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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, 2003.                                          
|           |  |                                                                                         
|           |  | 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 0-25699                                                          

P L X  T E C H N O L O G Y,  I N C.

(Exact name of Registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or Other Jurisdiction of
Incorporation or Organization) |  | 94-3008334
(I.R.S. Employer Identification No.)

870 Maude Avenue, Sunnyvale, CA 94085
(Address of Principal Executive Offices) (Zip Code)

Registrants Telephone Number, Including Area Code: (408) 774-9060

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 [  ]

As of May 1, 2003, there were
20,822,586 shares of common stock, par value $0.001 per share, outstanding.

This Report on Form 10-Q includes 46 pages with the Index to Exhibits located on page 25





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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM I. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                    
|EXHIBIT INDEX                
|EXHIBIT 11.1                 
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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PLX TECHNOLOGY, INC.
INDEX TO
REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2003

|        |                                                                                       |                                                                                                    |      |  
|------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ---- | -
|        |                                                                                       |                                                                                                    | Page
|        |                                                                                       |                                                                                                    |     
|        | PART I.  FINANCIAL INFORMATION                                                        |                                                                                                    |     
|Item 1. | Financial Statements (Unaudited):                                                     |                                                                                                    |     
|        |                                                                                       | Condensed Consolidated Balance Sheets at March 31, 2003 and
December 31, 2002                      |      | 3
|        |                                                                                       | Condensed Consolidated Statements of Operations for the three
months ended March 31, 2003 and 2002 |      | 4
|        |                                                                                       | Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2003 and 2002 |      | 5
|        |                                                                                       | Notes to Condensed Consolidated Financial Statements                                               |      | 6
|Item 2. | Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                    | 9   
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                    | 21  
|Item 4. | Controls and Procedures                                                               |                                                                                                    | 21  
|        |                                                                                       | PART II. OTHER INFORMATION                                                                         |      |  
|Item 6. | Exhibits and Reports on Form 8-K                                                      |                                                                                                    | 21  

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM I. FINANCIAL STATEMENTS




PLX TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                           |                                               |   |             |        |              |   |        |        |  
|------------------------------------------ | --------------------------------------------- | - | ----------- | ------ | ------------ | - | ------ | ------ | -
|                                           |                                               |   | March 31,   |        | December 31,
|                                           |                                               |   | 2003        |        | 2002 (1)    
|                                           |                                               |   |             |        |             
|                                           |                                               |   | (unaudited) |        |              |   |       
|ASSETS                                     |                                               |   |             |        |              |   |        |       
|Current assets:                            |                                               |   |             |        |              |   |        |       
|                                           | Cash and cash equivalents                     |   | $           | 4,166  |              |   | $      | 5,482  |  
|                                           | Short-term investments                        |   |             | 16,142 |              |   |        | 13,131 |  
|                                           | Accounts receivable, net                      |   |             | 3,320  |              |   |        | 2,568  |  
|                                           | Inventories                                   |   |             | 847    |              |   |        | 1,003  |  
|                                           | Income tax receivable                         |   |             | 3,635  |              |   |        | 3,635  |  
|                                           | Other current assets                          |   |             | 2,197  |              |   |        | 1,793  |  
|                                           |                                               |   |             |        |              |   |        |        |  
|Total current assets                       |                                               |   | 30,307      |        |              |   | 27,612 |       
|                                           | Property and equipment, net                   |   |             | 31,749 |              |   |        | 31,962 |  
|                                           | Long-term investments                         |   |             | 1,002  |              |   |        | 3,067  |  
|                                           | Goodwill                                      |   |             | 8,054  |              |   |        | 8,054  |  
|                                           | Other intangible assets                       |   |             | 837    |              |   |        | 970    |  
|                                           | Other assets                                  |   |             | 277    |              |   |        | 310    |  
|                                           |                                               |   |             |        |              |   |        |        |  
|Total assets                               |                                               | $ | 72,226      |        |              | $ | 71,975 |       
|                                           |                                               |   |             |        |              |   |        |        |  
|LIABILITIES                                |                                               |   |             |        |              |   |        |       
|Current liabilities:                       |                                               |   |             |        |              |   |        |       
|                                           | Accounts payable                              |   | $           | 1,949  |              |   | $      | 1,582  |  
|                                           | Accrued compensation and benefits             |   |             | 1,075  |              |   |        | 932    |  
|                                           | Deferred revenues                             |   |             | 689    |              |   |        | 613    |  
|                                           | Accrued commissions                           |   |             | 208    |              |   |        | 201    |  
|                                           | Other accrued expenses                        |   |             | 689    |              |   |        | 683    |  
|                                           |                                               |   |             |        |              |   |        |        |  
|Total current liabilities                  |                                               |   | 4,610       |        |              |   | 4,011  |       
|STOCKHOLDERS EQUITY                       |                                               |   |             |        |              |   |        |       
|                                           | Common stock, par value                       |   |             | 21     |              |   |        | 21     |  
|                                           | Additional paid-in capital                    |   |             | 74,977 |              |   |        | 74,953 |  
|                                           | Deferred compensation                         |   |             | (443   | )            |   |        | (900   | )
|                                           | Notes receivable for employee stock purchases |   |             | (67    | )            |   |        | (67    | )
|                                           | Accumulated other comprehensive income        |   |             | 33     |              |   |        | 46     |  
|                                           | Accumulated deficit                           |   |             | (6,905 | )            |   |        | (6,089 | )
|                                           |                                               |   |             |        |              |   |        |        |  
|Total stockholders equity                 |                                               |   | 67,616      |        |              |   | 67,964 |       
|                                           |                                               |   |             |        |              |   |        |        |  
|Total liabilities and stockholders equity |                                               | $ | 72,226      |        |              | $ | 71,975 |       
|                                           |                                               |   |             |        |              |   |        |        |  

(1)  The balance sheet at December 31, 2002 has been derived from the audited financial statements as of that date.

See accompanying notes to condensed consolidated financial statements.

