
    9,329
    
    
    
    8,364Computers, office furniture and equipment
    
    
    37
    
    
    
    55,730
    
    
    
    64,386Buildings
    
    
    31.5
    
    
    
    2,756
    
    
    
    2,756Land
    
    
    N/A
    
    
    
    9,800
    
    
    
    9,800113,563
    
    
    
    120,448Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (85,919
    )
    
    
    (94,453
    )$
    27,644
    
    
    $
    25,995
 7




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##### Table of Contents



Purchased intangibles (in thousands):
 December 31, 2008
    
    
    March 31, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    Amortizationand
    
    
    
    
    
    
    
    
    
    
    andGross
    
    
    Impairments
    
    
    Net
    
    
    Gross
    
    
    Impairments
    
    
    NetDeveloped technology
    
    $
    425,000
    
    
    $
    (397,220
    )
    
    $
    27,780
    
    
    $
    425,000
    
    
    $
    (383,745
    )
    
    $
    41,255Backlog/customer relationships
    
    
    6,330
    
    
    
    (4,903
    )
    
    
    1,427
    
    
    
    6,330
    
    
    
    (4,687
    )
    
    
    1,643Patents/core technology
rights/tradenames
    
    
    62,305
    
    
    
    (52,919
    )
    
    
    9,386
    
    
    
    62,305
    
    
    
    (49,178
    )
    
    
    13,127$
    493,635
    
    
    $
    (455,042
    )
    
    $
    38,593
    
    
    $
    493,635
    
    
    $
    (437,610
    )
    
    $
    56,025
  Cost of
    
    
    OperatingRevenue
    
    
    Expenses
    
    
    TotalFiscal year 2009 (remaining)
    
    $
    4,308
    
    
    
    1,320
    
    
    
    5,628Fiscal 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
    
    $
    27,780
    
    
    
    10,813
    
    
    
    38,593
 Other assets (in thousands):
 December 31,
    
    
    March 31,2008
    
    
    2008Non-current portion of prepaid expenses*
    
    $
    15,107
    
    
    $
    4,251Strategic investments
    
    
    7,000
    
    
    
    7,000Other
    
    
    2,896
    
    
    
    2,532$
    25,003
    
    
    $
    13,783
 
 *
    
    The increase was due to the addition of an $11.0 million technology licensing fee during the three months ended December 31, 2008. Cash, cash equivalents, short-term investments and marketable securities:
  December 31,
    
    
    March 31,2008
    
    
    2008Cash
    
    $
    10,802
    
    
    $
    7,414Cash equivalents
    
    
    81,865
    
    
    
    35,275U.S. Treasury securities and agency bonds
    
    
    1,254
    
    
    
    8,838Corporate bonds
    
    
    5,827
    
    
    
    13,431Mortgage-backed and asset-backed securities*
    
    
    22,226
    
    
    
    52,837Closed-end bond funds
    
    
    45,505
    
    
    
    55,621Preferred stock and options
    
    
    20,406
    
    
    
    21,392$
    187,885
    
    
    $
    194,808
 
 *
    
    At December 31, 2008 and March 31, 2008, approximately
$17.4 million and $43.1 million of the amounts
presented were mortgage-backed securities,
respectively. 8




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##### Table of Contents



December 31,
    
    
    March 31,2008
    
    
    2008Reported as:Cash and cash equivalents
    
    $
    92,667
    
    
    $
    42,689Short-term investments available-for-sale
    
    
    95,218
    
    
    
    100,200Marketable securities
    
    
    
    
    
    
    51,919$
    187,885
    
    
    $
    194,808
  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
    
    
    LossesCorporate bonds
    
    $
    5,571
    
    
    $
    (389
    )
    
    $
    
    
    
    $
    
    
    
    $
    5,571
    
    
    $
    (389
    )Mortgage-backed and
asset-backed securities
    
    
    7,109
    
    
    
    (658
    )
    
    
    
    
    
    
    
    
    
    
    7,109
    
    
    
    (658
    )Closed-end bond funds
    
    
    12,887
    
    
    
    (2,005
    )
    
    
    
    
    
    
    
    
    
    
    12,887
    
    
    
