##### 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, 2007
 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)
    
    
    3Item 1.
    
    Condensed Consolidated Balance Sheets at December 31, 2007 and March 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended December 31,
2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4.
    
    Controls and Procedures
    
    
    37Part II.
    
    OTHER INFORMATION
    
    
    38Item 1.
    
    Legal Proceedings
    
    
    38Item 1A.
    
    Risk Factors
    
    
    38Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    55Item 3.
    
    Defaults Upon Senior Securities
    
    
    55Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    55Item 5.
    
    Other Information
    
    
    55Item 6.
    
    Exhibits
    
    
    56Signatures
    
    
    57EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 APPLIED MICRO CIRCUITS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
 December 31,
    
    
    March 31,2007
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    34,491
    
    
    $
    51,595Short-term investments-available-for-sale
    
    
    82,358
    
    
    
    232,875Accounts receivable, net
    
    
    31,745
    
    
    
    32,558Inventories
    
    
    39,820
    
    
    
    31,286Other current assets
    
    
    11,817
    
    
    
    14,438Total current assets
    
    
    200,231
    
    
    
    362,752Marketable securities
    
    
    69,453
    
    
    
    Property and equipment, net
    
    
    25,563
    
    
    
    27,150Goodwill
    
    
    335,624
    
    
    
    335,857Purchased intangibles, net
    
    
    61,929
    
    
    
    79,787Other assets
    
    
    17,713
    
    
    
    10,966Total assets
    
    $
    710,513
    
    
    $
    816,512LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    25,874
    
    
    $
    26,893Accrued payroll and related expenses
    
    
    7,000
    
    
    
    10,021Other accrued liabilities
    
    
    13,745
    
    
    
    16,383Deferred revenue
    
    
    2,822
    
    
    
    2,393Total current liabilities
    
    
    49,441
    
    
    
    55,690Stockholders equity:Preferred stock, $0.01 par value:Authorized shares2,000, none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value:Authorized shares375,000 at December 31, 2007 and 157,500 at March 31, 2007
Issued and outstanding shares65,678 at December 31, 2007 and 70,744 at March 31, 2007
    
    
    657
    
    
    
    707Additional paid-in capital
    
    
    5,890,804
    
    
    
    5,956,346Accumulated other comprehensive income (loss)
    
    
    (5,122
    )
    
    
    224Accumulated deficit
    
    
    (5,225,267
    )
    
    
    (5,196,455
    )Total stockholders equity
    
    
    661,072
    
    
    
    760,822Total liabilities and stockholders equity
    
    $
    710,513
    
    
    $
    816,512
 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
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    66,267
    
    
    $
    76,642
    
    
    $
    174,612
    
    
    $
    222,685Cost of revenues
    
    
    33,311
    
    
    
    37,799
    
    
    
    90,137
    
    
    
    104,863Gross profit
    
    
    32,956
    
    
    
    38,843
    
    
    
    84,475
    
    
    
    117,822Operating expenses:Research and development
    
    
    24,696
    
    
    
    24,550
    
    
    
    74,658
    
    
    
    72,242Selling, general and administrative
    
    
    14,125
    
    
    
    17,351
    
    
    
    46,038
    
    
    
    49,963Acquired in-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,300Amortization of purchased intangible assets
    
    
    1,320
    
    
    
    1,350
    
    
    
    4,001
    
    
    
    3,645Restructuring charges
    
    
    125
    
    
    
    67
    
    
    
    1,469
    
    
    
    2,733Option investigation, net
    
    
    (792
    )
    
    
    2,705
    
    
    
    (291
    )
    
    
    4,405Total operating expenses
    
    
    39,474
    
    
    
    46,023
    
    
    
    125,875
    
    
    
    146,288Operating loss
    
    
    (6,518
    )
    
    
    (7,180
    )
    
    
    (41,400
    )
    
    
    (28,466
    )Interest income, net
    
    
    2,093
    
    
    
    3,028
    
    
    
    7,269
    
    
    
    9,623Other income, net
    
    
    55
    
    
    
    93
    
    
    
    4,861
    
    
    
    292Loss before income taxes
    
    
    (4,370
    )
    
    
    (4,059
    )
    
    
    (29,270
    )
    
    
    (18,551
    )Income tax expense (benefit)
    
    
    (31
    )
    
    
    113
    
    
    
    (458
    )
    
    
    327Net loss
    
    $
    (4,339
    )
    
    $
    (4,172
    )
    
    $
    (28,812
    )
    
    $
    (18,878
    )Basic and diluted net loss per share:Net loss per share
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.42
    )
    
    $
    (0.27
    )Shares used in calculating basic and diluted net loss per share
    
    
    67,015
    
    
    
    70,450
    
    
    
    68,737
    
    
    
    71,228
 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)
 Nine Months EndedDecember 31,2007
    
    
    2006Operating activities:Net loss
    
    $
    (28,812
    )
    
    $
    (18,878
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activitiesDepreciation and amortization
    
    
    4,891
    
    
    
    6,518Amortization of purchased intangibles
    
    
    17,858
    
    
    
    18,551Acquired in-process research and development
    
    
    
    
    
    
    13,300Stock-based compensation expense:Stock options
    
    
    7,029
    
    
    
    7,854Restricted stock units
    
    
    1,199
    
    
    
    59Non-cash restructuring charges (benefit)
    
    
    (32
    )
    
    
    2,521Impairment of marketable securities
    
    
    846
    
    
    
    Realized gain on sale of strategic investments
    
    
    (4,649
    )
    
    
    Net (gain)
loss on disposal of property
    
    
    (8
    )
    
    
    34Changes in operating assets and liabilities:Accounts receivable
    
    
    813
    
    
    
    (7,973
    )Inventories
    
    
    (8,534
    )
    
    
    (11,294
    )Other assets
    
    
    1,106
    
    
    
    (3,148
    )Accounts payable
    
    
    (1,019
    )
    
    
    (719
    )Accrued payroll and other accrued liabilities
    
    
    (5,628
    )
    
    
    (6,315
    )Deferred revenue
    
    
    429
    
    
    
    (372
    )Net cash (used in) provided by operating activities
    
    
    (14,511
    )
    
