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 March 31, 2009.




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 W. 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 has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes[  ]  No[  ]
 Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a small reporting company. See
definition of “large accelerated filer”, "accelerated filer" and "small
reporting company" in Rule 12b-2 of the Exchange Act (Check One):
 Large
accelerated filer [  ] Accelerated
filer [X] Non-accelerated
filer [  ]  Small Reporting
Company [  ]
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes [  ]    No
[X]
  As
of March
31, 2009 there
were 33,604,240 shares of common
stock, par value $0.001 per share,
outstanding.


PLX
TECHNOLOGY, INC.


INDEX
TO


REPORT
ON FORM 10-Q


FOR
QUARTER ENDED MARCH 31, 2009




PART
      I. FINANCIAL INFORMATION
              PageItem 1.
              Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at March 31, 2009
      and December 31, 2008
              3Condensed Consolidated Statements of Operations for the
      three months ended March 31, 2009 and 2008
              4Condensed Consolidated Statements of Cash Flows for the three
      months ended March 31, 2009 and 2008
              5Notes to Condensed Consolidated Financial
      Statements
              6Item 2.
              Management's Discussion and Analysis of Financial Condition
      and Results of Operations
              17Item 3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              25Item 4.
              Controls and Procedures
              25PART
      II. OTHER INFORMATIONItem 1A.
              Risk Factors
              26Item 2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              33Item 6.
              Exhibits
              33Signature
              
              34


2




PART
I.   FINANCIAL INFORMATION





ITEM 1.    FINANCIAL
STATEMENTS








PLX TECHNOLOGY, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)


(in
thousands)




March
      31,
              
              
              March
      31,2009
              
              
              2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
              
              $
              7,443
              
              
              $
              6,865Short-term
      marketable securities
              
              
              29,153
              
              
              
              32,677Accounts
      receivable, net
              
              
              7,427
              
              
              
              5,712Inventories
              
              
              6,916
              
              
              
              7,257Other
      current assets
              
              
              5,752
              
              
              
              4,699Total
      current assets
              
              
              56,691
              
              
              
              57,210Property
      and equipment, net
              
              
              11,655
              
              
              
              10,590Goodwill
              
              
              1,367
              
              
              
              -Other acquired
      intangible assets
              
              
              8,202
              
              
              
              -Long-term
      marketable securities
              
              
              4,985
              
              
              
              7,585Other
      assets
              
              
              5,204
              
              
              
              1,875Total
      assets
              
              $
              88,104
              
              
              $
              77,260LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
              
              $
              5,243
              
              
              $
              4,003Accrued
      compensation and benefits
              
              
              1,804
              
              
              
              2,360Accrued
      commissions
              
              
              465
              
              
              
              475Short
      term note payable
              
              
              8,622
              
              
              
              -Other
      accrued expenses
              
              
              1,663
              
              
              
              1,219Long
      term note payable
              
              
              1,316
              
              
              
              -Total
      liabilities
              
              
              19,113
              
              
              
              8,057Stockholders'
      Equity:Common
      stock, par value
              
              
              34
              
              
              
              28Additional
      paid-in capital
              
              
              142,557
              
              
              
              132,159Accumulated
      other comprehensive income (loss)
              
              
              (15
              )
              
              
              104Accumulated
      deficit
              
              
              (73,585
              )
              
              
              (63,088
              )Total
      stockholders' equity
              
              
              68,991
              
              
              
              69,203Total
      liabilities and stockholders' equity
              
              $
              88,104
              
              
              $
              77,260


See
accompanying notes to condensed consolidated financial statements.




3




PLX TECHNOLOGY, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(in
thousands, except per share amounts)







Three
      Months EndedMarch
      31,2009
              
              
              2008Net
      revenues
              
              $
              16,457
              
              
              $
              22,755Cost
      of revenues
              
              
              7,511
              
              
              
              8,912Gross
      margin
              
              
              8,946
              
              
              
              13,843Operating
      expenses:Research
      and development
              
              
              7,903
              
              
              
              6,498Selling,
      general and administrative
              
              
              6,895
              
              
              
              6,453Acquisition
      related costs
              
              
              2,630
              
              
              
              -Amortization
      of acquired intangible assets
              
              
              854
              
              
              
              241Total
      operating expenses
              
              
              18,282
              
              
              
              13,192Income
      (loss) from operations
              
              
              (9,336
              )
              
              
              651Interest
      income and other, net
              
              
              48
              
              
              
              488Loss
      on fair value remeasurement
              
              
              (1,190
              )
              
              
              -Income
      (loss) before provision for income taxes
              
              
              (10,478
              )
              
              
              1,139Provision
      for income taxes
              
              
              19
              
              
              
              77Net
      income (loss)
              
              $
              (10,497
              )
              
              $
              1,062Basic
      net income (loss) per share
              
              $
              (0.31
              )
              
              $
              0.04Shares
      used to compute basic per share amounts
              
              
              33,604
              
              
              
              28,707Diluted
      net income (loss) per share
              
              $
              (0.31
              )
              
              $
              0.04Shares
      used to compute diluted per share amounts
              
              
              33,604
              
              
              
              28,867


See
accompanying notes to condensed consolidated financial statements.




4


PLX TECHNOLOGY, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(in
thousands)






Three
      Months EndedMarch
      31,2009
              
              
              2008Cash
      flows from operating activities:Net
      income (loss)
              
              $
              (10,497
              )
              
              $
              1,062Adjustments
      to reconcile net income to net cash flows provided by (used in) operating
      activities, net of assets acquired and liabilities
assumed:Depreciation
      and amortization
              
              
              581
              
              
              
              573Share-based
      compensation expense
              
              
              211
              
              
              
              885Amortization
      of acquired intangible assets
              
              
              854
              
              
              
              241Write-downs
      of inventories
              
              
              86
              
              
              
              45Fair
      value remeasurement of note payable
              
              
              1,190
              
              
              
              -Impairment
      of assets
              
              
              286
              
              
              
              -Changes
      in pre-acquisition deferred tax balances
              
              
              -
              
              
              
              (151
              )Other
      non-cash items
              
              
              10
              
              
              
              (55
              )Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (429
              )
              
              
              (250
              )Inventories
              
              
              2,932
              
              
              
              (159
              )Other
      current assets
              
              
              182
              
              
              
              (56
              )Other
      assets
              
              
              (770
              )
              
              
              (283
              )Accounts
      payable
              
              
              (1,909
              )
              
              
              184Accrued
      compensation and benefits
              
              
              (1,297
              )
              
              
              (237
              )Other
      accrued expenses
              
              
              (815
              )
              
              
              369Net
      cash provided by (used in) operating activities
              
              
              (9,385
              )
              
              
              2,168Cash
      flows from investing activities:Cash
      acquired in Oxford acquisition
              
              
              4,392
              
              
              
              -Purchases
      of marketable securities
              
              
              (9,292
              )
              
              
              (11,842
              )Sales
      and maturities of marketable securities
              
              
              15,300
              
              
              
              9,500Purchase
      of property and equipment
              
              
              (300
              )
              
              
              (924
              )Net
      cash provided by (used in) investing activities
              
              
              10,100
              
              
              
              (3,266
              )Cash
      flows from financing activities:Proceeds
      from exercise of common stock options
              
              
              -
              
              
              
              10Repurchase
      of common stock
              
              
              -
              
              
              
              (3,907
              )Principal
      payments on capital lease obligations
              
              
              (125
              )
              
              
              -Net
      cash (used in) financing activities
              
              
              (125
              )
              
              
              (3,897
              )Effect
      of exchange rate fluctuations on cash and cash equivalents
              
              
              (12
              )
              
              
              (19
              )Net
      decrease in cash and cash equivalents
              
              
              578
              
              
              
              (5,014
              )Cash
      and cash equivalents at beginning of period
              
              
              6,865
              
              
              
              19,175Cash
      and cash equivalents at end of period
              
              $
              7,443
              
              
              $
              14,161Supplemental
      disclosure of cash flow  information:Cash
      paid for income taxes
              
              $
              47
              
              
              $
              39Cash
      paid for interest
              
              $
              25
              
              
              $
              -Common
      stock issued in connection with acquisition
              
              $
              10,192
              
              
              $
              -Convertible
      note issued in connection with acquisition
              
              $
              6,188
              
              
              $
              -


See
accompanying notes to condensed consolidated financial statements.




5


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 March 31, 2009 and for the three month period ended March 31,
2009 and 2008 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, 2008.




