**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-Q**




**(Mark
      One)**


**x
      QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15 (d) OF THE****SECURITIES
      EXCHANGE ACT OF 1934.**




**FOR
      THE QUARTERLY PERIOD ENDED September 30, 2007**




**OR**




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




**For
      the transition period from
             to
            .**




**Commission
      file number 000-24487**







**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, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one). Large accelerated filer   ̈    Accelerated
      filer  x    Non-accelerated
      filer   ̈




Indicate
      by check mark whether the registrant is a Shell Company (as defined in 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 43,895,550.















**PART
                I – FINANCIAL INFORMATION**Item 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 Procedures**PART
                II – OTHER INFORMATION**Item 1.
            Legal
                ProceedingsItem 1A
            Risk
                FactorsItem
                4.
            Submission
                of Matters to a Vote of Security
                HoldersItem 6.
            ExhibitsSignatures










**PART
      I – FINANCIAL INFORMATION**




**ITEM 1.****FINANCIAL
      STATEMENTS**




**MIPS
      TECHNOLOGIES, INC.**




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      thousands)**




**September 30,**
              **2007**
            
            
            **June 30,**
              **2007****(unaudited)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            17,586
            
            
            $
            119,039Marketable
                investments
            
            
            —
            
            
            
            25,845Accounts
                receivable, net
            
            
            21,762
            
            
            
            5,212Prepaid
                expenses and other current assets
            
            
            18,710
            
            
            
            2,472Total
                current assets
            
            
            58,058
            
            
            
            152,568Equipment,
                furniture and property, net
            
            
            15,636
            
            
            
            5,781Goodwill
            
            
            112,357
            
            
            
            565Intangible
                assets, net
            
            
            33,875
            
            
            
            3,369Other
                assets
            
            
            31,717
            
            
            
            12,579$
            251,643
            
            
            $
            174,862**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            3,767
            
            
            $
            503Accrued
                liabilities
            
            
            50,371
            
            
            
            16,118Short-term
                debt
            
            
            21,717
            
            
            
            —Deferred
                revenue
            
            
            4,829
            
            
            
            2,633Total
                current liabilities
            
            
            80,684
            
            
            
            19,254Long-term
                liabilities
            
            
            19,400
            
            
            
            5,726100,084
            
            
            
            24,980Stockholders’
                equity:Common
                stock
            
            
            43
            
            
            
            43Preferred
                stock
            
            
            —
            
            
            
            —Additional
                paid-in capital
            
            
            244,902
            
            
            
            240,444Accumulated
                other comprehensive income
            
            
            4,422
            
            
            
            435Accumulated
                deficit
            
            
            (97,808
            )
            
            
            (91,040
            )Total
                stockholders’ equity
            
            
            151,559
            
            
            
            149,882$
            251,643
            
            
            $
            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**
              **September 30,****2007**
            
            
            **2006**Revenue:Royalties
            
            $
            10,519
            
            
            $
            11,207Contract
                revenue
            
            
            11,633
            
            
            
            8,343Total
                revenue
            
            
            22,152
            
            
            
            19,550Costs
                and expenses:Cost
                of contract revenue
            
            
            3,324
            
            
            
            337Research
                and development
            
            
            9,013
            
            
            
            7,774Sales
                and marketing
            
            
            5,586
            
            
            
            4,871General
                and administrative
            
            
            7,009
            
            
            
            4,311Acquired
                in-process research and development
            
            
            5,440
            
            
            
            —Total
                costs and expenses
            
            
            30,372
            
            
            
            17,293Operating
                income (loss)
            
            
            (8,220
            )
            
            
            2,257Other
                income, net
            
            
            494
            
            
            
            1,429Income
                (loss) before income taxes
            
            
            (7,726
            )
            
            
            3,686Provision
                (benefit) for income taxes
            
            
            (695
            )
            
            
            1,363Net
                income (loss)
            
            $
            (7,031
            )
            
            $
            2,323Net
                income (loss) per basic share
            
            $
            (0.16
            )
            
            $
            0.05Net
                income (loss) per diluted share
            
            $
            (0.16
            )
            
            $
            0.05Shares
                used in computing basic net income (loss)
                per  share
            
            
            43,766
            
            
            
            43,461Shares
                used in computing diluted net income (loss) per share
            
            
            43,766
            
            
            
            45,101





See
      accompanying notes.




2
 Table
          of Contents


**MIPS
      TECHNOLOGIES, INC.**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
      (unaudited)**


**(In
      thousands)**




**Three
                Months Ended**
              **September 30,****2007**
            
            
            **2006**Operating
                activities:Net
                income (loss)
            
            $
            (7,031
            )
            
            $
            2,323Adjustments
                to reconcile net income (loss) to net cash provided by (used in )
                operating activities:Depreciation
            
            
            828
            
            
            
            485Amortization
                of intangible assets
            
            
            1,265
            
            
            
            291Stock-based
                compensation
            
            
            2,390
            
            
            
            2,063Acquired
                in-process research and development
            
            
            5,440
            
            
            
            —Other
                non-cash charges
            
            
            —
            
            
            
            (211
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (777
            )
            
            
            (969
            )Prepaid
                expenses and other current assets
            
            
            503
            
            
            
            368Other
                assets
            
            
            2,397
            
            
            
            (3,139
            )Accounts
                payable
            
            
            413
            
            
            
            (1,196
            )Accrued
                compensation
            
            
            (2,010
            )
            
            
            1,724Other
                current accrued liabilities
            
            
            1,149
            
            
            
            1,768Income
                tax payable
            
            
            (6,021
            )
            
            
            516Deferred
                revenue
            
            
            83
            
            
            
            237Long-term
                liabilities
            
            
            414
            
            
            
            2,013Net
                cash provided by (used in) operating activities
            
            
            (957
            )
            
