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, 2010.




OR




[   ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO _____________




Commission file number
000-25699











PLX Technology, Inc.




(Exact
name of Registrant as Specified in its Charter)




Delaware
              94-3008334(State
      or Other Jurisdiction of Incorporation or
    Organization)
              (I.R.S.
      Employer Identification Number)


870 W. Maude Avenue


Sunnyvale, California  94085


(408) 774-9060




(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes[X] No[  ]


Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes[  ]  No[  ]
 Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a small reporting company. See
definition of “large accelerated filer”, "accelerated filer" and "small
reporting company" in Rule 12b-2 of the Exchange Act (Check One):
 Large
accelerated filer [  ] Accelerated
filer [X] Non-accelerated
filer [  ] Small Reporting
Company [  ]
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes [  ]    No
[X]
  As
of March
31, 2010 there
were 37,042,343 shares of common
stock, par value $0.001 per share,
outstanding.
 
 PLX
TECHNOLOGY, INC.
 INDEX
TO
 REPORT
ON FORM 10-Q
 FOR
QUARTER ENDED MARCH 31, 2010
 
 PART
      I. FINANCIAL INFORMATION
                  PageItem
      1.
                  Financial
      Statements (Unaudited)Condensed
      Consolidated Balance Sheets at March 31, 2010 and December 31,
      2009
                  3Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2010 and 2009
                  4Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2010 and 2009
                  5Notes
      to Condensed Consolidated Financial Statements
                  6Item
      2.
                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  16Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  24Item
      4.
                  Controls
      and Procedures
                  24PART
      II. OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  25Item
      1A.
                  Risk
      Factors
                  25Item
      6.
                  Exhibits
                  32Signature
                  33
  2
 PART
I.   FINANCIAL INFORMATION
 
 ITEM
1.    FINANCIAL STATEMENTS
 
 
 PLX
TECHNOLOGY, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (in
thousands)
  March
      31,
                  
                  
                  December
      31,2010
                  
                  
                  2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  11,943
                  
                  
                  $
                  11,299Short-term
      marketable securities
                  
                  
                  24,957
                  
                  
                  
                  27,060Accounts
      receivable, net
                  
                  
                  9,575
                  
                  
                  
                  9,167Inventories
                  
                  
                  10,896
                  
                  
                  
                  9,628Other
      current assets
                  
                  
                  3,607
                  
                  
                  
                  3,712Total
      current assets
                  
                  
                  60,978
                  
                  
                  
                  60,866Property
      and equipment, net
                  
                  
                  10,830
                  
                  
                  
                  10,856Goodwill
                  
                  
                  1,367
                  
                  
                  
                  1,367Other
      acquired intangible assets
                  
                  
                  4,992
                  
                  
                  
                  5,640Long-term
      marketable securities
                  
                  
                  5,002
                  
                  
                  
                  1,656Other
      assets
                  
                  
                  3,056
                  
                  
                  
                  3,635Total
      assets
                  
                  $
                  86,225
                  
                  
                  $
                  84,020LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                  
                  $
                  7,243
                  
                  
                  $
                  6,489Accrued
      compensation and benefits
                  
                  
                  1,651
                  
                  
                  
                  1,261Accrued
      commissions
                  
                  
                  525
                  
                  
                  
                  740Short
      term capital lease obligation
                  
                  
                  925
                  
                  
                  
                  776Other
      accrued expenses
                  
                  
                  1,307
                  
                  
                  
                  1,657Total
      current liabilities
                  
                  
                  11,651
                  
                  
                  
                  10,923Long
      term capital lease obligation
                  
                  
                  767
                  
                  
                  
                  1,098Total
      liabilities
                  
                  
                  12,418
                  
                  
                  
                  12,021Stockholders'
      Equity:Common
      stock, par value
                  
                  
                  37
                  
                  
                  
                  37Additional
      paid-in capital
                  
                  
                  154,270
                  
                  
                  
                  153,939Accumulated
      other comprehensive loss
                  
                  
                  (116
                  )
                  
                  
                  (87
                  )Accumulated
      deficit
                  
                  
                  (80,384
                  )
                  
                  
                  (81,890
                  )Total
      stockholders' equity
                  
                  
                  73,807
                  
                  
                  
                  71,999Total
      liabilities and stockholders' equity
                  
                  $
                  86,225
                  
                  
                  $
                  84,020
  See
accompanying notes to condensed consolidated financial statements.
  3
 
 PLX
TECHNOLOGY, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 (in
thousands, except per share amounts)
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Net
      revenues
                  
                  $
                  28,819
                  
                  
                  $
                  16,457Cost
      of revenues
                  
                  
                  12,471
                  
                  
                  
                  7,511Gross
      margin
                  
                  
                  16,348
                  
                  
                  
                  8,946Operating
      expenses:Research
      and development
                  
                  
                  7,553
                  
                  
                  
                  7,903Selling,
      general and administrative
                  
                  
                  6,463
                  
                  
                  
                  6,895Acquisition
      and restructuring related costs
                  
                  
                  -
                  
                  
                  
                  2,630Amortization
      of acquired intangible assets
                  
                  
                  648
                  
                  
                  
                  854Total
      operating expenses
                  
                  
                  14,664
                  
                  
                  
                  18,282Income
      (loss) from operations
                  
                  
                  1,684
                  
                  
                  
                  (9,336
                  )Interest
      income and other, net
                  
                  
                  61
                  
                  
                  
                  48Loss
      on fair value remeasurement
                  
                  
                  -
                  
                  
                  
                  (1,190
                  )Income
      (loss) before provision for income taxes
                  
                  
                  1,745
                  
                  
                  
                  (10,478
                  )Provision
      for income taxes
                  
                  
                  239
                  
                  
                  
                  19Net
      income (loss)
                  
                  $
                  1,506
                  
                  
                  $
                  (10,497
                  )Basic
      net income (loss) per share
                  
                  $
                  0.04
                  
                  
                  $
                  (0.31
                  )Shares
      used to compute basic per share amounts
                  
                  
                  37,025
                  
                  
                  
                  33,604Diluted
      net income (loss) per share
                  
                  $
                  0.04
                  
                  
                  $
                  (0.31
                  )Shares
      used to compute diluted per share amounts
                  
                  
                  37,816
                  
                  
                  
                  33,604
 See
accompanying notes to condensed consolidated financial statements.
  4
  PLX
TECHNOLOGY, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (in
thousands)
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      income (loss)
                  
                  $
                  1,506
                  
                  
                  $
                  (10,497
                  )Adjustments
      to reconcile net income (loss) to net cash flows provided by (used in)
      operating activities,net
      of assets acquired and liabilities assumed:Depreciation
      and amortization
                  
                  
                  813
                  
                  
                  
                  798Share-based
      compensation expense
                  
                  
                  253
                  
                  
                  
                  211Amortization
      of acquired intangible assets
                  
                  
                  648
                  
                  
                  
                  854Write-downs
      of inventories
                  
                  
                  113
                  
                  
                  
                  86Fair
      value remeasurement of note payable
                  
                  
                  -
                  
                  
                  
                  1,190Other
      non-cash items
                  
                  
                  54
                  
                  
                  
                  19Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (408
                  )
                  
                  
                  (429
                  )Inventories
                  
                  
                  (1,381
                  )
                  
                  
                  2,932Other
      current assets
                  
                  
                  105
                  
                  
                  
                  182Other
      assets
                  
                  
                  301
                  
                  
                  
                  (987
                  )Accounts
      payable
                  
                  
                  754
                  
                  
                  
                  (1,909
                  )Accrued
      compensation and benefits
                  
                  
                  390
                  
                  
                  
                  (1,297
                  )Other
      accrued expenses
                  
                  
                  (565
                  )
                  
                  
                  (538
                  )Net
      cash provided by (used in) operating activities
                  
                  
                  2,583
                  
                  
                  
                  (9,385
                  )Cash
      flows from investing activities:Cash
      acquired in Oxford acquisition
                  
                  
                  -
                  
                  
                  
                  4,392Purchases
      of marketable securities
                  
                  
                  (10,753
                  )
                  
                  
                  (9,292
                  )Sales
      and maturities of marketable securities
                  
                  
                  9,436
                  
                  
                  
                  15,300Purchase
      of property and equipment
                  
                  
                  (509
                  )
                  
                  
                  (300
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  (1,826
                  )
                  
                  
                  10,100Cash
      flows from financing activities:Proceeds
      from exercise of common stock options
                  
                  
                  78
                  
                  
                  
                  -Principal
      payments on capital lease obligations
                  
                  
                  (182
                  )
                  
                  
                  (125
                  )Net
      cash (used in) financing activities
                  
                  
                  (104
                  )
                  
                  
                  (125
                  )Effect
      of exchange rate fluctuations on cash and cash equivalents
                  
                  
                  (9
                  )
                  
                  
                  (12
                  )Net
      increase in cash and cash equivalents
                  
                  
                  644
                  
                  
                  
                  578Cash
      and cash equivalents at beginning of period
                  
                  
                  11,299
                  
                  
                  
                  6,865Cash
      and cash equivalents at end of period
                  
                  $
                  11,943
                  
                  
                  $
                  7,443Supplemental
      disclosure of cash flow  information:Cash
      paid for income taxes
                  
                  $
                  7
                  
                  
                  $
                  47Cash
      paid for interest
                  
                  $
                  18
                  
                  
                  $
                  25Common
      stock issued in connection with acquisition
                  
                  $
                  -
                  
                  
                  $
                  10,192Convertible
      note issued in connection with acquisition
                  
                  $
                  -
                  
                  
                  $
                  6,188
 See
accompanying notes to condensed consolidated financial statements.
  5
 
 PLX TECHNOLOGY, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
  1.  Basis
of Presentation
  The
accompanying unaudited condensed consolidated financial statements of PLX
Technology, Inc. and its wholly-owned subsidiaries (collectively, “PLX” or the
“Company”) as of March 31, 2010 and for the three month periods ended March 31,
2010 and 2009 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.  In the
opinion of management, the unaudited condensed consolidated financial statements
include all adjustments (consisting only of normal recurring accruals) that
management considers necessary for a fair presentation of the Company’s
financial position, operating results and cash flows for the interim periods
presented. Operating results and cash flows for interim periods are not
necessarily indicative of results for the entire year.
  The
unaudited condensed consolidated financial statements include all of the
accounts of the Company and those of its wholly-owned
subsidiaries.  All intercompany accounts and transactions have been
eliminated.
  This
financial data should be read in conjunction with the audited consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2009.
  Use
of Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect various accounts, including but not limited to
goodwill, acquired intangible assets, income taxes, inventories, revenue
recognition and related sales reserves, allowance for doubtful accounts,
share-based compensation and warranty reserves as reported in the financial
statements and accompanying notes.  Actual results could differ from
those estimates and such differences may be material to the financial
statements.
  Comprehensive
Net Income (Loss)
  The
Company’s comprehensive net income (loss) for the three month periods ended
March 31, 2010 and 2009 was as follows (in thousands):
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Net
      income (loss)
                  
                  $
                  1,506
                  
                  
                  $
                  (10,497
                  )Unrealized
      loss on marketable securities, net
                  
                  
                  (20
                  )
                  
                  
                  (107
                  )Cumulative
      translation adjustments
                  
                  
                  (9
                  )
                  
                  
                  (12
                  )Comprehensive
      net income (loss)
                  
                  $
                  1,477
                  
                  
                  $
                  (10,616
                  )
  Revenue
Recognition
  The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery or customer acceptance, where applicable, has occurred, the fee is
fixed or determinable, and collection is reasonably assured.
 