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PLX TECHNOLOGY, INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

|                                                           |                                             |   |                    |       |      |   |        |       | 
|---------------------------------------------------------- | ------------------------------------------- | - | ------------------ | ----- | ---- | - | ------ | ----- | 
|                                                           |                                             |   | Three Months Ended
|                                                           |                                             |   | March 31,         
|                                                           |                                             |   |                   
|                                                           |                                             |   | 2003               |       | 2002
|                                                           |                                             |   |                    |       |     
|Net revenues                                               |                                             | $ | 8,503              |       |      | $ | 10,118 |      
|Cost of revenues                                           |                                             |   | 2,515              |       |      |   | 3,361  |      
|                                                           |                                             |   |                    |       |      |   |        |      
|Gross margin                                               |                                             |   | 5,988              |       |      |   | 6,757  |      
|Operating expenses:                                        |                                             |   |                    |       |      |   |        |      
|                                                           | Research and development                    |   |                    | 3,713 |      |   |        | 3,659 | 
|                                                           | Selling, general and administrative         |   |                    | 3,058 |      |   |        | 3,338 | 
|                                                           | Amortization of purchased intangible assets |   |                    | 133   |      |   |        | 133   | 
|                                                           |                                             |   |                    |       |      |   |        |      
|Total operating expenses                                   |                                             |   | 6,904              |       |      |   | 7,130  |      
|Loss from operations                                       |                                             |   | (916               | )     |      |   | (373   | )    
|Interest income and other, net                             |                                             |   | 108                |       |      |   | 231    |      
|                                                           |                                             |   |                    |       |      |   |        |      
|Loss before provision for income taxes                     |                                             |   | (808               | )     |      |   | (142   | )    
|Provision for income taxes                                 |                                             |   | 8                  |       |      |   | 129    |      
|                                                           |                                             |   |                    |       |      |   |        |      
|Net loss                                                   |                                             | $ | (816               | )     |      | $ | (271   | )    
|                                                           |                                             |   |                    |       |      |   |        |      
|Basic and diluted net loss per share                       |                                             | $ | (0.04              | )     |      | $ | (0.01  | )    
|                                                           |                                             |   |                    |       |      |   |        |      
|Shares used to compute basic and diluted
per share amounts |                                             |   | 21,135             |       |      |   | 23,432 |      
|                                                           |                                             |   |                    |       |      |   |        |      

See accompanying notes to condensed consolidated financial statements.

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PLX TECHNOLOGY, INC.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

|                                                                                |                                                   |                                   |        |                    |      |      |        |     |       |  
|------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------- | ------ | ------------------ | ---- | ---- | ------ | --- | ----- | -
|                                                                                |                                                   |                                   |        | Three Months Ended
|                                                                                |                                                   |                                   |        | March 31,         
|                                                                                |                                                   |                                   |        |                   
|                                                                                |                                                   |                                   |        | 2003               |      | 2002
|                                                                                |                                                   |                                   |        |                    |      |     
|Cash flows from operating activities                                            |                                                   |                                   |        |                    |      |      |        |    
|Net loss                                                                        |                                                   | $                                 | (816   | )                  |      | $    | (271   | )  
|Adjustments to reconcile net loss to net cash provided by operating activities: |                                                   |                                   |        |                    |      |      |        |    
|                                                                                | Depreciation                                      |                                   |        | 564                |      |      |        | 639 |      
|                                                                                | Amortization of deferred compensation             |                                   |        | 457                |      |      |        | 652 |      
|                                                                                | Amortization of other purchased intangible assets |                                   |        | 133                |      |      |        | 133 |      
|                                                                                | Other non-cash items                              |                                   |        | 36                 |      |      |        | 23  |      
|                                                                                | Changes in operating assets and liabilities:      |                                   |        |                    |      |      |        |     |      
|                                                                                |                                                   | Accounts receivable               |        |                    | (751 | )    |        |     | (503  | )
|                                                                                |                                                   | Inventories                       |        |                    | 156  |      |        |     | 1,287 |  
|                                                                                |                                                   | Income tax receivable             |        |                    |     |      |        |     | 195   |  
|                                                                                |                                                   | Other current assets              |        |                    | (404 | )    |        |     | (767  | )
|                                                                                |                                                   | Other assets                      |        |                    | 32   |      |        |     | 143   |  
|                                                                                |                                                   | Accounts payable                  |        |                    | 366  |      |        |     | (197  | )
|                                                                                |                                                   | Accrued compensation and benefits |        |                    | 143  |      |        |     | 76    |  
|                                                                                |                                                   | Accrued commissions               |        |                    | 7    |      |        |     | (29   | )
|                                                                                |                                                   | Deferred tax liability            |        |                    |     |      |        |     | 577   |  
|                                                                                |                                                   | Deferred revenues                 |        |                    | 76   |      |        |     | 493   |  
|                                                                                |                                                   | Other accrued expenses            |        |                    | 15   |      |        |     | 41    |  
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Net cash provided by operating activities                                       |                                                   |                                   | 14     |                    |      |      | 2,492  |    
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Investing Activities                                                            |                                                   |                                   |        |                    |      |      |        |    
|Purchases of investments                                                        |                                                   |                                   | (2,000 | )                  |      |      | (6,125 | )  
|Sales and maturities of investments                                             |                                                   |                                   | 1,000  |                    |      |      | 1,000  |    
|Purchases of property and equipment                                             |                                                   |                                   | (349   | )                  |      |      | (358   | )  
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Net cash used in investing activities                                           |                                                   |                                   | (1,349 | )                  |      |      | (5,483 | )  
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Financing Activities                                                            |                                                   |                                   |        |                    |      |      |        |    
|Proceeds from sales of common stock                                             |                                                   |                                   | 24     |                    |      |      | 1,162  |    
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Net cash provided by financing activities                                       |                                                   |                                   | 24     |                    |      |      | 1,162  |    
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Effect of exchange rate fluctuations on cash and cash equivalents               |                                                   |                                   | (5     | )                  |      |      | (1     | )  
|Decrease in cash and cash equivalents                                           |                                                   |                                   | (1,316 | )                  |      |      | (1,830 | )  
|Cash and cash equivalents at beginning of year                                  |                                                   |                                   | 5,482  |                    |      |      | 9,631  |    
|                                                                                |                                                   |                                   |        |                    |      |      |        |    
|Cash and cash equivalents at end of period                                      |                                                   | $                                 | 4,166  |                    |      | $    | 7,801  |    
|                                                                                |                                                   |                                   |        |                    |      |      |        |    

See accompanying notes to condensed consolidated financial statements.

