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 THESECURITIES EXCHANGE
      ACT OF
      1934.




FOR
      THE QUARTERLY PERIOD
      ENDED December 31, 2007




OR




 ̈
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15 (d) OF THESECURITIES EXCHANGE
      ACT OF 1934.




For
      the transition period from
             to
            .




Commission
      file number
      000-24487







MIPS
      TECHNOLOGIES,
      INC.


(Exact
      name of registrant as specified in its charter)






DELAWARE
            77-0322161(State
                or other jurisdiction of
              Incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                Number)




1225
      CHARLESTON ROAD, MOUNTAIN VIEW,
      CA 94043-1353


(Address
      of principal executive offices)




Registrant’s
      telephone number, including area code: (650) 567-5000





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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See the definition of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
              accelerated filer ̈
            Accelerated
              filer  x
            Non-accelerated
              filer   ̈
            Smaller
              reporting company   ̈




Indicate
      by check mark whether the registrant is a Shell Company (as defined in Rule12b-2
      of the Exchange Act).    Yes   ̈    No
  x




As
      of
      October 31, 2007, the number of outstanding shares of the registrant’s common
      stock, $0.001 par value, was 44,021,070.












PART
                  I – FINANCIAL
                  INFORMATIONItem 1.
              Financial
                  Statements
                  (Unaudited):Condensed
                  Consolidated Balance
                  SheetsCondensed
                  Consolidated Statements of
                  OperationsCondensed
                  Consolidated Statements of Cash
                  FlowsNotes
                  to Condensed Consolidated Financial
                  StatementsItem 2.
              Management’s
                  Discussion and Analysis of Results of
                  Operations and Financial ConditionItem 3.
              Quantitative
                  and Qualitative Disclosures About Market
                  RiskItem 4.
              Controls
                  and ProceduresPART
                  II – OTHER INFORMATIONItem 1.
              Legal
                  ProceedingsItem 1A
              Risk
                  FactorsItem
                  4.
              Submission
                  of Matters to a Vote of Security
                  HoldersItem 6.
              ExhibitsSignatures
  Table
            of Contents


PART
        I – FINANCIAL INFORMATION
   ITEM 1. 
FINANCIAL
        STATEMENTS
  MIPS
        TECHNOLOGIES, INC.
  CONDENSED
        CONSOLIDATED BALANCE SHEETS
  (In
        thousands)
   December 31,
                2007
              
              
              June 30,
                2007(unaudited)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              15,188
              
              
              $
              119,039Marketable
                  investments
              
              
              -
              
              
              
              25,845Accounts
                  receivable, net
              
              
              15,441
              
              
              
              5,212Unbilled
                  receivables
              
              
              5,079
              
              
              
              -Prepaid
                  expenses and other current assets
              
              
              18,882
              
              
              
              2,472Total
                  current assets
              
              
              54,590
              
              
              
              152,568Equipment,
                  furniture and property, net
              
              
              15,715
              
              
              
              5,781Goodwill
              
              
              114,971
              
              
              
              565Intangible
                  assets, net
              
              
              35,638
              
              
              
              3,369Other
                  assets
              
              
              34,251
              
              
              
              12,579$
              255,165
              
              
              $
              174,862LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCurrent
                  liabilities:Accounts
                  payable
              
              $
              5,159
              
              
              $
              503Accrued
                  liabilities
              
              
              51,423
              
              
              
              16,118Short-term
                  debt
              
              
              22,053
              
              
              
              —Deferred
                  revenue
              
              
              4,542
              
              
              
              2,633Total
                  current liabilities
              
              
              83,177
              
              
              
              19,254Long-term
                  liabilities
              
              
              27,440
              
              
              
              5,726110,617
              
              
              
              24,980Stockholders’
                  equity:Common
                  stock
              
              
              43
              
              
              
              43Preferred
                  stock
              
              
              -
              
              
              
              —Additional
                  paid-in capital
              
              
              247,400
              
              
              
              240,444Accumulated
                  other comprehensive income
              
              
              6,998
              
              
              
              435Accumulated
                  deficit
              
              
              (109,893)
              
              
              
              (91,040
              )Total
                  stockholders’ equity
              
              
              144,548
              
              
              
              149,882$
              255,165
              
              
              $
              174,862
  See
        accompanying notes.
  1
 Table
            of Contents
  MIPS
        TECHNOLOGIES, INC.
  CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
        (unaudited)
  (In
        thousands, except per share data)
  
 Three
                  Months Ended
              
              
              Six
                  Months EndedDecember 31,
              
              
              December 31,2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue:Royalties
              
              $
              12,515
              
              
              $
              11,188
              
              
              $
              23,035
              
              
              $
              22,394Contract
                  revenue
              
              
              13,935
              
              
              
              9,817
              
              
              
              25,568
              
              
              
              18,161Total
                  revenue
              
              
              26,450
              
              
              
              21,005
              
              
              
              48,603
              
              
              
              40,555Costs
                  and expenses:Costs
                  of contract revenue
              
              
              9,379
              
              
              
              378
              
              
              
              12,703
              
              
              
              770Research
                  and development
              
              
              9,493
              
              
              
              8,251
              
              
              
              18,506
              
              
              
              16,024Sales
                  and marketing
              
              
              6,153
              
              
              
              5,154
              
              
              
              11,739
              
              
              
              9,971General
                  and administrative
              
              
              7,869
              
              
              
              4,577
              
              
              
              14,878
              
              
              
              8,888Acquired
                  in-process research and development
              
              
              910
              
              
              
              —
              
              
              
              6,350
              
              
              
              —Total
                  costs and expenses
              
              
              33,804
              
              
              
              18,360
              
              
              
              64,176
              
              
              
              35,653Operating
                  income (loss)
              
              
              (7,354
              )
              
              
              2,645
              
              
              
              (15,573
              )
              
              
              4,902Other
                  income (expense), net
              
              
              (1,220
              )
              
              
              1,544
              
              
              
              (727
              )
              
              
              2,974Income
                  (loss) before income taxes
              
              
              (8,574
              )
              
              
              4,189
              
              
              
              (16,300
              )
              
              
              7,876Provision
                  for income taxes
              
              
              3,511
              
              
              
              1,601
              
              
              
              2,816
              
              
              
              2,965Net
                  income (loss)
              
              $
              (12,085
              )
              
              $
              2,588
              
              
              $
              (19,116
              )
              
              $
              4,911Net
                  income (loss) per basic share
              
              $
              (0.28
              )
              
              $
              0.06
              
              
              $
              (0.44
              )
              
              $
              0.11Net
                  income (loss) per diluted share
              
              $
              (0.28
              )
              
              $
              0.06
              
              
              $
              (0.44
              )
              
              $
              0.11Shares
                  used in computing net income (loss) per basic share
              
              
              43,902
              
              
              
              43,533
              
              
              
              43,834
              
              
              
              43,497Shares
                  used in computing net income (loss) per diluted share
              
              
              43,902
              
              
              
              45,703
              
              
              
              43,834
              
              
              
              45,402
 
 See
        accompanying notes.
  2
 Table
            of Contents
  MIPS
        TECHNOLOGIES, INC.
  CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
        (unaudited)
  (In
        thousands)
 
 
 Six
                  Months Ended
                December 31,2007
              
              
              2006Operating
                  activities:Net
                  income (loss)
              
              $
              (19,116
              )
              
              $
              4,911Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:Depreciation
              
              
              1,603
              
              
              
              1,006Stock-based
                  compensation
              
              
              4,343
              
              
              
              3,830Acquired
                  in-process research and development
              
              
              6,350
              
              
              
              —Amortization
                  of intangibles
              
              
              3,794
              
              
              
              680Other
                  non-cash charges
              
              
              396
              
              
              
              (484
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              296
              
              
              
              (1,225
              )Prepaid
                  expenses and other current assets
              
              
              742
              
              
              
              746Other
                  assets
              
              
              550
              
              
              
              (2,848
              )Accounts
                  payable
              
              
              1,577
              
              
              
              (1,163
              )Accrued
                  compensation
              
              
              (2,446
              )
              
              
              1,276Other
                  current accrued liabilities
              
              
              (2,322
              )
              
              
              1,987Income
                  tax payable
              
              
              (2,706
              )
              
              
              1,614Deferred
                  revenue
              
              
              (168
              )
              
              
              444Long-term
                  liabilities
              
              
              4,205
              
              
              
              2,093Net
                  cash provided by (used in) operating activities
              
              
              (2,902
              )
              
              
              12,867Investing
                  activities:Purchases
                  of marketable investments
              
              
              —
              
              
              
              (24,507
              )Proceeds
                  from sales of marketable investments
              
              
              25,940
              
              
              
              25,000Capital
                  expenditures
              
              
              (1,012
              )
              
              
              (3,524
              )Acquisition
                  of Chipidea Microelectronica, S.A., net of cash acquired
              
              
              (120,601
              )
              
              
              —Restricted
                  cash
              
              
              (27,163
              )
              
              
              —Net
                  cash used in investing activities
              
              
              (122,836
              )
              
              
              (3,031
              )Financing
                  activities:Net
                  proceeds from issuance of common stock
              
              
              2,273
              
              
              
              386Proceeds
                  from short-term debt, net
              
              
              19,423
              
              
              
              —Repayments
                  of capital lease obligations
              
              
              27
              
              
              
              —Net
                  cash provided by financing activities
              
              
              21,723
              
              
              
              386Effect
                  of exchange rate on cash
              
              
              164
              
              
              
              42Net
                  increase (decrease) in cash and cash equivalents
              
              
              (103,851
              )
              
              
              10,264Cash
                  and cash equivalents, beginning of period
              
              
              119,039
              
              
              
              101,481Cash
                  and cash equivalents, end of period
              
              $
              15,188
              
              
              $
              111,745Supplemental
                  disclosures of cash transaction:Income
                  taxes paid
              
              
              1,505
              
              
              
              1,374Interest
                  paid
              
              
              788
              
              
              
              —
  See
        accompanying notes.
   3
 Table
            of Contents
  
 MIPS
        TECHNOLOGIES, INC.
  NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS—UNAUDITED
  Note
        1.  Description of Business and Basis of Presentation.
  MIPS
        Technologies, Inc. is a leading supplier of intellectual property (IP) to
        the
        global semiconductor industry. Our technology solutions include the
        high-performance MIPS architecture and related embedded processor cores,
        which
        are broadly used in markets such as digital entertainment, wired and wireless
        communications and networking, office automation, security, microcontrollers,
        and automotive. With the acquisition of Chipidea Microelectrónica S.A.
        (Chipidea) on August 27, 2007, we have become the leading supplier of IP to
        semiconductor companies for analog and mixed signal devices.
  Following
        the acquisition of Chipidea we are organized in two business groups, the
        Processor Business Group (PBG) and the Analog Business Group
        (ABG).  The PBG provides industry-standard processor architectures and
        cores for digital consumer and business applications.  The ABG
        includes the Chipidea operation and provides analog and mixed-signal IP that
        produces cost-efficient System-on Chip (SOC) applications and turnkey
        solutions.
  Basis
        of
        Presentation.
  The
        condensed consolidated financial statements have been prepared in accordance
        with the rules and regulations of the Securities and Exchange Commission
        (SEC)
        applicable to interim financial information. Certain information and footnote
        disclosures that would be in financial statements prepared in accordance
        with
        generally accepted accounting principles have been omitted in these interim
        statements as allowed by such SEC rules and regulations. The balance sheet
        at
        June 30, 2007 has been derived from audited financial statements, but does
        not include all disclosures required by generally accepted accounting
        principles. However, we believe that the disclosures are adequate to make
        the
        information presented not misleading. The unaudited condensed consolidated
        financial statements included in this Form 10-Q should be read in conjunction
        with the audited consolidated financial statements and related notes for
        the
        fiscal year ended June 30, 2007, included in our 2007 Annual Report on Form
        10-K.
 
 The
        unaudited results of operations for the interim periods shown in these financial
        statements are not necessarily indicative of operating results for the entire
        fiscal year. In our opinion, the condensed consolidated financial statements
        include all normal recurring adjustments necessary to present fairly the
        financial position, results of operations and cash flows for each interim
        period
        shown.
 
 Use
        of
        Estimates. The preparation of financial statements in conformity
        with accounting principles generally accepted in the United States requires
        us
        to make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenue and expenses
        during
        the reporting period. Actual results inevitably will differ from those
        estimates, and such differences may be material to the financial
        statements.
  Revenue
        Recognition.
  Royalty
        Revenue
  We
        classify all revenue that involves the sale of a licensee’s products as royalty
        revenue. Royalty revenue is recognized in the quarter in which a report is
        received from a licensee detailing the shipments of products incorporating
        our IP components, which is generally in the quarter following the sale of
        the licensee’s product to its customer. Royalties are calculated either as a
        percentage of the revenue received by the seller on sales of such products
        or on
        a per unit basis. We periodically engage a third party to perform royalty
        audits
        of our licensees, and if these audits indicate any over- or under-reported
        royalties, we account for the results when they are identified.
   4
 Table
            of Contents
  Contract
        Revenue
  Processor
        Business Group
  We
        derive
        revenue from license fees for the transfer of proven and reusable IP components
        or from engineering services. We enter into licensing agreements that provide
        licensees the right to incorporate our IP components in their products with
        terms and conditions that have historically varied by licensee. Revenue earned
        under contracts with our licensees is classified as either contract revenue
        or
        royalties. We recognize revenue in accordance with Staff Accounting Bulletin
        (SAB) No. 104, Revenue
        Recognition(SAB 104), and for multiple deliverable arrangements we
        follow the guidance in EITF 00-21, Revenue Arrangements with
        Multiple
        Deliverables, to determine whether there is more than one unit of
        accounting. To the extent that the deliverables are separable into multiple
        units of accounting, we then allocate the total fee on such arrangements
        to the
        individual units of accounting using the residual method. We then recognize
        revenue for each unit of accounting depending on the nature of the
        deliverable(s) comprising the unit of accounting (following SAB
        No. 104).
  We
        derive
        revenue from license fees for currently available technology or from engineering
        services for technology under development. Each of these types of contracts
        includes a nonexclusive license for the underlying IP. Fees for contracts
        for
        currently available technology include:  license fees relating to
        our IP, including processor designs; maintenance and support, typically for
        one year; and royalties payable following the sale by our licensees of products
        incorporating the licensed technology. Generally, our customers pay us a
        single
        upfront fee that covers the license and first year maintenance and support.
        Our
        deliverables in these arrangements include (a) processor designs and
        related IP and (b) maintenance and support. The license for our IP, which
        includes processor designs, has standalone value and can be used by the licensee
        without maintenance and support. Further, objective and reliable evidence
        of
        fair value exists for maintenance and support based on specified renewal
        rates.
        Accordingly, (a) license fees and (b) maintenance and support fees are
        each treated as separate units of accounting. Total upfront fees are allocated
        to the license of processor designs and related IP and maintenance and support
        using the residual method. Designs and related IP are initially delivered
        followed by maintenance and support. Objective and reliable evidence of the
        fair
        value exists for maintenance and support. However, no such evidence of fair
        value exists for processor designs and related IP. Consistent with the residual
        method, the amount of consideration allocated to processor designs and related
        IP equals the total arrangement consideration less the fair value of maintenance
        and support, which is based on specified renewal rates. Following the guidance
        in SAB No. 104, fees for or allocated to licenses to currently available
        technology are recorded as revenue upon the execution of the license agreement
        when there is persuasive evidence of an arrangement, fees are fixed or
        determinable, delivery has occurred and collectibility is reasonably assured.
        We
        assess the credit worthiness of each customer when a transaction under the
        agreement occurs. If collectibility is not considered reasonably assured,
        revenue is recognized when the fee is collected. Other than maintenance and
        support, there is no continuing obligation under these arrangements after
        delivery of the IP.
  Contracts
        relating to technology under development also can involve delivery of a license
        to IP, including processor designs. However, in these arrangements we undertake
        best-efforts engineering services intended to further the development of
        certain
        technology that has yet to be developed into a final processor design. Rather
        than paying an upfront fee to license completed technology, customers in
        these
        arrangements pay us milestone fees as we perform the engineering services.
        If
        the development work results in completed technology in the form of a processor
        design and related IP, the customer is granted a license to such completed
        technology at no additional fee. These contracts typically include the purchase
        of first year maintenance and support commencing upon the completion of a
        processor design and related IP for an additional fee, which fee is equal
        to the
        renewal rate specified in the arrangement. The licensee is also obligated
        to pay
        us royalties following the sale by our licensee of products incorporating
        the
        licensed technology. We continue to own the IP that we develop and we retain
        the
        fees for engineering services regardless of whether the work performed results
        in a completed processor design.  We develop IP with intent to license
        it to multiple customers.  Our cost of development of such IP
        significantly exceeds the license revenue from a particular customer
        arrangement.  Costs incurred with respect to internally developed
        technology and engineering services are included in research and development
        expenses, as they are not directly related to any particular licensee, license
        agreement, or license fees. Fees for engineering services in contracts for
        technology under development, which contracts are performed on a best efforts
        basis, are recognized as revenue as services are performed subsequent to
        the
        execution of the arrangement; however, we limit the amount of revenue recognized
        to the aggregate amount received or currently due pursuant to the milestone
        terms. As engineering activities are best-efforts and at-risk and because
        the
        customer must pay an additional fee for the first year of maintenance and
        support if the activities are successful, the maintenance and support is
        a
        contingent deliverable that is not accounted for upfront under contracts
        relating to technology under development.
   5
 Table
            of Contents
  Analog
        Business Group
  License
        agreements provide for the performance of engineering services involving
        design
        and development of customized analog and mixed signal IP from basic building
        blocks to complete subsystems, including the development of new IP or
        configuring existing IP to customer’s specifications.  Fees are
        determined based on a number of factors including direct cost and the value
        of
        the underlying technology.  We expect to earn gross margins for each
        agreement.  We recognize revenue from these arrangements under
        Statement of Position (SOP) No. 81-1, Accounting for Performance
        of
        Construction-Type and Certain Production-Type Contracts(SOP 81-1), for
        licensing of new IP development or configuration of existing IP to a customer’s
        specification.  Revenue is recognized on a percentage of completion
        basis from the signing of the license and design agreement through silicon
        validation for new IP development and through the completion of all outstanding
        obligations for configuration of existing IP.  The amount of revenue
        recognized is based on the total license fees under the license agreement
        and
        the percentage of completion is measured by the actual costs incurred to
        date on
        the project compared to the total estimated project cost. Revenue is recognized
        only when collectibility is probable. The estimates of project costs are
        based
        on the IP specifications and prior experience of the same or similar IP
        development and are reviewed and updated regularly by
        management.  Under the percentage of completion method, provisions for
        estimated losses on uncompleted contracts are recognized in the period in
        which
        the likelihood of such losses is determined.  Licensing of existing IP
        that does not require any configuration is recognized upon delivery of the
        IP
        and when all other revenue recognition criteria under SAB 104 have been
        met.  Direct costs incurred in the design and development of the IP
        under these arrangements is included in cost of contract revenue.
  Maintenance
        and Support
  Certain
        arrangements in the PBG and ABG also include maintenance and support obligation.
        Under such arrangements, we provide unspecified upgrades, bug fixes and
        technical support. No other upgrades, products or other post-contract support
        are provided. These arrangements are renewable annually by the customer.
        Maintenance and support revenue is recognized at its fair value ratably over
        the
        period during which the obligation exists, typically 12 months. The fair
        value
        of any maintenance and support obligation is established based on the specified
        renewal rate for such support and maintenance. Maintenance and support revenue
        is included in contract revenue in the statement of operations.
 