    (2,005
    )Preferred stock and options
    
    
    10,277
    
    
    
    (1,080
    )
    
    
    
    
    
    
    
    
    
    
    10,277
    
    
    
    (1,080
    )$
    35,844
    
    
    $
    (4,132
    )
    
    $
    
    
    
    $
    
    
    
    $
    35,844
    
    
    $
    (4,132
    )
  Cash, cash equivalents, short-term investments and marketable securities, measured at fair value:
  Fair Value Measurement(In thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDescriptionCash
    
    $
    10,802
    
    
    $
    
    
    
    $
    
    
    
    $
    10,802Cash equivalents
    
    
    81,865
    
    
    
    
    
    
    
    
    
    
    
    81,865US Treasury securities and agency bonds
    
    
    1,254
    
    
    
    
    
    
    
    
    
    
    
    1,254Corporate bonds
    
    
    
    
    
    
    5,827
    
    
    
    
    
    
    
    5,827Mortgage backed and asset backed securities
    
    
    
    
    
    
    22,226
    
    
    
    
    
    
    
    22,226Closed-end bond funds
    
    
    45,505
    
    
    
    
    
    
    
    
    
    
    
    45,505Preferred stock and options
    
    
    
    
    
    
    20,406
    
    
    
    
    
    
    
    20,406$
    139,426
    
    
    $
    48,459
    
    
    $
    
    
    
    $
    187,885
 9




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##### Table of Contents



Fair Value Measurement(In thousands)Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalReported as:Cash and cash equivalents
    
    $
    92,667
    
    
    $
    
    
    
    $
    
    
    
    $
    92,667Short-term investments available-for-sale
    
    
    46,759
    
    
    
    48,459
    
    
    
    
    
    
    
    95,218$
    139,426
    
    
    $
    48,459
    
    
    $
    
    
    
    $
    187,885
 Other accrued liabilities (in thousands):
 December 31,
    
    
    March 31,2008
    
    
    2008Executive deferred compensation
    
    $
    2,895
    
    
    $
    3,558Employee related liabilities
    
    
    2,190
    
    
    
    2,475Warranty
    
    
    1,366
    
    
    
    1,475Professional fees
    
    
    1,191
    
    
    
    785Restructuring liabilities
    
    
    1,119
    
    
    
    1,578Current income taxes
    
    
    439
    
    
    
    322Other taxes
    
    
    122
    
    
    
    317Other
    
    
    2,330
    
    
    
    4,145$
    11,652
    
    
    $
    14,655
 Warranty reserves:
   Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Beginning accrual balance
    
    $
    1,320
    
    
    $
    1,882
    
    
    $
    1,475
    
    
    $
    2,692Charged to (reduction in) costs and expenses
    
    
    110
    
    
    
    288
    
    
    
    156
    
    
    
    (21
    )Charges incurred
    
    
    (164
    )
    
    
    (177
    )
    
    
    (325
    )
    
    
    (338
    )Adjustments to estimated liability
    
    
    100
    
    
    
    (600
    )
    
    
    60
    
    
    
    (940
    )Ending accrual balance
    
    $
    1,366
    
    
    $
    1,393
    
    
    $
    1,366
    
    
    $
    1,393
 10




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##### Table of Contents



Interest
income (expense), net and other-than-temporary impairment (in thousands):
 Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    2,785
    
    
    $
    2,947
    
    
    $
    7,879
    
    
    $
    9,191Net realized loss on
short-term investments
and other-than-temporary
impairment on investment
securities
    
    
    (10,282
    )
    
    
    (852
    )
    
    
    (17,588
    )
    
    
    (1,911
    )Interest expense
    
    
    
    
    
    
    (2
    )
    
    
    (4
    )
    
    
    (11
    )$
    (7,497
    )
    
    $
    2,093
    
    
    $
    (9,713
    )
    
    $
    7,269
  Other income, net (in thousands):
 Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net gain (loss) on disposals of property and equipment
    
    $
    14
    
    
    $
    (56
    )
    
    $
    (15
    )
    
    $
    8Foreign
currency gain (loss)
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    (51
    )Gain on strategic investment*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,649Other
    
    
    81
    
    
    
    111
    
    
    
    449
    
    
    