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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 subsidiary (collectively, PLX
or the Company) as of March 31, 2003 and for the three-month periods
ended March 31, 2003 and 2002 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 condensed consolidated financial
statements include all adjustments (consisting only of normal recurring
accruals) that management considers necessary for a fair presentation of
our 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.
|  
|   |  | 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, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | 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 the amounts 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 Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | The Company has adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income. The Companys comprehensive net
loss for the three months ended March 31, 2003 and March 31, 2002 was as
follows (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                      |  |                    |      |      |  |   |      |  
|------------------------------------- |  | ------------------ | ---- | ---- |  | - | ---- | -
|                                      |  | Three Months Ended
|                                      |  | March 31,         
|                                      |  |                   
|                                      |  | 2003               |      | 2002
|                                      |  |                    |      |     
|                                      |  | (unaudited)       
|Net loss                              |  | $                  | (816 | )    |  | $ | (271 | )
|Unrealized losses on investments, net |  |                    | (17  | )    |  |   | (50  | )
|Cumulative translation adjustments    |  |                    | 4    |      |  |   | (2   | )
|                                      |  |                    |      |      |  |   |      |  
|Accumulated other comprehensive loss  |  | $                  | (829 | )    |  | $ | (323 | )
|                                      |  |                    |      |      |  |   |      |  



| |  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). It
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment
to an exit or disposal plan. Statement 146 is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002. Adoption
of this statement did not have a material impact on the Companys financial
position, results of operations or cash flows.

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|   |  | In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the
fair value of an obligation assumed under a guarantee. The recognition
provisions of FIN 45 were effective for any guarantees issued or modified
after December 31, 2002. Adoption of FIN 45 did not have a material impact
on the Companys financial position, results of operations or cash flows.
FIN 45 also requires additional disclosures by a guarantor in its interim
and annual financial statements about the obligations associated with
guarantees issued. As disclosed in the Companys Form 10-K for the year
ended December 31, 2002, the Companys products are warranted to be free
from defect for a period of one year, however, to date, the Company has
experienced an immaterial amount of defective product returns. In
addition, the Company generally indemnifies, under predetermined
conditions, its customers for infringement of third party intellectual
property rights by its products or services.                  
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS 148 amends SFAS 123
Accounting for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148
amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect
of the method used on reported results. The transition guidance and annual
disclosure requirements are effective for fiscal years ending after
December 15, 2002. The Company has adopted the disclosure provisions for
this Form 10-Q (see Note 3 of the Condensed Consolidated Financial
Statements). The Company has continued to account for stock-based
compensation under the provisions of Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees using the intrinsic
value method. Accordingly, the adoption of SFAS 148 did not have a
material effect on our financial position, results of operations, or cash
flows.
|  
|   |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Certain previously reported amounts have been reclassified to conform to
the current year presentation format with no impact on net income. All
financial information has been restated to conform to this presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|2. |  | 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,
|                |  | 2003        |     | 2002        
|                |  |             |     |             
|                |  | (unaudited) |     |              |  |  
|Work in process |  | $           | 235 |              |  | $ | 338   | 
|Finished goods  |  |             | 612 |              |  |   | 665   | 
|                |  |             |     |              |  |   |       | 
|Total           |  | $           | 847 |              |  | $ | 1,003 | 
|                |  |             |     |              |  |   |       | 



|3. |  | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company has elected to follow APB Opinion No. 25 and related
interpretations in accounting for its stock options and grants since the
alternative fair market value accounting provided for under Statement of
Financial Accounting Standards (SFAS) No. 123 requires use of grant
valuation models that were not developed for use in valuing employee stock
options and grants. Under APB Opinion No. 25, if the exercise price of the
Companys stock grants and options equals the fair value of the underlying
stock on the date of grant, no compensation expenses are recognized.

7



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| |  | If compensation cost for the Companys stock-based compensation plans had
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, then the Companys
net loss per share would have been adjusted to the pro forma amounts
indicated below:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                    |  |                    |        |                    |  |   |        |  
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ------------------ |  | - | ------ | -
|                                                                                                    |  | Three Months Ended |        | Three Months Ended
|                                                                                                    |  | March 31, 2003     |        | March 31, 2002    
|                                                                                                    |  |                    |        |                   
|                                                                                                    |  | (unaudited)       
|Net loss as reported                                                                                |  | $                  | (816   | )                  |  | $ | (271   | )
|Add: Stock-based compensation included in reported net loss                                         |  |                    | 457    |                    |  |   | 652    |  
|Deduct: Stock-based compensation cost under SFAS 123                                                |  |                    | (1,846 | )                  |  |   | (2,834 | )
|                                                                                                    |  |                    |        |                    |  |   |        |  
|Pro forma net loss                                                                                  |  | $                  | (2,205 | )                  |  | $ | (2,453 | )
|                                                                                                    |  |                    |        |                    |  |   |        |  
|Pro forma basic and diluted net loss per common share:                                              |  |                    |        |                    |  |   |        |  
|Pro forma shares used in the calculation of pro forma net loss
per common share  basic and diluted |  |                    | 21,135 |                    |  |   | 23,432 |  
|Reported net loss per common share  basic and diluted                                              |  | $                  | (0.04  | )                  |  | $ | (0.01  | )
|                                                                                                    |  |                    |        |                    |  |   |        |  
|Pro forma net loss per common share  basic and diluted                                             |  | $                  | (0.10  | )                  |  | $ | (0.10  | )
|                                                                                                    |  |                    |        |                    |  |   |        |  



| |  | Pro forma information regarding net loss is required by SFAS 123, which
also requires that the information be determined as if the Company had
accounted for grants subsequent to December 31, 1994 under a method
specified by SFAS 123. Options granted were estimated using the
Black-Scholes valuation model. The following weighted average assumptions
were used:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    |  |                    |      |                    |  |  |      |  
|----------------------------------- |  | ------------------ | ---- | ------------------ |  |  | ---- | -
|                                    |  | Three Months Ended |      | Three Months Ended
|                                    |  | March 31, 2003     |      | March 31, 2002    
|                                    |  |                    |      |                   
|Volatility                          |  |                    | 1.00 |                    |  |  | 1.00 |  
|Expected life of options (in years) |  |                    | 4.05 |                    |  |  | 4.05 |  
|Dividend yield                      |  |                    | 0.00 | %                  |  |  | 0.00 | %
|Risk-free interest rate             |  |                    | 2.43 | %                  |  |  | 4.69 | %



|4. |  | Net Loss Per Share                                                                                                           
|-- |  | -----------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The following table sets forth the computation of basic and diluted net
loss per share (in thousands, except per share data):