    
    138Investing activities:Proceeds from sales and maturities of investments
    
    
    490,932
    
    
    
    379,413Purchases of investments
    
    
    (416,517
    )
    
    
    (306,744
    )Purchase of strategic investments
    
    
    (5,000
    )
    
    
    (1,500
    )Net proceeds from the sale of strategic investments
    
    
    5,249
    
    
    
    Purchase of property and equipment
    
    
    (4,943
    )
    
    
    (5,783
    )Proceeds from sale of property and equipment
    
    
    1,646
    
    
    
    Net cash paid for acquisitions
    
    
    
    
    
    
    (71,971
    )Net cash provided by (used in) investing activities
    
    
    71,367
    
    
    
    (6,585
    )Financing activities:Proceeds from issuance of common stock
    
    
    3,785
    
    
    
    248Repurchase of company stock
    
    
    (56,950
    )
    
    
    (20,137
    )Funding of structured stock repurchase agreements
    
    
    (41,830
    )
    
    
    Funds received from structured stock repurchase agreements including gains
    
    
    21,112
    
    
    
    17,379Payments of long-term debt
    
    
    
    
    
    
    (289
    )Other
    
    
    (77
    )
    
    
    166Net cash used in financing activities
    
    
    (73,960
    )
    
    
    (2,633
    )Net decrease in cash and cash equivalents
    
    
    (17,104
    )
    
    
    (9,080
    )Cash and cash equivalents at the beginning of the period
    
    
    51,595
    
    
    
    49,125Cash and cash equivalents at the end of the period
    
    $
    34,491
    
    
    $
    40,045Supplementary cash flow disclosure:Cash paid for:Interest
    
    $
    11
    
    
    $
    4Income taxes
    
    $
    164
    
    
    $
    488
 See Accompanying Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
    Accounting changes:
 Accounting for Uncertainty in Income Taxesan Interpretation of
FASB Statement No. 109.
 1-for-4 reverse stock split:
  Use of Estimates
  6




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Recent Accounting Pronouncements
 Fair Value
Measurements
 The Fair Value Option for
Financial Assets and Financial Liabilities
 Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities
 Business Combinations  a replacement of FASB
Statement No. 141
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 2. CERTAIN FINANCIAL STATEMENT INFORMATION
 Accounts receivable (in thousands):
 December 31,
    
    
    March 31,2007
    
    
    2007Accounts receivable
    
    $
    33,103
    
    
    $
    34,116Less: allowance for doubtful accounts
    
    
    (1,358
    )
    
    
    (1,558
    )$
    31,745
    
    
    $
    32,558
 Inventories (in thousands):
 December 31,
    
    
    March 31,2007
    
    
    2007Finished goods
    
    $
    31,471
    
    
    $
    16,691Work in process
    
    
    5,018
    
    
    
    9,630Raw materials
    
    
    3,331
    
    
    
    4,965$
    39,820
    
    
    $
    31,286
 Other current assets (in thousands):
 December 31,
    
    
    March 31,2007
    
    
    2007Deposits
    
    $
    604
    
    
    $
    1,247Prepaid expenses
    
    
    9,802
    
    
    
    10,435Interest receivable
    
    
    768
    
    
    
    1,104Other
    
    
    643
    
    
    
    1,652$
    11,817
    
    
    $
    14,438
 Property and equipment (in thousands):
 Useful
    
    
    December 31,
    
    
    March 31,Life
    
    
    2007
    
    
    2007(in years)Machinery and equipment
    
    
    57
    
    
    $
    33,723
    
    
    $
    43,084Leasehold improvements
    
    
    115
    
    
    
    8,262
    
    
    
    10,156Computers, office furniture and equipment
    
    
    37
    
    
    
    65,483
    
    
    
    76,809Buildings
    
    
    31.5
    
    
    
    2,756
    
    
    
    2,756Land
    
    
    N/A
    
    
    
    9,800
    
    
    
    11,302120,024
    
    
    
    144,107Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (94,461
    )
    
    
    (116,957
    )$
    25,563
    
    
    $
    27,150
  7




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##### Table of Contents



Goodwill:
  GoodwillMarch 31, 2007
    
    $
    335,857Canadian tax settlement
    
    
    (233
    )December 31, 2007
    
    $
    335,624
  Purchased intangibles:
  December 31, 2007
    
    
    March 31, 2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    AmortizationGross
    
    
    and Impairments
    
    
    Net
    
    
    Gross
    
    
    and Impairments
    
    
    NetDeveloped technology
    
    $
    425,000
    
    
    $
    (379,161
    )
    
    $
    45,839
    
    
    $
    425,000
    
    
    $
    (365,411
    )
    
    $
    59,589Backlog/customer relationships
    
    
    6,330
    
    
    
    (4,613
    )
    
    
    1,717
    
    
    
    6,330
    
    
    
    (4,288
    )
    
    
    2,042Patents/core technology rights/tradename
    
    
    62,305
    
    
    
    (47,932
    )
    
    
    14,373
    
    
    
    62,305
    
    
    
    (44,149
    )
    
    
    18,156$
    493,635
    
    
    $
    (431,706
    )
    
    $
    61,929
    
    
    $
    493,635
    
    
    $
    (413,848
    )
    
    $
    79,787
  Cost of
    
    
    OperatingSales
    
    
    Expenses
    
    
    TotalFiscal year
2008 (remaining)
    
    $
    4,593
    
    
    $
    1,310
    
    
    $
    5,903Fiscal year 2009
    
    
    17,823
    
    
    
    5,239
    
    
    
    23,062Fiscal year 2010
    
    
    12,097
    
    
    
    4,018
    
    
    
    16,115Fiscal year 2011
    
    
    10,500
    
    
    
    4,018
    
    
    
    14,518Fiscal year 2012
    
    
    875
    
    
    
    852
    
    
    
    1,727Thereafter
    
    
    
    
    
    
    604
    
    
    
    604Total
    
    $
    45,888
    
    
    $
    16,041
    
    
    $
    61,929
 Other assets (in thousands):
 December 31,
    
    
    March 31,2007
    
    
    2007Non-current portion of prepaid expenses
    
    $
    4,276
    
    
    $
    3,386Strategic investments
    
    
    10,000
    
    
    