    255$
    100
    
    
    $
    55
    
    
    $
    439
    
    
    $
    4,861
 
 *
    
    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
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (274,460
    )
    
    $
    (4,339
    )
    
    $
    (281,947
    )
    
    $
    (28,812
    )Shares used in basic and diluted net loss per share
computation (denominator):Weighted average common shares outstanding
    
    
    65,366
    
    
    
    67,015
    
    
    
    65,127
    
    
    
    68,737Dilutive effect of stock options and restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used in basic and diluted net loss per share computation
    
    
    65,366
    
    
    
    67,015
    
    
    
    65,127
    
    
    
    68,737Basic and diluted net loss per share
    
    $
    (4.20
    )
    
    $
    (0.06
    )
    
    $
    (4.33
    )
    
    $
    (0.42
    )
  11




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##### Table of Contents



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
    
    
    1,289
    
    
    
    
    
    
    
    
    
    
    
    1,289Cash payments
    
    
    (1,092
    )
    
    
    (341
    )
    
    
    
    
    
    
    (1,433
    )Noncash charges
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Reductions to estimated liability
    
    
    (258
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Liability, December 31, 2008
    
    $
    607
    
    
    $
    512
    
    
    $
    
    
    
    $
    1,119
 12




---



##### 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
    
    
    (310
    )
    
    
    (341
    )
    
    
    
    
    
    
    (651
    )Reductions to estimated liability
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    (38
    )Liability, December 31, 2008
    
    $
    
    
    
    $
    512
    
    
    $
    
    
    
    $
    512September 2008 Restructuring ProgramCharged to expense
    
    $
    1,289
    
    
    $
    
    
    
    $
    
    
    
    $
    1,289Cash payments
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    (625
    )Noncash charge
    
    
    (57
    )
    
     
    
    
    
    
    
    


    
    (57
    )Liability, December 31, 2008
    
    $
    607
    
    
    $
    
    
    
    $
    
    
    
    $
    607
      13




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##### Table of Contents



4. COMPREHENSIVE LOSS
  Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (274,460
    )
    
    $
    (4,339
    )
    
    $
    (281,947
    )
    
    $
    (28,812
    )Change in net unrealized gain (loss) on
short-term investments and marketable
securities
    
    
    5,954
    
    
    
    (983
    )
    
    
    1,930
    
    
    
    (5,204
    )Foreign currency translation adjustment loss
    
    
    (219
    )
    
    
    280
    
    
    
    (213
    )
    
    
    (142
    )Comprehensive loss
    
    $
    (268,725
    )
    
    $
    (5,042
    )
    
    $
    (280,230
    )
    
    $
    (34,158
    )
 5. STOCKHOLDERS EQUITY
 Preferred Stock
  Common Stock
  Employee Stock Purchase Plan
  Stock Repurchase Program
   14




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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
    
    $
    300,000
    
    
    
    
    
    
    $
    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
    
    $
    105,517
 
 *
    
    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. 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
    
    
    2,394
    
    
    
    6.23Exercised
    
    
    (40
    )
    
    
    2.31Cancelled
    
    
    (3,178
    )
    
    
    20.07Outstanding at the end of the period
    
    
    8,390
    
    
    $
    13.47Vested at the end of the period
    
    
    4,860
    
    
    $
    17.31
    Options Outstanding
    
    Options ExercisableWeightedAverageRemainingRange of
    
    
    
    
    
    
    Weighted
    
    Contractual
    
    
    
    
    
    WeightedExercise
    
    
    Number of
    
    Average
    
    Term
    
    Number of
    
    AveragePrices
    
    
    Shares
    
    Exercise Price
    
    (in years)
    
    Shares
    
    Exercise Price$
    0.52
    
    $
    7.60
    
    
    
    1,725,076
    
    
    $
    5.03
    
    
    
    7.52
    
    
    
    245,517
    
    
    $
    3.437.67
    
    
    11.44
    
    
    
    1,761,685
    
    
    
    8.63
    
    
    
    7.02
    
    
    
    518,413
    
    
    
    9.8111.56
    
    
    12.84
    
    
    
    1,896,422
    
    
    
    12.35
    
    
    
    4.96
    
    
    