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, acquired intangible assets, 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 month period ended March
31, 2009 and 2008 was as follows (in thousands):




Three
      Months EndedMarch
      31,2009
              
              
              2008Net
      income (loss)
              
              $
              (10,497
              )
              
              $
              1,062Unrealized
      loss on marketable securities, net
              
              
              (107
              )
              
              
              (40
              )Cumulative
      translation adjustments
              
              
              (12
              )
              
              
              (19
              )Comprehensive
      net income (loss)
              
              $
              (10,616
              )
              
              $
              1,003
  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.




The
Company recognizes revenue in accordance with Statements of Financial Accounting
Standards (“SFAS”) No. 48, Revenue Recognition When Right of
Return Exists. 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.




6




In
the first quarter of 2009, the Company terminated all Oxford distributor
agreements which offered its distributors price protection and stock rotation
and estimated the reserve for residual rights from these agreements. The Company
resigned a small number of the terminated distributors under contacts
substantially similar to PLX’s distributor contracts. As of March 31, 2009 the
Company offers pricing protection to two distributors 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 and inventory at the
distributor to determine the ending sales reserve required for this
program.  The Company also offers stock rotation rights to two
distributors such that they can return up to a total of 5% of products purchased
every six months in exchange for other the Company’s products of equal value.
The Company analyzes current stock rotation requests and past
experience  to determine the ending sales reserve required for this
program.  In addition, the Company has arrangements with a small
number of customers offering a rebate program on various products. The Company
records rebates as a reduction of revenue under the guidelines of Emerging Issues Task Force
(“EITF’) 01-9, Accounting for Consideration Given
to a Customer (Including a Reseller of the Vendor’s Product). Reserves
are reduced directly from revenue and recorded as a reduction to accounts
receivable.





Recent
Accounting Pronouncements




In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
141(R), Business Combinations
– Revised 2007, which replaces FASB Statement No. 141, Business Combinations. SFAS
141(R) establishes principles and requirements intending to improve the
relevance, representational faithfulness and comparability of information that a
reporting entity provides in its financial reports about a business combination
and its effects. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008.  The adoption of SFAS 141(R) on January 1, 2009
changed the Company’s accounting treatment for business combinations. Among
other things, acquisition related costs are required to be expensed as incurred
under SFAS 141(R). On January 2, 2009 we completed the acquisition of Oxford and
as a result, the Company expensed acquisition related costs of $0.8 million and
$0.3 million in the fourth quarter of 2008 and the first quarter of 2009,
respectively.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51. SFAS 160
establishes accounting and reporting standards to improve the relevance,
comparability and transparency of financial information that a reporting entity
provides in its consolidated financial statements. SFAS 160 became effective
December 15, 2008. The adoption of SFAS 160 did not have a material impact on
the Company’s financial position or results of operations.





In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2, which
delayed the effective date of SFAS No. 157, Fair Value Measurements, to
fiscal years ending after November 15, 2008 for non-financial assets and
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis. FSP FAS 157-2 became effective
November 15, 2008. The adoption of FSP FAS 157-2 did not have a material
impact on the Company’s financial position or results of
operations.





In April
2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of
Intangible Assets. FSP 142-3 amends the factors an entity should consider
in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS 142, Goodwill and Other Intangible
Assests, and adds certain disclosures for an entity’s accounting policy
of the treatment of the costs, period of extension, and total costs
incurred.  FSP 143-3 must be applied prospectively to intangible
assets acquired after January 1, 2009.  The adoption of FSP 142-3 did
not have a material impact on the Company’s financial position or results of
operations.





2.  Share-Based
Compensation





Stock
Option Plans





In May
2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (“2008
Plan”).  Under the 2008 Plan, there is authorized for issuance and
available for awards an aggregate of 1,200,000 shares of the Company’s common
stock, plus the number of shares of the Company’s common stock available for
issuance under the Company’s prior incentive plan, its 1999 Stock Incentive
Plan, that are not subject to outstanding awards as of May 27,
2008.  In addition, the share reserve under the 2008 Plan will be
increased by the number of shares issuable pursuant to awards outstanding under
the prior plan that would have otherwise reverted to the prior plan because it
expires, are canceled or otherwise terminated without being exercised. Awards
under the 2008 Plan may include stock options, restricted stock, stock
appreciation rights, performance awards, restricted stock units and other
awards, provided that with respect to full value awards, such as restricted
stock or restricted stock units, no more than 300,000 shares may be issued in
the form of full value awards during the term of the 2008
Plan.  Awards under the 2008 Plan may be made to the Company’s
officers and other employees, its board members and consultants that it
hires.  The 2008 Plan has a term of ten years.




7





Share-Based
Compensation Expense





The fair
value of share-based awards to employees is calculated using the Black-Scholes
option pricing model, which 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 weighted average
assumptions:




Three
      Months EndedMarch
      31,2009
              
              
              2008Risk-free
      interest rate
              
              
              1.64
              %
              
              
              2.40
              %Expected
      volatility
              
              
              0.59
              
              
              
              0.50Expected
      life (years)
              
              
              4.51
              
              
              
              4.47
  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 has historically calculated its expected volatility assumption required
in the Black-Scholes model by blending the historical and implied volatility.
The historical volatility is based on the weekly closing prices of its common
stock over a period equal to the expected term of the option. Market based
implied volatility is based on utilizing market data of actively traded options
on the Company’s stock, from options at- or near-the-money traded options, at a
point in time as close to the grant of the employee options as reasonably
practical and with similar terms to the employee share option, or a remaining
maturity of at least six months if no similar terms are available. The
historical volatility of the price of the Company’s common stock over the
expected term of the option is a strong indicator of the expected future
volatility. In addition, implied volatility takes into consideration market
expectations of how future volatility will differ from historical
volatility.  Historically, the Company did not believe that one
estimate was more reliable than the other so it used a 50/50 blend of historical
volatility and market-based volatility. However, due to the recent lack of
available market data to calculate implied volatility, the Company began using
100% historical volatility during the fourth quarter of 2008.





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 months ended March 31, 2009
and 2008 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. The Company’s estimated forfeiture rate
at March 31, 2009 and 2008 of 29% and 26%, respectively, was based on
historical experience.





The
following table shows total share-based compensation and employee stock
ownership plan expenses for the three months ended March 31, 2009 and 2008,
included in the respective line items of the Condensed Consolidated Statements
of Operations (in thousands):




8




Three
      Months EndedMarch
      31,2009
            
            
            2008Cost
      of revenues
            
            $
            10
            
            
            $
            18Research
      and development
            
            
            109
            
            
            
            403Selling,
      general and administrative
            
            
            221
            
            
            
            464Total
      share-based compensation expense
            
            $
            340
            
            
            $
            885


A summary
of option activity under the Company’s stock equity plans during the three
months ended March 31, 2009 is as follows:




Weighted
      AverageRemaining
              
              
              AggregateOptions
      Available
              
              
              Number
      of
              
              
              Weighted
      Average
              
              
              Contratual
      Term
              
              
              IntrinsicOptions
              
              for
      Grant
              
              
              Shares
              
              
              Exercise
      Price
              
              
              (in
      years)
              
              
              ValueOutstanding
      at December 31, 2008
              
              
              1,312,185
              
              
              
              4,759,843
              
              
              $
              9.80
              
              
              
              4.20
              
              
              $
              1,262Granted
              
              
              (915,000
              )
              
              
              915,000
              
              
              
              1.91Cancelled
              
              
              368,136
              
              
              
              (368,136
              )
              
              
              8.97Plan
      Termination
              
              
              (33,452
              )
              
              
              -
              
              
              
              -Outstanding
      at March 31, 2009
              
              
              731,869
              
              
              
              5,306,707
              
              
              $
              8.50
              
              
              
              4.68
              
              
              $
              305,144Exercisable
      at March 31, 2009
              
              
              
              
              
              
              2,970,142
              
              
              $
              11.62
              
              
              
              3.43
              
              
              $
              5,994
  The
Black-Scholes weighted average fair values of options granted during the three
months ended March 31, 2009 and 2008 were $0.92 and $3.02,
respectively.