 Accounts
        Receivable.  Accounts receivable includes amounts billed and
        currently due from customers, net of the allowance for doubtful accounts..
        The
        allowance for doubtful accounts was $1.5 million and $4,000 at December 31,
        2007
        and June 30, 2007.
  Unbilled
        Receivables.Unbilled receivables
        are
        primarily related to revenues on contracts that have been recognized for
        accounting purposes under the percentage of completion method but have not
        yet
        been billed to customers.  We invoice the customer upon completion of
        the contractual milestone.
 
 Equipment,
        Furniture and Property.    Equipment, furniture and
        property are stated at cost and depreciation, which includes the amortization
        of
        assets under capital leases, is computed using the straight-line method.
        Useful
        lives of generally three years are used for equipment and furniture, and
        useful lives of up to fifty years are used for buildings. Leasehold improvements
        are depreciated over the shorter of the remaining life of the improvement
        or the
        terms of the related leases.
 
 Reclassifications.  Certain
        balances in our fiscal 2007 consolidated financial statements have been
        reclassified to conform to the presentation in fiscal 2008.
  Stock-Based
        Compensation. We account for stock-based compensation in accordance with
        Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004)
Share-Based Payment
        (SFAS 123R). Compensation cost recognized during the three and six-month
        periods
        ended December 31, 2007 and 2006, includes: (a) compensation cost for all
        share-based payments granted prior to, but not yet vested as of July 1,
        2005, based on the grant date fair value estimated in accordance with the
        original provisions of SFAS 123 amortized on an accelerated basis over the
        options’ vesting period, and (b) compensation cost for all share-based
        payments granted subsequent to July 1, 2005, based on the grant-date fair
        value estimated in accordance with the provisions of SFAS 123R amortized
        on a
        straight-line basis over the options’ vesting period.
   6
 Table
            of Contents
  The
        following table shows total stock-based employee compensation expense (see
        Note
        12, “Stock-Based Compensation” for types of stock-based employee arrangements)
        included in the condensed consolidated statement of operations for the three
        and
        six-month periods ended December 31, 2007 and 2006 (in thousands):
 
 Three Months
                Ended
                December 31,
                2007
              
              
              Three Months
                Ended
                December 31,
                2006
              
              
              Six
                  Months
                Ended
                December 31,
                2007
              
              
              Six
                  Months
                Ended
                December 31,
                2006Costs
                  and expenses:Research
                  and development
              
              $
              825
              
              
              $
              714
              
              
              $
              1,658
              
              
              $
              1,503Sales
                  and marketing
              
              
              636
              
              
              
              534
              
              
              
              1,298
              
              
              
              1,100General
                  and administrative
              
              
              621
              
              
              
              520
              
              
              
              1,517
              
              
              
              1,228Total
                  stock-based compensation expense
              
              $
              2,082
              
              
              $
              1,768
              
              
              $
              4,473
              
              
              $
              3,831
 
 There
        was
        no capitalized stock-based employee compensation cost as of December 31,
        2007 or
        2006. There were no material recognized tax benefits during the second quarter
        of either fiscal 2008 or fiscal 2007.
  For
        restricted common stock issued at discounted prices, we recognize compensation
        expense over the vesting period for the difference between the exercise or
        purchase price and the fair market value on the measurement date. Total
        compensation expense recognized in our financial statements for restricted
        stock
        awards was $26,000 and $61,000 for the three- and six-month periods ended
        December 31, 2007 and $35,000 and $71,000 for the three-month and six-month
        periods ended December 31, 2006.
  Note
        2.  Computation of Earnings Per Share
 
 Earnings
        per
        Share. We follow the provisions of SFAS No. 128, Earnings per Share(SFAS 128). SFAS 128 requires the presentation of basic and fully
        diluted earnings per share. Basic earnings per share is computed by dividing
        income available to common stockholders by the weighted average number of
        common
        shares that were outstanding during the period. Diluted earnings per share
        is
        computed giving effect to all dilutive potential common shares that were
        outstanding for any periods presented in these financial
        statements.
  The
        following table sets forth the computation of basic and diluted earnings
        per
        share (in thousands, except per share amounts):
 
 Three
                  Months Ended
                December 31,
              
              
              Six
                  Months Ended
                December 31,2007
              
              
              2006
              
              
              2007
              
              
              2006Numerator:Net
                  income (loss)
              
              $
              (12,085
              )
              
              $
              2,588
              
              
              $
              (19,116
              )
              
              $
              4,911Denominator:Weighted-average
                  shares of common stock outstanding
              
              
              43,927
              
              
              
              43,593
              
              
              
              43,862
              
              
              
              43,557Less:
                  Weighted-average shares subject to repurchase
              
              
              (25
              )
              
              
              (60
              )
              
              
              (28
              )
              
              
              (60
              )Shares
                  used in computing net income (loss) per basic share
              
              
              43,902
              
              
              
              43,533
              
              
              
              43,834
              
              
              
              43,497Net
                  income (loss) per basic share
              
              $
              (0.28
              )
              
              $
              0.06
              
              
              $
              (0.44
              )
              
              $
              0.11Shares
                  used in computing net income (loss) per diluted share
              
              
              43,902
              
              
              
              45,703
              
              
              
              43,834
              
              
              
              45,402Net
                  income (loss) per diluted share
              
              $
              (0.28
              )
              
              $
              0.06
              
              
              $
              (0.44
              )
              
              $
              0.11Potentially
                  dilutive securities excluded from net income (loss) per diluted
                  share
                  because they are anti-dilutive
              
              
              11,523
              
              
              
              9,358
              
              
              
              9,335
              
              
              
              9,275
 
 Note
        3.  Comprehensive Income (Loss)
 
 Total
        comprehensive income (loss) includes net income (loss) and other comprehensive
        income, which primarily comprises unrealized gains and losses from foreign
        currency adjustments.  Total comprehensive loss for the second quarter
        of fiscal 2008 and for the first six months of fiscal 2008 was $9.5 million
        and
        $12.6 million compared to total comprehensive income of  $2.7 million
        and $5.1 million for the comparable periods in the prior year.
   7
 Table
            of Contents
 
 Note
        4.  Acquisition
 
 On
        August 27, 2007, we completed the acquisition of Chipidea Microelectronica
        S.A., a privately held supplier of analog and mixed signal intellectual property
        based in Lisbon, Portugal.  We acquired all of the outstanding stock
        of Chipidea for $147 million in cash, of which $14.7 million
        is held in escrow to satisfy indemnification claims that may arise. Payment
        of $12.5 million of the total consideration, which is due to certain former
        shareholders of  Chipedea, is contingent upon their continued
        employment with us for the two-year period after our acquisition of
        Chipidea.  Therefore, this consideration will be recorded as
        compensation expense over the period during which it is earned.  In
        addition, we have agreed to issue up to 610,687 shares of common stock of
        MIPS (or, at MIPS’ election, cash in an amount equal to the value of such shares
        at the time such shares are required to be issued) in February 2009, if certain
        revenue targets are achieved for the two-year period through December
        31, 2008. The value of the shares, if issued, will be added to the purchase
        price of the acquisition and recorded as goodwill. Furthermore, we have agreed
        to pay to the former shareholders of Chipidea up to 1.2 million Euro
        in cash (approximately $1.8 million at December 31, 2007), if Chipidea receives
        a certain grant from the Portuguese government on or before June 30, 2008.
        In
        the event that the grant from the Portuguese government is received, we will
        record the payment as goodwill.
 
 We
        acquired Chipidea to position ourselves as a leading independent supplier
        of
        analog and mixed signal IP for wireless, digital consumer and connectivity
        markets. The acquisition allows us to utilize our existing business model
        while
        growing the base of products we offer to the same set of customers. In addition,
        with the acquisition of Chipidea, we gain a strong team of analog and mixed
        signal designers for the development of commercial analog and mixed signal
        IP.
  Purchase
        Price
        Allocation.The
        transaction was accounted for as a purchase in accordance with Statement
        of
        Financial Accounting Standards No. 141, Business Combinations (SFAS
        141); therefore, Chipidea’s tangible assets and identifiable intangible assets
        have been valued based on their estimated fair value on the acquisition date
        as
        set forth below. The purchase price of $136.9 million includes the cash
        paid of $147 million and the acquisition costs of $2.4 million less the
        contingent payment to employees of $12.5 million, and was allocated as follows
        (in thousands):
 
 Cash
                  and Investments
              
              $
              1,566Accounts
                  receivable
              
              
              14,689Fixed
                  Assets
              
              
              9,841Other
                  current assets
              
              
              1,401Intangible
                  assets
              
              
              33,760In-process
                  research and development
              
              
              6,350Goodwill
              
              
              106,634Other
                  long term assets
              
              
              8,303Short
                  term debt
              
              
              (968
              )Accounts
                  payable and other current liabilities
              
              
              (28,764
              )Deferred
                  revenue
              
              
              (2,240
              )Deferred
                  taxes
              
              
              (12,033
              )Long
                  term liabilities
              
              
              (1,674
              )Total
                  purchase price
              
              $
              136,865
 
 The
        above
        purchase price allocation reflects adjustments recorded during the second
        quarter of fiscal 2008 upon finalization of the valuation as of the date
        of
        acquisition of accounts receivables, intangible assets, acquired in process
        research and development, accrued liabilities, deferred taxes and long-term
        liabilities and the determination of acquisition costs and estimated useful
        lives of intangible assets. As a result of these adjustments, goodwill decreased
        by $0.6 million, accounts receivable decreased by $0.8 million, intangible
        assets increased by $3.3 million, in process research and development increased
        by $0.9 million, accrued liabilities increased by $0.1 million, deferred
        taxes
        increased by $3.3 million, long-term liabilities decreased by $0.7 million
        and
        acquisition costs increased by $0.1 million.
 
 Intangible
        Assets.In performing our purchase price allocation in order
        to determine the valuation of the purchased intangible assets, we considered,
        among other factors, our intention for future use of acquired assets, analyses
        of historical financial performance and estimates of the future performance
        of
        Chipidea’s products.  The fair value of intangible assets was
        determined by using an income approach which was based on estimates and
        assumptions determined by management. The rates utilized to discount net
        cash
        flows to their present values were based on our weighted average cost of
        capital
        and ranged from 14% to 20%. These discount rates were determined after
        consideration of our rate of return on debt capital and equity and the weighted
        average return on invested capital.
   8
 Table
            of Contents
 
 The
        following table sets forth the components of intangible assets and related
        useful lives (in thousands):
 
 Fair
                  Value
              
              Useful
                  lifeDeveloped
                  and core technology
              
              $
              19,110
              
              5
                  to 15 yearsCustomer
                  relationships and backlog
              
              
              12,110
              
              1
                  to 7 yearsOther
              
              
              2,540
              
              3
                  to 5 yearsTotal
                  intangible assets
              
              $
              33,760
  Developed
        and
        core technology, which comprise products that have reached technological
        feasibility, includes products in most of Chipidea’s product lines. The
        amortization of developed and core technology assets is recorded as cost
        of
        contract revenue.  Customer relationships and backlog represent the
        underlying relationships with Chipidea’s installed customer base and open
        customer purchase orders at the date of acquisition.  The amortization
        of customer relationships and backlog is recorded as cost of contract
        revenue.  The weighted average amortization period of the intangible
        assets is approximately 5.2 years.
 
 Acquired
        In-Process Research and Development.We expensed acquired
        in-process research and development (IPR&D) upon acquisition as it
        represents incomplete Chipidea research and development projects that had
        not
        reached technological feasibility and had no alternative future use as of
        the
        date of our acquisition. Technological feasibility is established when an
        enterprise has completed all planning, designing, coding, and testing activities
        that are necessary to establish that a product can be produced to meet its
        design specifications including functions, features, and technical performance
        requirements.The value
        assigned to IPR&D was $6.4 million and determined based on an analysis
        of data concerning developmental products, their stage of development, the
        time
        and resources needed to complete them, target markets, their expected income
        and
        net cash flow generating ability and associated risks.  In the first
        quarter of fiscal 2008 we recorded a charge of $5.4 million based on preliminary
        valuation analysis.  In the second quarter of fiscal 2008 we finalized
        the purchase price allocation as of the date of acquisition and recorded
        an
        additional charge of 910,000.
 
 The
        principal projects at acquisition date were extensions of existing technologies
        for several analog IP cores. We incurred post-acquisition cost of approximately
        $1.8 million during the first six months of fiscal 2008 for these projects
        and
        estimate that an additional investment of approximately $1.7 million in research
        and development will be required during fiscal 2008 and 2009 to complete
        them.
  Goodwill.  Goodwill
        of $106.6 million represented the excess of the purchase price over the fair
        value of the net tangible and intangible assets acquired. The acquisition
        allows
        us to utilize our existing business model while growing the base of products
        we
        offer to the same set of customers. In addition, with the acquisition of
        Chipidea, we gain a strong team of analog and mixed signal designers for
        the
        development of commercial analog and mixed signal IP.  These factors
        significantly contributed to the determination of the purchase price and
        the
        recognition of goodwill.  Goodwill is not being amortized but will be
        reviewed annually for impairment or more frequently if impairment indicators
        arise, in accordance with SFAS No. 142, Goodwill and Other Intangible
        Assets. Goodwill has been assigned to the ABG and is not expected to be
        deductible for tax purposes.  Additionally, goodwill is subject to
        foreign exchange translation adjustments as the functional currency of Chipidea
        is the Euro.
  Deferred
        Revenue.In connection with the purchase price allocation, we
        have estimated the fair value of deferred revenue related to development
        and
        support obligations assumed from Chipidea in connection with the acquisition.
        The estimated fair value of the obligations was determined utilizing a cost
        build-up approach. The cost build-up approach determines fair value by
        estimating the costs relating to fulfilling the obligations plus a normal
        profit
        margin. As a result, in allocating the purchase price, we recorded an adjustment
        to reduce the carrying value of Chipidea’s deferred revenue to $2.2 million,
        which represents our estimate of the fair value of the obligation
        assumed.
  Contingent
        Consideration.In connection with the acquisition, Chipidea
        made certain representations and warranties to us, and Chipidea’s former
        shareholders agreed to indemnify us against damages which might arise from
        a
        breach of those representations and warranties. Under the terms of the
        acquisition, the former Chipidea shareholders set aside $14.7 million of
        cash
        consideration for payment of possible indemnification claims made by us.
        Accordingly, a liability for this contingent cash consideration has been
        recorded in accrued liabilities and this amount has been considered in the
        purchase price.  Under the terms of the acquisition, this amount has
        been set aside in an escrow account and is recorded in prepaids and other
        current assets and is scheduled to be released on the one year anniversary
        of
        the acquisition date.
 
 Deferred
        Compensation.  Payment of approximately $12.5 million to
        certain shareholders is contingent upon their continued employment with
        us.  These payments are due 12 months and 24 months from the
        acquisition date.  This consideration will be recorded as compensation
        expense as earned, and the liability will be recorded in accrued
        compensation.  A restricted cash account has been established for the
        funding of this payment and is recorded in other assets.
   9
 Table
            of Contents
  Proforma
        financial
        information.The results of operations of Chipidea have been included in
        our consolidated financial statements subsequent to the date of acquisition.
        The
        financial information in the table below summarizes the combined results
        of
        operations of MIPS and Chipidea, on a pro forma basis, as though the companies
        had been combined as of the beginning of each of the periods presented (in
        thousands, except per share data):
 
 Three
                  months ended
                December
                  31,
              
              
              Six
                  months ended
                December
                  31,2007
              
              
              2006
              
              
              2007
              
              
              2006Total
                  pro forma revenues
              
              $
              26,450
              
              
              $
              28,792
              
              
              $
              55,485
              
              
              $
              53,861Pro
                  forma net income (loss)
              
              $
              (12,085
              )
              
              $
              368
              
              
              $
              (19,984
              )
              
              $
              (1,912
              )Pro
                  forma net income (loss) per share - basic and diluted
              
              $
              (0.28
              )
              
              $
              0.01
              
              
              $
              (0.46
              )
              
              $
              (0.04
              )Reported
                  net income (loss)
              
              $
              (12,085
              )
              
              $
              2,588
              
              
              $
              (19,116
              )
              
              $
              4,911Reported
                  net income (loss) per share - basic and diluted
              
              $
              (0.28
              )
              
              $
              0.06
              
              
              $
              (0.44
              )
              
              $
              0.11
 
 The
        pro forma financial information is presented for informational purposes only
        and
        is not indicative of the results of operations that would have been achieved
        if
        the merger had taken place at the beginning of each of the periods presented.
        The pro forma financial information for fiscal 2008 includes merger related
        expenses of $126,000 recorded by Chipidea and a charge of $6.4 million for
        IPR&D.  Chipidea’s functional currency is the Euro and its
        financial statements have been translated into dollars in each period
        presented.
 