    1,474,841
    
    
    
    12.3312.92
    
    
    15.40
    
    
    
    1,798,979
    
    
    
    14.24
    
    
    
    5.04
    
    
    
    1,461,522
    
    
    
    14.1815.56
    
    
    300.13
    
    
    
    1,207,523
    
    
    
    33.16
    
    
    
    3.53
    
    
    
    1,160,479
    
    
    
    33.86$
    0.52
    
    $
    300.13
    
    
    
    8,389,685
    
    
    $
    13.47
    
    
    
    5.74
    
    
    
    4,860,772
    
    
    $
    17.31
  16




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##### Table of Contents



Restricted Stock Units
   Restricted Stock UnitsOutstandingNumber of Shares(in thousands)Balance at beginning of period
    
    
    1,200Awarded during the period
    
    
    1,116Vested during the period
    
    
    (415
    )Cancelled during the period
    
    
    (282
    )Balance at end of period
    
    
    1,619
   6. STOCK-BASED COMPENSATION
 Share-Based Payment
  Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock-based compensation expense by type of awardsStock options
    
    $
    432
    
    
    $
    1,762
    
    
    $
    4,135
    
    
    $
    7,029Restricted stock units
    
    
    1,473
    
    
    
    550
    
    
    
    3,975
    
    
    
    1,199Total stock-based compensation expense
    
    
    1,905
    
    
    
    2,312
    
    
    
    8,110
    
    
    
    8,228Stock-based compensation capitalized to (expensed from) inventory
    
    
    (53
    )
    
    
    (129
    )
    
    
    (117
    )
    
    
    64Total stock-based compensation
    
    $
    1,852
    
    
    $
    2,183
    
    
    $
    7,993
    
    
    $
    8,292
 17




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##### Table of Contents



Three Months Ended December 31,Employee StockEmployee Stock Options
    
    Purchase Plans2008
    
    2007
    
    2008
    
    2007Expected life (years)
    
    
    3.9
    
    
    
    3.9
    
    
    
    0.5
    
    
    
    0.5Risk-free interest rate
    
    
    2.1
    %
    
    
    3.9
    %
    
    
    1.9
    %
    
    
    5.0
    %Volatility
    
    
    55
    %
    
    
    47
    %
    
    
    43
    %
    
    
    55
    %Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Weighted average fair value per share
    
    $
    2.30
    
    
    $
    5.27
    
    
    $
    2.13
    
    
    $
    3.44
    Three Months Ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock-based compensation included in expenses:Cost of revenues
    
    $
    91
    
    
    $
    224
    
    
    $
    487
    
    
    $
    535Research and development
    
    
    1,244
    
    
    
    1,177
    
    
    
    3,679
    
    
    
    3,448Selling, general and administrative
    
    
    570
    
    
    
    911
    
    
    
    3,944
    
    
    
    4,245Total stock-based compensation expense
    
    $
    1,905
    
    
    $
    2,312
    
    
    $
    8,110
    
    
    $
    8,228Stock-based compensation capitalized to (expensed from) inventory
    
    
    (53
    )
    
    
    (129
    )
    
    
    (117
    )
    
    
    64Total stock-based compensation
    
    $
    1,852
    
    
    $
    2,183
    
    
    $
    7,993
    
    
    $
    8,292
  7. CONTINGENCIES
 Legal Proceedings
  18




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##### 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. GOODWILL IMPAIRMENT
  Goodwill and Other Intangible
Assets.
 Accounting for the Impairment or Disposal of Long-Lived Assets
  20




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##### Table of Contents



11. SUBSEQUENT EVENT
  21




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##### 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 nine months ended
December 31, 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
   22




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##### Table of Contents



Three Months Ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    57,565
    
    
    
    100.0
    %
    
    $
    66,267
    
    
    
    100.0
    %
    
    $
    (8,702
    )
    
    
    (13.1
    )%Cost of revenues
    
    
    27,763
    
    
    
    48.2
    
    
    
    33,311
    
    
    
    50.3
    
    
    
    (5,548
    )
    
    
    (16.7
    )Gross profit
    
    
    29,802
    
    
    
    51.8
    
    
    
    32,956
    
    
    
    49.7
    
    
    