The
following table summarizes ranges of outstanding and exercisable options as of
March 31, 2009:


Options
      Outstanding
              
              
              Options
      ExercisableWeighted
      AverageRemaining
              
              
              Weighted
              
              
              
              
              
              WeightedContratual
      Term
              
              
              Average
              
              
              
              
              
              AverageRange
      of Exercise Prices
              
              
              Number
              
              
              (in
      years)
              
              
              Exercise
      Price
              
              
              Number
              
              
              Exercise
      Price$1.25-$2.05
              
              
              
              1,440,231
              
              
              
              6.76
              
              
              $
              1.96
              
              
              
              25,231
              
              
              $
              1.93$2.33-$7.98
              
              
              
              1,071,899
              
              
              
              4.71
              
              
              
              6.11
              
              
              
              609,571
              
              
              
              5.98$8.25-$9.89
              
              
              
              1,075,997
              
              
              
              3.72
              
              
              
              9.14
              
              
              
              976,708
              
              
              
              9.11$9.96-$15.58
              
              
              
              1,116,497
              
              
              
              4.36
              
              
              
              11.70
              
              
              
              756,549
              
              
              
              12.00$16.65-$25.94
              
              
              
              602,083
              
              
              
              1.72
              
              
              
              21.32
              
              
              
              602,083
              
              
              
              21.32Total
              
              
              
              5,306,707
              
              
              
              4.65
              
              
              $
              8.50
              
              
              
              2,970,142
              
              
              $
              11.62
  There
were no options exercised during the three months ended March 31, 2009. For the
same period in 2008 the total intrinsic value of options exercised was $5,000.
The fair value of options vested during the three months ended March 31, 2009
was approximately $2.1 million. As of March 31, 2009, total unrecognized
compensation costs related to nonvested stock options including estimated
forfeitures was $1.7 million which is expected to be recognized as expense over
a weighted average period of approximately 1.67 years.





Tender
Offer





On March
31, 2009, The Company commenced an offer to purchase for cash certain
outstanding options held by its employees (including officers) and directors,
and filed associated documents with the SEC under Schedule TO.  As of
March 31, 2009, options to purchase up to 5,306,707 shares of our common stock
were issued and outstanding under all of our stock option plans. Of these
outstanding stock options, options to purchase up to 3,262,809 shares of our
common stock are eligible for purchase under the offer.  Eligible
options must have had an exercise price of at least $5.50 and must meet other
conditions set forth in the offer.  The amount of cash offered for
eligible options is based on the Black-Scholes valuation of each eligible
option, subject to a minimum of $0.05 per share, and ranges from $0.05 to $1.42
per share.




9




As a result of this tender offer,
options to purchase 2,533,278 shares of the Company’s common stock were validly
tendered and not withdrawn, and the Company has accepted the repurchase of these
options.  Each eligible optionee who validly tendered eligible options
pursuant to the offer to purchase will receive a cash payment in the range of
$0.05 to $1.42 per option for an aggregate amount of $0.9
million.The aggregate amount of the payments made in exchange
for eligible options will be charged to stockholders' equity to the extent that
the amount does not exceed the fair value of the eligible options accepted for
payment, as determined at the purchase date. The amount paid in excess of that
fair value, as determined at the purchase date, will be recorded as compensation
expense. Accounting for the purchase of eligible options will be reflected on
the Company’s consolidated financial statements for the second quarter of
2009.





The
Company will return to its 2008 Equity Incentive Plan the first 400,000 shares
underlying options purchased pursuant to the offer if such options were
originally issued under the 2008 plan or our 1999 Stock Incentive
Plan.  These shares will then be available for future
grant.  With respect to other options purchased pursuant to the offer,
the shares underlying such options will not be available for future option
grants.





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):




March
      31,
              
              
              December
      31,2009
              
              
              2008Work-in-process
              
              $
              1,873
              
              
              $
              2,506Finished
      goods
              
              
              5,043
              
              
              
              4,751Total
              
              $
              6,916
              
              
              $
              7,257
  The
Company evaluates the need for potential inventory provisions by considering a
combination of factors including the life of the product, sales history,
obsolescence and sales forecasts.





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 EndedMarch
      31,2009
            
            
            2008Net
      income (loss)
            
            $
            (10,497
            )
            
            $
            1,062Weighted
      average shares of common stock outstanding
            
            
            33,604
            
            
            
            28,707Net
      income (loss) per share - basic
            
            $
            (0.31
            )
            
            $
            0.04Shares
      used in computing basic net income (loss) per share
            
            
            33,604
            
            
            
            28,707Dilutive
      effect of stock options
            
            
            -
            
            
            
            160Shares
      used in computing diluted net income (loss) per share
            
            
            33,604
            
            
            
            28,867Net
      income (loss) per share - diluted
            
            $
            (0.31
            )
            
            $
            0.04


As the
Company incurred a loss for the three month period ended March 31, 2009, the
effect of dilutive securities, totaling 5.3 million shares has been excluded
from the computation of diluted loss per share, as its impact would be
anti-dilutive. Dilutive securities are comprised of options to purchase common
stock.




10





Weighted
average employee stock options to purchase approximately 4.1 million shares for
the three month period ended March 31, 2008, were outstanding, but were 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
Company’s common stock and, therefore, the effect would have been
anti-dilutive.





5.  Fair
Value Measurements





The
Company adopted SFAS No. 157, Fair Value Measurements,
effective January 1, 2008, for financial assets and liabilities measured on a
recurring basis.  SFAS 157 applies to all financial assets and
financial liabilities that are being measured on a recurring
basis.  SFAS 157 established a framework for measuring fair value and
expands related disclosures.  The statement requires fair value
measurement be classified and disclosed in one of the following three
categories:





Level 1:
Valuations based on quoted prices in active markets for identical assets and
liabilities.  The fair value of available-for-sale securities included
in the level 1 category is based on quoted prices that are readily and regularly
available in an active market.





Level 2: Valuations based on observable
inputs (other than Level 1 prices), such as quoted prices for similar assets at
the measurement date; quoted prices in markets that are not active; or other
inputs that are observable, either directly or indirectly. The fair value of
available-for-sale securities included in the Level 2 category is based on the
market values obtained from an independent pricing service that were evaluated
using pricing models that vary by asset class and may incorporate available
trade, bid and other market information and price quotes from well established
independent pricing vendors and broker-dealers.





Level 3:
Valuations based on inputs that are unobservable and involve management judgment
and the reporting entity’s own assumptions about market participants and
pricing.





The fair
value of financial assets and liabilities measured on a recurring basis is as
follows (in thousands):




Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
            
            
            Significant
      Other
            
            
            Significantfor
      Identical Assets or Liabilities
            
            
            Observable
      Inputs
            
            
            Unobservable
      InputsMarch
      31, 2009
            
            
            (Level
      1)
            
            
            (Level
      2)
            
            
            (Level
      3)Assets:Money
      market funds
            
            $
            4,003
            
            
            $
            4,003
            
            
            $
            -
            
            
            $
            -Marketable
      securities
            
            
            34,138
            
            
            
            -
            
            
            
            34,138
            
            
            
            -Total
            
            $
            38,141
            
            
            $
            4,003
            
            
            $
            34,138
            
            
            $
            -Liabilities:
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            -Convertible
      note
            
            $
            7,378
            
            
            $
            7,378
            
            
            $
            -
            
            
            $
            -Total
            
            $
            7,378
            
            
            $
            7,378
            
            
            $
            -
            
            
            $
            -


The fair
value of non-financial assets measured on a non-recurring basis is as follows
(in thousands):




Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
              
              
              Significant
      Other
              
              
              Significantfor
      Identical Assets or Liabilities
              
              
              Observable
      Inputs
              
              
              Unobservable
      InputsMarch
      31, 2009
              
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)Assets:Goodwill
              
              $
              1,367
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,367Acquired
      intangibles, net
              
              
              8,202
              
              
              
              -
              
              
              
              -
              
              
              
              8,202Total
              
              $
              9,569
              
              
              $
              -
              
              
              $
              -
              
              
              $
              9,569
  6.  Investments





The
Company accounts for its investments in accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities.  As of March 31, 2009, the
Company’s securities consisted of debt securities and were designated as
available-for-sale. Available-for-sale securities are carried at fair value,
based on quoted market prices, with unrealized gains and losses reported in a
separate component of stockholders’ equity.  The amortized cost of
debt securities is adjusted for the amortization of premiums and the accretion
of discounts to maturity, both of which are included in interest
income.  Realized gains and losses are recorded on the specific
identification method.