            
            6,273Investing
                activities:Purchases
                of marketable investments
            
            
            —
            
            
            
            (9,789
            )Proceeds
                from sale of marketable investments
            
            
            25,940
            
            
            
            10,000Capital
                expenditures
            
            
            (432
            )
            
            
            (2,745
            )Acquisition
                of Chipidea Microelectronica, S.A. net of cash acquired
            
            
            (120,547
            )
            
            
            —Restricted
                cash
            
            
            (27,173
            )
            
            
            —Net
                cash used in investing activities
            
            
            (122,212
            )
            
            
            (2,534
            )Financing
                activities:Net
                proceeds from issuance of common stock
            
            
            1,857
            
            
            
            258Proceeds
                from short-term debt
            
            
            20,693
            
            
            
            —Capitalized
                debt issuance costs
            
            
            (860
            )
            
            
            —Repayments
                of capital lease obligations
            
            
            (54
            )
            
            
            —Net
                cash provided by financing activities
            
            
            21,636
            
            
            
            258Effect
                of exchange rate on cash
            
            
            80
            
            
            
            27Net
                increase (decrease) in cash and cash equivalents
            
            
            (101,453
            )
            
            
            4,024Cash
                and cash equivalents, beginning of period
            
            
            119,039
            
            
            
            101,481Cash
                and cash equivalents, end of period
            
            $
            17,586
            
            
            $
            105,505Supplemental
                disclosures of cash transaction:Income
                taxes paid
            
            
            598
            
            
            
            866Interest
                paid
            
            
            179
            
            
            
            —





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 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 adjustments (consisting
      only of normal recurring adjustments) necessary to present fairly the financial
      position, results of operations and cash flows for each interim period
      shown.




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 included 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.




***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.




*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).


4
 Table
          of Contents




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.




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.




5
 Table
            of Contents




*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, and unbilled costs and accrued profits
      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.  As we recognize those revenues, we reflect
      appropriate amounts of milestone payments and progress payments as an offset
      to
      the related receivables balance.  At September 30, 2007, approximately
      $4.6 million in unbilled accounts receivable was included in accounts
      receivable, net on the balance sheet.





***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-month periods ended September 30, 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.




The
      following table shows total stock-based employee compensation expense (see
      Note
      9, “Stock-Based Compensation” for types of stock-based employee arrangements)
      included in the condensed consolidated statement of operations for the
      three-month periods ended September 30, 2007 and 2006 (in
      thousands):




**Three
                Months Ended**
              **September 30,****2007**
            
            
            **2006**Costs
                and expenses:Research
                and development
            
            $
            833
            
            
            $
            789Sales
                and marketing
            
            
            662
            
            
            
            566General
                and administrative
            
            
            895
            
            
            
            708Total
                stock-based compensation expense
            
            $
            2,390
            
            
            $
            2,063





There
      was
      no capitalized stock-based employee compensation cost as of September 30,
      2007 or 2006. There were no material recognized tax benefits during the first
      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
      $35,000 for both the three-month period ended September 30, 2007 and
      September 30, 2006.






6
 Table
            of Contents




**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**
              **September 30,****2007**
            
            
            **2006**Numerator:Net
                income (loss)
            
            $
            (7,031
            )
            
            $
            2,323Denominator:Weighted-average
                shares of common stock outstanding
            
            
            43,796
            
            
            
            43,521Less:
                Weighted-average shares subject to repurchase
            
            
            (30
            )
            
            
            (60
            )Shares
                used in computing basic net income (loss) per share
            
            
            43,766
            
            
            
            43,461Basic
                net income (loss) per share
            
            $
            (0.16
            )
            
            $
            0.05Shares
                used in computing diluted net income (loss) per share
            
            
            43,766
            
            
            
            45,101Net
                income (loss) per diluted share
            
            $
            (0.16
            )
            
            $
            0.05Potentially
                dilutive securities excluded from net income per diluted share because
                they are anti-dilutive
            
            
            —
            
            
            
            9,191





**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 first three months of
      fiscal 2008 was $3.0 million and total comprehensive income for the comparable
      period in the prior year was $2.5 million.





**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, including $14.7 million held in
      escrow to satisfy indemnification claims that may arise. Payment of $12.5
      million of the total consideration, which is due to certain shareholders,
      is contingent upon their continued employment with us over the next two
      years.  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 in calendar years 2007 and 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 a maximum of 1.2 million Euro in cash (approximately $1.7
      million at September 30, 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.






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***Preliminary
      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 estimates and assumptions that we made are subject
      to change upon the finalization of the valuation of certain liabilities,
      intangible assets, property, and estimated useful lives of certain intangible
      assets. The preliminary purchase price of $136.8 million includes the cash
      paid of $147 million and the acquisition costs of $2.3 million less the
      contingent payment to employees of $12.5 million, and was allocated as follows
      (in thousands):





Cash
                and Investments
            
            $
            1,566Accounts
                receivable
            
            
            15,458Fixed
                Assets
            
            
            9,841Other
                current assets
            
            
            1,401Intangible
                assets
            
            
            30,510In-process
              research and development
            
            
            5,440Goodwill
            
            
            107,243Other
                long term assets
            
            
            8,303Short
                term debt
            
            
            (968
            )Accounts
                payable and other current liabilities
            
            
            (28,653
            )Deferred
                revenue
            
            
            (2,280
            )Deferred
                taxes
            
            
            (8,694
            )Long
                term liabilities
            
            
            (2,355
            )Total
                purchase price
            
            $
            136,812





***Intangible
      Assets.***In performing our preliminary 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 provided 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.





