**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
  **Washington,
        D.C. 20549**
  **FORM
        10-Q**
  (MARK
        ONE)
  **[X] QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**
  **For
        the quarterly period ended June 30, 2007**
  **OR**
  **[   ]
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT
        OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _____________**
  **Commission
        file number 000-25699**
   
  **PLX
        Technology, Inc.**
  (Exact
        name of Registrant as Specified in its Charter)
  **Delaware**
                **94-3008334**(State
                    or Other Jurisdiction of Incorporation or
                    Organization)
                (I.R.S.
                    Employer Identification Number)
 **870
        Maude Avenue**
 **Sunnyvale,
        California  94085**
 **(408)
        774-9060**
  (Address,
        including zip code, and telephone number, including area code, of registrant's
        principal executive offices)
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the preceding 12 months (or for such shorter period that the registrant was
        required to file such reports), and (2) has been subject to such filing requirements
        for the past 90 days. Yes[X] No[ ]
 Indicate
          by check mark whether the Registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer. See definition of “accelerated
          filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
          One):
 
 Large
          accelerated filer [ ]   Accelerated filer [X]    Non-accelerated filer [ ]
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act).  Yes [  ]    No
          [X]
  As
          of July 31, 2007
          there were 28,739,043 shares of common
          stock, par value $0.001 per share,
          outstanding.








**PLX
        TECHNOLOGY, INC.**
 **INDEX
        TO**
 **REPORT
        ON FORM 10-Q**
 **FOR
        QUARTER ENDED JUNE 30, 2007**
 
 **PART
                      I. FINANCIAL INFORMATION**
                  
                  **Page**Item
                      1.
                  Financial
                      Statements (Unaudited)Condensed
                      Consolidated Balance Sheets at June 30, 2007 and
                      December 31, 2006
                  
                  3Condensed
                      Consolidated Statements of Operations for the three
                      and six months ended June 30, 2007 and 2006
                  
                  4Condensed
                      Consolidated Statements of Cash Flows for the six
                      months ended June 30, 2007 and 2006
                  
                  5Notes
                      to Condensed Consolidated Financial
                      Statements
                  
                  6Item
                      2.
                  Management's
                      Discussion and Analysis of Financial Condition
                      and Results of Operations
                  
                  12Item
                      3.
                  Quantitative
                      and Qualitative Disclosures About Market
                      Risk
                  
                  19Item
                      4.
                  Controls
                      and Procedures
                  
                  19**PART
                      II. OTHER INFORMATION**Item
                      1A.
                  Risk
                      Factors
                  
                  20Item
                      4.
                  Submission
                      of Matters to a Vote of Security
                      Holders
                  
                  26Item
                      6.
                  Exhibits
                  
                  27Signature
                  
                  
                  28
 
  **PART
        I.  FINANCIAL INFORMATION**
 
 **ITEM
        1.  FINANCIAL STATEMENTS**
 
 
 **PLX
        TECHNOLOGY, INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 (in
        thousands)
 
 **June
                    30,**
                
                
                **December
                    31,****2007**
                
                
                **2006
                    (1)**(unaudited)ASSETSCurrent
                    Assets:Cash
                    and cash equivalents
                
                $
                28,259
                
                
                $
                32,804Short-term
                    marketable securities
                
                
                12,492
                
                
                
                5,853Accounts
                    receivable, net
                
                
                8,336
                
                
                
                8,491Inventories
                
                
                6,957
                
                
                
                8,295Other
                    current assets
                
                
                3,440
                
                
                
                600Total
                    current assets
                
                
                59,484
                
                
                
                56,043Property
                    and equipment, net
                
                
                28,127
                
                
                
                28,744Goodwill
                
                
                34,976
                
                
                
                34,976Other
                    purchased intangible assets
                
                
                2,059
                
                
                
                2,856Long-term
                    marketable securities
                
                
                6,697
                
                
                
                3,666Other
                    assets
                
                
                760
                
                
                
                1,663Total
                    assets
                
                $
                132,103
                
                
                $
                127,948LIABILITIESCurrent
                    Liabilities:Accounts
                    payable
                
                $
                5,694
                
                
                $
                2,995Accrued
                    compensation and benefits
                
                
                1,943
                
                
                
                2,417Accrued
                    commissions
                
                
                638
                
                
                
                1,100Other
                    accrued expenses
                
                
                500
                
                
                
                500Total
                    current liabilities
                
                
                8,775
                
                
                
                7,012CommitmentsSTOCKHOLDERS'
                    EQUITYCommon
                    stock, par value
                
                
                29
                
                
                
                29Additional
                    paid-in capital
                
                
                131,539
                
                
                
                128,735Accumulated
                    other comprehensive loss
                
                
                (154
                )
                
                
                (96
                )Accumulated
                    deficit
                
                
                (8,086
                )
                
                
                (7,732
                )Total
                    stockholders' equity
                
                
                123,328
                
                
                
                120,936Total
                    liabilities and stockholders' equity
                
                $
                132,103
                
                
                $
                127,948
 (1)  Derived
        from audited financial statements
 
 See
        accompanying notes to condensed consolidated financial statements.
   
 
 
 **PLX
        TECHNOLOGY, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 (in
        thousands, except per share amounts)
  **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Net
                    revenues
                
                $
                19,764
                
                
                $
                19,411
                
                
                $
                38,404
                
                
                $
                39,416Cost
                    of revenues
                
                
                8,118
                
                
                
                8,225
                
                
                
                15,381
                
                
                
                15,722Gross
                    margin
                
                
                11,646
                
                
                
                11,186
                
                
                
                23,023
                
                
                
                23,694Operating
                    expenses:Research
                    and development
                
                
                6,143
                
                
                
                4,835
                
                
                
                11,885
                
                
                
                9,914Selling,
                    general and administrative
                
                
                6,061
                
                
                
                5,982
                
                
                
                12,231
                
                
                
                11,657Amortization
                    of purchased intangible assets
                
                
                357
                
                
                
                481
                
                
                
                797
                
                
                
                993Total
                    operating expenses
                
                
                12,561
                
                
                
                11,298
                
                
                
                24,913
                
                
                
                22,564Income
                    (loss) from operations
                
                
                (915
                )
                
                
                (112
                )
                
                
                (1,890
                )
                
                
                1,130Interest
                    income and other, net
                
                
                607
                
                
                
                421
                
                
                
                1,181
                
                
                
                763Income
                    (loss) before provision (benefit) for income taxes
                
                
                (308
                )
                
                
                309
                
                
                
                (709
                )
                
                
                1,893Provision
                    (benefit) for income taxes
                
                
                (226
                )
                
                
                28
                
                
                
                (355
                )
                
                
                71Net
                    income (loss)
                
                $
                (82
                )
                
                $
                281
                
                
                $
                (354
                )
                
                $
                1,822Basic
                    net income (loss) per share
                
                $
                (0.00
                )
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                0.07Shares
                    used to compute basic per share amounts
                
                
                28,674
                
                
                
                28,081
                
                
                
                28,660
                
                
                
                27,983Diluted
                    net income (loss) per share
                
                $
                (0.00
                )
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                0.06Shares
                    used to compute diluted per share amounts
                
                
                28,674
                
                
                
                28,938
                
                
                
                28,660
                
                
                
                28,868
 See
        accompanying notes to condensed consolidated financial statements.
  
 
 **PLX
        TECHNOLOGY, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 (in
        thousands)
 
 **Six
                    Months Ended****June
                    30,****2007**
                
                
                **2006**Cash
                    flows from operating activitiesNet
                    income (loss)
                
                $
                (354
                )
                
                $
                1,822Adjustments
                    to reconcile net income (loss) to cash flows provided by operating
                    activities:Depreciation
                    and amortization
                
                
                960
                
                
                
                976Share-based
                    compensation expense
                
                
                2,364
                
                
                
                2,500Amortization
                    of purchased intangible assets
                
                
                797
                
                
                
                993Deferred
                    margins
                
                
                -
                
                
                
                (1,963
                )Write-downs
                    for inventories
                
                
                572
                
                
                
                195Other
                    non-cash items
                
                
                (91
                )
                
                
                (107
                )Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                162
                
                
                
                170Inventories
                
                
                766
                
                
                
                (5,979
                )Other
                    current assets
                
                
                (2,840
                )
                
                
                274Other
                    assets
                
                
                903
                
                
                
                68Accounts
                    payable
                
                
                2,699
                
                
                
                2,575Accrued
                    compensation and benefits
                
                
                (936
                )
                
                
                508Other
                    accrued expenses
                
                
                -
                
                
                
                (731
                )Net
                    cash provided by operating activities
                
                
                5,002
                
                
                
                1,301Cash
                    flows provided by (used in) investing activities:Purchases
                    of marketable securities
                
                
                (16,213
                )
                
                
                (4,073
                )Sales
                    and maturities of marketable securities
                
                
                6,600
                
                
                
                16,728Purchase
                    of property and equipment
                
                
                (348
                )
                
                
                (642
                )Net
                    cash provided by (used in) investing activities
                
                
                (9,961
                )
                
                
                12,013Cash
                    flows provided by financing activities:Proceeds
                    from exercise of common stock options
                
                
                440
                
                
                
                2,494Net
                    cash provided by financing activities
                
                
                440
                
                
                
                2,494Effect
                    of exchange rate fluctuations on cash and cash equivalents
                
                
                (26
                )
                
                
                (12
                )Increase
                    (decrease) in cash and cash equivalents
                
                
                (4,545
                )
                
                
                15,796Cash
                    and cash equivalents at beginning of year
                
                
                32,804
                
                
                
                21,028Cash
                    and cash equivalents at end of period
                
                $
                28,259
                
                
                $
                36,824
 See
        accompanying notes to condensed consolidated financial statements.
  