 Revenue
from product sales to direct customers and distributors is recognized upon
shipment and transfer of risk of loss, if the Company believes collection is
reasonably assured and all other revenue recognition criteria are met. The
Company assesses the probability of collection based on a number of factors,
including past transaction history and the customer’s creditworthiness.  At
the end of each reporting period, the sufficiency of allowances for doubtful
accounts is assessed based on the age of the receivable and the individual
customer’s creditworthiness.
  6
 
 As of
March 31, 2010 the Company offers pricing protection to two distributors whereby
the Company supports the distributor’s resale product margin on certain products
held in the distributor’s inventory. The Company analyzes current requests for
credit in process, also known as ship and debits, and inventory at the
distributor to determine the ending sales reserve required for this
program.  The Company also offers stock rotation rights to three
distributors such that they can return up to a total of 5% of products purchased
every six months in exchange for other PLX products of equal value. The Company
analyzes current stock rotation requests and past experience to determine the
ending sales reserve required for this program.  In addition, the
Company has arrangements with a small number of customers offering a rebate
program on various products. The Company records rebates as a reduction of
revenue when the rebate is in the form of cash consideration. Reserves are
reduced directly from revenue and recorded as a reduction to accounts
receivable.
 
 Recent
Accounting Pronouncement
  In
January 2010, the FASB amended the guidance related to fair value disclosures.
This amended guidance requires disclosures about inputs and valuation techniques
used to measure fair value as well as disclosures about significant transfers,
beginning in the first quarter of 2010. Additionally, this guidance requires
presentation of disaggregated activity within the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), beginning in the
first quarter of 2011. The adoption of this guidance did not have a material
impact on the Company’s financial position or results of operations and the
Company does not believe that it will have subsequent impact after the 2011
adoption of the guidance around fair value measurements using unobservable
inputs.
 
 2.  Share-Based
Compensation
 
 Stock
Option Plans
 
 In May
2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (“2008
Plan”).  Under the 2008 Plan, there is authorized for issuance and
available for awards an aggregate of 1,200,000 shares of the Company’s common
stock, plus the number of shares of the Company’s common stock available for
issuance under the Company’s prior incentive plan, its 1999 Stock Incentive
Plan, that were not subject to outstanding awards as of May 27,
2008.  In addition, the share reserve under the 2008 Plan will be
increased by the number of shares issuable pursuant to awards outstanding under
the prior plan that would have otherwise reverted to the prior plan because such
awards expire, are canceled or otherwise terminated without being exercised.
Awards under the 2008 Plan may include stock options, restricted stock, stock
appreciation rights, performance awards, restricted stock units and other
awards, provided that with respect to full value awards, such as restricted
stock or restricted stock units, no more than 300,000 shares may be issued in
the form of full value awards during the term of the 2008
Plan.  Awards under the 2008 Plan may be made to the Company’s
officers and other employees, its board members and consultants that it hires
and have a term of seven years.  The 2008 Plan has a term of ten
years.
 
 Share-Based
Compensation Expense
 
 The fair
value of share-based awards to employees is calculated using the Black-Scholes
option pricing model, which requires subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect the
calculated values.
 
 The
weighted-average fair value of share-based compensation to employees is based on
the multiple option valuation approach. Forfeitures are estimated and it is
assumed no dividends will be declared. The estimated fair value of share-based
compensation awards to employees is amortized using the straight-line method
over the vesting period of the options. The weighted-average fair value
calculations are based on the following weighted average
assumptions:
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Risk-free
      interest rate
                  
                  
                  2.17
                  %
                  
                  
                  1.64
                  %Expected
      volatility
                  
                  
                  0.61
                  
                  
                  
                  0.59Expected
      life (years)
                  
                  
                  4.19
                  
                  
                  
                  4.51
  Risk-Free Interest Rate: The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant for the expected term of the option.
  7
 
 Expected Term: The Company’s
expected term represents the weighted-average period that the Company’s stock
options are expected to be outstanding. The expected term is based on the
observed and expected time to post-vesting exercise of options by employees. The
Company uses historical exercise patterns of previously granted options in
relation to stock price movements to derive an employee behavioral pattern used
to forecast expected exercise patterns.
 
 Expected Volatility: The
Company believes that historical volatility best represents expected volatility
due to the lack of market data consistently available to calculate implied
volatility. The historical volatility is based on the weekly closing prices of
its common stock over a period equal to the expected term of the option and is a
strong indicator of the expected future volatility.
 
 These
factors could change in the future, which would affect the share-based
compensation expense in future periods.
 
 As
share-based compensation expense recognized in the unaudited Condensed
Consolidated Statements of Operations for the three months ended March 31, 2010
and 2009 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. Forfeitures are estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. The Company’s estimated forfeiture rate at March 31, 2010 and
2009 of 26% and 29%, respectively, was based on historical
experience.
 
 The
following table shows total share-based compensation and employee stock
ownership plan expenses for the three months ended March 31, 2010 and 2009,
included in the respective line items of the Condensed Consolidated Statements
of Operations (in thousands):
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Cost
      of revenues
                  
                  $
                  7
                  
                  
                  $
                  10Research
      and development
                  
                  
                  144
                  
                  
                  
                  109Selling,
      general and administrative
                  
                  
                  195
                  
                  
                  
                  221Total
      share-based compensation expense
                  
                  $
                  346
                  
                  
                  $
                  340
  A summary
of option activity under the Company’s stock equity plans during the quarter
ended March 31, 2010 is as follows:
  Weighted
      AverageRemaining
                  
                  
                  AggregateOptions
      Available
                  
                  
                  Number
      of
                  
                  
                  Weighted
      Average
                  
                  
                  Contratual
      Term
                  
                  
                  IntrinsicOptions
                  
                  for
      Grant
                  
                  
                  Shares
                  
                  
                  Exercise
      Price
                  
                  
                  (in
      years)
                  
                  
                  ValueOutstanding
      at December 31, 2009
                  
                  
                  870,810
                  
                  
                  
                  2,825,796
                  
                  
                  $
                  4.36
                  
                  
                  
                  5.14
                  
                  
                  $
                  1,794,310Granted
                  
                  
                  (830,500
                  )
                  
                  
                  830,500
                  
                  
                  
                  4.92Exercised
                  
                  
                  -
                  
                  
                  
                  (30,140
                  )
                  
                  
                  2.59Cancelled
                  
                  
                  32,605
                  
                  
                  
                  (32,605
                  )
                  
                  
                  4.90Plan
      Termination
                  
                  
                  (625
                  )
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at March 31, 2010
                  
                  
                  72,290
                  
                  
                  
                  3,593,551
                  
                  
                  $
                  4.50
                  
                  
                  
                  5.34
                  
                  
                  $
                  5,758,282Exercisable
      at March 31, 2010
                  
                  
                  
                  
                  
                  
                  1,315,911
                  
                  
                  $
                  6.09
                  
                  
                  
                  3.83
                  
                  
                  $
                  1,739,465
  The
Black-Scholes weighted average fair values of options granted during the three
months ended March 31, 2010 and 2009 were $2.41 and $0.92,
respectively.
  8
  The
following table summarizes ranges of outstanding and exercisable options as of
March 31, 2010:
  Options
      Outstanding
                  
                  
                  Options
      ExercisableWeighted
      AverageRemaining
                  
                  
                  Weighted
                  
                  
                  
                  
                  
                  WeightedContratual
      Term
                  
                  
                  Average
                  
                  
                  
                  
                  
                  AverageRange
      of Exercise Prices
                  
                  
                  Number
                  
                  
                  (in
      years)
                  
                  
                  Exercise
      Price
                  
                  
                  Number
                  
                  
                  Exercise
      Price$1.25-$2.00
                  
                  
                  
                  843,269
                  
                  
                  
                  5.81
                  
                  
                  $
                  1.91
                  
                  
                  
                  208,235
                  
                  
                  $
                  1.91$2.04-$3.76
                  
                  
                  
                  769,126
                  
                  
                  
                  4.89
                  
                  
                  
                  2.46
                  
                  
                  
                  396,975
                  
                  
                  
                  2.75$3.87-$4.68
                  
                  
                  
                  312,000
                  
                  
                  
                  6.05
                  
                  
                  
                  3.91
                  
                  
                  
                  17,500
                  
                  
                  
                  4.11$4.92-$4.92
                  
                  
                  
                  822,000
                  
                  
                  
                  6.92
                  
                  
                  
                  4.92
                  
                  
                  
                  -
                  
                  
                  
                  -$4.95-$25.94
                  
                  
                  
                  847,156
                  
                  
                  
                  3.49
                  
                  
                  
                  8.74
                  
                  
                  
                  693,201
                  
                  
                  
                  9.32Total
                  
                  
                  
                  3,593,551
                  
                  
                  
                  5.34
                  
                  
                  $
                  4.50
                  
                  
                  
                  1,315,911
                  
                  
                  $
                  6.09
  The total
intrinsic value of options exercised during the three months ended March 31,
2010 was $0.1 million. There were no options exercised during the same period in
2009. The fair value of options vested during the three months ended March 31,
2010 was approximately $1.0 million. As of March 31, 2010, total unrecognized
compensation costs related to nonvested stock options including estimated
forfeitures was $2.1 million which is expected to be recognized as expense over
a weighted average period of approximately 1.64 years.
 
 3.  Inventories
 
 Inventories
are valued at the lower of cost (first-in, first-out method) or market (net
realizable value).  Inventories were as follows (in
thousands):
  March
      31,
                  
                  
                  December
      31,2010
                  
                  
                  2009Work-in-process
                  
                  $
                  2,940
                  
                  
                  $
                  2,242Finished
      goods
                  
                  
                  7,956
                  
                  
                  
                  7,386Total
                  
                  $
                  10,896
                  
                  
                  $
                  9,628
  The
Company evaluates the need for potential inventory provisions by considering a
combination of factors including the life of the product, sales history,
obsolescence and sales forecasts.
 
 4.  Net
Income (Loss) Per Share
 
 The
Company uses the treasury stock method to calculate the weighted average shares
used in the diluted earnings per share.The following table sets
forth the computation of basic and diluted net income (loss) per share (in
thousands, except per share data):
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Net
      income (loss)
                  
                  $
                  1,506
                  
                  
                  $
                  (10,497
                  )Weighted
      average shares of common stock outstanding
                  
                  
                  37,025
                  
                  
                  
                  33,604Net
      income (loss) per share - basic
                  
                  $
                  0.04
                  
                  
                  $
                  (0.31
                  )Shares
      used in computing basic net income (loss) per share
                  
                  
                  37,025
                  
                  
                  
                  33,604Dilutive
      effect of stock options
                  
                  
                  791
                  
                  
                  
                  -Shares
      used in computing diluted net income (loss) per share
                  
                  
                  37,816
                  
                  
                  
                  33,604Net
      income (loss) per share - diluted
                  
                  $
                  0.04
                  
                  
                  $
                  (0.31
                  )
  Weighted
average employee stock options to purchase approximately 1.4 million shares for
the three month period ended March 31, 2010 were outstanding, but were not
included in the computation of diluted earnings per share because the exercise
price of stock options was greater than the average share price of the Company’s
stock and, therefore, the effect would have been anti-dilutive.
  9
 
 As the
Company incurred a net loss for the three month period ended March 31, 2009, the
effect of dilutive securities, totaling 5.3 million shares has been excluded
from the computation of diluted loss per share, as its impact would be
anti-dilutive. Dilutive securities are comprised of options to purchase common
stock.
 
 5.  Fair
Value Measurements
 
 The
accounting guidance for fair value measurements provided a framework for
measuring fair value and expands related disclosures. Fair value is defined as
the price that would be received for an asset or the exit price that would be
paid to transfer a liability in the principal or most advantageous market in an
orderly transaction between market participants on the measurement date. The
guidance also established a hierarchy which requires an entity to maximize the
use of observable inputs, when available.  The guidance requires fair
value measurement be classified and disclosed in one of the following three
categories:
 
 Level 1:
Valuations based on quoted prices in active markets for identical assets and
liabilities.  The fair value of available-for-sale securities included
in the level 1 category is based on quoted prices that are readily and regularly
available in an active market.
 
 Level 2:
Valuations based on observable inputs (other than Level 1 prices), such as
quoted prices for similar assets at the measurement date; quoted prices in
markets that are not active; or other inputs that are observable, either
directly or indirectly. The fair value of available-for-sale securities included
in the Level 2 category is based upon quoted prices in markets that are not
active and incorporate available trade, bid and other market
information.
 