    5,000Other
    
    
    3,437
    
    
    
    2,580$
    17,713
    
    
    $
    10,966
 8




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##### Table of Contents



Marketable securities:
  December 31,
    
    
    March 31,2007
    
    
    2007U.S. Treasury securities and agency bonds
    
    $
    9,003
    
    
    $
    39,425Corporate bonds
    
    
    15,647
    
    
    
    20,878Mortgage-backed and asset-backed securities
    
    
    52,765
    
    
    
    60,820Closed-end bond funds
    
    
    55,190
    
    
    
    85,252Preferred stock and options
    
    
    19,206
    
    
    
    22,203Marketable equity securities*
    
    
    
    
    
    
    4,297$
    151,811
    
    
    $
    232,875
 December 31,
    
    
    March 31,2007
    
    
    2007Reported as:Short-term investments available-for-sale
    
    $
    82,358
    
    
    $
    232,875Marketable securities
    
    
    69,453
    
    
    
    $
    151,811
    
    
    $
    232,875
 
 *
    
    Marketable equity securities represents the Companys equity investment in Mellanox
Technologies, Ltd., an Israeli company listed on the Nasdaq Stock Market. This investment was
sold in September 2007.  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
    
    $
    776
    
    
    $
    
    
    
    $
    3,490
    
    
    $
    10
    
    
    $
    4,266
    
    
    $
    10Corporate bonds
    
    
    1,186
    
    
    
    47
    
    
    
    10,299
    
    
    
    303
    
    
    
    11,485
    
    
    
    350Mortgage-backed and asset-backed securities
    
    
    1,958
    
    
    
    17
    
    
    
    34,110
    
    
    
    528
    
    
    
    36,068
    
    
    
    545Closed-end bond funds
    
    
    29,926
    
    
    
    2,553
    
    
    
    21,554
    
    
    
    2,615
    
    
    
    51,480
    
    
    
    5,168Preferred stock and options
    
    
    2,356
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    2,356
    
    
    
    383$
    36,202
    
    
    $
    3,000
    
    
    $
    69,453
    
    
    $
    3,456
    
    
    $
    105,655
    
    
    $
    6,456
 
 *
    
    Classified as marketable securities.  9




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##### Table of Contents



Other accrued liabilities (in thousands):
 December 31,
    
    
    March 31,2007
    
    
    2007Executive deferred compensation
    
    $
    4,491
    
    
    $
    3,422Employee related liabilities
    
    
    2,599
    
    
    
    2,732Warranty
    
    
    1,393
    
    
    
    2,692Professional fees
    
    
    931
    
    
    
    1,199Restructuring liabilities
    
    
    487
    
    
    
    350Current income taxes
    
    
    590
    
    
    
    1,212Other taxes
    
    
    673
    
    
    
    918Other
    
    
    2,581
    
    
    
    3,858$
    13,745
    
    
    $
    16,383
 Warranty reserves:
   Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Beginning accrual balance
    
    $
    1,882
    
    
    $
    3,517
    
    
    $
    2,692
    
    
    $
    4,066Acquired Quake warranty liability
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    202Charged to (reductions in) costs and expenses
    
    
    (438
    )
    
    
    439
    
    
    
    (801
    )
    
    
    194Payments
    
    
    (51
    )
    
    
    (425
    )
    
    
    (498
    )
    
    
    (729
    )Ending accrual balance
    
    $
    1,393
    
    
    $
    3,733
    
    
    $
    1,393
    
    
    $
    3,733
  10




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##### Table of Contents



Interest income, net (in thousands):
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest income
    
    $
    2,947
    
    
    $
    3,005
    
    
    $
    9,191
    
    
    $
    10,905Net realized loss
on short-term
investments and
other-than-temporary impairment on
marketable
securities
    
    
    (852
    )
    
    
    27
    
    
    
    (1,911
    )
    
    
    (1,278
    )Interest expense
    
    
    (2
    )
    
    
    (4
    )
    
    
    (11
    )
    
    
    (4
    )$
    2,093
    
    
    $
    3,028
    
    
    $
    7,269
    
    
    $
    9,623
  Other income, net (in thousands):
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net gain (loss) on disposals of property and equipment
    
    $
    (56
    )
    
    $
    (34
    )
    
    $
    8
    
    
    $
    (34
    )Foreign currency gain (loss)
    
    
    
    
    
    
    11
    
    
    
    (51
    )
    
    
    91Gain on sale
of strategic investment*
    
    
    
    
    
    
    
    
    
    
    4,649
    
    
    
    Other
    
    
    111
    
    
    
    116
    
    
    
    255
    
    
    
    235$
    55
    
    
    $
    93
    
    
    $
    4,861
    
    
    $
    292
 
 *
    
    In September 2007, the Company sold its
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 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (4,339
    )
    
    $
    (4,172
    )
    
    $
    (28,812
    )
    
    $
    (18,878
    )Shares used in basic and diluted net loss per share computation
(denominator):Weighted average common shares outstanding
    
    
    67,015
    
    
    
    70,450
    
    
    
    68,737
    
    
    
    71,228Dilutive effect of stock options and restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used in basic and diluted net loss per share computation
    
    
    67,015
    
    
    
    70,450
    
    
    
    68,737
    
    
    
    71,228Basic and diluted net loss per share
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.42
    )
    
    $
    (0.27
    )
  11




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##### Table of Contents



3. RESTRUCTURING CHARGES
  Facilities
    
    
    PropertyConsolidation and
    
    
    andWorkforce
    
    
    Operating Lease
    
    
    EquipmentReduction
    
    
    Commitments
    
    
    Impairments
    
    
    TotalLiability, March 31, 2006
    
    $
    5,830
    
    
    $
    1,814
    
    
    $
    
    
    
    $
    7,644Charged to expense
    
    
    500
    
    
    
    328
    
    
    
    2,794
    
    
    
    3,622Cash payments
    
    
    (5,287
    )
    
    
    (504
    )
    
    
    
    
    
    
    (5,791
    )Noncash charges
    
    
    
    
    
    
    
    
    
    
    (2,794
    )
    
    
    (2,794
    )Reductions to estimated liability
    
    
    (693
    )
    
    
    (1,638
    )
    
    
    