   **PLX
        TECHNOLOGY, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 
  **1.** **Basis
        of Presentation**
  The
        accompanying unaudited condensed consolidated financial statements of PLX
        Technology, Inc. and its wholly-owned subsidiaries (collectively, “PLX” or the
“Company”) as of June 30, 2007 and for the three and six month periods ended
        June 30, 2007 and 2006 have been prepared in accordance with generally accepted
        accounting principles for interim financial information and with the
        instructions to Form 10-Q and Article 10 of Regulation S-X.  In the
        opinion of management, the unaudited condensed consolidated financial statements
        include all adjustments (consisting only of normal recurring accruals) that
        management considers necessary for a fair presentation of the Company’s
        financial position, operating results and cash flows for the interim periods
        presented. Operating results and cash flows for interim periods are not
        necessarily indicative of results for the entire year.
  The
        unaudited condensed consolidated financial statements include all of the
        accounts of the Company and those of its wholly owned
        subsidiaries.  All intercompany accounts and transactions have been
        eliminated.
  This
        financial data should be read in conjunction with the audited consolidated
        financial statements and notes thereto included in our Annual Report on Form
        10-K for the fiscal year ended December 31, 2006.
  ***Use
        of Estimates***
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States requires management to make estimates
        and assumptions that affect various accounts, including but not limited to
        goodwill, income taxes, inventories, revenue recognition and related sales
        reserves, allowance for doubtful accounts, share-based compensation and warranty
        reserves as reported in the financial statements and accompanying
        notes.  Actual results could differ from those estimates and such
        differences may be material to the financial statements.
  ***Comprehensive
        Net Income (Loss)***
  The
        Company’s comprehensive net income (loss) for the three and six month periods
        ended June 30, 2007 and June 30, 2006 was as follows (in
        thousands):
  **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Net
                    income (loss)
                
                $
                (82
                )
                
                $
                281
                
                
                $
                (354
                )
                
                $
                1,822Unrealized
                    gain (loss) on marketable securities, net
                
                
                (34
                )
                
                
                11
                
                
                
                (32
                )
                
                
                39Cumulative
                    translation adjustments
                
                
                (12
                )
                
                
                (10
                )
                
                
                (26
                )
                
                
                (12
                )Comprehensive
                    net income (loss)
                
                $
                (128
                )
                
                $
                282
                
                
                $
                (412
                )
                
                $
                1,849
  ***Revenue
          Recognition***
  The
        Company recognizes revenue when persuasive evidence of an arrangement exists,
        delivery or customer acceptance, where applicable, has occurred, the fee
        is
        fixed or determinable, and collection is reasonably assured.
  Revenue
        from product sales to direct customers and distributors is recognized upon
        shipment and transfer of risk of loss, if the Company believes collection
        is
        reasonably assured and all other revenue recognition criteria are met. The
        Company assesses the probability of collection based on a number of factors,
        including past transaction history and the customer’s creditworthiness.  At
        the end of each reporting period, the sufficiency of allowances for doubtful
        accounts is assessed based on the age of the receivable and the individual
        customer’s creditworthiness.
  In
        the
        first quarter ended March 31, 2006, the Company completed an evaluation of
        its
        revenue recognition methodology and concluded that it was more appropriate
        to
        recognize revenues on sales to distributors at the time of shipment to a
        distributor (also referred to as the sell-in basis of recognizing
        revenue).  Prior to the first quarter, the Company recognized revenues
        on sales to distributors when the distributor resold the product to its end
        customer (also referred to as the sell-through basis of recognizing revenue).
        Statement of Financial Accounting Standards (“SFAS”) No. 48, *Revenue
        Recognition When Right of Return Exists*, sets forth conditions that must be
        met to recognize revenue at the time of shipment.  Among those
        conditions is that a company that provides a right of return or pricing
        concession to a buyer be able to reasonably estimate the amount of future
        returns or pricing concessions.  In the past, the Company had
        concluded that it did not meet this condition and therefore used the
        sell-through basis of revenue recognition.  In the first quarter of
        2006, the Company concluded that it is able to reasonably estimate returns
        and
        pricing concessions, and therefore had implemented the sell-in method of
        accounting for sales to distributors.  The Company recognized an
        additional $2.8 million in revenues during the first quarter of 2006 due
        to this
        change resulting in an increase to diluted earning per share of
        $0.06.
  The
        Company offers pricing protection
        to a single distributor whereby the Company supports the distributor’s resale
        product margin on certain products held in the distributor’s inventory. In
        general, the Company analyzes current requests for credit in process, also
        known
        as ship and debits, inventory at the distributor and credit expectations
        to
        determine the ending sales reserve required for this program. In addition,
        the
        Company offers stock rotation rights to several distributors that allows
        returns
        of up to 5% of products purchased every six months in exchange for other
        PLX
        products of equal value. In general, the Company analyzes current stock rotation
        requests and past experience to determine the ending sales reserve required
        for
        this program.
  As
        of
        June 30, 2007, the Company has controls in place to monitor sales returns
        from
        and pricing concessions to its distributors.  The Company uses data
        from a variety of controls, such as monthly monitoring of distributor inventory
        levels, Returns Material Authorization (“RMA”) controls and regular monitoring
        of distributor pricing concession and product rotation requests.  The
        Company uses this data to arrive at a reasonable estimate on sales returns
        from
        and pricing concessions to its distributors.
  ***Recent
        Accounting Pronouncements***
  In
        June
        2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
        (“FIN”) No. 48, *Accounting for Uncertainty in Income Taxes—an
        interpretation of FASB Statement No. 109*. This Interpretation
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return, and provides guidance on derecognition, classification,
        interest and penalties, accounting in interim periods, disclosure, and
        transition. The Company implemented FIN 48 as of January 1, 2007. The Company
        has determined that the effects of FIN 48 does not have a material impact
        on its
        financial statements.
  In
        September 2006, FASB issued SFAS No. 157, *Fair Value
        Measurements*.  SFAS 157 defines fair value, establishes a framework
        for measuring fair value in generally accepted accounting principles (“GAAP”)
        and expands disclosures about fair value measurements.   SFAS 157
        is effective for fiscal years beginning after November 15, 2007 and interim
        periods within those fiscal years.   The Company is currently
        evaluating the effect that the adoption of SFAS 157 will have on its financial
        position and results of operations.
  In
        February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for
        Financial Assets and Financial Liabilities-including an amendment of FASB
        Statement No. 115.*SFAS 159 permits entities to choose to measure many
        financial instruments and certain other items at fair value that are not
        currently required to be measured at fair value, with unrealized gains and
        losses related to these financial instruments reported in earnings at each
        subsequent reporting date. This Statement is effective for fiscal years
        beginning after November 15, 2007. The Company is currently evaluating the
        effect that the adoption of SFAS 159 will have on its financial position
        and
        results of operations.
  **2.****Share-Based Compensation**
  ***Stock
        Option Plans***
  In
        January 1998, the Company’s stockholders approved the 1998 Stock Incentive Plan
        (“1998 Plan”).  Under the 1998 Plan, options generally vest over four
        years and have a maximum term of 10 years.  The Board of Directors
        generally establishes the exercise price as the closing price quoted on NASDAQ
        on the date of grant.  In addition to stock options, the 1998 Plan
        allows for the grant of restricted stock, stock appreciation rights, performance
        shares, performance units, dividends and dividend equivalents.
  In
        January 1999, the Company’s stockholders approved the 1999 Stock Incentive Plan
        (“1999 Plan”).  The 1999 Plan has substantially the same terms as the
        1998 Plan.
  ***Share-Based
        Compensation Expense***
  On
        January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
*Share-Based Payment* using the modified prospective transition method,
        which requires the measurement and recognition of compensation expense for
        all
        share-based payment awards made to the Company’s employees and directors
        including stock options. Share-based compensation expense for stock options
        granted subsequent to January 1, 2006 was based on the grant-date fair
        value estimated in accordance with the provisions of SFAS 123(R). For awards
        granted prior to, but not vested, as of January 1, 2006, share-based
        compensation expense was based on the grant-date fair value, previously
        estimated, using the Black-Scholes valuation model, in accordance with the
        original provisions of SFAS 123. The Company recognizes the share-based
        compensation expense on a straight-line basis over the requisite service
        period
        of the award, which generally equals the vesting period of each
        grant.
  The
        fair
        value of share-based awards to employees is calculated using the Black-Scholes
        option pricing model, even though this model was developed to estimate the
        fair
        value of freely tradable, fully transferable options without vesting
        restrictions, which differ significantly from the Company’s stock options. The
        Black-Scholes model requires subjective assumptions, including future stock
        price volatility and expected time to exercise, which greatly affect the
        calculated values.
  The
        weighted-average fair value of share-based compensation to employees is based
        on
        the multiple option valuation approach. Forfeitures are estimated and it
        is
        assumed no dividends will be declared. The estimated fair value of share-based
        compensation awards to employees is amortized using the straight-line method
        over the vesting period of the options. The weighted-average fair value
        calculations are based on the following average assumptions:
  **Three
                  Months Ended**
              
              
              **Six
                  Months Ended****June
                  30,**
              
              
              **June
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Risk-free
                  interest rate
              
              
              4.96
              %
              
              
              5.04
              %
              
              
              4.71
              %
              
              
              4.94
              %Expected
                  volatility
              
              
              0.58
              
              
              
              0.68
              
              
              
              0.60
              
              
              
              0.68Expected
                  life (years)
              
              
              4.35
              
              
              
              4.39
              
              
              
              4.35
              
              
              
              4.39
  **Risk-Free
        Interest Rate**: The risk-free interest rate is based on the U.S.
        Treasury yield curve in effect at the time of grant for the expected term
        of the
        option.
  **Expected
        Term**: The Company’s expected term represents the weighted-average
        period that the Company’s stock options are expected to be outstanding. The
        expected term is based on the observed and expected time to post-vesting
        exercise of options by employees. The Company uses historical exercise patterns
        of previously granted options in relation to stock price movements to derive
        an
        employee behavioral pattern used to forecast expected exercise
        patterns.
  **Expected
        Volatility**: The Company calculates its expected volatility assumption
        required in the Black-Scholes model by blending the historical volatility
        with
        the market-based implied volatility.  The selection of the proportion of
        market-based volatility depends, among other things, on the availability
        of
        traded options on the Company’s stock and term of such options. Due to
        sufficient volume of the traded options, during the three and six months
        ended
        June 30, 2007 and 2006, the Company used, in accordance with SAB 107, 100%
        market-based implied volatility. The selection of the implied volatility
        approach was based upon the availability of traded options on the Company’s
        stock and the Company’s assessment that implied volatility is more
        representative of future stock price trends than historical
        volatility.
  These
        factors could change in the future, which would affect the share-based
        compensation expense in future periods.
  As
        share-based compensation expense recognized in the unaudited Condensed
        Consolidated Statements of Operations for the three and six months ended
        June
        30, 2007 and 2006 is based on awards ultimately expected to vest, it has
        been
        reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be
        estimated at the time of grant and revised, if necessary, in subsequent periods
        if actual forfeitures differ from those estimates. Our estimated forfeiture
        rate
        of 27% was based on historical experience.
  The
        following table shows total share-based compensation expense described for
        the
        three and six months ended June 30, 2007 and 2006, included in the Condensed
        Consolidated Statements of Operations (in thousands):
  **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Cost
                    of revenues
                
                $
                13
                
                
                $
                15
                
                
                $
                31
                
                
                $
                25Research
                    and development
                
                
                422
                
                
                
                556
                
                
                
                954
                
                
                
                1,033Selling,
                    general and administrative
                
                
                777
                
                
                
                865
                
                
                
                1,379
                
                
                
                1,442Pre-tax
                    stock-based compensation expense
                
                
                1,212
                
                
                
                1,436
                
                
                
                2,364
                
                
                
                2,500Income
                    tax
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
                    stock-based compensation expense
                
                $
                1,212
                
                
                $
                1,436
                
                
                $
                2,364
                
                
                $
                2,500
  A
        summary
        of option activity under the Company’s stock equity plans during the six months
        ended June 30, 2007 is as follows:
  **Weighted
                    Average****Remaining**
                
                
                **Aggregate****Options
                    Available**
                
                
                **Number
                    of**
                
                
                **Weighted
                    Average**
                
                
                **Contratual
                    Term**
                
                
                **Intrinsic****Options**
                
                **for
                    Grant**
                
                
                **Shares**
                
                
                **Exercise
                    Price**
                
                
                **(in
                    years)**
                
                
                **Value**Outstanding
                    at December 31, 2006
                
                
                1,640,010
                
                
                
                3,713,477
                
                
                $
                11.47
                
                
                
                5.39
                
                
                $
                11,718,444Granted
                
                
                (572,900
                )
                