    (3,154
    )
    
    
    (9.6
    )Total operating expenses
    
    
    301,194
    
    
    
    523.3
    
    
    
    39,474
    
    
    
    59.5
    
    
    
    261,720
    
    
    
    663.0Operating loss
    
    
    (271,392
    )
    
    
    (471.5
    )
    
    
    (6,518
    )
    
    
    (9.8
    )
    
    
    (264,874
    )
    
    
    (4,063.7
    )Interest and other income
(expense), net
    
    
    (7,397
    )
    
    
    (12.8
    )
    
    
    2,148
    
    
    
    3.2
    
    
    
    (9,545
    )
    
    
    (444.4
    )Loss before income taxes
    
    
    (278,789
    )
    
    
    (484.3
    )
    
    
    (4,370
    )
    
    
    (6.6
    )
    
    
    (274,419
    )
    
    
    (6,279.6
    )Income tax  benefit
    
    
    (4,329
    )
    
    
    (7.5
    )
    
    
    (31
    )
    
    
    (0.1
    )
    
    
    (4,298
    )
    
    
    (13,864.5
    )Net loss
    
    $
    (274,460
    )
    
    
    (476.8
    )%
    
    $
    (4,339
    )
    
    
    (6.5
    )%
    
    $
    (270,121
    )
    
    
    (6,225.4
    )%
 Nine months ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    208,556
    
    
    
    100.0
    %
    
    $
    174,612
    
    
    
    100.0
    %
    
    $
    33,944
    
    
    
    19.4
    %Cost of revenues
    
    
    99,594
    
    
    
    47.8
    
    
    
    90,137
    
    
    
    51.6
    
    
    
    9,457
    
    
    
    10.5Gross profit
    
    
    108,962
    
    
    
    52.2
    
    
    
    84,475
    
    
    
    48.4
    
    
    
    24,487
    
    
    
    29.0Total operating expenses
    
    
    384,898
    
    
    
    184.6
    
    
    
    125,875
    
    
    
    72.1
    
    
    
    259,023
    
    
    
    205.8Operating loss
    
    
    (275,936
    )
    
    
    (132.4
    )
    
    
    (41,400
    )
    
    
    (23.7
    )
    
    
    (234,536
    )
    
    
    (566.5
    )Interest and other income
(expense), net
    
    
    (9,274
    )
    
    
    (4.4
    )
    
    
    12,130
    
    
    
    6.9
    
    
    
    (21,404
    )
    
    
    (176.5
    )Loss before income taxes
    
    
    (285,210
    )
    
    
    (136.8
    )
    
    
    (29,270
    )
    
    
    (16.8
    )
    
    
    (255,940
    )
    
    
    (874.4
    )Income tax  benefit
    
    
    (3,263
    )
    
    
    (1.6
    )
    
    
    (458
    )
    
    
    (0.3
    )
    
    
    (2,805
    )
    
    
    (612.4
    )Net loss
    
    $
    (281,947
    )
    
    
    (135.2
    )%
    
    $
    (28,812
    )
    
    
    (16.5
    )%
    
    $
    (253,135
    )
    
    
    (878.6
    )%
 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;
 23




---



##### 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;
    
    combinations of companies in our customer base, resulting in the combined company choosing our competitors IC
standardization other than our supported product platforms;
    
    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.
   Three Months Ended
    
    Nine months endedDecember 31,
    
    December 31,2008
    
    2007
    
    2008
    
    2007Avnet Inc.
    
    
    23
    %
    
    
    25
    %
    
    
    23
    %
    
    
    24
    %Hon Hai
    
    
    10
    %
    
    
    *
    
    
    
    *
    
    
    
    *
 
 *
    
    Net revenue was less than 10% in the three months and nine months ended December 31, 2007.   Three Months Ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    19,372
    
    
    
    33.7
    %
    
    $
    22,900
    
    
    
    34.6
    %Other North America
    
    
    3,288
    
    
    
    5.7
    
    
    
    6,856
    
    
    
    10.3Europe
    
    
    11,908
    
    
    
    20.7
    
    
    
    10,825
    
    
    
    16.3Asia
    
    
    22,581
    
    
    
    39.2
    
    
    