 Note
        5.  Purchased Intangible Assets and Goodwill
  Purchased
        Intangible Assets.All of our purchased intangible assets,
        except goodwill, are subject to amortization. Purchased intangible assets
        subject to amortization consisted of the following as of December 31, 2007
        and
        June 30, 2007 (in thousands):
 
 December 31,
                  2007
              
              
              June 30,
                  2007Gross
                Carrying
                Value
              
              
              Accumulated
                Amortization
              
              
              Net
                Carrying
                Value
              
              
              Gross
                Carrying
                Value
              
              
              Accumulated
                Amortization
              
              
              Net
                Carrying
                ValueDeveloped
                  and core technology
              
              $
              26,509
              
              
              $
              (5,402
              )
              
              $
              21,107
              
              
              $
              6,062
              
              
              $
              (3,645
              )
              
              $
              2,417Customer
                  relationships and backlog
              
              
              14,267
              
              
              
              (2,299
              )
              
              
              11,968
              
              
              
              1,310
              
              
              
              (400
              )
              
              
              910Other
              
              
              2,828
              
              
              
              (265
              )
              
              
              2,563
              
              
              
              110
              
              
              
              (68
              )
              
              
              42Purchased
                  intangible assets
              
              $
              43,604
              
              
              $
              (7,966)
              
              
              $
              35,638
              
              
              $
              7,482
              
              
              $
              (4,113
              )
              
              $
              3,369
  The
        estimated future amortization expense of purchased intangible assets as of
        December 31, 2007 is approximately $5.3 million, $7.6 million, $6.8 million,
        $6.0 million and $5.3 million for the remaining six months of fiscal 2008
        and
        for fiscal years 2009, 2010, 2011 and 2012 respectively, and approximately
        $4.6
        million for years following fiscal 2012.  The future amortization
        expense will be subject to foreign currency fluctuations as the Chipidea
        intangible assets are recorded in Euro. Amortization expense for purchased
        intangible assets was $3.8 million for the first six months of fiscal 2008
        and
        $582,000 for the first six months of fiscal 2007.
  The
        balance at December 31, 2007, included $19.1 million, $11.2 million, and
        $2.5
        million of developed and core technology, customer relationships and backlog,
        and other intangibles, respectively, from the acquisition of Chipidea, with
        estimated useful lives of 5 to 15 years, 1 to 7 years, and 3 to 5 years,
        respectively.
  Goodwill.
  Goodwill
        as
        allocated to our segments as of December 31, 2007, consisted of the following
        (in thousands):
  Processor
                  Business Group
              
              
              Analog
                  Business Group
              
              
              TotalBalance
                  at June 30, 2007
              
              $
              565
              
              
              
              —
              
              
              $
              565Additions
                  (Chipidea)
              
              
              —
              
              
              
              106,634
              
              
              
              106,634Currency
                  translation adjustment
              
              
              —
              
              
              
              7,772
              
              
              
              7,772Balance
                  at December 31, 2007
              
              $
              565
              
              
              $
              114,406
              
              
              $
              114,971
 
 10
 Table
            of Contents
  Note
        6.  Short-term Debt
 
 The
        components of short-term debt are as follows (in thousands):
 
 December
                  31, 2007Credit
                  agreement
              
              
              20,000Bank
                  lines of credit
              
              
              1,971Other
              
              
              82$
              22,053
 
 We
        had no short-term debt
        outstanding at June 30, 2007.
  Revolving
        Credit
        Agreement. On August 24, 2007, we entered into a $35
        million Revolving Credit Agreement (Credit Agreement) with a syndicate of
        several banks and other financial institutions, and Jefferies Finance, LLC,
        as
        the administrative agent. Funds available under the
        Credit Agreement were used to fund the acquisition of Chipidea, as
        well as for general corporate and working capital purposes. In connection
        with
        the Credit Agreement, we incurred $1.6 million of underwriting
        fees, expenses and administration fees. We deferred these fees as loan
        origination fees and they will be amortized over the estimated life of the
        Credit Agreement and recorded as other expense.
 
 On
        December 31, 2007, borrowings of $20 million were outstanding under the Credit
        Agreement. Borrowings under the Credit Agreement bear interest at a rate
        equal
        to an applicable margin plus, at our option, either (a) a base rate
        determined by reference to the higher of (1) the United States prime rate
        and (2) the federal funds rate plus 0.5% or (b) a LIBOR rate, for a
        term period of one, two, three or six months, determined by reference to
        the
        costs of funds for deposits for the interest period relevant to such borrowing,
        adjusted for certain additional costs.  We can elect to convert an
        existing interest calculation method at our discretion.  The
        applicable margin for borrowings under the Credit Agreement is 1.25% with
        respect to base rate borrowings and 2.25% with respect to LIBOR borrowings.
        As
        of December 31, 2007, the base rate was 7.25% and the LIBOR rate was 4.9375%.
        We
        elected the LIBOR method for determining the interest rate for the outstanding
        $20 million.  Interest is payable on a monthly basis.
 
 We
        are
        required to pay a commitment fee to the lenders with respect to any unutilized
        commitments under the Credit Agreement. The commitment fee on the Credit
        Agreement is 0.375% per annum and is due quarterly. We may voluntarily
        reduce the amount committed under the Credit Agreement on a permanent basis.
        Principal amounts outstanding under the Credit Agreement are due and payable
        in
        full on August 22, 2008.
 The
        Credit
        Agreement contains certain customary representations and warranties, affirmative
        and negative covenants, and events of default, including the requirement
        that we
        maintain, and report on a quarterly basis, for the trailing twelve months,
        a leverage ratio (as defined in the Credit Agreement) of no greater than
        3.5 to
        1.0. All obligations under the Credit Agreement, and the guarantees of those
        obligations, are secured by substantially all our assets, subject to certain
        exceptions. Our report to the lenders for the quarter ended December 31,
        2007 is
        not yet due, but we believe we were in compliance with all covenants relating
        to
        the Credit Agreement as of that date.  However, we are in discussions
        with the lender regarding the interpretation of certain elements used in
        the
        determination of the leverage ratio, and if the calculation of this ratio
        is
        interpreted differently than our current belief of the appropriate
        interpretation, then we would not be in compliance with this ratio at December
        31, 2007.   According to the credit agreement, in the event that
        we fail to meet the leverage ratio, our loan would be converted to a higher
        base
        rate loan.  In addition, the lender could elect (a) to increase the
        interest rate to the default rate (2% plus ABR rate plus applicable margin)
        and
        the administrative agent has the ability to require a retroactive increase
        in
        the event there is a miscalculation of the leverage ratio and / or (b) terminate
        the revolver and declare all or any portion of the loans due and
        payable.
  Bank
        Lines of
        Credit. We have bank line of credit agreements with
        several Portuguese banks with a total aggregate available credit of
        approximately $2.5 million as of December 31, 2007.  The interest rates on
        these agreements range from 5.684% to 6.434% and the agreements have expiration
        dates ranging from January 16, 2008 to March 30, 2008, with automatic renewal
        provisions for additional 90-day periods.  As of December 31, 2007, we have
        outstanding borrowings of $2.0 million and available credit of $496,000 under
        these agreements.
  Other. 
        We have a non-interest bearing loan with a Portuguese governmental agency
        of
        approximately $78,000.
  As
        of
        December 31, 2007, we have entered into letters of credit for approximately
        $2.5
        million with various financial institutions in Portugal, Belgium and Norway
        in
        association with certain building leases and government grants.
   11
 Table
            of Contents
  Note
        7.  Other Income (Expense), Net
  The
        components of other income (expense), net are as follows (in
        thousands):
 
 
 Three
                  months ended December
                  31,
              
              
              Six
                  months ended December
                  31,2007
              
              
              2006
              
              
              2007
              
              
              2006Interest
                  income
              
              $
              128
              
              
              $
              1,629
              
              
              $
              1,177
              
              
              $
              3,128Interest
                  expense
              
              
              (646
              )
              
              
              —
              
              
              
              (833
              )
              
              
              —Other
              
              
              (702
              )
              
              
              (85
              )
              
              
              (1,071
              )
              
              
              (154
              )Total
                  other income (expense), net
              
              $
              (1,220
              )
              
              $
              1,544
              
              
              $
              (727
              )
              
              $
              2,974
  Note
        8.  Equipment, Furniture and Property
 
 The
        components of equipment, furniture and property are as follows (in
        thousands):
  December
                  31, 2007
              
              
              June
                  30, 2007Equipment
              
              $
              16,614
              
              
              $
              15,473Land
                  and buildings
              
              
              8,030
              
              
              
              —Furniture
                  and fixtures
              
              
              4,377
              
              
              
              2,67829,021
              
              
              
              18,151Accumulated
                  depreciation and amortization
              
              
              (13,306
              )
              
              
              (12,370
              )Equipment,
                  furniture and property, net
              
              $
              15,715
              
              
              $
              5,781
  Note
        9.  Prepaid Expenses and Other Current and Long-Term
        Assets
 
 The
        components of prepaid expenses and other current assets are as follows (in
        thousands):
  December
                  31, 2007
              
              
              June
                  30, 2007Short-term
                  restricted cash
              
              $
              14,876
              
              
              $
              —Other
                  prepaid expenses and other assets
              
              
              4,006
              
              
              
              2,472$
              18,882
              
              
              $
              2,472
 
 The
        components of other long-term assets are as follows (in thousands):
  December
                  31, 2007
              
              
              June
                  30, 2007Long-term
                  restricted cash
              
              $
              14,552
              
              
              $
              264Investments
                  in other companies
              
              
              4,446
              
              
              
              4,463Long-term
                  computer aided design licenses
              
              
              12,374
              
              
              
              4,474Cash
                  surrender value of insurance contracts tied to our deferred compensation
                  plan
              
              
              2,330
              
              
              
              2,310Other
                  long-term assets
              
              
              549
              
              
              
              1,068$
              34,251
              
              
              $
              12,579
  Note
        10.  Accrued and Long-Term Liabilities
 
 The
        components of accrued liabilities are as follows (in thousands):
  December
                  31, 2007
              
              
              June
                  30, 2007Accrued
                  compensation and employee-related expenses
              
              $
              10,198
              
              
              $
              6,848Income
                  taxes payable
              
              
              2,206
              
              
              
              2,195Payable
                  to Chipidea shareholders
              
              
              14,876
              
              
              
              —Capital
                  lease obligations
              
              
              7,370
              
              
              
              —Other
                  accrued liabilities
              
              
              16,773
              
              
              
              7,075$
              51,423
              
              
              $
              16,118
   12
 Table
            of Contents
  The
        components of long-term liabilities are as follows (in thousands):
  December
                  31, 2007
              
              
              June
                  30, 2007Deferred
                  compensation
              
              $
              2,972
              
              
              $
              2,298Long-term
                  deferred tax liability
              
              
              12,524
              
              
              
              —Long-term
                  income tax liability
              
              
              3,649
              
              
              
              —Long-term
                  accounts payable
              
              
              6,919
              
              
              
              2,363Other
                  long-term liabilities
              
              
              1,376
              
              
              
              1,065$
              27,440
              
              
              $
              5,726
  Note
        11.  Commitments and Contingencies
 
 Purchase
        Commitments with Suppliers
 
 We
        have
        outstanding purchase orders for ongoing operations of approximately $12.7
        million as of December 31, 2007. Payments of these obligations are subject
        to
        the provision of services or products.
  Litigation
  A derivative action entitled In
        re MIPS Technologies, Inc.
        Derivative Litigation, Case No. C-06-06699-RMW, which was filed on
        October 27, 2007, is pending in the United States District Court,
        Northern District of California, against certain current and former MIPS
        officers and directors and MIPS as a nominal defendant.  The complaint in
        the action alleges that the individual defendants breached their
        fiduciary duties and violated California and federal securities laws as a
        result
        of, among other things, purported backdating of stock option grants,
        insider trading and the dissemination of false financial statements.
        Plaintiff seeks to recover, purportedly on behalf of MIPS, unspecified
        monetary damages, corporate governance changes, equitable and injunctive
        relief,
        and fees and costs.  The court granted MIPS' motion to dismiss the
        consolidated complaint and granted plaintiff leave to file an amended
        complaint.  It is not known when or on what basis the action will be
        resolved.
 
 From
        time
        to time, we receive communications from third parties asserting patent or
        other
        rights allegedly covering our products and technologies. Based upon our
        evaluation, we may take no action or we may seek to obtain a license, redesign
        an accused product or technology, initiate a formal proceeding with the
        appropriate agency (e.g., the U.S. Patent and Trademark Office) and/or initiate
        litigation. There can be no assurance in any given case that a license will
        be
        available on terms we consider reasonable or that litigation can be avoided
        if
        we desire to do so. If litigation does ensue, the adverse third party will
        likely seek damages (potentially including treble damages) and may seek an
        injunction against the sale of our products that incorporate allegedly infringed
        intellectual property or against the operation of our business as presently
        conducted, which could result in our having to stop the sale of some of our
        products or to increase the costs of selling some of our products. Such lawsuits
        could also damage our reputation. The award of damages, including material
        royalty payments, or the entry of an injunction against the sale of some
        or all
        of our products, could have a material adverse affect on us. Even if we were
        to
        initiate litigation, such action could be extremely expensive and time-consuming
        and could have a material adverse effect on us. We cannot assure you that
        litigation related to our intellectual property rights or the intellectual
        property rights of others can always be avoided or successfully
        concluded.
  Even
        if
        we were to prevail, any litigation could be costly and time-consuming and
        would
        divert the attention of our management and key personnel from our business
        operations, which could have a material adverse effect on us.
   13
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            of Contents
 
 Note 12. 
        Stock-Based Compensation
  Activity
        under our Stock Option Plans for the six months ended December 31, 2007 is
        summarized as follows:
  Number
                  of
                Shares
              
              
              Weighted
                Average
                Exercise Price
              
              
              Weighted
                Average
                Remaining
                Contractual
                Life
              
              
              Aggregate
                Intrinsic Value(in thousands)Outstanding
                  at July 1, 2007
              
              
              13,830,478
              
              
              $
              7.39Options
                  granted
              
              
              2,028,463
              
              
              $
              7.42Options
                  exercised
              
              
              (401,594
              )
              
              $
              5.78Options
                  cancelled
              
              
              (339,088
              )
              
              $
              8.69Outstanding
                  at December 31, 2007
              
              
              15,118,259
              
              
              $
              7.42
              
              
              
              4.75
              
              
              $
              4,472Exercisable
                  at December 31, 2007
              
              
              11,355,691
              
              
              $
              7.51
              
              
              
              4.34
              
              
              $
              4,414
  Aggregate
        intrinsic value represents the value of our closing stock price on the last
        trading day of the period in excess of the exercise price multiplied by the
        number of options outstanding or exercisable. The intrinsic value of options
        exercised represents the value of our closing stock price on the exercise
        date
        in excess of the exercise price multiplied by the number of options exercised.
        The total intrinsic value of options exercised for the six months ended December
        31, 2007 and 2006 was $1.0 million and $158,000.
  Nonvested
        share activity under our Stock Options Plans for the three months ended December
        31, 2007 is summarized as follows:
  Non-vested
                Number of
                Shares
              
              
              Weighted Average
                Grant-Date
                Fair
                  ValueNonvested
                  balance at July 1, 2007
              
              
              60,000
              
              
              $
              4.72Vested
              
              
              (30,000
              )
              
              $
              4.72Cancelled
              
              
              (5,000
              )
              
              $
              4.52Nonvested
                  balance at December 31, 2007
              
              
              25,000
              
              
              $
              4.76
  As
        of
        December 31, 2007, $75,000 of total unrecognized compensation costs related
        to
        nonvested awards is expected to be recognized over a weighted average period
        of
        0.65 years. The fair value of shares vested during the first six months of
        fiscal 2008 was $235,000.
  Grant
        Date Fair
        Values. The weighted average fair value has been estimated at the
        date of grant using a Black-Scholes option-pricing model. The following are
        significant weighted average assumptions used for estimating the fair value
        of
        the activity under our stock option plans:
 
 Employee Stock Options
              
              
              Employee Stock Purchase PlanSix Months Ended December 31,
              
              
              Six Months Ended December 31,2007
              
              
              2006
              
              
              2007
              
              
              2006Expected
                  life (in years)
              
              
              4.20
              
              
              
              4.20
              
              
              
              0.73
              
              
              
              —Risk-free
                  interest rate
              
              
              4.12
              %
              
              
              4.83
              %
              
              
              4.07
              %
              
              
              —Expected
                  volatility
              
              
              .51
              
              
              
              .64
              
              
              
              .36
              
              
              
              —Dividend
                  yield
              
              
              0.00
              %
              
              
              0.00
              %
              
              
              0.00
              %
              
              
              —Grant
                  date fair value
              
              $
              3.33
              
              
              $
              3.64
              
              
              $
              2.26
              
              
              
              —
 
 There
        were no shares granted under our stock purchase plan during the first six
        months
        of fiscal 2008.  Our current purchase period began on August 6, 2007
        and will end on April 30, 2008.  There were no employee stock
        purchases in fiscal 2007.
   14
 Table
            of Contents
  Note
        13.  Income Taxes
  We
        recorded an income tax provision of $3.5 million for the three-month period
        ended December 31, 2007 and a provision of $1.6 million for the comparable
        period in fiscal 2007.  We recorded an income tax provision of $ 2.8
        million for the six-month period ended December 31, 2007 and a tax provision
        of
        $3.0 million for the comparable period in fiscal 2007.  In January
        2008, during preparation of the financial statements for the three-months
        period
        ended December 31, 2007, we revised our annual forecast and are now projecting
        a
        pre-tax loss for fiscal 2008.  As a result, we are not able to recognize a
        current period tax benefit from the utilization of our deferred tax asset. 
We recorded a provision instead of a tax benefit since we are required under
        FAS
        109 to recognize a valuation allowance against our deferred tax assets and
        therefore, we are not able to benefit from certain stock option expense,
        carry-forward of foreign tax credits and carry-forward of net operating
        losses.  The valuation allowance reduces the expected tax benefit which
        results in a higher current period expense.  The actual tax provision
        for the three-month period ended December 31, 2007, includes a year-to-date
        true-up of income tax expense for the quarter ended September 30,
        2007.
  Our
        estimated annual income tax before discrete items for fiscal 2008
        primarily consists of U.S. state minimum taxes and foreign taxes on income
        earned in certain foreign jurisdictions and withholding taxes.  The actual
        tax provision for the six-month period ended December 31, 2007 differs from
        the estimated annual tax due to discrete items recorded during the
        period, primarily related to a change in estimate related to our research
        and development credits of $584,000, offset by recognition of previously
        unrecognized tax benefits of $772,000 related to changes in the tax law for
        Chipidea in Portugal.  The estimated annual effective tax rate of 38%
        for fiscal 2007 primarily consists of US federal and state taxes and foreign
        taxes on income earned in certain foreign jurisdictions and withholding taxes,
        offset in part by the availability of certain foreign tax credits and general
        business tax credits.  In January 2008, during preparation of the financial
        statements for the three-months period ended December 31, 2007, we revised
        our
        annual forecast.  As a result, the actual tax for the three-month
        period ended December 31, 2007 includes a year-to-date true-up of income
        tax
        expense for the quarter ended September 30, 2007.
  In
        June
        2006, the Financial Accounting Standards Board (FASB) issued Interpretation
        48,
Accounting for Uncertainty
        in
        Income Taxes  (FIN 48). FIN 48 clarifies the accounting for
        uncertainty in income taxes recognized in an enterprise’s financial statements
        in accordance with Statement of Financial Accounting Standards 109, Accounting for Income
        Taxes
        (SFAS 109).  This interpretation prescribes a recognition threshold and
        measurement attribute for the financial statement recognition and measurement
        of
        a tax position taken or expected to be taken in a tax return.  FIN 48 also
        provides guidance on de-recognition of tax benefits, classification on the
        balance sheet, interest and penalties, accounting in interim periods,
        disclosure, and transition.  This interpretation is effective for
        fiscal years beginning after December 15, 2006.
  We
        adopted the provisions of FIN 48 on July 1, 2007.  The cumulative
        effect of adopting FIN 48 on July 1, 2007 is recognized as a change in
        accounting principle, recorded as an adjustment to the opening balance of
        accumulated deficit on the adoption date.  As a result of the
        implementation of FIN 48, we recognized a decrease of approximately $264,000
        in
        the liability for unrecognized tax benefits related to tax positions taken
        in
        prior periods, which resulted in a decrease of $264,000 in accumulated
        deficit.
  The
        total
        amount of gross unrecognized tax benefits was $3.7 million as of July 1,
        2007
        (the date of adoption of FIN 48) and $5.0 million as of December 31,
        2007.The increase
        in the gross unrecognized tax benefits from July 1, 2007 to
        December 31, 2007 was primarily related to amounts assumed in the Chipidea
        acquisition.  Also, the total
        amount of
        unrecognized tax benefits that, if recognized, would affect the effective
        tax
        rate was $817,000 as of July 1, 2007 and $883,000 as of December 31,
        2007.
  We
        recognize interest
        and penalties related to uncertain tax positions as a component of provision
        for
        income taxes.Accrued interest and penalties relating to the
        income tax on the unrecognized tax benefits was approximately $150,000 as
        of
        July 1, 2007 and approximately $902,000 as of December 31, 2007, with
        approximately $66,000 being included as a component of provision for income
        taxes in the six-month period ended December 31, 2007.  The increase
        in interest and penalties from July 1, 2007 to December 31, 2007 was primarily
        related to amounts assumed in the Chipidea acquisition.
 