                
                572,900
                
                
                
                10.15Exercised
                
                
                -
                
                
                
                (26,499
                )
                
                
                5.20Cancelled
                
                
                51,174
                
                
                
                (51,174
                )
                
                
                13.36Outstanding
                    at March 31, 2007
                
                
                1,118,284
                
                
                
                4,208,704
                
                
                $
                11.31
                
                
                
                5.38
                
                
                $
                4,085,919Granted
                
                
                (104,000
                )
                
                
                104,000
                
                
                
                10.42Exercised
                
                
                -
                
                
                
                (48,675
                )
                
                
                6.21Cancelled
                
                
                55,456
                
                
                
                (55,456
                )
                
                
                11.73Outstanding
                    at June 30, 2007
                
                
                1,069,740
                
                
                
                4,208,573
                
                
                $
                11.34
                
                
                
                5.19
                
                
                $
                7,512,282Exercisable
                    at June 30, 2007
                
                
                
                
                
                
                2,537,675
                
                
                $
                11.90
                
                
                
                4.63
                
                
                $
                5,628,361
 The
        Black-Scholes weighted average fair values of options granted during the
        three
        months ended June 30, 2007 and 2006 were $5.32 and $7.01,
        respectively.
  The
        Black-Scholes weighted average fair values of options granted during the
        six
        months ended June 30, 2007 and 2006 were $5.34 and $7.31,
        respectively.
  The
        following table summarizes ranges of outstanding and exercisable options
        as of
        June 30, 2007:
  **Options
                      Outstanding**
                  
                  
                  **Options
                      Exercisable****Weighted
                      Average****Remaining**
                  
                  
                  **Weighted**
                  
                  
                  
                  
                  
                  **Weighted****Contratual
                      Term**
                  
                  
                  **Average**
                  
                  
                  
                  
                  
                  **Average****Range
                      of Exercise Prices**
                  
                  
                  **Number**
                  
                  
                  **(in
                      years)**
                  
                  
                  **Exercise
                      Price**
                  
                  
                  **Number**
                  
                  
                  **Exercise
                      Price**$0.88
                    - $8.25
                  
                  
                  
                  847,055
                  
                  
                  
                  4.71
                  
                  
                  $
                  5.96
                  
                  
                  
                  743,823
                  
                  
                  $
                  5.75$8.31
                    - $9.43
                  
                  
                  
                  919,137
                  
                  
                  
                  4.87
                  
                  
                  
                  9.00
                  
                  
                  
                  636,887
                  
                  
                  
                  9.02$9.45
                    - $10.21
                  
                  
                  
                  952,700
                  
                  
                  
                  6.53
                  
                  
                  
                  10.04
                  
                  
                  
                  156,248
                  
                  
                  
                  9.74$10.29
                    - $16.65
                  
                  
                  
                  1,077,498
                  
                  
                  
                  5.59
                  
                  
                  
                  13.81
                  
                  
                  
                  588,534
                  
                  
                  
                  14.81$19.38
                    - $27.00
                  
                  
                  
                  412,183
                  
                  
                  
                  2.81
                  
                  
                  
                  24.15
                  
                  
                  
                  412,183
                  
                  
                  
                  24.15Total
                  
                  
                  
                  4,208,573
                  
                  
                  
                  5.19
                  
                  
                  $
                  11.34
                  
                  
                  
                  2,537,675
                  
                  
                  $
                  11.90
 The
        total
        intrinsic value of options exercised during the three and six months ended
        June
        30, 2007 was approximately $0.2 million and $0.4 million,
        respectively.  For the same periods in 2006 the total intrinsic value
        of option exercised was $1.6 million and $3.4 million, respectively. As of
        June
        30, 2007, total unrecognized compensation costs related to nonvested stock
        options including estimated forfeitures was $4.0 million which is expected
        to be
        recognized as expense over a weighted average period of approximately 1.39
        years.
 
 **3.****Inventories**
 
 Inventories
        are valued at the lower of cost (first-in, first-out method) or market (net
        realizable value).  Inventories were as follows (in
        thousands):
  **June
                    30,**
                
                
                **December
                    31,****2007**
                
                
                **2006**Work-in-process
                
                $
                1,988
                
                
                $
                1,226Finished
                    goods
                
                
                4,969
                
                
                
                7,069Total
                
                $
                6,957
                
                
                $
                8,295
 The
        Company evaluates the need for potential
        write-downs of inventory by considering a combination of factors. Based on
        the
        life of the product, sales history, obsolescence and sales forecast, the
        Company
        may record write-downs to inventory of up to 100%.
  **4.  Net
        Income (Loss) Per Share**
 
 The
        Company uses the treasury stock method to calculate the weighted average
        shares
        used in the diluted earnings per share in accordance with SFAS No. 128,
*Earnings Per Share.*The following table sets forth the computation of
        basic and diluted net income (loss) per share (in thousands, except per share
        data):
  **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Net
                    income (loss)
                
                $
                (82
                )
                
                $
                281
                
                
                $
                (354
                )
                
                $
                1,822Weighted
                    average shares of common stock outstanding
                
                
                28,674
                
                
                
                28,081
                
                
                
                28,660
                
                
                
                27,983Net
                    income (loss) per share - basic
                
                $
                (0.00
                )
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                0.07Shares
                    used in computing basic net income (loss) per share
                
                
                28,674
                
                
                
                28,081
                
                
                
                28,660
                
                
                
                27,983Dilutive
                    effect of stock options
                
                
                -
                
                
                
                857
                
                
                
                -
                
                
                
                885Shares
                    used in computing diluted net income (loss) per share
                
                
                28,674
                
                
                
                28,938
                
                
                
                28,660
                
                
                
                28,868Net
                    income (loss) per share - diluted
                
                $
                (0.00
                )
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                0.06
  The
        Company incurred a net loss for the three and six month periods ended June
        30,
        2007. Therefore, the effect of dilutive securities of approximately 4.2 million
        equivalent shares for each of the three and six month periods ended June
        30,
        2007 was excluded from the computation of diluted loss per share as its impact
        would be anti-dilutive. Dilutive securities include only stock
        options.
  Weighted
        average employee stock options to purchase approximately 3.5 million shares
        for
        the three and six month periods ended June 30, 2006 were outstanding, but
        was
        not included in the computation of diluted earnings per share because the
        exercise price of the stock options was greater than the average share price
        of
        the common shares and, therefore, the effect would have been
        anti-dilutive.
 
 **5.  Segments
        of an Enterprise and Related Information**
 
 The
        Company has one operating segment, the sale of semiconductor devices. The
        Chief
        Executive Officer has been identified as the Chief Operating Decision Maker
        (“CODM”) because he has final authority over resource allocation decisions and
        performance assessment. The CODM does not receive discrete financial information
        about individual components of the Company’s business. The majority of the
        Company’s assets are located in the United States.
  Revenues
        by geographic region based on customer location were as follows (in
        thousands):
  **Three
                  Months Ended**
              
              
              **Six
                  Months Ended****June
                  30,**
              
              
              **June
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Revenues:United
                  States
              
              $
              5,233
              
              
              $
              4,843
              
              
              $
              11,002
              
              
              $
              9,599Singapore
              
              
              3,583
              
              
              
              3,311
              
              
              
              6,303
              
              
              
              6,452China
              
              
              3,102
              
              
              
              2,028
              
              
              
              6,104
              
              
              
              3,822Other
                  Asia Pacific
              
              
              2,943
              
              
              
              2,455
              
              
              
              5,355
              
              
              
              5,601Taiwan
              
              
              2,338
              
              
              
              3,702
              
              
              
              4,381
              
              
              
              7,036Europe,
                  Middle East and Africa
              
              
              1,992
              
              
              
              2,107
              
              
              
              4,328
              
              
              
              5,042The
                  Americas - excluding United States
              
              
              573
              
              
              
              965
              
              
              
              931
              
              
              