11




The fair
value of available-for-sale investments is as follows (in
thousands):




March
      31, 2009Amortized
              
              
              Unrealized
              
              
              Unrealized
              
              
              EstimatedCost
              
              
              Gain
              
              
              Loss
              
              
              Fair
      ValueCorporate
      bonds and notes
              
              $
              6,495
              
              
              $
              50
              
              
              $
              -
              
              
              $
              6,545Municipal
      bonds
              
              
              1,505
              
              
              
              5
              
              
              
              -
              
              
              
              1,510US
      treasury and government agencies securities
              
              
              25,955
              
              
              
              128
              
              
              
              -
              
              
              
              26,083Total
      bonds, notes and equity securities
              
              $
              33,955
              
              
              $
              183
              
              
              $
              -
              
              
              $
              34,138Less
      amounts classified as cash equivalents
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Total
      short and long-term available-for-sale investments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              34,138Contractual
      maturity dates for investments:Less
      than one year:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29,153One
      to two years:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,985$
              34,138
  December
      31, 2008Amortized
              
              
              Unrealized
              
              
              Unrealized
              
              
              EstimatedCost
              
              
              Gain
              
              
              Loss
              
              
              Fair
      ValueCorporate
      bonds and notes
              
              $
              9,898
              
              
              $
              92
              
              
              $
              (47
              )
              
              $
              9,943Municipal
      bonds
              
              
              1,509
              
              
              
              6
              
              
              
              -
              
              
              
              1,515US
      treasury and government agencies secutites
              
              
              28,564
              
              
              
              240
              
              
              
              -
              
              
              
              28,804Total
      bonds, notes and equity securities
              
              $
              39,971
              
              
              $
              338
              
              
              $
              (47
              )
              
              $
              40,262Less
      amounts classified as cash equivalents
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Total
      short and long-term available-for-sale investments
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              40,262Contractual
      maturity dates for investments:Less
      than one year:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              32,677One
      to two years:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,585$
              40,262
  The
Company compares the carrying value of its available for sale investments with
their quoted market prices at the end of each period.  If the quoted
price of a marketable security has dropped significantly during a period or has
been below our carrying value for an extended period of time, the Company
reviews the investment to determine whether the decline is other than
temporary.  If the Company determines that the decline is other than
temporary, the investment is written down to its market value as measured at the
end of the period.  Any resulting charge is included in the Company’s
statement of operations in the related period. The Company has not recorded any
other than temporary impairment charges in the accompanying financial
statements.





7.  Acquisition
of Oxford Semiconductor Inc.





On
January 2, 2009, the Company acquired all of the outstanding shares of capital
stock of Oxford Semiconductor, Inc. (Oxford), a privately held fabless provider
of industry-leading silicon and software for the consumer and small office/home
office (SOHO) storage markets.





Established
in 1992, Oxford has been providing silicon and software solutions to
interconnect digital systems, including PCIe, USB, FireWire, Ethernet, SATA and
eSATA.  Oxford’s corporate headquarters were located in Milpitas,
California, with most of its employees based in Oxford’s design center in
Abingdon, United Kingdom.  The consumer and SOHO external storage
markets account for the majority of Oxford’s sales.  Oxford provides
advanced system-on-chip solutions for both direct-attached storage (DAS) and
network-attached storage (NAS) external drives.  Oxford‘s customers
include Seagate, Western Digital, LaCie, Hewlett Packard, and
Macpower.




12





We
believe that through this acquisition, we have a leadership position in two of
the fastest-growing interconnect chip markets – PCI Express-based systems and
consumer external storage.  Major synergies include common
interconnect technologies and design flows, sales, marketing and support
systems, and supply chains.  Most importantly, we can create
innovative products that combine the considerable intellectual property and
industry knowledge of Oxford and PLX.





The total
consideration paid for the transaction was $16.4 million, consisting of 5.6
million shares at $1.82 per share, the closing price on January 2, 2009, the
date the transaction was closed, and the fair value of the contingently
convertible debt liability as of January 2, 2009, of $6.2 million.





As a part
of the Merger Agreement, the Company acquired all of the outstanding shares of
capital stock of Oxford in exchange for 5.6 million shares of common stock of
PLX and a promissory note in the principal amount of $14.2 million (the “Note”)
that will be satisfied by either (i) the issuance of an additional 3.4 million
shares of common stock of PLX upon approval of PLX’s stockholders, which is
being sought at a special meeting of stockholders to be held on May 22, 2009, or
(ii) the repayment of the principal amount of the Note if such stockholder
approval is not obtained by June 30, 2009.  Upon approval of PLX’s
stockholders, the Note automatically converts into PLX common stock, and the
implied conversion rate on the Note is $4.18 per share.  We believe it
is probable that the Note will convert to 3.4 million shares.  Under
SFAS 141R, the contingently convertible promissory note is considered contingent
consideration which is recorded at fair value as of the acquisition date, and
changes to the fair value of contingent consideration are reflected through the
statement of operations.  The fair value of the convertible note on
the acquisition date was based on that day’s closing stock price of $1.82 per
share. As of March 31, 2009, the convertible note was remeasured to fair
value.  Based on the closing stock price of $2.17 as of March 31,
2009, the fair value of the convertible note was $7.4 million.  The
change in fair value of $1.2 million was recognized as a loss in the quarter
ended March 31, 2009.





The
following table summarizes the consideration paid for Oxford and the amounts of
the assets acquired and liabilities assumed at the acquisition
date.





Fair
value of consideration transferred:





5,600,000
      common shares of PLX
            
            $
            10,192Contingent
      consideration
            
            
            6,188Fair
      value of total consideration
            
            $
            16,380


Recognized
amounts of identifiable assets acquired and liabilities assumed (in
thousands):




Cash
      and cash equivalents
            
            $
            4,392Trade
      receivables
            
            
            1,286Inventories
            
            
            2,677Tax
      receivable
            
            
            835Licensed
      IP
            
            
            2,499Property,
      plant and equipment
            
            
            1,357Identifiable
      intangible assets
            
            
            9,056Other
      assets
            
            
            482Trade
      and other payable
            
            
            (3,163
            )Accruals
      and other liabilities
            
            
            (4,408
            )Total
      indentifiable net assets
            
            $
            15,013Goodwill
            
            
            1,367$
            16,380


The fair
value of assets acquired include trade receivables of $1.6
million.  The gross amount due under sales related contracts is $1.6
million, of which $0.3 million is expected to be uncollectible as a result of
recognized credits due to distributors for the difference in the price they
previously purchased product for from Oxford Semiconductor, Inc. and the
authorized quote price based on the distributors’ sell through
activity.  The gross amount under a prior IP royalty arrangement is
$0.3 million and the full amount is expected to be uncollectible.




13





The
identified intangible assets consist of core technology, trade name and customer
relationships.  The valuation of the acquired intangibles is
classified as a level 3 measurement under SFAS No. 157, Fair Value Measurements,
because the valuation was based on significant unobservable inputs and involved
management judgment and assumptions about market participants and
pricing.   In determining fair value of the acquired intangible
assets, we determined the appropriate unit of measure, the exit market and the
highest and best use for the assets, as per SFAS 157. The fair value was
estimated using an incremental income approach.





The
goodwill arising from the acquisition is largely attributable to the synergies
expected to be realized after the Company’s acquisition and integration of
Oxford.  The Company only has one operating segment, semiconductor
products, so all of the goodwill was assigned to the one
segment.  Goodwill is not expected to be deductible for tax
purposes.





Oxford
contributed revenues of $4.7 million and a net loss of $4.5 million to the
Company for the period from January 2, 2009 to March 31,
2009.  Included in the loss for the quarter ended March 31, 2009 are
severance costs of $2.0 million and impairment on operating leases of $0.3
million.  The loss does not include non-engineering personnel costs
after February 28, 2009 as remaining non-engineering personnel were integrated
into the Company’s operations during the quarter. See Note 10 to our condensed
consolidated financial statements for additional information.





Because
the acquisition took place on January 2, 2009, which was in substance the
beginning of the year, no pro forma data is presented for the quarter ended
March 31, 2009 as the Company’s historical statement of operations already
includes the results of Oxford for the entire period. The following unaudited
pro forma summary presents consolidated information of the Company as if the
business combination occurred on January 1, 2008.




Pro
      FormaThree
      Months EndedMarch
      31, 2008Revenue
              
              $
              34,438Loss
              
              $
              (246
              )
  The pro
forma amounts have been calculated after applying the Company’s accounting
policies and adjusting the results of Oxford to reflect the amortization that
would have been recorded assuming the intangible assets had been acquired on
January 1, 2008.