The
      following table sets forth the components of intangible assets and related
      useful lives (in thousands):





**Fair
                Value**
            
            
            **Useful
                life**Developed
                and core technology
            
            $
            15,050
            
            
            3
                to 15 yearsCustomer
                relationships and backlog
            
            
            13,360
            
            
            1
                to 7 yearsOther
            
            
            2,100
            
            
            3
                to 4 yearsTotal
                intangible assets
            
            $
            30,510





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 will be 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 will be recorded as sales and marketing expenses
      and
      the amortization of backlog assets will be recorded as cost of contract
      revenue.  The weighted average amortization period of the intangible
      assets is approximately 4.2 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 $5.4 million and determined based on an analysis
      of data provided by Chipidea 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.





The
      principal projects at acquisition date were extensions of existing technologies
      for several analog IP cores. We incurred post-acquisition cost of approximately
      $455,000 during the first quarter of fiscal 2008 for these projects and estimate
      that additional investment of approximately $3.5 million in research and
      development will be required during fiscal 2008 and 2009 to complete
      them.




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***Goodwill.***  Goodwill of $107.2 million represented the
      excess of the purchase price over the fair value of the net tangible and
      intangible sets acquired. As stated, 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 preliminary 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 $2.3 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 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.





***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 September 30,****2007**
            
            
            **2006**Total
                pro forma revenues
            
            $
            27,275
            
            
            $
            23,782Pro
                forma net income (loss)
            
            
            (9,019
            )
            
            
            1,229Pro
                forma net income (loss) per share - basic and diluted
            
            $
            (0.21
            )
            
            $
            0.03Reported
                net income (loss)
            
            
            (7,031
            )
            
            
            2,323Reported
                net income (loss) per share - basic and diluted
            
            $
            (0.16
            )
            
            $
            0.05




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 2007 includes merger related expenses of
      $126,000 recorded by Chipidea and a charge of $5.4 million for
      IPR&D.  Chipidea’s functional currency is the Euro and its
      financial statements have been translated into dollars in each period
      presented.


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**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
      September 30, 2007 and June 30, 2007 (in thousands):




**September 30,
                2007**
            
            
            **June 30,
                2007****Gross**
              **Carrying**
              **Value**
            
            
            **Accumulated**
              **Amortization**
            
            
            **Net**
              **Carrying**
              **Value**
            
            
            **Gross**
              **Carrying**
              **Value**
            
            
            **Accumulated**
              **Amortization**
            
            
            **Net**
              **Carrying**
              **Value**Developed
                and core technology
            
            $
            21,744
            
            
            $
            (4,307
            )
            
            $
            17,437
            
            
            $
            6,062
            
            
            $
            (3,645
            )
            
            $
            2,417Customer
                relationships and backlog
            
            
            15,230
            
            
            
            (966
            )
            
            
            14,264
            
            
            
            1,310
            
            
            
            (400
            )
            
            
            910Other
            
            
            2,298
            
            
            
            (124
            )
            
            
            2,174
            
            
            
            110
            
            
            
            (68
            )
            
            
            42Purchased
                intangible assets
            
            $
            39,272
            
            
            $
            (5,397
            )
            
            $
            33,875
            
            
            $
            7,482
            
            
            $
            (4,113
            )
            
            $
            3,369




The
      estimated future amortization expense of purchased intangible assets as of
      September 30, 2007 is approximately $8.8 million, $8.5 million, $7.7
      million, $4.6 million and $1.4 million for the remaining nine months of fiscal
      2008 and for fiscal years 2009, 2010, 2011 and 2012 respectively, and
      approximately $2.8 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 $1.3 million in the first quarter of fiscal
      2008
      and $291,000 in the first quarter of fiscal 2007.




The
      balance at September 30, 2007, included $15.7 million, $13.4 million, and $2.2
      million of developed and core technology, customer relationships and backlog,
      and other intangibles, respectively, from the acquisition of Chipidea, with
      estimated useful lives of 3 to 15 years, 1 to 7 years, and 3 to 4 years,
      respectively.




***Goodwill.***




Goodwill
      as
      allocated to our segments as of September 30, 2007, consisted of the following
      (in thousands):




**Processor
                Business Group**
            
            
            **Analog
                Business Group**
            
            
            **Total**Balance
                at June 30, 2007
            
            $
            565
            
            
            
            —
            
            
            $
            565Additions
                (Chipidea)
            
            
            —
            
            
            
            107,243
            
            
            
            107,243Currency
                translation adjustment
            
            
            —
            
            
            
            4,549
            
            
            
            4,549Balance
                at September 30, 2007
            
            $
            565
            
            
            $
            111,792
            
            
            $
            112,357





**Note
        6.  Short-term Debt**





The
        components of short-term debt are as follows (in
        thousands):





**September
                30, 2007**Credit agreement
            
            
            20,000Bank
              lines of credit
            
            
            1,635Other
            
            
            82$
            21,717


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   ***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 being 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 $860,000 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. In addition, we are required
        to
        pay a facility fee of 1% of the aggregate principal amount of the revolving
        commitment outstanding under the Credit Agreement as of October 31, 2007.
        This
        amount is payable on November 6, 2007.  We are required to pay an
        additional facility fee of 1% of the aggregate principal amount of the
        revolving commitment outstanding under the Credit Agreement on December 10,
        2007.





At
        September 30, 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.
        At
        September 30, 2007, the base rate was 9.0% and the LIBOR rate was 5.1875%.
        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, for the trailing twelve months, and reported on a quarterly
        basis, 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. We were in compliance with all covenants relating to
        the
        Credit Agreement as of September 30, 2007.





***Bank
      Lines of Credit***




We
      have bank line of credit agreements with several Portuguese banks with
      total available credit of approximately $2.4 million at September 30,
      2007.  The interest rates on these agreements range from 5.741% to 6.491%
      and the agreements have expiration dates ranging from October 12, 2007 to
      December 28, 2007, with automatic renewal provisions for additional 90-day
      periods.  As of September 30, 2007, we have outstanding borrowings of $1.6
      million and available credit of $800,000 under these agreements.