              1,864Total
              
              $
              19,764
              
              
              $
              19,411
              
              
              $
              38,404
              
              
              $
              39,416
  For
        the
        three months ended June 30, 2007, one distributor accounted for 31% of net
        revenues. As of June 30, 2007, the same distributor accounted for 25% of
        the
        total accounts receivable balance. For the same period in 2006, two distributors
        accounted for 32% and 12%, respectively, of net revenues. As of December
        31,
        2006, these same two distributors accounted for 31% and 7%, respectively,
        of the
        total accounts receivable balance. For both of these periods, no other
        individual direct customer or distributor represented greater than 10% of
        net
        revenues.
  For
        the
        six months ended June 30, 2007, one distributor accounted for 31% of net
        revenues. For the same period in 2006, two distributors accounted for 30%
        and
        11%, respectively, of net revenues. For both of these periods, no other
        individual direct customer or distributor represented greater than 10% of
        net
        revenues.
  **6.  Income
        Taxes**
  Net
        income tax benefit of $355,000 has been recorded for the six month period
        ended
        June 30, 2007, compared to income tax expense of $71,000 for the same period
        in
        2006.  Income tax benefit for the six months ended June 30, 2007 is a
        result of applying the estimated annual effective tax rate to cumulative
        loss
        before taxes.  The income tax benefit also includes $115,000 tax
        benefit for a release of tax reserves due to a lapse of the applicable statue
        of
        limitations in April 2007.  For the same period in 2006, the provision
        for income taxes related to federal alternative minimum tax, miscellaneous
        state
        income taxes and foreign income taxes currently payable.
  The
        Company has determined that negative evidence supports the need for a full
        valuation allowance against its net deferred tax assets at this time. The
        Company will maintain a full valuation allowance until sufficient positive
        evidence exists to support a reversal of the valuation allowance.
  The
        Company adopted FIN 48 at the beginning of calendar year 2007. As a result
        of the implementation of FIN 48, the Company recognized no material adjustment
        in the liability for unrecognized income tax benefits. As of June 30, 2007,
        the
        Company has unrecognized tax benefits of approximately $1.8
        million.   Future changes in the remaining balance of
        unrecognized tax benefits will have no impact on the effective tax rate as
        they
        are subject to a full valuation allowance. The Company does not have any
        material accrued interest or penalties associated with any unrecognized tax
        benefits. The Company does not believe it is more likely than not that its
        unrecognized tax benefits will significantly change within the next twelve
        months.
  The
        Company is subject to taxation in the United States and various states and
        foreign jurisdictions.  The tax years 1997-2006 remain open to
        examination by the federal and most state tax authorities due to certain
        acquired net operating loss and overall credit carryforward
        positions.
  **ITEM
        2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS**
  This
        Report on Form 10-Q contains forward-looking statements within the "safe
        harbor" provisions of the Private Securities Litigation Reform Act of 1995,
        including statements regarding our expectations, hopes, intentions, beliefs
        or
        strategies regarding the future.  Such forward-looking statements also
        include statements regarding our future gross margin, our future research
        and
        development expenses, our future selling, general and administrative expenses,
        our ability to meet our capital requirements for the next twelve months,
        our
        future capital requirements, current high turns fill requirements and our
        anticipation that sales to a small number of customers will account for a
        significant portion of our sales.  Actual results could differ
        materially from those projected in such forward-looking
        statements.  Factors that could cause actual results to differ include
        unexpected changes in the mix of our product sales, unexpected pricing
        pressures, or unexpected capital requirements that may arise due to other
        possible acquisitions or other events, unanticipated changes in the businesses
        of our suppliers, and unanticipated cash shortfalls.  Actual results
        could also differ for the reasons noted under the sub-heading “Factors That May
        Affect Future Operating Results” in Item 1A, Risk Factors in Part II of this
        report on Form 10-Q and in other sections of this report on Form
        10-Q.  All forward-looking statements included in this Form 10-Q
        are based on information available to us on the date of this report on
        Form 10-Q, and we assume no obligation to update the forward-looking
        statements, or to update the reasons why actual results could differ from
        those
        projected in the forward-looking statements.
  The
        following discussion should be read in conjunction with the audited consolidated
        financial statements and the notes thereto included in our Annual Report
        on Form
        10-K for the fiscal year ended December 31, 2006.
  **OVERVIEW**
  PLX
        was
        founded in 1986, and between 1994 and 2002 we focused on the development
        of I/O
        interface semiconductors and related software and development tools that
        are
        used in systems incorporating the PCI standard.  In 1994 and 1995, a
        significant portion of our revenues were derived from the sale of semiconductor
        devices that perform similar functions as our current products, except they
        were
        based on a variety of industry standards.  Our revenues since 1996
        have been derived predominantly from the sale of semiconductor devices based
        on
        the PCI standard to a large number of customers in a variety of applications
        including networking and telecommunications, enterprise storage, imaging,
        industrial and other embedded applications as well as in related adapter
        cards.  In 2002, we shifted the majority of our development efforts to
        PCI Express.  In September 2004, we began shipping products based on
        the PCI Express standard for next-generation systems.
  We
        utilize a “fabless” semiconductor business model whereby we purchase wafers or
        packaged and tested semiconductor devices from independent manufacturing
        foundries.  This approach allows us to focus on defining, developing,
        and marketing our products and eliminates the need for us to invest large
        amounts of capital in manufacturing facilities and work-in-process
        inventory.
  We
        rely
        on a combination of direct sales personnel, distributors and manufacturers’
representatives throughout the world to sell a significant portion of our
        products.  We pay manufacturers’ representatives a commission on sales
        while we sell products to distributors at a discount from the selling
        price.
  Our
        gross
        margins have fluctuated in the past and are expected to fluctuate in the
        future
        due to changes in product and customer mix, write-downs and recoveries of
        excess
        or obsolete inventory, the position of our products in their respective life
        cycles, and specific product manufacturing costs.
  The
        time
        period between initial customer evaluation and design completion can range
        from
        six to twelve months or more.  Furthermore, there is typically an
        additional six to twelve month or greater period after design completion
        before
        a customer requests volume production of our products.  Due to the
        variability and length of these design cycles and variable demand from
        customers, we may experience significant fluctuations in new orders from
        month
        to month.  In addition, we typically make inventory purchases prior to
        receiving customer orders.  Consequently, if anticipated sales and
        shipments in any quarter do not occur when expected, expenses and inventory
        levels could be disproportionately high, and our results for that quarter
        and
        potentially future quarters would be materially and adversely
        affected.
  Our
        long-term success will depend on our ability to introduce new
        products.  While new products typically generate little or no revenues
        during the first twelve months following their introduction, our revenues
        in
        subsequent periods depend upon these new products.  Due to the lengthy
        sales cycle and additional time before our customers request volume production,
        significant revenues from our new products typically occur twelve to twenty-four
        months after product introduction.  As a result, revenues from newly
        introduced products have, in the past, produced a small percentage of our
        total
        revenues in the year the product was introduced.  See –“Our Lengthy
        Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected
        Revenues” in Item 1A, Risk Factors, in Part II of this report on Form
        10-Q.
  **RESULTS
        OF OPERATIONS**
  The
        following table summarizes historical results of operations as a percentage
        of
        net revenues for the periods shown:
  **Three
                  Months Ended**
              
              
              **Six
                  Months Ended****June
                  30,**
              
              
              **June
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Net
                  revenues
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %Cost
                  of revenues
              
              
              41.1
              
              
              
              42.4
              
              
              
              40.1
              
              
              
              39.9Gross
                  margin
              
              
              58.9
              
              
              
              57.6
              
              
              
              59.9
              
              
              
              60.1Operating
                  expenses:Research
                  and development
              
              
              31.1
              
              
              
              24.9
              
              
              
              30.9
              
              
              
              25.2Selling,
                  general and administrative
              
              
              30.7
              
              
              
              30.8
              
              
              
              31.8
              
              
              
              29.6Amortization
                  of purchased intangible assets
              
              
              1.8
              
              
              
              2.5
              
              
              
              2.1
              
              
              
              2.5Total
                  operating expenses
              
              
              63.6
              
              
              
              58.2
              
              
              
              64.8
              
              
              
              57.3Income
                  (loss) from operations
              
              
              (4.7
              )
              
              
              (0.6
              )
              
              
              (4.9
              )
              
              
              2.8Interest
                  income and other, net
              
              
              3.1
              
              
              
              2.2
              
              
              
              3.1
              
              
              
              1.9Income
                  (loss) before provision (benefit) for income taxes
              
              
              (1.6
              )
              
              
              1.6
              
              
              
              (1.8
              )
              
              
              4.7Provision
                  (benefit) for income taxes
              
              
              (1.1
              )
              
              
              0.1
              
              
              
              (0.9
              )
              
              
              0.2Net
                  income (loss)
              
              
              (0.5
              )%
              
              
              1.5
              %
              
              
              (0.9
              )%
              
              
              4.5
              %
  **Net
        Revenues**
  Net
        revenues consist of product revenues generated principally by sales of our
        semiconductor devices.  Net revenues for the three months ended June
        30, 2007 were $19.8 million, an increase of 1.8% from $19.4 million for the
        three months ended June 30, 2006. The increase was due primarily to increased
        sales of our PCI Express products, partially offset by the decreased sales
        of
        our PCI I/O devices and USB products. For the three months ended June 30,
        2007
        and 2006, sales of our PCI Express products accounted for 32.5% and 20.9%,
        respectively, of our total net revenues.
  For
        the
        three months ended June 30, 2007, one distributor accounted for 31% of net
        revenues.  For the same period in 2006, two distributors accounted for
        32% and 12%, respectively, of net revenues. For both of these periods, no
        other
        individual direct customer or distributor represented greater than 10% of
        net
        revenues.
  Net
        revenues for the six months ended June 30, 2007 were $38.4 million, a decrease
        of 2.6% from $39.4 million for the six months ended June 30, 2006. The 2006
        results include an additional $2.8 million in revenues recognized in the
        first
        quarter of 2006 as a result of the change from the sell-through to the sell-in
        basis of revenue recognition. PCI Express product revenue increased while
        PCI
        I/O devices and USB product revenues decreased for the six months ended June
        30,
        2007 as compared to the same period in the prior year. For the six months
        ended
        June 30, 2007 and 2006, sales of our PCI Express products accounted for 29.8%
        and 20.1%, respectively, of our total net revenues.
  For
        the
        six months ended June 30, 2007, one distributor accounted for 31% of net
        revenues.  For the same period in 2006, two distributors accounted for
        30% and 11%, respectively, of net revenues.  For both of these
        periods, no other individual direct customer or distributor represented greater
        than 10% of net revenues.
  Customer
        demand for semiconductors can change quickly and unexpectedly.  Our revenue
        levels have been highly dependent on the amount of new orders that are received
        for products to be delivered to the customer within the same quarter, also
        called “turns fill” orders.  Because of the long cycle time to build our
        products and our lack of visibility into demand when turns fill orders are
        high,
        it is difficult to predict which products to build to match future demand. 
We believe the current high turns fill requirements will continue
        indefinitely.  The sustainability of improved customer demand is
        uncertain and highly dependent on economic conditions.  The high turns fill
        orders requirement together with the uncertainty of product mix and pricing,
        makes it difficult to predict future levels of sales and profitability and
        may
        require us to carry higher levels of inventory.
  **Gross
        Margin**
  Gross
        margin represents net revenues less the cost of revenues.  Cost of
        revenues includes the cost of (1) purchasing semiconductor devices or wafers
        from our independent foundries, (2) package, assembly and test services from
        our
        independent foundries, assembly contractors and test contractors and (3)
        our
        operating costs associated with the procurement, storage, and shipment of
        products as allocated to production.
  Gross
        margin for the three months ended June 30, 2007 was 58.9%, as compared to
        57.6%
        for the same period in 2006.  In absolute dollars, gross margin
        increased by $0.5 million or 4.1% to $11.7 million for the three months ended
        June 30, 2007 from $11.2 million for the same period in 2006. The increase
        in
        gross margin as a percentage and in absolute dollars is primarily due to
        increased product shipments and improved production yields of our PCI Express
        products.
  Gross
        margin for the six months ended June 30, 2007 was 59.9%, as compared to 60.1%
        for the same period in 2006.  In absolute dollars, gross margin
        decreased by $0.7 million or 2.8% to $23.0 million for the six months ended
        June
        30, 2007 from $23.7 million for the same period in 2006. Excluding the $1.9
        million increase in gross margin from our change in revenue recognition to
        distributors in the first quarter of 2006, gross margin would have increased
        by
        0.4 percentage points or $1.2 million in absolute dollars due to increased
        product shipments of our PCI I/O devices and PCI Express products.
  Future
        gross profit and gross margin are highly dependent on the product and customer
        mix, write-downs and recoveries of excess or obsolete inventory, the position
        of
        our products in their respective life cycles and specific manufacturing
        costs.  Accordingly, we are not able to predict future gross profit
        levels or gross margins with certainty.
  **Research
        and Development Expenses**
  Research
        and development (“R&D”) expenses consist primarily of salaries, share-based
        compensation and related costs of employees engaged in research, design,
        and
        development activities. In addition, expenses for outside engineering
        consultants and non-recurring engineering at our independent foundries are
        included in R&D expenses.
  R&D
        as a percentage of net revenues increased to 31.1% for the three months ended
        June 30, 2007, as compared to 24.9% for the same period in 2006. In absolute
        dollars, R&D expenses increased by $1.3 million or 27.1% to $6.1 million for
        the three months ended June 30, 2007 from $4.8 million for the same period
        in
        2006. The increase in R&D as a percentage of revenue as well as the increase
        in absolute dollars is due primarily to increased non-recurring engineering
        fees
        associated with new product designs and increased spending on external
        engineering tools.
  R&D
        as a percentage of net revenues increased to 30.9% for the six months ended
        June
        30, 2007, as compared to 25.2% for the same period in 2006. In absolute dollars,
        R&D expenses increased by $2.0 million or 19.9% to $11.9 million for the six
        months ended June 30, 2007 from $9.9 million for the same period in 2006.
        The
        increase in R&D as a percentage of revenue as well as the increase in
        absolute dollars is due primarily to lower revenues and higher R&D spending
        on non-recurring engineering fees associated with new product designs and
        increased spending on external engineering tools.
  We
        believe continued spending on research and development to develop new products
        is critical to our success and, consequently, expect research and development
        expenses to increase in absolute dollars in future periods.
  **Selling,
        General and Administrative Expenses**
  Selling,
        general and administrative (“SG&A”) expenses consist primarily of salaries,
        share-based compensation and related costs of employees engaged in selling
        and
        administrative activities, professional fees, trade show and other promotional
        expenses, as well as sales commissions to manufactures’
representatives.
  SG&A
        as a percentage of net revenues remained relatively flat at 30.7% for the
        three
        months ended June 30, 2007, as compared to 30.8% for the same period in
        2006.  In absolute dollars, SG&A expenses increased by $0.1
        million or 1.3% to $6.1 million for the three months ended June 30, 2007
        from
        $6.0 million for the same period in 2006. The decrease in SG&A as a
        percentage of revenue is due to higher revenues. The increase in absolute
        dollars is due primarily to the increase in compensation and benefit expenses
        of
        approximately $0.2 million resulting from higher headcount, partially offset
        by
        a decrease in sales commissions to manufacturer’s representatives of
        approximately $0.1 million as a result of reduced commission rates.
  SG&A
        as a percentage of net revenues increased to 31.8% for the six months ended
        June
        30, 2007, as compared to 29.6% for the same period in 2006.  In
        absolute dollars, SG&A expenses increased by $0.5 million or 4.9% to $12.2
        million for the six months ended June 30, 2007 from $11.7 million for the
        same
        period in 2006. The increase in SG&A as a percentage of revenue is due to
        higher SG&A spending and lower revenues. The increase in absolute dollars is
        due to increases in compensation and benefit expenses of approximately $0.7
        million resulting from higher headcount, partially offset by a decrease in
        sales
        commissions to manufacturer’s representatives of approximately $0.2 as a result
        of reduced commission rates.
  We
        expect
        SG&A expenses in absolute dollars to likely increase in future
        periods.
  **Amortization
        of Purchased Intangible Assets**
  Amortization
        of purchased intangible assets consists of amortization expense related to
        developed/core technology and customer base acquired as a result of the HiNT
        Corporation acquisition in May 2003 and NetChip Technology, Inc. acquisition
        in
        May 2004.  Amortization of purchased intangible assets decreased by
        $0.1 million or 25.8% to $0.4 million for the three months ended June 30,
        2007
        from $0.5 million for the same period in 2006.  The decrease is due to
        the customer base acquired as a result of the NetChip Technology, Inc.
        acquisition in May 2004 becoming fully amortized in May 2007.
  Amortization
        of purchased intangible assets decreased by $0.2 million or 19.7% to $0.8
        million for the six months ended June 30, 2007 from $1.0 million for the
        same
        period in 2006.  The decrease is due to the customer base acquired as
        a result of the NetChip Technology, Inc. acquisition in May 2004 becoming
        fully
        amortized in May 2007.
  **Interest
        Income and Other, Net**
  Interest
        income reflects interest earned on cash, cash equivalents and short-term
        and
        long-term investment balances. Interest income and other increased by $0.2
        million to $0.6 million for the three months ended June 30, 2007 from $0.4
        million from the same period in 2006.  The increase was primarily due
        to higher cash and investment balances and higher interest rates.
  Interest
        income and other increased by $0.4 million to $1.2 million for the six months
        ended June 30, 2007 from $0.8 million from the same period in
        2006.  The increase was primarily due to higher cash and investment
        balances and higher interest rates.
  **Provision
        for Income Taxes**
  Net
        income tax benefit of $355,000 has been recorded for the six month period
        ended
        June 30, 2007, compared to income tax expense of $71,000 for the same period
        in
        2006. Income tax benefit for the six months ended June 30, 2007 is a result
        of
        applying the estimated annual effective tax rate to cumulative loss before
        taxes. The income tax benefit also includes $115,000 tax benefit for a release
        of tax reserves due to a lapse of the applicable statute of limitations in
        April
        2007. For the same period in 2006, the provision for income taxes related
        to
        federal alternative minimum tax, miscellaneous state income taxes and foreign
        income taxes currently payable.
  We
        have
        determined that negative evidence supports the need for a full valuation
        allowance against our net deferred tax assets at this time. We will maintain
        a
        full valuation allowance until sufficient positive evidence exists to support
        a
        reversal of the valuation allowance.
  We
        adopted FIN 48 at the beginning of calendar year 2007. As a result of the
        implementation of FIN 48, we recognized no material adjustment in the liability
        for unrecognized income tax benefits. As of June 30, 2007, we have unrecognized
        tax benefits of approximately $1.8 million. Future changes in the remaining
        balance of unrecognized tax benefits will have no impact on the effective
        tax
        rate as they are subject to a full valuation allowance. We do not have any
        material accrued interest or penalties associated with any unrecognized tax
        benefits. We do not believe it is more likely than not that our unrecognized
        tax
        benefits will significantly change within the next twelve months.
  We
        are
        subject to taxation in the US and various states and foreign
        jurisdictions.  The tax years 1997-2006 remain open to examination by
        the federal and most state tax authorities due certain net operating loss
        and
        credit carryforward positions.
  **Liquidity
        and Capital Resources**
  In
        summary, our cash flows were (in thousands):
  **Six
                  Months Ended****June
                  30,****2007**
              
