10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

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: 000-23193

APPLIED MICRO CIRCUITS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2586591
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
215 Moffett Park Drive, Sunnyvale, CA	94089
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (408) 542-8600

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of September 30, 2012, 65,317,077 shares of the registrant’s common stock, $0.01 par value per share, were issued and outstanding.

APPLIED MICRO CIRCUITS CORPORATION

INDEX

		Page
Part I.	FINANCIAL INFORMATION (unaudited)
Item 1.	Condensed Consolidated Balance Sheets at September 30, 2012 and March 31, 2012		3
	Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2012 and 2011		4
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended September 30, 2012 and 2011		5
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2012 and 2011		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		34
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings		34
Item 1A.	Risk Factors		34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		54
Item 3.	Defaults Upon Senior Securities		54
Item 4.	(Removed and Reserved)		54
Item 5.	Other Information		54
Item 6.	Exhibits		55
Signatures			56

2

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	September 30, 2012			March 31, 2012
	(unaudited)			(note)
ASSETS
Current assets:
Cash and cash equivalents	$	11,992		$	28,065
Short-term investments-available-for-sale		77,695			85,781
Accounts receivable, net		14,275			22,666
Inventories		18,437			23,244
Other current assets		26,450			31,105
Total current assets		148,849			190,861
Property and equipment, net		37,858			38,100
Goodwill		13,183			13,183
Purchased intangibles		14,024			16,634
Other assets		11,019			10,274
Total assets	$	224,933		$	269,052
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,095		$	21,383
Accrued payroll and related expenses		7,106			6,844
Veloce accrued liability		17,450			32,870
Other accrued liabilities		8,206			9,052
Deferred revenue		1,219			2,137
Total current liabilities		48,076			72,286
Veloce accrued liability		17,894			27,530
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 2,000, none issued and outstanding		—			—
Common stock, $0.01 par value:
Authorized shares — 375,000 at September 30, 2012 and March 31, 2012
Issued and outstanding shares — 65,317 at September 30, 2012 and 61,879 at March 31, 2012		648			619
Additional paid-in capital		5,915,248			5,881,336
Accumulated other comprehensive loss		(1,032	)		(1,765	)
Accumulated deficit		(5,755,901	)		(5,710,954	)
Total stockholders’ equity		158,963			169,236
Total liabilities and stockholders’ equity	$	224,933		$	269,052

Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

See Accompanying Notes to Condensed Consolidated Financial Statements

3

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net revenues	$	46,324		$	64,929		$	87,618		$	125,773
Cost of revenues		20,561			27,704			38,916			54,035
Gross profit		25,763			37,225			48,702			71,738
Operating expenses:
Research and development		34,383			29,609			69,154			57,977
Selling, general and administrative		13,531			8,941			26,001			21,497
Amortization of purchased intangible assets		601			803			1,251			1,902
Restructuring (recoveries) charges, net		—			(40	)		—			873
Total operating expenses		48,515			39,313			96,406			82,249
Operating loss		(22,752	)		(2,088	)		(47,704	)		(10,511	)
Interest income (expense), net		745			1,469			2,424			2,750
Other income (expense), net		90			48			173			123
Loss before income taxes		(21,917	)		(571	)		(45,107	)		(7,638	)
Income tax (benefit) expense		(360	)		581			(160	)		391
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Basic and diluted net loss per share	$	(0.33	)	$	(0.02	)	$	(0.71	)	$	(0.13	)
Shares used in calculating basic and diluted net loss per share		64,947			62,526			63,678			63,202

See Accompanying Notes to Condensed Consolidated Financial Statements

4

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Other comprehensive gain (loss), net of tax:
Unrealized gain (loss) on investments		1,358			(2,176	)		855			(1,724	)
Loss on foreign currency translation		(6	)		(108	)		(122	)		(199	)
Other comprehensive gain (loss), net of tax		1,352			(2,284	)		733			(1,923	)
Total comprehensive loss	$	(20,205	)	$	(3,436	)	$	(44,214	)	$	(9,952	)

See Accompanying Notes to Condensed Consolidated Financial Statements

5

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended September 30,
	2012			2011
Operating activities:
Net loss	$	(44,947	)	$	(8,029	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		4,905			3,840
Amortization of purchased intangibles		2,609			4,096
Stock-based compensation expense:
Stock options		2,172			2,579
Restricted stock units		13,151			4,723
Warrants		1,289			—
Veloce accrued liability		4,650			—
Acquisition related adjustment		(133	)		(2,267	)
Net loss on disposals of property		3			10
Tax effect on other comprehensive income		(565	)		—
Changes in operating assets and liabilities:
Accounts receivable		8,391			(8,086	)
Inventories		4,807			7,834
Other assets		(2,735	)		(7,159	)
Accounts payable		(4,293	)		(5,908	)
Accrued payroll and other accrued liabilities		(1,819	)		55
Veloce accrued liability		(14,814	)		—
Deferred revenue		(918	)		(560	)
Net cash used for operating activities		(28,247	)		(8,872	)
Investing activities:
Proceeds from sales and maturities of short-term investments		24,868			87,746
Purchases of short-term investments		(15,361	)		(67,735	)
Purchase of property, equipment and other assets		(7,606	)		(9,757	)
Proceeds from sale of strategic equity investment		7,146			—
Purchases of strategic equity investment		(500	)		(2,500	)
Funding of note receivable		—			(1,000	)
Net cash provided by investing activities		8,547			6,754
Financing activities:
Proceeds from issuance of common stock		5,359			2,952
Funding of restricted stock units withheld for taxes		(313	)		(2,441	)
Repurchase of common stock		(654	)		(20,852	)
Funding of structured stock repurchase agreements		—			(10,000	)
Payment of contingent consideration		(485	)		—
Other		(280	)		(160	)
Net cash provided by (used for) financing activities		3,627			(30,501	)
Net decrease in cash and cash equivalents		(16,073	)		(32,619	)
Cash and cash equivalents at beginning of year		28,065			84,402
Cash and cash equivalents at end of year	$	11,992		$	51,783
Supplementary cash flow disclosures:
Income taxes	$	197		$	22
Shares issued for Veloce merger consideration	$	14,842		$	—

See Accompanying Notes to Condensed Consolidated Financial Statements

6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include all the accounts of Applied Micro Circuits Corporation (“AMCC”, “APM”, “AppliedMicro” or the “Company”), and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods as a variable interest entity (“VIE”) since the Company was determined to be its primary beneficiary. On June 20, 2012, the Company completed the acquisition of Veloce which became a wholly owned subsidiary of the Company as of this date. See note 4 of Notes to Condensed Consolidated Financial Statements for further details of the acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management 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 net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to its capitalized mask sets including its useful lives, which affects cost of goods sold and property and equipment or R&D expenses, if not capitalized; inventory valuation, warranty liabilities, and revenue reserves, which affects cost of sales, gross margin, and revenues; allowance for doubtful accounts, which affects operating expenses; the unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net; the valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles and impairments of goodwill; the valuation of the Veloce consideration which affects operating expenses; the potential costs of litigation, which affects operating expenses; the valuation of deferred income taxes, which affects income tax expense (benefit); and stock-based compensation, which affects gross margin and operating expenses. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from management’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

2. CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	September 30, 2012			March 31, 2012
	(In thousands)
Accounts receivable	$	15,211		$	23,765
Less: allowance for bad debts		(936	)		(1,099	)
	$	14,275		$	22,666

Inventories:

	September 30, 2012		March 31, 2012
	(In thousands)
Finished goods	$	14,436	$	17,883
Work in process		3,338		3,818
Raw materials		663		1,543
	$	18,437	$	23,244

7

Other current assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Prepaid expenses	$	21,388	$	20,353
Executive deferred compensation assets		1,362		1,344
Deposits		897		899
Proceeds receivable on sale of strategic investment		—		7,100
Other		2,803		1,409
	$	26,450	$	31,105

Property and equipment:

	Useful Life		September 30, 2012			March 31, 2012
	(In years)		(In thousands)
Machinery and equipment		5-7	$	36,732		$	36,600
Leasehold improvements		1-15		17,405			14,228
Computers, office furniture and equipment		3-7		43,031			43,929
Buildings		31.5		2,756			2,756
Land		—		9,800			9,800
				109,724			107,313
Less: accumulated depreciation and amortization				(71,866	)		(69,213	)
			$	37,858		$	38,100

Goodwill and purchased intangibles:

Goodwill is as follows:

	(In thousands)
Goodwill related to TPack acquisition, as of September 30, 2012 and March 31 2012	$	13,183

Purchase-related intangibles were as follows:

	September 30, 2012									March 31, 2012
	Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life		Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life
	(In thousands)							(In years)		(In thousands)							(In years)
Developed technology/in-process research and development	$	441,300	$	(430,413	)	$	10,887		4.0	$	441,300	$	(429,054	)	$	12,246		4.6
Customer relationships		12,830		(9,982	)		2,848		2.8		12,830		(8,881	)		3,949		2.9
Patents/core technology rights/tradename		63,206		(62,917	)		289		1.0		63,206		(62,767	)		439		1.5
	$	517,336	$	(503,312	)	$	14,024			$	517,336	$	(500,702	)	$	16,634

8

As of September 30, 2012, the estimated future amortization expense of purchased intangible assets to be charged to cost of sales and operating expenses was as follows (in thousands):

	Cost of Sales		Operating Expenses		Total
Fiscal Years Ending March 31,
2013 (remaining)	$	1,358	$	675	$	2,033
2014		2,717		1,189		3,906
2015		2,717		904		3,621
2016		2,717		369		3,086
2017 and thereafter		1,378		—		1,378
Total	$	10,887	$	3,137	$	14,024

Other assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Non-current portion of prepaid expenses	$	5,769	$	4,193
Strategic investments		5,250		4,750
Other		—		1,331
	$	11,019	$	10,274

Other accrued liabilities:

	September 30, 2012		March 31, 2012
	(In thousands)
Customer deposits*	$	75	$	415
Employee related liabilities		2,333		2,051
Executive deferred compensation		1,362		1,344
Income taxes		1,428		1,401
Professional fees		1,278		961
Contingent consideration		—		618
Other		1,730		2,262
	$	8,206	$	9,052

* Includes credit balances in Accounts Receivable that have been reclassified as Other Accrued Liabilities

Strategic Investments

The Company has entered into certain equity investments in privately held businesses to achieve certain strategic business objectives. The Company’s investments in equity securities of privately held businesses are accounted for under the cost method. Under the cost method, strategic investments in which the Company holds less than a 20% voting interest and on which the Company does not have the ability to exercise significant influence are carried at the lower of cost or cost reduced by other-than-temporary impairments, as appropriate. These investments are included in other assets on the Company’s condensed consolidated balance sheets. The Company periodically reviews these investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments when an other-than-temporary decline has occurred. During the six months ended September 30, 2012 and 2011, the Company invested $0.5 million and $2.5 million, respectively, in non-marketable equity investments and these amounts were carried at cost.

9

Short-term investments:

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments (in thousands):

	September 30, 2012								March 31, 2012
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		13,008		—		—		13,008
U.S. Treasury securities and agency bonds		17,533		23		1		17,555		16,771		11		19		16,763
Corporate bonds		20,485		95		6		20,574		23,361		56		10		23,407
Mortgage-backed and asset-backed securities*		3,942		398		26		4,314		7,308		364		61		7,611
Closed-end bond funds		23,705		5,760		1,097		28,368		26,401		5,161		1,649		29,913
Preferred stock		4,878		2,006		—		6,884		6,209		1,878		—		8,087
	$	82,535	$	8,282	$	1,130	$	89,687	$	108,115	$	7,470	$	1,739	$	113,846
Reported as:
Cash and cash equivalents							$	11,992							$	28,065
Short-term investments available-for-sale								77,695								85,781
							$	89,687							$	113,846

* At September 30, 2012 and March 31, 2012, approximately $2.0 million and $4.6 million of the estimated fair value presented were mortgage-backed securities, respectively.

The established guidelines for measuring fair value and expanded disclosures regarding fair value measurements are defined as a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 —	Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 —	Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 —	Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments measured at fair value on a recurring basis (in thousands):

	September 30, 2012								March 31, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		10,510		2,498		—		13,008
U.S. Treasury securities and agency bonds		17,555		—		—		17,555		16,763		—		—		16,763
Corporate bonds		—		20,574		—		20,574		—		23,407		—		23,407
Mortgage-backed and asset-backed securities		—		4,314		—		4,314		—		7,611		—		7,611
Closed-end bond funds		28,368		—		—		28,368		29,913		—		—		29,913
Preferred stock		—		6,884		—		6,884		—		8,087		—		8,087
	$	57,915	$	31,772	$	—	$	89,687	$	72,243	$	41,603	$	—	$	113,846

There were no significant transfers in and out of Level 1 and Level 2 fair value measurements during the three and six months ended September 30, 2012.

The Company periodically reviews its strategic investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments when an other-than-temporary decline has occurred. No other-than-temporary declines were recorded during the three months ended September 30, 2012. During the three and six months ended September 30, 2012, the Company invested zero and $0.5 million in a non-marketable equity investment and this amount was carried at cost.

10

The following is a summary of the cost and estimated fair values of available-for-sale securities with stated maturities, which include U.S. Treasury securities and agency bonds, corporate bonds and mortgage-backed and asset-backed securities, by contractual maturity (in thousands):

	September 30, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	16,038	$	16,190	$	16,683	$	16,722
Mature in 1 – 2 years		24,201		24,284		26,869		27,026
Mature in 3 – 5 years		484		522		2,421		2,496
Mature after 5 years		1,237		1,447		1,467		1,537
	$	41,960	$	42,443	$	47,440	$	47,781

The following is a summary of gross unrealized losses (in thousands):

	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of September 30, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	2,456	$	—	$	—	$	—	$	2,456	$	—
Corporate bonds		898		4		248		2		1,146		6
Mortgage-backed and asset-backed securities		723		8		232		18		955		26
Closed-end bond funds		—		—		7,180		1,098		7,180		1,098
	$	4,077	$	12	$	7,660	$	1,118	$	11,737	$	1,130
	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of March 31, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	8,938	$	19	$	—	$	—	$	8,938	$	19
Corporate bonds		5,463		10		—		—		5,463		10
Mortgage-backed and asset-backed securities		894		20		353		42		1,247		62
Closed-end bond funds		—		—		6,628		1,648		6,628		1,648
	$	15,295	$	49	$	6,981	$	1,690	$	22,276	$	1,739

Other-Than-Temporary Impairment

Based on an evaluation of securities that have been in a loss position, the Company did not recognize any other-than-temporary impairment charges, for the three and six months ended September 30, 2012 and 2011. The Company considered various factors which included a credit and liquidity assessment of the underlying securities and the Company’s intent and ability to hold the underlying securities until its estimated recovery of amortized cost. As of September 30, 2012 and March 31, 2012, the Company also had $8.3 million and $7.5 million in gross unrealized gains, respectively. The basis for computing realized gains or losses is by specific identification.

Warranty reserves

The Company’s products typically carry a one year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, use of materials and service delivery costs incurred in correcting any product failure. Should actual product failure rates, use of materials or service delivery costs differ from the Company’s estimates, additional warranty reserves could be required, which could reduce its gross margin.

11

The following table summarizes warranty reserve activity (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Beginning balance	$	447		$	197		$	454		$	176
Charged to costs of revenues		85			99			215			305
Charges incurred		(162	)		(52	)		(299	)		(237	)
Ending balance	$	370		$	244		$	370		$	244

Interest income, net (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Interest income	$	568	$	1,127	$	1,230	$	2,089
Net realized gain on short-term investments		177		342		1,194		661
	$	745	$	1,469	$	2,424	$	2,750

Other income, net (in thousands):

	Three Months Ended September 30,					Six Months Ended September 30,
	2012			2011		2012			2011
Net loss on disposals of property	$	(3	)	$	—	$	(10	)	$	(10	)
Other, net		93			48		183			133
	$	90		$	48	$	173		$	123

Net loss per share:

Shares used in basic net loss per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net loss per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of restricted stock units (“RSUs”) and outstanding warrants. However, potentially issuable common shares are not used in computing diluted net loss per share as their effect would be anti-dilutive due to the loss recorded during the periods presented. The reconciliation of shares used to calculate basic and diluted net loss per share consists of the following (in thousands, except per share data):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic		64,947			62,526			63,678			63,202
Net effect of dilutive common share equivalents		—			—			—			—
Weighted average common shares outstanding, diluted		64,947			62,526			63,678			63,202
Basic and diluted net loss per share	$	(0.33	)	$	(0.02	)	$	(0.71	)	$	(0.13	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 10.2 million and 10.3 million equivalent shares for the three and six months ended September 30, 2012, respectively, and 9.9 million and 7.8 million shares for the three and six months ended September 2011, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company has incurred losses in the periods presented.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 0.5 million and 0.4 million equivalent shares for the three and six months ended September 30, 2012, respectively, and 0.1 million and 0.6 million shares for the three and six months ended September 2011, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company has incurred losses in the periods presented.

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Total equivalent shares excluded from the net loss per share computation are 10.7 million each for the three and six months ended September 30, 2012, respectively, and 10.0 million and 8.4 million shares for three and six months ended September 30, 2011, respectively.

3. RESTRUCTURING CHARGES

The Company recognizes restructuring costs associated with exit or disposal activities. Cost relating to facilities closure or lease commitments are recognized when the facility has been exited. Termination costs are recognized when the cost are deemed both probable and estimable. The Company did not implement any restructuring programs during the three and six months ended September 30, 2012. The restructuring activity for the three and six months ended September 30, 2011 is described below.

April 2011 Restructuring Program

The April 2011 restructuring program was implemented as part of the Company’s ongoing cost reduction efforts and to better align its global operations to achieve greater efficiencies. The Company moved more of its functions offshore, which would allow it to be closer and more connected to its customer’s third party subcontract manufacturers. The April 2011 restructuring plan included eliminating or relocating 25 positions. As a result of the April 2011 restructuring program, the Company recorded a charge of $0.9 million for employee severances.

4. VELOCE

On June 20, 2012 (the “Closing Date”), the Company completed its acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, entered into as of May 17, 2009 (the “Initial Agreement”), as amended by Amendment No. 1 to Agreement and Plan of Merger, entered into as of November 8, 2010 (the “First Amendment”), and Amendment No. 2 to Agreement and Plan of Merger, entered into as of April 5, 2012 (the “Second Amendment” and, collectively with the Initial Agreement and the First Amendment, the “Merger Agreement”). The First Amendment was amended, restated and replaced in its entirety by the Second Amendment.

The terms of the Merger Agreement include the payment of initial consideration of up to $60.4 million, payable in shares of Company common stock and/or cash (at the Company’s election) to holders of Veloce common stock options that were vested on the Closing Date, to Veloce stockholders and holders of Veloce stock equivalents. Following the closing, the Company paid part of the consideration by issuing approximately 2.4 million shares of its common stock and paying approximately $12.7 million in cash, with the balance of the $60.4 million to be paid, using a similar ratio of Company shares and cash, over the next two to three years upon the satisfaction of additional vesting requirements. During the three and six months ended September 30, 2012, as part of the above arrangement, the company issued 0.2 million shares and 2.6 million shares respectively, and paid approximately $2.1 million and $14.8 million in cash, respectively.

For accounting purposes, the consideration payable for the acquisition of Veloce is considered compensatory and will be recognized as research and development expense. Recognition of these costs will occur when certain development and performance milestones become probable of achievement and earned. As of March 31, 2012, one significant performance and development milestone set forth under the Merger Agreement was considered probable of achievement and the Company therefore recorded the initial consideration of $60.4 million, which was recognized as research and development expense. During the three and six months ended September 30, 2012, the Company recognized an additional $2.3 million and $4.7 million, respectively, of research and development expense in connection with progress achieved against certain product development milestones included in the Second Amendment. No other product development milestones included in the Merger Agreement were considered probable of achievement as of September 30, 2012.

The Second Amendment further provides for potential payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to Company products on which Veloce has worked. The additional payments would be payable in partial amounts upon the achievement of each such milestone. The Company currently expects aggregate additional payments to range from a minimum of $4.7 million to a maximum of $75 million, based on the Company’s current expectations relating to the achievement of such product development milestones. Any such additional payments may be payable in shares of Company common stock and/or cash (at the Company’s election).

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5. STOCKHOLDERS’ EQUITY

Preferred Stock

The Certificate of Incorporation allows for the issuance of up to two million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series of the designation of such series, without further vote or action by the stockholders.

Common Stock

At September 30, 2012, the Company had 375.0 million shares authorized for issuance and approximately 65.3 million shares issued and outstanding. At March 31, 2012, there were approximately 61.9 million shares issued and outstanding.

Employee Stock Purchase Plan

The Company had in effect the 1998 Employee Stock Purchase Plan (1998 Plan) under which 4.8 million shares of common stock was reserved for issuance. In August 2010, the Company’s stockholders approved the proposal to increase the number of shares reserved for issuance to 6.3 million shares. In August 2012, the Company’s stockholders approved the proposal to reserve an additional 1.8 million shares under the 2012 Employee Stock Purchase Plan (2012 Plan). Upon adoption of the 2012 Plan, the 1998 Plan was terminated. Under the terms of the 2012 Plan, purchases are made semiannually and the purchase price of the common stock is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the six months ended September 30, 2012 and 2011, 0.4 million shares for each of these periods were issued under the 1998 Plan. At September 30, 2012, 6.6 million shares had been issued under all previous stock plans and none were available for future issuance, and 1.8 million shares were available for issuance under the 2012 Plan.

Stock Repurchase Program

In August 2004, the Board authorized a stock repurchase program for the repurchase of up to $200.0 million of the Company’s common stock. Under the program, the Company is authorized to make purchases in the open market or enter into structured stock repurchase agreements. In October 2008, the Board increased the stock repurchase program by $100.0 million. During the six months ended September 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 per share. During the six months ended September 30, 2011, approximately 3.5 million shares were repurchased on the open market at a weighted average price of $5.98 per share. From the time the program was first implemented in August 2004, the Company has repurchased on the open market a total of 17.3 million shares at a weighted average price of $10.04 per share. All repurchased shares were retired upon delivery to the Company.

The Company also utilizes structured stock repurchase agreements to buy back shares which are prepaid written put options on its common stock. The Company pays a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a pre-determined amount of cash or stock depending on the closing market price of its common stock on the expiration date of the agreement. Upon expiration of each agreement, if the closing market price of its common stock is above the pre-determined price, the Company will have its cash investment returned with a premium. If the closing market price is at or below the pre-determined price, the Company will receive the number of shares specified at the agreement inception. The Company considered the guidance in ASC Topic 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and ASC Topic 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Any cash received, including the premium, is treated as additional paid-in capital on the balance sheet.

During the six months ended September 30, 2012, the Company did not enter into any structured stock repurchase agreements. During the six months ended September 30, 2011, the Company entered into structured stock repurchase agreements totaling $10.0 million for which it received 1.0 million in shares of its common stock at an effective purchase price of $9.74 per share from the settled structured stock repurchase agreements. At September 30, 2011, the Company had no outstanding structured stock repurchase agreements. From the inception of the Company’s most recent stock repurchase program in August 2004, it entered into structured stock repurchase agreements totaling $277.5 million. Upon settlement of these agreements, as of September 30, 2012, the Company received $179.8 million in cash and 10.0 million shares of its common stock at an effective purchase price of $9.78 per share.

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The table below is a plan-to-date summary of the Company’s repurchase program activity as of September 30, 2012 (in thousands, except per share data):

	Aggregate Price		Repurchased Shares		Average Price Per Share
Stock repurchase program
Authorized amount	$	300,000		—	$	—
Open market repurchases		173,611		17,284		10.04
Structured stock repurchase agreements*		110,517		9,989		11.06
Total repurchases	$	284,128		27,273	$	10.42
Available for repurchase	$	15,872

* The amounts above do not include gains recorded to additional paid-in-capital of $12.8 million from structured stock repurchase agreements which settled in cash. The average price per share for structured stock repurchase agreements adjusted for gains from settlements in cash would have been $9.78 per share and for total repurchases would have been $9.97 per share.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These option plans include two stockholder-approved plans (the 1992 Stock Option Plan and 1997 Directors’ Stock Option Plan) and four plans not approved by stockholders (the 2000 Equity Incentive Plan, Cimaron Communications Corporation’s 1998 Stock Incentive Plan assumed in the fiscal 1999 merger, and JNI Corporation’s 1997 and 1999 Stock Option Plans assumed in the fiscal 2004 merger). Certain other outstanding options were assumed through the Company’s various acquisitions.

In April 2011, the Compensation Committee and the Board of Directors approved the Company’s 2011 Equity Incentive Plan (“2011 Plan”). The Company’s stockholders approved the 2011 Plan during its August 2011 annual meeting. The 2011 Plan serves as a successor to the 1992 Plan and no additional equity awards will be granted under the 1992 Plan. The total number of shares of common stock reserved for issuance under the 2011 Plan consists of 4.2 million shares plus up to 10.9 million shares subject to any stock awards under the 1992 Plan or the 2000 Plan that terminate or are forfeited or repurchased and would otherwise be returned to the share reserve under the 1992 Plan or the 2000 Plan, respectively.

The Board has delegated administration of the Company’s equity plans to the Compensation Committee, which generally determines eligibility, vesting schedules and other terms for awards granted under the plans. Options under the plans expire not more than ten years from the date of grant and are generally exercisable upon vesting. Vesting generally occurs over four years. New hire grants generally vest and become exercisable at the rate of 25% on the first anniversary of the date of grant and ratably on a monthly basis over a period of 36 months thereafter; subsequent option grants to existing employees generally vest and become exercisable ratably on a monthly basis over a period of 48 months measured from the date of grant.

In May 2009, Dr. Gopi, our CEO, was awarded 300,000 stock options for “Extraordinary Accomplishment.” The Black-Scholes value of these stock options is $1.1 million. These options will vest only if Company performance milestones are satisfied; otherwise they will expire unvested. The first milestone for 75,000 shares will vest only if we achieve an annual revenue target of $270 million or more for any fiscal year from fiscal 2010 through fiscal 2013. The next milestone for another 75,000 shares will vest only if we achieve an annual revenue target of $310 million or more for any fiscal year from fiscal 2010 through fiscal 2013 or an annual revenue target of $350 million or more for fiscal 2014. The last milestone for 150,000 shares will vest only if we achieve an annual operating margin of 13.5% of annual revenue or higher in fiscal 2013 or 15% or higher for any fiscal year from fiscal 2010 through fiscal 2012. The Company evaluates the probability of achieving the milestones and adjusts any stock option expense accordingly.