***Other******.*** 
      We have a non-interest bearing loan with a Portuguese governmental agency of
      approximately $76,000.


As
        of
        September 30, 2007, 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.


**Note
        7.  Other Income,
        Net**


The
      components of interest and other income, net are as follows (in
      thousands):




**Three
                months ended**
              **September
                30,****2007**
            
            
            **2006**Interest
                income
            
            $
            1,049
            
            
            $
            1,498Interest
                expense
            
            
            (186
            )
            
            
            —Other
            
            
            (369
            )
            
            
            (69
            )Total
                interest and other income, net
            
            $
            494
            
            
            $
            1,429






11
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**Note
      8.  Equipment, Furniture and Property**





The
      components of equipment, furniture and property are as follows (in
      thousands):




**September
                30,
                2007**
            
            
            **June
                30, 2007**Equipment
            
            $
            16,925
            
            
            $
            15,473Land
                and buildings
            
            
            7,820
            
            
            
            —Furniture
                and fixtures
            
            
            4,116
            
            
            
            2,67828,861
            
            
            
            18,151Accumulated
                depreciation and amortization
            
            
            (13,225
            )
            
            
            (12,370
            )Equipment,
                furniture and property, net
            
            $
            15,636
            
            
            $
            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):




**September
                30,
                2007**
            
            
            **June
                30,
                2007**Short-term
                restricted cash
            
            $
            14,754
            
            
            $
            —Other
                prepaid expenses and other assets
            
            
            3,956
            
            
            
            2,472$
            18,710
            
            
            $
            2,472





The
      components of other long-term assets are as follows (in thousands):




**September
                30,
                2007**
            
            
            **June
                30,
                2007**Long-term
                restricted cash
            
            $
            13,992
            
            
            $
            264Long-term
                deferred tax asset
            
            
            191
            
            
            
            —Investments
                in other companies
            
            
            4,453
            
            
            
            4,463Long-term
                computer aided design licenses
            
            
            9,759
            
            
            
            4,474Cash
                surrender value
            
            
            2,376
            
            
            
            2,310Other
                long-term assets
            
            
            1,018
            
            
            
            1,068$
            31,717
            
            
            $
            12,579




**Note
      10.  Accrued and Long-Term Liabilities**


The
        components of accrued liabilities are as follows (in thousands):
  **September
                  30,
                  2007**
              
              
              **June
                  30,
                  2007**Accrued
                  compensation and employee-related expenses
              
              $
              10,360
              
              
              $
              6,848Income
                  taxes payable
              
              
              (977
              )
              
              
              2,195Payable
                  to Chipidea shareholders
              
              
              14,754
              
              
              
              —Capital
                  lease obligations
              
              
              7,587
              
              
              
              —Other
                  accrued liabilities
              
              
              18,647
              
              
              
              7,075$
              50,371
              
              
              $
              16,118
  Income
        taxes payable has a negative balance due to the benefit recorded for the
        first
        fiscal quarter of 2008.
  The
        components of long-term liabilities are as follows (in thousands):
  **September
                  30,
                  2007**
              
              
              **June
                  30,
                  2007**Deferred
                  compensation
              
              $
              2,966
              
              
              $
              2,298Long-term
                  deferred tax liability
              
              
              7,846
              
              
              
              —Long-term
                  income tax liability
              
              
              4,886
              
              
              
              —Other
                  long-term liabilities
              
              
              3,702
              
              
              
              3,428$
              19,400
              
              
              $
              5,726
  12
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**Note
      11.  Commitments and Contingencies**


*Purchase
      Commitments with Suppliers*





We
      have
      outstanding purchase orders for ongoing operations of approximately $6.9 million
      as of September 30, 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, is pending in the United States District Court
      for the 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. A motion to dismiss the consolidated complaint is
      pending. 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.





**Note 12. 
      Stock-Based Compensation**





Activity
      under our Stock Option Plans for the three months ended September 30, 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
            
            
            1,515,463
            
            
            $
            7.86Options
                exercised
            
            
            (299,229
            )
            
            $
            6.30Options
                cancelled
            
            
            (89,655
            )
            
            $
            12.10Outstanding
                at September 30, 2007
            
            
            14,957,057
            
            
            $
            7.44
            
            
            
            5.14
            
            
            $
            22,194Exercisable
                at September 30, 2007
            
            
            10,821,681
            
            
            $
            7.55
            
            
            
            4.73
            
            
            $
            18,499




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 three months ended
      September 30, 2007 and 2006 was $841,000 and $149,000.




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Nonvested
      share activity under our Stock Options Plans for the three months ended
      September 30, 2007 is summarized as follows:




**Non-vested**
              **Number of**
              **Shares**
            
            
            **Weighted Average**
              **Grant-Date**
              **Fair
                Value**Nonvested
                balance at July 1, 2007
            
            
            60,000
            
            
            $
            4.72Vested
            
            
            (30,000
            )
            
            $
            4.72Nonvested
                balance at September 30, 2007
            
            
            30,000
            
            
            $
            4.72




As
      of
      September 30, 2007, $123,000 of total unrecognized compensation costs
      related to nonvested awards is expected to be recognized over a weighted average
      period of 0.9 years. The fair value of shares vested during the first three
      months of fiscal 2008 was $206,000.




***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 Plan****Three
                Months**
              **Ended September 30,**
            
            
            **Three
                Months**
              **Ended September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Expected
                life (in years)
            
            
            4.2
            
            
            
            4.2
            
            
            
            0.73
            
            
            
            —Risk-free
                interest rate
            
            
            4.36
            %
            
            
            4.86
            %
            
            
            4.07
            %
            
            
            —Expected
                volatility
            
            
            0.51
            
            
            
            0.65
            
            
            
            0.36
            
            
            
            —Dividend
                yield
            
            
            0.00
            %
            
            
            0.00
            %
            
            
            0.00
            %
            
            
            —Grant
                date fair value
            
            $
            3.55
            
            
            $
            3.57
            
            
            $
            2.26
            
            
            
            —




There
      were no shares granted under our stock purchase plan during the first quarter
      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.