|                                                              |  |                    |        |      |  |   |        |  
|------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                              |  | Three Months Ended
|                                                              |  | March 31,         
|                                                              |  |                   
|                                                              |  | 2003               |        | 2002
|                                                              |  |                    |        |     
|                                                              |  | (unaudited)       
|Net loss                                                      |  |                    | (816   | )    |  | $ | (271   | )
|                                                              |  |                    |        |      |  |   |        |  
|Shares used in computing basic and
diluted net loss per share |  |                    | 21,135 |      |  |   | 23,432 |  
|                                                              |  |                    |        |      |  |   |        |  
|Net loss per share  basic and diluted                        |  | $                  | (0.04  | )    |  | $ | (0.01  | )
|                                                              |  |                    |        |      |  |   |        |  



|   |  | As the Company incurred a loss for the three-month periods ended March 31,
2003 and 2002, the effect of dilutive securities, totaling 4.0 million and
3.7 million equivalent shares, respectively, have been excluded from the
computation of diluted loss per share, as their impact would be
anti-dilutive.                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Segments of an Enterprise and Related Information                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The Company has one operating segment, the sale of semiconductor devices.
The President 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.

8



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| |  | Revenues by geographic region based on customer location were as follows
(in thousands):
| |  | ----------------------------------------------------------------------------------------

|          |                           |   |                    |       |      |   |        |       | 
|--------- | ------------------------- | - | ------------------ | ----- | ---- | - | ------ | ----- | 
|          |                           |   | Three Months Ended
|          |                           |   | March 31,         
|          |                           |   |                   
|          |                           |   | 2003               |       | 2002
|          |                           |   |                    |       |     
|          |                           |   | (unaudited)       
|Revenues: |                           |   |                    |       |      |   |        |      
|          | North America             |   | $                  | 3,607 |      |   | $      | 4,421 | 
|          | France                    |   |                    | 930   |      |   |        | 1,391 | 
|          | Europe  excluding France |   |                    | 1,147 |      |   |        | 1,491 | 
|          | Asia  excluding Taiwan   |   |                    | 2,096 |      |   |        | 1,892 | 
|          | Taiwan                    |   |                    | 723   |      |   |        | 923   | 
|          |                           |   |                    |       |      |   |        |       | 
|Total     |                           | $ | 8,503              |       |      | $ | 10,118 |      
|          |                           |   |                    |       |      |   |        |       | 



|   |  | For the three months ended March 31, 2003 and 2002, approximately 11% and
14% respectively, of net revenue was derived from sales to one distributor.
No other individual direct customer or distributor represented greater
than 10% of net revenues. Two end customers have historically and continue
to be significant customers each accounting for over 10% of net revenues.
The majority of our sales to these two end customers are sold through both
distributors and contract manufacturers                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|6. |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | There was an $8,000 income tax expense for the three months ended March 31,
2003 on a pretax loss of $0.8 million, compared to a $0.1 million tax
expense on a pretax loss of $0.1 million for the three months ended March
31, 2002. Income tax expense for the three months ended March 31, 2003
relates to miscellaneous state and foreign income taxes currently payable
and also differs from the expected benefit derived by applying the
applicable U.S. federal statutory rate to the loss from operations
primarily due to nondeductible acquisition-related items and an increase in
the valuation allowance for deferred tax assets. The three months ended
March 31, 2002 differs from the expected benefit derived by applying the
applicable U.S. federal statutory rate to the loss from operations
primarily due to nondeductible acquisition-related items.
|  
|7. |  | Subsequent Event                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Under the Companys stock repurchase program approved by the Board of
Directors of the Company on September 30, 2002, approximately 318,000
shares of the Companys common stock has been repurchased at a cost of
approximately $0.9 million since March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         






| |  | 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 include, but are not limited to, (i) fluctuation of our gross
margins under the sub-heading Overview, which is subject to the risk,
among other risks, that there are changes in product and customer mix, the
position of our products in their respective life cycles, and specific
product manufacturing costs; (ii) the length of our sales cycle, under the
sub-heading Overview, which is subject to the risk, among other risks,
that anticipated sales and shipments in any quarter do not occur when
expected; (iii) our anticipated expense levels for amortization of goodwill
and purchased intangible assets and deferred compensation, under the
sub-heading Results of Operations, which is subject to various
uncertainties, among them the impact of statements of financial accounting
standards that we may be required to adopt in the future; and (iv) the
sufficiency of our existing resources and cash generated from operations to
meet our capital requirements under the sub-heading Results of
Operations, which is subject to the risk, among other risks, that a
decrease in our inventory levels, an increase in our level of investment in
new technologies or an increase in the levels of monthly expenses required
to launch new products may require that we raise additional funds. Actual
results could differ materially from those projected in any forward-looking
statements for the reasons detailed above, as well as the reasons noted
under the sub-heading Factors That May Affect Future Operating
Results
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. See Factors That May
Affect Future Operating

9



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| |  | Results below, as well as such other risks and
uncertainties as are detailed in our Securities and Exchange Commission
reports and filings for a discussion of the factors that could cause actual
results to differ materially from 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, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | OVERVIEW                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | PLX was founded in 1986, and since 1994 we have focused on development of
I/O interface semiconductors and related software and development tools
that are used in systems incorporating the PCI standard. In 1994 and 1995,
a significant portion of our revenues were derived from the sale of
semiconductor devices that perform similar functions as our current
products, except they were based on a variety of industry standards. Our
revenues since 1996 have been derived predominantly from the sale of
semiconductor devices based on the PCI standard to a large number of
customers in a variety of applications including networking and
telecommunications, enterprise storage, imaging, industrial and other
embedded applications as well as in related adapter cards. We generate
less than 1% of our revenues from sales of our software and development
tools.
|
| |  | We utilize a fabless semiconductor business model whereby we purchase
packaged and tested semiconductor devices from independent manufacturing
foundries. This approach allows us to focus on defining, developing, and
marketing our products and eliminates the need for us to invest large
amounts of capital in manufacturing facilities and work-in-process
inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | We rely on a combination of direct sales personnel and 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. We generally recognize revenue at the time of
title passage. Recognition of sales to distributors, including
international distributors, is deferred until the product is resold by the
distributors to end users. See Certain Factors That May Affect Future
Operating Results  A Large Portion of Our Revenues Is Derived From Sales
to Third-Party Distributors Who May Terminate Their Relationships with Us
at Any Time.                                                                                                                              
|
| |  | Our gross margins have fluctuated in the past and are expected to fluctuate
in the future due to changes in product and customer mix, write-downs and
recoveries of excess or obsolete inventory, the position of our products in
their respective life cycles, and specific product manufacturing costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The time period between initial customer evaluation and design completion
can range from six to twelve months or more. Furthermore, there is
typically an additional six to twelve month or greater period after design
completion before a customer commences volume production of equipment
incorporating our products. Due to these lengthy sales cycles, 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.                                                                         
|
| |  | The supply of semiconductors can quickly and unexpectedly match or exceed
demand because customer end demand can change very quickly and
semiconductor suppliers can rapidly increase production output. This can
lead to a sudden oversupply situation and a subsequent reduction in order
rates and revenues as customers adjust their inventories to true demand
rates. Customers continuously adjust their inventories resulting in
frequent changes in demand for our products.                                                                                                                                                                                                                                                                                                                                                                                               