    25,329
    
    
    
    38.2Other
    
    
    416
    
    
    
    0.7
    
    
    
    357
    
    
    
    0.6$
    57,565
    
    
    
    100
    %
    
    $
    66,267
    
    
    
    100.0
    %
 Nine months ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    70,343
    
    
    
    33.7
    %
    
    $
    61,841
    
    
    
    35.4
    %Other North America
    
    
    16,075
    
    
    
    7.7
    
    
    
    15,449
    
    
    
    8.8Europe
    
    
    39,388
    
    
    
    18.9
    
    
    
    33,521
    
    
    
    19.2Asia
    
    
    81,845
    
    
    
    39.2
    
    
    
    62,983
    
    
    
    36.1Other
    
    
    905
    
    
    
    0.5
    
    
    
    818
    
    
    
    0.5$
    208,556
    
    
    
    100
    %
    
    $
    174,612
    
    
    
    100.0
    %
  24




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##### Table of Contents



Goodwill
Impairment Charge.
 Net Loss.
 
    
    stock-based compensation expense;
    
    amortization of purchased intangibles;
    
    acquired in-process research and development;
    
    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
   25




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##### Table of Contents



Inventory Valuation and Warranty Liabilities
   Goodwill and Intangible Asset Valuation
  .
   26




---



##### Table of Contents



Investments
 Accounting for Certain Investments in Debt and Equity Securitie
 Fair Value of Financial Instruments
 Fair Value Measurements
        27




---



##### Table of Contents



Restructuring Charges
  Valuation of Deferred Income Taxes
  Stock-Based Compensation Expense
  Revenue Recognition
 Revenue
Recognition
 28




---



##### Table of Contents



Allowance for Bad Debts
  29




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##### Table of Contents



RESULTS OF OPERATIONS
 Comparison of the Three and Nine Months ended December 31, 2008 to the Three and Nine Months ended
December 31, 2007
 Net Revenues.
 Three Months Ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeProcess
    
    $
    28,427
    
    
    
    49.4
    %
    
    $
    27,704
    
    
    
    41.8
    %
    
    $
    723
    
    
    
    2.6
    %Transport
    
    
    19,299
    
    
    
    33.5
    
    
    
    24,982
    
    
    
    37.7
    
    
    
    (5,683
    )
    
    
    (22.7
    )Store
    
    
    9,839
    
    
    
    17.1
    
    
    
    13,581
    
    
    
    20.5
    
    
    
    (3,742
    )
    
    
    (27.6
    )$
    57,565
    
    
    
    100.0
    %
    
    $
    66,267
    
    
    
    100.0
    %
    
    $
    (8,702
    )
    
    
    (13.1
    )%
 Nine months ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeProcess
    
    $
    95,621
    
    
    
    45.8
    %
    
    $
    75,929
    
    
    
    43.5
    %
    
    $
    19,692
    
    
    
    25.9
    %Transport
    
    
    77,594
    
    
    
    37.2
    
    
    
    59,630
    
    
    
    34.2
    
    
    
    17,964
    
    
    
    30.1Store
    
    
    35,341
    
    
    
    17.0
    
    
    
    39,053
    
    
    
    22.4
    
    
    
    (3,712
    )
    
    
    (9.5
    )$
    208,556
    
    
    
    100.0
    %
    
    $
    174,612
    
    
    
    100.0
    %
    
    $
    33,944
    
    
    
    19.4
    %
  Gross Profit
 Three Months Ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeNet revenues
    
    $
    57,565
    
    
    
    100.0
    %
    
    $
    66,267
    
    
    
    100.0
    %
    
    $
    (8,702
    )
    
    
    (13.1
    )%Cost of revenues
    
    
    27,763
    
    
    
    48.2
    
    
    
    33,311
    
    
    
    50.3
    
    
    
    (5,548
    )
    
    
    (16.7
    )Gross profit
    
    $
    29,802
    
    
    
    51.8
    %
    
    $
    32,956
    
    
    
    49.7
    %
    
    $
    (3,154
    )
    
    
    (9.6
    )%
 Nine months ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Increase
    
    
    % ChangeNet revenues
    
    $
    208,556
    
    
    
    100.0
    %
    
    $
    174,612
    
    
    