**Note
      13.  Income Taxes**




We
      recorded
      an income tax benefit of $695,000 for the three-month period ended September
      30,
      2007 and a provision of $1.4 million for the comparable period in fiscal
      2007.




Our
      estimated
      annual effective income tax rate, before discrete items, of 52% for fiscal
      2008
      primarily consists of U.S. federal and state taxes and foreign taxes on income
      earned in certain foreign jurisdictions and withholding taxes, and foreign
      taxes
      related to Chipidea, offset in part by the availability of certain foreign
      tax
      credits and general business tax credits.  The actual tax rate of 9% for
      the first three-month period ended September 30, 2007 differs from the estimated
      annual effective tax rate of 52% due to discrete items recorded during the
      period, primarily the tax impact of the acquired in-process research and
      development expense of $5,440,000 related to the Chipidea acquisition and a
      provision related to a change in estimate related to our research and
      development credits of $584,000.  The estimated annual effective tax rate,
      before discrete items, of 38% in the first quarter of 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.  The actual tax rate of 37% recorded in the first quarter of
      fiscal 2007 is lower than the calculated estimated annual effective rate of
      38%
      due to discrete items such as tax benefit from employees' disqualifying
      dispositions of stock options.




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 SFAS No. 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 derecognition 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.




MIPS
      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,
      MIPS 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.




14
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The
      total
      amount of gross unrecognized tax benefits as of July 1, 2007 (the date of
      adoption of FIN 48) and September 30, 2007 were $3,749,000 and $5,971,000,
      respectively.  The increase in the gross unrecognized tax benefits
      from July 1, 2007 to September 30, 2007 was primarily related to amounts assumed
      in the Chipidea acquisition.  Also, the total amount of unrecognized tax
      benefits that, if recognized, would affect our effective tax rate as of July
      1,
      2007 and September 30, 2007, were $817,000 and $826,000,
      respectively.




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 as of July 1, 2007 and
      September 30, 2007, was approximately $150,000 and $1,214,000,
      respectively, with approximately $20,000 being included as a component of
      provision for income taxes in the quarter ended September 30, 2007. 
The increase in interest and penalties from July 1, 2007 to September 30, 2007
      is 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 2003 and subsequent tax years remain subject
      to
      examination by the appropriate governmental agencies for Portuguese tax
      purposes.





**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.




15
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The
      following
      table shows revenue, depreciation and amortization expense, segment operating
      profit (loss) and total assets and expenditures for long-lived assets of each
      segment (in thousands) for the first quarter of fiscal 2008:





**Processor
                Business Group**
            
            
            **Analog
                Business Group**
            
            
            **Unallocated
                Amounts**
            
            
            **Total**Revenue
            
            $
            19,931
            
            
            $
            2,221
            
            
            
            —
            
            
            $
            22,152Depreciation
                expense
            
            
            717
            
            
            
            63
            
            
            
            —
            
            
            
            780Amortization
                expense
            
            
            1,266
            
            
            
            970
            
            
            
            —
            
            
            
            2,236Segment
                operating profit (loss)
            
            
            1,720
            
            
            
            (2,109
            )
            
            
            —
            
            
            
            (389
            )Less:  Stock-based
                compensation
            
            
            —
            
            
            
            —
            
            
            
            (2,390
            )
            
            
            (2,390
            )Less:  Acquired
                in-process research and development
            
            
            —
            
            
            
            —
            
            
            
            (5,440
            )
            
            
            (5,440
            )Add:  Other
                income, net
            
            
            —
            
            
            
            —
            
            
            
            494
            
            
            
            494Loss
                before taxes
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (7,726
            )Total
                assets
            
            
            86,382
            
            
            
            165,261
            
            
            
            —
            
            
            
            251,643Total
                expenditures for additions to long-lived assets
            
            
            760
            
            
            
            —
            
            
            
            —
            
            
            
            760





**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.







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**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.  We have consolidated the financial results of Chipidea for the
        five week period from the close of the transaction on August 27,
        2007 through September 30, 2007.





Revenue
      in the first quarter of fiscal 2008 increased 13% over the comparable period
      in
      fiscal 2007 due to an increase in contract revenue.  Contract revenue
      increased by $3.3 million or 39% over the comparable period in fiscal
      2007 primarily due to the revenue contribution from the new Analog Business
      Group. Royalty revenues decreased 6% over the comparable period in fiscal 2007
      primarily due to recording of a calculation adjustment by one of our licensees
      even though shipments reported by our licensees increased by 3% to nearly
      92 million units.  Operating expense in the first quarter of
      fiscal 2008 increased by $13.1 million or 76% in comparison with the comparable
      period in fiscal 2007. The increase was primarily due to the acquisition of
      Chipidea and the related in-process research and development charge of $5.4
      million. 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.




Net
      loss
      before income tax benefit for the first quarter of fiscal 2008 was $7.7 million
      compared to net income before income tax of $3.7 million in the first quarter
      of
      fiscal 2007.




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 for $35 million to help fund the acquisition and
      current operating requirements, of which $20 million was outstanding at
      September 30, 2007.