In February 2012, Dr. Gopi was awarded 500,000 restricted stock units. The Black-Scholes value of these stock options is $3.7 million. These options will vest only if the Company’s performance milestones relating to the Veloce merger are satisfied; otherwise they will expire unvested. The Company evaluates the probability of achieving the milestones and recognizes any stock option expense accordingly.

At September 30, 2012 and March 31, 2012, there were no shares of common stock subject to repurchase. Options are granted at prices at least equal to fair value of the Company’s common stock on the date of grant.

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Option activity under the Company’s stock incentive plans during the six months ended September 30, 2012 is set forth below (in thousands, except per share data):

	Number of Shares			Weighted Average Exercise Price Per Share
Outstanding at the beginning of the year		4,164		$	10.67
Granted		40			5.58
Exercised		(14	)		5.14
Forfeited		(252	)		18.68
Outstanding at the end of the period		3,938		$	10.13
Vested and expected to vest at the end of the period		3,910		$	10.14
Vested at the end of the period		3,133		$	10.42

At September 30, 2012, the weighted average remaining contractual term for options outstanding and vested is 3.8 years each.

The aggregate pretax intrinsic value of options exercised during the six months ended September 30, 2012 was approximately $11,000. This intrinsic value represents the excess of the fair market value of the Company’s common stock on the date of exercise over the exercise price of such options.

The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of September 30, 2012 were as follows (in thousands, except exercise prices and years):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$ 1.68 - $ 7.12		939		3.28	$	6.40		553	$	6.03
7.13 - 8.07		854		4.06		7.71		816		7.70
8.08 - 11.86		938		5.10		10.34		654		10.15
11.87 - 14.40		829		3.34		12.94		732		13.03
14.41 - 24.16		378		2.44		18.15		378		18.15
$ 1.68 - $24.16		3,938		3.82	$	10.13		3,133	$	10.42

As of September 30, 2012, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $10,000 each. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) pursuant to its 1992 Plan, 2000 Equity Incentive Plan and 2011 Equity Incentive Plan as part of its regular annual employee equity compensation review program as well as to new hires. RSUs are share awards that, upon vesting, will deliver to the holder, shares of the Company’s common stock. Generally, RSUs vest ratably on a quarterly basis over four years from the date of grant. For employees hired after May 15, 2006, RSUs will vest on a quarterly basis over four years from the date of hire provided that no shares will vest during the first year of employment, at the end of which the shares that would have vested during that year will vest and the remaining shares will vest over the remaining 12 quarters.

In May 2009, the Company issued three-year performance-based RSU grants, or “EBITDA” Grants which were completed in fiscal 2012 and no additional grants will be made under this grant.

In April 2011, the Committee authorized additional three-year performance-based RSU grants, or “EBITDA2” Grants. EBITDA2 Grants are similar to the EBITDA Grant program introduced in 2009. The Company evaluates the probability of achieving the milestones and adjusts any RSU expense which is included in stock-based compensation expense. As of September 30, 2012, the Company believes that that it would be highly unlikely for any EBITDA2 shares to vest during the three-year life of the program. Fiscal 2012 was declared zero attainment and vesting target shares have rolled over to fiscal 2013. The Company expects that all shares issued under the EBITDA2 program will expire unvested when the program concludes in May 2014.

In November 2011 and February 2012, the Committee authorized additional 18-month performance-based RSU grants, or “Performance Retention Grants”, which are intended to incentivize superior performance and retain key employees. In May 2012, the

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Committee authorized 12-month Performance Retention Grants. Vesting for the Performance Retention Grants is subject to (i) the accomplishment of goals and objectives of the individual’s business unit and (ii) individual performance as measured by the accomplishment of individual goals and objectives. The 18-month RSU shares vest 2/3 after one year, with certain unearned amounts able to roll over to the subsequent vesting period, and 1/3 after 18 months. The 12-month RSU shares will have the opportunity to vest after one year. Unvested RSU shares remaining at the end of the program period will expire unvested. The Company evaluates the probability of achieving the goals and objectives and adjusts any RSU expense which is included in stock-based compensation expense.

Restricted stock unit activity during the six months ended September 30, 2012 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year		9,244
Awarded		522
Vested		(327	)
Cancelled		(797	)
Outstanding at the end of the period		8,642

The weighted average remaining contractual term for the restricted stock units outstanding as of September 30, 2012 was 1.31 years.

As of September 30, 2012, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $43.7 million which includes performance based awards which are subject to milestone attainment. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

The aggregate pretax intrinsic value of RSUs released during the three months ended September 30, 2012 was $1.8 million. This intrinsic value represents the fair market value of the Company’s common stock on the date of release.

Warrants

On May 17, 2009, the Company entered into a development agreement with Veloce pursuant to which Veloce agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company’s common stock (the “Warrant”). The Warrant vesting schedule was amended in conjunction with the amended development agreement on November 8, 2010. In connection with the Merger Agreement amendment entered into on April 5, 2012, the Company and Veloce further modified the Warrant by fully accelerating the vesting schedule resulting in the recognition of approximately $1.3 million of stock compensation expense during the quarter ended June 30, 2012. All vested shares were subsequently sold and the proceeds distributed, prior to the acquisition of Veloce by the Company on June 20, 2012.

6. STOCK-BASED COMPENSATION

The Company accounts for stock based compensation activity using the modified prospective method. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value stock-based compensation, excluding RSUs, which we use the fair market value of our common stock. The Black-Scholes model determines the fair value of share-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s stock price, volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Although the fair value of stock options granted by the Company is estimated by the Black-Scholes model, the estimated fair value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

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The fair value of the options granted is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following tables:

	Three Months Ended September 30,
	Employee Stock Purchase  Plans
	2012			2011
Expected life (years)		0.5			0.5
Risk-free interest rate		0.2	%		0.2	%
Volatility		50	%		55	%
Dividend yield		—	%		—	%
Weighted average fair value	$	1.50		$	1.92

The Company did not grant options during the three months ended September 30, 2012 and 2011.

	Six Months Ended September 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2012			2011			2012			2011
Expected life (years)		4.5			3.8			0.5			0.5
Risk-free interest rate		0.7	%		1.4	%		0.2	%		0.2	%
Volatility		54	%		48	%		50	%		55	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average fair value	$	2.47		$	3.83		$	1.50		$	1.92

The weighted average grant-date fair value per share of the restricted stock units awarded was $5.75 and $5.52 during the three and six months ended September 30, 2012, respectively, compared to $5.86 and $9.87 during the three and six months ended September 30, 2011, respectively. The weighted average fair value per share was calculated based on the fair market value of the Company’s common stock on the respective grant dates.

Effective April 1, 2012, the Company revised its estimated forfeiture rate used in determining the amount of stock-based compensation from 6.8% to 6.6% as a result of an decreasing rate of forfeitures in recent periods, which the Company believes is indicative of the rate it will experience during the remaining vesting period of currently outstanding unvested grants.

The following table summarizes stock-based compensation expense related to stock options and restricted stock units (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by type of award
Stock options and warrants	$	601	$	992	$	2,089	$	2,561
Restricted stock units		7,031		2,103		13,151		4,709
Total stock-based compensation		7,632		3,095		15,240		7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

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The following table summarizes stock-based compensation expense as it relates to the Company’s statement of operations (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by cost centers
Cost of revenues	$	175	$	69	$	355	$	177
Research and development		3,714		1,726		7,919		4,114
Selling, general and administrative		3,743		1,300		6,966		2,979
Total stock-based compensation	$	7,632	$	3,095	$	15,240	$	7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

Stock-based compensation expense will continue to have a significant adverse impact on the Company’s reported results of operations, although it will have no impact on its overall financial position. The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2016 related to unvested share-based payment awards at September 30, 2012 is $15.8 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.3 years. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional equity awards or assumes unvested equity awards in connection with acquisitions.

The above stock based compensation expense of approximately $15.3 million for the six months ended September 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See note 5 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

7. CONTINGENCIES

Legal Proceedings

In 1993, the Company was named as a Potentially Responsible Party (“PRP”) along with more than 100 other companies that used an Omega Chemical Corporation waste treatment facility in Whittier, California (the “Omega Site”). The U.S. Environmental Protection Agency (“EPA”) has alleged that Omega failed to properly treat and dispose of certain hazardous waste materials at the Omega Site. The Company is a member of a large group of PRPs, known as the Omega Chemical Site PRP Organized Group (“OPOG”) that has agreed to fund certain on-going remediation efforts at the Omega Site. In February 2001, the U.S. District Court for the Central District of California (the “Court”) approved a consent decree between EPA and OPOG to study contamination and evaluate cleanup options at the Omega Site (the Operable Unit 1 or “OU1”). In January 2009, the Court approved two amendments to the consent decree, the first expanding the scope of work to mitigate volatile organic compounds affecting indoor air quality near the Omega Site and the second adding settling parties to the consent decree. Removal of waste materials from the Omega Site has been completed. As part of OU1, efforts to remediate the soil and groundwater at the Omega Site, including without limitation the extraction of chemical vapors from the soil in and around the site, are underway and are expected to be ongoing for several years. In addition, OPOG and EPA are investigating a regional groundwater contamination plume allegedly originating at the Omega Site (the Operable Unit 2 or “OU2”). In September 2011, EPA issued an interim Record of Decision specifying the interim clean-up actions EPA has chosen for OU2, and in September 2012, it issued a special notice letter that triggered the commencement of good faith settlement negotiations with OPOG. It is anticipated that such settlement negotiations will result in EPA and OPOG entering into a remediation consent decree with the Court regarding OU2. In November 2007, Angeles Chemical Company, located downstream from the Omega Site, filed a lawsuit (the “Angeles Litigation”) in the Court against OPOG and the PRPs for cost recovery and indemnification for future response costs allegedly resulting from the regional groundwater contamination plume described above. In March 2008, the Court granted OPOG’s motion to stay the Angeles Litigation pending EPA’s determination of how to investigate and remediate the regional groundwater. In November 2010, a toxic tort litigation (the “Aguirre Litigation”) was commenced against Omega and OPOG in Los Angeles Superior Court by a group of employees of the Tri-Cities Regional Occupational Program located near the Omega Site. The plaintiffs claimed, among other things, negligence, unlawful discharge of pollutants and public nuisance, and seek monetary damages for a variety of alleged injuries. In September 2012, the parties reached a final settlement of the Aguirre Litigation and the court dismissed the action with prejudice. The Company’s aggregate contribution allocation for the defense and settlement of the action was approximately $19,000. In 2010, certain PRP’s challenged the criteria previously used to allocate liability among the PRP’s. In December 2011, an allocation committee established by OPOG to review those criteria recommended changes to the cost allocation structure that would, upon final approval, increase the Company’s overall share of liability within the PRP group. In addition, the recent departure of one or more PRPs from OPOG could have the effect of increasing the proportional liability of the remaining PRPs, including the Company. In January 2012, as a result of the allocation criteria modifications and PRP departure from OPOG described above, the Company’s proportional allocation of liability was increased. Although the Company considers a loss

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relating to the Omega Site probable, its share of any financial obligations for the remediation of the Omega Site, including taking into account the allocation increases described above, is not currently believed to be material to the Company’s financial statements, based on the Company’s approximately 0.5% contribution to the total waste tonnage sent to the site and current estimates of the potential remediation costs. Based on currently available information, the Company has a loss accrual that is not material and believes that the actual amount of its costs will not be materially different from the amount accrued. However, proceedings are ongoing and the eventual outcome of the clean-up efforts and the pending litigation matters is uncertain at this time. Based on currently available information, the Company does not believe that any eventual outcome will have a material adverse effect on its operations.

AppliedMicro TPack A/S, the Company’s wholly-owned subsidiary acquired in September 2010 (“TPack”), is involved in a contract dispute with Xtera Communications Inc. and its subsidiary Meriton Networks Canada Inc. (collectively, “Xtera”), regarding a software development and licensing agreement the parties entered into in September 2006. In August 2009, Xtera filed an action against TPack in the United States District Court for the Eastern Division of Texas, which was dismissed in October 2010 for lack of jurisdiction. In September 2009, TPack filed an action against Xtera in the Ontario Superior Court of Justice in Canada, which action was resumed in March 2011 following dismissal of the Texas action. In the Canadian action, TPack seeks contract damages from Xtera of approximately $1.0 million plus pre-judgment interest and expenses. In April 2011, Xtera filed a statement of defense and counter claim with the Ontario court, in which Xtera denies liability to TPack and seeks reimbursement of approximately $1.7 million in development fees and royalties previously paid to TPack, plus pre-judgment interest and expenses. Discovery in the legal proceedings is continuing. The Company does not currently anticipate that the TPack/Xtera legal proceedings will have a material adverse effect on the Company.

8. INCOME TAXES

The total amount of unrecognized tax benefits as of July 1, 2012, was $43.3 million, including interest and penalties. The Company does not foresee significant changes to its estimated amount of liability associated with its uncertain tax positions within the next twelve months.

The Company’s income tax expense consists of state taxes and foreign taxes. The federal statutory income tax rate was 35% for the three and six months ended September 30, 2012 and 2011. The Company’s income tax benefit for the three and six months ended September 30, 2012 for the three and six month periods ended September 30, 2011 was $0.4 million and $0.2 million, respectively, as compared to income tax expense of $0.6 million and $0.4 million, respectively. The decrease in the income tax expense recorded for the six months ended September 30, 2012 compared to September 30, 2011, was primarily related to other comprehensive income. In applying the exception to the general principle of intra-period tax allocations under ASC 740-10, the Company considered income recognized in other comprehensive income. Accordingly, the allocation of the current year tax provision included recognizing $0.6 million tax benefit arising from the loss from continuing operations and the offsetting tax expense was allocated to other comprehensive income.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of our operations. The MD&A is organized as follows:

• Caution concerning forward-looking statements. This section discusses how forward-looking statements made by us in the MD&A and elsewhere in this quarterly report are based on management’s present expectations about future events and are inherently susceptible to uncertainty and changes in circumstances.

• Overview. This section provides an introductory overview and context for the discussion and analysis that follows in the MD&A.

• Critical accounting policies. This section discusses those accounting policies that are both considered important to our financial condition and operating results and require significant judgment and estimates on the part of management in their application.

• Results of operations. This section provides an analysis of our results of operations for the three and six months ended September 30, 2012 and 2011. A brief description is provided of transactions and events that impact the comparability of the results being analyzed.

• Financial condition and liquidity. This section provides an analysis of our cash position and cash flows, as well as a discussion of our financing arrangements and financial commitments.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

The MD&A should be read in conjunction with the consolidated financial statements and notes thereto included in this report. This discussion contains forward-looking statements. These forward-looking statements are made as of the date of this report. Any statement that refers to an expectation, projection or other characterization of future events or circumstances, including the underlying assumptions, is a forward-looking statement. We use certain words and their derivatives such as “anticipate”, “believe”, “plan”, “expect”, “estimate”, “predict”, “intend”, “may”, “will”, “should”, “could”, “future”, “potential”, and similar expressions in many of the forward-looking statements. The forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and other assumptions made by us. These statements and the expectations, estimates, projections, beliefs and other assumptions on which they are based are subject to many risks and uncertainties and are inherently subject to change. We describe many of the risks and uncertainties that we face in Part II, Item 1A, “Risk Factors” and elsewhere in this report. Our actual results and actual events could differ materially from those anticipated in any forward-looking statement. Readers should not place undue reliance on any forward-looking statement.

OVERVIEW

The Company

Applied Micro Circuits Corporation (“AppliedMicro”, “APM”, “AMCC”, the “Company”, “we” or “our”) is a leader in semiconductor solutions for the data center, enterprise, telecom and consumer/small medium business (“SMB”) markets. We design, develop, market, sell and support high-performance low power ICs, which are essential for the processing, transporting and storing of information worldwide. In the telecom and enterprise markets, we utilize a combination of design expertise coupled with system-level knowledge and multiple technologies to offer IC products for wireline and wireless communications equipment such as wireless access points, wireless base stations, multi-function printers, enterprise and edge switches, blade servers, storage systems, gateways, core switches, routers, metro, long-haul, and ultra-long-haul transport platforms. In the consumer/SMB markets, we combine optimized software and system-level expertise with highly integrated semiconductors to deliver comprehensive reference designs and stand-alone semiconductor solutions for wireline and wireless communications equipment such as wireless access points, network attached storage, and residential and smart energy gateways. We are committed to our strategy to focus on the transition to converge computing and connectivity into the Data Center which will create optimized total-cost-of-ownership solutions for cloud server workloads and position us towards the large growth datacenter market. Our corporate headquarters are located in Sunnyvale, California. Sales and engineering offices are located throughout the world.

We are a semiconductor company that possesses fundamental and differentiated intellectual property for high speed signal processing, packet based communications processors and telecommunications transport protocols. This intellectual property enables us to be a key player in the data center, enterprise and telecommunications applications. Our customer focus is on the OEMs and telecommunications companies that build and connect to data centers. As of September 30, 2012, our business had two reporting units, Computing and Connectivity.

Since the start of fiscal 2011, we have invested a total of $353.5 million in the R&D of new products, including higher-speed, lower-power and lower-cost products, products that combine the functions of multiple existing products into single highly-integrated solutions, and other products to expand and complete our portfolio of communications solutions. These products, and our customers’ products for which they are intended, are highly complex. Due to this complexity, it often takes several years to complete the

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development and qualification of a product before it enters into volume production. Accordingly, we have not yet generated significant revenues from some of the products developed during this time period. In addition, downturns in the telecommunications market can severely impact our customers’ business and often result in significantly less demand for our products than was expected when the development work commenced.

Acquisition of Veloce

On June 20, 2012 (the “Closing Date”), the Company completed its acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, entered into as of May 17, 2009 (the “Initial Agreement”), as amended by Amendment No. 1 to Agreement and Plan of Merger, entered into as of November 8, 2010 (the “First Amendment”), and Amendment No. 2 to Agreement and Plan of Merger, entered into as of April 5, 2012 (the “Second Amendment” and, collectively with the Initial Agreement and the First Amendment, the “Merger Agreement”). The First Amendment was amended, restated and replaced in its entirety by the Second Amendment.

The terms of the Merger Agreement include the payment of initial consideration of $60.4 million, payable in shares of Company common stock and/or cash (at the Company’s election) to holders of Veloce common stock options that were vested on the Closing Date, to Veloce stockholders and holders of Veloce stock equivalents. Following the closing, the Company paid part of the consideration by issuing approximately 2.4 million shares of its common stock and paying approximately $12.7 million in cash, with the balance of the $60.4 million to be paid, using a similar ratio of Company shares and cash, over the next two to three years upon the satisfaction of additional vesting requirements. During the three and six months ended September 30, 2012, as part of the above arrangement, the company issued 0.2 million shares and 2.6 million shares respectively, and paid approximately $2.1 million and $14.8 million in cash, respectively.

For accounting purposes, the consideration payable for the acquisition of Veloce is considered compensatory and will be recognized as research and development expense. Recognition of these costs will occur when certain development and performance milestones become probable of achievement and earned. As of March 31, 2012, one significant performance and development milestone set forth under the Merger Agreement was considered probable of achievement and the Company therefore recorded the initial consideration of $60.4 million, which was recognized as research and development expense. During the three and six months ended September 30, 2012, the Company recognized an additional $2.3 million and $4.7 million, respectively, of research and development expense in connection with progress achieved against certain product development milestones included in the Second Amendment. No other product development milestones included in the Merger Agreement were considered probable of achievement as of September 30, 2012.

The Second Amendment further provides for potential payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to Company products on which Veloce has worked. The additional payments would be payable in partial amounts upon the achievement of each such milestone. The Company currently expects aggregate additional payments to range from a minimum of $4.7 million to a maximum of $75 million, based on the Company’s current expectations relating to the achievement of such product development milestones. Any such additional payments may be payable in shares of Company common stock and/or cash (at the Company’s election).

In connection with the Acquisition, substantially all of the former Veloce employees are expected to continue working for the Company and will primarily focus on achieving the post-closing Company product development milestones upon which the additional payments to Veloce shareholders, Optionholders and Unitholders are contingent.

Summary Financials

The following tables present a summary of our results of operations for the three and six months ended September 30, 2012 and 2011 (dollars in thousands):

	Three Months Ended September 30,
	2012						2011
	Amount			% of Net Revenue			Amount			% of Net Revenue			Increase (Decrease)			% Change
Net revenues	$	46,324			100.0	%	$	64,929			100.0	%	$	(18,605	)		(28.7	)%
Cost of revenues		20,561			44.4			27,704			42.7			7,143			25.8
Gross profit		25,763			55.6			37,225			57.3			(11,462	)		(30.8	)
Total operating expenses		48,515			104.7			39,313			60.5			9,202			23.4
Operating loss		(22,752	)		(49.1	)		(2,088	)		(3.2	)		20,664			989.7
Interest and other income, net		835			1.8			1,517			2.3			(682	)		(44.9	)
Loss before income taxes		(21,917	)		(47.3	)		(571	)		(0.9	)		21,346			3,738.4
Income tax (benefit) expense		(360	)		0.8			581			0.9			(941	)		(161.9	)
Net loss	$	(21,557	)		(46.5	)%	$	(1,152	)		(1.8	)%	$	20,405			1,771.3

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	Six Months Ended September 30,
	2012						2011
	Amount			% of Net Revenue			Amount			% of Net Revenue			Increase (Decrease)			% Change
Net revenues	$	87,618			100.0	%	$	125,773			100.0	%	$	(38,155	)		(30.3	)%
Cost of revenues		38,916			44.4			54,035			43.0			15,119			28.0
Gross profit		48,702			55.6			71,738			57.0			(23,036	)		(32.1	)
Total operating expenses		96,406			110.0			82,249			65.4			14,157			17.2
Operating loss		(47,704	)		(54.4	)		(10,511	)		(8.4	)		37,193			353.9
Interest and other income, net		2,597			3.0			2,873			2.3			(276	)		(9.6	)
Loss before income taxes		(45,107	)		(51.5	)		(7,638	)		(6.1	)		37,469			490.6
Income tax (benefit) expense		(160	)		0.2			391			0.3			(551	)		(140.9	)
Net loss	$	(44,947	)		(51.3	)%	$	(8,029	)		(6.4	)%	$	36,918			(459.8	)%

Net Revenues. We generate revenues primarily through sales of our IC products, embedded processors and printed circuit board assemblies to OEMs, such as Alcatel-Lucent, Ciena, Cisco, Brocade, Fujitsu, Hitachi, Huawei, Juniper, Ericsson, NEC, Nokia Siemens Networks, and Tellabs, who in turn supply their equipment principally to communications service providers.

On a sell-through basis, we had approximately 51 days of inventory in the distributor channel at September 30, 2012 as compared to 70 days at September 30, 2011. The decrease in inventory days was due to smaller amounts being sold into the distributor channel as well as more inventory in the distribution channel being sold through during the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011.

The gross margins for our solutions have historically declined over time. Some factors that we expect to cause downward pressure on the gross margins for our products include competitive pricing pressures, unfavorable product mix, the cost sensitivity of our customers particularly in the higher-volume markets, new product introductions by us or our competitors, and capacity constraints in our supply chain. From time to time, for strategic reasons, we may accept orders at less than optimal gross margins in order to facilitate the introduction of, or, market penetration of our new or existing products. To maintain acceptable operating results, we will need to offset any reduction in gross margins of our products by reducing costs, increasing sales volume, developing and introducing new products and developing new generations and versions of existing products on a timely basis.

We classify our revenues into two categories based on the markets that the underlying products serve. The categories are Computing and Connectivity. We use this information to analyze our performance and success in these markets including our strategy to focus on the transition to the large growth datacenter market.

We are continuing to focus our current connectivity investments on high growth 10G and faster Ethernet solutions, data center, Optical Transport Network (“OTN”) and enterprise market opportunities while continuing to service the Telecom (SONET/SDH) market. Over time, we believe customers will transition from the SONET/SDH standard to higher speed, lower power products that utilize the OTN standard in order to support the increasing demand for transmission of data over networks. However, the timing and extent of this transition is uncertain due to the significant investment that is needed to convert networks to the OTN standard. As such, the rate of conversion to the OTN standard is, in part, greatly influenced by global economic market conditions. Recessionary type market conditions will result in a slower transition of networks to the OTN standard. Additionally, there can be no assurance that our revenues will increase as the OTN standard is adopted.

The demand for our products has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:

• the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory corrections;

• the qualification, availability and pricing of competing products and technologies and the resulting effects on the sales, pricing and gross margins of our products;

• our ability to specify, develop or acquire, complete, introduce, and market new products and technologies in a cost effective and timely manner;

• the rate at which our present and future customers and end-users adopt our products and technologies in our target markets;

• general economic and market conditions in the semiconductor industry and communications markets;

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• combinations of companies in our customer base, resulting in the combined company choosing our competitor’s IC standardization rather than our supported product platforms;

• the gain or loss of one or more key customers, or their key customers, or significant changes in the financial condition of one or more of our key customers or their key customers;

• our expectation of a market ramp for our products could be incorrect and such ramp could get pushed out or not happen at all;

• our ability to meet customer demand due to capacity constraints at our suppliers; and

• natural disasters that could affect our supply chain or our customer’s supply chain which would affect their requirements of our products.

For these and other reasons, our net revenue and results of operations for the three and six months ended September 30, 2012 may not necessarily be indicative of future net revenue and results of operations.

Based on direct shipments, net revenues to customers that were equal to or greater than 10% of total net revenues were as follows (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Wintec (global logistics provider)		20	%		21	%		19	%		21	%
Avnet (distributor)		28	%		20	%		28	%		18	%
Ericsson		*			14	%		*			10	%
Flextronics (sub-contract manufacturer)		12	%		*			11	%		13	%

* Less than 10% of total net revenues.