During
the three months ended March 31, 2009, the Company incurred $0.3 million of
third party acquisition related costs, primarily for outside legal
costs.  These expenses were included in operating expenses under
acquisition related costs in the Company’s consolidated statement of operations
for the quarter ended March 31, 2009.





8.  Goodwill
and Intangibles





As
discussed in note 7, the acquisition of Oxford included the acquisition of $9.1
million of identifiable intangible assets.  All of these intangibles
are subject to amortization.  There is no residual value on any of the
intangible assets.





The
following table summarizes the gross carrying amount and accumulated
amortization for each major intangible class and the weighted average
amortization period, in total and by major intangible asset class, as of March
31, 2009.




EstimatedGross
      Carrying
              
              
              Accumulated
              
              
              Net
              Amortization
              UsefulValue
              
              
              Amortization
              
              
              Value
              Method
              LifeExisting
      and core technologyUSB
      and Serial Connectivity
              
              $
              4,600
              
              
              $
              (575
              )
              
              $
              4,025
              Accelerated
              3
      yearsNetwork
      Attached Storage Connectivity
              
              
              3,800
              
              
              
              (190
              )
              
              
              3,610
              Straight-line
              5
      yearsTrade
      Name
              
              
              600
              
              
              
              (75
              )
              
              
              525
              Straight-line
              2
      yearsCustomer
      Relationships
              
              
              56
              
              
              
              (14
              )
              
              
              42
              Accelerated
              1
      yearTotals
              
              $
              9,056
              
              
              $
              (854
              )
              
              $
              8,202
              
              3.8
      years


14





The
amortization expense for the quarter ended March 31, 2009 was $0.9
million.  Estimated future amortization expense is as follows (in
thousands):




2009
              
              $
              2,5622010
              
              
              2,5932011
              
              
              1,5272012
              
              
              7602013
              
              
              760Total
              
              $
              8,202
  Amortization
expense for the quarter ended March 31, 2008 was $0.2 million and related to the
amortization of intangibles acquired through our prior acquisitions of HiNT
Corporation and NetChip Technology, Inc.  As of December 31, 2008, the
Company determined that these assets were impaired and the remaining carrying
value of $0.8 million was written off.





The
changes in the carrying amounts of goodwill are as follows:




Balance
      as of December 31, 2008
            
            $
            -Oxford
      Acquisistion
            
            
            1,367Balance
      as of March 31, 2009
            
            $
            1,367




10.  Restructuring
Costs





Severance





In the
three months ended March 31, 2009 the Company recorded approximately $2.0
million of severance and benefit related costs, included in acquisition related
costs in the Condensed Consolidated Statement of Operations, related to the
termination of 53 employees as a result of the redundancy issue associated with
the acquisition of Oxford. As of March 31, 2009 approximately $1.8 million of
the $2.0 million severance and benefit related costs was paid, and the remaining
$0.2 million is included in accrued compensation and benefits and other accrued
expenses in the Condensed Consolidated Balance Sheet. The Company expects all
severance and benefit accruals to be paid by March 31, 2010.





Lease
Termination





In
January 2009, associated with the acquisition of Oxford, the company acquired a
building lease in Milpitas, California which was vacated upon acquisition. The
Company has not been able to find a sublease for this property given the current
market conditions and available space in the area. The future lease costs for
the property were $0.3 million which extends through February 2010. The Company
recorded the liability, included in other accrued expenses in the Condensed
Consolidated Balance Sheet, for the costs to be incurred at the future cash
payment amount of $0.3 million as the total cash payment is not materially
different from the fair value and fully impaired the lease. The impairment $0.3
million was recorded in the Condensed Consolidated Statement of Operations for
the three months ended March 31, 2009. The Company expects the lease expense
accrual to be paid by February 2010.





11.  Stock
Repurchase





In
September 2002, the Company’s Board of Directors authorized the repurchase of up
to 2,000,000 shares of the Company’s common stock. In July 2008, the
Company’s Board of Directors authorized an additional 2,000,000 shares under the
repurchase program.  At the discretion of the management, the Company can
repurchase the shares from time to time in the open market or in privately
negotiated transactions.  Approximately 774,000 shares were repurchased for
approximately $1.9 million in cash in 2002 and 2003. The Company did not
repurchase any additional shares from January 1, 2004 through December 31, 2007.
In 2008 the Company repurchased 956,000 shares for approximately $6.5 million.
The Company did not repurchase any additional shares during the three months
ended March 31, 2009.




15





12.  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 EndedMarch
      31,2009
              
              
              2008Revenues:Taiwan
              
              $
              4,095
              
              
              $
              2,717China
              
              
              2,705
              
              
              
              3,774United
      States
              
              
              2,497
              
              
              
              5,201Europe,
      Middle East and Africa
              
              
              2,152
              
              
              
              2,885Singapore
              
              
              2,081
              
              
              
              4,246Other
      Asia Pacific
              
              
              1,618
              
              
              
              2,776The
      Americas - excluding United States
              
              
              1,309
              
              
              
              1,156Total
              
              $
              16,457
              
              
              $
              22,755
  For the
three months ended March 31, 2009, sales to Excelpoint Systems Pte Ltd and
Promate Electronics Co., Ltd accounted for 21% and 14%, respectively, of net
revenues. As of March 31, 2009, the same distributors accounted for 26% and 16%,
respectively, of the total accounts receivable balance. For the same period in
2008, Excelpoint Systems Pte Ltd, Answer Technology, Inc. and Avnet, Inc.
accounted for 30%, 12% and 12%, respectively, of net revenues. As of March 31,
2008, the same distributors accounted for 32%, 11%and 10%, 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.




13.  Income
Taxes




A
provision for income tax of $19,000 has been recorded for the three month period
ended March 31, 2009, compared to a provision of $77,000 for the same period in
2008.  Income tax expense for the three months ended March 31, 2009
was a result of applying the estimated annual effective tax rate to cumulative
loss before taxes adjusted for certain discrete items which are fully recognized
in the period they occur.  For the same period in 2008, the income tax
expense was a result of applying the estimated annual effective tax rate to
cumulative income before taxes adjusted for certain discrete items which are
fully recognized in the period they occur.




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, regarding accounting for uncertain tax benefits, at the
beginning of calendar year 2007. As of March 31, 2009, the Company had
unrecognized tax benefits of approximately $2.2 million of which none, if
recognized, would result in a reduction of the Company’s effective tax
rate.  There were no material changes in the amount of unrecognized
tax benefits during the three months ended March 31, 2009. Future changes in the
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
believe the amount of 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 1998 through 2008 remain open to
examination by the federal and most state tax authorities due to certain
acquired net operating loss and overall credit carryforward
positions.





16





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 expected synergies of other effects of our
acquisition of Oxford, 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, 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, 2008.





OVERVIEW





PLX
Technology, Inc. ("PLX" or the "Company"), a Delaware corporation established in
1986, designs, develops, manufactures, and sells integrated circuits for
interconnect applications.  These interconnect products are a
fundamental building block for standards-based subsystems.  We market
our products to major customers that sell electronic systems in the server,
storage, communications, industrial, and consumer markets.





Products
based on current serial interconnect technology standards such as PCI Express,
USB, SATA, and Ethernet provide capabilities to customers that previous parallel
technologies did not.  They offer the ability for systems to scale in
performance and capabilities, and allow for a standards-based building block
approach that was not feasible in the past.  As these serial
technologies have become mainstream, we have been able to offer differentiated
products based on standard ports that provide scalability and performance at a
high-volume price point.





PLX is
the market share leader in PCI Express switches and bridges.  We
recognized the trend towards this serial, switched interconnect technology
early, launched products for this market long before our competitors, and have
deployed multiple generations of products to serve a general-purpose, horizontal
market.  In addition to enabling customer differentiation through our
product features, the breadth of our product offering is in itself a significant
benefit to our customers, since we can serve the complete needs of our customers
with cost-effective solutions tailored to the specific subsystem
requirements.  Our long experience with PCI Express connectivity
products enables PLX to deliver reliable devices that operate under non-ideal
real-world system environments.





PLX is
building on our broad, general purpose interconnect success, and in particular
our success in enterprise storage, by focusing on a rapidly growing vertical
market: Consumer/Small Office Home Office (SOHO) storage.  On January
2, 2009, we completed the acquisition of Oxford Semiconductor, Inc. (Oxford), a
leading supplier of semiconductor components for the consumer and SOHO markets.
Oxford has brought to market several generations of leadership products that
allow storage customers to attach their disk subsystems directly to a computer
through USB direct-attached storage (DAS), or to attach them through local area
network-attached storage (NAS).  We identified the shift from parallel
to serial hard disk connectivity early, and benefited from this trend to be
become the leader in high performance consumer/SOHO storage
connectivity.   Our products provide a rich variety of
connectivity options, including USB, SATA, eSATA, FireWire, and Ethernet, and
offer capabilities such as RAID and data encryption at industry leading
performance levels.