17
 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 periods ended September 30, 2007 and
      September 30, 2006 was as follows (in thousands):




**Three
                Months Ended**
              **September 30,****2007**
            
            
            **2006**
            
            
            **Change**
              **in**
              **Percent**RevenueRoyalties
            
            $
            10,519
            
            
            $
            11,207
            
            
            
            (6
            %)*Percentage
                of Total Revenue*
            
            **
            *47*
            *%*
            
            **
            *57*
            *%*Contract
                Revenue
            
            
            11,633
            
            
            
            8,343
            
            
            
            39
            %*Percentage
                of Total Revenue*
            
            **
            *53*
            *%*
            
            **
            *43*
            *%*Total
                Revenue
            
            $
            22,152
            
            
            $
            19,550
            
            
            
            13
            %




*Royalties*. 
      The decrease in royalties was primarily due to the impact of a calculation
      adjustment by a licensee.  As a result of this adjustment, we
      reduced revenue in the first quarter of fiscal 2008 by approximately
      $528,000.




*Contract
      Revenue*.  The increase in contract revenue is primarily due to
      revenues from the Analog Business Group, acquired in August 2007, of $2.2
      million.  In addition, contract revenue in the processor business
      group increased by $1.1 million primarily due to an increase in fees for
      developed technology.  The increase in fees for developed technology
      was primarily due to an increase in fees generated by the MIPS 34K core family
      of $1.5 million, an increase in fees generated by the MIPS architecture product
      family of $750,000, and an increase in fees generated by the MIPS 4K core family
      of $723,000, offset in part by a decrease in fees from the MIPS 24K core family
      of $1.5 million.  Fees relating to unlimited use licenses were $3.9
      million and $3.0 million during the first quarter of fiscal 2008 and fiscal
      2007, respectively. There were six new license agreements completed in the
      first
      quarter of fiscal 2008 compared to eight in the first quarter of fiscal
      2007.




*Cost
      and Expenses.*Our cost and expenses for the three-month periods ended
      September 30, 2007 and September 30, 2006 was as follows (in
      thousands):




**Three
                Months Ended**
              **September 30,****2007**
            
            
            **2006**
            
            
            **Change**
              **in**
              **Percent**Cost
                and ExpensesCost
                of Contract Revenue
            
            $
            3,324
            
            
            $
            337
            
            
            
            886
            %Research
                and Development
            
            $
            9,013
            
            
            $
            7,774
            
            
            
            16
            %Sales
                and Marketing
            
            $
            5,586
            
            
            $
            4,871
            
            
            
            15
            %General
                and Administrative
            
            $
            7,009
            
            
            $
            4,311
            
            
            
            63
            %





*Cost
      of Contract Revenue.*Cost of contract revenue includes salaries,
      depreciation, and the amortization of intangible assets.  The
      increase in cost of contract revenue in the first quarter of fiscal 2008 is
      due
      to the acquisition of the Analog Business Group, whose revenue is generated
      by
      projects which include the development of technology that is directly
      related to the requirements of particular licensees and license
      agreements.




*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 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.




The
      increase in research and development expenses for the first quarter of fiscal
      2008 over the comparable period in fiscal 2007 was primarily due to an increase
      in salary expense of $586,000 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 $102,000 of salary expense related to the 301 research and
      development employees in the analog business group acquired on August 27,
      2007.  In addition, depreciation expense increased by $226,000 due to
      an increase in our computer-aided design tool base and our infrastructure to
      support our increased headcount, and fees paid to third parties increased by
      $200,000 related to milestones completed under a development
      agreement.


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          of Contents


*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 first quarter of fiscal 2008 over
      the comparable period in fiscal 2007 was primarily due to an increase in salary
      expense of $560,000 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
      $189,000 of salary expense related to the 15 sales and marketing employees
      in
      the Analog Business Group acquired on August 27, 2007.




*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 was primarily the result of
      an
      increase in fees related to the integration of Chipidea of $839,000, an increase
      in audit and tax services fees of $621,000 in the Processor Business
      Group, and an increase in stock compensation expense for our board of
      directors of $226,000 related to the annual grant following the annual
      shareholders meeting.





*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 in the first quarter of fiscal 2008 of
      $5.4 million for the acquired in-process research and development expense upon
      completion of the acquisition.




*Other
      Income, Net*. Other income, net, for the first quarter of fiscal 2008 was
      $494,000 compared to $1.4 million for the comparable period in fiscal 2007.
      The
      decrease in other income was primarily due to a decrease in interest income
      due
      to a decrease in our invested balances and amortization of $336,000 in loan
      origination fees related to our revolving credit agreement, offset in part
      by an
      increase in foreign exchange remeasurement gains of $409,000.




*Income
      Taxes*.  We recorded an income tax benefit of $695,000 for the
      three-month period ended September 30, 2007 and a provision of $1.4 million
      for
      the comparable period in fiscal 2007.




Our
        estimated
        annual effective income tax rate, before discrete items, of 52% for fiscal
        2008
        primarily consists of U.S. federal and state taxes and foreign taxes on income
        earned in certain foreign jurisdictions and withholding taxes, and foreign
        taxes
        related to Chipidea, offset in part by the availability of certain foreign
        tax
        credits and general business tax credits.  The actual tax rate of 9% for
        the three-month period ended September 30, 2007 differs from the estimated
        annual effective tax rate of 52% due to discrete items recorded during the
        period, primarily the tax impact of the acquired in-process research and
        development expense of $5,440,000 related to the Chipidea acquisition and
        a
        provision related to a change in estimate related to our research and
        development credits of $584,000.  The estimated annual effective tax rate,
        before discrete items, of 38% in the first quarter of fiscal 2007 primarily
        consists of U.S. 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.  The actual tax rate of 37% recorded in the first quarter of
        fiscal 2007 is lower than the calculated estimated annual effective rate
        of 38%
        due to discrete items such as tax benefit from employees' disqualifying
        dispositions of stock options.
  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 SFAS No. 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 derecognition 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.
  19
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              of Contents
  MIPS
        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,
        MIPS 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 as of July 1, 2007 (the date of
        adoption of FIN 48) and September 30, 2007 were $3,749,000 and $5,971,000,
        respectively.  The increase in the gross unrecognized tax benefits
        from July 1, 2007 to September 30, 2007 was primarily related to amounts
        assumed
        in the Chipidea acquisition.  Also, the total amount of unrecognized tax
        benefits that, if recognized, would affect our effective tax rate as of July
        1,
        2007 and September 30, 2007, were $817,000 and $826,000,
        respectively.
  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 as of July 1, 2007 and
        September 30, 2007, was approximately $150,000 and $1,214,000,
        respectively, with approximately $20,000 being included as a component of
        provision for income taxes in the quarter ended September 30, 2007. 
The increase in interest and penalties from July 1, 2007 to September 30,
        2007
        is 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 2003 and subsequent tax years remain subject
        to
        examination by the appropriate governmental agencies for Portuguese tax
        purposes.
  **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 September 30,
      2007. At September 30, 2007, we had cash, cash equivalents and marketable
      investments of $17.6 million. 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 three months ended September 30, 2007 and 2006. For
      complete statements of cash flows for those periods, see the financial
      statements in Item 1.