              
              **2006**Net
                  cash provided by operating activities
              
              $
              5,002
              
              
              $
              1,301Net
                  cash provided by (used in) investing activities
              
              
              (9,961
              )
              
              
              12,013Net
                  cash provided by financing activities
              
              
              440
              
              
              
              2,494Effect
                  of exchange rate fluctuations on cash and cash equivalents
              
              
              (26
              )
              
              
              (12
              )
  We
        invest
        excess cash predominantly in debt instruments that are highly liquid, of
        high-quality investment grade, and predominantly have maturities of less
        than
        one year with the intent to make such funds readily available for operating
        purposes. As of June 30, 2007 cash, cash equivalents, short-term and long-term
        marketable securities were $47.4 million, an increase of $5.1 million from
        $42.3
        million at December 31, 2006.
  Cash
        provided by operating activities primarily consists of net income (loss)
        adjusted for certain non-cash items including depreciation, amortization
        of
        purchased intangible assets, share-based compensation expense, write-downs
        for
        inventories, other non-cash items, and the effect of changes in working capital
        and other activities. Cash provided by operating activities for the six months
        ended June 30, 2007 of $5.0 million consisted primarily of a net loss of
        $0.4 million adjusted for non-cash items of $4.6 million and
        $0.8 million provided by working capital and other activities. Cash
        provided by operating activities for the six months ended June 30, 2006 of
        $1.3 million consisted primarily of net income of $1.8 million
        adjusted for non-cash items of $2.6 million, partially offset by
        $3.1 million used in working capital and other activities.
  Cash
        used
        in investing activities for the six months ended June 30, 2007 of
        $10.0 million was primarily due to cash used in purchases of marketable
        securities (net of sales and maturities of investments) of $9.6 million and
        capital expenditures of $0.4 million. Capital expenditures have generally
        been comprised of purchases of computer hardware, software, server equipment
        and
        furniture and fixtures, and are currently expected to modestly increase in
        2007.
        Cash provided by investing activities for the six months ended June 30, 2006
        of
        $12.0 million was primarily due to proceeds from sales and maturities (net
        of purchases) of investments in marketable securities of $12.6 million,
        partially offset by capital expenditures of $0.6 million.
  Cash
        provided by financing activities for the six months ended June 30, 2007 of
        $0.4 million was due to proceeds from the exercise of stock options. Cash
        provided by financing activities for the six months ended June 30, 2006 of
        $2.5 million was due to proceeds from the exercise of stock
        options.
  The
        negative effect of exchange rates on cash and cash equivalents for the six
        months ended June 30, 2007 and 2006 was due to the weakening of the U.S.
        dollar
        against other foreign currencies.
  In
        September 2002, our Board of Directors authorized the repurchase of up
        to 2,000,000 shares of common stock.  At the discretion of the
        management, we can repurchase the shares from time to time in the open market
        or
        in privately negotiated transactions.   Approximately 774,000
        shares had been repurchased for approximately $1.9 million in cash in
        2003.  We did not repurchase any shares in 2004, 2005 or 2006, or
        during the six month period ended June 30, 2007.
  As
        of
        June 30, 2007, we had the following significant contractual obligations and
        commercial commitments (in thousands):
  **Payments
                      due in**Less
                      than
                  
                  
                  1-3Total
                  
                  
                  1
                      Year
                  
                  
                  YearsOperating
                      leases - facilities and equipment
                  
                  $
                  159
                  
                  
                  $
                  99
                  
                  
                  $
                  60Software
                      licenses
                  
                  
                  4,433
                  
                  
                  
                  3,566
                  
                  
                  
                  867Inventory
                      purchase commitments
                  
                  
                  6,146
                  
                  
                  
                  6,146
                  
                  
                  