10



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| |  | The semiconductor industry experienced such a change in the supply and
demand situation over the past three years. During this period, customers
in the high-speed communications end market, and the contract manufacturing
firms that serve this market, adjusted their demand on component suppliers
as they coped with high levels of inventory and sharply reduced demand for
their end products. In addition, the slowing of global economic growth
during 2001 and 2002 led to lower order rates from customers serving the
telecommunications, industrial and computer end markets as they adjusted to
lower demand for their products. The decline in order rates resulted in a
sequential decline in our revenues for the three months ended March 31,
2002 and 2003. The rapid build-up of semiconductor inventories in global
sales channels resulted in reduced lead times for components during this
same period relative to previous years. The perceived overabundance of
semiconductors combined with uncertain demand for their end products led
our customers to move to a just-in-time order pattern as they worked to
reduce inventories. Due to the combination of excess supply, reduced demand
and lower lead times, orders rates declined during for the three months
ended March 31, 2002 and 2003. Customers appear to be placing orders on an
as needed basis due to short supplier lead times combined with the
uncertain macroeconomic outlook. The low backlog and uncertainty of
customer demand significantly limits our ability to predict future levels
of sales and profitability.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Our long-term success will depend on our ability to introduce new products.
While new products typically generate little or no revenues during the
first twelve months following their introduction, our revenues in
subsequent periods depend upon these new products. Due to the lengthy
sales cycle and additional time for customers to commence 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 Certain Factors That May Affect Future Operating Results  Our
Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our
Expected Revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | RESULTS OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The following table summarizes historical results of operations as a
percentage of net revenues for the periods shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                               |                                             |                          |       |                    |      |      |       |      |      | 
|------------------------------ | ------------------------------------------- | ------------------------ | ----- | ------------------ | ---- | ---- | ----- | ---- | ---- | 
|                               |                                             |                          |       | Three Months Ended
|                               |                                             |                          |       | March 31,         
|                               |                                             |                          |       |                   
|                               |                                             |                          |       | 2003               |      | 2002
|                               |                                             |                          |       |                    |      |     
|Net revenues                   |                                             |                          | 100.0 | %                  |      |      | 100.0 | %   
|Cost of revenues               |                                             |                          | 29.6  |                    |      |      | 33.2  |     
|                               |                                             |                          |       |                    |      |      |       |     
|Gross margin                   |                                             |                          | 70.4  |                    |      |      | 66.8  |     
|Operating expenses:            |                                             |                          |       |                    |      |      |       |     
|                               | Research and development                    |                          |       | 43.7               |      |      |       | 36.2 |     
|                               | Selling, general and administrative         |                          |       | 36.0               |      |      |       | 33.0 |     
|                               | Amortization of purchased intangible assets |                          |       | 1.6                |      |      |       | 1.3  |     
|                               |                                             |                          |       |                    |      |      |       |     
|                               |                                             | Total operating expenses |       |                    | 81.3 |      |       |      | 70.5 | 
|                               |                                             |                          |       |                    |      |      |       |     
|Operating loss                 |                                             |                          | (10.9 | )                  |      |      | (3.7  | )   
|Interest income and other, net |                                             |                          | 1.3   |                    |      |      | 2.3   |     
|                               |                                             |                          |       |                    |      |      |       |     
|Loss before income taxes       |                                             |                          | (9.6  | )                  |      |      | (1.4  | )   
|Provision for income taxes     |                                             |                          | 0.1   |                    |      |      | 1.3   |     
|                               |                                             |                          |       |                    |      |      |       |     
|Net loss                       |                                             |                          | (9.7  | )%                 |      |      | (2.7  | )%  
|                               |                                             |                          |       |                    |      |      |       |     



| |  | Net Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Net revenues consist of product revenues generated principally by sales of
our semiconductor devices. Net revenues for the three months ended March
31, 2003 were $8.5 million, a decrease of 16.0% from $10.1 million for the
three months ended March 31, 2002. The decrease was primarily due to
reduced demand from a significant customer, Prediwave, as well as lower
overall unit shipments during the three months ended March 31, 2003.
Prediwave used our product in their set top boxes targeted for sale in
China. We completed our last shipment to Prediwave in the first quarter of
2002. In the first quarter of 2002, Prediwave accounted for approximately
$1 million of our net revenues. Excluding sales to Prediwave in the first
quarter of 2002, revenues decreased to $8.5 million for the three months
ended March 31, 2003 from $9.1 million for the three months ended March 31,
2002. For the three months ended March 31, 2003
and 2002, 11% and 14%, respectively, of net revenues was derived from sales
to one significant distributor. No other individual direct customer or
distributor represented greater than 10% of net revenues.