**Three
                Months Ended**
              **September 30,****2007**
            
            
            **2006****Net
                cash provided by (used in) operating activities**
            
            **$**
            **(957**
            **)**
            
            **$**
            **6,273**Net
                income (loss)
            
            
            (7,031
            )
            
            
            2,323Depreciation
            
            
            828
            
            
            
            485Stock-based
                compensation
            
            
            2,390
            
            
            
            2,063Acquired
                in-process research and development
            
            
            5,440
            
            
            
            —Amortization
                of intangibles
            
            
            1,265
            
            
            
            291Accounts
                receivable
            
            
            (777
            )
            
            
            (969
            )Other
                assets
            
            
            2,397
            
            
            
            (3,139
            )Accounts
                payable
            
            
            413
            
            
            
            (1,196
            )Other
                current accrued liabilities
            
            
            1,149
            
            
            
            1,768Income
                tax payable
            
            
            (6,021
            )
            
            
            516Accrued
                compensation
            
            
            (2,010
            )
            
            
            1,724Long-term
                liabilities
            
            
            414
            
            
            
            2,013Prepaid
              expenses and other current assets
            
            
            503
            
            
            
            368**Net
                cash used in investing activities**
            
            **$**
            **(122,212**
            **)**
            
            **$**
            **(2,534**
            **)**Net
                sales of short-term investments
            
            
            25,940
            
            
            
            211Capital
                expenditures
            
            
            (432
            )
            
            
            (2,745
            )Acquisition
                of Chipidea Microelectronica S.A., net of cash acquired
            
            
            (120,547
            )
            
            
            —Restricted
                cash
            
            
            (27,123
            )
            
            
            —**Net
                cash provided by financing activities**
            
            **$**
            **21,636**
            
            
            **$**
            **258**Net
                proceeds from issuance of common stock
            
            
            1,857
            
            
            
            258Net
                proceeds from short-term debt
            
            
            20,693
            
            
            
            —**Net
                increase (decrease) in cash and cash equivalents**
            
            **$**
            **(101,453**
            **)**
            
            **$**
            **4,024**


20
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  Net
        cash used
        by operating activities was $957,000 for the three month period ended September
        30, 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, a decrease in accrued compensation due to the payout of approximately
        $3.8 million in accrued bonuses offset in part by an increase in accruals
        for
        services related to the integration of Chipidea, and an increase in accounts
        receivable due to the addition of the Analog Business Group.  This use
        of cash was partially offset by cash provided by increases in our accrued
        liabilities primarily due to increases from our Analog Business Group, and
        a
        decrease in prepaid expenses and other assets due to interest
        received.




For
      the
      three-month period ended September 30, 2006, our operating activities
      provided net cash of $6.3 million primarily due to our net income and non-cash
      charges including stock-based compensation under SFAS No. 123R,
      depreciation, and amortization of intangible assets. In addition, cash was
      provided by an increase in long term liabilities due to a $2.1 million accrual
      for extended payment terms on a Computer-Aided Design Time-Based License (“CAD
      TBL”), as well as an increase in accrued compensation due to the accrual of
      profit sharing and executive bonus for the quarter and an increase in other
      current accrued liabilities due to higher accruals of legal and accounting
      fees,
      and accruals relating to CAD TBLs and maintenance contracts, partially offset
      by
      a $1.0 million payment related to the FS2 acquisition. This provision of cash
      was partially offset by cash used due to an increase in other assets relating
      to
      a $3.1 million purchase of a CAD TBL, and by a decrease in accounts payable
      due
      to a $628,000 payment for our business insurance policy renewal.




Net
      cash
      used in investing activities was $122.2 million for the three month period
      ended
      September 30, 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 $2.5 million for the three months ended
      September 30, 2006 which was primarily due to purchases of equipment and
      computer-aided design tools used in our development activities offset slightly
      by net sales of short-term investments.




Net
      cash
      provided by financing activities was $21.6 million for the three months ended
      September 30, 2007 compared to $258,000 for the comparable period in the
      prior year. Net cash provided by financing activities during the three month
      period ended September 30, 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
      three month period ended September 30, 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.




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 quarter
      of fiscal 2008, we recorded approximately $3.6 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.