 Although we file U.S. federal, U.S. state, and foreign tax returns, our major
        tax jurisdictions are the United States and Portugal. Our fiscal 2004 and
        subsequent tax years remain subject to examination by the IRS for U.S. federal
        tax purposes, and our calendar 2004 and subsequent tax years remain subject
        to
        examination by the appropriate governmental agencies for Portuguese tax
        purposes.
   15
 Table
            of Contents
  Note
        14. Operating Segments
        and Geographic
        information
  We
        evaluate
        our reportable segments in accordance with SFAS No. 131, Disclosures about Segments
        of an
        Enterprise and Related Information (SFAS 131). Our Chief Executive
        Officer has been identified as our Chief Operating Decision Maker (CODM).
        The
        CODM allocates resources to the segments based on their business prospects,
        competitive factors, net revenue and operating results.
  Prior
        to
        fiscal year 2008, we determined that we operated in one reportable business
        group. In the first quarter of fiscal 2008, following the acquisition of
        Chipidea, we organized into two business groups, the Processor Business
        Group (PBG) and the Analog Business Group (ABG). These segments were determined
        based upon our internal organization and management structure and are the
        primary way in which the CODM is provided with financial information. The
        CODM
        evaluates segment performance based on net revenues and operating
        income, excluding certain items. Our costs, operating results and balance
        sheets are analyzed in the two reportable business groups. The results of
        each
        segment have been prepared using consistent accounting policies with those
        of
        MIPS as a whole. Segment information is presented based upon our management’s
        organizational structure as of September 30, 2007. Future changes to the
        internal financial structure may result in changes to the reportable segments
        disclosed.
  We
        are a
        leading provider of industry-standard microprocessor 32- and 64-bit
        architectures and cores and a leading supplier of analog and mixed-signal
        semiconductor intellectual property. The major segments we serve are as
        follows:
  (i)           Processor
        Business Group:
  The
        PBG provides industry-standard processor architectures and cores for digital
        consumer and business applications. This group designs and licenses high
        performance 32- and 64-bit architectures and cores, which offer smaller
        dimensions and greater energy efficiency in embedded processors. Markets
        served
        by the PBG segment include digital set-top boxes, digital televisions, DVD
        recordable devices, broadband access devices, digital cameras, laser printers
        and network routers.
  (ii)           Analog
        Business Group:
  The
        ABG includes the Chipidea operation and provides analog and mixed-signal
        IP that
        produces cost-efficient System-on-Chip (SoC) applications and turnkey solutions.
        The ABG IP portfolio covers all fundamental functions in the analog and
        mixed-signal electronic space, including data conversion, clock management,
        power management, radio connectivity, physical connectivity, and voice audio
        and
        video processing. Market segments served by the ABG segment are wireless
        communications, power line communications, data communications, video, audio
        and
        voice signal processing, xDSL modems, set-top boxes, multimedia and digital
        consumer electronics.
  The
        following
        tables show revenue, depreciation and amortization expense, segment operating
        loss and total assets and expenditures for long-lived assets of each segment
        (in
        thousands):
 
 Three
        months ended December 31, 2007
 
 Processor
                  Business Group
              
              
              Analog
                  Business Group
              
              
              Unallocated
                  Amounts
              
              
              TotalRevenue
              
              $
              16,624
              
              
              $
              9,826
              
              
              $
              —
              
              
              $
              26,450Depreciation
                  expense
              
              
              708
              
              
              
              115
              
              
              
              —
              
              
              
              823Amortization
                  expense
              
              
              1,242
              
              
              
              2,232
              
              
              
              —
              
              
              
              3,474Segment
                  operating profit (loss)
              
              
              (2,099)
              
              
              
              (2,263
              )
              
              
              —
              
              
              
              (4,362
              )Less:  Stock-based
                  compensation
              
              
              —
              
              
              
              —
              
              
              
              (2,082
              )
              
              
              (2,082
              )Less:  Acquired
                  in-process research and development
              
              
              —
              
              
              
              —
              
              
              
              (910
              )
              
              
              (910
              )Add:  Other
                  income (expense), net
              
              
              —
              
              
              
              —
              
              
              
              (1,220
              )
              
              
              (1,220
              )Loss
                  before taxes
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (8,574
              )Total
                  assets
              
              
              90,889
              
              
              
              164,276
              
              
              
              —
              
              
              
              255,165Total
                  expenditures for additions to long-lived assets
              
              
              5,481
              
              
              
              —
              
              
              
              —
              
              
              
              5,481
 
  16
 Table
            of Contents
 
 Six
        months ended December 31, 2007
 
 Processor
                  Business Group
              
              
              Analog
                  Business Group
              
              
              Unallocated
                  Amounts
              
              
              TotalRevenue
              
              $
              36,555
              
              
              $
              12,048
              
              
              
              —
              
              
              $
              48,603Depreciation
                  expense
              
              
              1,426
              
              
              
              177
              
              
              
              —
              
              
              
              1,603Amortization
                  expense
              
              
              2,508
              
              
              
              3,205
              
              
              
              —
              
              
              
              5,713Segment
                  operating profit (loss)
              
              
              (388
              )
              
              
              (4,362
              )
              
              
              —
              
              
              
              (4,750)Less:  Stock-based
                  compensation
              
              
              —
              
              
              
              —
              
              
              
              (4,473
              )
              
              
              (4,473)Less:  Acquired
                  in-process research and development
              
              
              —
              
              
              
              —
              
              
              
              (6,350
              )
              
              
              (6,350)Add:  Other
                  income (expense), net
              
              
              —
              
              
              
              —
              
              
              
              (727
              )
              
              
              (727)Loss
                  before taxes
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (16,300)Total
                  assets
              
              
              90,889
              
              
              
              164,276
              
              
              
              —
              
              
              
              255,165Total
                  expenditures for additions to long-lived assets
              
              
              6,241
              
              
              
              —
              
              
              
              —
              
              
              
              6,241
 
 Note
        15.  Recent Accounting Pronouncements
  In
        February
        2007, the FASB SFAS No. 159, The Fair Value Option
        for Financial
        Assets and Financial Liabilities - Including an amendment of FASB No.115
        (SFAS 159). SFAS 159 permits companies to choose to measure many financial
        instruments and certain other items at fair value in order to mitigate
        volatility in reported earnings caused by measuring related assets and
        liabilities differently without having to apply complex hedge accounting
        provisions. SFAS 159 is effective for fiscal years beginning November 15,
        2007,
        and interim periods within those fiscal years. We are currently assessing
        the
        potential effect, if any, of implementing this standard.
 
 In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements(SFAS
        157), which defines fair value, establishes a framework for measuring fair
        value
        and expands disclosure, about fair value measurements. SFAS 157 is
        effective for fiscal years beginning after November 15, 2007, and interim
        periods within those fiscal years. We are currently assessing the potential
        effect, if any, of implementing this standard.
 
 In
        December 2007, the FASB issued SFAS
        No. 141(R),Business
        Combinations(SFAS
        141R).SFAS
        141R retains the fundamental
        requirements in SFAS 141 that the acquisition method of accounting (which
        SFAS
        141 called thepurchase
        method) be used for all business
        combinations and for an acquirer to be identified for each business combination.
        SFAS 141R also establishes principles and requirements for how the acquirer:
        (a) recognizes and measures in its financial statements the identifiable
        assets acquired, the liabilities assumed, and any non-controlling interest
        in
        the acquiree; (b) recognizes and measures the goodwill acquired in the
        business combination or a gain from a bargain purchase; and (c) determines
        what information to disclose to enable users of the financial statements
        to
        evaluate the nature and financial effects of the business combination. SFAS
        141R
        applies prospectively to business combinations for which the acquisition
        date is
        on or after the beginning of the first annual reporting period beginning
        on or
        after December 15, 2008. We have not yet determined the impact, if any,
        that SFAS 141R will have on our financial condition or results of
        operations.
 
 In
        December 2007, the FASB issued
        SFAS No. 160,Non-controlling
        Interests in Consolidated Financial Statements(SFAS
        160).SFAS
        160 amendsARB51
        to establish accounting and reporting
        standards for the non-controlling (minority) interest in a subsidiary and
        for the deconsolidation of a subsidiary. Itclarifies
        that a non-controlling
        interest in a subsidiary is an ownership interest in the consolidated entity
        that should be reported as equity in the consolidated financial statements
        and
        establishes a single method of accounting for changes in a parent’s ownership
        interest in a subsidiary that does not result indeconsolidation.
        SFAS 160 is effective
        for fiscal years beginning on or afterDecember 15, 2008. We have not yet determined
        the impact,
        if any, that SFAS 160 will have on our financial statements.
 
 Note
        16.  Subsequent event.
 
 In
        January 2008, we announced plans
        to reduce our PBG workforce with the objective of reducing our operating
        expenses.  These actions will result in a restructuring charge in the
        third quarter of fiscal 2008 of between $2.5 and $3.0 million, comprised
        of
        employee severance costs, facilities exit costs, and asset
        write-offs.
   17
 Table
            of Contents
 
 ITEM 2. 
        MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
        CONDITION
  You
        should
        read the following discussion and analysis together with our unaudited condensed
        consolidated financial statements and the notes to those statements included
        elsewhere in this report. This discussion may contain forward-looking statements
        that involve risks and uncertainties. Forward-looking statements within this
        Quarterly Report on Form 10-Q include our expectations for future levels
        of
        operating expenses as well as other expenses and are identified by words
        such as
“believes,” “anticipates,” “expects,” “intends,” “may” and other similar
        expressions. Our actual results could differ materially from those indicated
        in
        these forward-looking statements as a result of certain factors, including
        those
        described under “Risk Factors”, and other risks affecting our business. We
        undertake no obligation to update any forward-looking statements included
        in
        this discussion.
 
 Overview
 
 We
        are a
        leading supplier of intellectual property (IP) to the global semiconductor
        industry. Our technology solutions include the high-performance MIPS
        architecture and related embedded processor cores, which are broadly used
        in
        markets such as digital entertainment, wired and wireless communications
        and
        networking, office automation, security, microcontrollers, and
        automotive. With the acquisition of Chipidea Microelectrónica S.A.
        (Chipidea) on August 27, 2007, we have become the leading supplier of IP to
        semiconductor companies for analog and mixed signal devices. Our customers
        include global semiconductor companies, and the annual unit volumes of
        products incorporating our technologies exceeded 350 million in fiscal year
        2007.
  Following
        the acquisition of Chipidea we are organized in two business groups, the
        Processor Business Group (PBG) and the Analog Business Group
        (ABG).  The PBG provides industry-standard processor architectures and
        cores for digital consumer and business applications.  The ABG
        includes the Chipidea operation and provides analog and mixed-signal IP that
        produces cost-efficient System-on Chip (SOC) applications and turnkey
        solutions.  The consolidated financial results for the second quarter of
        fiscal 2008 include the first full quarter of operations following the
        acquisition of Chipidea.
 
 Revenue
        in the second quarter of fiscal 2008 increased 26% over the comparable period
        in
        fiscal 2007 due to an increase in both royalties and contract
        revenue.  The increase in royalties of $1.3 million was primarily due
        to a 8% increase in PBG royalties.  Our licensees reported shipments
        of approximately 107 million units during the quarter, an increase of 19%
        over
        the comparable period in fiscal 2007. Contract revenue increased by 42% over
        the
        comparable period in fiscal 2007 due to the revenue contribution from ABG
        of
        $9.4 million.  The ABG contribution was offset in part by a 54%
        decline in PBG contract revenue which we believe was due to delays in processor
        licensing decisions due to consolidation activity in the industry which
        affected two potential agreements and to our customers' concerns over current
        business and economic conditions.  Total costs and operating expense
        in the second quarter of fiscal 2008 increased by $15.4 million or 84% over
        the
        comparable period in fiscal 2007. The increase was primarily due to the first
        full quarter of ABG costs and expenses of $12.1 million. Additionally, we
        recorded an adjustment of $910,000 to the in-process research and development
        charge that had been recorded in the first quarter of fiscal 2008 and
        amortized $1.7 million as compensation expense associated with the
        continued employment of certain Chipidea employees.  We also
        incurred $1.3 million in integration costs primarily related to accounting
        fees
        for consulting services, tax, audit and IFRS to US GAAP reconciliation of
        Chipidea historical financials. We expect our operating expenses for the
        remainder of fiscal 2008 to be higher than the comparable periods in fiscal
        2007
        as we continue to integrate Chipidea into our operations. As disclosed in
        Note
        16 under subsequent events, we are taking action during the third quarter
        of
        fiscal 2008 to reduce our PBG operating expenses.  We do not expect to
        fully benefit from these actions until the fourth quarter of fiscal
        2008.  We expect to record a restructuring charge in the third quarter
        of fiscal 2008 of $2.5 million to $3.0 million.
  Net
        loss
        before income tax provision for the second quarter of fiscal 2008 was $8.6
        million compared to net income before income tax of $4.2 million in the second
        quarter of fiscal 2007.
  Our
        cash,
        cash equivalents and marketable securities decreased by approximately $2.4
        million to $15.2 million at December 31, 2007.  In August 2007, we
        entered into a short-term revolving loan agreement for $35 million to help
        fund
        the acquisition of Chipidea and current operating requirements, of which
        $20
        million was outstanding at December 31, 2007.
   18
 Table
            of Contents
  Results
        of Operations
  Revenue.Total
        revenue
        consists of royalties and contract revenue. Royalties are based upon sales
        by
        licensees of products incorporating our technology. Contract revenue consists
        of
        technology license fees generated from new and existing license agreements
        for
        developed technology and engineering service fees generated from contracts
        for
        technology under development or configuration of existing IP. Technology
        license
        fees vary based on, among other things, whether a particular technology is
        licensed for a single application or for multiple or unlimited applications
        during a specified period, and whether the license granted covers a particular
        design or a broader architecture.
  Our
        revenue in the three-month and six-month periods ended December 31, 2007
        and
        December 31, 2006 was as follows (in thousands):
 
 Three Months Ended December 31,
              
              
              Six
                  Months
                  Ended December 31,2007
              
              
              2006
              
              
              Change in
                Percent
              
              
              2007
              
              
              2006
              
              
              Change in
                PercentRevenueRoyalties
              
              $
              12,515
              
              
              $
              11,188
              
              
              
              12
              %
              
              $
              23,035
              
              
              $
              22,394
              
              
              
              3
              %Percentage
                  of Total Revenue
              
              
              47
              %
              
              
              53
              %
              
              
              
              
              
              
              47
              %
              
              
              55
              %Contract
                  Revenue
              
              $
              13,935
              
              
              $
              9,817
              
              
              
              42
              %
              
              $
              25,568
              
              
              $
              18,161
              
              
              
              41
              %Percentage
                  of Total Revenue
              
              
              53
              %
              
              
              47
              %
              
              
              
              
              
              
              53
              %
              
              
              45
              %Total
                  Revenue
              
              $
              26,450
              
              
              $
              21,005
              
              
              
              26
              %
              
              $
              48,603
              
              
              $
              40,555
              
              
              
              20
              %
 
 Royalties.  The
        increase in royalties in the second quarter of fiscal 2008 from the comparable
        period in fiscal 2007 is primarily due to a 19% increase in unit volumes
        shipped
        by our royalty paying licensees offset in part by a decline in the average
        selling price of chips sold by our licensees.
 