 Level 3:
Valuations based on inputs that are unobservable and involve management judgment
and the reporting entity’s own assumptions about market participants and
pricing.
 
 The fair
value of financial assets and liabilities measured on a recurring basis is as
follows (in thousands):
  Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
                  
                  
                  Significant
      Other
                  
                  
                  Significantfor
      Identical Assets or Liabilities
                  
                  
                  Observable
      Inputs
                  
                  
                  Unobservable
      InputsMarch
      31, 2010
                  
                  
                  (Level
      1)
                  
                  
                  (Level
      2)
                  
                  
                  (Level
      3)Assets:Money
      market funds
                  
                  $
                  900
                  
                  
                  $
                  900
                  
                  
                  $
                  -
                  
                  
                  $
                  -Marketable
      securities
                  
                  
                  31,453
                  
                  
                  
                  -
                  
                  
                  
                  31,453
                  
                  
                  
                  -Total
                  
                  $
                  32,353
                  
                  
                  $
                  900
                  
                  
                  $
                  31,453
                  
                  
                  $
                  -
 
 Fair
      Value Measurement as Reporting Date UsingQuoted
      Prices in Active Markets
                  
                  
                  Significant
      Other
                  
                  
                  Significantfor
      Identical Assets or Liabilities
                  
                  
                  Observable
      Inputs
                  
                  
                  Unobservable
      InputsDecember
      31, 2009
                  
                  
                  (Level
      1)
                  
                  
                  (Level
      2)
                  
                  
                  (Level
      3)Assets:Money
      market funds
                  
                  $
                  3,611
                  
                  
                  $
                  3,611
                  
                  
                  $
                  -
                  
                  
                  $
                  -Marketable
      securities
                  
                  
                  28,716
                  
                  
                  
                  -
                  
                  
                  
                  28,716
                  
                  
                  
                  -Total
                  
                  $
                  32,327
                  
                  
                  $
                  3,611
                  
                  
                  $
                  28,716
                  
                  
                  $
                  -
  6.  Investments
 
 As of
March 31, 2010, the Company’s securities consisted of debt securities and were
designated as available-for-sale. Available-for-sale securities are carried at
fair value, based on quoted market prices or prices quoted in markets that are
not active, with unrealized gains and losses reported in a separate component of
stockholders’ equity.  The amortized cost of debt securities is
adjusted for the amortization of premiums and the accretion of discounts to
maturity, both of which are included in interest income.  Realized
gains and losses are recorded on the specific identification
method.
  10
  The fair
value of available-for-sale investments is as follows (in
thousands):
  March
      31, 2010Amortized
                  
                  
                  Unrealized
                  
                  
                  Unrealized
                  
                  
                  EstimatedCost
                  
                  
                  Gain
                  
                  
                  Loss
                  
                  
                  Fair
      ValueCertificate
      of deposit
                  
                  $
                  2,735
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,735Corporate
      bonds and notes
                  
                  
                  2,236
                  
                  
                  
                  -
                  
                  
                  
                  (6
                  )
                  
                  
                  2,230Municipal
      Bonds
                  
                  
                  542
                  
                  
                  
                  -
                  
                  
                  
                  (2
                  )
                  
                  
                  540US
      treasury and government agencies securities
                  
                  
                  25,932
                  
                  
                  
                  28
                  
                  
                  
                  (12
                  )
                  
                  
                  25,948Total
      bonds, notes and equity securities
                  
                  $
                  31,445
                  
                  
                  $
                  28
                  
                  
                  $
                  (20
                  )
                  
                  $
                  31,453Less
      amounts classified as cash equivalents
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,494
                  )Total
      short and long-term available-for-sale investments
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  29,959Contractual
      maturity dates for investments:Less
      than one year:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  24,957One
      to two years:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,002$
                  29,959
  December
      31, 2009Amortized
                  
                  
                  Unrealized
                  
                  
                  Unrealized
                  
                  
                  EstimatedCost
                  
                  
                  Gain
                  
                  
                  Loss
                  
                  
                  Fair
      ValueCertificate
      of deposit
                  
                  $
                  1,726
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,726Corporate
      bonds and notes
                  
                  
                  1,937
                  
                  
                  
                  8
                  
                  
                  
                  (3
                  )
                  
                  
                  1,942Municipal
      Bonds
                  
                  
                  106
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  106US
      treasury and government agencies securities
                  
                  
                  24,919
                  
                  
                  
                  35
                  
                  
                  
                  (12
                  )
                  
                  
                  24,942Total
      bonds, notes and equity securities
                  
                  $
                  28,688
                  
                  
                  $
                  43
                  
                  
                  $
                  (15
                  )
                  
                  $
                  28,716Contractual
      maturity dates for investments:Less
      than one year:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  27,060One
      to two years:
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,656$
                  28,716
 The
following tables show the gross unrealized losses and fair value for investments
in an unrealized loss position as of March 31, 2010 and December 31, 2009,
aggregated by investment category and the length of time that individual
securities have been in a continuous loss position (in thousands):
  March
      31, 2010Less
      than 12 Months
                  
                  
                  12
      months or Greater
                  
                  
                  TotalFair
      Value
                  
                  
                  Unrealized
      Loss
                  
                  
                  Fair
      Value
                  
                  
                  Unrealized
      Loss
                  
                  
                  Fair
      Value
                  
                  
                  Unrealized
      LossCorporate
      bonds and notes
                  
                  $
                  2,230
                  
                  
                  $
                  (6
                  )
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,230
                  
                  
                  $
                  (6
                  )Municipal
      Bonds
                  
                  
                  435
                  
                  
                  
                  (2
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  435
                  
                  
                  
                  (2
                  )US
      treasury and government agencies securities
                  
                  
                  17,404
                  
                  
                  
                  (12
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17,404
                  
                  
                  
                  (12
                  )Total
                  
                  $
                  20,069
                  
                  
                  $
                  (20
                  )
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  20,069
                  
                  
                  $
                  (20
                  )
 
 December
      31, 2009Less
      than 12 Months
                
                
                12
      months or Greater
                
                
                TotalFair
      Value
                
                
                Unrealized
      Loss
                
                
                Fair
      Value
                
                
                Unrealized
      Loss
                
                
                Fair
      Value
                
                
                Unrealized
      LossCorporate
      bonds and notes
                
                $
                561
                
                
                $
                (3
                )
                
                $
                -
                
                
                $
                -
                
                
                $
                561
                
                
                $
                (3
                )US
      treasury and government agencies securities
                
                
                13,292
                
                
                
                (12
                )
                
                
                -
                
                
                
                -
                
                
                
                13,292
                
                
                
                (12
                )Total
                
                $
                13,853
                
                
                $
                (15
                )
                
                $
                -
                
                
                $
                -
                
                
                $
                13,853
                
                
                $
                (15
                )
 11
  The
Company reviews its available for sale investments for impairment at the end of
each period.  Investments in debt securities, which make up the
majority of the Company’s investments, are considered impaired when the fair
value of the debt security is below its amortized cost. If an impairment exists
and the Company determines it has intent to sell the debt security or if it is
more likely than not that it will be required to sell the debt security before
recovery of its amortized cost basis, an other-than-temporary impairment loss is
recognized in earnings to write the debt security down to its fair value.
However, even if the Company does not expect to sell the debt security, it must
evaluate expected cash flows to be received and determine if a credit loss
exists. In the event of a credit loss, only the amount of impairment associated
with the credit loss is recognized in earnings. Amounts relating to factors
other than credit losses are recognized in other comprehensive income (loss).
The Company did not record any other-than-temporary write-downs in the
accompanying financial statements.
 
 7.  Acquisition
of Oxford Semiconductor Inc.
 
 On
January 2, 2009, the Company acquired all of the outstanding shares of capital
stock of Oxford Semiconductor, Inc. (Oxford), a privately held fabless provider
of industry-leading silicon and software for the consumer and small office/home
office (SOHO) storage markets.
 
 Established
in 1992, Oxford has been providing silicon and software solutions to
interconnect digital systems, including PCIe, USB, 1394, Ethernet, Serial ATA
and external Serial ATA.  Oxford’s corporate headquarters were located
in Milpitas, California, with most of its employees based in Oxford’s design
center in Abingdon, United Kingdom.  The consumer and SOHO external
storage markets account for the majority of Oxford’s sales.  Oxford
provides advanced system-on-chip solutions for both direct-attached storage
(DAS) and network-attached storage (NAS) external drives.  Oxford’s
customers include Seagate, Western Digital, LaCie, Hewlett Packard, and
Macpower.
 
 The
Company believes that through this acquisition, it has a leadership position in
two of the fastest-growing interconnect chip markets – PCI Express-based systems
and consumer external storage.  Major synergies include common
interconnect technologies and design flows, sales, marketing and support
systems, and supply chains.  Most importantly, the Company can create
innovative products that combine the considerable intellectual property and
industry knowledge of Oxford and PLX.
 
 The total
consideration paid for the transaction was $16.4 million, consisting of 5.6
million shares at $1.82 per share, the closing price on January 2, 2009, the
date the transaction was closed, and the fair value of the contingently
convertible debt liability as of January 2, 2009, of $6.2 million.
 
 As a part
of the Merger Agreement, the Company acquired all of the outstanding shares of
capital stock of Oxford in exchange for 5.6 million shares of common stock of
PLX and a promissory note in the principal amount of $14.2 million (the “Note”)
that was to be satisfied by either (i) the issuance of an additional 3.4 million
shares of common stock of PLX upon approval of PLX’s stockholders, or (ii) the
repayment of the principal amount of the Note if such stockholder approval was
not obtained by June 30, 2009.  On May 22, 2009 at a special meeting
of the shareholders, the shareholders approved the conversion of the $14.2
million note to 3.4 million shares of common stock of the Company.
 
 Under the
revised business combinations guidance, which became effective for the Company
on January 1, 2009, the contingently convertible promissory note was considered
contingent consideration which was recorded at fair value as of the acquisition
date, and changes to the fair value of contingent consideration were reflected
through the statement of operations.  The fair value of the
convertible note on the acquisition date was based on that day’s closing stock
price of $1.82 per share.  On March 31, 2009, the convertible note was
remeasured to fair value. Based on the closing stock price of $2.17 as of March
31, 2009, the fair value of the convertible note was $7.4 million. The change in
fair value of $1.2 million was recognized as a loss in the quarter ended March
31, 2009.
 
 The
following table summarizes the consideration paid for Oxford and the amounts of
the assets acquired and liabilities assumed at the acquisition
date.
 
 Fair
value of consideration transferred:
  5,600,000
      common shares of PLX
                  
                  $
                  10,192Contingent
      consideration
                  
                  
                  6,188Fair
      value of total consideration
                  
                  $
                  16,380
  12
 
 Recognized
amounts of identifiable assets acquired and liabilities assumed (in
thousands):
  Cash
      and cash equivalents
                  
                  $
                  4,392Trade
      receivables
                  
                  
                  1,286Inventories
                  
                  
                  2,677Tax
      receivable
                  
                  
                  835Licensed
      IP
                  
                  
                  2,499Property,
      plant and equipment
                  
                  
                  1,357Identifiable
      intangible assets
                  
                  
                  9,056Other
      assets
                  
                  
                  482Trade
      and other payable
                  
                  
                  (3,163
                  )Accruals
      and other liabilities
                  
                  
                  (4,408
                  )Total
      indentifiable net assets
                  
                  $
                  15,013Goodwill
                  
                  
                  1,367$
                  16,380
  The fair
value of assets acquired included trade receivables of $1.6
million.  The gross amount due under sales related contracts was $1.6
million, of which $0.3 million was expected to be uncollectible as a result of
recognized credits due to distributors for the difference in the price they
previously purchased products for from Oxford Semiconductor, Inc. and the
authorized quote price based on the distributors’ sell through
activity.  The gross amount under a prior intellectual property
royalty arrangement was $0.3 million and the full amount was expected to be
uncollectible.
 