                  -Total
                      cash obligations
                  
                  $
                  10,738
                  
                  
                  $
                  9,811
                  
                  
                  $
                  927
 We
        believe that our existing resources, together with
        cash generated from our operations will be sufficient to meet our capital
        requirements for at least the next twelve months.  Our future capital
        requirements will depend on many factors, including the inventory levels
        we
        maintain, the level of investment we make in new technologies and improvements
        to existing technologies and the levels of monthly expenses required to launch
        new products.  From time to time, we may also evaluate potential
        acquisitions and equity investments complementary to our technologies and
        market
        strategies.  To the extent that existing resources and future earnings
        are insufficient to fund our future activities, we may need to raise additional
        funds through public or private financings.  Additional funds may not
        be available or, if available, we may not be able to obtain them on terms
        favorable to us and our stockholders.
  **Critical
        Accounting Policies**
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States requires management to make estimates
        and assumptions that affect the reported amounts of assets and liabilities,
        revenues and expenses and related disclosures of contingent assets and
        liabilities in the condensed consolidated financial statements and accompanying
        notes. The U.S. Securities and Exchange Commission (“SEC”) has defined a
        company’s critical accounting policies as the ones that are most important to
        the portrayal of the company’s financial condition and results of operations,
        and which require the company to make its most difficult and subjective
        judgments, often as a result of the need to make estimates of matters that
        are
        inherently uncertain.  Based on this definition, we have identified
        the critical accounting policies and judgments addressed below.  We
        also have other key accounting policies which involve the use of estimates,
        judgments and assumptions that are significant to understanding our
        results.  Although we believe that our estimates, assumptions and
        judgments are reasonable, they are based upon information presently
        available.  Actual results may differ significantly from these
        estimates under different assumptions, judgments or conditions.
  ***Revenue
        Recognition***
  We
        recognize revenue when persuasive evidence of an arrangement exists, delivery
        or
        customer acceptance, where applicable, has occurred, the fee is fixed or
        determinable, and collection is reasonably assured.
  Revenue
        from product sales to direct customers and distributors is recognized upon
        shipment and transfer of risk of loss, if we believe collection is reasonably
        assured and all other revenue recognition criteria are met. We assess the
        probability of collection based on a number of factors, including past
        transaction history and the customer’s creditworthiness.  At the end of
        each reporting period, the sufficiency of allowances for doubtful accounts
        is
        assessed based on the age of the receivable and the individual customer’s
        creditworthiness.
  During
        the quarter ended March 31, 2006, we completed an evaluation of our revenue
        recognition methodology and concluded that it was more appropriate to recognize
        revenues on sales to distributors at the time of shipment to a distributor
        (also
        referred to as the sell-in basis of recognizing revenue).  Prior to
        the first quarter of 2006, we recognized revenues on sales to distributors
        when
        the distributor resold the product to its end customer (also referred to
        as the
        sell-through basis of recognizing revenue).  SFAS No. 48, *Revenue
        Recognition When Right of Return Exists*, sets forth conditions that must be
        met to recognize revenue at the time of shipment.  Among those
        conditions is that a company that provides a right of return or pricing
        concession to a buyer be able to reasonably estimate the amount of future
        returns or pricing concessions.  In the past, we had concluded that we
        did not meet this condition and therefore used the sell-through basis of
        revenue
        recognition.  In the first quarter of 2006, we concluded that we are
        able to reasonably estimate returns and pricing concessions, and therefore
        have
        implemented the sell-in method of accounting for sales to
        distributors.  We recognized an additional $2.8 million in revenues
        during the first quarter of 2006 due to this change resulting in an increase
        to
        diluted earnings per share of $0.06.
  We
        offer pricing protection to a single
        distributor whereby we support the distributor’s resale product margin on
        certain products held in the distributor’s inventory. In general, we analyze
        current requests for credit in process, also known as ship and debits, inventory
        at the distributor and credit expectations to determine the ending sales
        reserve
        required for this program. In addition, we offer stock rotation rights to
        several distributors that allow returns of up to 5% of products purchased
        every
        six months in exchange for other PLX products of equal value. In general,
        we
        analyze current stock rotation requests and past experience to determine
        the
        ending sales reserve required for this program.
  As
        of
        June 30, 2007, we have controls in place to monitor sales returns from and
        pricing concessions to our distributors.  We use data from a variety
        of controls, such as monthly monitoring of distributor inventory levels,
        Returns
        Material Authorization controls, and regular monitoring of distributor pricing
        concession and product rotation requests.  We use this data to arrive
        at a reasonable estimate on sales returns from and pricing concessions to
        our
        distributors.
  ***Inventory
        Valuation***
  We
        evaluate the need for potential write-downs for inventory by considering
        a
        combination of factors.  Based on the life of the product, sales
        history, obsolescence, and sales forecast, we may record write-downs to our
        inventory of up to 100%.  Any adverse changes to our future product
        demand may result in increased write-downs, resulting in decreased gross
        margin.  In addition, future sales on any of our previously written
        down inventory may result in increased gross margin in the period of
        sale.
  ***Allowance
        for Doubtful Accounts***
  We
        evaluate the collectibility of our accounts receivable based on length of
        time
        the receivables are past due. Generally, our customers have thirty days to
        remit
        payment of invoices. We record reserves for bad debts against amounts due
        to
        reduce the net recognized receivable to the amount we reasonably believe
        will be
        collected.  Once we have exhausted collection efforts, we will reduce
        the related accounts receivable against the allowance established for that
        receivable. We have certain customers with individually large amounts due
        at any
        given balance sheet date.  Any unanticipated change in one of those
        customers’ creditworthiness or other matters affecting the collectibility of
        amounts due from such customers could have a material affect on our results
        of
        operations in the period in which such changes or events occur. Historically,
        our write-offs have been insignificant.
  ***Share-Based
        Compensation***
  Upon
        adoptions of SFAS 123R on January 1, 2006, we began estimating the value
        of
        employee stock options on the date of grant using the Black-Scholes
        model.  Prior to the adoption of SFAS 123R, the value of each employee
        stock option was estimated on the date of grant using the Black-Scholes model
        for the purpose of the pro forma financial disclosure in accordance with
        SFAS
        123.  The determination of fair value of share-based payment awards on
        the date of grant using an option-pricing model is affected by our stock
        price
        as well as assumptions regarding a number of highly complex and subjective
        variables.  These variables include, but are not limited to the
        expected stock price volatility over the term of the awards and the actual
        and
        projected employee stock option exercise behaviors.  The expected term
        of options granted is derived from historical data on employee exercises
        and
        post-vesting employment termination behavior.  We calculated our
        expected volatility assumption required in the Black-Scholes model by blending
        the historical volatility of our stock with the implied volatility for traded
        options on our stock. We estimate the amount of forfeitures at the time of
        grant
        and revise, if necessary, in subsequent periods if actual forfeitures differ
        from those estimates. As of January 1, 2006 we have adopted the modified
        prospective transition method and its effect is included beginning in our
        first
        quarter 2006 financial statements.
  ***Taxes***
  We
        account for income taxes using the asset and liability
        method.  Deferred taxes are determined based on the differences
        between the financial statement and tax bases of assets and liabilities,
        using
        enacted tax rates in effect for the year in which the differences are expected
        to reverse.  Valuation allowances are established when necessary to
        reduce deferred tax assets to the amounts expected to be realized. As of
        June
        30, 2007, we carried a valuation allowance for the entire deferred tax asset
        as
        a result of uncertainties regarding the realization of the asset balance.
        We
        will maintain a full valuation allowance against our deferred tax assets
        until
        sufficient positive evidence exists to support a reversal of the valuation
        allowance.
  Future
        taxable income and/or tax planning strategies may eliminate all or a portion
        of
        the need for the valuation allowance. In the event we determine we are able
        to
        realize our deferred tax asset, an adjustment to the valuation allowance
        may
        increase income in the period such determination is made.
  **ITEM
        3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
        ABOUT MARKET RISK**
  We
        have
        an investment portfolio comprised of fixed income securities, including amounts
        classified as cash equivalents, short-term investments and long-term
        investments. Our investment portfolio totaled $43.7 million at June 30,
        2007.  These securities are subject to interest rate fluctuations and
        will decrease in market value if interest rates increase.
  The
        primary objective of our investment activities is to preserve principal while
        at
        the same time maximizing yields without significantly increasing
        risk.  While our investment policy allows us to invest in high
        quality, short-term and long-term debt instruments, our investment portfolio
        as
        of June 30, 2007 is comprised of cash equivalents, short-term investments
        and
        long-term investments.  A hypothetical 100 basis point increase in
        interest rates would result in less than a $0.2 million decrease (less than
        1%)
        in the fair value of our available-for-sale securities.
  **ITEM
        4.  CONTROLS AND
        PROCEDURES**
  **(a)
        Evaluation of disclosure controls and procedures.**
  Based
        on
        their evaluation as of June 30, 2007, our Chief Executive Officer and Chief
        Financial Officer have concluded that our disclosure controls and procedures
        (as
        defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
        of 1934, as amended) were effective to ensure that the information required
        to
        be disclosed by us in this Quarterly Report on Form 10-Q was recorded,
        processed, summarized and reported within the time periods specified in the
        SEC's rules and instructions for Form 10-Q and that such disclosure
        controls and procedures were also effective to ensure that information required
        to be disclosed in the reports we file or submit under the Exchange Act is
        accumulated and communicated to our management, including our Chief Executive
        Officer and Chief Financial Officer, as appropriate to allow timely decisions
        regarding required disclosure.
  **(b) Changes
        in internal controls.**
  There
        has
        been no significant change in our internal control over financial reporting
        that
        occurred during our most recent fiscal quarter that has materially affected
        or
        is reasonably likely to materially affect our internal control over financial
        reporting.
   