 Royalties
        in the first six months of fiscal 2008 were up slightly from the comparable
        period in fiscal 2007.  The increase is due to the addition of
        royalties from the ABG of $487,000 following  the acquisition of
        Chipidea in August 2007 and an 11% increase in PBG unit shipments offset
        in part
        by a $528,000 royalty adjustment due to the impact of a calculation adjustment
        by one of our licensees.
  Contract
        Revenue.  The
        increase in contract revenue in both periods presented is due to revenues
        from
        the ABG following the Chipidea acquisition in August 2007.  In the
        second quarter of fiscal 2008, revenues from the ABG were $9.4
        million.  We entered into 31 new contracts signed by the ABG in
        the second fiscal quarter of 2008.  Revenue from ABG contracts is
        generally recognized on a percentage of completion basis over the period
        of
        contract performance.  The ABG increase was offset in part by a
        decrease in contract revenue generated by the PBG of $5.1 million primarily
        because there were fewer new contracts completed during the quarter and
        therefore there was a decrease in license fees for developed
        technology.  We experienced delays in processor licensing decisions
        primarily due to consolidation activity in the industry affecting two
        potential agreements and our customers' concerns over current business and
        economic conditions. There were five new license agreements completed by
        the PBG
        in the second quarter of fiscal 2008 compared to nine in the second quarter
        of
        fiscal 2007.  Fees generated by the MIPS 24K core product family
        decreased $2.7 million, fees generated by the MIPS architecture family
        decreased $1.1 million and fees generated by the MIPS 4K core family
        decreased $750,000 compared to the corresponding period in fiscal
        2007.
 
 The
        increase in contract revenues in the first six months of fiscal 2008 over
        the
        comparable period in fiscal 2007 is due to revenues from the ABG of $11.6
        million.  There were 51 new contracts completed by the ABG in the
        second fiscal quarter of 2008 subsequent to our acquisition of
        Chipidea, and 247 contracts generating ABG revenue as of December 31,
        2007.  This increase was offset in part by a decrease in contract
        revenue generated by the PBG of $4.3 million primarily because there were
        fewer
        new contracts completed during the period.  This was due
        to consolidation activity in the industry affecting two potential
        agreements and our customers' concerns over current business and economic
        conditions.  There were eleven new license agreements completed by the
        PBG in the first six months of fiscal 2008 compared to seventeen in the
        comparable period of fiscal 2007.  Fees generated by the MIPS 24K core
        product family decreased $4.1 million in the first six months of fiscal
        2008 over the comparable period in fiscal 2007, offset somewhat by an increase
        in fees from the MIPS 34K core product family of $1.6 million.
   19
 Table
            of Contents
  Cost
        and Expenses.Our
        cost and expenses for the three-month and six-month periods ended December
        31,
        2007 and December 31, 2006 was as follows (in thousands):
 
 Three
                  Months
                  Ended December 31,
              
              
              Six
                  Months
                  Ended December 31,2007
              
              
              2006
              
              
              Change in
                Percent
              
              
              2007
              
              
              2006
              
              
              Change in
                PercentCost
                  and ExpensesCost
                  of Contract Revenue
              
              $
              9,379
              
              
              $
              378
              
              
              
              2,381
              %
              
              $
              12,703
              
              
              $
              770
              
              
              
              1,550
              %Research
                  and Development
              
              $
              9,493
              
              
              $
              8,251
              
              
              
              15
              %
              
              $
              18,506
              
              
              $
              16,024
              
              
              
              15
              %Sales
                  and Marketing
              
              $
              6,153
              
              
              $
              5,154
              
              
              
              19
              %
              
              $
              11,739
              
              
              $
              9971
              
              
              
              18
              %General
                  and Administrative
              
              $
              7,869
              
              
              $
              4,577
              
              
              
              72
              %
              
              $
              14,878
              
              
              $
              8,888
              
              
              
              67
              %
 
 Cost
        of Contract Revenue.Cost of contract revenue includes salaries, depreciation, and the
        amortization of intangible assets primarily associated with the
        ABG.  The increase in cost of contract revenue in the
        second  quarter of fiscal 2008 and the first six months of fiscal 2008
        over the comparable periods in fiscal 2007 is due to the additional cost
        of
        revenue associated with Chipidea’s analog processor products.  The
        ABG’s revenue is generated by projects which include the development
        of technology that is directly related to the requirements of particular
        licensees and license agreements.  As such, the cost of revenue for
        the ABG is substantially higher than is the case for the PBG.
  Research
        and
        Development.  Research and development expenses include salaries and
        contractor and consultant fees, as well as costs related to workstations,
        software, computer aided design tools, and stock-based compensation expense.
        The
        costs we incur with respect to internally developed technology and engineering
        services for the PBG are included in research and development expenses as
        they
        are incurred and are not directly related to any particular licensee, license
        agreement or license fee.  Because of the nature of these expenses,
        the research and development expenses for the PBG are substantially higher
        than
        the research and development expenses of the ABG, where more of the expense
        incurred for the development of technology is directly related to the
        requirements of particular licensees and license agreements.
  The
        increase in research and development expenses in the second quarter of fiscal
        2008 over the comparable period in fiscal 2007 was primarily due to an increase
        in salary expense of $252,000 related to the annual merit increase in the
        processor business group, as well as the addition of $382,000 of salary expense
        related to ABG research and development efforts.  In addition, bonus
        expense increased by $666,000 primarily due to the accrual of an escrow amount
        due to certain founders of Chipidea.  The increase was offset in part
        by a decrease in bonus earned under our PBG bonus plans as we did not meet
        plan
        targets in the second quarter of fiscal 2008, and a decrease in fees paid
        to
        third parties of $400,000 related to milestones completed under a development
        agreement in the second quarter of fiscal 2007.
 
 The
        increase in research and development expenses in the first six months of
        fiscal
        2008 over the comparable period in fiscal 2007 was primarily due to an increase
        in salary expense of $838,000 related to the annual merit increase in the
        processor business group, as well as the addition of $484,000 of salary expense
        related to the research and development employees in the analog business
        group acquired on August 27, 2007.  Bonus expense increased by $615,000
        primarily due to the accrual of an escrow amount due to certain founders
        of
        Chipidea somewhat offset by decreases in bonus earned under our PBG bonus
        plans
        as we did not meet plan targets in the first half of fiscal 2008.  In
        addition, depreciation expense increased by $401,000 due to an increase in
        our
        computer-aided design tool base and IT infrastructure to support our increased
        headcount.
 
 Sales
        and Marketing. Sales
        and marketing expenses include salaries, commissions and costs associated
        with
        third party independent software development tools, direct marketing, other
        marketing efforts and stock-based compensation expense. Our sales and marketing
        efforts are directed at establishing and supporting our licensing
        relationships.
  The
        increase in sales and marketing expense for the second quarter of fiscal
        2008
        over the comparable period in fiscal 2007 was primarily due to an increase
        in
        salary expense of $355,000 related to an increase in headcount of 7 employees
        and the annual merit increase in the processor business group as well as
        the
        addition of $672,000 of expense related to the 11 sales and marketing
        employees in the analog business group acquired on August 27,
        2007.  In addition, travel expense increased by $278,000 primarily due
        to the increase in our worldwide sales force from the ABG
        acquisition.  These increases were somewhat offset by a decrease in
        commission and bonus expense of $417,000 reflecting a decrease in commissions
        caused by lower PBG revenues in the second quarter of fiscal 2008 and a decrease
        in bonus earned under our PBG bonus plans as we did not meet plan targets
        in the
        second quarter of fiscal 2008.
   20
 Table
            of Contents
  The
        increase in sales and marketing expense for first six months of fiscal 2008
        over
        the comparable period in fiscal 2007 was primarily due to an increase in
        salary
        expense of $730,000 related to an increase in headcount of 7 employees and
        the
        annual merit increase in the processor business group as well as the addition
        of
        $861,000 of expense related to the 11 sales and marketing employees in the
        analog business group acquired on August 27, 2007.  In addition,
        travel expense increased by $386,000 primarily due to the increase in our
        worldwide sales force from the ABG acquisition and an increase in the cost
        of
        our annual sales conference held in the first quarter of the fiscal
        year.  These increases were somewhat offset by a decrease in
        commission and bonus expense of $514,000 reflecting a decrease in commissions
        caused by lower revenues in the first six months of fiscal 2008 and a decrease
        in bonus earned under our PBG bonus plans as we did not meet plan targets
        in the
        first six months of fiscal 2008.  Additionally there was a decrease of
        $432,000 in consulting expense due to the termination of a contract with
        a sales
        agent in Taiwan.
  General
        and
        Administrative. General and administrative expenses comprise salaries,
        legal fees including those associated with the establishment and protection
        of
        our patent, trademark and other intellectual property rights which are integral
        to our business and expenses related to compliance with the reporting and
        other
        requirements of a publicly traded company including directors and officers
        liability insurance, in addition to stock-based compensation
        expense.
  The
        increase in general and administrative expenses in the second quarter of
        fiscal
        2008 over the comparable period in fiscal 2007 was primarily the result of
        an
        increase in fees related to the integration of the ABG of $1.3 million, an
        increase in salary and benefits expense of $674,000 primarily due to expenses
        for the additional 22 administrative employees in the ABG.   In
        addition, travel expense increased by $235,000 primarily due to the increase
        in
        travel associated with the addition of the ABG.
 
 The
        increase in general and administrative expenses in the first six months of
        fiscal 2008 over the comparable period in fiscal 2007 was primarily the result
        of an increase in fees related to the integration of the ABG of $2.0 million,
        an
        increase in audit and tax fees of $925,000, and an increase in salary and
        benefits expense of $927,000 primarily due to expenses for the additional
        22
        administrative employees in the ABG.   Bonus expense increased by
        $456,000 primarily due to the accrual of an escrow amount due to certain
        founders of Chipidea somewhat offset by decreases in bonus earned under our
        PBG
        bonus plans as we did not meet plan targets in the second quarter of fiscal
        2008.  In addition, travel expense increased by $348,000 primarily due
        to the increase in travel associated with the addition of the ABG and hiring
        costs increased by $259,000 due to an increase in relocation expense and
        in the
        use of recruiters to fill open positions..
 
 Acquired
        In-process Research and
        Development.In August 2007, we completed the acquisition of Chipidea, a
        privately held supplier of analog and mixed signal intellectual property,
        for
        cash consideration. The fair value of the in-process technology was determined
        by estimating the present value of the net cash flows we believed would result
        from the acquired technology. Because technological feasibility of certain
        of
        the acquired technology had not been established and no future alternative
        use
        for the in-process technology existed at the time of the acquisition, we
        recorded a charge of $6.4 million in the first six-months of fiscal 2008
        for the
        acquired in-process research and development expense upon completion of the
        acquisition.   In the first quarter of fiscal 2008 we recorded a
        charge of $5.4 million  based on preliminary valuation
        analysis.  In the second quarter of fiscal 2008 we finalized the
        purchase price allocation as of the date of acquisition and recorded an
        additional charge of 910,000.
 
 Other
        Income
        (Expense), Net. Other
        income (expense), net, for the second quarter of fiscal 2008 was an expense
        of
        $1.2 millioncompared to
        income of $1.5 millionfor
        the comparable period in fiscal 2007. The decrease in other income was primarily
        due to a decrease in interest income of $1.5 million due to a decrease in
        our
        invested balances, an increase in interest expense of $646,000primarily due to interest
        incurred on
        our short-term debt, and amortization of $460,000 in loan origination fees
        related to our revolving credit agreement.
  Other
        income (expense), net, for the first six months of fiscal 2008 was an expense
        of
        $727,000 compared to income of $3.0 million for the comparable period in
        fiscal
        2007. The decrease in other income was primarily due to a decrease in interest
        income of $2.0 million due to a decrease in our invested balances, an increase
        in interest expense of $833,000 primarily due to interest incurred on our
        short-term debt, and amortization of $794,000 in loan origination fees related
        to our revolving credit agreement.
   21
 Table
            of Contents
 
 Income
        Taxes.  We
        recorded an income tax provision of $3.5 million for the three-month period
        ended December 31, 2007 and a provision of $1.6 million for the comparable
        period in fiscal 2007.  We recorded an income tax provision of $ 2.8
        million for the six-month period ended December 31, 2007 and a tax provision
        of
        $3.0 million for the comparable period in fiscal 2007.  In January
        2008, during preparation of the financial statements for the three-months
        period
        ended December 31, 2007, we revised our annual forecast and are now projecting
        a
        pre-tax loss for fiscal 2008.  As a result, we are not able to recognize a
        current period tax benefit from the utilization of our deferred tax asset. 
We recorded a provision instead of a tax benefit since we are required under
        FAS
        109 to recognize a valuation allowance against our deferred tax assets and
        therefore, we are not able to benefit from certain stock option expense,
        carry-forward of foreign tax credits and carry-forward of net operating
        losses.  The valuation allowance reduces the expected tax benefit which
        results in a higher current period expense.  The actual tax provision
        for the three-month period ended December 31, 2007, includes a year-to-date
        true-up of income tax expense for the quarter ended September 30,
        2007.  Our
            estimated annual income tax before discrete items for fiscal 2008
            primarily consists of U.S. state minimum taxes and foreign taxes on income
            earned in certain foreign jurisdictions and withholding taxes.  The actual
            tax provision for the six-month period ended December 31, 2007 differs from
            the estimated annual tax due to discrete items recorded during the
            period, primarily related to a change in estimate related to our research
            and development credits of $584,000, offset by recognition of previously
            unrecognized tax benefits of $772,000 related to changes in the tax law
            for
            Chipidea in Portugal.  The estimated annual effective tax rate of 38%
            for fiscal 2007 primarily consists of US federal and state taxes and
            foreign
            taxes on income earned in certain foreign jurisdictions and withholding
            taxes,
            offset in part by the availability of certain foreign tax credits and
            general
            business tax credits.  In January 2008, during preparation of the financial
            statements for the three-months period ended December 31, 2007, we revised
            our
            annual forecast.  As a result, the actual tax for the three-month
            period ended December 31, 2007 includes a year-to-date true-up of income
            tax
            expense for the quarter ended September 30, 2007.
 In
          June
          2006, the Financial Accounting Standards Board (FASB) issued Interpretation
          48,
Accounting for Uncertainty
          in
          Income Taxes  (FIN 48). FIN 48 clarifies the accounting for
          uncertainty in income taxes recognized in an enterprise’s financial statements
          in accordance with Statement of Financial Accounting Standards 109, Accounting for Income
          Taxes
          (SFAS 109).  This interpretation prescribes a recognition threshold and
          measurement attribute for the financial statement recognition and measurement
          of
          a tax position taken or expected to be taken in a tax return.  FIN 48 also
          provides guidance on de-recognition of tax benefits, classification on
          the
          balance sheet, interest and penalties, accounting in interim periods,
          disclosure, and transition.  This interpretation is effective for
          fiscal years beginning after December 15, 2006.
  We
          adopted the provisions of FIN 48 on July 1, 2007.  The cumulative
          effect of adopting FIN 48 on July 1, 2007 is recognized as a change in
          accounting principle, recorded as an adjustment to the opening balance
          of
          accumulated deficit on the adoption date.  As a result of the
          implementation of FIN 48, we recognized a decrease of approximately $264,000
          in
          the liability for unrecognized tax benefits related to tax positions taken
          in
          prior periods, which resulted in a decrease of $264,000 in accumulated
          deficit.
  The
          total
          amount of gross unrecognized tax benefits was $3.7 million as of July 1,
          2007
          (the date of adoption of FIN 48) and $5.0 million as of December 31,
          2007.The
          increase in the gross unrecognized tax benefits from July 1, 2007 to
          December 31, 2007 was primarily related to amounts assumed in the Chipidea
          acquisition.  Also, the
          total amount of
          unrecognized tax benefits that, if recognized, would affect the effective
          tax
          rate was $817,000 as of July 1, 2007 and $883,000 as of December 31,
          2007.
  We
          recognize interest
          and penalties related to uncertain tax positions as a component of provision
          for
          income taxes.Accrued interest and penalties relating to the
          income tax on the unrecognized tax benefits was approximately $150,000
          as of
          July 1, 2007 and approximately $902,000 as of December 31, 2007, with
          approximately $66,000 being included as a component of provision for income
          taxes in the six-month period ended December 31, 2007.  The increase
          in interest and penalties from July 1, 2007 to December 31, 2007 was primarily
          related to amounts assumed in the Chipidea acquisition.
 
 Although we file U.S. federal, U.S. state, and foreign tax returns, our
          major
          tax jurisdictions are the United States and Portugal. Our fiscal 2004 and
          subsequent tax years remain subject to examination by the IRS for U.S.
          federal
          tax purposes, and our calendar 2004 and subsequent tax years remain subject
          to
          examination by the appropriate governmental agencies for Portuguese tax
          purposes.
   22
 Table
              of Contents
 Financial
        Condition
 
 As
a
        result of the acquisition of Chipidea by payment of cash, our cash, cash
        equivalents and marketable securities decreased by approximately $127 million
        during the first quarter of fiscal 2008.  We entered into a short-term
        revolving loan agreement of $35 million to help fund the acquisition and
        current
        operating requirements, of which $20 million was outstanding at December
        31,
        2007. At December 31, 2007, we had cash, cash equivalents and marketable
        investments of $15.2 million. Principal amounts oustanding under this revolving
        loan agreement are due and payable in full on August 22, 2008. Our
        principal requirements for cash are to fund working capital needs, and, to
        a
        lesser extent, capital expenditures for equipment purchases, licensing of
        computer aided design tools used in our development activities and acquisition
        of technologies and patents. The following table summarizes selected items
        (in
        thousands) from our statements of cash flows for the six months ended December
        31, 2007 and 2006. For complete statements of cash flows for those periods,
        see
        the financial statements in Item 1.
 