We expect that our largest customers will continue to account for a substantial portion of our net revenue for the foreseeable future.

Net revenues by geographic region were as follows (in thousands):

	Three Months Ended September 30,										Six Months Ended September 30,
	2012					2011					2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Amount		% of Net Revenue			Amount		% of Net Revenue
United States of America*	$	17,283		37.3	%	$	32,377		49.9	%	$	33,428		38.1	%	$	58,441		46.5	%
Taiwan		4,965		10.7			4,871		7.5			10,066		11.5			9,466		7.5
Hong Kong		6,189		13.4			8,333		12.8			11,918		13.6			12,507		9.9
China		1,056		2.3			1,730		2.7			1,589		1.8			3,090		2.5
Europe*		9,832		21.2			8,700		13.4			16,790		19.2			22,694		18.0
Japan		1,829		3.9			1,940		3.0			4,038		4.6			3,841		3.0
Malaysia		1,401		3.0			1,791		2.8			2,345		2.7			4,845		3.8
Singapore		2,659		5.7			3,082		4.7			5,062		5.8			6,875		5.5
Other Asia		1,024		2.2			1,705		2.6			1,928		2.2			3,568		2.8
Other		86		0.3			400		0.6			454		0.5			446		0.5
	$	46,324		100.0	%	$	64,929		100.0	%	$	87,618		100.0	%	$	125,773		100.0	%

* Change in revenues was primarily due to shift in customer demand and continuing geographic changes to macro economic-conditions

All of our revenues are primarily denominated in U.S. dollars, other than revenues that account for less than 10% of our total revenues, which are denominated primarily in Danish Kroner.

Key non-GAAP measurements. We use certain non-GAAP metrics such as Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) to measure our performance. We define Adjusted EBITDA as net (loss) income, less interest income, income taxes, depreciation and amortization, stock-based compensation, amortization of intangibles and other one-time and/or non-cash items.

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The following table reconciles Adjusted EBITDA to the accompanying financial statements (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Adjustment to net loss:
Interest and other income, net		(661	)		(924	)		(1,334	)		(2,268	)
Stock-based compensation expense		7,634			3,124			15,323			7,302
Warrant expense		—			—			1,289			—
Amortization of purchased intangibles		1,280			1,482			2,609			4,096
Restructuring (recoveries) charges		—			(40	)		—			873
Veloce accrued liability		2,325			—			4,650			—
Impairment of marketable securities*		(174	)		(593	)		(1,263	)		(605	)
Acquisition related recoveries		—			(2,267	)		—			(2,267	)
Depreciation and amortization		3,550			2,423			6,355			4,654
Other and income tax adjustment		(360	)		581			(293	)		391
Adjusted EBITDA	$	(7,963	)	$	2,634		$	(17,611	)	$	4,147

* For non-GAAP purposes, any gain or loss relating to marketable securities is not recognized until the underlying securities are sold and the actual gain or loss is realized.

We believe that Adjusted EBITDA is a useful supplemental measure of our operation’s performance because it helps investors evaluate and compare the results of operations from period to period by removing the accounting impact of the company’s financing strategies, tax provisions, depreciation and amortization, restructuring charges, stock based compensation expense, discontinued operations and certain other operating items. We adjust for these excluded items because we believe that, in general, these items possess one or more of the following characteristics: their magnitude and timing is largely outside of the company’s control; they are unrelated to the ongoing operations of the business in the ordinary course; they are unusual or infrequent and the company does not expect them to occur in the ordinary course of business; or they are non-cash expenses.

Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, or GAAP, and should not be considered a substitute for operating income, net income or any other measure determined in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Adjusted EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors and is used as a metric to determine the performance vesting of our three-year RSU grants issued in May 2009 (the “EBITDA Grants”) and May 2011 (the “EBITDA2 Grants”). Management believes Adjusted EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business. Management also believes that Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate the company.

The book-to-bill ratio is another metric commonly used by investors to compare and evaluate technology and semiconductor companies. The book-to-bill ratio is a demand-to-supply ratio that compares the total amount of orders received to the total amount of orders filled. This ratio tells whether the company has more orders than it delivered (if greater than 1), has the same amount of orders that it delivered (equals 1), or has less orders than it delivered (under 1). Though the ratio provides an indicator of whether orders are rising or falling, it does not consider the timing of or if the order will result in future revenues and the effect of changing lead times on bookings. Our book-to-bill ratio at September 30, 2012 and 2011 was 1.0 and 0.9, respectively.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance 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 at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to: inventory valuation and capitalized mask set costs, which affect our cost of sales and gross profit; the valuation of goodwill and purchased intangibles, which has in the past affected, and could in the future affect, our impairment charges to write down the carrying value of purchased intangibles and the amount of related periodic amortization expense recorded for definite-lived intangibles; the valuation of the Veloce consideration which affects operating expenses; and an evaluation of other-than-temporary impairment of our investments, which affects the amount and timing of write-down charges. We also have other key accounting policies, such as our policies for stock-based compensation and revenue recognition. The methods, estimates and judgments we use in

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applying these critical accounting policies have a significant impact on the results we report in our financial statements. 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 values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from management’s estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Investments

We hold a variety of securities that have varied underlying investments. We review our investment portfolio periodically to assess for other-than-temporary impairment. We assess the existence of impairment of our investments in order to determine the classification of the impairment as “temporary” or “other-than-temporary”. The factors used to determine whether an impairment is temporary or other-than-temporary involves considerable judgment. The factors we consider in determining whether any individual impairment is temporary or other-than-temporary are primarily the length of the time and the extent to which the market value has been less than amortized cost, the nature of underlying assets (including the degree of collateralization), the financial condition, credit rating, market liquidity conditions and near-term prospects of the issuer. If the fair value of a debt security is less than its amortized cost basis at the balance sheet date, an assessment would have to be made as to whether the impairment is other-than-temporary. If we decided to sell the security, an other-than-temporary impairment shall be considered to have occurred. However, if we do not intend to sell the debt security, we shall consider available evidence to assess whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost basis due to cash, working capital requirements, contractual or regulatory obligations indicate that the security will be required to be sold before a forecasted recovery occurs. If it is more likely than not that we are required to sell the security before recovery of its amortized cost basis, an other-than-temporary impairment is considered to have occurred. If we do not expect to recover the entire amortized cost basis of the security, we would not be able to assert that we will recover its amortized cost basis even if we do not intend to sell the security. Therefore, in those situations, an other-than-temporary impairment shall be considered to have occurred. We use present value cash flow models to determine whether the entire amortized cost basis of the security will be recovered. We will compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. An other-than-temporary impairment is said to have occurred if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. During the three and six months ended September 30, 2012 and fiscal year ended March 31, 2012, we did not record any other-than-temporary impairment charges. As of September 30, 2012, we did not record an impairment charge in connection with securities in a loss position (fair value less than carrying value) with unrealized losses of $1.1 million as we believe that such unrealized losses are temporary. In addition, we also had $8.3 million in unrealized gains.

Veloce Consideration

We periodically evaluate the progress of the development work that is performed by our wholly owned subsidiary, Veloce, in connection with our contractual arrangement with Veloce. Based on such an evaluation as well as considering various other qualitative factors, we assess the estimated timing and probability of attaining certain performance milestones. Upon assessing a milestone as probable of achievement, the expense that is recognized considers the stage of product development and estimating the performance metrics that will be achieved. The consideration that we will pay for each performance milestone is based upon the timing and the performance metrics that will ultimately be achieved. Significant judgment is required to assess estimated timing and the probability of achieving the performance milestones and determining the amount of expense to be recognized.

During the three and six months ended September 30, 2012, the Company recognized an additional $2.3 million and $4.7 million, respectively, of research and development expense in connection with progress achieved against certain product development milestones included in the Second Amendment. No other product development milestones included in the Merger Agreement were considered probable of achievement as of September 30, 2012.

Inventory Valuation

Our policy is to value inventories at the lower of cost or market on a part-by-part basis. This policy requires us to make estimates regarding the market value of our inventories, including an assessment of excess or obsolete inventories. We determine excess and obsolete inventories based on an estimate of the future demand for our products within a specified time horizon, generally 12 months. The estimates we use for future demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts. If our demand forecast is greater than our actual demand we may be required to take additional excess inventory charges, which would decrease gross margin and net operating results. Any impairment charges taken establishes a new cost basis for the underlying inventory and the cost basis for such inventory is not marked-up on changes in circumstances until a gain is realized upon its eventual sale. This accounting is consistent with the guidance provided by SAB Topic 5-BB. To illustrate the

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sensitivity of inventory valuations to future estimates, as of September 30, 2012, reducing our future demand estimate to six months would decrease our current inventory valuation by approximately $0.7 million and increasing our future demand forecast to 18 months would not have any significant effect on our current inventory valuation.

Purchased Definite-Lived Intangible Assets and Other Long-Lived Assets

We evaluate our long-lived assets such as property, plant and equipment and purchased intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. The carrying value of an asset or asset group is not recoverable if the amount of undiscounted future cash flows the assets are expected to generate (including any net proceeds expected from the disposal of the asset) are less than its carrying value. When we identify an impairment has occurred, we reduce the carrying value of the assets to its comparable market value (if available and appropriate) or to its estimated fair value based on a discounted cash flow approach.

Revenue Recognition

We recognize revenue based on four basic criteria: 1) there is evidence that an arrangement exists; 2) delivery has occurred; 3) the fee is fixed or determinable; and 4) collectability is reasonably assured. We recognize revenue upon determination that all criteria for revenue recognition have been met. In addition, we do not recognize revenue until the applicable customer’s acceptance criteria have been met. The criteria are usually met at the time of product shipment. Our standard terms and conditions of sale do not allow for product returns and we generally do not allow product returns other than under warranty or stock rotation agreements. Revenue from shipments to distributors is recognized upon shipment. In addition, we record reductions to revenue for estimated allowances such as returns not pursuant to contractual rights, competitive pricing programs and rebates. These estimates are based on our experience with stock rotations and the contractual terms of the competitive pricing and rebate programs. Royalty revenues are recognized when cash is received, only when royalty amounts cannot be reasonably estimated. Royalty revenues are based upon sales of our customer’s products that include our technology.

Shipping terms are generally FCA (Free Carrier) shipping point. If actual returns or pricing adjustments exceed our estimates, we would record additional reductions to revenue.

From time to time we generate revenue from the sale of our internally developed IP. We generally recognize revenue from the sale of IP when all basic criteria outlined above are met, which is generally when the payments are received.

Mask Costs

We incur significant costs for the fabrication of masks used by our contract manufacturers to manufacture our products. If we determine, at the time the cost for the fabrication of masks are incurred, that technological feasibility of the product has been achieved, we consider the nature of these costs to be pre-production costs. Accordingly, such costs are capitalized as property and equipment under machinery and equipment and are amortized as cost of sales over approximately three years, representing the estimated production period of the product. We periodically reassess the estimated product production period for specific mask sets capitalized. If we determine, at the time fabrication mask costs are incurred, that either technological feasibility of the product has not occurred or that the mask is not reasonably expected to be used in production manufacturing or that the commercial feasibility of the product is uncertain, the related mask costs are expensed to R&D in the period in which the costs are incurred. We will also periodically assess capitalized mask costs for impairment. During the three and six months ended September 30, 2012, total mask costs capitalized was $1.2 million and $3.1 million, respectively. During the three and six months ended September 30, 2011, total mask costs capitalized was $1.1 million each.

Stock-Based Compensation Expense

All share-based payments, including grants of stock options, restricted stock units and employee stock purchase rights, are required to be recognized in our financial statements based on their respective grant date fair values. The fair value of each employee stock option and employee stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our share-based payments, excluding RSUs, which we use the fair market value of our common stock. The fair values generated by the Black-Scholes model may not be indicative of the actual fair values of our stock-based awards as it does not consider certain factors important to stock-based awards, such as continued employment, periodic vesting requirements and limited transferability. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility of our stock options at grant date by equally weighting the historical volatility and the implied volatility of our stock over specific periods of time as the expected volatility assumption required in the Black-Scholes model. The expected life of the stock options is based on historical and other data including life of the option and vesting period. The risk-free interest rate assumption is the implied yield currently available on zero-coupon government issues with a remaining term equal to the expected

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term. The dividend yield assumption is based on our history and expectation of dividend payouts. The fair value of our restricted stock units is based on the fair market value of our common stock on the date of grant. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ significantly from those estimated. We evaluate the assumptions used to value stock-based awards on a quarterly basis. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. We currently estimate when and if performance-based grants will be earned. If the awards are not considered probable of achievement, no amount of stock-based compensation is recognized. If we consider the award to be probable, expense is recorded over the estimated service period. To the extent that our assumptions are incorrect, the amount of stock-based compensation recorded will be increased or decreased. To the extent that we grant additional equity securities to employees or we assume unvested securities in connection with any acquisitions, our stock-based compensation expense will be increased by the additional unearned compensation resulting from those additional grants or acquisitions.

RESULTS OF OPERATIONS

Comparison of the Three and Six Months Ended September 30, 2012 to the Three and Six Months Ended September 30, 2011

Net Revenues. Net revenues for the three and six months ended September 30, 2012 were $46.3 million and $87.6 million, representing a decrease of 28.7% and 30.3% from net revenues of $64.9 million and $125.8 million for the three and six months ended September 30, 2011, respectively. We classify our revenues into two categories based on the markets that the underlying products serve. The categories are Computing and Connectivity. We use this information to analyze our performance and success in these markets. See the following tables (dollars in thousands):

	Three Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			(Decrease)			% Change
Computing	$	23,776		51.3	%	$	32,565		50.2	%	$	(8,789	)		(27.0	)%
Connectivity		22,548		48.7			32,364		49.8			(9,816	)		(30.3	)
	$	46,324		100.0	%	$	64,929		100.0	%	$	(18,605	)		(28.7	)%
	Six Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			(Decrease)			% Change
Computing	$	46,214		52.7	%	$	64,159		51.0	%	$	(17,945	)		(28.0	)%
Connectivity		41,404		47.3			61,614		49.0			(20,210	)		(32.8	)
	$	87,618		100.0	%	$	125,773		100.0	%	$	(38,155	)		(30.3	)%

During the three and six months ended September 30, 2012, our Computing revenues declined by 27.0% and 28.0%, respectively, and our Connectivity revenues declined by 30.3% and 32.8%, respectively compared to the same period last year. The overall revenue decline was spread across both the Computing and Connectivity product families and was as a result of lower demand for our products due to overall softness in the macro conditions. In addition, the revenues for our Connectivity products were lower due to the delay in the overall OTN infrastructure build-out.

Gross Profit. The following table presents net revenues, cost of revenues and gross profit for the three and six months ended September 30, 2012 and 2011 (dollars in thousands):

	Three Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase (Decrease)			% Change
Net revenues	$	46,324		100.0	%	$	64,929		100.0	%	$	(18,605	)		(28.7	)%
Cost of revenues		20,561		44.4			27,704		42.7			7,143			25.8
	$	25,763		55.6	%	$	37,225		57.3	%	$	(11,462	)		(30.8	)%
	Six Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase (Decrease)			% Change
Net revenues	$	87,618		100.0	%	$	125,773		100.0	%	$	(38,155	)		(30.3	)%
Cost of revenues		38,916		44.4			54,035		43.0			15,119			28.0
	$	48,702		55.6	%	$	71,738		57.0	%	$	(23,036	)		(32.1	)%

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The gross profit percentage for the three and six months ended September 30, 2012 was 55.6% compared to 57.3% and 57.0% for the three and six months ended September 30, 2011, respectively. The decrease in our gross profit percentage, excluding the impact of amortization of purchased intangibles, was 58.5% and 57.8%, and 59.7% and 58.8%, respectively, for the three and six months ended September 30, 2012 and 2011, respectively. The decrease in our gross profit percentage was primarily due to lower licensing revenues, unfavorable product mix, lower overall revenues that have an impact on the absorption of fixed costs, and declining average selling prices.

The amortization of purchased intangible assets included in cost of revenues during the three and six months ended September 30, 2012 and 2011 $1.4 million and $1.9 million, and $1.5 million and $2.2 million, respectively. The decrease was primarily due to certain purchased intangible assets being fully amortized during the fiscal year ended March 31, 2012 resulting in a lower amortization charge in the three and six months ended September 30, 2012.

Research and Development and Selling, General and Administrative Expenses. The following table presents research and development and selling, general and administrative expenses for the three and six months ended September 30, 2012 and 2011 (dollars in thousands):

	Three Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase		% Change
Research and development	$	34,383		74.2	%	$	29,609		45.6	%	$	4,774		16.1	%
Selling, general and administrative	$	13,531		29.2	%	$	8,941		13.8	%	$	4,590		51.3	%
	Six Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase		% Change
Research and development	$	69,154		78.9	%	$	57,977		46.1	%	$	11,177		19.3	%
Selling, general and administrative	$	26,001		29.7	%	$	21,497		17.1	%	$	4,504		21.0	%

Research and Development. Increases in research and development (“R&D”) expenses are primarily driven by the effect of a ramp-up in the costs relating to Veloce, our wholly-owned subsidiary, our internal costs related to the ARM 64-bit silicon server development effort, and costs incurred on our developmental effort relating to other new products. Total consolidated R&D expenses consist primarily of salaries and related costs (including stock-based compensation) of employees engaged in research, design and development activities, costs related to engineering design tools, subcontracting costs and facilities expenses.

We recorded an initial consideration of $60.4 million as of March 31, 2012 (fiscal 2012) relating to the Veloce merger as the consummation of this merger was considered probable as of this date. On June 20, 2012, we completed the merger of Veloce and as of September 30, 2012, we recognized an additional $4.7 million of R&D expense in connection with progress achieved against certain product development milestones included in the second amendment. For accounting purposes, the Veloce consideration is considered a compensatory R&D expenditure (as the merger consideration is primarily to acquire the R&D employees of Veloce) which will be paid out in cash or equity, or a combination thereof, at the discretion of the Company. Additional purchase consideration will be recorded and amortized in future periods, if and when the additional development milestones are achieved. See note 4 of Notes to Condensed Consolidated Financial Statements for further details relating to Veloce.

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The increase in R&D expenses of 16.1% for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 was primarily due to $2.3 million for Veloce merger consideration costs, $2.0 million in stock-based compensation charges, $0.8 million in consumable equipment and software cost, $0.6 million in third party foundry cost $0.5 million in personnel cost, $0.3 million in packaging and other engineering costs offset by a decrease of $0.6 in technology access fees, $0.5 million in printed circuit board cost, and $0.3 each million in new product development cost and engineering tools and supplies. The increase in R&D expenses of 19.3% for the six months ended September 30, 2012 compared to the six months ended September 30, 2011 was primarily due $6.0 million for Veloce merger consideration costs (which includes approximately $1.3 million of expense related to the acceleration of Veloce warrants), $3.8 million in stock-based compensation charges, $1.4 million in consumable equipment and software cost, $0.9 million in personnel cost, $0.7 million each in customer funded non-recurring engineering payments, corporate allocation expense and packaging and other engineering costs offset by a decrease of $1.4 million in technology access fees, $0.5 million in third party foundry cost, $0.4 million in contractor cost and $0.2 million in printed circuit board cost.

We believe that a continued commitment to R&D is vital to our goal of maintaining a leadership position with innovative products. In addition to our internal R&D programs, our business strategy includes acquiring products, technologies or businesses from third parties. Future acquisitions of products, technologies or businesses may result in substantial additional on-going R&D costs.

Selling, General and Administrative. Selling, general and administrative (“SG&A”) expenses consist primarily of personnel related expenses (including stock-based compensation), professional and legal fees, corporate branding and facilities expenses. The increase in SG&A expenses of 51.3% for the three months ended September 30, 2012 compared to the three months ended September 30, 2011, was primarily due to $2.4 million in stock-based compensation charges, $2.3 million relating to the reversal of a previously accrued liability associated with an acquisition in the quarter ended September 30, 2011 (none in the quarter ended September 30, 2012), $0.7 million in professional service fees offset by a decrease of $0.5 million in general administration costs, $0.2 million in marketing and travel costs and $0.1 million in sales commission expenses. The increase in SG&A expenses of 21.0% for the six months ended September 30, 2012 compared to the six months ended September 30, 2011, was primarily due to $4.0 million in stock-based compensation charges, $2.1 million relating to the reversal of previously accrued liabilities associated with an acquisition in the six months ended September 30, 2011 (none in the six months ended September 30, 2012) and $0.8 million in professional service fees offset by a decrease of $0.6 million in general administration costs, $0.4 million each in personnel cost, $0.5 each in marketing and travel costs and corporate allocation expenses, $0.3 million in sales commission cost and $0.1 million in professional service fees. Future acquisitions of products, technologies or businesses may result in substantial additional on-going SG&A costs.

Stock-Based Compensation. The following table presents stock-based compensation expense for the three and six months ended September 30, 2012 and 2011, which was included in the tables above (dollars in thousands):

	Three Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase		% Change
Costs of revenues	$	177		0.4	%	$	98		0.1	%	$	79		80.6	%
Research and development		3,714		8.0			1,726		2.7			1,988		115.2
Selling, general and administrative		3,743		8.1			1,300		2.0			2,443		187.9
	$	7,634		16.5	%	$	3,124		4.8	%	$	4,510		144.4	%

	Six Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase		% Change
Costs of revenues	$	438		0.5	%	$	209		0.1	%	$	229		109.6	%
Research and development		7,919		9.0			4,114		3.3			3,805		92.5
Selling, general and administrative		6,966		8.0			2,979		2.4			3,987		133.8
	$	15,323		17.5	%	$	7,302		5.8	%	$	8,021		109.8	%

The increase in stock-based compensation of 144.4% and 109.8% during the three and six months ended September 30, 2012 compared to the three and six months ended September 30, 2011, respectively, was primarily due to the expense associated with the granting of new performance retention grants and other performance based awards. The above stock based compensation expense of approximately $7.6 million and $15.3 million for the three and six months ended September 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See note 5 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

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Restructuring Charges. There were no restructuring charges for the three and six months ended September 30, 2012. The restructuring charges recorded during the three and six months ended September 30, 2011 was primarily for employee severances. As part of our ongoing cost reduction efforts, we could implement additional restructuring programs and may incur significant additional restructuring charges.

Interest and Other Income, net. The following table presents interest and other income (expense), net for the three and six months ended September 30, 2012 and 2011 (dollars in thousands):

	Three Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			Increase (Decrease)			% Change
Interest income (expense), net	$	745		1.6	%	$	1,469		2.3	%	$	(724	)		(49.3	)%
Other income (expense), net	$	90		0.2	%	$	48		(0.1	)%	$	42			(87.5	)%

	Six Months Ended September 30,
	2012					2011
	Amount		% of Net Revenue			Amount		% of Net Revenue			(Decrease)			% Change
Interest income (expense), net	$	2,424		2.2	%	$	2,750		2.2	%	$	(326	)		(11.9	)%
Other income (expense), net	$	173		0.1	%	$	123		0.1	%	$	50			40.7	%

Interest Income (expense), net. Interest income, net of management fees, reflects interest earned on cash and cash equivalents, short-term investments and marketable securities. The decrease in interest income, net for the three and six months ended September 30, 2012, compared to the three and six months ended September 30, 2011 was primarily due to our lower cash, cash equivalents and short-term investments available-for-sale balances.

Income Taxes. The federal statutory income tax rate was 35% for the fiscal three and six months ended September 30, 2012 and 2011. The decrease in the income tax expense recorded for the three months ended September 30, 2012 compared to September 30, 2011, was primarily related to other comprehensive income. The allocation of the prior year tax provision included recognizing $0.4 million tax benefit arising from the loss from continuing operations and the offsetting tax expense was allocated to other comprehensive income.

FINANCIAL CONDITION AND LIQUIDITY

As of September 30, 2012, our principal source of liquidity consisted of $89.7 million in cash, cash equivalents and short-term investments which is approximately $1.37 per share of outstanding common stock as compared to $1.84 per share at March 31, 2012. Working capital as of September 30, 2012 was $100.8 million. Total cash, cash equivalents, and short-term investments decreased by $24.2 million during the six months ended September 30, 2012, primarily due to cash used for operations of $28.3 million, purchase of property and equipment of $7.6 million, the repurchases of our common stock for $0.7 million, a strategic investment of $0.5 million, payment of contingent consideration of $0.5 million and the funding of restricted stock units withheld for taxes of $0.3 million offset by proceeds from stock issuance of $5.4 million, proceeds from sale of a strategic equity investment of $7.1 million and a $1.4 million unrealized gain on our short-term investments. At September 30, 2012, we had contractual obligations not included on our balance sheet totaling $89.6 million, primarily related to facility leases, IP licenses, engineering design software tool licenses, non-cancelable inventory purchase commitments and liability for uncertain tax positions.

For the six months ended September 30, 2012, we used $28.3 million of cash in our operations compared to $8.9 million used for our operations for the six months ended September 30, 2011. Our net loss of $44.9 million for the six months ended September 30, 2012 included $28.1 million of non-cash charges consisting of $4.9 million of depreciation, $2.6 million of amortization of purchased intangibles, $16.6 million of stock-based compensation and $4.7 million of additional Veloce compensation cost offset by $0.6 million relating to the tax effect on other comprehensive income and $0.1 million in acquisition related adjustment (relating to our TPack acquisition in fiscal 2011). Our net loss of $8.0 million for the six months ended September 30, 2011 included $12.9 million of non-cash charges consisting of $3.8 million of depreciation, $4.1 million of amortization of purchased intangibles and $7.3 million of stock-based compensation, offset by a $2.3 million reduction to the estimated fair value of our contingent consideration. The remaining change in operating cash flows for the six months ended September 30, 2012 primarily reflected decreases in accounts receivable, inventories, other assets, accounts payable, Veloce accrued liability, deferred revenue and other accrued liabilities and increases in accrued payroll and related expenses. Our overall quarterly days sales outstanding was 28 days and 40 days for the three months ended September 30, 2012 and 2011, respectively. Decrease in the revenues generated during the last month of the quarter ended September 30, 2012 as compared to the same period for the quarter ended March 31, 2012 was the primary reason for the decrease in our day’s sales outstanding.