21
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**Contractual
      Obligations**





Our
      contractual obligations as of September 30, 2007 were as
      follows:




**Payments
                due by period
                (in thousands)****Total**
            
            
            **Less than**
              **1
                year**
            
            
            **1-3**
              **years**
            
            
            **3-5**
              **years**
            
            
            **More than**
              **5
                years**Operating
                lease obligations (1)
            
            $
            12,455
            
            
            $
            3,175
            
            
            $
            4,050
            
            
            $
            2,450
            
            
            $
            2,780Capital
                lease obligations (2)
            
            
            2,956
            
            
            
            976
            
            
            
            1,861
            
            
            
            119
            
            
            
            —Purchase
                obligations (3)
            
            
            6,897
            
            
            
            6,617
            
            
            
            280
            
            
            
            —
            
            
            
            —Other
                short-term liabilities reflected on our Balance Sheet (4)
            
            
            22,094
            
            
            
            22,094
            
            
            
            —
            
            
            
            —
            
            
            
            —Other
                long-term liabilities and obligations (5)
            
            
            15,952
            
            
            
            6,493
            
            
            
            9,459
            
            
            
            —
            
            
            
            —Total
            
            $
            60,354
            
            
            $
            39,355
            
            
            $
            15,650
            
            
            $
            2,569
            
            
            $
            2,780





(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 decreased by approximately $535,000 since June 30,
                2007.




(4)
            Short-term
                liabilities includes:  $14.8 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,
                $2.8 million due to shareholders of a company acquired by Chipidea
                prior
                to August 2007, and $2.2 million in payables for computer aided design
                licenses.




(5)
            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 $13.0
                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.




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
                September 30, 2007, we had $3,867,000 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.







**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:


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***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.




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.




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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.







**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 E uro
      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 9.1 million
      Euro 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)
      under the Exchange Act) were not effective as of September 30, 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. We expect to develop and implement
      a
      plan to remediate the material weaknesses described above. With regard to the
      process of accounting for income taxes, our remediation plan is expected to
      include: (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.   We
      expect to implement the controls included in this remediation plan by December
      31, 2007.





Other
      than the changes as part of the remediation plan discussed above, there were
      no
      changes in our internal control over the financial reporting that occurred
      during the first quarter of fiscal 2008 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




24
 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, is pending in the United States District Court
      for the 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. A motion to dismiss the consolidated complaint is
      pending. 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.




**We
      used substantially all of our cash to complete the Chipidea acquisition and
      in
      connection with the transaction entered into a short-term credit facility under
      which we have current borrowings outstanding.**In
      order to complete the Chipidea acquisition, we used all of our existing cash
      resources and entered into a one-year credit facility under which we have
      borrowed to support our working capital needs. 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.




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**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, many of
      which are outside of our control. 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.




**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 contract revenue increased 28% in fiscal 2005, but declined 12% in
      fiscal 2006, and then increased by 42% in fiscal 2007. While we expect that
      we
      will continue to grant additional licenses to new licensees and develop new
      products to license to both new and existing licensees, 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 cores and other intellectual property that satisfies 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.




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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.




**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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**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 cusotmers 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.




**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 the interpretation of tax laws. 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 our current
      examination or any other examinations will not have an adverse effect on our
      operating results and financial condition.




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**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 two 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 I, Item 3, “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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**ITEM 4.** 
      **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





(a) We
      held
      our 2006 Annual Meeting of Stockholders on August 9, 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 one Class II director to serve for a
      three-year term as follows:





**For**
            **Against**
            **Withheld**
            **Non-Vote**Fred
                M. Gibbons
            24,945,419
            ---
            14,665,081
            ---





(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, 2007 as
      follows:





**For**
            **Against**
            **Withheld**
            **Non-Vote**36,275,721
            3,319,251
            15,528
            ---




(3) The
      following directors each continued their term of office after the meeting: 
John Bourgoin, Kenneth L. Coleman, Robert R. Herb, Anthony B. Holbrook and
      William M. Kelly.




**ITEM 6.** 
      **EXHIBITS**




(a) Exhibits




10.1
            Discretionary
                Bonus for Sandy Creighton approved on August 9, 2007, by the Company’s
                Board of Directors (incorporated herein by reference as described
                in the
                Company’s Current Report on Form 8-K filed on August 17,
                2007).





10.2
            Share
                Purchase Agreement dated August 24, 2007, between MIPS Technologies,
                Inc.,
                Atlantic Acqco, Limitada, the shareholders of Chipidea – Microelectrónica
                S.A., Espírito Santo Ventures – Sociedade de Capital de Risco, SA
                (incorporated herein by reference to Exhibit 2.1 to the Company’s Current
                Report on Form 8-K filed on August 28,
                2007).





10.31
            Use
                and Construction Rights Agreement between
                Tagusparque - Sociedade de Promocão
                e
                Desenvolvimento do Parque de Ciên
                e
                Tecnologia da Area de Lisboa ("Tagusparque") to Banco Comercial Português,
                S.A. (BCP), dated November 5, 2004 (described in Section 1.2.1 of
                the
                Summary of Documents filed as Exhibit
                10.31).




10.32
            Financial
                real estate lease agreement dated November 5,
                2004, and Addendum thereto dated May 4, 2007, between BCP and Chipidea
                (described in Sections 1.2.2 and 1.2.3 of the Summary of Documents
                filed as Exhibit 10.31).




10.33
            Promissory
                sale and purchase agreement and acknowledge
                of initial payment dated June 12, 2006, and Addendum thereto dated
                March
                16, 2007, between Chpidea and Fundimo - Sociedade Gestora de Fudos
                de
                Investimento Imobiliario, S.A. (Fundimo) (described in Sections 1.2.4
                and
                1.2.5 of the Summary of Documents filed as Exhibit
                10.31).




10.34
            Promissory
                real estate lease agreement dated July 12,
                2006 between Chipidea and Fundimo (described in Section 1.2.6 of the
                Summary of Documents filed as Exhibit
                10.31).




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.


ITEMS
      2,
      3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.




31
 Table
          of Contents


**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 corporation**November
                14,
                2007
            By:
            /s/ MERVIN
              S. KATOMervin
              S. KatoVice
              President and Chief
              Financial Officer(Principal
              Financial
              Accounting Officer)







32