 The
identified intangible assets consist of core technology, trade name and customer
relationships.  The valuation of the acquired intangibles was
classified as a level 3 measurement under the fair value measurement guidance,
because the valuation was based on significant unobservable inputs and involved
management judgment and assumptions about market participants and
pricing.   In determining fair value of the acquired intangible
assets, the Company determined the appropriate unit of measure, the exit market
and the highest and best use for the assets. The fair value was estimated using
an incremental income approach.
 
 The
goodwill that arose from the acquisition is largely attributable to the
synergies expected to be realized after the Company’s acquisition and
integration of Oxford.  The Company only has one operating segment,
semiconductor products, so all of the goodwill was assigned to the one
segment.  Goodwill is not expected to be deductible for tax
purposes.
 
 Oxford
contributed revenues and gross profit of $7.1 million and $3.8 million,
respectively, to the Company for the quarter ended March 31, 2010 and $4.7 and
$2.2 million, respectively, for the same period in 2009. Oxford operations were
fully integrated as of the end of the first quarter of 2009 and it is therefore
not practicable to identify earnings associated with Oxford’s
contribution.
 
 Because
the acquisition took place on January 2, 2009, which was in substance the
beginning of the year, no pro forma data is presented for the quarter ended
March 31, 2009 as the Company’s historical statement of operations already
includes the results of Oxford for the entire period.
 
 During
the three months ended March 31, 2009, the Company incurred $0.3 million of
third party acquisition related costs, primarily for outside legal and
accounting costs.  These expenses were included in operating expenses
under acquisition related costs in the Company’s consolidated statement of
operations for the three months ended March 31, 2009.
 
 8.  Goodwill
and Intangibles
 
 As
discussed in Note 7, the acquisition of Oxford included the acquisition of $9.1
million of identifiable intangible assets.  All of these intangibles
are subject to amortization.  There is no estimated residual value on
any of the intangible assets.
  13
  The
following table summarizes the gross carrying amount and accumulated
amortization for each major intangible class and the weighted average
amortization period, in total and by major intangible asset class, as of March
31, 2010 (in thousands).
  EstimatedGross
      Carrying
                  
                  
                  Accumulated
                  
                  
                  Net
                  
                  Amortization
                  UsefulValue
                  
                  
                  Amortization
                  
                  
                  Value
                  
                  Method
                  LifeExisting
      and core technologyUSB
      and Serial Connectivity
                  
                  $
                  4,600
                  
                  
                  $
                  (2,683
                  )
                  
                  $
                  1,917
                  
                  Accelerated
                  3
      yearsNetwork
      Attached Storage Connectivity
                  
                  
                  3,800
                  
                  
                  
                  (950
                  )
                  
                  
                  2,850
                  
                  Straight-line
                  5
      yearsTrade
      Name
                  
                  
                  600
                  
                  
                  
                  (375
                  )
                  
                  
                  225
                  
                  Straight-line
                  2
      yearsCustomer
      Relationships
                  
                  
                  56
                  
                  
                  
                  (56
                  )
                  
                  
                  -
                  
                  Accelerated
                  1
      yearTotals
                  
                  $
                  9,056
                  
                  
                  $
                  (4,064
                  )
                  
                  $
                  4,992
                  
                  
                  3.8
      years
  The
amortization expense for the three month period ended March 31, 2010 and 2009
was $0.6 million and $0.9 million respectively.  Estimated future
amortization expense is as follows (in thousands):
  Remainder
      of 2010
                  
                  $
                  1,9452011
                  
                  
                  1,5272012
                  
                  
                  7602013
                  
                  
                  760Total
                  
                  $
                  4,992
  9.  Restructuring
Costs
 
 Severance
 
 In the
three months ended March 31, 2009, the Company recorded approximately $2.0
million of severance and benefit related costs, included in acquisition and
restructuring related costs in the Consolidated Statement of Operations, related
to the termination of 53 employees as a result of the redundancy issue
associated with the acquisition of Oxford. As of March 31, 2010 all of the $2.0
million severance and benefit related costs were paid.
 
 Lease
Termination
 
 In
January 2009, associated with the acquisition of Oxford, the Company assumed a
building lease in Milpitas, California which was vacated upon acquisition. The
Company was not able to find a sublease for this property given the market
conditions at the time and available space in the area. The future lease costs
for the property were $0.3 million which extended through February 2010. The
Company recorded the liability, included in other accrued expenses in the
Consolidated Balance Sheet, for the costs to be incurred at the future cash
payment amount of $0.3 million as the total cash payment was not materially
different from the fair value. The lease accrual charge of $0.3 million was
recorded in the Consolidated Statement of Operations in the first quarter of
2009. The accrued lease liability was paid in full in January 2010.
 
 10.  Segments
of an Enterprise and Related Information
  The
Company has one operating segment, the sale of semiconductor devices. The Chief
Executive Officer has been identified as the Chief Operating Decision Maker
(“CODM”) because he has final authority over resource allocation decisions and
performance assessment. The CODM does not receive discrete financial information
about individual components of the Company’s business. The majority of the
Company’s assets are located in the United States.
  14
  Revenues
by geographic region based on customer location were as follows (in
thousands):
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Revenues:China
                  
                  $
                  8,590
                  
                  
                  $
                  5,086Taiwan
                  
                  
                  5,818
                  
                  
                  
                  1,714Singapore
                  
                  
                  4,521
                  
                  
                  
                  2,081United
      States
                  
                  
                  4,034
                  
                  
                  
                  2,497Other
      Asia Pacific
                  
                  
                  3,115
                  
                  
                  
                  1,618Europe,
      Middle East and Africa
                  
                  
                  2,583
                  
                  
                  
                  2,152The
      Americas - excluding United States
                  
                  
                  158
                  
                  
                  
                  1,309Total
                  
                  $
                  28,819
                  
                  
                  $
                  16,457
  There
were no direct end customers that accounted for more than 10% of net revenues.
Sales to the following distributors accounted for 10% or more of net
revenues:
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Excelpoint
      Systems Pte Ltd
                  
                  
                  29
                  %
                  
                  
                  21
                  %Answer
      Technology, Inc.
                  
                  
                  20
                  %
                  
                  
                  *
                  %Promate
      Electronics Co., Ltd
                  
                  
                  13
                  %
                  
                  
                  14
                  %Avnet,
      Inc.
                  
                  
                  17
                  %
                  
                  
                  *
                  %
 *      Less
than 10%
  The
following distributors accounted for 10% or more of the total accounts
receivable balance:
  March
      31,2010
                  
                  
                  2009Excelpoint
      Systems Pte Ltd
                  
                  
                  27
                  %
                  
                  
                  26
                  %Answer
      Technology, Inc.
                  
                  
                  25
                  %
                  
                  
                  *
                  %Promate
      Electronics Co., Ltd
                  
                  
                  18
                  %
                  
                  
                  16
                  %Avnet,
      Inc.
                  
                  
                  12
                  %
                  
                  
                  *
                  %
  *      Less
than 10%
  11.  Income
Taxes
  A
provision for income tax of $0.2 million has been recorded for the three month
period ended March 31, 2010, compared to a provision of $19,000 for the same
period in 2009.  Income tax expense for the three months ended March
31, 2010 is a result of applying the estimated annual effective tax rate to
cumulative profit before taxes adjusted for certain discrete items which are
fully recognized in the period they occur. We excluded from our calculation of
the effective tax rate losses of a certain foreign jurisdiction since we cannot
benefit those losses. For the same period in 2009, the income tax expense was
result of applying the estimated annual effective tax rate to cumulative loss
before taxes adjusted for certain discrete items.
  The
Company has determined that negative evidence supports the need for a full
valuation allowance against its net deferred tax assets at this time. The
Company will maintain a full valuation allowance until sufficient positive
evidence exists to support a reversal of the valuation allowance.
  15
  As of
March 31, 2010, the Company had unrecognized tax benefits of approximately $3.7
million of which none, if recognized, would result in a reduction of the
Company’s effective tax rate.  There were no material changes in the
amount of unrecognized tax benefits during the three months ended March 31,
2010. Future changes in the balance of unrecognized tax benefits will have no
impact on the effective tax rate as they are subject to a full valuation
allowance. The Company does not believe the amount of its unrecognized tax
benefits will significantly change within the next twelve months.
 
 The
Company is subject to taxation in the United States and various states and
foreign jurisdictions.  The tax years 1998 through 2009 remain open to
examination by the federal and most state tax authorities due to certain
acquired net operating loss and overall credit carryforward
positions.
 
 ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 This
Report on Form 10-Q contains forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
including statements regarding our expectations, hopes, intentions, beliefs or
strategies regarding the future.  Such forward-looking statements also
include statements regarding our future gross margin, our future research and
development expenses, our future selling, general and administrative expenses,
our ability to meet our capital requirements for the next twelve months, our
future capital requirements, current high turns fill requirements, that the
Consumer/Small Office Home Office (SOHO) is a rapidly growing market and our
anticipation that sales to a small number of customers will account for a
significant portion of our sales.  Actual results could differ
materially from those projected in such forward-looking
statements.  Factors that could cause actual results to differ include
unexpected changes in the mix of our product sales, unexpected pricing
pressures, unexpected capital requirements that may arise due to other possible
acquisitions or other events, unanticipated changes in the businesses of our
suppliers, and unanticipated cash shortfalls.  Actual results could
also differ for the reasons noted under the sub-heading “Factors That May Affect
Future Operating Results” in Item 1A, Risk Factors in Part II of this report on
Form 10-Q and in other sections of this report on Form 10-Q.  All
forward-looking statements included in this Form 10-Q are based on
information available to us on the date of this report on Form 10-Q, and we
assume no obligation to update the forward-looking statements, or to update the
reasons why actual results could differ from those projected in the
forward-looking statements.
 
 The
following discussion should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2009.
 
 OVERVIEW
 
 PLX
Technology, Inc. ("PLX" or the "Company"), a Delaware corporation established in
1986, designs, develops, manufactures, and sells integrated circuits for
interconnect applications.  These interconnect products are a
fundamental building block for standards-based subsystems.  We market
our products to major customers that sell electronic systems in the server,
enterprise storage, consumer storage, communications, PC peripheral, consumer
and embedded markets.
 
 Products
based on current serial interconnect technology standards such as PCI Express,
USB, Serial ATA, and Ethernet provide capabilities to customers that previous
parallel technologies did not.  They offer the ability for systems to
scale in performance and capabilities, and allow for a standards-based building
block approach that was not feasible in the past.  As these serial
technologies have become mainstream, we have been able to offer differentiated
products based on standard ports that provide scalability and performance at a
high-volume price point.
 
 PLX is
the market share leader in PCI Express switches and bridges.  We
recognized the trend towards this serial, switched interconnect technology
early, launched products for this market long before our competitors, and have
deployed multiple generations of products to serve a general-purpose, horizontal
market.  In addition to enabling customer differentiation through our
product features, the breadth of our product offering is in itself a significant
benefit to our customers, since we can serve the complete needs of our customers
with cost-effective solutions tailored to the specific subsystem
requirements.  Our long experience with PCI Express connectivity
products enables PLX to deliver reliable devices that operate under non-ideal
real-world, system environments.
  16
 
 PLX is
building on our broad, general purpose interconnect success, and in particular
our success in enterprise storage, by focusing on a rapidly growing vertical
market: Consumer/SOHO storage.  On January 2, 2009, we completed the
acquisition of Oxford Semiconductor, Inc. (Oxford), a leading supplier of
semiconductor components for the consumer and SOHO markets. Oxford has brought
to market several generations of leadership products that allow storage
customers to attach their disk subsystems directly to a computer through USB
direct-attached storage (DAS), or to attach them through local area
network-attached storage (NAS).  We identified the shift from parallel
to serial hard disk connectivity early, and benefited from this trend to become
the leader in high performance consumer/SOHO storage
connectivity.   Our products provide a rich variety of
connectivity options, including USB, Serial ATA, external Serial ATA, 1394 and
Ethernet, and offer capabilities such as RAID and data encryption at industry
leading performance levels.
 