    100.0
    %
    
    $
    33,944
    
    
    
    19.4
    %Cost of revenues
    
    
    99,594
    
    
    
    47.8
    
    
    
    90,137
    
    
    
    51.6
    
    
    
    9,457
    
    
    
    10.5Gross profit
    
    $
    108,962
    
    
    
    52.2
    %
    
    $
    84,475
    
    
    
    48.4
    %
    
    $
    24,487
    
    
    
    29.0
    %
 30




---



##### Table of Contents



Research and Development and Selling, General and Administrative Expenses
 Three Months Ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeResearch and development
    
    $
    21,255
    
    
    
    36.9
    %
    
    $
    24,696
    
    
    
    37.3
    %
    
    $
    (3,441
    )
    
    
    (13.9
    )%Selling, general and
administrative
    
    $
    13,418
    
    
    
    23.3
    %
    
    $
    14,125
    
    
    
    21.3
    %
    
    $
    (707
    )
    
    
    (5.0
    )%
 Nine months ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeResearch and development
    
    $
    69,197
    
    
    
    33.2
    %
    
    $
    74,658
    
    
    
    42.8
    %
    
    $
    (5,461
    )
    
    
    (7.3
    )%Selling, general and
administrative
    
    $
    46,365
    
    
    
    22.2
    %
    
    $
    46,038
    
    
    
    26.4
    %
    
    $
    327
    
    
    
    0.7
    %
 Research and Development.
 Selling, General and Administrative.
 31




---



##### Table of Contents



Stock-Based Compensation
 Three Months Ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeCosts of revenues
    
    $
    91
    
    
    
    0.2
    %
    
    $
    224
    
    
    
    0.3
    %
    
    $
    (133
    )
    
    
    (59.4
    )%Research and development
    
    
    1,244
    
    
    
    2.2
    
    
    
    1,177
    
    
    
    1.8
    
    
    
    67
    
    
    
    5.7Selling, general and administrative
    
    
    570
    
    
    
    1.0
    
    
    
    911
    
    
    
    1.4
    
    
    
    (341
    )
    
    
    (37.4
    )$
    1,905
    
    
    
    3.3
    %
    
    $
    2,312
    
    
    
    3.5
    %
    
    $
    (407
    )
    
    
    (17.6
    )%
 Nine months ended December 31,2008
    
    
    2007% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeCosts of revenues
    
    $
    487
    
    
    
    0.2
    %
    
    $
    535
    
    
    
    0.3
    %
    
    $
    (48
    )
    
    
    (9.0
    )%Research and development
    
    
    3,679
    
    
    
    1.8
    
    
    
    3,448
    
    
    
    2.0
    
    
    
    231
    
    
    
    6.7Selling, general and administrative
    
    
    3,944
    
    
    
    1.9
    
    
    
    4,245
    
    
    
    2.4
    
    
    
    (301
    )
    
    
    (7.1
    )$
    8,110
    
    
    
    3.9
    %
    
    $
    8,228
    
    
    
    4.7
    %
    
    $
    118
    
    
    
    (1.4
    )%
  Goodwill and Purchased Intangible Asset Impairment Charges.
 32




---



##### Table of Contents



Restructuring Charges
 Three Months Ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeRestructuring charges
    
    $
    1,150
    
    
    
    2.0
    %
    
    $
    125
    
    
    
    0.2
    %
    
    $
    1,025
    
    
    
    (820.0
    )%Nine months ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeRestructuring charges
    
    $
    1,032
    
    
    
    0.5
    %
    
    $
    1,469
    
    
    
    0.8
    %
    
    $
    (437
    )
    
    
    (29.7
    )%
  Option investigation and related expenses
 Three Months Ended December 31.2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeOption investigation, net
    
    $
    (79
    )
    
    
    (0.1
    )%
    
    $
    (792
    )
    
    
    (1.2
    )%
    
    $
    713
    
    
    
    90.0
    %Nine months ended December 31.2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeOption investigation, net
    
    $
    84
    
    
    
    0.1
    %
    
    $
    (291
    )
    
    
    (0.2
    )%
    
    $
    375
    
    
    