 Six Months Ended December 31,2007
              
              
              2006Net
                  cash provided by (used in) operating activities
              
              $
              (2,902
              )
              
              $
              12,867Net
                  income
              
              
              (19,116
              )
              
              
              4,911Depreciation
              
              
              1,603
              
              
              
              1,006Stock-based
                  compensation
              
              
              4,343
              
              
              
              3,830Acquired
                  in-process research and development
              
              
              6,350
              
              
              
              —Amortization
                  of intangibles
              
              
              3,794
              
              
              
              680Accounts
                  receivable
              
              
              296
              
              
              
              (1,225
              )Other
                  assets
              
              
              550
              
              
              
              (2,848
              )Other
                  current accrued liabilities
              
              
              (2,322
              )
              
              
              1,987Income
                  tax payable
              
              
              (2,706
              )
              
              
              1,614Accounts
                  payable
              
              
              1,577
              
              
              
              (1,163
              )Accrued
                  compensation
              
              
              (2,446
              )
              
              
              1,276Long-term
                  liabilities
              
              
              4,205
              
              
              
              2,093Net
                  cash used in investing activities
              
              $
              (122,836
              )
              
              $
              (3,031
              )Net
                  maturities (purchases) of short-term investments
              
              
              25,940
              
              
              
              493Capital
                  expenditures
              
              
              (1,226
              )
              
              
              (3,524
              )Acquisition
                  of Chipidea Microelectronica S.A., net of cash required
              
              
              (120,616
              )
              
              
              —Restricted
                  cash
              
              
              (27,163
              )
              
              
              —Net
                  cash provided by financing activities
              
              $
              21,723
              
              
              $
              386Proceeds
                  from short-term debt, net
              
              
              19,423
              
              
              
              -Net
                  proceeds from issuance of common stock
              
              
              2,273
              
              
              
              386Net
                  increase (decrease) in cash and cash equivalents
              
              $
              (103,851
              )
              
              $
              10,264
 
 Net
        cash used in operating
        activities was $2.9 million for the six month period ended December 31, 2007,
        primarily due to our net loss partially offset by non-cash charges including
        stock-based compensation under SFAS No. 123R, depreciation, amortization of
        intangible assets, and acquired in-process research and development
        costs.  Cash was used by a decrease in our income taxes payable and a
        decrease in accrued compensation due to the payout of approximately $3.8
        million
        in accrued bonuses. These uses of cash were partially offset by cash
        provide by an increase in our long-term liabilities due to extended payment
        terms on Computer Aided Design Time-Based License (“CAD TBL”) licenses and
        increases in our deferred tax assets .
  For
        the
        six-month period ended December 31, 2006, our operating activities provided
        net cash of $12.9 million primarily due to net income and non-cash charges
        including stock-based compensation and depreciation and amortization of
        intangibles. Reported cash flow was provided by increases in long-term
        liabilities due to a $2.1 million accrual for extended payment terms on a
        CAD
        TBL, as well as an increase in other current accrued liabilities due to higher
        accruals of legal and accounting fees and higher accruals for CAD TBL and
        maintenance contracts. In addition, cash flow was provided by an increase
        in
        accrued compensation due to accruals under the executive bonus plan and our
        profit sharing plan and an increase in our income tax payable due primarily
        to
        our tax provision. The net cash provided by these sources was partially offset
        by an increase in other assets relating to a $3.1 million purchase of a CAD
        TBL,
        an increase in accounts receivable due to invoicing of new license agreements
        signed near the end of the quarter, and a decrease in accounts payable due
        in
        part to a $628,000 payment for our business insurance policy.
   23
 Table
            of Contents
 
 Net
        cash used in investing activities
        was $122.8 million for the six month period ended December 31, 2007 which
        was
        primarily due to cash used for our acquisition of Chipidea and the establishment
        of restricted cash accounts for the amounts held in escrow related to the
        Chipidea acquisition.  This use of cash was offset in part by
        $25.9 million of cash provided from the proceeds of the sale of our marketable
        investments.  Net cash used in investing activities was $3.0 million
        for the six months ended December 31, 2006 which was primarily due to purchases
        of equipment and computer-aided design tools used in our development activities
        offset slightly by net maturities of short-term investments.
  Net
        cash provided by financing
        activities was $21.7 million for the six months ended December 31, 2007 compared
        to $368,000 for the comparable period in the prior year. Net cash provided
        by
        financing activities during the six month period ended December 31,, 2007
        was
        primarily attributable to the loan of $20 million under our revolving credit
        agreement and activity under our employee stock plans, offset in part by
        cash
        paid for loan origination fees.   Net cash provided by financing
        activities during the six month period ended December 31, 2006 was attributable
        primarily to purchases under our employee stock plans.
  Our
        future liquidity and capital
        requirements could vary significantly from quarter to quarter, depending
        on
        numerous factors, including, among others:
  ·
              the
                  cost, timing and success of product development
                  efforts;
 
 ·
              the
                  level and timing of contract revenues and royalties;·
              the
                  cost of maintaining and enforcing patent claims and other intellectual
                  property rights and other
                  litigation;
 
 ·
              level
                  and timing of restructuring activities;
                  and
 
 ·
              whether
                  cash would be used to complete any
                  acquisitions.
 
 We
        believe that we have sufficient cash to meet our projected operating and
        capital
        requirements for the next twelve months. However, we may in the future be
        required to raise additional funds through public or private financing,
        strategic relationships or other arrangements. Additional equity financing
        may
        be dilutive to holders of our common stock, and debt financing, if available,
        may involve restrictive covenants. Moreover, strategic relationships, if
        necessary to raise additional funds, may require that we relinquish our rights
        to certain of our technologies. Our failure to raise capital when needed
        could
        have a material adverse effect on our business, results of operations and
        financial condition.  Principal amounts outstanding under the revolving
        loan agreement are due and payable in full on August 22, 2008.  We expect
        to refinance this loan or obtain additional financing prior to the loan maturity
        date.
  The
        Credit Agreement contains certain customary
        representations and warranties, affirmative and negative covenants, and events
        of default, including the requirement that we maintain, and report on a
        quarterly basis, for the trailing twelve months, a leverage ratio (as defined
        in
        the Credit Agreement) of no greater than 3.5 to 1.0. All obligations under
        the
        Credit Agreement, and the guarantees of those obligations, are secured by
        substantially all our assets, subject to certain exceptions. Our report to
        the
        lenders for the quarter ended December 31, 2007 is not yet due, but we believe
        we were in compliance with all covenants relating to the Credit Agreement
        as of
        that date.  However, we are in discussions with the lender regarding
        the interpretation of certain elements used in the determination of the leverage
        ratio, and if the calculation of this ratio is interpreted differently than
        our
        current belief of the appropriate interpretation, then we would not be in
        compliance with this ratio at December 31, 2007.   According to
        the credit agreement, in the event that we fail to meet the leverage ratio,
        our
        loan would be converted to a higher base rate loan.  In addition, the
        lender could elect (a) to increase the interest rate to the default rate
        (2%
        plus ABR rate plus applicable margin) and the administrative agent has the
        ability to require a retroactive increase in the event there is a miscalculation
        of the leverage ratio and / or (b) terminate the revolver and declare all
        or any
        portion of the loans due and payable.
  We
        are exposed to fluctuations in currency exchange rates because the
        functional currency of our international operating subsidiaries is the local
        currency.  We experience foreign exchange translation exposure on our
        net assets and liabilities denominated in currencies other than the U.S.
        dollar.  The related foreign currency translation gains and losses
        from translating these amounts into U. S. dollars are reflected in accumulated
        other comprehensive income under stockholder’s equity on our balance
        sheet.   For example, in the first six months of fiscal 2008, we
        recorded approximately $5.9 million in other comprehensive income, net of
        deferred tax liabilities, in the equity section of our balance sheet related
        to
        fluctuations in the Euro exchange rate, as Chipidea’s functional currency is the
        Euro.
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  Our
        contractual obligations as of December 31,, 2007 were as
        follows:
  Payments
                  due by period (in thousands)Total
              
              
              Less than1
                  year
              
              
              1-3years
              
              
              3-5years
              
              
              More than5
                  yearsOperating
                  lease obligations (1)
              
              $
              12,543
              
              
              $
              3,312
              
              
              $
              3,944
              
              
              $
              2,645
              
              
              $
              2,642Capital
                  lease obligations (2)
              
              
              7,893
              
              
              
              7,370
              
              
              
              471
              
              
              
              52
              
              
              
              —Purchase
                  obligations (3)
              
              
              12,727
              
              
              
              9,066
              
              
              
              3,661
              
              
              
              —
              
              
              
              —Short-term
                debt (4)
              
              
              22,053
              
              
              
              22,053
              
              
              
              —
              
              
              
              —
              
              
              
              —Other
                  short-term liabilities reflected on our Balance Sheet (5)
              
              
              21,306
              
              
              
              21,306
              
              
              
              —
              
              
              
              —
              
              
              
              —Other
                  long-term liabilities and obligations (6)
              
              
              18,980
              
              
              
              6,731
              
              
              
              12,249
              
              
              
              —
              
              
              
              —Total
              
              $
              95,502
              
              
              $
              69,838
              
              
              $
              20,325
              
              
              $
              2,697
              
              
              $
              2,642
  (1)
              We
                  lease office facilities and equipment under noncancelable operating
                  leases
                  that expire through 2016. In connection with the lease for our
                  Mountain
                  View headquarters, we have entered into a letter of credit as a
                  security
                  deposit with a financial institution for $264,000, which is guaranteed
                  by
                  a time-based certificate of deposit.  In addition, we have
                  entered into letters of credit of approximately $2.5 million with
                  various
                  financial institutions in Portugal, Belgium and Norway in association
                  with
                  certain building leases and government
                  grants.
 
 (2)
              Commitments
                  due under our capital leases for equipment and property.
 (3)
              Outstanding
                  purchase orders for ongoing operations. Payments of these obligations
                  are
                  subject to the provision of services or products. Purchase obligations
                  have increased by approximately $5.2 million since June 30, 2007
                  primarily due to purchases of computer aided design licenses and
                  additional purchase orders from the ABG.
 (4)
              Short-term
                  debt includes $20 million due under a revolving credit agreement,
                  $2.0
                  million due under various credit lines, and $82,000 primarily due
                  to a
                  loan with a government agency in Portugal.(5)
              Short-term
                  liabilities includes:  $14.9 million related to an escrow
                  account related to the Chipidea acquisition completed in August
                  2007,
                  which will be settled twelve months from the acquisition date,
                  $2.3
                  million related to a prepayment associated with the sale of a building,
                  $1.5 million due to shareholders of a company acquired by Chipidea
                  prior
                  to August 2007, and $2.6 million in payables for computer aided
                  design
                  licenses.
 (6)
              Long-term
                  liabilities and obligations include:  $3.0 million due to
                  employees under a deferred compensation plan, under which
                  distributions are elected by the employees, and $13.5
                  million liabilities related to an escrow account for the
                  consideration contingent due upon continued employment of certain
                  employees related to the Chipidea acquisition, half of which will
                  be
                  settled 12 months from the acquisition date and half of which will be
                  settled 24 months from the acquisition date, $1.4 million due to
                  shareholders of a company acquired by Chipidea prior to August
                  2007, and
                  $1.1 million in payables for computer aided design licenses.
 The
                  table above does not include:  (1) the potential cash earn-out
                  payments of up to $1.0 million payable within 1 year related to
                  the
                  acquisition of FS2, which are contingent upon the achievement of
                  certain
                  minimum earnings thresholds and project milestone achievement;
                  (2) the
                  potential additional cash purchase payment of up to 1.2 million
                  Euro
                  payable within 1 year related to certain Portuguese government
                  grants
                  associated with the Chipidea purchase; and (3) the potential additional
                  performance-based milestone payment of 610,687 shares of our common
                  stock
                  or a cash equivalent related to the Chipidea acquisition, due in
                  February
                  2009.  Also, as a result of the adoption of FIN 48 on July 1,
                  2007, we reclassified unrecognized tax benefits to long-term income
                  taxes
                  payable.  As of December 31, 2007, we had $5,874,000 of income tax
                  liabilities.  At this time, we are unable to make a reasonably
                  reliable estimate of the timing of payments in individual years
                  beyond 12
                  months.  While these contingent payments are not fixed at
                  present, they represent potential
                  commitments.
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 Critical
        Accounting Polices and Estimates
  We
        prepare our financial statements in conformity with U.S. generally accepted
        accounting principles, which require us to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities at the date of the
        financial statements and the reported amounts of revenue and expenses during
        the
        reporting period. We regularly evaluate our accounting estimates and
        assumptions. We base our estimates and assumptions on historical experience
        and
        on various other factors that we believe to be reasonable under the
        circumstances, the results of which form the basis for making judgments about
        the carrying value of assets and liabilities that are not readily apparent
        from
        other sources. Actual results inevitably will differ from the estimates,
        and
        such differences may require material adjustments to our financial statements.
        We believe there have been no significant changes to the items we disclosed
        as
        our critical accounting policies and estimates in our discussion and analysis
        of
        financial condition and results of operations in our 2007 Form 10-K, except
        in
        the following policy:
  Revenue
        Recognition.
  Royalty
        Revenue
  We
        classify all revenue that involves the sale of a licensee’s products as royalty
        revenue. Royalty revenue is recognized in the quarter in which a report is
        received from a licensee detailing the shipments of products incorporating
        our
        intellectual property components, which is generally in the quarter following
        the sale of the licensee’s product to its customer. Royalties are calculated
        either as a percentage of the revenue received by the seller on sales of
        such
        products or on a per unit basis. We periodically engage a third party to
        perform
        royalty audits of our licensees, and if these audits indicate any over- or
        under-reported royalties, we account for the results when they are
        identified.
  Contract
        Revenue
  Processor
        Business Group
  We
        derive revenue from license fees for the transfer of proven and reusable
        intellectual property components or from engineering services. We enter into
        licensing agreements that provide licensees the right to incorporate our
        intellectual property components in their products with terms and conditions
        that have historically varied by licensee. Revenue earned under contracts
        with
        our licensees is classified as either contract revenue or royalties. We
        recognize revenue in accordance with Staff Accounting Bulletin (SAB)
        No. 104, Revenue
        Recognition(SAB 104), and for multiple deliverable arrangements we
        follow the guidance in EITF 00-21, Revenue Arrangements with
        Multiple
        Deliverables, to determine whether there is more than one unit of
        accounting. To the extent that the deliverables are separable into multiple
        units of accounting, we then allocate the total fee on such arrangements
        to the
        individual units of accounting using the residual method. We then recognize
        revenue for each unit of accounting depending on the nature of the
        deliverable(s) comprising the unit of accounting (principally following SAB
        No. 104).
  We
        derive
        revenue from license fees for currently available technology or from engineering
        services for technology under development. Each of these types of contracts
        includes a nonexclusive license for the underlying intellectual property.
        Fees
        for contracts for currently available technology include: license fees relating
        to our intellectual property, including processor designs; maintenance and
        support, typically for one year; and royalties payable following the sale
        by our
        licensees of products incorporating the licensed technology. Generally, our
        customers pay us a single upfront fee that covers the license and first year
        maintenance and support. Our deliverables in these arrangements include
        (a) processor designs and related intellectual property and
        (b) maintenance and support. The license for our intellectual property,
        which includes processor designs, has standalone value and can be used by
        the
        licensee without maintenance and support. Further, objective and reliable
        evidence of fair value exists for maintenance and support based on specified
        renewal rates. Accordingly, (a) license fees and (b) maintenance and
        support fees are each treated as separate units of accounting. Total upfront
        fees are allocated to the license of processor designs and related intellectual
        property and maintenance and support using the residual method. Designs and
        related intellectual property are initially delivered followed by maintenance
        and support. Objective and reliable evidence of the fair value exists for
        maintenance and support. However, no such evidence of fair value exists for
        processor designs and related intellectual property. Consistent with the
        residual method, the amount of consideration allocated to processor designs
        and
        related intellectual property equals the total arrangement consideration
        less
        the fair value of maintenance and support, which is based on specified renewal
        rates. Following the guidance in SAB No. 104, fees for or allocated to
        licenses to currently available technology are recorded as revenue upon the
        execution of the license agreement when there is persuasive evidence of an
        arrangement, fees are fixed or determinable, delivery has occurred and
        collectibility is reasonably assured. We assess the credit worthiness of
        each
        customer when a transaction under the agreement occurs. If collectibility
        is not
        considered reasonably assured, revenue is recognized when the fee is collected.
        Other than maintenance and support, there is no continuing obligation under
        these arrangements after delivery of the intellectual property.
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  Contracts
        relating to technology under development also can involve delivery of a license
        to intellectual property, including processor designs. However, in these
        arrangements we undertake best-efforts engineering services intended to further
        the development of certain technology that has yet to be developed into a
        final
        processor design. Rather than paying an upfront fee to license completed
        technology, customers in these arrangements pay us milestone fees as we perform
        the engineering services. If the development work results in completed
        technology in the form of a processor design and related intellectual property,
        the customer is granted a license to such completed technology at no additional
        fee. These contracts typically include the purchase of first year maintenance
        and support commencing upon the completion of a processor design and related
        intellectual property for an additional fee, which fee is equal to the renewal
        rate specified in the arrangement. The licensee is also obligated to pay
        us
        royalties following the sale by our licensee of products incorporating the
        licensed technology. We continue to own the intellectual property that we
        develop and we retain the fees for engineering services regardless of whether
        the work performed results in a completed processor design.  We
        develop intellectual property with intent to license it to multiple
        customers.  Our cost of development of such intellectual property
        significantly exceeds the license revenue from a particular customer
        arrangement.  Costs incurred with respect to internally developed
        technology and engineering services are included in research and development
        expenses, as they are not directly related to any particular licensee, license
        agreement, or license fees. Fees for engineering services in contracts for
        technology under development, which contracts are performed on a best efforts
        basis, are recognized as revenue as services are performed subsequent to
        the
        execution of the arrangement; however, we limit the amount of revenue recognized
        to the aggregate amount received or currently due pursuant to the milestone
        terms. As engineering activities are best-efforts and at-risk and because
        the
        customer must pay an additional fee for the first year of maintenance and
        support if the activities are successful, the maintenance and support is
        a
        contingent deliverable that is not accounted for upfront under contracts
        relating to technology under development.
 