11



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| |  | Gross Margin                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Gross margin represents net revenues less the cost of revenues. Cost of
revenues includes the cost of purchasing packaged semiconductor devices
from our independent foundries and our operating costs associated with the
procurement, storage, and shipment of products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The increase in gross margin to 70.4% for the three months ended March 31,
2003 from 66.8% for the same period in 2002 was primarily related to a
benefit of approximately $0.2 million from selling previously written-down
inventory. Excluding this benefit, gross margin was 68.0% for the three
months ended March 31, 2003, compared with 66.8% for the same period in
2002. The increase in gross margin was due to shifts in our product and
customer mix.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Research and Development Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Research and development (R&D) expenses consist primarily of salaries and
related costs of employees engaged in research, design, and development
activities. In addition, expenses for outside engineering consultants and
non-recurring engineering at our independent foundries and deferred
compensation are included in research and development expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The increase in R&D as a percent of net revenues to 43.7% for the three
months ended March 31, 2003, as compared to 36.2% for the same period in
2002 was due primarily to a decline in revenues. In absolute dollars, R&D
expenses remained approximately the same at $3.7 million for the three
months ended March 31, 2003 and 2002. Excluding deferred compensation of
$0.5 million and $0.7 million for the three months ended March 31, 2003 and
2002, R&D increased by $0.3 million to $3.3 million for the three months
ended March 31, 2003 from $3.0 million for the same period in 2002. The
increase in R&D was due to the development of new products and the
enhancement of existing products.                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Selling, General and Administrative Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Selling, general and administrative (SG&A) expenses consist primarily of
employee-related expenses, professional fees, trade show and other
promotional expenses, and sales commissions to manufacturers
representatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The increase in SG&A as a percent of net revenues to 36.0% for the three
months ended March 31, 2003, as compared to 33.0% for the same period in
2002 was due primarily to a decline in revenues. In absolute dollars, SG&A
expenses decreased by $0.3 million or 8.4% to $3.1 million for the three
months ended March 31, 2003 from $3.3 million for the same period in 2002.
The decrease was primarily due to decreases in sales commissions to
manufacturers representatives as a result of lower revenues, decreases in
discretionary spending and lower headcount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Amortization of Purchased Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Amortization of purchased intangible assets remained approximately the same
at $0.1 million for the three months ended March 31, 2003 and 2002. We
will continue to amortize these intangibles through May 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Deferred Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | We recorded deferred compensation of $12.3 million related to stock options
granted below fair market value to employees in relation to the acquisition
of Sebring Systems in May 2000. Additionally, we recorded deferred
compensation of $3.5 million in connection with the grant of stock options
below fair market value to our employees in September 2000. The amount of
deferred compensation is presented as a reduction of stockholders equity
and amortized ratably over the vesting period of the applicable stock
grants. Amortization of deferred compensation recorded for the three
months ended March 31, 2003 and 2002, was $0.5 million and $0.7 million,
respectively. The $0.2 million decrease in deferred compensation is due to
the termination of employment of employees who had received the underlying
stock options. Substantially all of these amounts are included in research
and development expenses. We expect to record compensation expenses
related to deferred compensation of approximately $0.5 million through
September 30, 2003.
|
| |  | Interest Income and Other, Net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Interest income reflects interest earned on average cash, cash equivalents
and short-term and long-term investment balances. In absolute dollars,
interest income and other decreased by $0.1 million or 53.2% to $0.1
million for the three months ended March 31, 2003 from $0.2 million for the
same period in 2002. The decrease for the three months ended March 31, 2003
compared to March 31, 2002 was due primarily to lower rental income as a
result of the loss of a subtenant from our office facilities and lower
interest earned on the decrease in interest rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Provision for Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | There was an $8,000 income tax expense for the three months ended March 31,
2003 on a pretax loss of $0.8 million, compared to a $0.1 million tax expense
on a pretax loss of $0.1 million for the three months ended March 31, 2002.
Income tax expense for the three months ended March 31, 2003 relates to
miscellaneous state and foreign income taxes currently payable and also differs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

12



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from the expected benefit derived by applying the applicable U.S. federal
statutory rate to the loss from operations primarily due to nondeductible
acquisition-related items and an increase in the valuation allowance for
deferred tax assets. . The three months ended March 31, 2002 differs from
the expected benefit derived by applying the applicable U.S. federal
statutory rate to the loss from operations primarily due to nondeductible
acquisition-related items.

Liquidity and Capital Resources

Cash and cash equivalents and short and long-term investments were $21.3
million at March 31, 2003, a decrease of $0.4 million from $21.7 million at
December 31, 2002. The decrease was primarily due to the following: (1) a
net loss of $0.8 million adjusted for non-cash expenses of $1.2 million, (2)
an increase in accounts receivable and other current assets of $0.8 million
and $0.4 million, respectively, and (3) capital expenditures totaling $0.3
million. Such decreases were partially offset by decreases in inventories
of $0.2 million and increases in accounts payable and accrued compensation
of $0.4 million and $0.1 million, respectively.

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 consolidated financial statements and
accompanying notes. The 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.

Inventory Write-downs. We evaluate the write-downs for inventory based on a
combination of factors. Based on the life of the product, sales history,
obsolescence, and sales forecast, we record write-downs ranging from 0% to
100%. Any adverse changes to our future product demand may result in
increased write-downs, resulting in decreased gross margin. In addition,
future sales on any of our previously written down inventory may result in
increased gross margin.

Allowance for Doubtful Accounts. We evaluate the collectibility of our
accounts receivable based on length of time the receivables are past due. We
record reserves for bad debts against amounts due to reduce the net
recognized receivable to the amount we reasonably believe will be collected.
We have certain customers with individually large amounts due at any given
balance sheet date. Any unanticipated change in one of those customers
credit worthiness or other matters affecting the collectibility of amounts
due from such customers could have a material affect on our results of
operations in the period in which such changes or events occur.

Goodwill. We adopted Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible Assets on January 1, 2002. This standard
requires that goodwill and intangible assets deemed to have indefinite lives
are no longer amortized, but rather are reviewed for impairment annually, or
more frequently if certain indicators arise. Although at March 31, 2003, no
impairment of goodwill has been recognized, it is reasonably possible that
assumptions upon which the recoverability of goodwill were based could
differ in the future. In that event, impairment charges could be required.

Taxes. We account for income taxes using the 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, 2003, we carried a
valuation allowance for the entire deferred tax asset as a

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result of
uncertainties regarding the realization of the asset balance. 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.

CERTAIN 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.

Our Operating Results May Fluctuate Significantly Due To Factors Which Are
Not Within Our Control

Our quarterly operating results have fluctuated significantly in the past
and are expected to fluctuate significantly in the future based on a number
of factors, many of which are not under our control. Our operating
expenses, which include product development costs and selling, general and
administrative expenses, are relatively fixed in the short-term. If our
revenues are lower than we expect because we sell fewer semiconductor
devices, delay the release of new products or the announcement of new
features, or for other reasons, we may not be able to quickly reduce our
spending in response.