PLX
offers a complete solution consisting of semiconductor devices, software
development kits, hardware design kits, operating system ports, and firmware
solutions that enable added-value features in our products.  We
differentiate our products by offering higher performance and lower power, and
by enabling a richer customer experience based on proprietary features that
enable system-level customer advantages, and by providing capabilities that
enable a customer to get to market more quickly.




17




We
utilize a “fabless” semiconductor business model whereby we purchase wafers or
packaged and tested semiconductor devices from independent manufacturing
foundries.  The advantage of this approach, in our opinion, 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.




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 orders 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 successfully 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 FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31,
2008





Net
Revenues





The
following table shows the revenue by product type (in thousands) and as a
percentage of net revenues:




Three
      Months EndedMarch
      31,2009
              
              
              2008Legacy
      products
              
              $
              7,078
              
              
              $
              12,190As
      a percentage of revenues
              
              
              43.0
              %
              
              
              53.6
              %PCI
      Express products
              
              $
              6,195
              
              
              $
              10,565As
      a percentage of revenues
              
              
              37.6
              %
              
              
              46.4
              %Storage
      products
              
              $
              3,184
              
              
              $
              -As
      a percentage of revenues
              
              
              19.4
              %
              
              
              -
  Net
revenues consist of product revenues generated principally by sales of our
semiconductor devices.  Net revenues for the three months ended March
31, 2009 were $16.5 million, a decrease of 27.7% from $22.8 million for the same
period in 2008. The decrease was due to lower sales as a result of the weakened
global economy and economic uncertainty, partially offset by revenues generated
from the Storage and Legacy products acquired as part of the Oxford
acquisition.





For the
three months ended March 31, 2009, sales to Excelpoint Systems Pte Ltd and
Promate Electronics Co., Ltd accounted for 21% and 14%, respectively, of net
revenues. For the same period in 2008, Excelpoint Systems Pte Ltd, Answer
Technology, Inc. and Avnet, Inc. accounted for 30%, 12% 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.




18





In the
fourth quarter of 2008 and the first quarter of 2009 we experienced a broad
decrease in order rates across most product lines, markets and end customers,
and we expect second quarter of 2009 sales to modestly expand compared to the
first quarter of 2009. Future demand for our products is uncertain and is highly
dependant on general economic conditions and the demand for products that
contain our chips. 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 high turns fill orders
pattern, 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.




Three
      Months EndedMarch
      31,2009
              
              
              2008in
      thousandsGross
      profit
              
              $
              8,946
              
              
              $
              13,843Gross
      margin
              
              
              54.4
              %
              
              
              60.8
              %
  Gross
margin for the three months ended March 31, 2009 decreased by 35.4% compared to
the same period in 2008. The decrease was primarily due to the lower margins of
the products acquired in the Oxford acquisition as well as overall product mix.
The Oxford product margin was lower than expected as a result of an unplanned
increase in demand of one of the Storage products.





Future
gross profit and gross margin are highly dependent on the product and customer
mix, provisions 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 tape-out costs at our
independent foundries, salaries and related costs, including share-based
compensation and expenses for outside engineering consultants.




Three
      Months EndedMarch
      31,2009
              
              
              2008in
      thousandsR&D
      expenses
              
              $
              7,903
              
              
              $
              6,498As
      a percentage of revenues
              
              
              48.0
              %
              
              
              28.6
              %
  R&D
expenses increased by $1.4 million or 21.6% in the three months ended March 31,
2009 compared to the same period in 2008. The increase in R&D in absolute
dollars and as a percentage of revenue is due primarily to increases in R&D
spending on compensation and benefit expenses of $0.8 million, engineering tools
of $0.6 million and tape-out related costs of $0.4 million related to new
activities assumed as a result of the acquisition of Oxford, partially offset by
the decrease in share-based compensation expenses of $0.4 million.





We
believe continued spending on research and development to develop new products
is critical to our success. While we expect to achieve synergies after the
integration of Oxford, R&D expenses in the second quarter of 2009 are
expected to increase due to significant stock compensation costs related to our
tender offer.  Refer to Note 2 for additional information on the
tender offer.  We anticipate that R&D expenses over time will
fluctuate due to the timing of projects and tape-out related
activities.




19




Selling,
General and Administrative Expenses





Selling,
general and administrative (“SG&A”) expenses consist primarily of salaries
and related costs, including share-based compensation, commissions to
manufactures’ representatives and professional fees, as well as trade show and
other promotional expenses.


Three
      Months EndedMarch
      31,2009
              
              
              2008in
      thousandsSG&A
      expenses
              
              $
              6,895
              
              
              $
              6,453As
      a percentage of revenues
              
              
              41.9
              %
              
              
              28.4
              %
  SG&A
expenses increased by $0.4 million or 6.9% in the three months ended March 31,
2009 compared to the same period in 2008. The increase in SG&A in absolute
dollars and as a percentage is due primarily to increased salaries and related
costs associated to the acquisition of Oxford.





While we
expect SG&A expenses in absolute dollars to decrease modestly in future
periods as synergies are achieved after the integration of Oxford, SG&A
expenses in the second quarter of 2009 are expected to increase due to
significant stock compensation costs related to our tender
offer.  Refer to Note 2 for additional information on the tender
offer.





Acquisition
Related Costs




Three
      Months EndedMarch
      31,2009
              
              
              2008in
      thousandsDeal
      costs
              
              $
              333
              
              
              $
              -Severance
      costs
              
              
              2,020
              
              
              
              -Lease
      impairment
              
              
              277
              
              
              
              -$
              2,630
              
              
              $
              -
  During
the three months ended March 31, 2009 we recorded $2.6 million in acquisition
related costs associated with the January 2, 2009 acquisition of Oxford. Deal
costs related primarily to outside legal costs. Severance costs were the result
of layoffs due to the redundancy issue that arose as a result of the
acquisition. In addition, we acquired a building lease in Milpitas, California
which was vacated upon acquisition.  As a result, we took an
impairment charge of the operating lease. See Note 10 of the condensed
consolidated financial statements for additional information.





Amortization
of Acquired Intangible Assets





Amortization
of acquired intangible assets consists of amortization expense related to
developed core technology, tradename and customer base acquired as a result of
the Oxford acquisition in January 2009 and the developed core technology
acquired in the HiNT Corporation acquisition in May 2003 and NetChip Technology,
Inc. acquisition in May 2004.





Three
      Months EndedMarch
      31,2009
            
            
            2008in
      thousandsAmortization
      of acquired intangible assets
            
            $
            854
            
            
            $
            241As
      a percentage of revenues
            
            
            5.2
            %
            
            
            1.1
            %


Amortization
of acquired intangible increased by $0.6 million or 254.4% in the three months
ended March 31, 2009 compared to the same period in 2008. The 2008 amortization
expense related to intangibles acquired in our prior acquisitions of HiNT and
NetChip. The increase is due to the developed core technology, tradename and
customer base acquired as a result of the acquisition of Oxford. See Note 8 to
our condensed consolidated financial statements for additional
information.




20





Interest
Income and Other, Net


Three
      Months EndedMarch
      31,2009
              
              
              2008in
      thousandsInterest
      income
              
              $
              245
              
              
              $
              482Interest
      Expense
              
              
              (252
              )
              
              
              -Other
      income
              
              
              55
              
              
              
              6$
              48
              
              
              $
              488
  Interest
income reflects interest earned on cash, cash equivalents and short-term and
long-term investment balances. Interest income for the three months ended March
31, 2009 decreased by $0.2 million or 49.2%, compared to the same period in
2008. The decrease was primarily due to lower cash and investment balances and
interest rate fluctuations.





Interest
expense of $0.3 million for the three months ended March 31, 2009 primarily
consisted of interest recorded on the $14.2 million note associated with the
acquisition of Oxford. We did not record interest expense for the same period in
2008.





Other
income includes foreign currency translation gains and losses and other
miscellaneous transactions. Other income may fluctuate significantly but we do
not expect it to have material impact on our consolidated statements of
operations.