 PLX
offers a complete solution consisting of semiconductor devices, software
development kits, hardware design kits, operating system ports, and firmware
solutions that enable added-value features in our products.  We
differentiate our products by offering higher performance at lower power, by
enabling a richer customer experience based on proprietary features that enable
system-level customer advantages, and by providing capabilities that enable a
customer to get to market more quickly.
  We
utilize a “fabless” semiconductor business model whereby we purchase wafers or
packaged and tested semiconductor devices from independent manufacturing
foundries.  The advantage of this approach, in our opinion, is that it
allows us to focus on defining, developing and marketing our products and
eliminates the need for us to invest large amounts of capital in manufacturing
facilities and work-in-process inventory.
  We rely
on a combination of direct sales personnel, distributors and manufacturers’
representatives throughout the world to sell a significant portion of our
products.  We pay manufacturers’ representatives a commission on sales
while we sell products to distributors at a discount from the selling
price.
  The time
period between initial customer evaluation and design completion can range from
six to twelve months or more.  Furthermore, there is typically an
additional six to twelve month or greater period after design completion before
a customer orders volume production of our products.  Due to the
variability and length of these design cycles and variable demand from
customers, we may experience significant fluctuations in new orders from month
to month.  In addition, we typically make inventory purchases prior to
receiving customer orders.  Consequently, if anticipated sales and
shipments in any quarter do not occur when expected, expenses and inventory
levels could be disproportionately high, and our results for that quarter and
potentially future quarters would be materially and adversely
affected.
 
 Our
long-term success will depend on our ability to successfully introduce new
products.  While new products typically generate little or no revenue
during the first twelve months following their introduction, our revenues in
subsequent periods depend upon these new products.  Due to the lengthy
sales cycle and additional time before our customers request volume production,
significant revenues from our new products typically occur twelve to twenty-four
months after product introduction.  As a result, revenues from newly
introduced products have, in the past, produced a small percentage of our total
revenues in the year the product was introduced.  See –“Our Lengthy
Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected
Revenues” in Item 1A, Risk Factors, in Part II of this report on Form
10-Q.
 
 RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND MARCH 31,
2009
 
 Net
Revenues
 
 The
following table shows the revenue by product type (in thousands) and as a
percentage of net revenues:
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009PCI
      Express products
                  
                  $
                  13,784
                  
                  
                  $
                  6,195As
      a percentage of revenues
                  
                  
                  47.8
                  %
                  
                  
                  37.7
                  %Storage
      products
                  
                  $
                  4,687
                  
                  
                  $
                  3,184As
      a percentage of revenues
                  
                  
                  16.3
                  %
                  
                  
                  19.3
                  %Connectivity
      products
                  
                  $
                  10,348
                  
                  
                  $
                  7,078As
      a percentage of revenues
                  
                  
                  35.9
                  %
                  
                  
                  43.0
                  %
  Net
revenues consist of product revenues generated principally by sales of our
semiconductor devices.  Net revenues for the three months ended March
31, 2010 were $28.8 million, an increase of 75.1% from $16.5 million for the
same period in 2009. The increase was due to overall higher sales as a result of
increased enterprise and consumer spending as market conditions have improved
compared to the first quarter of 2009.
  17
  In the
first quarter of 2010, increasing product demand throughout the semiconductor
industry challenged the industry’s supply chain and we were not able to procure
an adequate supply of product to fulfill our customers’ demand for our products.
We expect these supplier capacity constraints to continue into the second
quarter of 2010.
  There
were no direct end customers that accounted for more than 10% of net revenues.
Sales to the following distributors accounted for 10% or more of net
revenues:
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009Excelpoint
      Systems Pte Ltd
                  
                  
                  29
                  %
                  
                  
                  21
                  %Answer
      Technology, Inc.
                  
                  
                  20
                  %
                  
                  
                  *
                  %Promate
      Electronics Co., Ltd
                  
                  
                  13
                  %
                  
                  
                  14
                  %Avnet,
      Inc.
                  
                  
                  17
                  %
                  
                  
                  *
                  %
  *      Less
than 10%
  In the
first quarter of 2009, we experienced a broad decrease in order rates across
most product lines, markets and end customers due to the economic downturn that
began in the later part of 2008. We began to see market conditions improve in
the second half of 2009, which have continued in the first quarter of 2010.
Future demand for our products is uncertain and is highly dependent on general
economic conditions and the demand for products that contain our chips. Customer
demand for semiconductors can change quickly and unexpectedly.  Our revenue
levels have been highly dependent on the amount of new orders that are received
for products to be delivered to the customer within the same quarter, also
called “turns fill” orders.  Because of the long cycle time to build our
products and our lack of visibility into demand when turns fill orders are high,
it is difficult to predict which products to build to match future demand. 
We believe the current high turns fill requirements will continue
indefinitely.  The high turns fill orders pattern, together with the
uncertainty of product mix and pricing, makes it difficult to predict future
levels of sales and profitability and may require us to carry higher levels of
inventory.
 
 Gross
Margin
 
 Gross
margin represents net revenues less the cost of revenues.  Cost of
revenues includes the cost of (1) purchasing semiconductor devices or wafers
from our independent foundries, (2) package, assembly and test services from our
independent foundries, assembly contractors and test contractors and (3) our
operating costs associated with the procurement, storage, and shipment of
products as allocated to production.
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsGross
      profit
                  
                  $
                  16,348
                  
                  
                  $
                  8,946Gross
      margin
                  
                  
                  56.7
                  %
                  
                  
                  54.4
                  %
  Gross
profit for the three months ended March 31, 2010 increased by 82.7% compared to
the same period in 2009. The increase in absolute dollars was due to the overall
increase of product shipments, while the increase as a percentage was primarily
due to overall product and customer mix as well as cost reductions achieved
during the later part of 2009.
 
 Future
gross profit and gross margin are highly dependent on the product and customer
mix, provisions and sales of excess or obsolete inventory, the position of our
products in their respective life cycles and specific manufacturing
costs.  Accordingly, we are not able to predict future gross profit
levels or gross margins with certainty.
  18
  Research
and Development Expenses
 
 Research
and development (“R&D”) expenses consist primarily of tape-out costs at our
independent foundries, salaries and related costs, including share-based
compensation and expenses for outside engineering consultants.
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsR&D
      expenses
                  
                  $
                  7,553
                  
                  
                  $
                  7,903As
      a percentage of revenues
                  
                  
                  26.2
                  %
                  
                  
                  48.0
                  %
  R&D
expenses decreased by $0.4 million or 4.4% in the three months ended March 31,
2010 compared to the same period in 2009. The decrease in R&D in absolute
dollars was primarily due to decreased R&D spending on engineering tools and
consulting of $0.5 million due to the timing of projects taped-out and salaries
and related costs of $0.2 million as a result of the employee terminations in
the first quarter of 2009 due to the redundancy issue associated with the
acquisition of Oxford, partially offset by an increase in variable compensation
expenses of $0.2 million. The decrease in R&D as a percentage was primarily
due to increased revenues.
  We
believe continued spending on research and development to develop new products
is critical to our success. We anticipate that R&D expenses over time will
fluctuate due to the timing of projects and tape-out related
activities.
 
 Selling,
General and Administrative Expenses
 
 Selling,
general and administrative (“SG&A”) expenses consist primarily of salaries
and related costs, including share-based compensation, commissions to
manufactures’ representatives and professional fees, as well as trade show and
other promotional expenses.
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsSG&A
      expenses
                  
                  $
                  6,463
                  
                  
                  $
                  6,895As
      a percentage of revenues
                  
                  
                  22.4
                  %
                  
                  
                  41.9
                  %
  SG&A
expenses decreased by $0.4 million or 6.3% in the three months ended March 31,
2010 compared to the same period in 2009. The decrease in SG&A in absolute
dollars is due primarily to a decrease in salaries and related costs of $0.5
million as a result of the employee terminations in the first quarter of 2009
due to the redundancy issue associated with the acquisition of Oxford, partially
offset by an increase in commissions to manufacturers’ representatives of $0.3
million resulting from increased revenues. The decrease in SG&A as a
percentage was primarily due to increased revenues.
 
 Acquisition
and Restructuring Related Costs
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsDeal
      costs
                  
                  $
                  -
                  
                  
                  $
                  333Severance
      costs
                  
                  
                  -
                  
                  
                  
                  2,020Lease
      commitment accrual
                  
                  
                  -
                  
                  
                  
                  277$
                  -
                  
                  
                  $
                  2,630
  During
the three months ended March 31, 2009 we recorded $2.6 million in acquisition
related costs associated with the January 2, 2009 acquisition of Oxford. Deal
costs related primarily to outside legal and accounting costs. Severance costs
were the result of layoffs due to the redundancy issue that arose as a result of
the acquisition. In addition, we assumed a building lease in Milpitas,
California which was vacated upon the acquisition.  As a result, we
recorded a lease commitment charge on the operating lease in the first quarter
of 2009. See Note 9 of the condensed consolidated financial statements for
additional information.
  19
 
 Amortization
of Acquired Intangible Assets
 
 Amortization
of acquired intangible assets consists of amortization expense related to
developed core technology, tradename and customer base acquired as a result of
the Oxford acquisition in January 2009.
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsAmortization
      of acquired intangible assets
                  
                  $
                  648
                  
                  
                  $
                  854As
      a percentage of revenues
                  
                  
                  2.2
                  %
                  
                  
                  5.2
                  %
  Amortization
of acquired intangible decreased by $0.2 million or 24.1% in the three months
ended March 31, 2010 compared to the same period in 2009. The decrease was due
to the accelerated amortization of the developed core technology and the
customer base becoming fully amortized in December 2009.
 
 Interest
Income and Other, Net
  Three
      Months EndedMarch
      31,2010
                  
                  
                  2009in
      thousandsInterest
      income
                  
                  $
                  61
                  
                  
                  $
                  245Interest
      expense
                  
                  
                  (18
                  )
                  
                  
                  (252
                  )Other
      income
                  
                  
                  18
                  
                  
                  
                  55$
                  61
                  
                  
                  $
                  48
  Interest
income reflects interest earned on cash, cash equivalents and short-term and
long-term investment balances. Interest income for the three months ended March
31, 2010 decreased by $0.2 million or 75.1%, compared to the same period in
2009. The decrease was primarily due to lower investment balances and decreased
interest rates on new investments.
 
 Interest
expense for the three months ended March 31, 2010 of $18,000 consisted of
interest recorded on our capital lease obligations. Interest expense for the
three months ended March 31, 2009 of $0.3 million primarily consisted of
interest recorded on the $14.2 million note associated with the acquisition of
Oxford.
 
 Other
income includes foreign currency transaction gains and losses and other
miscellaneous transactions. Other income may fluctuate significantly due to
currency fluctuations.
 
 Loss
on Fair Value Remeasurement of Contingently Convertible Note
Payable
 
 As a part
of the consideration for the Oxford acquisition, we recorded a liability for the
contingent consideration due which was recorded at fair value as of the
acquisition date. We are required to remeasure the liability to fair value until
the contingency is resolved and record the change in fair value in
earnings.  The fair value of the note payable was based on 3.4 million
shares with a stock price of $1.82, or $6.2 million. As of March 31, 2009, the
closing stock price was $2.17, or $7.4 million. The loss on the fair value of
the note remeasurement is the increase in fair value of the liability of $1.2
million, which was recorded in the first quarter of 2009. In May 2009, the note
was converted into shares of common stock of PLX. See Note 7 of the condensed
consolidated financial statements for additional information on the contingent
consideration arrangement.
  20
  Provision
for Income Taxes
 
 A
provision for income tax of $0.2 million has been recorded for the three month
period ended March 31, 2010, compared to a provision of $19,000 for the same
period in 2009.  Income tax benefit for the three  months
ended March 31, 2010 is a result of applying the estimated annual effective tax
rate to cumulative profit before taxes adjusted for certain discrete items which
are fully recognized in the period they occur. The Company excluded from its
calculation of the effective tax rate losses of a certain foreign jurisdiction
since the Company cannot benefit those losses. For the same period in 2009, the
income tax expense is a result of applying the estimated annual effective tax
rate to cumulative profit before taxes adjusted for certain discrete
items.
  We
have determined that negative evidence supports the need for a full valuation
allowance against our net deferred tax assets at this time. We will maintain a
full valuation allowance until sufficient positive evidence exists to support a
reversal of the valuation allowance.
  As of
March 31, 2010, we have unrecognized tax benefits of approximately $3.7 million
of which none, if recognized, would result in a reduction of our effective tax
rate.  There were no material changes in the amount of unrecognized
tax benefits during the three months ended March 31, 2010.  Future
changes in the balance of unrecognized tax benefits will have no impact on the
effective tax rate as they are subject to a full valuation allowance. We do not
expect that the amount of our unrecognized tax benefits will significantly
change within the next twelve months.
 