    
    
    
    (2,331
    )Liability, March 31, 2007
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    350Charged to expense
    
    
    1,501
    
    
    
    
    
    
    
    
    
    
    
    1,501Cash payments
    
    
    (1,332
    )
    
    
    
    
    
    
    
    
    
    
    (1,332
    )Reductions to estimated liability
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Liability, December 31, 2007
    
    $
    487
    
    
    $
    
    
    
    $
    
    
    
    $
    487
  Facilities
    
    
    PropertyConsolidation and
    
    
    andWorkforce
    
    
    Operating Lease
    
    
    EquipmentReduction
    
    
    Commitments
    
    
    Impairments
    
    
    TotalApril 2003 Restructuring ProgramLiability, March 31, 2006
    
    $
    
    
    
    $
    907
    
    
    $
    
    
    
    $
    907Cash payments
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (88
    )Reductions to estimated liability
    
    
    
    
    
    
    (819
    )
    
    
    
    
    
    
    (819
    )Liability, March 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    July 2005 Restructuring ProgramLiability, March 31, 2006
    
    $
    
    
    
    $
    907
    
    
    $
    
    
    
    $
    907Cash payments
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (88
    )Reductions to estimated liability
    
    
    
    
    
    
    (819
    )
    
    
    
    
    
    
    (819
    )Liability, March 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    March 2006 Restructuring ProgramLiability, March 31, 2006
    
    $
    5,830
    
    
    $
    
    
    
    $
    
    
    
    $
    5,830Charged to expense
    
    
    
    
    
    
    328
    
    
    
    2,794
    
    
    
    3,122Cash payments
    
    
    (4,917
    )
    
    
    (328
    )
    
    
    
    
    
    
    (5,245
    )Non-cash charge
    
    
    
    
    
    
    
    
    
    
    (2,794
    )
    
    
    (2,794
    )Reductions to estimated liability
    
    
    (613
    )
    
    
    
    
    
    
    
    
    
    
    (613
    )Liability, March 31, 2007
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    300Cash payments
    
    
    (167
    )
    
    
    
    
    
    
    
    
    
    
    (167
    )Liability, December 31, 2007
    
    $
    133
    
    
    $
    
    
    
    $
    
    
    
    $
    133June 2006 Restructuring ProgramCharged to expense
    
    $
    500
    
    
    $
    
    
    
    $
    
    
    
    $
    500Cash payments
    
    
    (370
    )
    
    
    
    
    
    
    
    
    
    
    (370
    )Reductions to estimated liability
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    (80
    )Liability, 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
    
    
    (653
    )
    
    
    
    
    
    
    
    
    
    
    (653
    )Liability, December 31, 2007
    
    $
    80
    
    
    $
    
    
    
    $
    
    
    
    $
    80
 12




---



##### Table of Contents



Facilities
    
    
    PropertyConsolidation and
    
    
    andWorkforce
    
    
    Operating Lease
    
    
    EquipmentReduction
    
    
    Commitments
    
    
    Impairments
    
    
    TotalSeptember 2007 Restructuring ProgramCharged to expense
    
    $
    768
    
    
    $
    
    
    
    $
    
    
    
    $
    768Cash payments
    
    
    (494
    )
    
    
    
    
    
    
    
    
    
    
    (494
    )Liability, December 31, 2007
    
    $
    274
    
    
    $
    
    
    
    $
    
    
    
    $
    274
       13




---



##### Table of Contents



4. COMPREHENSIVE LOSS
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (4,339
    )
    
    $
    (4,172
    )
    
    $
    (28,812
    )
    
    $
    (18,878
    )Change in net unrealized gain (loss) on short-term investments
    
    
    (983
    )
    
    
    1,304
    
    
    
    (5,204
    )
    
    
    7,124Foreign currency translation adjustment gain (loss)
    
    
    280
    
    
    
    249
    
    
    
    (142
    )
    
    
    50Comprehensive loss
    
    $
    (5,042
    )
    
    $
    (2,619
    )
    
    $
    (34,158
    )
    
    $
    (11,704
    )
 5. STOCKHOLDERS EQUITY
 Preferred Stock
  Common Stock
   Employee Stock Purchase Plan
  Stock Repurchase Program
   14




---



##### Table of Contents



Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock
   Nine Months EndedDecember 31,2007
    
    
    2006Open market repurchases:Aggregate repurchase price
    
    $
    56,950
    
    
    $
    20,137Repurchased shares
    
    
    4,950
    
    
    
    1,561Average price per share
    
    $
    11.50
    
    
    $
    12.90Structured stock repurchase agreements:Shares acquired in settlement
    
    
    706
    
    
    
    1,924Average price per share*
    
    $
    11.34
    
    
    $
    13.00Total shares acquired by repurchase or in settlement
    
    
    5,656
    
    
    
    3,485Average price per share
    
    $
    11.48
    
    
    $
    12.96
 
 *
    
    The average price per share of shares acquired in settlements of structured stock repurchase
agreements during the nine months ended December 31, 2007 and 2006 does not include gains on
settlements in cash of $2.3 million and $1.5 million, respectively. Stock Options
    15




---



##### Table of Contents



Number of Shares
    
    
    Weighted Average(in thousands)
    
    
    Exercise Price Per ShareOutstanding at the beginning of the period
    
    
    12,486
    
    
    $
    21.84Granted
    
    
    1,139
    
    
    
    12.20Exercised
    
    
    (187
    )
    
    
    7.95Cancelled
    
    
    (3,906
    )
    
    
    29.12Outstanding at the end of the period
    
    
    9,532
    
    
    $
    17.97Vested at the end of the period
    
    
    7,025
    
    
    $
    19.88
   16




---



##### Table of Contents



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    $11.92
    
    
    1,974
    
    
    $
    9.98
    
    
    
    5.23
    
    
    
    1,367
    
    
    $
    9.8311.93    13.16
    
    
    2,020
    
    
    
    12.61
    
    
    
    7.13
    
    
    
    883
    
    
    
    12.8013.17    15.40
    
    
    1,970
    
    
    
    14.45
    
    
    
    5.61
    
    
    
    1,316
    
    
    
    14.4415.41    25.94
    
    
    1,365
    
    
    