Loss
on Fair Value Remeasurement of Contingently Convertible Note
Payable





As a part
of the consideration for the Oxford acquisition, we recorded a liability for the
contingent consideration due which, was recorded at fair value as of the
acquisition date. Under FAS 141(R), we are required to remeasure the liability
to fair value until the contingency is resolved and record the change in fair
value in earnings.  The fair value of the note payable was based on
3.4 million shares with a stock price of $1.82, or $6.2 million. As of March 31,
2009, the closing stock price was $2.17, or $7.4 million. The loss on the fair
value of the note remeasurement is the increase in fair value of the liability
of $1.2 million. See Note 7 of the condensed consolidated financial statements
for additional information on the contingent consideration
arrangement.




Provision
for Income Taxes





Income
tax expense of $19,000 has been recorded for the three month period ended March
31, 2009, compared to provision of $77,000 for the same period in
2008.  Income tax expense for the three months ended March 31, 2009
was a result of applying the estimated annual effective tax rate to cumulative
loss before taxes adjusted for certain discrete items which are fully recognized
in the period they occur.  For the same period in 2008, the income tax
expense was a result of applying the estimated annual effective tax rate to
cumulative income before taxes adjusted for certain discrete items which are
fully recognized in the period they occur.




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, regarding accounting for uncertain tax benefits, at the
beginning of calendar year 2007. As of March 31, 2009, we have unrecognized tax
benefits of approximately $2.2 million of which none, if recognized, would
result in a reduction of our effective tax rate.  There were no
material changes in the amount of unrecognized tax benefits during the three
months ended March 31, 2009.  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 expect that the amount
of our unrecognized tax benefits will significantly change within the next
twelve months.




21





We are
subject to taxation in the United States and various states and foreign
jurisdictions.  The tax years 1998 through 2008 remain open to
examination by the federal and most state tax authorities due to certain
acquired net operating loss and overall credit carryforward
positions.





Liquidity
and Capital Resources





In
summary, our cash flows were (in thousands):


Three
      Months EndedMarch
      31,2009
              
              
              2008Net
      cash provided by (used in) operating activities
              
              $
              (9,385
              )
              
              $
              2,168Net
      cash provided by (used in) investing activities
              
              
              10,100
              
              
              
              (3,266
              )Net
      cash (used in) financing activities
              
              
              (125
              )
              
              
              (3,897
              )Effect
      of exchange rate fluctuations on cash and cash equivalents
              
              
              (12
              )
              
              
              (19
              )
  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 March 31, 2009 cash, cash equivalents, short and long-term
marketable securities were $41.6 million, a decrease of $5.5 million from $47.1
million at December 31, 2008.





Cash
provided by (used in) operating activities primarily consists of net income
(loss) adjusted for certain non-cash items including depreciation, amortization,
share-based compensation expense, impairments, fair value remeasurements,
provisions for excess and obsolete inventories, changes in pre-acquisition
deferred tax balances, other non-cash items, and the effect of changes in
working capital and other activities. Cash used in operating activities for the
three months ended March 31, 2009 of $9.4 million consisted primarily of
net loss of $10.5 million adjusted for non-cash items of $3.2, decreases in
accounts payable of $1.9 million, accrued compensation and benefits of $1.3
million and other accrued expenses and liabilities of $0.8 million and an
increase in other assets of $0.8 million due to an increase in software an IP
licenses, partially offset by a decreases in inventory of $2.9 million and
accounts receivable of $0.4 million. Cash provided by operating activities for
the three months ended March 31, 2008 of $2.2 million consisted primarily
of net income of $1.1 million adjusted for non-cash items of $1.5 million
partially offset by increases in accounts receivable of $0.3 million and other
assets of $0.3 million.





Cash
provided by investing activities for the three months ended March 31, 2009 of
$10.1 million was primarily due to the sales and maturities of investments
(net of purchases of investments) of $6.0 million and cash acquired through
the acquisition of Oxford of $4.4 million. Cash used in investing activities for
the three months ended March 31, 2008 of $3.3 million was due to purchases
of marketable securities (net of sales and maturities of investments) of $2.3
million and capital expenditures of $0.9 million. Capital expenditures have
generally been comprised of purchases of engineering equipment, computer
hardware, software, server equipment and furniture and fixtures.





Cash used
in financing activities for the three months ended March 31, 2009 of $0.1
million was due to the payments made on capital lease obligations. Cash used in
financing activities for the three months ended March 31, 2008 of $3.9 million
was due to common stock repurchases.





The
negative effect of exchange rates on cash and cash equivalents for the three
months ended March 31, 2009 and 2008 was due to the weakening of the U.S. dollar
against other foreign currencies.





As of
March 31, 2009, we had the following significant contractual obligations and
commercial commitments (in thousands):




22




Payments
      due inLess
      than
              
              
              1-3
              
              
              More
      thanTotal
              
              
              1
      Year
              
              
              Years
              
              
              3
      YearsOperating
      leases - facilities and equipment
              
              $
              2,785
              
              
              $
              469
              
              
              $
              1,360
              
              
              $
              956Capital
      leases - IP
              
              
              2,850
              
              
              
              1,200
              
              
              
              1,650
              
              
              
              -Software
      licenses
              
              
              5,787
              
              
              
              2,875
              
              
              
              2,912
              
              
              
              -Inventory
      purchase commitments
              
              
              4,778
              
              
              
              4,778
              
              
              
              -
              
              
              
              -Total
      cash obligations
              
              $
              16,200
              
              
              $
              9,322
              
              
              $
              5,922
              
              
              $
              956
  As a part
of the Oxford acquisition Merger Agreement, we acquired all of the outstanding
shares of capital stock of Oxford in exchange for 5,600,000 shares of common
stock of PLX and a promissory note in the principal amount of $14,200,000 (the
“Note”) that will be satisfied by either (i) the issuance of an additional
3,400,000 shares of common stock of PLX upon approval of PLX’s stockholders, or
(ii) the repayment of the principal amount of the Note if such stockholder
approval is not obtained by June 30, 2009.  Interest at the rate of 6%
per annum, or approximately $0.3 million, is payable in cash whether the
principal balance is satisfied in cash or in shares of our common
stock.





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.




We
recognize revenue in accordance with Statements of Financial Accounting
Standards (“SFAS”) No. 48, Revenue Recognition When Right of
Return Exists. 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.





In the
first quarter of 2009, we terminated all Oxford distributor agreements which
offered its distributors price protection and stock rotation and estimated the
reserve for residual rights from these agreements. We resigned a small number of
the terminated distributors under contacts substantially similar to PLX’s
distributor contracts. As of March 31, 2009, we offer pricing protection to two
distributors whereby the Company supports 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
and inventory at the distributor to determine the ending sales reserve required
for this program.  We also offer stock rotation rights to two
distributors such that they can return up to a total of 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, which has
historically been insignificant, to determine the ending sales reserve required
for this program. In addition, we have arrangements with a small number of
customers offering a rebate program on various products.  We record
rebates as a reduction of revenue under the guidelines of Emerging Issues Task Force
(“EITF’) 01-9, Accounting for Consideration Given
to a Customer (Including a Reseller of the Vendor’s Product). Reserves
are reduced directly from revenue and recorded as a reduction to accounts
receivable.




23





Inventory
Valuation





We
evaluate the need for potential inventory provisions by considering a
combination of factors, including the life of the product, sales history,
obsolescence, and sales forecasts. Any adverse changes to our future product
demand may result in increased provisions, 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 between thirty to
forty five 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 adverse affect on our results of operations in the period in
which such changes or events occur. Historically, our write-offs have been
insignificant.





Goodwill





Our
methodology for allocating the purchase price related to business acquisitions
is determined through established valuation techniques. Goodwill is measured as
the excess of the cost of the acquisition over the amounts assigned to
identifiable tangible and intangible assets acquired less assumed liabilities.
We have one operating segment and business reporting unit, the sales of
semiconductor devices, and we perform goodwill impairment tests annually during
the fourth quarter and between annual tests if indicators of potential
impairment exist.





Long-lived
Assets





We review
long-lived assets, principally property and equipment and identifiable
intangibles, for impairment whenever events or circumstances indicate that the
carrying amount of assets may not be recoverable in accordance with SFAS No.
144, Accounting for the
Impairment or Disposal of Long-Lived Assets.  We evaluate
recoverability of assets to be held and used by comparing the carrying amount of
an asset to estimated future net undiscounted cash flows generated by the
asset.  If such assets are considered to be impaired, the impairment
recognized is measured as the amount by which the carrying amount of the assets
exceeds the fair value of the assets.