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We provided $8.5 million in cash from our investing activities during the six months ended September 30, 2012, compared to generating $6.8 million during the six months ended September 30, 2011. During the six months ended September 30, 2012, we used $7.6 million for the purchase of property and equipment and $0.5 million for purchase of strategic investment offset by proceeds of $9.5 million from short-term investment activities and $7.1 million from sales of strategic equity investment. During the six months ended September 30, 2011, we generated $20.0 million for net short-term investment activities offset by $9.8 million for the purchase of property and equipment, $2.5 million for purchase of strategic investment and $1.0 million in funding of a note receivable.

We provided $3.6 million in cash for our financing activities during the six months ended September 30, 2012, compared to using $30.5 million during the six months ended September 30, 2011. The major financing use of cash for the six months ended September 30, 2012 was the $0.7 million for the repurchase of common stock, $0.5 million for the payment of a contingent consideration and restricted stock units withheld for taxes of $0.3 million, offset by proceeds from the issuance of common stock of $5.3 million. The major financing use of cash for the six months ended September 30, 2011 was $20.9 million for the repurchase of common stock, $10.0 million for the funding of our structured stock repurchase agreements and $2.4 million for restricted stock units withheld for taxes, offset by $3.0 million in proceeds from the issuance of common stock.

Veloce Merger

On June 20, 2012 (the “Closing Date”), the Company completed its acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, entered into as of May 17, 2009 (the “Initial Agreement”), as amended by Amendment No. 1 to Agreement and Plan of Merger, entered into as of November 8, 2010 (the “First Amendment”), and Amendment No. 2 to Agreement and Plan of Merger, entered into as of April 5, 2012 (the “Second Amendment” and, collectively with the Initial Agreement and the First Amendment, the “Merger Agreement”). The First Amendment was amended, restated and replaced in its entirety by the Second Amendment.

The terms of the Merger Agreement include the payment of initial consideration of up to $60.4 million, payable in shares of Company common stock and/or cash (at the Company’s election) to holders of Veloce common stock options that were vested on the Closing Date, to Veloce stockholders and holders of Veloce stock equivalents. Following the closing, the Company paid part of the consideration by issuing approximately 2.4 million shares of its common stock and paying approximately $12.7 million in cash, with the balance of the $60.4 million to be paid, using a similar ratio of Company shares and cash, over the next two to three years upon the satisfaction of additional vesting requirements. During the three and six months ended September 30, 2012, as part of the above arrangement, the company issued 0.2 million shares and 2.6 million shares respectively, and paid approximately $2.1 million and $14.8 million in cash, respectively.

The Second Amendment further provides for potential payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to Company products on which Veloce has worked. The additional payments would be payable in partial amounts upon the achievement of each such milestone. The Company currently expects aggregate additional payments to range from a minimum of $4.7 million to a maximum of $75 million, based on the Company’s current expectations relating to the achievement of such product development milestones. Any such additional payments may be payable in shares of Company common stock and/or cash (at the Company’s election).

Although we currently believe we have adequate liquidity to operate normally, our cash balances could decrement significantly if we decide to pay for the remainder of the Veloce acquisition consideration using a greater proportion of cash or if our normal operations require us to expend more cash. If our stock price declines further, it could result in a much higher dilution to our stockholders. As a result of any of the above, we may be faced with liquidity issues and may be forced to raise capital from other sources, which may or may not be possible to do so on reasonable terms.

Stock Repurchase Program

In August 2004, our Board of Directors authorized a stock repurchase program for the repurchase of up to $200.0 million of our common stock. Under the program, we are authorized to make purchases in the open market or enter into structured agreements. In October 2008, our Board of Directors increased the stock repurchase program by $100.0 million. During the six months ended September 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 per share. During the six months ended September 30, 2011, approximately 3.5 million shares were repurchased on the open market at a weighted average price of $5.98 per share. All repurchased shares were retired upon delivery to us. As of September 30, 2012, we had $15.8 million available in our stock repurchase program.

We also utilize structured stock repurchase agreements to buy back shares which are prepaid written put options on our common stock. We pay a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a pre-determined amount of cash or stock depending on the closing market price of our common stock on the expiration date of the agreement. Upon expiration of each agreement, if the closing market price of our common stock is above the pre-determined price, we will have our cash investment returned with a premium. If the closing market price is at or below the pre-determined price, we will receive the number of shares specified at the agreement inception. Any cash received, including the premium, is treated as additional paid in capital on the balance sheet.

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We did not enter into any structured stock repurchase agreements during the six months ended September 30, 2012. During the six months ended September 30, 2011, we entered into structured stock repurchase agreements totaling $10.0 million. For those agreements that settled during the six months ended September 30, 2011, we received 1.0 million in shares of our common stock at an effective purchase price of $9.74 per share from the settled structured stock repurchase agreements. At September 30, 2011, we had no outstanding structured stock repurchase agreements.

Other

Our aggregate fixed commitments payable over the next five years for licensing fees relating to our R&D efforts, including our licensed IP, technology, product design, test and verification tools, are approximately $23.5 million. These amounts are also included in the table below.

The following table summarizes our contractual operating leases and other purchase commitments as of September 30, 2012 (in thousands):

	Operating Leases		Other Purchase Commitments			Total
Fiscal Years Ending March 31, 2013	$	1,252	$	56,877	*	$	58,129
2014		1,692		13,795			15,487
2015		870		11,996			12,866
2016		147		2,999			3,146
Total minimum payments	$	3,961	$	85,667		$	89,628

* Includes liability for uncertain tax positions of $43.4 million including interest and penalties. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, we are unable to make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as at September 30, 2012.

We believe that our available cash, cash equivalents and short-term investments will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months, although we could elect or could be required to raise additional capital during such period. There can be no assurance that such additional debt or equity financing will be available on commercially reasonable terms or at all. We expect to end our fiscal year with approximately $70 million in cash which we believe is the adequate level of cash to run our business operations. However, although we currently believe we have adequate liquidity to operate normally, our cash balances could decrement significantly if we decide to pay for the remainder of the Veloce acquisition consideration using a greater proportion of cash or if our normal operations require us to expend more cash. If our stock price declines further, it could result in a much higher dilution to our stockholders. As a result of any of the above, we may be faced with liquidity issues and may be forced to raise capital from other sources, which may or may not be possible to do so on reasonable terms.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates and a decline in the stock market. We are exposed to market risks related to changes in interest rates and foreign currency exchange rates.

We maintain an investment portfolio of various holdings, types of instruments and maturities. These securities are classified as available-for-sale and, consequently, are recorded on our consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income or loss. We have established guidelines relative to diversification and maturities that attempt to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of interest rate trends. We invest our excess cash in debt instruments of the U.S. Treasury, corporate bonds, commercial paper, mortgage-backed and asset backed securities, and closed-end bond funds, with credit ratings as specified in our investment policy. We also have invested in preferred stocks, which pay quarterly fixed rate dividends. We generally do not utilize derivatives to hedge against increases in interest rates which decrease market values.

We are exposed to market risk as it relates to changes in the market value of our investments. At September 30, 2012, our investment portfolio included short-term securities classified as available-for-sale investments with an aggregate fair market value of $77.7 million and a cost basis of $70.5 million. Substantially all of these securities are subject to interest rate risk, as well as credit risk and liquidity risk, and will decline in value if interest rates increase or an issuer’s credit rating or financial condition is weakened.

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The following table presents the hypothetical changes in fair value of our short-term investments held at September 30, 2012 (in thousands):

	Valuation of Securities Given an Interest Rate Decrease of X Basis Points (“BPS”)						Fair Value as of September 30, 2012		Valuation of Securities Given an Interest Rate Increase of X Basis Points (“BPS”)
	(150 BPS)		(100 BPS)		(50 BPS)				50 BPS		100 BPS		150 BPS
Available-for-sale investments	$	81,640	$	80,980	$	80,296	$	77,695	$	76,953	$	76,164	$	75,395

The modeling technique used measures the change in fair market value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points, 100 basis points, and 150 basis points. While this modeling technique provides a measure of our exposure to market risk, the current economic turbulence could cause interest rates to shift by more than 150 basis points.

We also invest in equity instruments of private companies for business and strategic purposes. These investments are valued based on our historical cost, less any recognized impairments. The estimated fair values are not necessarily representative of the amounts that we could realize in a current transaction.

We generally conduct business, including sales to foreign customers, in U.S. dollars, and as a result, we have limited foreign currency exchange rate risk. We did not enter into any forward currency exchange contract during the six months ended September 30, 2012. Gains and losses on foreign currency forward contracts that are designated and effective as hedges of anticipated transactions, for which a firm commitment has been attained, are deferred and included in the basis of the transaction in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of operations in the current period.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit with the SEC pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by Exchange Act Rule 13a-15(b), we conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2012. Based on the foregoing, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 7 of Notes to Consolidated Financial Statements, included in Part I, Item 1 of this report, is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Before deciding to invest in us or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. We update our descriptions of the risks and uncertainties facing us in our periodic reports filed with the SEC. The risks and uncertainties described below and in

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our other filings are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment. The risks and uncertainties set forth below with an asterisk (“*”) next to the title contain changes to the description of the risks and uncertainties associated with our business as previously disclosed in Item 1A to our Annual Report on Form 10-K for the fiscal year ended March 31, 2012 filed with the SEC on May 16, 2012.

*Our liquidity may deteriorate on our future uses of cash

Although we currently believe we have adequate liquidity to operate normally, our cash balances could decrement significantly if we decide to pay for the remainder of the Veloce acquisition consideration using a greater proportion of cash or if our normal operations require us to expend more cash. If our stock price declines further, it could result in a much higher dilution to our stockholders. As a result of any of the above, we may be faced with liquidity issues and may be forced to raise capital from other sources, which may or may not be possible to do so on reasonable terms. During the year ended March 31, 2012 and the six months ended September 30, 2012, our cash used in operating activities was approximately $9.4 million and $28.3 million, respectively.

*If we are unable to timely develop new products or new generations and versions of our existing products to replace our current products, our operating results and competitive position will be materially harmed.

Our industry is characterized by intense competition, rapidly evolving technology and continually changing customer requirements. These factors could render our existing products obsolete. Accordingly, our ability to compete in the future will depend in large part on our ability to identify and develop new products or new generations and versions of our existing products that achieve market acceptance on a timely and cost-effective basis, and to respond to changing requirements. If we are unable to do so, our business, operating results and financial condition will be negatively affected.

The successful development and market acceptance of our products depend on a number of factors, including, but not limited to:

• our successful collaboration with our ecosystem of partners including technology partners;

• our accurate prediction of changing customer requirements;

• timely development of new designs;

• timely qualification and certification of our products for use in electronic systems;

• continued availability on commercially reasonable terms of the technology components and tools licensed from third parties;

• commercial acceptance and production of the electronic systems into which our products are incorporated;

• availability, quality, price, performance, and size of our products relative to competing products and technologies;

• our customer service and support capabilities and responsiveness;

• successful development of relationships with existing and potential new customers; and

• changes in technology and industry standards.

We have in recent years devoted substantial engineering and financial resources to designing, developing and rolling out new products and technologies and introducing several new products in our Connectivity and Computing business units. However, there can be no assurance that our product development efforts will be successful or that the products and technologies we have recently developed and which we are currently developing will achieve market acceptance. If these products and technologies fail to achieve market acceptance, or if we are unable to continue developing new products and technologies that achieve market acceptance, our business, financial condition and operating results will be materially and adversely affected. In addition, for our X-Gene^TM and other server processor products, we are a licensee of the ARM v8 64-bit architecture and will depend upon the continuing timely completion and delivery by ARM of various updates and other deliverables under the license agreement. Any failure or material delay by ARM in completing its deliverables to us under the license could adversely affect our product development efforts and other planned server processor products that utilize the ARM 64-bit architecture.

*Our significant investment in Veloce may not result in the successful development of new technologies or products.

Under a merger agreement we entered into with Veloce in May 2009, as amended in November 2010 and April 2012, we agreed to acquire Veloce if certain performance milestones and delivery schedules set forth under the merger agreement are achieved. In June 2012, we completed the acquisition of Veloce upon the satisfaction of a specified FPGA product development milestone and other closing conditions. Pursuant to the merger agreement, as currently amended, the purchase price is estimated to be in the range of $60.4 million up to approximately $135 million, depending upon the achievement and timing of multiple product development milestones and technical performance results. At this time the eventual outcome is not determinable and as such we are unable to provide a narrower range for the estimated total merger consideration. We will update the range in the future when additional relevant information is available.

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Even after the successful completion of the acquisition of Veloce as described above, we may fail to appropriately integrate the operations of Veloce into the Company. Although we have spent considerable time and resources in the developmental effort, eventually Veloce may be unsuccessful in developing the products that are described in the merger agreement, in which case our investment in Veloce would not bear any significant value to our business and financial results and condition.

We face intense competition and price pressure.

The semiconductor industry is intensely competitive. We expect competition to continue to increase as our industry and our competitors evolves and develop.

Many of our competitors have longer operating histories and presences in key markets, greater name recognition, larger customer bases, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we do, and in some cases operate their own fabrication facilities. These competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion and sale of their products. We also face competition from newly established competitors, suppliers of products, and customers who choose to develop their own semiconductor solutions.

Existing or new competitors may develop technologies that more effectively address our markets with products that offer enhanced features and functionality, lower power requirements, greater levels of integration or lower cost. Increased competition also has resulted in and is likely to continue to result in increased expenditures on research and development, declining average selling prices, reduced gross margins and loss of market share in certain markets. These factors in turn create increased pressure to consolidate. We cannot assure you that we will be able to continue to compete successfully against current or new competitors. If we do not compete successfully, we may lose market share in our existing markets and our revenues may fail to increase or may decline.

We and our customers face intense price pressure from competition from companies in lower cost countries like China. In response to these price pressures, our customers could require us to reduce prices which could impact our financial results adversely. These price pressures could cause our customers and us to not be competitive and lose significant revenues. Furthermore, our discrete legacy products are being and could continue to be integrated into ASICs that could cause our revenues from such products to decline at a faster rate.

*Our dependence on third-party manufacturing and supply relationships increases the risk that we will not have an adequate supply of products to meet demand or that our cost of materials will be higher than expected.

We depend upon third parties to manufacture, assemble, package or test certain of our products. As a result, we are subject to risks associated with these third parties, including:

• reduced control over delivery schedules and quality;

• inadequate manufacturing yields and excessive costs;

• ability to attract and retain key personnel and to maintain knowledge base;

• difficulties selecting and integrating new subcontractors;

• potential lack of adequate capacity at the foundry during periods of excess demand, resulting in significant increases in lead-time requirements and production delays;

• increased risk of excess and obsolete inventory charges due to the higher level of inventories in response to the increased lead-times;

• limited warranties on products supplied to us;

• potential increases in prices;

• potential noncompetitive pricing of foundry services;

• potential instability and business disruption in countries where third-party manufacturers are located;

• potential misappropriation of our intellectual property; and

• potential foundry shortages when we commence manufacturing future products especially those with 28nm technologies which could delay the supply of products to our customers.

Our outside foundries generally manufacture our products on a purchase order basis, and we have few long-term supply arrangements with these suppliers. We have less control over delivery schedules, manufacturing yields and costs than competitors with their own fabrication facilities. A manufacturing disruption or capacity constraint experienced by one or more of our outside foundries or a disruption of our relationship with an outside foundry, including discontinuance of our products by that foundry, would negatively impact the production of certain of our products for a substantial period of time.

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As our third-party manufacturing suppliers extend their lead time requirements, we will likely need to also extend our lead time requirements to our customers. This could cause our customers to lower their competitive assessment of us as a supplier and, as a result, we may not be considered for future design awards.

Our IC products are generally only qualified for production at a single foundry. These suppliers can allocate, and in the past have allocated, capacity to the production of other companies’ products while reducing deliveries to us on short notice. There is also the potential that they may discontinue manufacturing our products or go out of business. Because establishing relationships, designing or redesigning ICs, and ramping production with new outside foundries may take over a year, there is no readily available alternative source of supply for these products.

Difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of outside foundries can lead to reduced yields of our IC products. The process technology of an outside foundry is typically proprietary to the manufacturer. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. As a result, yield problems may not be identified until well into the production process, and resolution of yield problems may require cooperation between us and our manufacturer. This risk could be compounded by the offshore location of certain of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems. Manufacturing defects that we do not discover during the manufacturing or testing process may lead to costly product recalls. These risks may lead to increased costs or delayed product delivery, which would harm our profitability and customer relationships.

If the foundries or subcontractors we use to manufacture our products discontinue the manufacturing processes needed to meet our demands, or fail to upgrade their technologies needed to manufacture our products, we may be unable to deliver products to our customers, which could materially adversely affect our operating results and harm our reputation. The transition to the next generation of manufacturing technologies at one or more of our outside foundries could be unsuccessful or delayed.

Our requirements typically represent a very small portion of the total production of the third-party foundries. As a result, we are subject to the risk that a producer will cease production of an older or lower-volume process that it uses to produce our parts. We cannot assure you that our external foundries will continue to devote resources to the production of parts for our products or continue to advance the process design technologies on which the manufacturing of our products are based. Each of these events could increase our costs, lower our gross margin, cause us to hold more inventories or materially impact our ability to deliver our products on time. As our volumes decrease with any third-party foundry, the likelihood of unfavorable pricing increases.

Some companies that supply our customers are similarly dependent on a limited number of suppliers to produce their products. These other companies’ products may be designed into the same networking equipment into which our products are designed. Our order levels could be reduced materially if these companies are unable to access sufficient production capacity to produce in volumes demanded by our customers because our customers may be forced to slow down or halt production on the equipment into which our products are designed.

Our restructuring activities could result in management distractions, operational disruptions and other difficulties.

Over the past several years, we have initiated several restructuring activities in an effort to reduce operating costs and such restructuring activities are likely to continue. Employees whose positions were eliminated in connection with these restructuring activities may seek employment with our competitors, customers or suppliers. Although each of our employees is required to sign a confidentiality agreement with us at the time of hire, which agreement contains covenants prohibiting among other things the disclosure or use of our confidential information and the solicitation of our employees, we cannot guarantee that the confidential nature of our proprietary information will be maintained in the course of such future employment, or that our key continuing employees will not be solicited to terminate their employment with us. Any additional restructuring efforts could divert the attention of our management away from our operations, harm our reputation, increase our expenses, increase the work load placed upon remaining employees and cause our remaining employees to lose confidence in the future performance of the Company and decide to leave. We cannot guarantee that any additional restructuring activities undertaken in the future will be successful, or that we will be able to realize the cost savings and other anticipated benefits from our previous or future restructuring plans. In addition, if we continue to reduce our workforce, it may adversely impact our ability to respond rapidly to new growth opportunities.

Natural disasters in certain regions, such as Japan and Thailand, could adversely affect our manufacturing and supply chain which, in turn, could have a material adverse effect on our business, our results of operations and our financial condition.

The occurrence of natural disasters in certain regions, such as the earthquake and tsunami in Japan and flooding in Thailand, could negatively impact our manufacturing and supply chain, our ability to deliver products, on a timely basis or at all, to our

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customers, the cost of our products, and the demand for our products. The occurrence of natural disasters could also cause delays in our customers’ supply chains, causing them to delay their requirements for our products until they resolve shortages from their other suppliers. Any such occurrences of natural disasters could have a material adverse effect on our business, our results of operations and our financial condition.

We may experience difficulties in transitioning to smaller geometry computing technologies or in achieving higher levels of design integration and, as a result, may experience reduced manufacturing yields, delays in product deliveries and increased expenses.

As smaller line width geometry processes become more prevalent, we expect to integrate greater levels of functionality into our IC products and to transition our IC products to increasingly smaller geometries. This transition will require us to redesign certain products and will require us and our foundries to migrate to new manufacturing processes for our products.

We may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs and increase performance, and we have designed IC products to be manufactured at as little as .04 micron geometry processes. We have experienced some difficulties in shifting to smaller geometry process technologies and new manufacturing processes. These difficulties resulted in reduced manufacturing yields, delays in product deliveries and increased expenses. The transition to smaller geometries is inherently more expensive and as we manufacture more products using smaller geometries, the incremental costs could have an adverse impact on our earnings. We may face similar difficulties, delays and expenses as we continue to transition our IC products to smaller geometry processes. We are dependent on our relationships with our foundries to transition to smaller geometry processes successfully. We cannot assure you that our foundries will be able to effectively manage the transition or that we will be able to maintain our relationships with our foundries. If we or our foundries experience significant delays in this transition or fail to implement this transition, our business, financial condition and results of operations could be materially and adversely affected.

The gross margins for our products could decrease rapidly or not increase as forecasted, which will negatively impact our business, financial conditions and results of operations.

The gross margins for our solutions have historically declined over time. Factors that we expect to cause downward pressure on the gross margins for our products include competitive pricing pressures, the cost sensitivity of our customers, particularly in the higher-volume markets, new product introductions by us or our competitors, the overall mix of our products sold during a particular quarter, and other factors. From time to time, for strategic reasons, we may accept orders at less than optimal gross margins in order to facilitate the introduction of new products or the market penetration of existing products. To maintain acceptable operating results, we will need to offset any reduction in gross margins of our products by reducing costs, increasing sales volume, developing and introducing new products and developing new generations and versions of existing products on a timely basis. If the gross margins for our products decline or not increase as anticipated and we are unable to offset those reductions, our business, financial condition and results of operations will be materially and adversely affected.

*The current economic circumstances and uncertain political conditions could harm our revenues, operating results and financial condition.

The economies of the United States and other developed or developing countries appear to be slowly emerging from an economic downturn. We cannot predict whether this economic recovery will continue or reverse course. Deteriorating economic conditions in certain countries (such as in Europe) could adversely spiral and impact the global nascent recovery which could in-turn adversely impact our revenues and financial results and condition.

The recent downturn has caused a decline in our near term revenues and it will take some time for our near-term revenues to return to their previous levels. Our current operating plans are based on assumptions concerning levels of consumer and corporate spending. If weak global and domestic economic and market conditions persist or deteriorate, we may experience further material impacts on our business, operating results and financial condition which could result in a decline in the price of our common stock. If economic conditions worsen, we may have to implement additional cost reduction measures or delay certain R&D spending, which may adversely impact our ability to introduce new products and technologies.

We maintain an investment portfolio of various holdings, types of instruments and maturities. These securities are generally classified as available-for-sale and, consequently, are recorded on our consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss). Our portfolio primarily includes fixed income securities, mutual funds and preferred stock, the values of which are subject to market price volatility. The deterioration of these market prices has had an unfavorable impact on our portfolio and has caused us to record impairment charges to our earnings. During the fiscal years ended March 31, 2012 and 2011, and for the three and six months ended September 30, 2012, we did not record any other-than-temporary impairment charges while during the fiscal year ended March 31, 2010 we recorded other-than-temporary impairment charges of $4.1 million. If market prices continue to decline or securities continue to be in a loss position over time, we may recognize additional impairments in the fair value of our investments.

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Adverse economic and market conditions could also harm our business by negatively affecting the parties with whom we do business, including our business partners, our customers and our suppliers. These conditions could impair the ability of our customers to pay for products they have purchased from us. As a result, allowances for doubtful accounts and write-offs of accounts receivable from our customers may increase. In addition, our suppliers may experience financial difficulties that could negatively affect their operations and their ability to supply us with the parts we need to manufacture our products.

Our product sales are concentrated among a few large customers. Adverse economic and market conditions affecting these customers could adversely affect our financial operations and results.

We have invested, and will continue to invest, in privately-held companies, most of which can still be considered to be in startup or developmental stages. These investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. We could lose all or substantially all of the value of our investments in these companies and, in some cases, we have lost all or substantially all of the value of our investment in such entities.

*Our operating results may fluctuate because of a number of factors, many of which are beyond our control.

If our operating results are below the expectations of research analysts or investors, then the market price of our common stock could decline. Some of the factors that affect our quarterly and annual results, but which are difficult to control or predict, are:

• communications, information technology and semiconductor industry conditions;

• fluctuations in the timing and amount of customer requests for product shipments;

• the reduction, rescheduling or cancellation of orders by customers, including as a result of slowing demand for our products or our customers’ products or over-ordering or double booking of our products or our customers’ products;

• changes in the mix of products that our customers buy;

• the gain or loss of one or more key customers or their key customers, or significant changes in the financial condition of one or more of our key customers or their key customers;

• our ability to introduce, certify and deliver new products and technologies on a timely basis;

• the announcement or introduction of new products and technologies by our competitors;

• competitive pressures on selling prices;

• the ability of our customers to obtain components from their other suppliers;

• market acceptance of our products and our customers’ products;

• fluctuations in manufacturing output, yields or other problems or delays in the fabrication, assembly, testing or delivery of our products or our customers’ products;

• disasters that could affect our supply chain or our customers supply chain;

• increases in the costs of products or discontinuance of products by our suppliers;

• the availability of external foundry capacity, contract manufacturing services, purchased parts and raw materials including packaging substrates;

• the availability of package and test vendor capacity;

• problems or delays that we and our foundries may face in shifting the design and manufacture of our future generations of IC products to smaller geometry process technologies and in achieving higher levels of design and device integration;

• the amounts and timing of meeting the specifications and expense recovery on non-recurring engineering projects;

• the amounts and timing of costs associated with warranties and product returns;

• the amounts and timing of investments in R&D;

• the product lifecycle and recoverability of capitalized architectural licenses, technology access fees and mask sets;

• the amounts and timing of the costs associated with payroll taxes related to stock option exercises or settlement of restricted stock units;

• costs associated with acquisitions and the integration of acquired companies, products and technologies;

• the impact of potential one-time charges related to purchased intangibles;

• our ability to successfully integrate acquired companies, products and technologies;

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• the impact on interest income of a significant use of our cash for an acquisition, stock repurchase or other purpose;

• the effects of changes in interest rates or credit worthiness on the value and yield of our short-term investment portfolio;

• costs associated with compliance with applicable environmental, other governmental or industry regulations including costs to redesign products to comply with those regulations or lost revenue due to failure to comply in a timely manner;

• the effects of changes in accounting standards;

• costs associated with litigation, including without limitation, attorney fees, litigation judgments or settlements, relating to the use or ownership of intellectual property or other claims arising out of our operations;

• our ability to identify, hire and retain senior management and other key personnel;

• the effects of war, acts of terrorism or global threats, such as disruptions in general economic activity and changes in logistics and security arrangements;

• the availability of ecosystem partners; and

• global economic and industry conditions.