    18.68
    
    
    
    3.34
    
    
    
    1,256
    
    
    
    18.9025.95   300.13
    
    
    2,203
    
    
    
    32.77
    
    
    
    1.26
    
    
    
    2,203
    
    
    
    32.77$0.19 $300.13
    
    
    9,532
    
    
    $
    17.97
    
    
    
    4.52
    
    
    
    7,025
    
    
    $
    19.88
  Restricted Stock Units
   Restricted Stock Units OutstandingNumber of Shares(in thousands)Balance at beginning of period
    
    
    184Awarded during the period
    
    
    1,161Vested during the period
    
    
    (174
    )Cancelled during the period
    
    
    (104
    )Balance at end of period
    
    
    1,067
   17




---



##### Table of Contents



6. STOCK-BASED COMPENSATION
 Share-Based Payment
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock-based compensation expense by type of awardsStock options
    
    $
    1,762
    
    
    $
    2,701
    
    
    $
    7,029
    
    
    $
    7,854Restricted stock units
    
    
    550
    
    
    
    23
    
    
    
    1,199
    
    
    
    59Total stock-based compensation expense
    
    
    2,312
    
    
    
    2,724
    
    
    
    8,228
    
    
    
    7,913Stock-based compensation capitalized to (expensed from) inventory
    
    
    (129
    )
    
    
    
    
    
    
    64
    
    
    
    Total stock-based compensation
    
    
    2,183
    
    
    $
    2,724
    
    
    $
    8,292
    
    
    $
    7,913
   Three Months Ended December 31,Employee StockEmployee Stock Options
    
    Purchase Plans2007(1)
    
    2006
    
    2007(2)
    
    2006Expected life (years)
    
    
    3.9
    
    
    
    4.4
    
    
    
    0.5
    
    
    
    1.3Risk-free interest rate
    
    
    3.9
    %
    
    
    4.6
    %
    
    
    5.0
    %
    
    
    2.9
    %Volatility
    
    
    47
    %
    
    
    56
    %
    
    
    55
    %
    
    
    64
    %Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Weighted average fair value per share
    
    $
    5.27
    
    
    $
    6.76
    
    
    $
    3.44
    
    
    $
    6.00
 18




---



##### Table of Contents



(1)
    
    As of March 2007, option grants will have an expiration of 8 years instead of the previous
expiration of 10 years with the exception of grants to non-employee directors, which will
continue to be granted with a 10 year expiration.(2)
    
    In January 2007, the Company reduced the offering period under its employee stock purchase
plan from 24 months to 6 months.    Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock-based compensation included in expenses:Cost of revenues
    
    $
    224
    
    
    $
    148
    
    
    $
    535
    
    
    $
    439Research and development
    
    
    1,177
    
    
    
    882
    
    
    
    3,448
    
    
    
    2,979Selling, general and administrative
    
    
    911
    
    
    
    1,694
    
    
    
    4,245
    
    
    
    4,495Total stock-based compensation expense
    
    
    2,312
    
    
    
    2,724
    
    
    
    8,228
    
    
    
    7,913Stock-based compensation capitalized to (expensed from) inventory
    
    
    (129
    )
    
    
    
    
    
    
    64
    
    
    
    Total stock-based compensation
    
    $
    2,183
    
    
    $
    2,724
    
    
    $
    8,292
    
    
    $
    7,913
   7. CONTINGENCIES
 Legal Proceedings
  19




---



##### Table of Contents



In re Applied Micro Circuits Derivative Litigation In re Applied Micro Circuits Corporation Shareholder Derivative Litigation
 20




---



##### Table of Contents



Segen v. Rickey, et al.,
 Regulatory Proceedings
    21




---



##### Table of Contents



8. INCOME TAXES
       9. ACQUISITION OF QUAKE TECHNOLOGIES, INC.
  22




---



##### Table of Contents



Business Combinations
 Net tangible assets
    
    $
    8,411Purchased inventory fair market value
    
    
    2,395Existing technology
    
    
    11,500In-process research and development
    
    
    13,300Patents/trademarks
    
    
    3,200Customer relationships/backlog
    
    
    2,800Goodwill
    
    
    39,597$
    81,203
  Cash
    
    $
    80,003Merger costs
    
    
    1,200Total consideration paid
    
    $
    81,203
    23




---



##### 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, 2007 and 2006. 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
  24




---



##### Table of Contents



Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    66,267
    
    
    
    100.0
    %
    
    $
    76,642
    
    
    
    100.0
    %
    
    $
    (10,375
    )
    
    
    (13.5
    )%Cost of revenues
    
    
    33,311
    
    
    
    50.3
    
    
    
    37,799
    
    
    
    49.3
    
    
    
    (4,488
    )
    
    
    (11.9
    )Gross profit
    
    
    32,956
    
    
    
    49.7
    
    
    
    38,843
    
    
    
    50.7
    
    
    
    (5,887
    )
    
    
    (15.2
    )Total operating expenses
    
    
    39,474
    
    
    
    59.5
    
    
    
    46,023
    
    
    
    60.1
    
    
    
    (6,549
    )
    
    
    (14.2
    )Operating loss
    
    
    (6,518
    )
    
    
    (9.8
    )
    
    
    (7,180
    )
    
    
    (9.4
    )
    
    
    662
    
    
    
    9.2Interest and other income, net
    
    
    2,148
    
    
    
    3.2
    
    
    
    3,121
    
    
    
    4.1
    
    
    
    (973
    )
    
    
    (31.2
    )Loss before income taxes
    
    
    (4,370
    )
    
    
    (6.6
    )
    
    
    (4,059
    )
    
    
    (5.3
    )
    
    
    (311
    )
    
    
    (7.7
    )Income tax expense (benefit)
    
    
    (31
    )
    
    
    (0.1
    )
    
    
    113
    
    
    
    0.1
    
    
    
    (144
    )
    
    
    (127.4
    )Net loss
    
    $
    (4,339
    )
    
    
    (6.5
    )%
    
    $
    (4,172
    )
    
    
    (5.4
    )%
    
    $
    (167
    )
    
    
    (4.0
    )
 Nine Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeNet revenues
    
    $
    174,612
    
    
    
    100.0
    %
    
    $
    222,685
    
    
    