   **PART
        II.  OTHER INFORMATION**
  **ITEM
        1A.  RISK FACTORS**
  **FACTORS
        THAT MAY AFFECT FUTURE OPERATING RESULTS**
   This
        quarterly report on Form 10-Q contains forward-looking statements which involve
        risks and uncertainties.  Our actual results could differ materially
        from those anticipated by such forward-looking statements as a result of
        certain
        factors, including those set forth below.  The following risk factors
        have been updated from those set forth in Item 1A. of Part I of our Annual
        Report on Form 10-K for the year ended December 31, 2006, and are restated
        in
        full.
  **Our
        Operating Results May Fluctuate Significantly Due To Factors Which Are Not
        Within Our Control**
  Our
        quarterly operating results have fluctuated significantly in the past and
        are
        expected to fluctuate significantly in the future based on a number of factors,
        many of which are not under our control.  Our operating expenses,
        which include product development costs and selling, general and administrative
        expenses, are relatively fixed in the short-term.  If our revenues are
        lower than we expect because we sell fewer semiconductor devices, delay the
        release of new products or the announcement of new features, or for other
        reasons, we may not be able to quickly reduce our spending in
        response.
  Other
                circumstances that can affect our operating results
                include:
 ·
              the
                  timing of significant orders, order cancellations and
                  reschedulings,
 ·
              the
                  loss of a significant customer(s),
 ·
              introduction
                  of products and technologies by our
                  competitors,
 ·
              the
                  availability of production capacity at the fabrication facilities
                  that
                  manufacture our products,
 ·
              our
                  significant customers could lose market share that may affect our
                  business,
 ·
              integration
                  of our product functionality into our customers’
                  products,
 ·
              our
                  ability to develop, introduce and market new products and technologies
                  on
                  a timely basis,
 ·
              unexpected
                  issues that may arise with devices in
                  production
 ·
              shifts
                  in our product mix toward lower margin
                  products,
 ·
              changes
                  in our pricing policies or those of our competitors or suppliers,
                  including decreases in unit average selling prices of our
                  products,
 ·
              the
                  availability and cost of materials to our
                  suppliers,
 ·
              general
                  economic conditions, and
 ·
              political
                  climate.
  These
        factors are difficult to forecast, and these or other factors could adversely
        affect our business.  Any shortfall in our revenues would have a
        direct impact on our business.  In addition, fluctuations in our
        quarterly results could adversely affect the market price of our common stock
        in
        a manner unrelated to our long-term operating performance.
  **The
        Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances
        In The Demand For Our Products**
  In
        the
        past, the semiconductor industry has been characterized by significant downturns
        and wide fluctuations in supply and demand.  Also, during this time,
        the industry has experienced significant fluctuations in anticipation of
        changes
        in general economic conditions.  This cyclicality has led to
        significant variances in product demand and production capacity.  It
        has also accelerated erosion of average selling prices per unit.  We
        may experience periodic fluctuations in our future financial results because
        of
        industry-wide conditions.
  **Because
        A Substantial Portion Of Our Net Sales Is Generated By A Small Number Of
        Large
        Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our Net
        Revenues And Earnings Will Be Harmed**
  Historically,
        a relatively small number of customers have accounted for a significant portion
        of our net revenues in any particular period.  For the three months
        ended June 30, 2007, one distributor accounted for 31% of net
        revenues.  For the same period in 2006, two distributors accounted for
        32% and 12%, respectively, of net revenues.  For the six months ended
        June 30, 2007, one distributor accounted for 31% of net revenues.  For
        the same period in 2006, two distributors accounted for 30% and 11%,
        respectively, of net revenues. For both of these periods, no other individual
        direct customer or distributor represented greater than 10% of net
        revenues.
  We
        have
        no long-term volume purchase commitments from any of our significant customers.
        We cannot be certain that our current customers will continue to place orders
        with us, that orders by existing customers will continue at the levels of
        previous periods or that we will be able to obtain orders from new customers.
        In
        addition, some of our customers supply products to end-market purchasers
        and any
        of these end-market purchasers could choose to reduce or eliminate orders
        for
        our customers' products. This would in turn lower our customers' orders for
        our
        products.
  We
        anticipate that sales of our products to a relatively small number of customers
        will continue to account for a significant portion of our net
        sales.  Due to these factors, the following have in the past and may
        in the future reduce our net sales or earnings:
  ·
              the
                  reduction, delay or cancellation of orders from one or more of
                  our
                  significant customers;
 ·
              the
                  selection of competing products or in-house design by one or more
                  of our
                  current customers;
 ·
              the
                  loss of one or more of our current customers;
                  or
 ·
              a
                  failure of one or more of our current customers to pay our
                  invoices.
  **Intense
        Competition In The Markets In Which We Operate May Reduce The Demand For
        Or
        Prices Of Our Products**
  Competition
        in the semiconductor industry is intense.  If our main target market,
        the microprocessor-based systems market, continues to grow, the number of
        competitors may increase significantly.  In addition, new
        semiconductor technology may lead to new products that can perform similar
        functions as our products.  Some of our competitors and other
        semiconductor companies may develop and introduce products that integrate
        into a
        single semiconductor device the functions performed by our semiconductor
        devices.  This would eliminate the need for our products in some
        applications.
  In
        addition, competition in our markets comes from companies of various sizes,
        many
        of which are significantly larger and have greater financial and other resources
        than we do and thus can better withstand adverse economic or market conditions.
        Therefore, we cannot assure you that we will be able to compete successfully
        in
        the future against existing or new competitors, and increased competition
        may
        adversely affect our business.  See “Business -- Products,” and “--
        Competition” in Part I of Item I of our Form 10-K for the year ended December
        31, 2006.
  **Our
        Independent Manufacturers May Not Be Able To Meet Our Manufacturing
        Requirements**
  We
        do not
        manufacture any of our semiconductor devices.  Therefore, we are
        referred to in the semiconductor industry as a “fabless” producer of
        semiconductors. Consequently, we depend upon third party manufacturers to
        produce semiconductors that meet our specifications.  We currently
        have third party manufacturers principally located in Japan, Taiwan, Singapore
        and Malaysia, that can produce semiconductors which meet our
        needs.  However, as the semiconductor industry continues to progress
        towards smaller manufacturing and design geometries, the complexities of
        producing semiconductors will increase.  Decreasing geometries may
        introduce new problems and delays that may affect product development and
        deliveries.  Due to the nature of the semiconductor industry and our
        status as a “fabless” semiconductor company, we could encounter
        fabrication-related problems that may affect the availability of our
        semiconductor devices, delay our shipments or may increase our
        costs.
  None
        of
        our semiconductor devices are currently manufactured by more than one
        supplier.  We place our orders on a purchase order basis and do not
        have a long term purchase agreement with any of our existing
        suppliers.  In the event that the supplier of a semiconductor device
        was unable or unwilling to continue to manufacture this product in the required
        volume, we would have to identify and qualify a substitute
        supplier.  Introducing new products or transferring existing products
        to a new third party manufacturer or process may result in unforeseen device
        specification and operating problems.  These problems may affect
        product shipments and may be costly to correct.  Silicon fabrication
        capacity may also change, or the costs per silicon wafer may
        increase.  Manufacturing-related problems may have a material adverse
        effect on our business.
  **Customers
        Are Requiring That We Offer Our Products In Lead-Free
        Packages**
  Governmental
        regulations in certain countries and customers' intention to produce products
        that are less harmful to the environment has resulted in a requirement from
        many
        of our customers to purchase integrated circuits that do not contain
        lead.  We have responded by offering our products in lead-free
        versions.  While the lead-free versions of our products are expected
        to be friendlier to the environment, the ultimate impact is
        uncertain.  The transition to lead-free products may produce sudden
        changes in demand depending on the packaging method used, which may result
        in
        excess inventory of products packaged using traditional methods. This may
        have
        an adverse affect on our results of operations.  In addition, the
        quality, cost and manufacturing yields of the lead-free products may be less
        favorable compared to the products packaged using more traditional materials
        which may result in higher costs to us.
  **Lower
        Demand For Our Customers’ Products Will Result In Lower Demand For Our
        Products**
  Demand
        for our products depends in large part on the development and expansion of
        the
        high-performance microprocessor-based systems markets including networking
        and
        telecommunications, enterprise storage, imaging and industrial
        applications.  The size and rate of growth of these
        microprocessor-based systems markets may in the future fluctuate significantly
        based on numerous factors.  These factors include the adoption of
        alternative technologies, capital spending levels and general economic
        conditions.  Demand for products that incorporate high-performance
        microprocessor-based systems may not grow.
  **Our
        Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our
        Expected Revenues**
  Our
        customers typically perform numerous tests and extensively evaluate our products
        before incorporating them into their systems.  The time required for
        test, evaluation and design of our products into a customer’s equipment can
        range from six to twelve months or more.  It can take an additional
        six to twelve months or more before a customer commences volume shipments
        of
        equipment that incorporates our products.  Because of this lengthy
        sales cycle, we may experience a delay between the time when we increase
        expenses for research and development and sales and marketing efforts and
        the
        time when we generate higher revenues, if any, from these
        expenditures.
  In
        addition, the delays inherent in our lengthy sales cycle raise additional
        risks
        of customer decisions to cancel or change product plans.  When we
        achieve a design win, there can be no assurance that the customer will
        ultimately ship products incorporating our products.  Our business
        could be materially adversely affected if a significant customer curtails,
        reduces or delays orders during our sales cycle or chooses not to release
        products incorporating our products.
  **Failure
        To Have Our Products Designed Into The Products Of Electronic Equipment
        Manufacturers Will Result In Reduced Sales**
  Our
        future success depends on electronic equipment manufacturers that design
        our
        semiconductor devices into their systems.  We must anticipate market
        trends and the price, performance and functionality requirements of current
        and
        potential future electronic equipment manufacturers and must successfully
        develop and manufacture products that meet these requirements.  In
        addition, we must meet the timing requirements of these electronic equipment
        manufacturers and must make products available to them in sufficient
        quantities.  These electronic equipment manufacturers could develop
        products that provide the same or similar functionality as one or more of
        our
        products and render these products obsolete in their applications.
  We
        do not
        have purchase agreements with our customers that contain minimum purchase
        requirements.  Instead, electronic equipment manufacturers purchase
        our products pursuant to short-term purchase orders that may be canceled
        without
        charge.  We believe that in order to obtain broad penetration in the
        markets for our products, we must maintain and cultivate relationships, directly
        or through our distributors, with electronic equipment manufacturers that
        are
        leaders in the embedded systems markets.  Accordingly, we will incur
        significant expenditures in order to build relationships with electronic
        equipment manufacturers prior to volume sales of new products.  If we
        fail to develop relationships with additional electronic equipment manufacturers
        to have our products designed into new microprocessor-based systems or to
        develop sufficient new products to replace products that have become obsolete,
        our business would be materially adversely affected.
  **Defects
        In Our Products Could Increase Our Costs And Delay Our Product
        Shipments**
  Our
        products are complex.  While we test our products, these products may
        still have errors, defects or bugs that we find only after commercial production
        has begun.  We have experienced errors, defects and bugs in the past
        in connection with new products.
  Our
        customers may not purchase our products if the products have reliability,
        quality or compatibility problems.  This delay in acceptance could
        make it more difficult to retain our existing customers and to attract new
        customers.  Moreover, product errors, defects or bugs could result in
        additional development costs, diversion of technical and other resources
        from
        our other development efforts, claims by our customers or others against
        us, or
        the loss of credibility with our current and prospective
        customers.  In the past, the additional time required to correct
        defects has caused delays in product shipments and resulted in lower
        revenues.  We may have to spend significant amounts of capital and
        resources to address and fix problems in new products.
  We
        must
        continuously develop our products using new process technology with smaller
        geometries to remain competitive on a cost and performance
        basis.  Migrating to new technologies is a challenging task requiring
        new design skills, methods and tools and is difficult to achieve.
  **Failure
        Of Our Products To Gain Market Acceptance Would Adversely Affect Our Financial
        Condition**
  We
        believe that our growth prospects depend upon our ability to gain customer
        acceptance of our products and technology.  Market acceptance of
        products depends upon numerous factors, including compatibility with other
        products, adoption of relevant interconnect standards, perceived advantages
        over
        competing products and the level of customer service available to support
        such
        products.  There can be no assurance that growth in sales of new
        products will continue or that we will be successful in obtaining broad market
        acceptance of our products and technology.
  We
        expect
        to spend a significant amount of time and resources to develop new products
        and
        refine existing products.  In light of the long product development
        cycles inherent in our industry, these expenditures will be made well in
        advance
        of the prospect of deriving revenues from the sale of any new
        products.  Our ability to commercially introduce and successfully
        market any new products is subject to a wide variety of challenges during
        this
        development cycle, including start-up bugs, design defects and other matters
        that could delay introduction of these products to the
        marketplace.  In addition, since our customers are not obligated by
        long-term contracts to purchase our products, our anticipated product orders
        may
        not materialize, or orders that do materialize may be cancelled.  As a
        result, if we do not achieve market acceptance of new products, we may not
        be
        able to realize sufficient sales of our products in order to recoup research
        and
        development expenditures.  The failure of any of our new products to
        achieve market acceptance would harm our business, financial condition, results
        of operation and cash flows.
  **A
        Large Portion Of Our Revenues Is Derived From Sales To Third-Party Distributors
        Who May Terminate Their Relationships With Us At Any Time**
  We
        depend
        on distributors to sell a significant portion of our products.  For
        the six months ended June 30, 2007 and 2006, sales through distributors
        accounted for approximately 74% and 71%, respectively, of our net
        revenues.  Some of our distributors also market and sell competing
        products.  Distributors may terminate their relationships with us at
        any time.  Our future performance will depend in part on our ability
        to attract additional distributors that will be able to market and support
        our
        products effectively, especially in markets in which we have not previously
        distributed our products.  We may lose one or more of our current
        distributors or may not be able to recruit additional or replacement
        distributors.  The loss of one or more of our major distributors could
        have a material adverse effect on our business, as we may not be successful
        in
        servicing our customers directly or through manufacturers’
representatives.
  **The
        Demand For Our Products Depends Upon Our Ability To Support Evolving Industry
        Standards**
  A
        majority of our revenues are derived from sales of products, which rely on
        the
        PCI, PCI-X, USB and PCI Express standards.  If markets move away from
        these standards and begin using new standards, we may not be able to
        successfully design and manufacture new products that use these new
        standards.  There is also the risk that new products we develop in
        response to new standards may not be accepted in the market.  In
        addition, these standards are continuously evolving, and we may not be able
        to
        modify our products to address new specifications.  Any of these
        events would have a material adverse effect on our business.
  **We
        Must Make Significant Research And Development Expenditures Prior To Generating
        Revenues From Products**
  To
        establish market acceptance of a new semiconductor device, we must dedicate
        significant resources to research and development, production and sales and
        marketing.  We incur substantial costs in developing, manufacturing
        and selling a new product, which often significantly precede meaningful revenues
        from the sale of this product.  Consequently, new products can require
        significant time and investment to achieve profitability.  Investors
        should understand that our efforts to introduce new semiconductor devices
        or
        other products or services may not be successful or profitable.  In
        addition, products or technologies developed by others may render our products
        or technologies obsolete or noncompetitive.
  We
        record
        as expenses the costs related to the development of new semiconductor devices
        and other products as these expenses are incurred.  As a result, our
        profitability from quarter to quarter and from year to year may be adversely
        affected by the number and timing of our new product launches in any period
        and
        the level of acceptance gained by these products.
  **We
        Could Lose Key Personnel Due To Competitive Market Conditions And
        Attrition**
  Our
        success depends to a significant extent upon our senior management and key
        technical and sales personnel.  The loss of one or more of these
        employees could have a material adverse effect on our business.  We do
        not have employment contracts with any of our executive officers.
  Our
        success also depends on our ability to attract and retain qualified technical,
        sales and marketing, customer support, financial and accounting, and managerial
        personnel.  Competition for such personnel in the semiconductor
        industry is intense, and we may not be able to retain our key personnel or
        to
        attract, assimilate or retain other highly qualified personnel in the
        future.  In addition, we may lose key personnel due to attrition,
        including health, family and other reasons.  We have experienced, and
        may continue to experience, difficulty in hiring and retaining candidates
        with
        appropriate qualifications.  If we do not succeed in hiring and
        retaining candidates with appropriate qualifications, our business could
        be
        materially adversely affected.
  **The
        Successful Marketing And Sales Of Our Products Depend Upon Our Third Party
        Relationships, Which Are Not Supported By Written
        Agreements**
  When
        marketing and selling our semiconductor devices, we believe we enjoy a
        competitive advantage based on the availability of development tools offered
        by
        third parties.  These development tools are used principally for the
        design of other parts of the microprocessor-based system but also work with
        our
        products.  We will lose this advantage if these third party tool
        vendors cease to provide these tools for existing products or do not offer
        them
        for our future products.  This event could have a material adverse
        effect on our business.  We have no written agreements with these
        third parties, and these parties could choose to stop providing these tools
        at
        any time.
  **Our
        Limited Ability To Protect Our Intellectual Property And Proprietary Rights
        Could Adversely Affect Our Competitive Position**
  Our
        future success and competitive position depend upon our ability to obtain
        and
        maintain proprietary technology used in our principal
        products.  Currently, we have limited protection of our intellectual
        property in the form of patents and rely instead on trade secret
        protection.  Our existing or future patents may be invalidated,
        circumvented, challenged or licensed to others.  The rights granted
        there under may not provide competitive advantages to us.  In
        addition, our future patent applications may not be issued with the scope
        of the
        claims sought by us, if at all.  Furthermore, others may develop
        technologies that are similar or superior to our technology, duplicate our
        technology or design around the patents owned or licensed by us.  In
        addition, effective patent, trademark, copyright and trade secret protection
        may
        be unavailable or limited in foreign countries where we may need
        protection.  We cannot be sure that steps taken by us to protect our
        technology will prevent misappropriation of the technology.
  We
        may
        from time to time receive notifications of claims that we may be infringing
        patents or other intellectual property rights owned by third
        parties.  While there is currently no intellectual property litigation
        pending against us, litigation could result in significant expenses to us
        and
        adversely affect sales of the challenged product or technology.  This
        litigation could also divert the efforts of our technical and management
        personnel, whether or not the litigation is determined in our
        favor.  In addition, we may not be able to develop or acquire
        non-infringing technology or procure licenses to the infringing technology
        under
        reasonable terms.  This could require expenditures by us of
        substantial time and other resources.  Any of these developments would
        have a material adverse effect on our business.
  **Our
        Potential Future Acquisitions May Not Be Successful Because Of Our Limited
        Experience With Acquisitions In The Past**
  As
        part
        of our business strategy, we expect to review acquisition prospects that
        would
        complement our existing product offerings, improve market coverage or enhance
        our technological capabilities.  Future acquisitions could result in
        any or all of the following:
  ·
              potentially
                  dilutive issuances of equity
                  securities,
 ·
              large
                  acquisition-related write-offs,
 ·
              the
                  incurrence of debt and contingent liabilities or amortization expenses
                  related to other intangible assets,
 ·
              difficulties
                  in the assimilation of operations, personnel, technologies, products
                  and
                  the information systems of the acquired
                  companies,
 ·
              diversion
                  of management’s attention from other business
                  concerns,
 ·
              risks
                  of entering geographic and business markets in which we have no
                  or limited
                  prior experience, and
 ·
              potential
                  loss of key employees of acquired
                  organizations.
  We
        have
        had limited experience with acquisitions in the past and may not be able
        to
        successfully integrate any businesses, products, technologies or personnel
        that
        may be acquired in the future.  Our failure to do so could have a
        material adverse effect on our business.
  **Because
        We Sell Our Products To Customers Outside Of The United States And Because
        Our
        Products Are Incorporated With Products Of Others That Are Sold Outside Of
        The
        United States We Face Foreign Business, Political And Economic
        Risks**
  Sales
        outside of the United States accounted for approximately 71% of our revenues
        for
        the six months ended June 30, 2007.  In 2006 and 2005, sales outside
        of the United States accounted for approximately 75% and 72% of our revenues,
        respectively.  Sales outside of the United States may fluctuate in
        future periods and may continue to account for a large portion of our
        revenues.  In addition, equipment manufacturers who incorporate our
        products into their products sell their products outside of the United States,
        thereby exposing us indirectly to foreign risks.  Further, most of our
        semiconductor products are manufactured outside of the United
        States.  Accordingly, we are subject to international risks,
        including:
  ·
              difficulties
                  in managing distributors,
 ·
              difficulties
                  in staffing and managing foreign subsidiary and branch
                  operations,
 ·
              political
                  and economic instability,
 ·
              foreign
                  currency exchange fluctuations,
 ·
              difficulties
                  in accounts receivable collections,
 ·
              potentially
                  adverse tax consequences,
 ·
              timing
                  and availability of export
                  licenses,
 ·
              changes
                  in regulatory requirements, tariffs and other
                  barriers,
 ·
              difficulties
                  in obtaining governmental approvals for telecommunications and
                  other
                  products, and
 ·
              the
                  burden of complying with complex foreign laws and
                  treaties.
  Because
        sales of our products have been denominated to date exclusively in United
        States
        dollars, increases in the value of the United States dollar will increase
        the
        price of our products so that they become relatively more expensive to customers
        in the local currency of a particular country, which could lead to a reduction
        in sales and profitability in that country.
  **A
        Downturn In The Global Economy May Adversely Affect Our Revenues, Results
        Of
        Operations And Financial Condition**
  Demand
        for semiconductor components is increasingly dependent upon the rate of growth
        in the global economy.  If the rate of global economic growth slows,
        or contracts, customer demand for products could be adversely affected, which
        in
        turn could adversely affect our revenues, results of operations and financial
        condition.  Many factors could adversely affect regional or global
        economic growth.  Some of the factors that could slow global economic
        growth include:  rising interest rates in the United States, a
        slowdown in the rate of growth of the Chinese economy, a significant act
        of
        terrorism which disrupts global trade or consumer confidence, and geopolitical
        tensions including war and civil unrest.  Reduced levels of economic
        activity, or disruptions of international transportation, could adversely
        affect
        sales on either a global basis or in specific geographic regions.
  **Our
        Principal Stockholders Have Significant Voting Power And May Take Actions
        That
        May Not Be In The Best Interests Of Our Other Stockholders**
  Our
        executive officers, directors and other principal stockholders, in the
        aggregate, beneficially own a substantial amount of our outstanding common
        stock.  Although these stockholders do not have majority control, they
        currently have, and likely will continue to have, significant influence with
        respect to the election of our directors and approval or disapproval of our
        significant corporate actions.  This influence over our affairs might
        be adverse to the interests of other stockholders.  In addition, the
        voting power of these stockholders could have the effect of delaying or
        preventing a change in control of PLX.
  **The
        Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely
        Affect The Rights Of The Holders Of Our Common Stock**
  Anti-takeover
        provisions of Delaware law and our Certificate of Incorporation may make
        a
        change in control of PLX more difficult, even if a change in control would
        be
        beneficial to the stockholders.  These provisions may allow the Board
        of Directors to prevent changes in the management and control of
        PLX.
  As
        part
        of our anti-takeover devices, our Board of Directors has the ability to
        determine the terms of preferred stock and issue preferred stock without
        the
        approval of the holders of the common stock.  Our Certificate of
        Incorporation allows the issuance of up to 5,000,000 shares of preferred
        stock.  There are no shares of preferred stock
        outstanding.  However, because the rights and preferences of any
        series of preferred stock may be set by the Board of Directors in its sole
        discretion without approval of the holders of the common stock, the rights
        and
        preferences of this preferred stock may be superior to those of the common
        stock.  Accordingly, the rights of the holders of common stock may be
        adversely affected.  Consistent with Delaware law, our Board of
        Directors may adopt additional anti-takeover measures in the
        future.
  **ITEM
        4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS**
  At
        the
        Company’s Annual Meeting of Stockholders held on May 24, 2007, the following
        proposals were submitted to a vote of stockholders:
  Proposal
        No. 1: Election of Directors
  The
        following votes were cast for each director nominee and each such nominee
        was
        reelected to the Company’s Board of Directors:
  **Name**
              