*Our business, financial condition and operating results would be harmed if we do not achieve anticipated revenues.

We can have revenue shortfalls for a variety of reasons, including:

• shortages of raw materials or production capacity constraints that lead our suppliers to allocate available supplies or capacity to their other customers, which may disrupt our ability to meet our production obligations;

• our customers may experience shortages from their suppliers that may cause them to delay orders or deliveries of our products;

• delays in the availability of our products or our customers’ products;

• delays in the availability of the software elements from third party vendors and ecosystem partners that may cause delays in customers using our hardware products resulting in further delays of bringing our product to market;

• the reduction, rescheduling or cancellation of customer orders;

• declines in the average selling prices of our products;

• delays when our customers are transitioning from old products to new products;

• a decrease in demand for our products or our customers’ products;

• a decline in the financial condition or liquidity of our customers or their customers;

• the failure of our products to be qualified in our customers’ systems or certified by our customers;

• excess inventory of our products held by our customers, resulting in a reduction in their order patterns as they work through the excess inventory of our products;

• fabrication, test, product yield, or assembly constraints for our products that adversely affect our ability to meet our production obligations;

• the failure of one or more of our subcontract manufacturers to perform its obligations to us;

• our failure to successfully integrate acquired companies, products and technologies; and

• global economic and industry conditions.

Our business is characterized by short-term orders and shipment schedules. Customer orders typically can be cancelled or rescheduled without significant penalty to the customer. Because we do not have substantial non-cancellable backlog, we typically plan our production and inventory levels based on internal forecasts of customer demand, which is highly unpredictable and can fluctuate substantially. Customer orders for our products typically have non-standard lead times, which make it difficult for us to predict revenues and plan inventory levels and production schedules. If we are unable to plan inventory levels and production schedules effectively, our business, financial condition and operating results could be materially and adversely affected.

From time to time, in response to anticipated long lead times to obtain inventory and materials from our outside contract manufacturers, suppliers and foundries, we may order materials in advance of anticipated customer demand. This advance ordering has in the past resulted and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors render our products less marketable. If we are forced to hold excess inventory or we incur unanticipated inventory write-downs, our financial condition and operating results could be materially and adversely affected.

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Our expense levels are relatively fixed in the short-term and are based on our expectations of future revenues. We have limited ability to reduce expenses quickly in response to any revenue shortfalls. Changes to production volumes and impact of overhead absorption may result in a decline in our financial condition or liquidity.

*Our business is dependent on the pace of recovery of the communications industry.

We are currently seeing certain signs that would indicate to us that we can expect the slowdown ((in the adoption of technology including optical transport network (OTN) technology) in our Connectivity business to reverse in the near future. It is possible that our estimations are incorrect and that it will take longer for the reversal of the slowdown to occur, or that our estimated market share in the Connectivity space is in fact much lower than we anticipate. Also, our product sales are concentrated among a few large customers. Adverse economic and market conditions affecting these customers could adversely affect our financial operations and results.

Interruptions, delays, security breaches or other unauthorized activities at third-party data centers or other Cloud Computing infrastructure providers could materially harm our business.

We conduct significant business functions and computer operations, including without limitation data storage and email, using the infrastructure systems of third-party vendors, such as remote data centers, virtual servers and other “cloud computing” resources. “Cloud computing” is an information technology hosting and delivery system in which data is stored outside of the user’s physical infrastructure and is delivered to and used by the user as an internet-based application service. These third-party systems may experience cyber attacks and other security breaches, along with the possible risk of loss, theft or unauthorized publication of our technical, proprietary and trade secret information or other confidential information of our employees and customers. Any interruptions or problems at such data centers or other cloud computing facilities could result in significant disruptions to our business operations hosted at or affected by such site. We do not control the operation of such data center or other providers, and each is vulnerable to damage or interruption from earthquakes, floods, fires, vandalism, power loss, telecommunications failures and similar events. These third-party vendor relationships present further risk management challenges for us, including, among others: confirming and monitoring the third-party’s security measures; the potential for improper handling of or access to our data; and data location uncertainty, including the possibility of data storage in inappropriate jurisdictions, where laws or security measures may be inadequate, or the unauthorized movement of technical data between locations in violation of applicable export laws. We undertake substantial efforts to assure the security and confidentiality of information provided to our vendors under cloud computing or other arrangements through appropriate risk evaluation, security and financial due diligence, contracts designed to set and maintain high security and confidentiality standards, and ongoing evaluation of third-party compliance with the required standards. While we expend significant resources on these measures, there can be no assurance that we will be successful in preventing attacks, breaches or other unauthorized activities or detecting and stopping them once they have begun. Our failure to effectively manage and communicate our strategies with our outsourced service providers, or their failure to perform as required or to properly protect our data, may result in operational difficulties which may adversely affect our business, financial condition and results of operations. In addition, such data center and other providers have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with the data center and other providers on commercially reasonable terms, we may experience costs or down time in connection with the transfer to new third-party providers.

We are dependent on orders that are received and shipped in the same quarter and are therefore limited in our visibility of future product shipments.

Our net sales in any given quarter depend upon a combination of shipments from backlog and orders received in that quarter for shipment in that quarter, which we refer to as turns business. We measure turns business at the beginning of a quarter based on the orders needed to meet the shipment forecasts that we set entering the quarter. Historically, we have relied on our ability to respond quickly to customer orders as part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules. Shorter lead times generally mean that turns orders as a percentage of our business are relatively high in any particular quarter and reduce our backlog visibility on future product shipments. Turns business correlate to overall semiconductor industry conditions and product lead times. Because turns business is difficult to predict, varying levels of turns business make our net sales more difficult to forecast. If we do not achieve a sufficient level of turns business in a particular quarter relative to our revenue forecasts, our revenue and operation results may suffer.

*Our business is dependent on selling to distributors.

Sales to distributors accounted for approximately 65% of our revenues for each of the three and six month periods ended September 30, 2012 and 55% and 53%, respectively, for the three and six months ended September 30, 2011. Our largest distributor accounted for approximately 28% of our revenues for each of the three and six months ended September 30, 2012 and 20% and 18%, respectively, for the three and six months ended September 30, 2011. We do not have long-term agreements with our distributors and either party can terminate the relationship with little advance notice.

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Any future adverse conditions in the U.S. and global economies or in the U.S. and global credit markets could materially impact the operations of our distributors. Any deterioration in the financial condition of our distributors or any disruption in the operations of our distributors could adversely impact the flow of our products to our end customers and adversely impact our results of operations. In addition, during an industry or economic downturn, it is possible there will be an oversupply of products and a decrease in sell-through of our products by our distributors which could cause them to hold excess inventories and reduce our net sales in a given period and result in an increase in stock rotations.

*Our business substantially depends upon the continued growth of the technology sector and the Internet.

The technology equipment industry is cyclical and has in the past experienced significant and extended downturns. The recent downturn was significant and we cannot predict if the current improvement is sustainable in the near future. A substantial portion of our business and revenue depends on the continued growth of the technology sector and the Internet. We sell our communications IC products primarily to communications equipment manufacturers that in turn sell their equipment to customers that depend on the growth of the Internet. The past downturn has caused a reduction in capital spending on information technology. While we are beginning to see indications of improvement, there are no guarantees that this growth will sustain, resulting in potential volatility. If there is another downturn, our business, operating results and financial condition may be materially and adversely affected. We are developing products for the cloud server market which is currently dominated by a few large customers. If we are unable to partner with and sell our products to these customers, our future revenues from these products may be adversely impacted.

The loss of one or more key customers, the diminished demand for our products from a key customer, or the failure to obtain certifications from a key customer or its distribution channel could significantly reduce our revenues and profits.

A relatively small number of customers have accounted for a significant portion of our revenues in any particular period. We have no long-term volume purchase commitments from our key customers. One or more of our key customers may discontinue operations as a result of consolidation, bankruptcy or otherwise. Reductions, delays and cancellation of orders from our key customers or the loss of one or more key customers could significantly reduce our revenues and profits. We cannot assure you that our current customers will continue to place orders with us, that orders by existing customers will continue at current or historical levels or that we will be able to obtain orders from new customers.

Our ability to maintain or increase sales to key customers and attract significant new customers is subject to a variety of factors, including:

• supply constraints and manufacturing delays by our outside foundries may result in significantly reduced volumes and delayed deliveries of our products;

• customers may stop incorporating our products into their own products with limited notice to us and may suffer little or no penalty as a result of such action;

• customers or prospective customers may not incorporate our products into their future product designs;

• design wins (as explained below) with customers or prospective customers may not result in sales to such customers;

• the introduction of new products by customers may occur later or be less successful in the market than planned;

• we may successfully design a product to customer specifications but the customer may not be successful in the market;

• sales of customer product lines incorporating our products may rapidly decline or such product lines may be phased out;

• our agreements with customers typically are non-exclusive and do not require them to purchase a minimum quantity of our products;

• many of our customers have pre-existing relationships with our current or potential competitors that may cause our customers to switch from using our products to using competing products;

• some of our OEM customers may develop products internally that would replace our products;

• we may not be able to successfully develop relationships with additional network equipment vendors;

• our relationships with some of our larger customers may deter other potential customers (who compete with these customers) from buying our products;

• the impact of terminating certain sales representatives or sales personnel as a result of a Company workforce reduction or otherwise; and

• some of our customers and prospective customers may become less viable or fail.

The occurrence of any one of the factors above could have a material adverse effect on our business, financial condition and results of operations.

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There is no guarantee that design wins will become actual orders and sales.

A “design win” occurs when a customer or prospective customer notifies us that our product has been selected to be integrated with the customer’s product. There can be delays of several months or more between the design win and when a customer initiates actual orders of our product. Following a design win, we will commit significant resources to the integration of our product into the customer’s product before receiving the initial order. Receipt of an initial order from a customer following a design win, however, is dependent on a number of factors, including the success of the customer’s product, and cannot be guaranteed. The design win may never result in an actual order or sale of our products.

Any significant order cancellations or order deferrals could cause unplanned inventory growth resulting in excess inventory, which may adversely affect our operating results.

Our customers may increase orders during periods of product shortages or cancel orders if their inventories are too high. Major inventory corrections by our customers are not uncommon and can last for significant periods of time and affect demand for our products. Customers may also cancel or delay orders in anticipation of new products or for other reasons. Cancellations or deferrals could cause us to hold excess inventory, which could reduce our profit margins by reducing sales prices, incurring inventory write-downs or writing off additional obsolete products.

The book-to-bill ratio is commonly used by investors to compare and evaluate technology and semiconductor companies. The book-to-bill ratio is a demand-to-supply ratio that compares the total amount of orders received to the total amount of orders filled. This ratio tells whether the Company has more orders than it delivered (if greater than 1), has the same amount of orders that it delivered (equals 1), or has less orders than it delivered (under 1). Though the ratio provides an indicator of whether orders are rising or falling, it does not consider the timing of, or if the order will result in future revenues and the effect of changing lead times on bookings. As lead times increase, customers will place orders sooner, therefore increasing our bookings and book-to-bill ratio.

The increasing lead times from our suppliers cause us to make commitments for inventory purchases earlier in our production cycle which in turn increases our risk of having excess inventory. In addition, some of our suppliers are delivering based on allocations which in turn cause us to increase our inventory levels. We must balance our inventory levels between the risk of losing a significant customer to a competitor because we cannot meet our customer’s requirements and the risk of having excess inventory if a significant order is cancelled.

Inventory fluctuations could affect our results of operations and restrict our ability to fund our operations. Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times, meet customer expectations and guard against the risk of inventory obsolescence because of changing technology and customer requirements.

We generally recognize revenue upon shipment of products to a customer. If a customer refuses to accept shipped products or does not pay for these products, we could miss future revenue projections or incur significant charges against our income, which could materially and adversely affect our operating results.

Our customers’ products typically have lengthy design cycles. A customer may decide to cancel or change its product plans, which could cause us to lose anticipated sales.

After we have developed and delivered a product to a customer, the customer will usually test and evaluate our product prior to designing its own equipment to incorporate our product. Our customers may need more than six months to test, evaluate and adopt our product and an additional nine months or more to begin volume production of the equipment or devices that incorporate our product. Due to this generally lengthy design cycle, we may experience significant delays from the time we increase our operating expenses and make investments in inventory until the time that we generate revenue from these products. It is possible that we may never generate any revenue from these products after incurring such expenditures. Even if a customer selects our product to incorporate into its equipment, we cannot guarantee that the customer will ultimately market and sell its equipment or devices that such efforts by our customer will be successful. The delays inherent in this lengthy design cycle increases the risk that a customer will decide to cancel or change its product plans. Such a cancellation or change in plans by a customer could cause us to lose sales that we had anticipated. While our customers’ design cycles are typically long, some of our product life cycles tend to be short as a result of the rapidly changing technology environment in which we operate. As a result, the resources devoted to R&D, product sales and marketing may not generate material revenue for us, and from time to time, we may need to write off excess and obsolete inventory. If we incur significant R&D and marketing expenses and investments in inventory in the future that we are not able to recover, and we are not able to mitigate those expenses, our operating results could be adversely affected. In addition, if we sell our products at reduced prices in anticipation of cost reductions but still hold higher cost products in inventory, our operating results would be harmed.

*An important part of our strategy is to focus on Data Center markets. If we change strategy or are unable to further expand our share of these markets or react timely or properly to emerging trends, our revenues may not grow and could decline.

Our markets frequently undergo transitions in which products rapidly incorporate new features and performance standards on an industry-wide basis. If our products are unable to support the new features or performance levels required by OEMs in these markets,

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or if our products fail to be certified by OEMs, we will lose business from an existing or potential customer and may not have the opportunity to compete for new design wins or certification until the next product transition occurs. If we fail to develop products with required features or performance standards, or if we experience a delay as short as a few months in certifying or bringing a new product to market, or if our customers fail to achieve market acceptance of their products, our revenues could be significantly reduced for a substantial period.

We expect a significant portion of our revenues to continue to be derived from sales of products based on current, widely accepted transmission standards. If the communications market evolves to new standards, we may not be able to successfully design and manufacture new products that address the needs of our customers or gain substantial market acceptance.

If we do not identify and pursue the correct emerging trends and align ourselves with the correct market leaders, we may not be successful and our business, financial condition and results of operations could be materially and adversely affected.

Customers for our products generally have substantial technological capabilities and financial resources. Some customers have traditionally used these resources to internally develop their own products. The future prospects for our products in these markets are dependent upon our customers’ acceptance of our products as an alternative to their internally developed products. Future sales prospects also are dependent upon acceptance of third-party sourcing for products as an alternative to in-house development. Network equipment vendors may in the future continue to use internally developed components. They also may decide to develop or acquire components, technologies or products that are similar to, or that may be substituted for, our products.

If our network equipment vendor customers fail to accept our products as an alternative, if they develop or acquire the technology to develop such components internally rather than purchase our products, or if we are otherwise unable to develop or maintain strong relationships with them, our business, financial condition and results of operations would be materially and adversely affected.

*Our business strategy contemplates the potential acquisition of other companies, products and technologies. Merger and acquisition activities involve numerous risks and we may not be able to address these risks successfully without substantial expense, delay or other operational or financial problems that could disrupt our business and harm our results of operations and financial condition.

Acquiring products, technologies or businesses from third parties, making equity investments in companies developing such products, technologies or businesses, and making additional investments in companies in which we already have an interest are all part of our long-term business strategy. The risks involved with merger and acquisition and equity investment activities include:

• diversion of management’s attention from our core businesses;

• failure to integrate or potential loss of key employees, particularly those of the acquired companies;

• difficulty in completing an acquired company’s in-process research or development projects;

• customer dissatisfaction or performance problems with an acquired company’s products or services;

• adverse effects on existing business relationships with suppliers and customers;

• costs associated with acquisitions, mergers or investments;

• difficulties associated with combining or integrating acquired companies, purchased operations, products or technologies;

• difficulties and risks associated with entering and competing in markets that are unfamiliar to us; and

• ability of the acquired companies to meet their financial projections.

In addition, in the event of any such investments, mergers or acquisitions, we could;

• issue stock that would dilute, in some cases significantly, our current stockholders’ percentage ownership;

• use a significant portion of our cash reserves or incur debt;

• assume liabilities, including unknown liabilities or other unanticipated costs, events or circumstances;

• incur amortization or impairment expenses related to goodwill and other intangible assets and deferred compensation; and

• incur large and immediate write-offs.

Any of these risks could materially harm our business, financial condition and results of operations.

As with past acquisitions, future acquisitions could adversely affect operating results. In particular, acquisitions may materially and adversely affect our results of operations because they may require large one-time charges or could result in increased debt or contingent liabilities, unanticipated third-party litigation, adverse tax consequences, substantial additional depreciation or deferred

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compensation charges. Our past purchase acquisitions required us to capitalize significant amounts of goodwill and purchased intangible assets. As a result of the slowdown in our industry and reduction of our market capitalization, we have been required to record significant impairment charges against these assets as noted in our previous financial statements. These market conditions continuously change and it is difficult to project how long these current uncertain economic conditions may last. These conditions have caused a decline in our near term revenues and it will take some time to ramp back up to our previous levels, if at all. Additionally, market values had deteriorated, which had an unfavorable impact on our valuations which are part of the goodwill and purchased intangible asset impairment tests. There can be no assurances that market conditions will not deteriorate further or that our market capitalization will not decline further. At September 30, 2012, we had $27.2 million of goodwill and purchased intangible assets. We cannot assure you that we will not be required to take significant charges as a result of impairment to the carrying value of the purchased intangible assets, due to further adverse changes in market conditions.

In September 2010, we completed the acquisition of TPack for $32 million in cash, exclusive of $0.5 million cash acquired. In conjunction with the acquisition, we recorded $23.7 million in amortizable intangible assets and $13.2 million in goodwill. In January 2011, TPack’s primary supplier of FPGAs announced it had acquired a competitor of TPack. This supplier will continue to provide FPGAs for TPack’s current products and products currently under development, but not for any future products. While we were negotiating with another supplier of FPGAs, they too acquired a competitor of TPack in March 2011. The increased competition from these synergistic acquisitions could adversely affect the future revenue streams from TPack as we implement a library strategy where customers can choose either FPGA supplier. The financial forecasts and other assumptions used to evaluate the acquisition that is included as part of the overall reporting unit may not materialize as expected.

In June 2012, the Company acquired Veloce for an initial consideration of $60.4 million with potential additional consideration that could range from $4.7 to $75 million, as adjusted, based upon actual technical performance results.

Our industry and markets are subject to consolidation, which may result in stronger competitors, fewer customers and reduced demand.

There has been industry consolidation among communications IC companies, network equipment companies and telecommunications companies in the past, such as the acquisition of Seamicro Inc. by Advanced Micro Devices in February 2012, Netlogic Microsystems, Inc. by Broadcom Corporation in February 2012 and Gennum Corporation by Semtech Corporation in March 2012. We expect this consolidation to continue as companies attempt to strengthen or hold their positions in evolving markets. Consolidation may result in stronger competitors, fewer customers and reduced demand, which in turn could have a material adverse effect on our business, operating results, and financial condition.

Our operating results are subject to fluctuations because we rely heavily on international sales.

International sales account for a significant part of our revenues and may account for an increasing portion of our future revenues. The revenues we derive from international sales may be subject to certain risks, including:

• foreign currency exchange fluctuations;

• changes in regulatory requirements;

• tariffs, rising protectionism and other barriers;

• timing and availability of export licenses;

• political and economic instability;

• natural disasters;

• increased exposure to liability under U.S and foreign anti-corruption laws and regulations;

• difficulties in staffing and managing foreign operations;

• difficulties in managing distributors;

• difficulties in obtaining governmental and export approvals for communications, processors and other products;

• reduced or uncertain protection for intellectual property rights in some countries;

• longer payment cycles and difficulties in collecting accounts receivable in some countries;

• burdens of complying with a wide variety of complex foreign laws and treaties;

• potentially adverse tax consequences; and

• an uncertain economic condition that may trail any improvements in the United States.

We are subject to risks associated with the imposition of legislation and regulations relating to the import or export of high technology products, information and technology. We cannot predict whether quotas, duties, taxes or other charges or restrictions

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upon the importation or exportation of our products will be implemented by the United States or other countries. Because sales of our products have been denominated to date primarily in United States dollars, increases in the value of the United States dollar could increase the price of our products so that they become relatively more expensive to customers in the local currency of a particular country, leading to a reduction in sales and profitability in that country. Future international activity may result in increased foreign currency denominated sales. Gains and losses on the conversion to United States dollars of accounts payable and other monetary assets and liabilities arising from international operations may contribute to fluctuations in our results of operations.

Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from laws in the United States, or may require that dispute resolution occur in a foreign country. As a result, our ability to enforce our rights under such agreements may be limited compared with our ability to enforce our rights under agreements governed by laws in the United States and adjudicated in the United States.

*Our foreign operations may subject us to risks relating to the U.S. Foreign Corrupt Practices Act, anti-bribery statutes and similar foreign regulations that may have a material adverse impact on our business, financial condition or results of operations.

Our international operations are also subject to laws regarding the conduct of business overseas, such as the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery regulations in foreign jurisdictions where we do business, such as China, India, Vietnam and in Europe. The FCPA prohibits the provision of illegal or improper inducements to foreign government officials in connection with obtaining or retaining business overseas or to secure an improper commercial advantage. The FCPA also requires us to keep accurate books and records of business transactions and maintain an adequate system of internal accounting controls. Violations of the FCPA, anti-bribery statutes or other similar laws by us, any of our foreign subsidiaries, or any of our or their employees, executive officers, distributors or other agents or intermediaries could subject us and the individuals involved to significant criminal or civil liability. In recent years, the Department of Justice and SEC have significantly stepped up their investigation and prosecution of alleged FCPA violations. Any such allegations of non-compliance with the FCPA, anti-bribery statutes or other similar laws could harm our reputation, divert management attention and result in significant expenses, and could therefore materially harm our business, financial condition or results of operations.

*Our portfolio of short-term investments is exposed to certain market risks.

We maintain an investment portfolio of various holdings, types of instruments and maturities. These securities are recorded on our consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of tax. Our investment portfolio is exposed to market risks related to changes in interest rates and credit ratings of the issuers, as well as to the risks of default by the issuers and lack of overall market liquidity. Substantially all of these securities are subject to interest rate and credit rating risk and will decline in value if interest rates increase or one of the issuers’ credit ratings is reduced. Increases in interest rates or decreases in the credit worthiness of one or more of the issuers in our investment portfolio could have a material adverse impact on our financial condition or results of operations. During the fiscal year ended March 31, 2010, we recorded $4.1 million in write-downs in the carrying value of certain securities as we determined the decline in the fair value of these securities to be other-than-temporary. If there is a further deterioration in market conditions or there are additional losses incurred, we may be required to record a further decline in the carrying value of these securities resulting in further charges. At September 30, 2012, the unrealized losses on these securities that were not written down as an other-than-temporary impairment charge were approximately $1.1 million, of which substantially the entire amount has been at an unrealized loss for greater than 12 months. If the fair value of any of these securities does not recover to at least the amortized cost of such security or we are unable to hold these securities until they recover, we may be required to record a decline in the carrying value of these securities.

Our markets are subject to rapid technological change, so our success depends heavily on our ability to develop and introduce new products.

The markets for our products are characterized by:

• rapidly changing technologies;

• evolving and competing industry standards;

• changing customer needs;

• frequent introductions of new products and enhancements;

• increased integration with other functions;

• long design and sales cycles;

• short product life cycles; and

• intense competition.

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To develop new products for the communications or other technology markets, we must develop, gain access to and use leading technologies in a cost-effective and timely manner and continue to develop technical and design expertise. We must have our products designed into our customers’ future products and maintain close working relationships with key customers in order to develop new products that meet customers’ changing needs. We must respond to changing industry standards, trends towards increased integration and other technological changes on a timely and cost-effective basis. Our pursuit of technological advances may require substantial time and expense and may ultimately prove unsuccessful. If we are not successful in adopting such advances, we may be unable to timely bring to market new products and our revenues will suffer.

Many of our products are based on industry standards that are continually evolving. Our ability to compete in the future will depend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by major systems manufacturers. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards or requirements, we could miss opportunities to achieve crucial design wins which in turn could have a material adverse effect on our business, operating results and financial condition.

*The markets in which we compete are highly competitive, and we expect competition to increase in these markets in the future.

The markets in which we compete are highly competitive, and we expect that domestic and international competition will increase in these markets, due in part to deregulation, rapid technological advances, price erosion, changing customer preferences and evolving industry standards. Increased competition could result in significant price competition, reduced revenues, lower profit margins or loss of market share. Our ability to compete successfully in our markets depends on a number of factors, including:

• our ability to partner with OEM and channel partners who are successful in the market;

• success in designing and subcontracting the manufacture of new products that implement new technologies;

• product quality, interoperability, reliability, performance and certification;

• our ability to attract and retain key engineering, operations, sales and marketing employees and management;

• customer support;

• time-to-market;

• price;

• production efficiency;

• design wins;

• expansion of production of our products for particular systems manufacturers;

• end-user acceptance of the systems manufacturers’ products;

• market acceptance of competitors’ products; and

• general economic conditions.

Our competitors may offer enhancements to existing products, or offer new products based on new technologies, industry standards or customer requirements that are available to customers on a more timely basis than comparable products from us or that have the potential to replace or provide lower cost alternatives to our products. The introduction of enhancements or new products by our competitors could render our existing and future products obsolete or unmarketable. We expect that certain of our competitors and other semiconductor companies may seek to develop and introduce products that integrate the functions performed by our IC products on a single chip, thus eliminating the need for our products. Each of these factors could have a material adverse effect on our business, financial condition and results of operations.

In the transport communications IC markets, we compete primarily against companies such as Broadcom, Cortina, PMC-Sierra and Vitesse. In the embedded processor communications IC market, we compete with technology companies such as Freescale Semiconductor, Cavium and Intel. Most of these companies may have substantially greater financial, marketing and distribution resources than we have. Certain of our customers or potential customers have internal IC design or manufacturing capabilities with which we compete. We may also face competition from new entrants to our target markets, including larger technology companies that may develop or acquire differentiating technology and then apply their resources to our detriment. Any failure by us to compete successfully in these target markets would have a material adverse effect on our business, financial condition and results of operations.