 Analog
        Business Group
  License
        agreements provide for the performance of engineering services involving
        design
        and development of customized analog and mixed signal intellectual property
        from
        basic building blocks to complete subsystems, including the development of
        new
        intellectual property or configuring existing intellectual property to
        customer’s specifications.  Fees are determined based on a number of
        factors including direct cost and the value of the underlying
        technology.  We expect to earn gross margins for each
        agreement.  We recognize revenue from these arrangements under
        Statement of Position (SOP) No. 81-1, Accounting for Performance
        of
        Construction-Type and Certain Production-Type Contracts(SOP 81-1), for
        licensing of new IP development or configuration of existing IP to a customer’s
        specification.  Revenue is recognized on a percentage of completion
        basis from the signing of the license and design agreement through silicon
        validation for new IP development and through the completion of all outstanding
        obligations for configuration of existing IP.  The amount of revenue
        recognized is based on the total license fees under the license agreement
        and
        the percentage of completion is measured by the actual costs incurred to
        date on
        the project compared to the total estimated project cost. Revenue is recognized
        only when collectibility is probable. The estimates of project costs are
        based
        on the IP specifications and prior experience of the same or similar IP
        development and are reviewed and updated regularly by
        management.  Under the percentage of completion method, provisions for
        estimated losses on uncompleted contracts are recognized in the period in
        which
        the likelihood of such losses is determined.  Licensing of existing IP
        that does not require any configuration is recognized upon delivery of the
        IP
        and when all other revenue recognition criteria under SAB 104 have been
        met.  Direct costs incurred in the design and development of the IP
        under these arrangements is included in cost of contract revenue.
  Maintenance
        and Support
  Certain
        arrangements in the Processor Business Group and Analog Business Group also
        include maintenance and support obligation. Under such arrangements, we provide
        unspecified upgrades, bug fixes and technical support. No other upgrades,
        products or other post-contract support are provided. These arrangements
        are
        renewable annually by the customer. Maintenance and support revenue is
        recognized at its fair value ratably over the period during which the obligation
        exists, typically 12 months. The fair value of any maintenance and support
        obligation is established based on the specified renewal rate for such support
        and maintenance. Maintenance and support revenue is included in contract
        revenue
        in the Statement of operations.
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 ITEM 3. 
        QUANTITATIVE
        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  We
        are
        exposed to interest rate risk on investments of our excess cash. The primary
        objective of our investment activities is to preserve capital. To achieve
        this
        objective and minimize the exposure due to adverse shifts in interest rates,
        we
        invest in high quality short-term maturity commercial paper, municipal bonds,
        and money market funds operated by reputable financial institutions in the
        United States. Due to the nature of our investments, we believe that we do
        not
        have a material interest rate risk exposure.
  In
        our
        Processor Business Group, we are exposed to fluctuations in currency exchange
        rates because a substantial portion of our revenue has been, and is expected
        to
        continue to be, derived from customers outside the United States. To date,
        substantially all of our revenue from international customers has been
        denominated in U.S. dollars. Because we cannot predict the amount of non-U.S.
        dollar denominated revenue earned by our licensees, we have not historically
        attempted to mitigate the effect that currency fluctuations may have on our
        revenue, and we do not presently intend to do so in the future.
  In
        our
        Analog Business Group, we are exposed to fluctuations in currency exchange
        rates
        because a substantial portion of our revenue is denominated in U.S. dollars
        while our functional currency is the Euro.  In order to reduce the effect
        of foreign currency fluctuations, we utilize foreign currency forward exchange
        contracts to hedge certain foreign currency transaction
        exposures.
  We
        are
        also exposed to fluctuations in currency exchange rates because the functional
        currency of our international operating subsidiaries is the local
        currency.  We experience foreign exchange translation exposure on our
        net assets and liabilities denominated in currencies other than the U.S.
        dollar.  The related foreign currency translation gains and losses
        from translating these amounts into U. S. dollars are reflected in accumulated
        other comprehensive income under stockholder’s equity on our balance
        sheet.   For example, Chipidea’s functional currency is the Euro
        and fluctuations in the Euro exchange rate will impact our earnings and our
        asset and liabilities.  We have not hedged against these
        fluctuations.  We also carry a restricted cash balance of 9.2 million
        Euro as of December 31, 2007 on our U.S. dollar balance sheet.  This
        amount is remeasured each period and fluctuations are recorded in our income
        statement.
 
 ITEM 4. 
        CONTROLS
        AND
        PROCEDURES
 
 Our
        chief
        executive officer and our chief financial officer have concluded, based on
        the
        evaluation of the effectiveness of our disclosure controls and procedures
        by our
        management, with the participation of our chief executive officer and our
        chief
        financial officer, as of the end of the period covered by this report, that
        our
        disclosure controls and procedures (as such term is defined under Rule 12a-15(e)
        and 15d-15(e) under the Exchange Act) were not effective as of December 31,
        2007, because of the material weakness described in Part II, Item 9A, in
        our 2007 Annual Report on Form 10-K. In that section, we describe a material
        weakness in our internal control over financial reporting as a result of
        errors
        found during the preparation of our financial statements with regards to
        the
        process of accounting for income taxes. Specifically, controls relating to
        the
        oversight and review of the tax provision by qualified personnel experienced
        in
        the application of tax rules, regulations and related accounting, and timely
        consultation with experts were ineffective. We have an on-going process of
        analyzing and improving our internal controls, including those related to
        the
        material weakness identified by management and have largely developed and
        are
        implementing a plan to remediate the material weaknesses described above.
        With
        regard to the process of accounting for income taxes, our remediation plan
        includes: (a) consideration and implementation of additional review of tax
        provision and reconciliations by qualified personnel experienced in application
        of tax rules and regulations and accounting for income taxes; and
        (b) consultation with tax experts in a timely
        manner.   Although we are continuing to implement this plan in
        order to address this material weakness, we cannot assure you that this material
        weakness will not cause us to determine that our internal control over financial
        reporting is not effective as of the end of our current fiscal
        year.
  Other
        than
        the changes as part of the remediation plan discussed above, there were no
        changes in our internal control over the financial reporting (as defined
        in Rule
        13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the second
        quarter of fiscal 2008 that has materially affected, or is reasonably likely
        to
        materially affect, our internal control over financial
        reporting.
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 Table
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  PART
        II – OTHER INFORMATION
  ITEM 1. 
        LEGAL
        PROCEEDINGS
 
 A derivative action entitled In
        re MIPS Technologies, Inc.
        Derivative Litigation, Case No. C-06-06699-RMW, which was filed on
        October 27, 2007, is pending in the United States District Court,
        Northern District of California, against certain current and former MIPS
        officers and directors and MIPS as a nominal defendant.  The complaint in
        the action alleges that the individual defendants breached their
        fiduciary duties and violated California and federal securities laws as a
        result
        of, among other things, purported backdating of stock option grants,
        insider trading and the dissemination of false financial statements.
        Plaintiff seeks to recover, purportedly on behalf of MIPS, unspecified
        monetary damages, corporate governance changes, equitable and injunctive
        relief,
        and fees and costs.  The court granted MIPS' motion to dismiss the
        consolidated complaint and granted plaintiff leave to file an amended
        complaint.  It is not known when or on what basis the action will be
        resolved.
 
 From
        time
        to time, we receive communications from third parties asserting patent or
        other
        rights allegedly covering our products and technologies. Based upon our
        evaluation, we may take no action or we may seek to obtain a license, redesign
        an accused product or technology, initiate a formal proceeding with the
        appropriate agency (e.g., the U.S. Patent and Trademark Office) and/or initiate
        litigation. For additional information regarding intellectual property
        litigation, see Part II, Item 1A. Risk factors – “We may be subject to claims of
        infringement”.
  ITEM 1A. 
        RISK
        FACTORS
 
 Our
        success is subject to numerous risks and uncertainties, including those
        discussed below. These factors could hinder our growth, cause us to sustain
        losses or have other adverse effects on us, all of which could cause our
        stock
        price to decline.
  During
        the first quarter of fiscal
        2008, we completed the acquisition of Chipidea, and there are numerous risks
        associated with this acquisition.In August 2007,
        we completed the acquisition of Chipidea, a Portuguese company that supplies
        analog and mixed signal intellectual property for the digital consumer, wireless
        and connectivity markets. The purchase price for this acquisition was $147
        million in cash paid at closing, with contingent obligations to issue up
        to
        610,687 shares of common stock (or to pay the cash value of such shares)
        based
        on the performance of the Chipidea business and to pay an additional
€1.2 million in cash if Chipidea receives a certain grant from the
        Portuguese government.
  This
        is a
        substantially larger acquisition than any that we have previously completed
        and
        involves technology and products that are largely new to us. Many of the
        risks
        discussed below under “We may encounter difficulties with future acquisitions
        that could harm our business” may be enhanced as a result of the Chipidea
        acquisition. Among the many risks associated with the acquisition are the
        following:
  ·
              the
                  challenges associated with integrating and managing a large acquired
                  business, which challenge will be enhanced by the geographical
                  distance
                  between our headquarters in California and the Chipidea headquarters
                  in
                  Portugal;
 
 ·
              our
                  dependence on the management of Chipidea to manage the Chipidea
                  business,
                  and integrate it with our existing business;·
              the
                  likely adverse impact to us if we were to lose key Chipidea personnel,
                  such as Jose Franca, founder and CEO, whose ongoing employment
                  with us
                  will be critical to our ability to continue to advance the Chipidea
                  technology and to effectively market and sell its
                  products;
 
 ·
              diversion
                  of our management team’s attention as we seek to capitalize on the
                  opportunities presented by this acquisition may adversely affect
                  our
                  ability to operate our existing
                  business.
  We
        may
        not achieve the advantages that we envisioned when we decided to complete
        this
        acquisition. For example, supporting the licensing of analog and mixed signal
        IP
        is relatively more labor intensive than that of our microprocessor IP business,
        and we cannot be assured of our ability to achieve operating results from
        this
        business that correspond to those that we can achieve in our existing business.
        If we are not as successful as we anticipated with the Chipidea business,
        our
        future operating results and financial condition would be adversely
        affected.
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 Table
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  We
        used all of our cash to
        complete the acquisition of Chipidea.    We used all
        of our available cash and short term investments to complete the acquisition
        of
        Chipidea, and in connection with the acquisition incurred debt under the
        Revolving Credit Agreement  This use of cash dramatically reduces our
        liquidity, and if we encounter difficulty in generating cash from the operation
        of our business we may be required to curtail our operations or take other
        acts
        that could adversely affect our ability to be successful over the longer
        term.
        In addition, we have not previously incurred debt for borrowed money. Loans
        under this facility are secured by virtually all of our assets, and the facility
        contains affirmative and negative covenants that impose restrictions on the
        operation of our business. We will be required to make substantial interest
        payments for so long as this debt is outstanding, and we cannot be assured
        that
        we will be able to repay this debt on or before its due date. We may be required
        to take on longer term financing to replace this facility, or sell equity
        securities in order to have cash to repay it. Our incurrence of long term
        debt
        could adversely affect our operating results and financial condition and
        the
        sale of equity securities could be on terms that are dilutive to our existing
        stockholders. Further, the covenants contained in the credit facility, or
        in any
        future debt we incur to replace this facility, may prevent us from taking
        advantage of opportunities that are otherwise available to us.  We may
        not be able to obtain favorable credit terms related to any debt that we
        may
        incur in the future.
  Our
        quarterly financial results are
        subject to significant fluctuations that could adversely affect our stock
        price.    Our quarterly financial results may vary
        significantly due to a number of factors. In addition, our revenue components
        are difficult to predict and may fluctuate significantly from period to period.
        Because our expenses are largely independent of our revenue in any particular
        period, it is difficult to accurately forecast our operating results. Our
        operating expenses are based, in part, on anticipated future revenue and
        a high
        percentage of our expenses are fixed in the short term. As a result, if our
        revenue is below expectations in any quarter, the adverse effect may be
        magnified by our inability to adjust spending in a timely manner to compensate
        for the revenue shortfall. Therefore, we believe that quarter-to-quarter
        comparisons of our revenue and operating results may not be a good indication
        of
        our future performance. Our recent acquisition of Chipidea will increase
        the
        challenge that we face in planning and predicting our future operating results.
        It is possible that in some future periods our results of operations may
        be
        below the expectations of securities analysts and investors. In that event,
        the
        price of our common stock may fall.
  Factors
        that could cause our revenue and operating results to vary from quarter to
        quarter include:
  ·
              our
                  ability to identify attractive licensing opportunities and then
                  enter into
                  new licensing agreements on terms that are acceptable to
                  us;
 
 ·
              our
                  ability to successfully conclude licensing agreements of any significant
                  value in a given quarter;·
              the
                  financial terms and delivery schedules of our contractual arrangements
                  with our licensees, which may provide for significant up-front
                  payments,
                  payments based on the achievement of certain milestones or extended
                  payment terms;
 
 ·
              the
                  demand for products that incorporate our technology;·
              our
                  ability to develop, introduce and market new intellectual
                  property;
 
 ·
              the
                  establishment or loss of licensing relationships with semiconductor
                  companies or digital consumer, wireless, connectivity and business
                  product
                  manufacturers;
 
 ·
              the
                  timing of new products and product enhancements by us and our
                  competitors;
 
 ·
              changes
                  in development schedules, research and development expenditure
                  levels and
                  product support by us and semiconductor companies and digital consumer,
                  wireless, connectivity and business product manufacturers;
                  and
 
 ·
              uncertain
                  economic and market conditions.
   30
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            of Contents
  The
        success of our business depends
        on maintaining and growing our contract
        revenue.    Contract revenue consists of technology
        license fees paid for access to our developed technology and engineering
        service
        fees related to technology under development. Our ability to secure the licenses
        from which our contract revenues are derived depends on our customers, including
        semiconductor companies, digital consumer, wireless, connectivity and business
        product manufacturers, adopting our technology and using it in the products
        they
        sell. Our PBG contract revenue increased 28% in fiscal 2005, but declined
        12% in
        fiscal 2006, increased by 42% in fiscal 2007 and declined by 23% during the
        first six months of fiscal 2008 over the comparable period in fiscal 2007.
        We
        cannot predict whether we can maintain our current contract revenue levels
        or if
        contract revenue will grow. Our licensees are not obligated to license new
        or
        future generations of our products, so past contract revenue may not be
        indicative of the amount of such revenue in any future period. If we cannot
        maintain or grow our contract revenue or if our customers do not adopt our
        technology and obtain corresponding licenses, our results of operations will
        be
        adversely affected.
  Our
        ability to achieve design wins
        may be limited unless we are able to develop enhancements and new generations
        of
        our intellectual property.    Our future success will
        depend, in part, on our ability to develop enhancements and new generations
        of
        our processors, cores and other intellectual property that satisfy the
        requirements of specific product applications and introduce these new
        technologies to the marketplace in a timely manner. If our development efforts
        are not successful or are significantly delayed, or if the characteristics
        of
        our intellectual property cores and related designs are not compatible with
        the
        requirements of specific product applications, our ability to achieve design
        wins may be limited. Our failure to achieve a significant number of design
        wins
        would adversely affect our business, results of operations and financial
        condition.
  Technical
        innovations of the type critical to our success are inherently complex and
        involve several risks, including:
  ·
              our
                  ability to anticipate and timely respond to changes in the requirements
                  of
                  semiconductor companies, and original equipment manufacturers,
                  or OEMs, of
                  digital consumer, wireless, connectivity and business
                  products;
 
 ·
              our
                  ability to anticipate and timely respond to changes in semiconductor
                  manufacturing processes;·
              changing
                  customer preferences in the digital consumer, wireless, connectivity
                  and
                  business products markets;
 
 ·
              the
                  emergence of new standards in the semiconductor industry and for
                  digital
                  consumer, wireless, connectivity and business products;·
              the
                  significant investment in a potential product that is often required
                  before commercial viability is determined;
                  and
 
 ·
              the
                  introduction by our competitors of products embodying new technologies
                  or
                  features.
  Our
        failure to adequately address these risks could render our existing intellectual
        property cores and related designs obsolete and adversely affect our business,
        results of operations and financial condition. In addition, we cannot assure
        you
        that we will have the financial and other resources necessary to develop
        intellectual property cores and related designs in the future, or that any
        enhancements or new generations of the technology that we develop will generate
        revenue sufficient to cover or in excess of the costs of
        development.
   31
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            of Contents
  We
        depend on royalties from the sale
        of products incorporating our technology, and we have limited visibility
        as to
        the timing and amount of such sales.    Our receipt
        of royalties from our licenses depends on our customers incorporating our
        technology into their products, their bringing these products to market,
        and the
        success of these products. In the case of our semiconductor customers, the
        amount of such sales is further dependent upon the sale of the products by
        their
        customers into which our customers’ products are incorporated. Thus, our ability
        to achieve design wins and enter into licensing agreements does not assure
        us of
        future revenue. Any royalties that we are eligible to receive are based on
        the
        sales of products incorporating the semiconductors or other products of our
        licensees, and as a result we do not have direct access to information that
        will
        help us anticipate the timing and amount of future royalties. Factors that
        negatively affect our licensees and their customers could adversely affect
        our
        business. The success of our direct and indirect customers is subject to
        a
        number of factors, including:
  ·
              the
                  competition these companies face and the market acceptance of their
                  products;
 
 ·
              the
                  engineering, marketing and management capabilities of these companies
                  and
                  technical challenges unrelated to our technology that they face
                  in
                  developing their products; and·
              their
                  financial and other resources.
  Because
        we do not control the business practices of our licensees and their customers,
        we have little influence on the degree to which our licensees promote our
        technology and do not set the prices at which products incorporating our
        technology are sold.
  We
        rely
        on our customers to correctly report to us the number or dollar value of
        products incorporating our technology that they have sold, as these sales
        are
        the basis for the royalty payments that they make to us. We have the right
        under
        our licensing agreements to perform a royalty audit of the customer’s sales so
        that we can verify the accuracy of their reporting, and if we determine that
        there has been an over-reported or under-reported amount of royalty, we account
        for the results when they are identified. By way of an example, we determined
        in
        the second quarter of fiscal 2005, as a result of an audit, that one of our
        customers had inadvertently reported a higher level of royalty than had actually
        occurred, and we accrued for this event as an offset against revenue in the
        quarter.
  If
        we do not compete effectively in
        the market for embedded intellectual property cores and related designs,
        our
        business will be adversely affected.    Competition
        in the market for embedded intellectual property and related designs is intense.
        Our products compete with those of other designers and developers of
        intellectual property cores, as well as those of semiconductor manufacturers
        whose product lines include digital, analog and/or mixed signal designs for
        embedded and non-embedded applications. In addition, we may face competition
        from the producers of unauthorized clones of our processor and other technology
        designs. The market for embedded processors in particular has recently faced
        downward pricing pressures on products. We cannot assure you that we will
        be
        able to compete successfully or that competitive pressure will not materially
        and adversely affect our business, results of operations and financial
        condition.
  In
        order
        to be successful in marketing our products to semiconductor companies, we
        must
        differentiate our intellectual property cores and related designs from those
        available or under development by the internal design groups of these companies,
        including some of our current and prospective licensees. Many of these internal
        design groups have substantial engineering and design resources and are part
        of
        larger organizations with substantial financial and marketing resources.
        These
        internal design groups may develop products that compete with ours.
  Some
        of
        our existing competitors, as well as a number of potential new competitors,
        has
        longer operating histories, greater brand recognition, larger customer bases
        as
        well as greater financial and marketing resources than we do. This may allow
        them to respond more quickly than we can to new or emerging technologies
        and
        changes in customer requirements. It may also allow them to devote greater
        resources than we can to the development and promotion of their technologies
        and
        products.
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            of Contents
 
 We
        may incur
        restructuring charges in the future, which could harm our results of
        operations.In January 2008, we announced plans to reduce our
        workforce with the objective of reducing our operating
        expenses.  These actions will result in a restructuring charge in the
        third quarter of fiscal 2008 of between $2.5 and $3.0 million, comprised
        of
        employee severance costs, facilities exit costs, and asset
        write-offs.  These restructuring activities may not be sufficient to
        appropriately align our operating expenses with our revenue
        expectations.  If we have not sufficiently reduced operating expenses
        or if revenues are below our expectations, we may be required to engage in
        additional restructuring activities, which could result in additional
        restructuring charges.  These restructuring charges could harm our
        results of operations.
  Our
        operations in foreign countries
        are subject to political and economic risks.With the
        acquisition of Chipidea we have now substantially expanded our operations
        outside the United States.  In addition to the main Chipidea
        facilities in Portugal, we also have operations in Belgium, China, France,
        Macau, Norway, Poland and the United Kingdom as well as sales offices in
        China,
        Germany, Japan, Israel and Taiwan.  We expect our international sales
        to grow, both in absolute terms and as a percentage of sales.  Our
        operations in countries outside the U.S. subject us to risks,
        including:
 
 ·
              changes
                  in tax laws, trade protection measures and import or export licensing
                  requirements;·
              potential
                  difficulties in protecting our intellectual
                  property;
 
 ·
              changes
                  in foreign currency rates;·
              restrictions,
                  or taxes, on transfers of funds between entities or facilities
                  in
                  different countries; and
 
 ·
              changes
                  in a given country’s political or economic
                  conditions.
 