    128.9%
  Interest and Other Income (Expense), net
 Three Months Ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeInterest income (expense), net
    
    $
    (7,497
    )
    
    
    13.0
    %
    
    $
    2,093
    
    
    
    3.2
    %
    
    $
    (9,590
    )
    
    
    (458.2
    )%Other income, net
    
    $
    100
    
    
    
    0.2
    %
    
    $
    55
    
    
    
    0.1
    %
    
    $
    45
    
    
    
    81.8
    %
 Nine months ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeInterest income (expense), net
    
    $
    (9,713
    )
    
    
    (4.7
    )%
    
    $
    7,269
    
    
    
    4.2
    %
    
    $
    (16,982
    )
    
    
    (233.6
    )%Other income, net
    
    $
    439
    
    
    
    0.2
    %
    
    $
    4,861
    
    
    
    2.8
    %
    
    $
    (4,422
    )
    
    
    (91.0
    )%
  33




---



##### Table of Contents



Income Taxes.
 Three Months Ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeIncome tax benefit
    
    $
    (4,329
    )
    
    
    7.5
    %
    
    $
    (31
    )
    
    
    (0.0
    )%
    
    $
    (4,298
    )
    
    
    (13,864.5
    )%
 Nine months ended December 31,2008
    
    2007% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeIncome tax benefit
    
    $
    (3,263
    )
    
    
    1.6
    %
    
    $
    (458
    )
    
    
    (0.3
    )%
    
    $
    (2,805
    )
    
    
    (612.4
    )%
  FINANCIAL CONDITION AND LIQUIDITY
       34




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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
    
    $
    300,000
    
    
    
    
    
    
    $
    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
    
    $
    105,517
 
 *
    
    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)
    
    $
    7,240
    
    
    $
    12,406
    
    
    $
    19,6462010
    
    
    6,891
    
    
    
    
    
    
    
    6,8912011
    
    
    1,850
    
    
    
    
    
    
    
    1,8502012
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    
    
    
    
    Total minimum payments
    
    $
    15,981
    
    
    $
    12,406
    
    
    $
    28,387
  OFF-BALANCE SHEET ARRANGEMENTS
  35




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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)
    
    
    December 31, 2008
    
    
    X Basis Points (BPS)(150 BPS)
    
    
    (100 BPS)
    
    
    (50 BPS)
    
    
    
    
    
    
    50 BPS
    
    
    100 BPS
    
    
    150 BPSAvailable-for-sale
investments
    
    $
    101,447
    
    
    $
    98,592
    
    
    $
    97,209
    
    
    $
    95,218
    
    
    $
    93,416
    
    
    $
    90,361
    
    
    $
    89,980
    36




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   Changes in Internal Control Over Financial Reporting
  37




---



##### 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.
   38




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##### Table of Contents



*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;
    
    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;
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
    
    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 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.
 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;
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
    
    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.
  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;
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
    
    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.
   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.
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*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.
       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;
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
    
    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;
    
    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;
    
    production efficiency;
    
    design wins;
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
    
    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;
    
    potential instability in countries where third-party manufacturers are located; and
    
    potential misappropriation of our intellectual property.
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Our operating results depend on manufacturing output and yields of our ICs and printed circuit
board assemblies, which may not meet expectations.
   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.
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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.
  *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.
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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.
     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;
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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.
    We could be harmed by litigation involving patents, proprietary rights or other claims.
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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.
  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.
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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
  
 ITEM 5. OTHER INFORMATION
 Transition of President and Chief Executive Officer
  Amendment to Executive Severance Benefit Plan
  
 ITEM 6. EXHIBITS
 3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Company, as amended.3.2
    
    Amended and Restated Bylaws of the Company.4.1(2)
    
    Specimen Stock Certificate.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 Registration Statement (No. 333-37609) filed October 10,
1997, or with any amendments thereto, which registration statement
became effective November 24, 1997. 52




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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
and
Accounting Officer) 53




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Exhibit Index
 3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Company, as amended.3.2
    
    Amended and Restated Bylaws of the Company.4.1(2)
    
    Specimen Stock Certificate.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 Registration Statement (No. 333-37609) filed October 10,
1997, or with any amendments thereto, which registration statement
became effective November 24, 1997. 54