 We are
subject to taxation in the United States and various states and foreign
jurisdictions.  The tax years 1998 through 2009 remain open to
examination by the federal and most state tax authorities due to certain
acquired net operating loss and overall credit carryforward
positions.
 
 Liquidity
and Capital Resources
 
 Cash
and Investments
 
 We invest
excess cash predominantly in debt instruments that are highly liquid, of
high-quality investment grade, and predominantly have maturities of less than
one year with the intent to make such funds readily available for operating
purposes. As of March 31, 2010 cash, cash equivalents, short and long-term
marketable securities were $41.9 million, an increase of $1.9 million from $40.0
million at December 31, 2009.
 
 Operating
Activities
 
 Cash
provided by (used in) operating activities primarily consists of net income
(loss) adjusted for certain non-cash items including depreciation, amortization,
share-based compensation expense, impairments, fair value remeasurements,
provisions for excess and obsolete inventories, other non-cash items, and the
effect of changes in working capital and other activities. Cash provided by
operating activities for the three months ended March 31, 2010 was
$2.6 million compared to cash used in operating activities of $9.4 million
in the same period in 2009. The increase in cash flow provided by operations was
primarily due to the 75% increase in revenues compared to the same period in
2009 and changes in our working capital. Our days sales outstanding decreased to
30 days at March 31, 2010 from 41 days at March 31, 2009 due to strong shipments
early in the quarter. Our days of inventory decreased to 79 days at March 31,
2010 from 83 days at March 31, 2009. Our days payables outstanding decreased to
52 days at March 31, 2010 from 63 days at March 31, 2009 primarily due to the
timing of vendor payments.
  Investing
Activities
 
 Our
investing activities are primarily driven by investment of our excess cash,
sales of investments, business acquisitions and capital expenditures. Capital
expenditures have generally been comprised of purchases of engineering
equipment, computer hardware, software, server equipment and furniture and
fixtures. The cash used in investing activities for the three months ended March
31, 2010 of $1.8 million was primarily due to the purchase of investments
(net of sales and maturities) of $1.3 million and capital expenditures of
$0.5 million. Cash provided by investing activities for the three months ended
March 31, 2009 of $10.1 million was due to sales and maturities of
investments (net of purchases of investments) of $6.0 million and cash acquired
through the acquisition of Oxford of $4.4 million, partially offset by capital
expenditures of $0.3 million.
  21
  Financing
Activities
 
 Cash used
in financing activities for the three months ended March 31, 2010 of $0.1
million was due to the payments made on capital lease obligations of $0.2
million, partially offset by proceeds from the exercise of stock options of $0.1
million. Cash used in financing activities for the three months ended March 31,
2009 of $0.1 million was due to the payments made on capital lease
obligations.
 
 Obligations
 
 As of
March 31, 2010, we had the following significant contractual obligations and
commercial commitments (in thousands):
  Payments
      due inLess
      than
                  
                  
                  1-3
                  
                  
                  More
      thanTotal
                  
                  
                  1
      Year
                  
                  
                  Years
                  
                  
                  3
      YearsOperating
      leases - facilities and equipment
                  
                  $
                  2,570
                  
                  
                  $
                  556
                  
                  
                  $
                  1,457
                  
                  
                  $
                  557Capital
      leases - IP
                  
                  
                  2,025
                  
                  
                  
                  1,125
                  
                  
                  
                  900
                  
                  
                  
                  -Software
      licenses
                  
                  
                  5,279
                  
                  
                  
                  3,113
                  
                  
                  
                  2,166
                  
                  
                  
                  -Inventory
      purchase commitments
                  
                  
                  9,899
                  
                  
                  
                  9,899
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      cash obligations
                  
                  $
                  19,773
                  
                  
                  $
                  14,693
                  
                  
                  $
                  4,523
                  
                  
                  $
                  557
  We
believe that our existing resources, together with cash generated from our
operations will be sufficient to meet our capital requirements for at least the
next twelve months.  Our future capital requirements will depend on
many factors, including the inventory levels we maintain, the level of
investment we make in new technologies and improvements to existing technologies
and the levels of monthly expenses required to launch new
products.  From time to time, we may also evaluate potential
acquisitions and equity investments complementary to our technologies and market
strategies.  To the extent that existing resources and future earnings
are insufficient to fund our future activities, we may need to raise additional
funds through public or private financings.  Additional funds may not
be available or, if available, we may not be able to obtain them on terms
favorable to us and our stockholders.
 
 Critical
Accounting Policies
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses and related disclosures of contingent assets and
liabilities in the condensed consolidated financial statements and accompanying
notes. The U.S. Securities and Exchange Commission (“SEC”) has defined a
company’s critical accounting policies as the ones that are most important to
the portrayal of the company’s financial condition and results of operations,
and which require the company to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain.  Based on this definition, we have identified
the critical accounting policies and judgments addressed below.  We
also have other key accounting policies which involve the use of estimates,
judgments and assumptions that are significant to understanding our results.
Although we believe that our estimates, assumptions and judgments are
reasonable, they are based upon information presently
available.  Actual results may differ significantly from these
estimates under different assumptions, judgments or conditions.
 
 Revenue
Recognition
 
 We
recognize revenue when persuasive evidence of an arrangement exists, delivery or
customer acceptance, where applicable, has occurred, the fee is fixed or
determinable, and collection is reasonably assured.
 
 Revenue
from product sales to direct customers and distributors is recognized upon
shipment and transfer of risk of loss, if we believe collection is reasonably
assured and all other revenue recognition criteria are met. We assess the
probability of collection based on a number of factors, including past
transaction history and the customer’s creditworthiness.  At the end of
each reporting period, the sufficiency of allowances for doubtful accounts is
assessed based on the age of the receivable and the individual customer’s
creditworthiness.
  22
 
 As of
March 31, 2010, we offer pricing protection to two distributors whereby the
Company supports the distributor’s resale product margin on certain products
held in the distributor’s inventory. We analyze current requests for credit in
process, also known as ship and debits, and inventory at the distributor to
determine the ending sales reserve required for this program.  We also
offer stock rotation rights to three distributors such that they can return up
to a total of 5% of products purchased every six months in exchange for other
PLX products of equal value. We analyze current stock rotation requests and past
experience, which has historically been insignificant, to determine the ending
sales reserve required for this program. In addition, we have arrangements with
a small number of customers offering a rebate program on various products. We
record rebates as a reduction of revenue when the rebate is in the form of cash
consideration. Reserves are reduced directly from revenue and recorded as a
reduction to accounts receivable.
 
 Inventory
Valuation
 
 We
evaluate the need for potential inventory provisions by considering a
combination of factors, including the life of the product, sales history,
obsolescence, and sales forecasts. Any adverse changes to our future product
demand may result in increased provisions, resulting in decreased gross
margin.  In addition, future sales on any of our previously written
down inventory may result in increased gross margin in the period of
sale.
 
 Allowance
for Doubtful Accounts
 
 We
evaluate the collectibility of our accounts receivable based on length of time
the receivables are past due. Generally, our customers have between thirty to
forty five days to remit payment of invoices. We record reserves for bad debts
against amounts due to reduce the net recognized receivable to the amount we
reasonably believe will be collected.  Once we have exhausted
collection efforts, we will reduce the related accounts receivable against the
allowance established for that receivable. We have certain customers with
individually large amounts due at any given balance sheet date.  Any
unanticipated change in one of those customers’ creditworthiness or other
matters affecting the collectibility of amounts due from such customers could
have a material adverse affect on our results of operations in the period in
which such changes or events occur. Historically, our write-offs have been
insignificant.
 
 Goodwill
 
 Our
methodology for allocating the purchase price related to business acquisitions
is determined through established valuation techniques. Goodwill is measured as
the excess of the cost of the acquisition over the amounts assigned to
identifiable tangible and intangible assets acquired less assumed liabilities.
We have one operating segment and business reporting unit, the sales of
semiconductor devices, and we perform goodwill impairment tests annually during
the fourth quarter and between annual tests if indicators of potential
impairment exist.
 
 Long-lived
Assets
 
 We review
long-lived assets, principally property and equipment and identifiable
intangibles, for impairment whenever events or circumstances indicate that the
carrying amount of assets may not be recoverable. We evaluate recoverability of
assets to be held and used by comparing the carrying amount of an asset to
estimated future net undiscounted cash flows generated by the
asset.  If such assets are considered to be impaired, the impairment
recognized is measured as the amount by which the carrying amount of the assets
exceeds the fair value of the assets.
 
 Share-Based
Compensation
 
 We
estimate the value of employee stock options on the date of grant using the
Black-Scholes model. The determination of fair value of share-based payment
awards on the date of grant using an option-pricing model is affected by our
stock price as well as assumptions regarding a number of highly complex and
subjective variables.  These variables include, but are not limited to
the expected stock price volatility over the term of the awards and the actual
and projected employee stock option exercise behaviors. The expected term of
options granted is derived from historical data on employee exercises and
post-vesting employment termination behavior. We calculate expected volatility
using the historical volatility of stock. We estimate the amount of forfeitures
at the time of grant and revise, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
 
 Taxes
 
 We
account for income taxes using the asset and liability
method.  Deferred taxes are determined based on the differences
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse.  Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. As of March
31, 2010, we carried a valuation allowance for the entire deferred tax asset as
a result of uncertainties regarding the realization of the asset balance. We
will maintain a full valuation allowance against our deferred tax assets until
sufficient positive evidence exists to support a reversal of the valuation
allowance.
  23
 
 Future
taxable income and/or tax planning strategies may eliminate all or a portion of
the need for the valuation allowance. In the event we determine we are able to
realize our deferred tax asset, an adjustment to the valuation allowance may
increase income in the period such determination is made.
 
 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
 
 Interest
Rate Risk
 
 We have
an investment portfolio of fixed income securities, including amounts classified
as cash equivalents, short-term investments and long-term investments of $32.4
million at March 31, 2010.  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 $2,000 decrease (less than 1%) in the fair value of
our available-for-sale securities.
 
 Foreign
Currency Exchange Risk
 
 All of
our revenue and a majority of our expense and capital purchasing activities are
transacted in U.S. dollars. However, we have significant operating activities
incurred in or exposed to other currencies, primarily the British Pound.
Therefore, significant strengthening or weakening of the U.S. dollar
relative to those foreign currencies could have a material impact on our results
of operations. We considered the historical trends in currency exchange rates
and determined that it was reasonably possible that a weighted average adverse
change of 20% in currency exchange rates could be experienced in the near term.
Such an adverse change would have resulted in an adverse impact on income before
taxes of $0.7 million as of March 31, 2010.
 
 ITEM 4.  CONTROLS AND PROCEDURES
 
 (a)
Evaluation of disclosure controls and procedures.
 
 Based on
their evaluation as of March 31, 2010, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended) were effective to ensure that the information required to
be disclosed by us in this Quarterly Report on Form 10-Q was recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and instructions for Form 10-Q and that such disclosure
controls and procedures were also effective to ensure that information required
to be disclosed in the reports we file or submit under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
 
 (b) Changes
in internal controls.
 