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Our operating results depend on manufacturing output and yields of our ICs and printed circuit board assemblies, which may not meet expectations.

The yields on wafers we have manufactured decline whenever a substantial percentage of wafers must be rejected or a significant number of die on each wafer are nonfunctional. Such declines can be caused by many factors, including minute levels of contaminants in the manufacturing environment, design issues, defects in masks used to print circuits on a wafer and difficulties in the fabrication process. Design iterations and process changes by our suppliers can cause a risk of defects. Many of these problems are difficult to diagnose, are time consuming and expensive to remedy and can result in shipment delays.

We estimate yields per wafer and final packaged parts in order to estimate the value of inventory. If yields are materially different than projected, work-in-process inventory may need to be re-valued. We may have to take inventory write-downs as a result of decreases in manufacturing yields. We may suffer periodic yield problems in connection with new or existing products or in connection with the commencement of production using a new design geometry or at a new manufacturing facility.

*We must develop or otherwise gain access to improved IC process technologies.

Our future success will depend upon our ability to access new IC process technologies at competitive pricing from our foundry partners. In the future, we will be required to transition one or more of our IC products to process technologies with smaller geometries, other materials or higher speeds in order to reduce costs or improve product performance. We may not be able to gain access to new process technologies in a timely or affordable manner or products based on these new technologies may not achieve market acceptance.

The complexity of our products may lead to errors, defects and bugs, which could negatively impact our reputation with customers and result in liability.

Products as complex as ours may contain errors, defects and bugs when first introduced or as new versions are released. Our products have in the past experienced such errors, defects and bugs. Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or hinder market acceptance of the products or result in a costly recall and could damage our reputation and adversely affect our ability to retain existing customers and attract new customers. Errors, defects or bugs could cause problems with device functionality, resulting in interruptions, delays or cessation of sales to our customers.

We may also be required to make significant expenditures of capital and resources to resolve such problems. We cannot assure you that problems will not be found in new products after commencement of commercial production, despite testing by us, our suppliers or our customers. Any such problems could result in:

• additional development costs;

• loss of, or delays in, market acceptance;

• diversion of technical and other resources from our other development efforts;

• claims by our customers or others against us; and

• loss of credibility with our current and prospective customers.

Any such event could have a material adverse effect on our business, financial condition and results of operations.

Regulatory authorities in jurisdictions into which we ship out products could levy fines or restrict our ability to export products.

A significant majority of our sales are made outside of the U.S. through the exporting and re-exporting of products. In addition to local jurisdictions’ export regulations, our U.S.-manufactured products and products based on U.S. technology are subject to U.S. laws and regulations governing international trade and exports. These laws and regulations include, but not limited to, the Foreign Corrupt Practices Act, the Export Administration Regulations (“EAR”), and trade sanctions against embargoed countries and destinations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”). Licenses or proper license exceptions are required for the shipment of our products to certain countries as well as for the transfer of certain information and technology to certain foreign countries, foreign nationals or other prohibited persons within the United States or abroad. A determination by the U.S. or local government that we have failed to comply with these or other export or anti-bribery regulations can result in penalties which may include denial of export privileges, fines, civil and criminal penalties and seizure of products. Such penalties could have a material adverse effect on our business, including our ability to meet our sales and earnings forecasts. Further, a change in these laws and regulations could restrict our ability to export to previously permitted countries, customers, distributors or other third parties. Any one or more of these sanctions or a change in laws or regulations could have a material adverse effect on our business, financial condition and results of operations.

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Potential U.S. tax legislation regarding our foreign earnings could materially and adversely impact our business and financial results.

Currently, a majority of our revenue is generated from customers located outside the U.S. and a substantial portion of our employees are located outside the U.S. Present U.S. income taxes and foreign withholding taxes have not been provided on undistributed earnings for our non–U.S. subsidiaries, because such earning are intended to be indefinitely reinvested in the operations of those subsidiaries.

If our internal control over financial reporting is not considered effective, our business and stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal control over financial reporting in our annual report on Form 10-K for that fiscal year. Section 404 also requires our independent registered public accounting firm to attest to and report on the effectiveness of our internal control over financial reporting.

Our management, including our chief executive officer and chief financial officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of control must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal control can provide absolute assurance that all control issues and instances of fraud involving a company have been, or will be, detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our internal control over financial reporting may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management has concluded, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of March 31, 2012. We cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal control over financial reporting in the future. A material weakness in our internal control over financial reporting would require management and our independent registered public accounting firm to report our internal control over financial reporting as ineffective. If our internal control over financial reporting is not considered effective, we may experience a restatement like we have in the past of our financial statements and/or a loss of public confidence, either of which could have an adverse effect on our business and on the market price of our common stock.

*Our future success depends in part on the continued service of our key senior management, design engineering, sales, marketing, and manufacturing personnel, our ability to identify, hire and retain additional, qualified personnel and successful succession planning.

Our future success depends to a significant extent upon the continued service of our senior management and engineering personnel and successful succession planning. The loss of key senior executives or engineers could have a material adverse effect on our business. There is intense competition for qualified personnel in the semiconductor industry, in particular design, product and test engineers. We may not be able to continue to attract and retain engineers or other qualified personnel necessary for the development of our business, or to replace engineers or other qualified personnel who may leave our employment in the future.

We also face the risks associated with our former employees assisting their new employers to recruit our key talent, in violation of their contractual non-solicitation and confidentiality covenants to us. For example, in December 2010 we commenced a lawsuit in the California Superior Court in Santa Clara County against two former AppliedMicro employees — one of whom was a former Company officer — and their new employer for causes of action including, among other things, breach of the employees’ contractual employee non-solicitation covenants to us in connection with their efforts to recruit key AppliedMicro engineers to leave AppliedMicro and to join their new company. In August 2011, following the results of our discovery in that action, we amended our complaint to add the CEO of the new employer as an additional defendant and additional causes of action, including breach of fiduciary duty and new breach of contract and contract interference claims. In September 2012, we further amended the complaint to add the acquiror of the employer as a defendant and additional causes of action. In such action, for which trial will likely be scheduled to commence in March 2013, we are seeking damages, including exemplary and punitive damages, injunctive relief and costs of suit. In addition, while we encourage our employees to abide by all contractual and legal obligations owed to their former employers, there can be no assurance that we will not be the target of allegations made by other companies that we have, directly or indirectly, unlawfully solicited their employees to join us. There are significant costs associated with recruiting, hiring and retaining personnel, as well as significant actual and potential losses to our business arising from the delays in or cancellation of technology development, product completion and roll-out, customer design wins and product orders, and sales revenues caused by the departure of key engineering resources.

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To manage our operations effectively, we will be required to continue to improve our operational, financial and management systems and to successfully hire, train, motivate, and manage our employees. Also, the integration of future business acquisitions would require significant additional management, technical and administrative resources. We cannot guarantee that we would be able to manage our expanded operations effectively.

Periods of contraction in our business may also inhibit our ability to attract and retain our personnel. As we respond to declining revenues and/or implement additional cost improvement measures such as reductions in force, our remaining key employees may lose confidence in the future performance of the Company and decide to leave. Loss of the services of, or failure to recruit, key design engineers or other technical and management personnel could be significantly detrimental to our product development or other aspects of our business.

Our ability to supply a sufficient number of products to meet demand could be severely hampered by a shortage of water, electricity or other supplies or by natural disasters or other catastrophes or by the effects of war, acts of terrorism or global threats.

The manufacture of our products requires significant amounts of water. Previous droughts have resulted in restrictions being placed on water use by manufacturers. In the event of a future drought, reductions in water use may be mandated generally and our external foundries’ ability to manufacture our products could be impaired.

Several of our facilities, including our principal executive offices, are located in California. California has experienced prolonged energy alerts and blackouts caused by disruption in energy supplies. As a consequence, businesses and other energy consumers in California continue to experience substantially increased costs of electricity and natural gas. We are unsure whether energy alerts and blackouts will reoccur or how severe they may become in the future. Many of our customers and suppliers are also headquartered or have substantial operations in California. If we or any of our major customers or suppliers located in California experience a sustained disruption in energy supplies, our results of operations could be materially and adversely affected.

A significant portion of our manufacturing operations are located in Asia. These areas are subject to natural disasters such as earthquakes or floods, like Japan and Thailand. We do not have earthquake insurance for these facilities, because adequate coverage is not offered at economically justifiable rates. A significant natural disaster or other catastrophic event could have a material adverse impact on our business, financial condition and operating results.

The effects of war, acts of terrorism or global threats, including, but not limited to, the outbreak of epidemic disease, could have a material adverse effect on our business, operating results and financial condition. The continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions to local and global economies and create further uncertainties. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders, or the manufacture or shipment of our products, our business, operating results and financial condition could be materially and adversely affected.

*We could incur substantial fines or litigation costs associated with our storage, use and disposal of hazardous materials.

We are subject to a variety of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our manufacturing process. Any failure to comply with present or future regulations could result in the imposition of fines, the suspension of production or a cessation of operations. These regulations could require us to acquire costly equipment or incur other significant expenses to comply with environmental regulations or clean up prior discharges.

Since 1993, we have been named as a potentially responsible party (“PRP”) along with more than 100 other companies that used Omega Chemical Corporation waste treatment facility in Whittier, California (the “Omega Site”). The U.S. Environmental Protection Agency (“EPA”) has alleged that the Omega Site failed to properly treat and dispose of certain hazardous waste material. We are a member of a large group of PRPs that has agreed to fund certain on-going remediation efforts at the Omega Site and with respect to the regional groundwater allegedly contaminated thereby.

In 2007, the PRPs were sued by a chemical company located downstream from the Omega Site, seeking a judicial determination that the Omega PRPs are responsible for some or all of the plaintiff’s potential liability to clean up groundwater contamination beneath Plaintiff’s site; that action has been stayed since March 2008 to allow for further delineation of the regional groundwater. In September 2011, EPA issued an interim remedial action proposal, designed to arrest the further spread of groundwater contamination; in the next few months EPA is expected to notify the PRPs with requests to implement the interim remedial action. In 2010, a toxic tort litigation was commenced against Omega and the PRP group by individuals alleging injuries caused by the Omega Site; that litigation was settled and dismissed with prejudice in September 2012.

50

Based on currently available information, we have a loss accrual for the Omega site that is not material and we believe that the actual amount of costs and liabilities will not be materially different from the amount accrued. However, proceedings are ongoing and the eventual outcome of the clean-up efforts and the pending litigation matter is uncertain at this time. Based on currently available information, we do not believe that any eventual outcome will have a material adverse effect on our operations but we cannot guarantee this result. In 2009, the U.S. Supreme Court decided U.S. v. Burlington Northern & Santa Fe Railway Co., 129 S.Ct. 1870, which determined that hazardous substance cleanup liability need not be joint and several in all cases. As a result of this decision, the liability is potentially divisible among the PRPs at an earlier stage in superfund cases such as Omega. At this time we do not know and cannot predict the full impact of this decision on our liability.

In November 2011, a significant member of the PRP group withdrew from the group. In January 2012, as a result of the PRP group’s modification of its allocation formulae and group member withdrawal, our proportional allocation of responsibility among the PRPs for the current remediation space increased. Any future increases to our proportional allocation of responsibility among the PRPs or the future reduction of parties participating in the PRP group due to additional member withdrawals could materially increase our potential liability relating to the Omega Site. Although we believe that we have been and currently are in material compliance with applicable environmental laws and regulations, we cannot guarantee that we are or will be in material compliance with these laws or regulations or that our future obligations to fund any remediation efforts, including those at the Omega Site, or expenses and potential liabilities relating to the pending litigation matter, will not have a material adverse effect on our business and financial condition.

*Customer demands and new regulations related to conflict-free minerals may force us to incur additional expenses.

In August 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted new requirements for companies that use certain minerals and derivative metals (referred to as “conflict minerals,” regardless of their actual country of origin) in their products. These new requirements will require companies to investigate, disclose and report whether or not such metals originated from the Democratic Republic of Congo or adjoining countries. In October 2012, the National Association of Manufacturers and the U.S. Chamber of commerce filed a petition for review in the U.S. Court of Appeals for the District of Columbia in response to a piece of Dodd-Frank regulation that requires public companies to source materials in their products where the sale of these minerals fuel humanitarian violence. The outcome of this suit is uncertain and may impact the adoption of these new requirements.

In the semiconductor industry, these minerals are most commonly found in metals. As there may be only a limited number of suppliers offering “conflict free” metals, we cannot be sure that we will be able to obtain necessary metals in sufficient quantities or at competitive prices. Also, since our supply chain is complex and some suppliers will not share their confidential supplier information, we may face challenges with our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are “conflict free.” Some customers may choose to disqualify us as a supplier and we may have to write off inventory in the event that it becomes unsalable as a result of these regulations.

Environmental laws and regulations could cause a disruption in our business and operations.

We are subject to various state, federal and international laws and regulations governing the environment, including those restricting the presence of certain substances in electronic products and making manufacturers of those products financially responsible for the collection, treatment, recycling and disposal of certain products. Such laws and regulations have been passed in several jurisdictions in which we operate, including various European Union (“EU”) member countries. For example, the EU has enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) and the Waste Electrical and Electronic Equipment (“WEEE”) directives. RoHS prohibits the use of lead and other substances in semiconductors and other products put on the market after July 1, 2006. The WEEE directive obligates parties that place electrical and electronic equipment on the market in the EU to put a clearly identifiable mark on the equipment, register with and report to EU member countries regarding distribution of the equipment, and provide a mechanism to take back and properly dispose of the equipment. There can be no assurance that similar programs will not be implemented in other jurisdictions resulting in additional costs, possible delays in delivering products, and even the discontinuance of existing and planned future product replacements if the cost were to become prohibitive.

We may not be able to protect our intellectual property adequately.

We rely in part on patents to protect our IP. We cannot assure you that our pending patent applications or any future applications will be approved, or that any issued patents will adequately protect the IP in our products and processes, will provide us with competitive advantages or will not be challenged by third parties or that if challenged, any such patents will be found to be valid or enforceable. Others may independently develop similar products or processes, duplicate our products or processes or design around any patents we currently hold or that may be issued to us.

51

To protect our IP, we also rely on the combination of mask work protection under the Federal Semiconductor Chip Protection Act of 1984, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements, and licensing arrangements. Despite these efforts, we cannot assure you that others will not independently develop substantially equivalent IP or otherwise gain access to our trade secrets or IP, or disclose such IP or trade secrets, or that we can meaningfully protect our IP. A failure by us to meaningfully protect our IP could have a material adverse effect on our business, financial condition and operating results.

We generally enter into confidentiality agreements with our employees, consultants, suppliers, customers and strategic partners. We also try to control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. Also, former employees may seek employment with our business partners, customers or competitors and we cannot assure you that the confidential nature of our proprietary information will be maintained in the course of such future employment. Additionally, former employees or third parties could attempt to penetrate our network to misappropriate our proprietary information or interrupt our business. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques. As a result, our technologies and processes may be misappropriated, particularly in foreign countries where laws may not protect our proprietary rights as fully as in the United States.

*We could be harmed by litigation involving patents, proprietary rights or other claims.

Litigation may be necessary to enforce our IP rights, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or misappropriation. The semiconductor industry is characterized by substantial litigation regarding patent and other IP rights. Currently the Company is not a named defendant in any IP infringement lawsuits. Nevertheless, as our products and IP become instantiated in more and more customer products and applications, and as patent infringement litigation brought by our competitors, non-practicing entities (also known as “NPEs” or “patent trolls”) and patent-licensing companies is on the rise, we are at an increased risk of being named as a defendant in such litigation. Due in part to the factors described above, the Company has been or currently is subject to the following:

• having information about our products and technologies subpoenaed in patent litigation between other third parties;

• demands that we enter into expensive licenses of third party patent portfolios in order to avoid being named as a defendant in future IP infringement suits; and

• claims demanding that we indemnify or reimburse customers or end users of our products with respect to their potential liability, including without limitation defense costs, arising from third party IP infringement claims brought against them.

Such claims, demands and litigation could result in substantial costs and diversion of resources, including the attention of our management and technical personnel, and could have a material adverse effect on our business, financial condition and results of operations.

We may be accused of infringing on or misappropriating the IP rights of third parties. In addition, we have contractual indemnification obligations to some of our customers, and other customers or end users may assert we have duties to indemnify them, with respect to claims that our products infringe third-party IP rights. For example, in connection with the patent infringement lawsuit previously brought by Broadcom Corporation against Emulex Corporation in the United States District Court in the Central District of California, Emulex has demanded that several of its components suppliers, including AppliedMicro, indemnify Emulex from and against certain legal expenses and other potential liabilities arising from the lawsuit. Although we are a supplier of components used by Emulex in certain products accused in the Broadcom litigation, we do not currently believe we have any obligations under the terms of our existing supply agreement with Emulex to indemnify it with respect to the Broadcom litigation. Notwithstanding the foregoing, there can be no assurance that IP infringement or misappropriation claims by third parties, or additional claims for indemnification by customers or end users resulting from infringement claims against them, will not be asserted in the future, or that any such existing or future assertions will not harm our business.

In addition, in the past, AppliedMicro has sold to third parties, including NPEs, groups of patents previously issued to or acquired by us that we deemed to be no longer essential to our core product lines and technologies. Such NPEs have on at least two occasions brought legal action asserting infringement of the acquired patents against various defendants, including customers or potential customers of AppliedMicro. Although the AppliedMicro and all of our Company’s customers are licensed under such acquired patents with respect to all products sold by us, nevertheless certain customers, against whom the NPEs have asserted infringement of the acquired patents for products that include those internally developed by the customer or acquired by third-party suppliers other than us, have reacted adversely to AppliedMicro based on our initial sale of the acquired patents to the NPEs. Such adverse reactions have included, among other things, demands that we reimburse the customer for expenses incurred in defending against or settling the legal action, as well as threats to reduce or discontinue the customer’s current or future business with the

52

AppliedMicro. There can be no assurance that any such expense reimbursement payments or other financial consideration extended to such affected customers or any actual reduction or discontinuance of product sales to such affected customers would not adversely affect our business, financial condition or operating results.

Any litigation relating to the IP rights of third parties would at a minimum be costly and could divert the efforts and attention of our management and technical personnel. In the event of any adverse ruling in any such litigation, we could be required to pay substantial damages, cease the manufacturing, use and sale of infringing products, discontinue the use of certain processes or obtain a license under the IP rights of the third party claiming infringement. A license might not be available on reasonable, economic and other terms or at all. From time to time, we may be involved in litigation relating to other claims arising out of our operations in the normal course of business. The ultimate outcome of any such litigation matters could have a material, adverse effect on our business, financial condition or operating results.

Our stock price is volatile.

The market price of our common stock has fluctuated significantly. In the future, the market price of our common stock could be subject to significant fluctuations due to general economic and market conditions and in response to quarter-to-quarter variations in:

• our anticipated or actual operating results;

• announcements or introductions of new products by us or our competitors;

• anticipated or actual operating results of our customers, peers or competitors;

• technological innovations or setbacks by us or our competitors;

• conditions in the semiconductor, communications or information technology markets;

• the commencement or outcome of litigation or governmental investigations;

• changes in ratings and estimates of our performance by securities analysts;

• announcements of merger or acquisition transactions;

• management changes;

• our inclusion in certain stock indices; and

• other events or factors.

The stock market in recent years has experienced extreme price and volume fluctuations that have affected the market prices of many high technology companies, particularly semiconductor companies. In some instances, these fluctuations appear to have been unrelated or disproportionate to the operating performance of the affected companies. Whether or not our stock is part of one or more Index funds could have a significant impact on our stock. We cannot assure you that our stock will be part of any Index fund. In addition, the current decline of the financial markets and related factors beyond our control, including the credit and mortgage crisis in both the U.S. and worldwide, may cause our stock price to decline rapidly and unexpectedly.

Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Provisions in our certificate of incorporation, as amended, and our bylaws, as amended and restated, may have the effect of delaying or preventing a change of control or changes in our directors and management. These provisions include the following:

• the ability of the board of directors to issue up to 2.0 million shares of “blank check” preferred stock with terms designed to prevent or delay a takeover attempt, as described further below;

• the prohibition of cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

• the requirement for advance notice for nominations of directors for election to the board or for proposing matters that can be acted upon at a stockholders’ meeting;

• the ability of the board of directors to alter our bylaws without obtaining stockholder approval;

• the requirement that any stockholder derivative actions and certain other intra-corporate disputes be litigated solely and exclusively in Delaware state court:

• the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors: and

• the prohibition of the right of stockholders to call a special meeting of stockholders.

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Our board of directors has the authority to issue up to 2.0 million shares of preferred stock and to determine the price, rights, preferences and privileges and restrictions, including voting rights, of those shares without any further vote or action by our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control, as the terms of the preferred stock that might be issued could potentially prohibit our consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or other extraordinary corporate transaction without the approval of the holders of the outstanding shares of preferred stock. The issuance of preferred stock could have a dilutive effect on our stockholders.

Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law. These provisions may prohibit, restrict or significantly delay large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us.

Although we believe these provisions in our charter and bylaws and under Delaware law collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In any event, these provisions may delay or prevent a third party from acquiring us. Any such delay or prevention could cause the market price of our common stock to decline.

If we issue additional shares of stock in the future, it may have a dilutive effect on our stockholders.

We have a significant number of authorized and unissued shares of our common stock available. These shares will provide us with the flexibility to issue our common stock for proper corporate purposes, which may include making acquisitions (including without limitation, our proposed acquisition of Veloce) through the use of stock, adopting additional equity incentive plans and raising equity capital. Any issuance of our common stock may result in immediate dilution of our stockholders.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Period	Total Number of Shares Purchased (in thousands)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced  Plans or Programs (in thousands)		Maximum Amount that May Yet Be Purchased Under the Plans or Programs (in thousands)
April 1 — May 30, 2012		—		—		—	$	16,525
May 1 — May 31, 2012		126	$	5.18		126		15,872
June 1 — June 30, 2012		—		—		—		15,872
Total shares repurchased		126	$	5.18		126

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

3.1(1)	Amended and Restated Certificate of Incorporation of the Company.
3.2(2)	Amended and Restated Bylaws of the Company.
3.3(3)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
4.1(4)	Specimen Stock Certificate.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit 3.2 filed with the Company’s Registration Statement (No. 333-37609) filed October 10, 1997, and as amended by Exhibit 3.3 filed with the Company’s Registration Statement (No. 333-45660) filed September 12, 2000 and Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on December 11, 2007.

(2) Incorporated by reference to identically numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

(3) Incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on December 11, 2007.

(4) Incorporated by reference to identically numbered exhibit filed with the Company’s Registration Statement (No. 333-37609) filed October 10, 1997, or with any amendments thereto, which registration statement became effective November 24, 1997.

55

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.

Date: November 1, 2012

APPLIED MICRO CIRCUITS CORPORATION
By:	/S/    ROBERT G. GARGUS
	Robert G. Gargus
	Senior Vice President and Chief Financial Officer
	(Duly Authorized Signatory and Principal Financial and Accounting Officer)

56

Exhibit Index

3.1(1)	Amended and Restated Certificate of Incorporation of the Company.
3.2(2)	Amended and Restated Bylaws of the Company.
3.3(3)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
4.1(4)	Specimen Stock Certificate.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit 3.2 filed with the Company’s Registration Statement (No. 333-37609) filed October 10, 1997, and as amended by Exhibit 3.3 filed with the Company’s Registration Statement (No. 333-45660) filed September 12, 2000 and Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on December 11, 2007.

(2) Incorporated by reference to identically numbered exhibit filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

(3) Incorporated by reference to Exhibit 3.1 filed with the Company’s Current Report on Form 8-K filed on December 11, 2007.

(4) Incorporated by reference to identically numbered exhibit filed with the Company’s Registration Statement (No. 333-37609) filed October 10, 1997, or with any amendments thereto, which registration statement became effective November 24, 1997.