Other circumstances that can affect our operating results include:



| |  | the timing of significant orders, order cancellations and reschedulings,                                                                     
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the loss of a significant customer(s),                                                                                                       
| 
| |  | our significant customers could lose market share that may affect our business,                                                              
| 
| |  | general economic conditions,                                                                                                                 
| 
| |  | our ability to develop, introduce and market new products and technologies on a timely basis,                                                
| 
| |  | changes in our pricing policies or those of our competitors or
suppliers, including decreases in unit average selling prices of our
products,
| 
| |  | introduction of products and technologies by our competitors,                                                                                
| 
| |  | shifts in our product mix toward lower margin products,                                                                                      
| 
| |  | the availability of production capacity at the fabrication facilities that manufacture our products,                                         
| 
| |  | the availability and cost of materials to our suppliers, 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.

Our Results Of Operations Have Been Adversely Affected By The Ongoing
Slowdown In The Global Economy

Over the past year, the global economy has been experiencing a slowdown due
to many factors, including decreased consumer confidence, unemployment, the
ongoing threat and cost of terrorism and reduced corporate profits and
capital spending. As a result of these unfavorable economic conditions, we
continue to experience reduced customer order rates. If these economic
conditions in the United States continue or worsen or if a wider or global
economic slowdown occurs, our business, financial condition and results of
operations may be materially and adversely affected.

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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 sales in any particular period. 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.

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.

Rapid Technological Change Could Make Our Products Obsolete

We operate in an industry that is subject to evolving industry standards,
rapid technological changes, rapid changes in customer demands and the rapid
introduction of new, higher performance products with shorter product life
cycles. As a result, we expect to continue to make significant investments
in research and development. However, we may not have adequate funds from
operations or otherwise to devote to research and development, forcing us to
reduce our research and development efforts. Also, we must manage product
transitions successfully, since announcements or introductions of new
products by us or our competitors could adversely affect sales of our
existing products because these existing products can become obsolete or
unmarketable for specific purposes. There can be no assurance that we will
be able to develop and introduce new products or enhancements to our
existing products on a timely basis or in a manner which satisfies customer
needs or achieves widespread market acceptance. Any significant delay in
releasing new products could adversely affect our reputation, give a
competitor a first-to-market advantage or allow a competitor to achieve
greater market share. The failure to adjust to rapid technological change
could harm our business, financial condition, results of operations and cash
flows.

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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
existing manufacturing processes and products, perceived advantages over
competing products and the level of customer service available to support
such products. Moreover, manufacturers often rely on a limited number of
equipment vendors to meet their manufacturing equipment needs. As a result,
market acceptance of our products may be adversely affected to the extent
potential customers utilize a competitors manufacturing equipment. 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.

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 note 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 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 that can produce semiconductors which meet our
needs. However, as the semiconductor industry continues to progress towards
smaller manufacturing and design geometries, the complexities of producing
semiconductors will increase. Decreasing geometries may introduce new
problems and delays that may affect product development and deliveries. Due
to the nature of the semiconductor industry and our status as a fabless
semiconductor company, we could encounter fabrication-related problems that
may affect the availability of our semiconductor devices, delay our
shipments or may increase our costs.

None of our semiconductor devices are currently manufactured by more than
one supplier. We place our orders on a purchase order basis and do not have
a long term purchase agreement with any of our existing suppliers. In the
event that the supplier of a semiconductor device was unable or unwilling to
continue to manufacture this product in the required volume, we would have
to identify and qualify a substitute supplier. Introducing new products or
transferring existing products to a new third party manufacturer or process
may result in unforeseen device specification and operating problems. These
problems may affect product shipments and may be costly to correct. Silicon
fabrication capacity may also change, or the costs per silicon wafer may
increase. Manufacturing-related problems may have a material adverse effect
on our business.

Further, the spread of the Severe Acute Respiratory Syndrome (SARS) virus
and the extent of local preventive measures could affect the production
capabilities of our manufacturers, all of which are located in Asia. If
this or any factor hinders our ability to obtain products from our
manufacturers in a timely basis, there could be significant disruption in
our business.

Intense Competition In The Markets In Which We Operate May Reduce The Demand
For Or Prices Of Our Products

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Competition in the semiconductor industry is intense. If our main target
market, the embedded 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. Also, as we start to sell our processor products, we
will compete with established embedded microprocessor companies and others.
Many of these indirect competitors and microprocessor companies have
significantly greater financial, technical, marketing and other resources
than PLX. 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 
Competition, and   Products in Part I of Item I of our Form 10-K for
the year ended December 31, 2002.

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
embedded systems or to develop sufficient new products to replace products
that have become obsolete, our business would be materially adversely
affected.

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 embedded systems markets including
networking and telecommunications, enterprise storage, imaging and
industrial applications. The size and rate of growth of these embedded
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 embedded systems may not grow.

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.

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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.

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. In
the three months ended March 31, 2003 and 2002, net revenues through
distributors accounted for approximately 52% and 54%, 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

Substantially all of our revenues are derived from sales of products, which
rely on the PCI standard. If the embedded systems markets move away from
this standard 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, the PCI

standard is continuously evolving, and we may not be able to modify our
products to address new PCI specifications. Any of these events would have
a material adverse effect on our business.

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 embedded 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.

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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 thereunder may not provide competitive
advantages to us. In addition, our future patent applications may not be
issued with the scope of the claims sought by us, if at all. Furthermore,
others may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents owned or
licensed by us. In addition, effective patent, trademark, copyright and
trade secret protection may be unavailable or limited in foreign countries
where we may need protection. We cannot be sure that steps taken by us to
protect our technology will prevent misappropriation of the technology.

We may from time to time receive notifications of claims that we may be
infringing patents or other intellectual property rights owned by third
parties. While there is currently no intellectual property litigation
pending against us, litigation could result in significant expenses to us
and adversely affect sales of the challenged product or technology. This
litigation could also divert the efforts of our technical and management
personnel, whether or not the litigation is determined in our favor. In
addition, we may not be able to develop or acquire non-infringing technology
or procure licenses to the infringing technology under reasonable terms.
This could require expenditures by us of substantial time and other
resources. Any of these developments would have a material adverse effect
on our business.

The Cyclical Nature Of The Semiconductor Industry May Lead To Significant
Variances In The Demand For Our Products

In the last few years, the semiconductor industry has been characterized by
significant downturns and wide fluctuations in supply and demand. Also,
during this time, the industry has experienced significant fluctuations in
anticipation of changes in general economic conditions. This cyclicality
has led to significant variances in product demand and production capacity.
It has also accelerated erosion of average selling prices per unit. We may
experience periodic fluctuations in our future financial results because of
industry-wide conditions.