 There has
been no change in our internal control over financial reporting that occurred
during our most recent fiscal quarter that has materially affected or is
reasonably likely to materially affect our internal control over financial
reporting.
  24
 
 PART
II. OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 On
February 2, 2010, Internet Machines LLC ("Internet Machines") filed a complaint,
which has been served on PLX, entitled Internet Machines LLC v. Alienware
Corporation, et al., in the United States District Court for the Eastern
District of Texas, alleging infringement by PLX and the other defendants in the
lawsuit of two patents held by Internet Machines.  The complaint in
the lawsuit seeks unspecified compensatory damages, treble damages and
attorneys' fees, as well as injunctive relief against further infringement of
the Internet Machines patents.
 
 We intend
to answer or otherwise respond to the Internet Machines complaint in the near
future.  While it is not possible to determine the ultimate outcome of
this litigation, we believe that we have meritorious defenses with respect to
the claims asserted against us and we intend to vigorously defend our
position.  We believe that any ultimate liability in this litigation
will not have a material impact on our financial position or results of
operations.
 
 ITEM
1A.  RISK FACTORS
 
 FACTORS
THAT MAY AFFECT FUTURE OPERATING RESULTS
 
 This
quarterly report on Form 10-Q contains forward-looking statements which involve
risks and uncertainties.  Our actual results could differ materially
from those anticipated by such forward-looking statements as a result of certain
factors, including those set forth below.  The following risk factors
have been updated from those set forth in Item 1A. of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2009, and are restated in
full.
 
 Global
Economic Conditions May Continue to Have an Adverse Effect on Our Businesses and
Results of Operations
 
 In late
2008 and 2009, the severe tightening of the credit markets, turmoil in the
financial markets, and weakening global economy contributed to slowdowns in the
industries in which we operate.  Economic uncertainty exacerbated
negative trends in spending and caused certain customers to push out, cancel, or
refrain from placing orders, which reduced revenue. We have seen market
conditions improve in the second half of 2009 and the first quarter of 2010;
however, the outlook for 2010 remains uncertain. Difficulties in obtaining
capital and uncertain market conditions may lead to the inability of some
customers to obtain affordable financing, resulting in lower sales. Customers
with liquidity issues may lead to additional bad debt expense. These conditions
may also similarly affect key suppliers, which could affect their ability to
deliver parts and result in delays in the availability of
product.  Further, these conditions and uncertainty about future
economic conditions make it challenging for us to forecast our operating
results, make business decisions, and identify the risks that may affect our
business, financial condition and results of operations. In addition, we
maintain an investment portfolio that is subject to general credit, liquidity,
market and interest rate risks that may be exacerbated by deteriorating
financial market conditions and, as a result, the value and liquidity of the
investment portfolio could be negatively impacted and lead to
impairment.  If the current improving economic conditions are not
sustained and deteriorate further, or if we are not able to timely and
appropriately adapt to changes resulting from the difficult macroeconomic
environment, our business, financial condition or results of operations may be
materially and adversely affected.
 
 Our
Operating Results May Fluctuate Significantly Due To Factors Which Are Not
Within Our Control
 
 Our
quarterly operating results have fluctuated significantly in the past and are
expected to fluctuate significantly in the future based on a number of factors,
many of which are not under our control.  Our operating expenses,
which include product development costs and selling, general and administrative
expenses, are relatively fixed in the short-term.  If our revenues are
lower than we expect because we sell fewer semiconductor devices, delay the
release of new products or the announcement of new features, or for other
reasons, we may not be able to quickly reduce our spending in
response.
  Other
      circumstances that can affect our operating results
    include:
  ·
                the
      timing of significant orders, order cancellations and
      reschedulings;
 ·
                the
      loss of one or more significant
customers;
 ·
                introduction
      of products and technologies by our
competitors;
 ·
                the
      availability of production capacity at the fabrication facilities that
      manufacture our products;
  25
  ·
                our
      significant customers could lose market share that may affect our
      business;
 ·
                integration
      of our product functionality into our customers’
  products;
 ·
                our
      ability to develop, introduce and market new products and technologies on
      a timely basis;
 ·
                unexpected
      issues that may arise with devices in
  production;
 ·
                shifts
      in our product mix toward lower margin
products;
 ·
                changes
      in our pricing policies or those of our competitors or suppliers,
      including decreases in unit average selling prices of our
      products;
 ·
                the
      availability and cost of materials to our
  suppliers;
 ·
                general
      macroeconomic conditions; and
 ·
                political
      climate.
  These
factors are difficult to forecast, and these or other factors could adversely
affect our business.  Any shortfall in our revenues would have a
direct impact on our business.  In addition, fluctuations in our
quarterly results could adversely affect the market price of our common stock in
a manner unrelated to our long-term operating performance.
 
 The
Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances
In The Demand For Our Products
 
 In the
past, the semiconductor industry has been characterized by significant downturns
and wide fluctuations in supply and demand.  Also, during this time,
the industry has experienced significant fluctuations in anticipation of changes
in general economic conditions.  This cyclicality has led to
significant variances in product demand and production capacity.  It
has also accelerated erosion of average selling prices per unit on some of our
products.  We may experience periodic fluctuations in our future
financial results because of industry-wide conditions.
 
 Because
A Substantial Portion Of Our Net Sales Is Generated By A Small Number Of Large
Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our Net
Revenues And Earnings Will Be Harmed
 
 Historically,
a relatively small number of customers have accounted for a significant portion
of our net revenues in any particular period.  See Note 10 of the
condensed consolidated financial statements for customer
concentrations.
  We have
no long-term volume purchase commitments from any of our significant customers.
We cannot be certain that our current customers will continue to place orders
with us, that orders by existing customers will continue at the levels of
previous periods or that we will be able to obtain orders from new customers. In
addition, some of our customers supply products to end-market purchasers and any
of these end-market purchasers could choose to reduce or eliminate orders for
our customers' products. This would in turn lower our customers' orders for our
products.
 
 We
anticipate that sales of our products to a relatively small number of customers
will continue to account for a significant portion of our net
sales.  Due to these factors, the following have in the past and may
in the future reduce our net sales or earnings:
  ·
                the
      reduction, delay or cancellation of orders from one or more of our
      significant customers;
 ·
                the
      selection of competing products or in-house design by one or more of our
      current customers;
 ·
                the
      loss of one or more of our current customers;
or
 ·
                a
      failure of one or more of our current customers to pay our
      invoices.
  Intense
Competition In The Markets In Which We Operate May Reduce The Demand For Or
Prices Of Our Products
  Competition
in the semiconductor industry is intense.  If our main target market,
the microprocessor-based systems market, continues to grow, the number of
competitors may increase significantly.  In addition, new
semiconductor technology may lead to new products that can perform similar
functions as our products.  Some of our competitors and other
semiconductor companies may develop and introduce products that integrate into a
single semiconductor device the functions performed by our semiconductor
devices.  This would eliminate the need for our products in some
applications.
  In
addition, competition in our markets comes from companies of various sizes, many
of which are significantly larger and have greater financial and other resources
than we do and thus can better withstand adverse economic or market conditions.
Therefore, we cannot assure you that we will be able to compete successfully in
the future against existing or new competitors, and increased competition may
adversely affect our business.  See “Business -- Products,” and “--
Competition” in Part I of Item I of our Form 10-K for the year ended December
31, 2009.
  26
 
 Our
Independent Manufacturers May Not Be Able To Meet Our Manufacturing
Requirements
 
 We do not
manufacture any of our semiconductor devices.  Therefore, we are
referred to in the semiconductor industry as a “fabless” producer of
semiconductors. Consequently, we depend upon third party manufacturers to
produce semiconductors that meet our specifications.  We currently
have third party manufacturers located in China, Japan, Korea, Malaysia,
Singapore and Taiwan, that can produce semiconductors which meet our
needs.  However, as the semiconductor industry continues to progress
towards smaller manufacturing and design geometries, the complexities of
producing semiconductors will increase.  Decreasing geometries may
introduce new problems and delays that may affect product development and
deliveries.  Due to the nature of the semiconductor industry and our
status as a fabless semiconductor company, we could encounter
fabrication-related problems that may affect the availability of our
semiconductor devices, delay our shipments or may increase our
costs.
 
 In the
first quarter of 2010, increasing product demand throughout the semiconductor
industry challenged the industry’s supply chain and we were not able to procure
an adequate supply of product to fulfill our customers’ demand for our products.
We expect these supplier capacity constraints to continue into the second
quarter of 2010.
  Only a
small number of our semiconductor devices are currently manufactured by more
than one supplier.  We place our orders on a purchase order basis and
do not have a long term purchase agreement with any of our existing
suppliers.  In the event that the supplier of a semiconductor device
was unable or unwilling to continue to manufacture our products in the required
volume, we would have to identify and qualify a substitute
supplier.  Introducing new products or transferring existing products
to a new third party manufacturer or process may result in unforeseen device
specification and operating problems.  These problems may affect
product shipments and may be costly to correct.  Silicon fabrication
capacity may also change, or the costs per silicon wafer may
increase.  Manufacturing-related problems may have a material adverse
effect on our business.
  Lower
Demand For Our Customers’ Products Will Result In Lower Demand For Our
Products
 
 Demand
for our products depends in large part on the development and expansion of the
high-performance microprocessor-based systems markets including networking and
telecommunications, enterprise and consumer storage, imaging and industrial
applications.  The size and rate of growth of these
microprocessor-based systems markets may in the future fluctuate significantly
based on numerous factors.  These factors include the adoption of
alternative technologies, capital spending levels and general economic
conditions. Demand for products that incorporate high-performance
microprocessor-based systems may not grow.
 
 Our
Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our
Expected Revenues
  Our
customers typically perform numerous tests and extensively evaluate our products
before incorporating them into their systems.  The time required for
test, evaluation and design of our products into a customer’s equipment can
range from six to twelve months or more.  It can take an additional
six to twelve months or more before a customer commences volume shipments of
equipment that incorporates our products.  Because of this lengthy
sales cycle, we may experience a delay between the time when we increase
expenses for research and development and sales and marketing efforts and the
time when we generate higher revenues, if any, from these
expenditures.
  In
addition, the delays inherent in our lengthy sales cycle raise additional risks
of customer decisions to cancel or change product plans.  When we
achieve a design win, there can be no assurance that the customer will
ultimately ship products incorporating our products.  Our business
could be materially adversely affected if a significant customer curtails,
reduces or delays orders during our sales cycle or chooses not to release
products incorporating our products.
 
 Failure
To Have Our Products Designed Into The Products Of Electronic Equipment
Manufacturers Will Result In Reduced Sales
 
 Our
future success depends on electronic equipment manufacturers that design our
semiconductor devices into their systems.  We must anticipate market
trends and the price, performance and functionality requirements of current and
potential future electronic equipment manufacturers and must successfully
develop and manufacture products that meet these requirements.  In
addition, we must meet the timing requirements of these electronic equipment
manufacturers and must make products available to them in sufficient
quantities.  These electronic equipment manufacturers could develop
products that provide the same or similar functionality as one or more of our
products and render these products obsolete in their applications.
  27
 
 We do not
have purchase agreements with our customers that contain minimum purchase
requirements.  Instead, electronic equipment manufacturers purchase
our products pursuant to short-term purchase orders that may be canceled without
charge. We believe that in order to obtain broad penetration in the markets for
our products, we must maintain and cultivate relationships, directly or through
our distributors, with electronic equipment manufacturers that are leaders in
the embedded systems markets.  Accordingly, we will incur significant
expenditures in order to build relationships with electronic equipment
manufacturers prior to volume sales of new products. If we fail to develop
relationships with additional electronic equipment manufacturers to have our
products designed into new microprocessor-based systems or to develop sufficient
new products to replace products that have become obsolete, our business would
be materially adversely affected.
 
 Defects
In Our Products Could Increase Our Costs And Delay Our Product
Shipments
 
 Our
products are complex. While we test our products, these products may still have
errors, defects or bugs that we find only after commercial production has begun.
We have experienced errors, defects and bugs in the past in connection with new
products.
 