    100.0
    %
    
    $
    (48,073
    )
    
    
    (21.6
    )%Cost of revenues
    
    
    90,137
    
    
    
    51.6
    
    
    
    104,863
    
    
    
    47.1
    
    
    
    (14,726
    )
    
    
    (14.0
    )Gross profit
    
    
    84,475
    
    
    
    48.4
    
    
    
    117,822
    
    
    
    52.9
    
    
    
    (33,347
    )
    
    
    (28.3
    )Total operating expenses
    
    
    125,875
    
    
    
    72.1
    
    
    
    146,288
    
    
    
    65.7
    
    
    
    (20,413
    )
    
    
    (14.0
    )Operating loss
    
    
    (41,400
    )
    
    
    (23.7
    )
    
    
    (28,466
    )
    
    
    (12.8
    )
    
    
    (12,934
    )
    
    
    (45.4
    )Interest and other income, net
    
    
    12,130
    
    
    
    6.9
    
    
    
    9,915
    
    
    
    4.5
    
    
    
    2,215
    
    
    
    22.3Loss before income taxes
    
    
    (29,270
    )
    
    
    (16.8
    )
    
    
    (18,551
    )
    
    
    (8.3
    )
    
    
    (10,719
    )
    
    
    (57.8
    )Income tax expense (benefit)
    
    
    (458
    )
    
    
    (0.3
    )
    
    
    327
    
    
    
    0.1
    
    
    
    (785
    )
    
    
    (240.1
    )Net loss
    
    $
    (28,812
    )
    
    
    (16.5
    )%
    
    $
    (18,878
    )
    
    
    (8.4
    )%
    
    $
    (9,934
    )
    
    
    (52.6
    )
 Net Revenue.
  
    
    the timing, rescheduling or cancellation of significant customer orders and our ability,
as well as the ability of our customers, to manage inventory corrections;
    
    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.
  25




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2007
    
    2006
    
    2007
    
    2006Avnet Inc.
(distributor)
    
    
    25
    %
    
    
    26
    %
    
    
    24
    %
    
    
    26
    %
   Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    22,900
    
    
    
    34.6
    %
    
    $
    35,182
    
    
    
    45.9
    %Other North America
    
    
    6,856
    
    
    
    10.3
    
    
    
    3,625
    
    
    
    4.7Europe and Israel
    
    
    10,825
    
    
    
    16.3
    
    
    
    11,910
    
    
    
    15.5Asia
    
    
    25,329
    
    
    
    38.2
    
    
    
    25,712
    
    
    
    33.5Other
    
    
    357
    
    
    
    0.6
    
    
    
    213
    
    
    
    0.4$
    66,267
    
    
    
    100.0
    %
    
    $
    76,642
    
    
    
    100.0
    %
 Nine Months Ended December 312007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueUnited States of America
    
    $
    61,841
    
    
    
    35.4
    %
    
    $
    95,008
    
    
    
    42.7
    %Other North America
    
    
    15,449
    
    
    
    8.8
    
    
    
    19,973
    
    
    
    9.0Europe and Israel
    
    
    33,521
    
    
    
    19.2
    
    
    
    37,261
    
    
    
    16.7Asia
    
    
    62,983
    
    
    
    36.1
    
    
    
    69,388
    
    
    
    31.2Other
    
    
    818
    
    
    
    0.5
    
    
    
    1,055
    
    
    
    0.4$
    174,612
    
    
    
    100.0
    %
    
    $
    222,685
    
    
    
    100.0
    %
  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; and
    
    income tax expenses (benefits).
 26




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Inventory Valuation and Warranty Liabilities
   Goodwill and Intangible Asset Valuation
  27




---



##### Table of Contents



Goodwill and Other Intangible
Assets
  Restructuring Charges
  28




---



##### Table of Contents



Valuation of Deferred Income Taxes
  Stock-Based Compensation Expense
 Share-Based Payment
 Revenue Recognition
 Revenue
Recognition
 29




---



##### Table of Contents



Allowance for Bad Debts
  RESULTS OF OPERATIONS
 Comparison of the Three and Nine Months Ended December 31, 2007 to the Three and Nine Months Ended
December 31, 2006
 Net Revenues.
 Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeICP
    
    $
    51,002
    
    
    
    77.0
    %
    
    $
    61,982
    
    
    
    80.9
    %
    
    $
    (10,980
    )
    
    
    (17.7
    )%Storage
    
    
    13,581
    
    
    
    20.5
    
    
    
    13,775
    
    
    
    18.0
    
    
    
    (194
    )
    
    
    (1.4
    )Other
    
    
    1,684
    
    
    
    2.5
    
    
    
    885
    
    
    
    1.1
    
    
    
    799
    
    
    
    90.3$
    66,267
    
    
    
    100.0
    %
    
    $
    76,642
    
    
    
    100.0
    %
    
    $
    (10,375
    )
    
    
    (13.5
    )
 Nine Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeICP
    
    $
    132,790
    
    
    
    76.0
    %
    
    $
    180,987
    
    
    
    81.3
    %
    
    $
    (48,197
    )
    
    
    (26.6
    )%Storage
    
    
    39,054
    
    
    
    22.4
    
    
    
    38,328
    
    
    
    17.2
    
    
    
    726
    
    
    
    1.9Other
    
    
    2,768
    
    
    
    1.6
    
    
    
    3,370
    
    
    
    1.5
    
    
    
    (602
    )
    
    
    (17.9
    )$
    174,612
    
    
    
    100.0
    %
    
    $
    222,685
    
    
    
    100.0
    %
    
    $
    (48,073
    )
    
    
    (21.6
    )
    Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeFocus
    
    $
    57,263
    
    
    
    86.4
    %
    
    $
    66,971
    
    
    
    87.4
    %
    
    $
    (9,708
    )
    
    
    (14.5
    )%Nonfocus
    
    
    9,004
    
    
    
    13.6
    
    
    
    9,671
    
    
    
    12.6
    
    
    
    (667
    )
    
    
    (6.9
    )$
    66,267
    
    
    
    100.0
    %
    
    $
    76,642
    
    
    
    100.0
    %
    
    $
    (10,375
    )
    