57

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. Paramesh Gopi, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Micro Circuits Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Paramesh Gopi

Dr. Paramesh Gopi

President and Chief Executive Officer

Date: November 1, 2012

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert G. Gargus, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Micro Circuits Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ ROBERT G. GARGUS

Robert G. Gargus,

Senior Vice President and Chief Financial Officer

Dated: November 1, 2012

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Dr. Paramesh Gopi, Chief Executive Officer of Applied Micro Circuits Corporation (the “Company”), hereby certifies that, to the best of his knowledge:

1. This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request.

This certification accompanies the Report to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

/s/ Paramesh Gopi

Dr. Paramesh Gopi

President and Chief Executive Officer

Dated: November 1, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Robert G. Gargus, Chief Financial Officer of Applied Micro Circuits Corporation (the “Company”), hereby certifies that, to the best of his knowledge:

1. This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request.

This certification accompanies the Report to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

/s/ ROBERT G. GARGUS

Robert G. Gargus,

Senior Vice President and Chief Financial Officer

Dated: November 1, 2012

XML

Stockholders' Equity (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	1 Months Ended	6 Months Ended
	Aug. 31, 2004	Sep. 30, 2012
Summary of Repurchase Program Activity
Stock repurchase program, Authorized amount	$ 200,000	$ 300,000
Total repurchases, Aggregate Price		284,128
Available for repurchase, Aggregate Price		15,872
Total repurchases, Repurchased Shares		27,273
Total repurchases, Average Price Per Share	$ 10.04	$ 10.42
Open market repurchases [Member]
Summary of Repurchase Program Activity
Total repurchases, Aggregate Price		173,611
Total repurchases, Repurchased Shares		17,284
Total repurchases, Average Price Per Share		$ 10.04
Structured stock repurchase agreements [Member]
Summary of Repurchase Program Activity
Total repurchases, Aggregate Price		$ 110,517
Total repurchases, Repurchased Shares		9,989
Total repurchases, Average Price Per Share		$ 11.06

XML

Contingencies (Details) (USD $)	1 Months Ended													6 Months Ended
	Sep. 30, 2012	Jan. 31, 2012	Mar. 31, 2011	Nov. 30, 2010	Oct. 30, 2010	Sep. 30, 2010	Sep. 30, 2009	Aug. 31, 2009	Jan. 31, 2009 Amendments	Mar. 31, 2008	Nov. 30, 2007	Sep. 30, 2006	Feb. 28, 2001	Sep. 30, 2012 Company	Apr. 30, 2011
Contingencies (Textual) [Abstract]
Aggregate contribution allocation for the defense and settlement	$ 19,000
Percent of contribution to the total waste		0.50%
Reimbursement seeking for contract damages from Xtera			1,000,000
Reimbursement seeking by Xtera for development and royalties previously paid by TPack															$ 1,700,000
Lawsuit filed period				November 2010			September 2009	August 2009			November 2007
Amendments approved to consent decree									2
Business Acquisition Period						2010-09
Company known along with other companies														100
Consent Decree Approved by US District Court													2001-02
Court Approved Two Amendments to the Consent Decree									2009-01
Loss contingency law suit stay granted date										2008-03
Contract Entered Period												2006-09
Case Dismissed by Court					2010-10
Action Was Resumed In March 2011			2011-03

XML

Stock-Based Compensation (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 7,632	$ 3,095	$ 15,240	$ 7,270
Stock-based compensation expensed from inventory	2	29	83	32
Total stock-based compensation expense	7,634	3,124	15,323	7,302
Cost of Revenues [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	175	69	355	177
Research and Development [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	3,714	1,726	7,919	4,114
Selling, General and Administrative [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 3,743	$ 1,300	$ 6,966	$ 2,979

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Certain Financial Statement Information (Details 14) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Interest Income, Net
Interest income	$ 568	$ 1,127	$ 1,230	$ 2,089
Net realized gain on short-term investments	177	342	1,194	661
Interest income, net	$ 745	$ 1,469	$ 2,424	$ 2,750

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Certain Financial Statement Information (Details 6) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Schedule of estimated future amortization expense of purchased intangible assets
2013 (remaining)	$ 2,033
2014	3,906
2015	3,621
2016	3,086
2017 and thereafter	1,378
Total	14,024
Cost of Sales [Member]
Schedule of estimated future amortization expense of purchased intangible assets
2013 (remaining)	1,358
2014	2,717
2015	2,717
2016	2,717
2017 and thereafter	1,378
Total	10,887
Operating Expenses [Member]
Schedule of estimated future amortization expense of purchased intangible assets
2013 (remaining)	675
2014	1,189
2015	904
2016	369
Total	$ 3,137

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Stockholders' Equity (Details 3)	6 Months Ended
	Sep. 30, 2012	May 15, 2006
Schedule of Restricted Stock Unit Activity
Restricted Stock Units Outstanding Number of Shares, Outstanding at the beginning of the year	9,244,000	0
Restricted Stock Units Awarded	522,000
Restricted Stock Units Vested	(327,000)
Restricted Stock Units Cancelled	(797,000)
Restricted Stock Units Outstanding Number of Shares, Outstanding at the end of the period	8,642,000	0

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Restructuring Charges (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Sep. 30, 2011	Sep. 30, 2011
Restructuring Charges (Textual) [Abstract]
Restructuring charges	$ (40)	$ 873
April 2011 Restructuring Program [Member]
Restructuring Charges (Textual) [Abstract]
Number of positions eliminated or relocated under restructuring program	25	25
April 2011 Restructuring Program [Member] | Employee Severances [Member]
Restructuring Charges (Textual) [Abstract]
Restructuring charges	$ 900	$ 900

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Stock-Based Compensation (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Stock Based Compensation (Textual) [Abstract]
Weighted average grant-date fair value per share of the restricted stock units awarded	$ 5.75	$ 5.86	$ 5.52	$ 9.87
Unearned stock-based compensation	$ 15,800,000		$ 15,800,000
Weighted-average period over which the unearned stock-based compensation is expected to be recognized, years			1 year 3 months 18 days
Stock-based compensation expense excluding acceleration of Veloce warrants	7,634,000	3,124,000	15,323,000	7,302,000
Stock-based compensation expense related to the acceleration of Veloce warrants			$ 1,289,000
Minimum [Member]
Stock Based Compensation (Textual) [Abstract]
Estimated forfeiture rate used in determining the amount of stock-based compensation			6.80%
Maximum [Member]
Stock Based Compensation (Textual) [Abstract]
Estimated forfeiture rate used in determining the amount of stock-based compensation			6.60%

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Restructuring Charges

6 Months Ended

Sep. 30, 2012

Restructuring Charges [Abstract]

RESTRUCTURING CHARGES

3. RESTRUCTURING CHARGES

The Company recognizes restructuring costs associated with exit or disposal activities. Cost relating to facilities closure or lease commitments are recognized when the facility has been exited. Termination costs are recognized when the cost are deemed both probable and estimable. The Company did not implement any restructuring programs during the three and six months ended September 30, 2012. The restructuring activity for the three and six months ended September 30, 2011 is described below.

April 2011 Restructuring Program

The April 2011 restructuring program was implemented as part of the Company’s ongoing cost reduction efforts and to better align its global operations to achieve greater efficiencies. The Company moved more of its functions offshore, which would allow it to be closer and more connected to its customer’s third party subcontract manufacturers. The April 2011 restructuring plan included eliminating or relocating 25 positions. As a result of the April 2011 restructuring program, the Company recorded a charge of $0.9 million for employee severances.

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Stockholders' Equity (Details Textual) (USD $)	1 Months Ended			6 Months Ended			6 Months Ended					1 Months Ended	6 Months Ended		1 Months Ended	6 Months Ended		1 Months Ended							1 Months Ended			6 Months Ended	1 Months Ended								6 Months Ended						1 Months Ended
	May 31, 2012	Oct. 31, 2008	Aug. 31, 2004	Sep. 30, 2012 Approved_Plan	Mar. 31, 2012	May 15, 2006	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Employee Stock Purchase Plan [Member]	Sep. 30, 2011 Employee Stock Purchase Plan [Member]	Aug. 30, 2010 Employee Stock Purchase Plan [Member]	Aug. 31, 2012 Employee Stock Purchase Plan [Member] Two Thousand Twelve Plan [Member]	Sep. 30, 2012 Employee Stock Purchase Plan [Member] All Previous Stock Plans [Member]	Sep. 30, 2012 1992 Stock Option Plan [Member]	Aug. 31, 2004 Stock Repurchase Program - Open Market [Member]	Sep. 30, 2012 Stock Repurchase Program - Open Market [Member]	Sep. 30, 2011 Stock Repurchase Program - Open Market [Member]	May 31, 2009 First Milestone - From Fiscal 2010 To 2013 [Member]	May 31, 2009 Second Milestone - From Fiscal 2010 To 2013 [Member]	May 31, 2009 Second Milestone - Fiscal 2014 [Member]	May 31, 2009 Third Milestone - Fiscal 2013 [Member]	May 31, 2009 Third Milestone - Fiscal 2010 To 2012 [Member]	Sep. 30, 2012 Common Stock Subject to Repurchase [Member]	Mar. 31, 2012 Common Stock Subject to Repurchase [Member]	May 31, 2012 Restricted Stock Units [Member]	Feb. 29, 2012 Restricted Stock Units [Member]	May 31, 2006 Restricted Stock Units [Member]	Sep. 30, 2012 Restricted Stock Units [Member]	Nov. 30, 2011 Restricted Stock Units [Member] Minimum [Member]	Nov. 30, 2011 Restricted Stock Units [Member] Maximum [Member]	May 31, 2012 Performance-Based RSU [Member]	Feb. 29, 2012 Performance-Based RSU [Member]	Nov. 30, 2011 Performance-Based RSU [Member]	Apr. 30, 2011 Performance-Based RSU [Member]	May 31, 2009 Performance-Based RSU [Member]	Aug. 31, 2004 Structured stock repurchase agreements [Member]	Sep. 30, 2012 Structured stock repurchase agreements [Member]	Sep. 30, 2011 Structured stock repurchase agreements [Member]	Sep. 30, 2012 Settlement of Structured Stock Repurchase Agreement [Member]	Sep. 30, 2012 Company's 2011 Equity Incentive Plan [Member] Minimum [Member]	Apr. 30, 2011 Company's 2011 Equity Incentive Plan [Member] Minimum [Member]	Sep. 30, 2012 Company's 2011 Equity Incentive Plan [Member] Maximum [Member]	Feb. 29, 2012 Chief Executive Officer [Member]	May 31, 2009 Chief Executive Officer [Member]	May 17, 2009 Veloce Technologies, Inc. [Member]
Stockholders Equity [Line Items]
Gain recorded to additional paid-in-capital																																					$ 12,800,000
Adjusted average price per share for repurchases																																					$ 9.78
Total repurchases, price per share, adjusted from gains settlements in cash				$ 9.97
Preferred stock authorized for issuance				2,000,000	2,000,000
Common stock, shares authorized				375,000,000	375,000,000
Common stock, shares issued				65,317,000	61,879,000
Common stock, shares outstanding				65,317,000	61,879,000
Common stock reserved for issuance									4,800,000		6,300,000
Common stock, shares issued, employee stock purchase plan									400,000	400,000		1,800,000	6,600,000
Percentage of purchase price of common stock equal to fair market value									85.00%
Shares available for future issuance									1,800,000																															0	4,200,000	10,900,000
Stock repurchase program, authorized amount			200,000,000	300,000,000
Increase in the amount authorized for stock purchase program		100,000,000
Stock repurchase program, shares repurchased				27,273,000											17,300,000	100,000	3,500,000																				9,989,000
Open market repurchased shares				100,000
Open market repurchased shares average cost per share				$ 5.18
Stock repurchase program, weighted average price per share			$ 10.04	$ 10.42												$ 5.18	$ 5.98																				$ 11.06
Structured stock repurchase agreement, amount																																				277,500,000		10,000,000
Structured stock repurchase agreement, shares received																																						1,000,000	10,000,000
Structured stock repurchase agreements, effective purchase price per share																																						$ 9.74	$ 9.78
Cash received from shares settled under structured stock agreements																																							179,800,000
Number of stockholder-approved plans				2
Number of plans unapproved by stockholders				4
Awards granted				40,000										0												500,000																		300,000
Options expiration period, in years				10 years
Vesting and exercisable rate of new hire grants, percentage				25.00%
Value of stock options awarded																																											3,700,000	1,100,000
Shares expected to vest				3,133,000														75,000	75,000		150,000
Annual target revenue																		270,000,000	310,000,000	350,000,000
Percentage of annual operating margin required for vesting of shares under milestone																					13.50%	15.00%
Shares outstanding				3,938,000	4,164,000																		0	0
Weighted average remaining contractual term for options outstanding				3 years 9 months 18 days
Weighted average remaining contractual term for options vested				3 years 9 months 18 days
Aggregate pretax intrinsic value of options exercised				11,000
Aggregate pre-tax intrinsic value of options outstanding and exercisable				10,000
Vesting and exercisable rate of new hire grants, grant date							36 months	48 months
Aggregate pre-tax intrinsic value of options outstanding
Common stock, closing price per share				$ 5.06																								$ 5.06
Number of shares vested				8,642,000	9,244,000	0
Term of award																															12-month	18-month	18-month	three-year	three-year
Vesting of restricted stock units first tranch	67.00%
Vesting of restricted stock units second tranch	33.00%
Weighted average remaining contractual term for the restricted stock units outstanding, in years				1 year 3 months 22 days
Aggregate pre-tax intrinsic value of restricted stock units outstanding which includes performance based awards which are subject to milestone attainments				43,700,000
Aggregate pre-tax intrinsic value of RSUs released				1,800,000
Number of years of development work to be performed																																													5 years
Stock-based compensation expense related to the acceleration of Veloce warrants				1,289,000
Outstanding Structured Stock Repurchase Agreement				$ 15,872,000
Vesting period, in years																									1 year		4 years	4 years	1 year	18 months

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Certain Financial Statement Information (Details 10) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	$ 89,687	$ 113,846
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis	89,687	113,846
Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis	57,915	72,243
Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis	31,772	41,603
Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis
Cash [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis	9,902	15,057
Cash [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis	9,902	15,057
Cash [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Cash [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
Cash equivalents [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis	2,090	13,008
Cash equivalents [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis	2,090	10,510
Cash equivalents [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis		2,498
Cash equivalents [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
U.S Treasury securities and agency bonds [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	17,555	16,763
U.S Treasury securities and agency bonds [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	17,555	16,763
U.S Treasury securities and agency bonds [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
U.S Treasury securities and agency bonds [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Corporate bonds [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	20,574	23,407
Corporate bonds [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Corporate bonds [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	20,574	23,407
Corporate bonds [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Mortgage-backed and asset-backed securities [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	4,314	7,611
Mortgage-backed and asset-backed securities [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Mortgage-backed and asset-backed securities [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	4,314	7,611
Mortgage-backed and asset-backed securities [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Closed-end bond funds [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	28,368	29,913
Closed-end bond funds [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	28,368	29,913
Closed-end bond funds [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	0
Closed-end bond funds [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Preferred stock [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	6,884	8,087
Preferred stock [Member] | Level 1 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash and cash equivalents measured at fair value on a recurring basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis
Preferred stock [Member] | Level 2 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis	6,884	8,087
Preferred stock [Member] | Level 3 [Member]
Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis
Cash cash equivalents and short term investments, measured at fair value on a recurring basis

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Certain Financial Statement Information (Details 9) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012		Sep. 30, 2011	Mar. 31, 2011
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	$ 82,535	$ 108,115
Available-for-sale investments, Gross Unrealized Gains	8,282	7,470
Available-for-sale investments, Gross Unrealized Losses	1,130	1,739
Cash cash equivalents and short term investments, Estimated Fair Value	89,687	113,846
Cash and cash equivalents	11,992	28,065	[1]	51,783	84,402
Short-term investments available-for-sale	77,695	85,781	[1]
Cash [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash and cash Equivalents, Estimated Fair Value	9,902	15,057
Cash, cash equivalents and short- term investments, Amortized Cost	9,902	15,057
Available-for-sale investments, Gross Unrealized Gains
Available-for-sale investments, Gross Unrealized Losses
Cash equivalents [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash and cash Equivalents, Estimated Fair Value	2,090	13,008
Cash, cash equivalents and short- term investments, Amortized Cost	2,090	13,008
Available-for-sale investments, Gross Unrealized Gains
Available-for-sale investments, Gross Unrealized Losses
U.S Treasury securities and agency bonds [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	17,533	16,771
Available-for-sale investments, Gross Unrealized Gains	23	11
Available-for-sale investments, Gross Unrealized Losses	1	19
Cash cash equivalents and short term investments, Estimated Fair Value	17,555	16,763
Corporate bonds [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	20,485	23,361
Available-for-sale investments, Gross Unrealized Gains	95	56
Available-for-sale investments, Gross Unrealized Losses	6	10
Cash cash equivalents and short term investments, Estimated Fair Value	20,574	23,407
Mortgage-backed and asset-backed securities [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	3,942	7,308
Available-for-sale investments, Gross Unrealized Gains	398	364
Available-for-sale investments, Gross Unrealized Losses	26	61
Cash cash equivalents and short term investments, Estimated Fair Value	4,314	7,611
Closed-end bond funds [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	23,705	26,401
Available-for-sale investments, Gross Unrealized Gains	5,760	5,161
Available-for-sale investments, Gross Unrealized Losses	1,097	1,649
Cash cash equivalents and short term investments, Estimated Fair Value	28,368	29,913
Preferred stock [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, cash equivalents and short- term investments, Amortized Cost	4,878	6,209
Available-for-sale investments, Gross Unrealized Gains	2,006	1,878
Available-for-sale investments, Gross Unrealized Losses
Cash cash equivalents and short term investments, Estimated Fair Value	$ 6,884	$ 8,087

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Stock-Based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Employee Stock Options [Member]
Schedule of Weighted-Average Assumptions Used to Estimate the Fair Value of Stock Options
Expected life (years)			4 years 6 months	3 years 9 months 18 days
Risk-free interest rate			0.70%	1.40%
Volatility			54.00%	48.00%
Dividend yield			0.00%	0.00%
Weighted average fair value			$ 2.47	$ 3.83
Employee Stock Purchase Plans [Member]
Schedule of Weighted-Average Assumptions Used to Estimate the Fair Value of Stock Options
Expected life (years)	6 months	6 months	6 months	6 months
Risk-free interest rate	0.20%	0.20%	0.20%	0.20%
Volatility	50.00%	55.00%	50.00%	55.00%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Weighted average fair value	$ 1.50	$ 1.92	$ 1.50	$ 1.92

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Certain Financial Statement Information (Details 11) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of cost and estimated fair values of available-for-sale securities with stated maturities by contractual maturity
Less than 1 year, Cost	$ 16,038	$ 16,683
Mature in 1 - 2 years, Cost	24,201	26,869
Mature in 3 - 5 years, Cost	484	2,421
Mature after 5 years, Cost	1,237	1,467
Cost, Total	41,960	47,440
Less than 1 year, Fair Value	16,190	16,722
Mature in 1 - 2 years, Fair Value	24,284	27,026
Mature in 3 - 5 years, Fair Value	522	2,496
Mature after 5 years, Fair Value	1,447	1,537
Fair Value, Total	$ 42,443	$ 47,781

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Certain Financial Statement Information (Details 12) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	$ 4,077	$ 15,295
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	12	49
12 Months or More of Unrealized Losses, Estimated Fair Value	7,660	6,981
12 Months or More of Unrealized Losses, Gross Unrealized Losses	1,118	1,690
Total, Estimated Fair Value	11,737	22,276
Total, Gross Unrealized Losses	1,130	1,739
U.S Treasury securities and agency bonds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	2,456	8,938
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses		19
12 Months or More of Unrealized Losses, Estimated Fair Value
12 Months or More of Unrealized Losses, Gross Unrealized Losses
Total, Estimated Fair Value	2,456	8,938
Total, Gross Unrealized Losses		19
Corporate bonds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	898	5,463
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	4	10
12 Months or More of Unrealized Losses, Estimated Fair Value	248
12 Months or More of Unrealized Losses, Gross Unrealized Losses	2
Total, Estimated Fair Value	1,146	5,463
Total, Gross Unrealized Losses	6	10
Mortgage-backed and asset-backed securities [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	723	894
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	8	20
12 Months or More of Unrealized Losses, Estimated Fair Value	232	353
12 Months or More of Unrealized Losses, Gross Unrealized Losses	18	42
Total, Estimated Fair Value	955	1,247
Total, Gross Unrealized Losses	26	62
Closed-end bond funds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses
12 Months or More of Unrealized Losses, Estimated Fair Value	7,180	6,628
12 Months or More of Unrealized Losses, Gross Unrealized Losses	1,098	1,648
Total, Estimated Fair Value	7,180	6,628
Total, Gross Unrealized Losses	$ 1,098	$ 1,648

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Certain Financial Statement Information

6 Months Ended

Sep. 30, 2012

Certain Financial Statement Information [Abstract]

CERTAIN FINANCIAL STATEMENT INFORMATION

2. CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	September 30, 2012			March 31, 2012
	(In thousands)
Accounts receivable	$	15,211		$	23,765
Less: allowance for bad debts		(936	)		(1,099	)
	$	14,275		$	22,666

Inventories:

	September 30, 2012		March 31, 2012
	(In thousands)
Finished goods	$	14,436	$	17,883
Work in process		3,338		3,818
Raw materials		663		1,543
	$	18,437	$	23,244

Other current assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Prepaid expenses	$	21,388	$	20,353
Executive deferred compensation assets		1,362		1,344
Deposits		897		899
Proceeds receivable on sale of strategic investment		—		7,100
Other		2,803		1,409
	$	26,450	$	31,105

Property and equipment:

	Useful Life		September 30, 2012			March 31, 2012
	(In years)		(In thousands)
Machinery and equipment		5-7	$	36,732		$	36,600
Leasehold improvements		1-15		17,405			14,228
Computers, office furniture and equipment		3-7		43,031			43,929
Buildings		31.5		2,756			2,756
Land		—		9,800			9,800
				109,724			107,313
Less: accumulated depreciation and amortization				(71,866	)		(69,213	)
			$	37,858		$	38,100

Goodwill and purchased intangibles:

Goodwill is as follows:

	(In thousands)
Goodwill related to TPack acquisition, as of September 30, 2012 and March 31 2012	$	13,183

Purchase-related intangibles were as follows:

	September 30, 2012									March 31, 2012
	Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life		Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life
	(In thousands)							(In years)		(In thousands)							(In years)
Developed technology/in-process research and development	$	441,300	$	(430,413	)	$	10,887		4.0	$	441,300	$	(429,054	)	$	12,246		4.6
Customer relationships		12,830		(9,982	)		2,848		2.8		12,830		(8,881	)		3,949		2.9
Patents/core technology rights/tradename		63,206		(62,917	)		289		1.0		63,206		(62,767	)		439		1.5
	$	517,336	$	(503,312	)	$	14,024			$	517,336	$	(500,702	)	$	16,634

As of September 30, 2012, the estimated future amortization expense of purchased intangible assets to be charged to cost of sales and operating expenses was as follows (in thousands):

	Cost of Sales		Operating Expenses		Total
Fiscal Years Ending March 31,
2013 (remaining)	$	1,358	$	675	$	2,033
2014		2,717		1,189		3,906
2015		2,717		904		3,621
2016		2,717		369		3,086
2017 and thereafter		1,378		—		1,378
Total	$	10,887	$	3,137	$	14,024

Other assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Non-current portion of prepaid expenses	$	5,769	$	4,193
Strategic investments		5,250		4,750
Other		—		1,331
	$	11,019	$	10,274

Other accrued liabilities:

	September 30, 2012		March 31, 2012
	(In thousands)
Customer deposits*	$	75	$	415
Employee related liabilities		2,333		2,051
Executive deferred compensation		1,362		1,344
Income taxes		1,428		1,401
Professional fees		1,278		961
Contingent consideration		—		618
Other		1,730		2,262
	$	8,206	$	9,052

* Includes credit balances in Accounts Receivable that have been reclassified as Other Accrued Liabilities

Strategic Investments

The Company has entered into certain equity investments in privately held businesses to achieve certain strategic business objectives. The Company’s investments in equity securities of privately held businesses are accounted for under the cost method. Under the cost method, strategic investments in which the Company holds less than a 20% voting interest and on which the Company does not have the ability to exercise significant influence are carried at the lower of cost or cost reduced by other-than-temporary impairments, as appropriate. These investments are included in other assets on the Company’s condensed consolidated balance sheets. The Company periodically reviews these investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments when an other-than-temporary decline has occurred. During the six months ended September 30, 2012 and 2011, the Company invested $0.5 million and $2.5 million, respectively, in non-marketable equity investments and these amounts were carried at cost.

Short-term investments:

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments (in thousands):

	September 30, 2012								March 31, 2012
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		13,008		—		—		13,008
U.S. Treasury securities and agency bonds		17,533		23		1		17,555		16,771		11		19		16,763
Corporate bonds		20,485		95		6		20,574		23,361		56		10		23,407
Mortgage-backed and asset-backed securities*		3,942		398		26		4,314		7,308		364		61		7,611
Closed-end bond funds		23,705		5,760		1,097		28,368		26,401		5,161		1,649		29,913
Preferred stock		4,878		2,006		—		6,884		6,209		1,878		—		8,087
	$	82,535	$	8,282	$	1,130	$	89,687	$	108,115	$	7,470	$	1,739	$	113,846
Reported as:
Cash and cash equivalents							$	11,992							$	28,065
Short-term investments available-for-sale								77,695								85,781
							$	89,687							$	113,846

* At September 30, 2012 and March 31, 2012, approximately $2.0 million and $4.6 million of the estimated fair value presented were mortgage-backed securities, respectively.

The established guidelines for measuring fair value and expanded disclosures regarding fair value measurements are defined as a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 —	Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 —	Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 —	Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments measured at fair value on a recurring basis (in thousands):

	September 30, 2012								March 31, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		10,510		2,498		—		13,008
U.S. Treasury securities and agency bonds		17,555		—		—		17,555		16,763		—		—		16,763
Corporate bonds		—		20,574		—		20,574		—		23,407		—		23,407
Mortgage-backed and asset-backed securities		—		4,314		—		4,314		—		7,611		—		7,611
Closed-end bond funds		28,368		—		—		28,368		29,913		—		—		29,913
Preferred stock		—		6,884		—		6,884		—		8,087		—		8,087
	$	57,915	$	31,772	$	—	$	89,687	$	72,243	$	41,603	$	—	$	113,846

There were no significant transfers in and out of Level 1 and Level 2 fair value measurements during the three and six months ended September 30, 2012.

The Company periodically reviews its strategic investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments when an other-than-temporary decline has occurred. No other-than-temporary declines were recorded during the three months ended September 30, 2012. During the three and six months ended September 30, 2012, the Company invested zero and $0.5 million in a non-marketable equity investment and this amount was carried at cost.

The following is a summary of the cost and estimated fair values of available-for-sale securities with stated maturities, which include U.S. Treasury securities and agency bonds, corporate bonds and mortgage-backed and asset-backed securities, by contractual maturity (in thousands):

	September 30, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	16,038	$	16,190	$	16,683	$	16,722
Mature in 1 – 2 years		24,201		24,284		26,869		27,026
Mature in 3 – 5 years		484		522		2,421		2,496
Mature after 5 years		1,237		1,447		1,467		1,537
	$	41,960	$	42,443	$	47,440	$	47,781

The following is a summary of gross unrealized losses (in thousands):

	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of September 30, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	2,456	$	—	$	—	$	—	$	2,456	$	—
Corporate bonds		898		4		248		2		1,146		6
Mortgage-backed and asset-backed securities		723		8		232		18		955		26
Closed-end bond funds		—		—		7,180		1,098		7,180		1,098
	$	4,077	$	12	$	7,660	$	1,118	$	11,737	$	1,130
	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of March 31, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	8,938	$	19	$	—	$	—	$	8,938	$	19
Corporate bonds		5,463		10		—		—		5,463		10
Mortgage-backed and asset-backed securities		894		20		353		42		1,247		62
Closed-end bond funds		—		—		6,628		1,648		6,628		1,648
	$	15,295	$	49	$	6,981	$	1,690	$	22,276	$	1,739

Other-Than-Temporary Impairment

Based on an evaluation of securities that have been in a loss position, the Company did not recognize any other-than-temporary impairment charges, for the three and six months ended September 30, 2012 and 2011. The Company considered various factors which included a credit and liquidity assessment of the underlying securities and the Company’s intent and ability to hold the underlying securities until its estimated recovery of amortized cost. As of September 30, 2012 and March 31, 2012, the Company also had $8.3 million and $7.5 million in gross unrealized gains, respectively. The basis for computing realized gains or losses is by specific identification.