Share-Based
Compensation





We
recognize share-based compensation expense in accordance with SFAS No. 123(R),
Share-Based Payment. We
estimate the value of employee stock options on the date of grant using the
Black-Scholes model. 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.  Historically, we
calculated our expected volatility assumption required in the Black-Scholes
model by using a 50/50 blend of historical volatility and market-based
volatility. However, due to the recent lack of available market data to
calculate implied volatility, we began using 100% historical volatility during
the fourth quarter of 2008. 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.




24





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 March
31, 2009, 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 of fixed income securities, including amounts classified
as cash equivalents, short-term investments and long-term investments of $38.1
million at March 31, 2009.  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.  We invest primarily in high quality, short-term and long-term
debt instruments. A hypothetical 100 basis point increase in interest rates
would result in less than a $3,000 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 March 31, 2009, 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 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.




25


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, 2008, and are restated in
full.





Global
Economic Conditions May Continue to Have an Adverse Effect on Our Businesses and
Results of Operations





The
recent severe tightening of the credit markets, turmoil in the financial
markets, and weakening global economy are contributing to slowdowns in the
industries in which we operate.  Economic uncertainty exacerbates
negative trends in spending and may cause certain customers to push out, cancel,
or refrain from placing orders, which may reduce revenue. Difficulties in
obtaining capital and deteriorating market conditions may also lead to the
inability of some customers to obtain affordable financing, resulting in lower
sales. Customers with liquidity issues may lead to additional bad debt expense.
These conditions may also similarly affect key suppliers, which could affect
their ability to deliver parts and result in delays in the availability of
product.  Further, these conditions and uncertainty about future
economic conditions make it challenging for us to forecast our operating
results, make business decisions, and identify the risks that may affect our
business, financial condition and results of operations. In addition, we
maintain an investment portfolio that is subject to general credit, liquidity,
market and interest rate risks that may be exacerbated by deteriorating
financial market conditions and, as a result, the value and liquidity of the
investment portfolio could be negatively impacted and lead to
impairment.  If the current economic conditions are prolonged or
deteriorate further, or if we are not able to timely and appropriately adapt to
changes resulting from the difficult macroeconomic environment, our business,
financial condition or results of operations may be materially and adversely
affected.





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 one or more significant
customers;


·
            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
      macro 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.




26




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 on some of our
products.  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 March 31, 2009, Excelpoint Systems Pte Ltd and Promate Electronics Co.,
Ltd accounted for 21% and 14%, respectively, of net revenues. For the same
period in 2008, Excelpoint Systems Pte Ltd Answer Technology, Inc. and Avnet,
Inc. accounted for 30%, 12% and 12%, respectively, of net revenues. For both
periods, no other individual direct customer or distributor represented greater
than 10% of net revenues in any period presented.





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, 2008.





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 located in China, Japan, Korea, Malaysia,
Singapore and Taiwan, 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.




27




Only a
small number 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 our products 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.




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 and customer 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.




28





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 three
months ended March 31, 2009 and 2008, sales through distributors accounted for
approximately 85% and 78%, 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 Express, PCI, PCI-X, SATA, Ethernet, Firewire and USB
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.




29





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.





Our Transition To A New Chief
Executive Officer May Not Be Successful





On
November 3, 2008, our board of directors appointed Ralph Schmitt as our chief
executive officer and as a member of our board of directors.  Mike
Salameh, retired as chief executive officer, continued as a full-time employee
for a short transition period and continues to serve as a member of the board of
directors.  While we have planned carefully for this transition, there
are no assurances that we will be able to implement a smooth transition to our
new chief executive officer. Any failure to effectively transition the chief
executive officer position could have a material adverse effect on our business,
results of operations or financial condition.





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.




30





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.





If
We Do Not Successfully Integrate Oxford With PLX, We May Not Achieve Our
Anticipated Synergies And Could Adversely Affect Our Financial
Condition




In
January 2009, we completed the acquisition of Oxford, a provider of reliable,
high-performance silicon and software solutions to interconnect digital systems,
including serial, parallel, USB, FireWire, Ethernet, SATA and
eSATA.  Although as of March 31, 2009, we have not encountered
significant difficulties with the integration of Oxford’s operations, there can
be no assurance that we will not encounter substantial difficulties during the
completion of the integration.  A substantial delay in the integration
of Oxford could result in a delay or failure to achieve the anticipated
synergies, which could adversely impact our results of
operations.  The possible difficulties of combining the operations of
the companies include, but are not limited to:





·
            the
      integration and consolidation of corporate and administrative
      infrastructures, including computer information
  systems;


·
            the
      integration of the sales force and customer
  base;


·
            possible
      inconsistencies in controls, policies and procedures and business
      cultures;


·
            the
      retention of key employees;


·
            the
      possible diversion of management’s attention from ongoing business
      concerns; and


·
            the
      possibility of costs or inefficiencies associated with the integration of
      the operations of the combined
company.




Our
failure to be successful in addressing these risks or other problems encountered
in our past or future acquisitions could cause us to fail to realize the
anticipated benefits of such acquisitions and could have an adverse impact on
our results of operations.





Acquisitions
Could Adversely Affect our Financial Condition and Could Expose Us to
Unanticipated Liabilities




As part
of our business strategy, we expect to continue to review acquisition prospects
that would complement our existing product offerings, improve market coverage or
enhance our technological capabilities.  The Oxford acquisition, as
well as potential future acquisitions, could result in any or all of the
following:





·
            potentially
      dilutive issuances of equity
securities;


·
            large
      acquisition-related write-offs;


·
            potential
      patent and trademark infringement claims against the acquired
      company;


·
            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;


·
            the
      incurrence of additional operating losses and expenses of Oxford or other
      potential companies we may acquire;


·
            possible
      delay or failure to achieve expected
synergies;


·
            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.




31




In
addition, the registration statement on Form S-3 covering 5,600,000 shares of
our common stock, which were issued to Oxford stockholders on January 2, 2009,
when the acquisition was completed enables the holders of the registered shares
to resell those shares in the public market without legal resale restrictions,
if they so choose and subject to market conditions. We expect to file a separate
registration statement on Form S-3 as promptly as practicable to register for
resale the additional 3,400,000 shares that we will issue in satisfaction of the
$14.2 million principal balance of the promissory note we issued to Oxford
stockholders on completion of the acquisition, if our stockholders approve such
share issuance.  We cannot predict the extent, if any, to which the
issuance of the additional shares in connection with the Oxford acquisition
would adversely affect the trading price of our stock, particularly in light of
the current financial, stock market and economic turmoil.




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 85% of our revenues for
the three months ended March 31, 2009.  In 2008 and 2007, sales
outside of the United States accounted for approximately 77% and 71% 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.




We
May Be Required To Record A Significant Charge To Earnings If Our Goodwill Or
Amortizable Intangible Assets Become Impaired





Under
generally accepted accounting principles, we review our amortizable intangible
and long lived assets for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. Goodwill is tested for
impairment annually, during the fourth quarter and between annual tests in
certain circumstances.  Factors that may be considered a change in
circumstances, indicating that the carrying value of our goodwill, amortizable
intangible assets or other long lived assets may not be recoverable, include a
persistent decline in stock price and market capitalization, reduced future cash
flow estimates, and slower growth rates in our industry. We may be required to
record a significant charge in our financial statements during the period in
which any additional impairment of our goodwill, amortizable intangible assets
or other long lived assets is determined, which would adversely impact our
results of operations.





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.




32





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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS




In
September 2002, our Board of Directors authorized the repurchase of up
to 2,000,000 shares of common stock.  In July 2008, our Board of
Directors authorized an additional 2,000,000 shares under the repurchase
program. 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 were repurchased for approximately $1.9 million in
cash in 2002 and 2003. We did not repurchase any additional shares from January
1, 2004 through December 31, 2007. In 2008 we repurchased 956,000 shares for
approximately $6.5 million. We did not repurchase any additional shares during
the three months ended March 31, 2009.





ITEM 6. EXHIBITS




ExhibitNumber
              
              Description31.1
              
              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.
  33




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.








Date: May
8, 2009





By     /s/ Arthur O.
Whipple





Arthur
O. Whipple


Chief
Financial Officer


(Principal Financial Officer and duly
authorized signatory)




34




EXHIBIT
INDEX




ExhibitNumber
                    
                    Description31.1
                    
                    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.
  35