    
    (13.5
    )
 Nine Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeFocus
    
    $
    156,254
    
    
    
    89.5
    %
    
    $
    190,433
    
    
    
    85.5
    %
    
    $
    (34,179
    )
    
    
    (17.9
    )%Nonfocus
    
    
    18,358
    
    
    
    10.5
    
    
    
    32,252
    
    
    
    14.5
    
    
    
    (13,894
    )
    
    
    (43.1
    )$
    174,612
    
    
    
    100.0
    %
    
    $
    222,685
    
    
    
    100.0
    %
    
    $
    (48,073
    )
    
    
    (21.6
    )
 30




---



##### Table of Contents



Gross Profit
 Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeNet revenues
    
    $
    66,267
    
    
    
    100.0
    %
    
    $
    76,642
    
    
    
    100.0
    %
    
    $
    (10,375
    )
    
    
    (13.5
    )%Cost of revenues
    
    
    33,311
    
    
    
    50.3
    
    
    
    37,799
    
    
    
    49.3
    
    
    
    (4,488
    )
    
    
    (11.9
    )Gross profit
    
    $
    32,956
    
    
    
    49.7
    %
    
    $
    38,843
    
    
    
    50.7
    %
    
    $
    (5,887
    )
    
    
    (15.2
    )
 Nine Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Decrease
    
    
    % ChangeNet revenues
    
    $
    174,612
    
    
    
    100.0
    %
    
    $
    222,685
    
    
    
    100.0
    %
    
    $
    (48,073
    )
    
    
    (21.6
    )%Cost of revenues
    
    
    90,137
    
    
    
    51.6
    
    
    
    104,863
    
    
    
    47.1
    
    
    
    (14,726
    )
    
    
    (14.0
    )Gross profit
    
    $
    84,475
    
    
    
    48.4
    %
    
    $
    117,822
    
    
    
    52.9
    %
    
    $
    (33,347
    )
    
    
    (28.3
    )
   Research and Development and Selling, General and Administrative Expenses
 Three Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeResearch and development
    
    $
    24,696
    
    
    
    37.3
    %
    
    $
    24,550
    
    
    
    32.0
    %
    
    $
    146
    
    
    
    0.6
    %Selling, general and administrative
    
    
    14,125
    
    
    
    21.3
    
    
    
    17,351
    
    
    
    22.6
    
    
    
    (3,226
    )
    
    
    (18.6
    )
 Nine Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeResearch and development
    
    $
    74,658
    
    
    
    42.8
    %
    
    $
    72,242
    
    
    
    32.4
    %
    
    $
    2,416
    
    
    
    3.3
    %Selling, general and administrative
    
    
    46,038
    
    
    
    26.4
    
    
    
    49,963
    
    
    
    22.4
    
    
    
    (3,925
    )
    
    
    (7.9
    )
 31




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##### Table of Contents



Research and Development.
 Selling, General and Administrative.
 Stock-Based Compensation
 Three Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeCosts of revenues
    
    $
    224
    
    
    
    0.3
    %
    
    $
    148
    
    
    
    0.2
    %
    
    $
    76
    
    
    
    51.4
    %Research and development
    
    
    1,177
    
    
    
    1.8
    
    
    
    882
    
    
    
    1.2
    
    
    
    295
    
    
    
    33.4Selling, general and administrative
    
    
    911
    
    
    
    1.4
    
    
    
    1,694
    
    
    
    2.2
    
    
    
    (783
    )
    
    
    (46.2
    )$
    2,312
    
    
    
    3.5
    %
    
    $
    2,724
    
    
    
    3.6
    %
    
    $
    (412
    )
    
    
    (15.1
    )
 Nine Months Ended December 31,2007
    
    
    2006% of Net
    
    
    
    
    
    
    % of Net
    
    
    IncreaseAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    (Decrease)
    
    
    % ChangeCosts of revenues
    
    $
    535
    
    
    
    0.3
    %
    
    $
    439
    
    
    
    0.2
    %
    
    $
    97
    
    
    
    22.1
    %Research and development
    
    
    3,448
    
    
    
    2.0
    
    
    
    2,979
    
    
    
    1.3
    
    
    
    469
    
    
    
    15.7Selling, general and administrative
    
    
    4,245
    
    
    
    2.4
    
    
    
    4,495
    
    
    
    2.1
    
    
    
    (250
    )
    
    
    (5.6
    )$
    8,228
    
    
    
    4.7
    %
    
    $
    7,913
    
    
    
    3.6
    %
    
    $
    316
    
    
    
    4.0
  32




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##### Table of Contents



Restructuring Charges
 Three Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Increase
    
    % ChangeRestructuring charges
    
    $
    125
    
    
    
    0.2
    %
    
    $
    67
    
    
    
    0.1
    %
    
    $
    58
    
    
    
    86.6
    %
 Nine Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeRestructuring charges
    
    $
    1,469
    
    
    
    0.8
    %
    
    $
    2,733
    
    
    
    1.2
    %
    
    $
    (1,264
    )
    
    
    (46.2
    )%
     Option investigation and related expenses
 Three Months Ended December 31.2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeOption investigation, net
    
    $
    (792
    )
    
    
    (1.2
    )%
    
    $
    2,705
    
    
    
    3.5
    %
    
    $
    (3,497
    )
    
    
    (129.3
    )%
 Nine Months Ended December 31.2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeOption investigation, net
    
    $
    (291
    )
    
    
    (0.2
    )%
    
    $
    4,405
    
    
    
    2.0
    %
    
    $
    (4,696
    )
    
    
    (106.6
    )%
  33




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##### Table of Contents



Interest
and Other Income, net
 Three Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeInterest income, net
    
    $
    2,093
    
    
    
    3.2
    %
    
    $
    3,028
    
    
    
    4.0
    %
    
    $
    (935
    )
    
    
    (30.9
    )%Other income, net
    
    
    55
    
    
    
    0.1
    
    
    
    93
    
    
    
    0.1
    
    
    
    (38
    )
    
    
    (40.9
    )
 Nine Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of Net
    
    IncreaseAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    (Decrease)
    
    % ChangeInterest income, net
    
    $
    7,269
    
    
    
    4.2
    %
    
    $
    9,623
    
    
    