 As
        a result
        of one or more of these risks, our operating costs could increase substantially,
        our flexibility in operating our business could be impaired, our taxes could
        increase, and our sales could be adversely affected.  Any of these
        items could have an adverse affect on our financial condition or results
        of
        operations.
  We
        may encounter difficulties with
        future acquisitions that could harm our
        business.    As part of our business strategy, in the
        future we may seek to acquire or invest in businesses or technologies that
        we
        believe can complement or expand our business, enhance our technical
        capabilities or that may otherwise offer growth opportunities. Any future
        acquisitions may require debt or equity financing, or the issuance of shares
        in
        the transaction, any of which could increase our leverage or be dilutive
        to our
        existing stockholders. We may not be able to complete acquisitions or strategic
        customer transactions on terms that are acceptable to us, or at all. We may
        incur charges related to acquisitions or investments that are completed.
        For
        instance, we recorded an acquired in-process research and development charge
        in
        the first quarter of fiscal 2008 as a result of our acquisition of Chipidea.
        We
        will also face challenges integrating acquired businesses and operations
        and
        assimilating and managing the personnel of the acquired operations. Geographic
        distances may further complicate the difficulties of this integration. The
        integration of acquired businesses, an area in which we have limited experience,
        may not be successful and could result in disruption to other parts of our
        business. Acquisitions involve a number of other risks and challenges,
        including:
  ·
              diversion
                  of management’s attention;
 
 ·
              potential
                  loss of key employees and customers of acquired companies;·
              exposure
                  to unanticipated contingent liabilities of acquired companies;
                  and
 
 ·
              use
                  of substantial portions of our available cash to consummate the
                  acquisition and/or operate the acquired
                  business.
  Any
        of
        these and other factors could harm our ability to realize the anticipated
        benefits of an acquisition.
  We
        depend on our key personnel to
        succeed.    Our success depends to a significant
        extent on the continued contributions of our key management, technical, sales
        and marketing personnel, many of whom are highly skilled and difficult to
        replace. This dependence is enhanced with our acquisition of Chipidea, as
        our
        ability to successfully operate this business in the future will depend
        significantly on our ability to retain key Chipidea management and employees.
        We
        cannot assure that we will retain our key officers and employees. Competition
        for qualified personnel, particularly those with significant experience in
        the
        semiconductor, analog, mixed signal and processor design industries, remains
        intense. The loss of the services of any of our key personnel or our inability
        to attract and retain qualified personnel in the future could make it difficult
        to meet key objectives, such as timely and effective project milestones and
        product introductions which could adversely affect our business, results
        of
        operations and financial condition.
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  Changes
        in effective tax rates or
        adverse outcomes from examination of our income tax returns could adversely
        affect our results.    Our future effective tax rates
        could be adversely affected by earnings being lower than anticipated in
        countries with low statutory tax rates, by changes in the valuation of our
        deferred tax assets and liabilities, or by changes in tax laws or regulations
        or
        the interpretation of tax laws or regulations. We operate in countries other
        than the United States and occasionally face inquiries and examinations
        regarding tax matters in these countries. There can be no assurance that
        the
        outcomes from examinations will not have an adverse effect on our operating
        results and financial condition.
  We
        may be subject to litigation and
        other legal claims that could adversely affect our financial
        results.    From time to time, we are subject to
        litigation and other legal claims incidental to our business. In addition,
        it is
        standard practice for us to include some form of indemnification of our
        licensees in our core and architecture license agreements, and from time
        to time
        we are engaged in claims by our licensees with respect to these obligations.
        It
        is possible that we could suffer unfavorable outcomes from litigation or
        other
        legal claims, including those made with respect to indemnification obligations,
        that are currently pending or that may arise in the future. Any such unfavorable
        outcome could materially adversely affect our financial condition or results
        of
        operations.
  We
        may be subject to claims of
        infringement.     Significant litigation regarding
        intellectual property rights exists in our industry. As we grow our business
        and
        expand into new markets that other companies are developing in, the risk
        that
        our technology may infringe upon the intellectual property rights of others
        increases. We cannot be certain that third parties will not make a claim
        of
        infringement against us, our licensees, or our licensees’ customers in
        connection with use of our technology. For example, Technology Properties
        Limited, Inc. filed a lawsuit in November 2005 against some of our licensees
        based upon the alleged infringement of certain microprocessor-related patents.
        Any claims, even those without merit, could be time consuming to defend,
        result
        in costly litigation and/or require us to enter into royalty or licensing
        agreements. These royalty or licensing agreements, if required, may not be
        available on acceptable terms to us or at all. A successful claim of
        infringement against us or one of our licensees in connection with its use
        of
        our technology could adversely affect our business.
  From
        time
        to time, we receive communications from third parties asserting patent or
        other
        rights allegedly covering our products and technologies. Based upon our
        evaluation, we may take no action or we may seek to obtain a license, redesign
        an accused product or technology, initiate a formal proceeding with the
        appropriate agency (e.g., the U.S. Patent and Trademark Office) and/or initiate
        litigation. There can be no assurance in any given case that a license will
        be
        available on terms we consider reasonable or that litigation can be avoided
        if
        we desire to do so. If litigation does ensue, the adverse third party will
        likely seek damages (potentially including treble damages) and may seek an
        injunction against the sale of our products that incorporate allegedly infringed
        intellectual property or against the operation of our business as presently
        conducted, which could result in our having to stop the sale of some of our
        products or to increase the costs of selling some of our products. Such lawsuits
        could also damage our reputation. The award of damages, including material
        royalty payments, or the entry of an injunction against the sale of some
        or all
        of our products, could have a material adverse affect on us. Even if we were
        to
        initiate litigation, such action could be extremely expensive and time-consuming
        and could have a material adverse effect on us. We cannot assure you that
        litigation related to our intellectual property rights or the intellectual
        property rights of others can always be avoided or successfully
        concluded.
  Even
        if we were to prevail, any litigation could be costly and time-consuming
        and
        would divert the attention of our management and key personnel from our business
        operations, which could have a material adverse effect on us.
  Our
        intellectual property may be
        misappropriated or expire, and we may be unable to obtain or enforce
        intellectual property rights.   We rely on a combination
        of protections provided by contracts, including confidentiality and
        nondisclosure agreements, copyrights, patents, trademarks, and common-law
        rights, such as trade secrets, to protect our intellectual
        property.  We cannot assure you that any of the patents or other
        intellectual property rights that we own or use will not be challenged,
        invalidated or circumvented by others or be of sufficient scope or strength
        to
        provide us with any meaningful protection or commercial
        advantage.   Policing the unauthorized use of our intellectual
        property is difficult, and we cannot be certain that the steps we have taken
        will prevent the misappropriation or unauthorized use of our technologies,
        particularly in foreign countries where the laws may not protect our proprietary
        rights as fully as in the United States. As part of our business strategy,
        we
        license our technology in multiple geographies including in countries whose
        laws
        do not provide as much protection for our intellectual property as the laws
        of
        the United States and where we may not be able to enforce our rights. In
        addition, intellectual property rights which we have obtained in particular
        geographies may and do expire from time to time. As a result, we cannot be
        certain that we will be able to prevent other parties from designing and
        marketing unauthorized MIPS compatible products, that others will not
        independently develop or otherwise acquire the same or substantially equivalent
        technologies as ours, or that others will not use information contained in
        our
        expired patents to successfully compete against us. Moreover, cross licensing
        arrangements, in which we license certain of our patents but do not generally
        transfer know-how or other proprietary information, may facilitate the ability
        of cross-licensees, either alone or in conjunction with others, to develop
        competitive products and designs. We also cannot assure you that any of our
        patent applications to protect our intellectual property will be approved,
        and
        patents that have issued do expire over time. Recent judicial decisions and
        proposed legislation in the United States may increase the cost of obtaining
        patents, limit the ability to adequately protect our proprietary technology,
        and
        have a negative impact on the enforceability of our patents. In addition,
        effective trade secret protection may be unavailable or limited in certain
        countries. If we are unable to protect, maintain or enforce our intellectual
        property rights, our technology may be used without the payment of license
        fees
        and royalties, which could weaken our competitive position, reduce our operating
        results and increase the likelihood of costly litigation.
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  We
        have recorded long-lived assets,
        and our results of operations would be adversely affected if their value
        becomes
        impaired.    We have recorded substantial amounts of
        purchased intangible assets and goodwill as a result of the Chipidea
        acquisition. If we complete additional acquisitions in the future, our purchased
        intangible assets amortization charge could further increase, and we may
        be
        required to record additional amounts of goodwill. We have made investments
        in
        certain private companies which could become impaired if the operating results
        of those companies change adversely.  We evaluate our long-lived
        assets, including purchased assets and investments in private companies,
        for
        impairment on an annual basis or whenever events or changes in circumstances
        indicate that the carrying amount may not be recoverable from its estimated
        future cash flows.
  In
        the
        future, if we determine that our long-lived assets are impaired, we will
        have to
        recognize additional charges for the impairment. We cannot be sure that we
        will
        not be required to record additional long-lived asset impairment charges
        in the
        future. Goodwill is evaluated annually for impairment in the fourth quarter
        of
        each fiscal year or more frequently if events and circumstances warrant,
        and our
        evaluation depends to a large degree on estimates and assumptions made by
        our
        management. Through fiscal 2007, our business was organized as one reporting
        unit. Accordingly, the assessment of impairment of goodwill was based on
        a
        comparison of the net book value to the market value of MIPS. However, in future
        periods, we will have multiple reporting units. Our assessment of any impairment
        of goodwill will be based on a comparison of the fair value of each of our
        reporting units to the carrying value of that reporting unit. Our determination
        of fair value relies on management’s assumptions of our future revenues,
        operating costs, and other relevant factors. If management’s estimates of future
        operating results change, or if there are changes to other assumptions such
        as
        the discount rate applied to future cash flows, the estimate of the fair
        value
        of our reporting units could change significantly, which could result in
        a
        goodwill impairment charge.
  The
        matters relating to the
        investigation by the Special Committee of the Board of Directors and the
        restatement of our consolidated financial statements may result in additional
        litigation and government enforcement actions.On August 30, 2006,
        we announced that our board of directors had formed a Special Committee
        consisting of independent directors and the Special Committee had hired
        independent counsel to conduct a full investigation of our historical option
        grant practices from the time of our initial public offering in July 1998
        through June 2006. As a result of the independent investigation, as well
        as our
        internal review, our management has concluded, and the Audit and Corporate
        Governance Committee of the Board of Directors agrees, that incorrect
        measurement dates were used for financial accounting purposes for certain
        stock
        option grants made in prior periods. While our management believes that we
        have
        made appropriate judgments in determining the correct measurement dates for
        the
        stock option grants, the SEC may disagree with the manner in which we have
        accounted for and reported, or not reported, the financial impact of past
        incorrect measurement dates. Accordingly, there is a risk that we may have
        to
        further restate our prior financial statements, amend prior filings with
        the
        SEC, or otherwise take other actions not currently contemplated.
  As
        described in Part II, Item 1, “Legal Proceedings”, derivative complaints
        have been filed in federal courts against current and former officers and
        directors pertaining to allegations relating to stock option grants. Additional
        litigation based on similar allegations may also be filed. We have provided
        the
        results of our independent investigation to the SEC and we have responded
        to
        informal requests for documents and additional information. On October 29,
        2007,
        we received notification from the SEC that its investigation has been terminated
        and no enforcement action has been recommended to the commission. No assurance
        can be given regarding the outcomes from litigation, regulatory proceedings
        or
        government enforcement actions relating to our past stock option practices.
        The
        resolution of these matters will be time consuming, expensive, and will distract
        our management from the conduct of our business. Furthermore, if we are subject
        to adverse findings in litigation, regulatory proceedings or government
        enforcement actions, we could be required to pay damages or penalties or
        have
        other remedies imposed, which could negatively impact our results of operations
        and financial condition.
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 Table
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  ITEM 4. 
        SUBMISSION
        OF
        MATTERS TO A VOTE OF SECURITY HOLDERS
 
 (a)  We
        held our 2007 Annual Meeting of Stockholders on December 6,
        2007.  Proxies for the meeting were solicited pursuant to Regulation
        14A.
 
 (b)  The
        matters described below were voted on at the Annual Meeting of Stockholders
        and
        the numbers of votes cast with respect to each matter and with respect to
        the
        election of directors were as indicated.
 
 (1)  Holders
        of our common stock voted to elect three Class III directors to serve for
        three-year terms as follows:
 
 For
              
              
              Against
              
              
              Withheld
              
              
              Abstentious/Broker
                  Non-VoteKenneth
                  L. Coleman
              
              
              25,747,264
              
              
              
              —
              
              
              
              11,180,555
              
              
              
              —William
                  M. Kelly
              
              
              34,817,866
              
              
              
              —
              
              
              
              2,109,953
              
              
              
              —Dr.
                  Jose E. Franca
              
              
              36,428,853
              
              
              
              —
              
              
              
              498,966
              
              
              
              —
 
 (2)  Holders
        of our common stock voted to ratify the appointment of Ernst & Young LLP as
        our independent auditors for the fiscal year ending June 30, 2008 as
        follows:
 
 For
              
              
              Against
              
              
              Withheld
              
              
              Abstentious/Broker
                  Non-Vote35,765,959
              
              
              
              1,141,287
              
              
              
              20,573
              
              
              
              —
  (3)  Holders
        of our common stock voted to approve the Amended and Restated 1998 Long-Term
        Incentive Plan as follows:
 
 For
              
              
              Against
              
              
              Withheld
              
              
              Abstentious/Broker
                  Non-Vote22,101,852
              
              
              
              2,359,781
              
              
              
              24,930
              
              
              
              12,441,256
 
 (4)  Holders
        of our common stock voted to approve the Amended and Restated Employee Stock
        Purchase Plan as follows:
 
 For
              
              
              Against
              
              
              Withheld
              
              
              Abstentious/Broker
                  Non-Vote24,264,592
              
              
              
              195,418
              
              
              
              26,553
              
              
              
              12,441,256
 
 (5)  Additional,
        each of the following directors continued their term of office after the
        meeting:  John Bourgoin, Fred M. Gibbons, Robert R. Herb, and Anthony B.
        Holbrook.
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 Table
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  ITEM 6. 
        EXHIBITS
  (a) 
        Exhibits
  3.1
              By-Laws
                  (incorporated herein by reference to Exhibit 3.01 to the Company’s Form
                  8-K filed on December 21, 2007).
 
 10.1
              MIPS
                  Technologies, Inc. 1998 Long-Term Incentive Plan (incorporated
                  herein by
                  reference to Appendix A to the Company’s definitive Proxy Statement filed
                  under Schedule 14A filed on October 25,
                  2007).
 
 10.2
              Form
                  of notice and stock option agreement with directors and officers
                  of the
                  Company under the Amended and Restated 1998 Long-Term Incentive
                  Plan
                  (incorporated herein by reference to Exhibit 99.02 to the Company’s Form
                  8-K filed on December 12, 2007).
 10.3
              Form
                  of notice and stock option agreement with employees of the Company
                  under
                  the Amended and Restated 1998 Long-Term Incentive Plan (incorporated
                  herein by reference to Exhibit 99.02 to the Company’s Form 8-K filed on
                  December 12, 2007).
 10.4
              MIPS
                  Technologies, Inc. Performance-Based Bonus Plan for Executives
                  (incorporated herein by reference to Exhibit 99.01 of the Company’s Form
                  8-K filed on October 16, 2007).
 10.5
              Special
                  Bonus Plan Letter Agreement (incorporated herein by reference to
                  Exhibit
                  99.02 to the Company’s Form 8-K filed on October 16, 2007).
 10.6
              MIPS
                  Technologies, Inc. Change in Control Agreement (incorporated herein
                  by
                  reference to Exhibit 99.03 to the Company’s Form 8-K filed on October 16,
                  2007).10.7
              Offer
                  Letter to Stuart Nichols (incorporated herein by reference to Exhibit
                  99.02 to the Company’s Form 8-K filed on November 26, 2007).31.1
              Certification
                  of Chief Executive Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of
                  2002.
 31.2
              Certification
                  of Chief Financial Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of
                  2002.
  32.1
              Certification
                  of Chief Executive Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of
                  2002.*
 32.2
              Certification
                  of Chief Financial Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of
                  2002.*
  
  *As
        contemplated by SEC Release No. 33-8212, these exhibits are furnished with
        this Quarterly Report on Form 10-Q and are not deemed filed with the Securities
        and Exchange commission and are not incorporated by reference in any filing
        of
        MIPS Technologies, Inc. under the Securities Act of 1933 or the Securities
        Act
        of 1934, whether made before or after the date hereof and irrespective of
        any
        general incorporation language in any such filings.
 
  PART
        II,
        ITEMS 2, 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
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SIGNATURES




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.




MIPS
                Technologies, Inc., a
                Delaware corporationFebruary 11,
                2008
            By:
            /s/ MERVIN
              S. KATOMervin
              S. KatoVice
              President and Chief
              Financial Officer(Principal
              Financial
              Accounting Officer)







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