Because We Sell Our Products To Customers Outside Of North America And
Because Our Products Are Incorporated With Products Of Others That Are Sold
Outside Of North America We Face Foreign Business, Political And Economic
Risks

Sales outside of North America accounted for 58% of our revenues for the
three months ended March 31, 2003. In 2002, 2001 and 2000, sales outside of
North America accounted for 58%, 44% and 39% of our revenues, respectively.
Sales outside of North America 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 North America, thereby exposing us indirectly
to foreign risks. Further, most of our semiconductor products are
manufactured outside of North America. 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,                

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| |  | 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.

Our Potential Future Acquisitions May Not Be Successful Because Of Our
Limited Experience With Acquisitions In The Past

There have been a significant number of mergers and acquisitions in the
semiconductor industry in the past. As part of our business strategy, we
expect to review acquisition prospects that would complement our existing
product offerings, improve market coverage or enhance our technological
capabilities. Future acquisitions could result in any or all of the
following:



| |  | potentially dilutive issuances of equity securities,                                                                                    
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | large one-time write-offs,                                                                                                              
| 
| |  | the incurrence of debt and contingent liabilities or amortization
expenses related to goodwill and other intangible assets,             
| 
| |  | difficulties in the assimilation of operations, personnel,
technologies, products and the information systems of the acquired
companies,
| 
| |  | diversion of managements attention from other business concerns,                                                                       
| 
| |  | risks of entering geographic and business markets in which we have no or limited prior experience, and                                  
| 
| |  | potential loss of key employees of acquired organizations.                                                                              

We have had limited experience with acquisitions in the past and may not be
able to successfully integrate any businesses, products, technologies or
personnel that may be acquired in the future. Our failure to do so could
have a material adverse effect on our business.

Our Principal Stockholders Have Significant Voting Power And May Take
Actions That May Not Be In The Best Interests Of Our Other Stockholders

Our executive officers, directors and other principal stockholders, in the
aggregate, beneficially own a substantial amount of our outstanding common
stock. Although these stockholders do not have majority control, they
currently have, and likely will continue to have, significant influence with
respect to the election of our directors and approval or disapproval of our
significant corporate actions. This influence over our affairs might be
adverse to the interests of other stockholders. In addition, the voting
power of these stockholders could have the effect of delaying or preventing
a change in control of PLX.

The Anti-Takeover Provisions In Our Certificate of Incorporation Could
Adversely Affect The Rights Of The Holders Of Our Common Stock

Anti-takeover provisions of Delaware law and our Certificate of
Incorporation may make a change in control of PLX more difficult, even if a
change in control would be beneficial to the stockholders. These provisions
may allow the Board of Directors to prevent changes in the management and
control of PLX.

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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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have an investment portfolio of fixed income securities, including those
classified as cash equivalents, of approximately $20.0 million at March 31,
2003. 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 $0.1 million decrease (less than 1%) in the fair
value of our available-for-sale securities.




ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Within the 90 days prior to the filing of this report, we carried out an
evaluation, under the supervision and with the participation of our
President and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures. Based on this
evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in this report on Form 10-Q.

(b)  Changes in internal controls.

There have been no significant changes in our internal controls or in other

factors which could significantly affect internal controls subsequent to our
most recent evaluation of our internal controls.




PART II. OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------

|        |  |                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                     
|Number  |  | Description                                                                                                                                                                         
|        |  |                                                                                                                                                                                     
|2.1(1)  |  | Agreement and Plan of Merger dated April 19, 2000 by and
among PLX Technology, Inc., OKW Technology Acquisition
Corporation and Sebring Systems, Inc.                               
|        |  |                                                                                                                                                                                     
|11.1*   |  | Sebring Systems, Inc. 1997 Stock Option/Stock Issuance Plan.                                                                                                                        
|        |  |                                                                                                                                                                                     
|99.1    |  | Certification of President Pursuant to Section 1350, Chapter
63 of Title 18, United States Code, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.              
|        |  |                                                                                                                                                                                     
|99.2    |  | Certification of Chief Financial Officer Pursuant to Section
1350, Chapter 63 of Title 18, United States Code, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



---

|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------



|(1) |  | Incorporated by reference to
Exhibit 2.1 to Form 8-K as filed on June 2, 2000.
|--- |  | ------------------------------------------------------------------------------



|(b) |  | Reports on Form 8-K. No reports on Form 8-K have been filed
during the quarter for which this report is filed.
|--- |  | --------------------------------------------------------------------------------------------------------------

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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 2, 2003 |  | By                   | /s/ | Rafael Torres                                                                                                        
|                  |  |                      |     |                                                                                                                      
|                  |  |                      |     | Rafael Torres
Vice President, Finance and
Chief Financial Officer(Authorized Officer and
Principal Financial Officer) | 

22



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##### Table of Contents



PLX TECHNOLOGY, INC.

CERTIFICATION

I, Michael J. Salameh, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of PLX Technology,
Inc.;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 2, 2003

|    |  |                                                     
|--- |  | ----------------------------------------------------
|By: |  | /s/ Michael J. Salameh

Michael J. Salameh
President

23



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##### Table of Contents



PLX TECHNOLOGY, INC.

CERTIFICATION

I, Rafael Torres, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of PLX Technology,
Inc.;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 2, 2003

|    |  |                                                        
|--- |  | -------------------------------------------------------
|By: |  | /s/ Rafael Torres
Rafael Torres
Chief Financial Officer

24



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                     
|Number  |  | Description                                                                                                                                                                         
|        |  |                                                                                                                                                                                     
|2.1(1)  |  | Agreement and Plan of Merger dated April 19, 2000 by and
among PLX Technology, Inc., OKW Technology Acquisition
Corporation and Sebring Systems, Inc.                               
|        |  |                                                                                                                                                                                     
|11.1*   |  | Sebring Systems, Inc. 1997 Stock Option/Stock Issuance Plan.                                                                                                                        
|        |  |                                                                                                                                                                                     
|99.1    |  | Certification of President Pursuant to Section 1350, Chapter
63 of Title 18, United States Code, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.              
|        |  |                                                                                                                                                                                     
|99.2    |  | Certification of Chief Financial Officer Pursuant to Section
1350, Chapter 63 of Title 18, United States Code, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



---

|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------



|(1) |  | Incorporated by reference to
Exhibit 2.1 to Form 8-K as filed on June 2, 2000.
|--- |  | ------------------------------------------------------------------------------