 Our
customers may not purchase our products if the products have reliability,
quality or compatibility problems. This delay in acceptance could make it more
difficult to retain our existing customers and to attract new
customers.  Moreover, product errors, defects or bugs could result in
additional development costs, diversion of technical and other resources from
our other development efforts, claims by our customers or others against us, or
the loss of credibility with our current and prospective customers. In the past,
the additional time required to correct defects has caused delays in product
shipments and resulted in lower revenues. We may have to spend significant
amounts of capital and resources to address and fix problems in new
products.
  We must
continuously develop our products using new process technology with smaller
geometries to remain competitive on a cost and performance
basis.  Migrating to new technologies is a challenging task requiring
new design skills, methods and tools and is difficult to achieve.
 
 Failure
Of Our Products To Gain Market Acceptance Would Adversely Affect Our Financial
Condition
 
 We
believe that our growth prospects depend upon our ability to gain customer
acceptance of our products and technology.  Market acceptance of
products depends upon numerous factors, including compatibility with other
products, adoption of relevant interconnect standards, perceived advantages over
competing products and the level of customer service available to support such
products.  There can be no assurance that growth in sales of new
products will continue or that we will be successful in obtaining broad market
acceptance of our products and technology.
 
 We expect
to spend a significant amount of time and resources to develop new products and
refine existing products. In light of the long product development cycles
inherent in our industry, these expenditures will be made well in advance of the
prospect of deriving revenues from the sale of any new products. Our ability to
commercially introduce and successfully market any new products is subject to a
wide variety of challenges during this development cycle, including start-up
bugs, design defects and other matters that could delay introduction of these
products to the marketplace. In addition, since our customers are not obligated
by long-term contracts to purchase our products, our anticipated product orders
may not materialize, or orders that do materialize may be cancelled. As a
result, if we do not achieve market acceptance of new products, we may not be
able to realize sufficient sales of our products in order to recoup research and
development expenditures. The failure of any of our new products to achieve
market acceptance would harm our business, financial condition, results of
operation and cash flows.
 
 A
Large Portion Of Our Revenues Is Derived From Sales To Third-Party Distributors
Who May Terminate Their Relationships With Us At Any Time
 
 We depend
on distributors to sell a significant portion of our products. For the three
months ended March 31, 2010 and 2009, sales through distributors accounted for
approximately 95% and 85%, 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.
  28
 
 The
Demand For Our Products Depends Upon Our Ability To Support Evolving Industry
Standards
 
 A
majority of our revenues are derived from sales of products, which rely on the
PCI Express, PCI, PCI-X, Serial ATA, Ethernet, 1394 and USB
standards.  If markets move away from these standards and begin using
new standards, we may not be able to successfully design and manufacture new
products that use these new standards.  There is also the risk that
new products we develop in response to new standards may not be accepted in the
market.  In addition, these standards are continuously evolving, and
we may not be able to modify our products to address new
specifications.  Any of these events would have a material adverse
effect on our business.
 
 We
Must Make Significant Research And Development Expenditures Prior To Generating
Revenues From Products
 
 To
establish market acceptance of a new semiconductor device, we must dedicate
significant resources to research and development, production and sales and
marketing.  We incur substantial costs in developing, manufacturing
and selling a new product, which often significantly precede meaningful revenues
from the sale of this product.  Consequently, new products can require
significant time and investment to achieve profitability.  Investors
should understand that our efforts to introduce new semiconductor devices or
other products or services may not be successful or profitable.  In
addition, products or technologies developed by others may render our products
or technologies obsolete or noncompetitive.
 
 We record
as expenses the costs related to the development of new semiconductor devices
and other products as these expenses are incurred.  As a result, our
profitability from quarter to quarter and from year to year may be adversely
affected by the number and timing of our new product launches in any period and
the level of acceptance gained by these products.
 
 We
Could Lose Key Personnel Due To Competitive Market Conditions And
Attrition
 
 Our
success depends to a significant extent upon our senior management and key
technical and sales personnel.  The loss of one or more of these
employees could have a material adverse effect on our business.  We do
not have employment contracts with any of our executive officers.
 
 Our
success also depends on our ability to attract and retain qualified technical,
sales and marketing, customer support, financial and accounting, and managerial
personnel.  Competition for such personnel in the semiconductor
industry is intense, and we may not be able to retain our key personnel or to
attract, assimilate or retain other highly qualified personnel in the
future.  In addition, we may lose key personnel due to attrition,
including health, family and other reasons.  We have experienced, and
may continue to experience, difficulty in hiring and retaining candidates with
appropriate qualifications.  If we do not succeed in hiring and
retaining candidates with appropriate qualifications, our business could be
materially adversely affected.
 
 The
Successful Marketing And Sales Of Our Products Depend Upon Our Third Party
Relationships, Which Are Not Supported By Written Agreements
 
 When
marketing and selling our semiconductor devices, we believe we enjoy a
competitive advantage based on the availability of development tools offered by
third parties.  These development tools are used principally for the
design of other parts of the microprocessor-based system but also work with our
products.  We will lose this advantage if these third party tool
vendors cease to provide these tools for existing products or do not offer them
for our future products.  This event could have a material adverse
effect on our business.  We have no written agreements with these
third parties, and these parties could choose to stop providing these tools at
any time.
  Our
Limited Ability To Protect Our Intellectual Property And Proprietary Rights
Could Adversely Affect Our Competitive Position
  Our
future success and competitive position depend upon our ability to obtain and
maintain proprietary technology used in our principal
products.  Currently, we have limited protection of our intellectual
property in the form of patents and rely instead on trade secret
protection.  Our existing or future patents may be invalidated,
circumvented, challenged or licensed to others.  The rights granted
there under may not provide competitive advantages to us.  In
addition, our future patent applications may not be issued with the scope of the
claims sought by us, if at all.  Furthermore, others may develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned or licensed by us.  In
addition, effective patent, trademark, copyright and trade secret protection may
be unavailable or limited in foreign countries where we may need
protection.  We cannot be sure that steps taken by us to protect our
technology will prevent misappropriation of the technology.
  29
 
 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.  If we are sued in intellectual property litigation, such
litigation may 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.
 
 Acquisitions
Could Adversely Affect Our Financial Condition And Could Expose Us To
Unanticipated Liabilities
  As part
of our business strategy, we expect to continue to review acquisition prospects
that would complement our existing product offerings, improve market coverage or
enhance our technological capabilities.   Potential future
acquisitions could result in any or all of the following:
 
 ·
                potentially
      dilutive issuances of equity
securities;
 ·
                large
      acquisition-related write-offs;
 ·
                potential
      patent and trademark infringement claims against the acquired
      company;
 ·
                the
      incurrence of debt and contingent liabilities or amortization expenses
      related to other intangible assets;
 ·
                difficulties
      in the assimilation of operations, personnel, technologies, products and
      the information systems of the acquired
  companies;
 ·
                the
      incurrence of additional operating losses and expenses of potential
      companies we may acquire;
 ·
                possible
      delay or failure to achieve expected
synergies;
 ·
                diversion
      of management’s attention from other business
  concerns;
 ·
                risks
      of entering geographic and business markets in which we have limited or no
      prior experience; and
 ·
                potential
      loss of key employees.
  Because
We Sell Our Products To Customers Outside Of The United States And Because Our
Products Are Incorporated With Products Of Others That Are Sold Outside Of The
United States We Face Foreign Business, Political And Economic
Risks
 
 Sales
outside of the United States accounted for approximately 86% of our revenues for
the three months ended March 31, 2010.  In 2009 and 2008, sales
outside of the United States accounted for approximately 84% and 77% of our
revenues, respectively.  Sales outside of the United States may
fluctuate in future periods and are expected to account for a large portion of
our revenues.  In addition, equipment manufacturers who incorporate
our products into their products sell their products outside of the United
States, thereby exposing us indirectly to foreign risks.  Further,
most of our semiconductor products are manufactured outside of the United
States.  Accordingly, we are subject to international risks,
including:
  ·
                difficulties
      in managing distributors;
 ·
                difficulties
      in staffing and managing foreign subsidiary and branch
      operations;
 ·
                political
      and economic instability;
 ·
                foreign
      currency exchange fluctuations;
 ·
                difficulties
      in accounts receivable collections;
 ·
                potentially
      adverse tax consequences;
 ·
                timing
      and availability of export
licenses;
 ·
                changes
      in regulatory requirements, tariffs and other
  barriers;
 ·
                difficulties
      in obtaining governmental approvals for telecommunications and other
      products; and
 ·
                the
      burden of complying with complex foreign laws and
  treaties.
  30
 
 Because
sales of our products have been denominated to date exclusively in United States
dollars, increases in the value of the United States dollar will increase the
price of our products so that they become relatively more expensive to customers
in the local currency of a particular country, which could lead to a reduction
in sales and profitability in that country.
  We
May Be Required To Record A Significant Charge To Earnings If Our Goodwill Or
Amortizable Intangible Assets Become Impaired
 
 Under
generally accepted accounting principles, we review our amortizable intangible
and long lived assets for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. Goodwill is tested for
impairment annually, during the fourth quarter and between annual tests in
certain circumstances.  Factors that may be considered a change in
circumstances, indicating that the carrying value of our goodwill, amortizable
intangible assets or other long lived assets may not be recoverable, include a
persistent decline in stock price and market capitalization, reduced future cash
flow estimates, and slower growth rates in our industry. We may be required to
record a significant charge in our financial statements during the period in
which any additional impairment of our goodwill, amortizable intangible assets
or other long lived assets is determined, which would adversely impact our
results of operations.
 
 Our
Principal Stockholders Have Significant Voting Power And May Take Actions That
May Not Be In The Best Interests Of Our Other Stockholders
 
 Our
executive officers, directors and other principal stockholders, in the
aggregate, beneficially own a substantial amount of our outstanding common
stock. Although these stockholders do not have majority control, they currently
have, and likely will continue to have, significant influence with respect to
the election of our directors and approval or disapproval of our significant
corporate actions.  This influence over our affairs might be adverse
to the interests of other stockholders.  In addition, the voting power
of these stockholders could have the effect of delaying or preventing a change
in control of PLX.
 
 The
Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely
Affect The Rights Of The Holders Of Our Common Stock
 
 Anti-takeover
provisions of Delaware law and our Certificate of Incorporation may make a
change in control of PLX more difficult, even if a change in control would be
beneficial to the stockholders.  These provisions may allow the Board
of Directors to prevent changes in the management and control of
PLX.
 
 As part
of our anti-takeover devices, our Board of Directors has the ability to
determine the terms of preferred stock and issue preferred stock without the
approval of the holders of the common stock.  Our Certificate of
Incorporation allows the issuance of up to 5,000,000 shares of preferred
stock.  There are no shares of preferred stock
outstanding.  However, because the rights and preferences of any
series of preferred stock may be set by the Board of Directors in its sole
discretion without approval of the holders of the common stock, the rights and
preferences of this preferred stock may be superior to those of the common
stock.  Accordingly, the rights of the holders of common stock may be
adversely affected.  Consistent with Delaware law, our Board of
Directors may adopt additional anti-takeover measures in the
future.
  31
 ITEM
6.  EXHIBITS
  ExhibitNumber
                  
                  Description31.1
                  
                  Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                  
                  Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
                  
                  Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63
      of Title 18, United States Code, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                  
                  Certification
      of Chief Finanical Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63
      of Title 18, United States Code, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
  32
  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
6, 2010
 
 By     /s/ Arthur O.
Whipple
 Arthur
O. Whipple
 Chief
Financial Officer
 (Principal Financial Officer and duly
authorized signatory)
  33
 
 EXHIBIT
INDEX
  ExhibitNumber
                  
                  Description31.1
                  
                  Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                  
                  Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
                  
                  Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63
      of Title 18, United States Code, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                  
                  Certification
      of Chief Finanical Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63
      of Title 18, United States Code, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 34