              **Votes
                  For**
              
              **Votes
                  Withheld**Michael
                  J. Salameh
              
              25,897,184
              
              118,050D.
                  James Guzy
              
              24,294,996
              
              1,720,238John
                  H. Hart
              
              25,881,334
              
              133,900Robert
                  H. Smith
              
              25,602,486
              
              412,748Thomas
                  Riordan
              
              25,896,684
              
              118,550Patrick
                  Verderico
              
              25,897,084
              
              118,150
  Proposal
        No. 2: Ratification of Independent Registered Public Accountants, which was
        approved:
  For
                
                
                25,990,897Against
                
                
                19,276Abstain
                
                
                5,061Total
                    Shares Voted
                
                
                26,015,234
 
   **ITEM
        6.  EXHIBITS**
  **Exhibit****Number**
                  
                  **Description**31.1
                  
                  Certification
                      of Chief Executive Officer
                      Pursuant to Section 302 of the Sarbanes-Oxley Act of
                      2002.31.2
                  
                  Certification
                      of Chief Financial Officer
                      Pursuant to Section 302 of the Sarbanes-Oxley Act of
                      2002.32.1
                  
                  Certification
                      of Chief Executive Officer
                      Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title
                      18,United
                      States Code, as Adopted Pursuant to
                      Section 906 of the Sarbanes-Oxley Act of
                      2002.32.2
                  
                  Certification
                      of Chief Finanical Officer
                      Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title
                      18,United
                      States Code, as Adopted Pursuant to
                      Section 906 of the Sarbanes-Oxley Act of
                      2002.
 **SIGNATURE**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  **PLX
        TECHNOLOGY, INC.**
 
 
  Dated:
        August 3, 2007
  By        /s/ Arthur
        O. Whipple
 Arthur
        O.
        Whipple
 Chief
        Financial Officer
 (*Principal
        Financial Officer)*
  
   **EXHIBIT
        INDEX**
  **Exhibit****Number**
              
              **Description**31.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  of Chief Financial Officer
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  of Chief Executive Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title
                  18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of
                  2002.32.2
              
              Certification
                  of Chief Finanical Officer
                  Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title
                  18,United
                  States Code, as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of
                  2002.