    4.3
    %
    
    $
    (2,354
    )
    
    
    (24.5
    )%Other income, net
    
    
    4,861
    
    
    
    2.8
    
    
    
    292
    
    
    
    0.1
    
    
    
    4,569
    
    
    
    1,564.7
 Interest Income net
 Other Income, net.
 Income Taxes.
 Three Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeIncome tax expense (benefit)
    
    $
    (31
    )
    
    
    (0.0
    )%
    
    $
    113
    
    
    
    0.1
    %
    
    $
    (144
    )
    
    
    (127.4
    )%
 Nine Months Ended December 31,2007
    
    2006% of Net
    
    
    
    
    
    % of NetAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Decrease
    
    % ChangeIncome tax expense (benefit)
    
    $
    (458
    )
    
    
    (0.3
    )%
    
    $
    327
    
    
    
    0.1
    %
    
    $
    (785
    )
    
    
    (240.1
    )%
  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
  35




---



##### Table of Contents



Nine Months EndedDecember 31,2007
    
    
    2006Open market repurchases:Aggregate repurchase price
    
    $
    56,950
    
    
    $
    20,137Repurchased shares
    
    
    4,950
    
    
    
    1,561Average price per share
    
    $
    11.50
    
    
    $
    12.90Structured stock repurchase agreements:Shares acquired in settlement
    
    
    706
    
    
    
    1,924Average price per share*
    
    $
    11.34
    
    
    $
    13.00Total shares acquired by repurchase or in settlement
    
    
    5,656
    
    
    
    3,485Average price per share
    
    $
    11.48
    
    
    $
    12.96
 
 *
    
    The average price per share of shares acquired in settlements of structured stock
repurchase agreements during the nine months ended December 31, 2007 and 2006 does not include
gains on settlements in cash of $2.3 million and $1.5 million, respectively.  OtherOperating
    
    
    PurchaseLeases
    
    
    Commitments
    
    
    TotalFiscal Years Ending March 31,2008
    
    $
    8,322
    
    
    $
    21,886
    
    
    $
    30,2082009
    
    
    8,387
    
    
    
    
    
    
    
    8,3872010
    
    
    4,082
    
    
    
    
    
    
    
    4,0822011
    
    
    984
    
    
    
    
    
    
    
    9842012 and thereafter
    
    
    
    
    
    
    
    
    
    
    Total minimum payments
    
    $
    21,775
    
    
    $
    21,886
    
    
    $
    43,661
   36




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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, 2007
    
    

X
Basis Points (BPS)(150 BPS)
    
    
    (100 BPS)
    
    
    (50 BPS)
    
    
    
    
    
    
    50 BPS
    
    
    100 BPS
    
    
    150 BPSAvailable-for-sale
investments
    
    $
    163,031
    
    
    $
    159,099
    
    
    $
    155,366
    
    
    $
    151,810
    
    
    $
    148,439
    
    
    $
    145,231
    
    
    $
    142,143
    
 ITEM 4. CONTROLS AND PROCEDURES
  37




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 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, 2007.
 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



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;
    
    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;
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
    
    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 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;
    
    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 at 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.
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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;
    
    customers or prospective customers may not incorporate our products in their future
product designs;
    
    design wins with customers or prospective customers may not result in sales to such
customers;
    
    the introduction of new products by customers may be later or 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 the
product lines may be phased out;
    
    our agreements with customers typically are non-exclusive and do not require them to
purchase a minimum amount of our products;
    
    many of our customers have pre-existing relationships with current or potential
competitors that may cause them to switch from our products to competing products;
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
    
    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
    
    the continued viability of our customers and prospective customers.
   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 are unable to further expand our share of these markets, 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;
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
    
    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;
    
    reduced or uncertain protection for intellectual property rights in some countries;
    
    longer payment cycles to collect accounts receivable in some countries;
    
    the burden 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 new product introductions 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;
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
    
    time-to-market;
    
    price;
    
    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.
    We do not have an internal wafer fabrication capability, which could result in unanticipated
liability and reduced revenues.
  
    
    if we have not effectively stored certain products manufactured in our internal facility
before its closure, we may incur liability to those customers to whom we have committed to
deliver such products; and
    
    we may be unable to repair or replace such products.
 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;
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
    
    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.
  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;
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
    
    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 controls over financial reporting are 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 have been named as a party to several derivative action lawsuits arising from our internal
option review, and we may be named in additional litigation, all of which could require significant
management time and attention and result in significant legal expenses and may result in an
unfavorable outcome which could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
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As a result of our option review
and restatement, we are subject to investigations by the SEC, which may not be resolved favorably and have required, and may
continue to require, a significant amount of management time and attention and accounting and legal
resources, which could adversely affect our business, results of operations and cash flows.
  The process of restating our financial statements,
 making the associated disclosures, and complying
with SEC requirements was subject to uncertainty and evolving requirements. *
  If we do not maintain compliance with Nasdaq listing requirements, our common stock could be
delisted, which could have a material adverse effect on the trading price of our common stock and
cause some investors to lose interest in our company.
  We could incur substantial fines or litigation costs associated with our storage, use and disposal
of hazardous materials. *
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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 operation and financial
condition. *
  
    
    problems combining or integrating the purchased operations, technologies or products;
    
    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 no or limited prior experience;
and
    
    potential loss of key employees, particularly those of the acquired organizations.In addition, in the event of any such investments or acquisitions, we could
    
    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.
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Our subsidiary has been named as a defendant in litigation that could result in substantial costs
and divert managements attention and resources.
  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
  Total Number ofShares Purchased as
    
    Maximum AmountPart of Publicly
    
    that May Yet BeTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    per Share
    
    Programs
    
    Plans or ProgramsOctober 1  October 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    51,199November 1  November 30, 2007
    
    
    2,472
    
    
    
    11.20
    
    
    
    2,472
    
    
    
    23,517December 1 December 31, 2007 (1)
    
    
    266
    
    
    
    11.26
    
    
    
    266
    
    
    
    20,517Total shares repurchased
    
    
    2,738
    
    
    
    11.21
    
    
    
    2,738
 
 (1)
    
    At December 31, 2007, we had five structured stock repurchase agreements outstanding.  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
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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.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. 56




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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)
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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.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.