Warranty reserves

The Company’s products typically carry a one year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, use of materials and service delivery costs incurred in correcting any product failure. Should actual product failure rates, use of materials or service delivery costs differ from the Company’s estimates, additional warranty reserves could be required, which could reduce its gross margin.

The following table summarizes warranty reserve activity (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Beginning balance	$	447		$	197		$	454		$	176
Charged to costs of revenues		85			99			215			305
Charges incurred		(162	)		(52	)		(299	)		(237	)
Ending balance	$	370		$	244		$	370		$	244

Interest income, net (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Interest income	$	568	$	1,127	$	1,230	$	2,089
Net realized gain on short-term investments		177		342		1,194		661
	$	745	$	1,469	$	2,424	$	2,750

Other income, net (in thousands):

	Three Months Ended September 30,					Six Months Ended September 30,
	2012			2011		2012			2011
Net loss on disposals of property	$	(3	)	$	—	$	(10	)	$	(10	)
Other, net		93			48		183			133
	$	90		$	48	$	173		$	123

Net loss per share:

Shares used in basic net loss per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net loss per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of restricted stock units (“RSUs”) and outstanding warrants. However, potentially issuable common shares are not used in computing diluted net loss per share as their effect would be anti-dilutive due to the loss recorded during the periods presented. The reconciliation of shares used to calculate basic and diluted net loss per share consists of the following (in thousands, except per share data):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic		64,947			62,526			63,678			63,202
Net effect of dilutive common share equivalents		—			—			—			—
Weighted average common shares outstanding, diluted		64,947			62,526			63,678			63,202
Basic and diluted net loss per share	$	(0.33	)	$	(0.02	)	$	(0.71	)	$	(0.13	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 10.2 million and 10.3 million equivalent shares for the three and six months ended September 30, 2012, respectively, and 9.9 million and 7.8 million shares for the three and six months ended September 2011, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company has incurred losses in the periods presented.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 0.5 million and 0.4 million equivalent shares for the three and six months ended September 30, 2012, respectively, and 0.1 million and 0.6 million shares for the three and six months ended September 2011, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company has incurred losses in the periods presented.

Total equivalent shares excluded from the net loss per share computation are 10.7 million each for the three and six months ended September 30, 2012, respectively, and 10.0 million and 8.4 million shares for three and six months ended September 30, 2011, respectively.

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Certain Financial Statement Information (Details 13) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Warranty Reserve Activity
Beginning balance	$ 447	$ 197	$ 454	$ 176
Charged to costs of revenues	85	99	215	305
Charges incurred	(162)	(52)	(299)	(237)
Ending balance	$ 370	$ 244	$ 370	$ 244

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Stockholders' Equity (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Sep. 30, 2012
Schedule of Option Activity Under Stock Incentive Plans
Number of Shares, Outstanding at the beginning of the year	4,164
Number of Shares, Granted	40
Number of Shares, Exercised	(14)
Number of Shares, Forfeited	(252)
Number of Shares, Outstanding at the end of the period	3,938
Vested and expected to vest at the end of the period	3,910
Number of Shares, Vested at the end of the period	3,133
Weighted Average Exercise Price Per Share, Outstanding at the beginning of the year	$ 10.67
Weighted Average Exercise Price Per Share, Granted	$ 5.58
Weighted Average Exercise Price Per Share, Exercised	$ 5.14
Weighted Average Exercise Price Per Share, Forfeited	$ 18.68
Weighted Average Exercise Price Per Share, Outstanding at the end of the period	$ 10.13
Weighted Average Exercise Price Per Share, Vested and expected to vest at the end of the period	$ 10.14
Weighted Average Exercise Price Per Share, Vested at the end of the period	$ 10.42

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Current assets:
Cash and cash equivalents	$ 11,992	$ 28,065	[1]
Short-term investments-available-for-sale	77,695	85,781	[1]
Accounts receivable, net	14,275	22,666	[1]
Inventories	18,437	23,244	[1]
Other current assets	26,450	31,105	[1]
Total current assets	148,849	190,861	[1]
Property and equipment, net	37,858	38,100	[1]
Goodwill	13,183	13,183	[1]
Purchased intangibles	14,024	16,634	[1]
Other assets	11,019	10,274	[1]
Total assets	224,933	269,052	[1]
Current liabilities:
Accounts payable	14,095	21,383	[1]
Accrued payroll and related expenses	7,106	6,844	[1]
Veloce accrued liability	17,450	32,870	[1]
Other accrued liabilities	8,206	9,052	[1]
Deferred revenue	1,219	2,137	[1]
Total current liabilities	48,076	72,286	[1]
Veloce accrued liability	17,894	27,530	[1]
Commitments and contingencies (Note 7)			[1]
Stockholders' equity:
Preferred stock, $0.01 par value: Authorized shares - 2,000, none issued and outstanding			[1]
Common stock, $0.01 par value: Authorized shares - 375,000 at September 30, 2012 and March 31, 2012 Issued and outstanding shares - 65,317 at September 30, 2012 and 61,879 at March 31, 2012	648	619	[1]
Additional paid-in capital	5,915,248	5,881,336	[1]
Accumulated other comprehensive loss	(1,032)	(1,765)	[1]
Accumulated deficit	(5,755,901)	(5,710,954)	[1]
Total stockholders' equity	158,963	169,236	[1]
Total liabilities and stockholders' equity	$ 224,933	$ 269,052	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Stock-Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 7,632	$ 3,095	$ 15,240	$ 7,270
Stock-based compensation expensed from inventory	2	29	83	32
Total stock-based compensation expense	7,634	3,124	15,323	7,302
Stock Options [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	601	992	2,089	2,561
Restricted Stock Units [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 7,031	$ 2,103	$ 13,151	$ 4,709

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Operating activities:
Net loss	$ (44,947)		$ (8,029)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	4,905		3,840
Amortization of purchased intangibles	2,609		4,096
Stock-based compensation expense:
Stock options	2,172		2,579
Restricted stock units	13,151		4,723
Warrants	1,289
Veloce accrued liability	4,650
Acquisition related adjustment	(133)		(2,267)
Net loss on disposals of property	3		10
Tax effect on other comprehensive income	(565)
Changes in operating assets and liabilities:
Accounts receivable	8,391		(8,086)
Inventories	4,807		7,834
Other assets	(2,735)		(7,159)
Accounts payable	(4,293)		(5,908)
Accrued payroll and other accrued liabilities	(1,819)		55
Veloce accrued liability	(14,814)
Deferred revenue	(918)		(560)
Net cash used for operating activities	(28,247)		(8,872)
Investing activities:
Proceeds from sales and maturities of short-term investments	24,868		87,746
Purchases of short-term investments	(15,361)		(67,735)
Purchase of property, equipment and other assets	(7,606)		(9,757)
Proceeds from sale of strategic equity investment	7,146
Purchases of strategic equity investment	(500)		(2,500)
Funding of note receivable			(1,000)
Net cash provided by investing activities	8,547		6,754
Financing activities:
Proceeds from issuance of common stock	5,359		2,952
Funding of restricted stock units withheld for taxes	(313)		(2,441)
Repurchase of common stock	(654)		(20,852)
Funding of structured stock repurchase agreements			(10,000)
Payment of contingent consideration	(485)
Other	(280)		(160)
Net cash provided by (used for) financing activities	3,627		(30,501)
Net decrease in cash and cash equivalents	(16,073)		(32,619)
Cash and cash equivalents at beginning of year	28,065	[1]	84,402
Cash and cash equivalents at end of year	11,992		51,783
Supplementary cash flow disclosures:
Income taxes	197		22
Shares issued for Veloce merger consideration	$ 14,842

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Certain Financial Statement Information (Details 16) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Reconciliation of Shares Used to Calculate Basic and Diluted Net (Loss) Income Per Share
Net loss	$ (21,557)	$ (1,152)	$ (44,947)	$ (8,029)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	64,947	62,526	63,678	63,202
Net effect of dilutive common share equivalents
Weighted average common shares outstanding, diluted	64,947	62,526	63,678	63,202
Basic and diluted net loss per share	$ (0.33)	$ (0.02)	$ (0.71)	$ (0.13)

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Certain Financial Statement Information (Details 3) (USD $) In Thousands, unless otherwise specified				6 Months Ended
	Sep. 30, 2012	Mar. 31, 2012		Sep. 30, 2012 Machinery and Equipment [Member] Minimum [Member]	Sep. 30, 2012 Machinery and Equipment [Member] Maximum [Member]	Sep. 30, 2012 Leasehold Improvements [Member] Minimum [Member]	Sep. 30, 2012 Leasehold Improvements [Member] Maximum [Member]	Sep. 30, 2012 Computers, Office Furniture and Equipment [Member] Minimum [Member]	Sep. 30, 2012 Computers, Office Furniture and Equipment [Member] Maximum [Member]	Sep. 30, 2012 Buildings [Member]
Schedule of Property and equipment
Useful Life				5 years	7 years	1 year	15 years	3 years	7 years	31 years 6 months
Machinery and equipment	$ 36,732	$ 36,600
Leasehold improvements	17,405	14,228
Computers, office furniture and equipment	43,031	43,929
Buildings	2,756	2,756
Land	9,800	9,800
Property and equipment, gross	109,724	107,313
Less: accumulated depreciation and amortization	(71,866)	(69,213)
Property and equipment, total	$ 37,858	$ 38,100	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Certain Financial Statement Information (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
Certain Financial Statement Information (Textual) [Abstract]
Non-marketable equity investment	$ 0.5	$ 2.5	$ 0.5	$ 2.5
Anti-dilutive securities that have been excluded from the net (loss) income per share computation	10.7	10.0	10.7	8.4
Certain Financial Statement Information (Additional Textual) [Abstract]
Percentage of voting interest	20.00%		20.00%
Estimated fair value presented were mortgage-backed securities	2.0		2.0		4.6
Gross unrealized gains			8.3		7.5
Products warranty period in years			1 year
Significant transfers in and out of Level 1 and Level 2 fair value measurements	0		0
Significant transfers in and out of Level 1 and Level 2 fair value measurements description			There were no significant transfers in and out of Level 1 and Level 2 fair value measurements during the three and six months ended September 30, 2012.
Recognized other-than-temporary impairment charges	0	0	0	0
Options and Restricted Stock Units [Member]
Certain Financial Statement Information (Textual) [Abstract]
Effect of dilutive securities that have been excluded from the net loss per share computation	0.5	0.1	0.4	0.6
Anti-dilutive securities that have been excluded from the net (loss) income per share computation	10.2	9.9	10.3	7.8
Short-term Investments [Member]
Certain Financial Statement Information (Textual) [Abstract]
Non-marketable equity investment	$ 0		$ 0

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Certain Financial Statement Information (Details 5) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Sep. 30, 2012	Mar. 31, 2012
Schedule of Purchased Intangible assets
Gross	$ 517,336	$ 517,336
Accumulated Amortization and Impairments	(503,312)	(500,702)
Net	14,024	16,634
Developed technology/in-process research and development [Member]
Schedule of Purchased Intangible assets
Gross	441,300	441,300
Accumulated Amortization and Impairments	(430,413)	(429,054)
Net	10,887	12,246
Weighted average remaining useful life (In years)	4 years	4 years 7 months 6 days
Customer relationships [Member]
Schedule of Purchased Intangible assets
Gross	12,830	12,830
Accumulated Amortization and Impairments	(9,982)	(8,881)
Net	2,848	3,949
Weighted average remaining useful life (In years)	2 years 9 months 18 days	2 years 10 months 24 days
Patents/core technology rights/tradename [Member]
Schedule of Purchased Intangible assets
Gross	63,206	63,206
Accumulated Amortization and Impairments	(62,917)	(62,767)
Net	$ 289	$ 439
Weighted average remaining useful life (In years)	1 year	1 year 6 months

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Summary of Significant Accounting Policies

6 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include all the accounts of Applied Micro Circuits Corporation (“AMCC”, “APM”, “AppliedMicro” or the “Company”), and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods as a variable interest entity (“VIE”) since the Company was determined to be its primary beneficiary. On June 20, 2012, the Company completed the acquisition of Veloce which became a wholly owned subsidiary of the Company as of this date. See note 4 of Notes to Condensed Consolidated Financial Statements for further details of the acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management 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 net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to its capitalized mask sets including its useful lives, which affects cost of goods sold and property and equipment or R&D expenses, if not capitalized; inventory valuation, warranty liabilities, and revenue reserves, which affects cost of sales, gross margin, and revenues; allowance for doubtful accounts, which affects operating expenses; the unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net; the valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles and impairments of goodwill; the valuation of the Veloce consideration which affects operating expenses; the potential costs of litigation, which affects operating expenses; the valuation of deferred income taxes, which affects income tax expense (benefit); and stock-based compensation, which affects gross margin and operating expenses. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from management’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	375,000	375,000
Common stock, shares issued	65,317	61,879
Common stock, shares outstanding	65,317	61,879

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Stockholders' Equity (Tables)

6 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Summary of Repurchase Program Activity

The table below is a plan-to-date summary of the Company’s repurchase program activity as of September 30, 2012 (in thousands, except per share data):

	Aggregate Price		Repurchased Shares		Average Price Per Share
Stock repurchase program
Authorized amount	$	300,000		—	$	—
Open market repurchases		173,611		17,284		10.04
Structured stock repurchase agreements*		110,517		9,989		11.06
Total repurchases	$	284,128		27,273	$	10.42
Available for repurchase	$	15,872

* The amounts above do not include gains recorded to additional paid-in-capital of $12.8 million from structured stock repurchase agreements which settled in cash. The average price per share for structured stock repurchase agreements adjusted for gains from settlements in cash would have been $9.78 per share and for total repurchases would have been $9.97 per share.

Schedule of Option Activity Under Stock Incentive Plans

Option activity under the Company’s stock incentive plans during the six months ended September 30, 2012 is set forth below (in thousands, except per share data):

	Number of Shares			Weighted Average Exercise Price Per Share
Outstanding at the beginning of the year		4,164		$	10.67
Granted		40			5.58
Exercised		(14	)		5.14
Forfeited		(252	)		18.68
Outstanding at the end of the period		3,938		$	10.13
Vested and expected to vest at the end of the period		3,910		$	10.14
Vested at the end of the period		3,133		$	10.42

Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable

The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of September 30, 2012 were as follows (in thousands, except exercise prices and years):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$ 1.68 - $ 7.12		939		3.28	$	6.40		553	$	6.03
7.13 - 8.07		854		4.06		7.71		816		7.70
8.08 - 11.86		938		5.10		10.34		654		10.15
11.87 - 14.40		829		3.34		12.94		732		13.03
14.41 - 24.16		378		2.44		18.15		378		18.15
$ 1.68 - $24.16		3,938		3.82	$	10.13		3,133	$	10.42

Schedule of Restricted Stock Unit Activity

Restricted stock unit activity during the six months ended September 30, 2012 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year		9,244
Awarded		522
Vested		(327	)
Cancelled		(797	)
Outstanding at the end of the period		8,642

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Document and Entity Information	6 Months Ended
	Sep. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	APPLIED MICRO CIRCUITS CORP
Entity Central Index Key	0000711065
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	65,317,077

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Stock-Based Compensation (Tables)

6 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

Schedule of Weighted-Average Assumptions Used to Estimate the Fair Value of Stock Options

The fair value of the options granted is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following tables:

	Three Months Ended September 30,
	Employee Stock Purchase  Plans
	2012			2011
Expected life (years)		0.5			0.5
Risk-free interest rate		0.2	%		0.2	%
Volatility		50	%		55	%
Dividend yield		—	%		—	%
Weighted average fair value	$	1.50		$	1.92

The Company did not grant options during the three months ended September 30, 2012 and 2011.

	Six Months Ended September 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2012			2011			2012			2011
Expected life (years)		4.5			3.8			0.5			0.5
Risk-free interest rate		0.7	%		1.4	%		0.2	%		0.2	%
Volatility		54	%		48	%		50	%		55	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average fair value	$	2.47		$	3.83		$	1.50		$	1.92

Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units

The following table summarizes stock-based compensation expense related to stock options and restricted stock units (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by type of award
Stock options and warrants	$	601	$	992	$	2,089	$	2,561
Restricted stock units		7,031		2,103		13,151		4,709
Total stock-based compensation		7,632		3,095		15,240		7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

Summary of Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense as it relates to the Company’s statement of operations (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by cost centers
Cost of revenues	$	175	$	69	$	355	$	177
Research and development		3,714		1,726		7,919		4,114
Selling, general and administrative		3,743		1,300		6,966		2,979
Total stock-based compensation	$	7,632	$	3,095	$	15,240	$	7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Operations [Abstract]
Net revenues	$ 46,324	$ 64,929	$ 87,618	$ 125,773
Cost of revenues	20,561	27,704	38,916	54,035
Gross profit	25,763	37,225	48,702	71,738
Operating expenses:
Research and development	34,383	29,609	69,154	57,977
Selling, general and administrative	13,531	8,941	26,001	21,497
Amortization of purchased intangible assets	601	803	1,251	1,902
Restructuring (recoveries) charges, net		(40)		873
Total operating expenses	48,515	39,313	96,406	82,249
Operating loss	(22,752)	(2,088)	(47,704)	(10,511)
Interest income (expense), net	745	1,469	2,424	2,750
Other income (expense), net	90	48	173	123
Loss before income taxes	(21,917)	(571)	(45,107)	(7,638)
Income tax (benefit) expense	(360)	581	(160)	391
Net loss	$ (21,557)	$ (1,152)	$ (44,947)	$ (8,029)
Basic and diluted net loss per share	$ (0.33)	$ (0.02)	$ (0.71)	$ (0.13)
Shares used in calculating basic and diluted net loss per share	64,947	62,526	63,678	63,202

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Stock-Based Compensation

6 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION

The Company accounts for stock based compensation activity using the modified prospective method. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value stock-based compensation, excluding RSUs, which we use the fair market value of our common stock. The Black-Scholes model determines the fair value of share-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s stock price, volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Although the fair value of stock options granted by the Company is estimated by the Black-Scholes model, the estimated fair value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The fair value of the options granted is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following tables:

	Three Months Ended September 30,
	Employee Stock Purchase  Plans
	2012			2011
Expected life (years)		0.5			0.5
Risk-free interest rate		0.2	%		0.2	%
Volatility		50	%		55	%
Dividend yield		—	%		—	%
Weighted average fair value	$	1.50		$	1.92

The Company did not grant options during the three months ended September 30, 2012 and 2011.

	Six Months Ended September 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2012			2011			2012			2011
Expected life (years)		4.5			3.8			0.5			0.5
Risk-free interest rate		0.7	%		1.4	%		0.2	%		0.2	%
Volatility		54	%		48	%		50	%		55	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average fair value	$	2.47		$	3.83		$	1.50		$	1.92

The weighted average grant-date fair value per share of the restricted stock units awarded was $5.75 and $5.52 during the three and six months ended September 30, 2012, respectively, compared to $5.86 and $9.87 during the three and six months ended September 30, 2011, respectively. The weighted average fair value per share was calculated based on the fair market value of the Company’s common stock on the respective grant dates.

Effective April 1, 2012, the Company revised its estimated forfeiture rate used in determining the amount of stock-based compensation from 6.8% to 6.6% as a result of an decreasing rate of forfeitures in recent periods, which the Company believes is indicative of the rate it will experience during the remaining vesting period of currently outstanding unvested grants.

The following table summarizes stock-based compensation expense related to stock options and restricted stock units (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by type of award
Stock options and warrants	$	601	$	992	$	2,089	$	2,561
Restricted stock units		7,031		2,103		13,151		4,709
Total stock-based compensation		7,632		3,095		15,240		7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

The following table summarizes stock-based compensation expense as it relates to the Company’s statement of operations (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by cost centers
Cost of revenues	$	175	$	69	$	355	$	177
Research and development		3,714		1,726		7,919		4,114
Selling, general and administrative		3,743		1,300		6,966		2,979
Total stock-based compensation	$	7,632	$	3,095	$	15,240	$	7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

Stock-based compensation expense will continue to have a significant adverse impact on the Company’s reported results of operations, although it will have no impact on its overall financial position. The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2016 related to unvested share-based payment awards at September 30, 2012 is $15.8 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.3 years. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional equity awards or assumes unvested equity awards in connection with acquisitions.

The above stock based compensation expense of approximately $15.3 million for the six months ended September 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See note 5 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

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Stockholders' Equity

6 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

5. STOCKHOLDERS’ EQUITY

Preferred Stock

The Certificate of Incorporation allows for the issuance of up to two million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series of the designation of such series, without further vote or action by the stockholders.

Common Stock

At September 30, 2012, the Company had 375.0 million shares authorized for issuance and approximately 65.3 million shares issued and outstanding. At March 31, 2012, there were approximately 61.9 million shares issued and outstanding.

Employee Stock Purchase Plan

The Company had in effect the 1998 Employee Stock Purchase Plan (1998 Plan) under which 4.8 million shares of common stock was reserved for issuance. In August 2010, the Company’s stockholders approved the proposal to increase the number of shares reserved for issuance to 6.3 million shares. In August 2012, the Company’s stockholders approved the proposal to reserve an additional 1.8 million shares under the 2012 Employee Stock Purchase Plan (2012 Plan). Upon adoption of the 2012 Plan, the 1998 Plan was terminated. Under the terms of the 2012 Plan, purchases are made semiannually and the purchase price of the common stock is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the six months ended September 30, 2012 and 2011, 0.4 million shares for each of these periods were issued under the 1998 Plan. At September 30, 2012, 6.6 million shares had been issued under all previous stock plans and none were available for future issuance, and 1.8 million shares were available for issuance under the 2012 Plan.

Stock Repurchase Program

In August 2004, the Board authorized a stock repurchase program for the repurchase of up to $200.0 million of the Company’s common stock. Under the program, the Company is authorized to make purchases in the open market or enter into structured stock repurchase agreements. In October 2008, the Board increased the stock repurchase program by $100.0 million. During the six months ended September 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 per share. During the six months ended September 30, 2011, approximately 3.5 million shares were repurchased on the open market at a weighted average price of $5.98 per share. From the time the program was first implemented in August 2004, the Company has repurchased on the open market a total of 17.3 million shares at a weighted average price of $10.04 per share. All repurchased shares were retired upon delivery to the Company.

The Company also utilizes structured stock repurchase agreements to buy back shares which are prepaid written put options on its common stock. The Company pays a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a pre-determined amount of cash or stock depending on the closing market price of its common stock on the expiration date of the agreement. Upon expiration of each agreement, if the closing market price of its common stock is above the pre-determined price, the Company will have its cash investment returned with a premium. If the closing market price is at or below the pre-determined price, the Company will receive the number of shares specified at the agreement inception. The Company considered the guidance in ASC Topic 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and ASC Topic 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Any cash received, including the premium, is treated as additional paid-in capital on the balance sheet.

During the six months ended September 30, 2012, the Company did not enter into any structured stock repurchase agreements. During the six months ended September 30, 2011, the Company entered into structured stock repurchase agreements totaling $10.0 million for which it received 1.0 million in shares of its common stock at an effective purchase price of $9.74 per share from the settled structured stock repurchase agreements. At September 30, 2011, the Company had no outstanding structured stock repurchase agreements. From the inception of the Company’s most recent stock repurchase program in August 2004, it entered into structured stock repurchase agreements totaling $277.5 million. Upon settlement of these agreements, as of September 30, 2012, the Company received $179.8 million in cash and 10.0 million shares of its common stock at an effective purchase price of $9.78 per share.

The table below is a plan-to-date summary of the Company’s repurchase program activity as of September 30, 2012 (in thousands, except per share data):

	Aggregate Price		Repurchased Shares		Average Price Per Share
Stock repurchase program
Authorized amount	$	300,000		—	$	—
Open market repurchases		173,611		17,284		10.04
Structured stock repurchase agreements*		110,517		9,989		11.06
Total repurchases	$	284,128		27,273	$	10.42
Available for repurchase	$	15,872

* The amounts above do not include gains recorded to additional paid-in-capital of $12.8 million from structured stock repurchase agreements which settled in cash. The average price per share for structured stock repurchase agreements adjusted for gains from settlements in cash would have been $9.78 per share and for total repurchases would have been $9.97 per share.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These option plans include two stockholder-approved plans (the 1992 Stock Option Plan and 1997 Directors’ Stock Option Plan) and four plans not approved by stockholders (the 2000 Equity Incentive Plan, Cimaron Communications Corporation’s 1998 Stock Incentive Plan assumed in the fiscal 1999 merger, and JNI Corporation’s 1997 and 1999 Stock Option Plans assumed in the fiscal 2004 merger). Certain other outstanding options were assumed through the Company’s various acquisitions.

In April 2011, the Compensation Committee and the Board of Directors approved the Company’s 2011 Equity Incentive Plan (“2011 Plan”). The Company’s stockholders approved the 2011 Plan during its August 2011 annual meeting. The 2011 Plan serves as a successor to the 1992 Plan and no additional equity awards will be granted under the 1992 Plan. The total number of shares of common stock reserved for issuance under the 2011 Plan consists of 4.2 million shares plus up to 10.9 million shares subject to any stock awards under the 1992 Plan or the 2000 Plan that terminate or are forfeited or repurchased and would otherwise be returned to the share reserve under the 1992 Plan or the 2000 Plan, respectively.

The Board has delegated administration of the Company’s equity plans to the Compensation Committee, which generally determines eligibility, vesting schedules and other terms for awards granted under the plans. Options under the plans expire not more than ten years from the date of grant and are generally exercisable upon vesting. Vesting generally occurs over four years. New hire grants generally vest and become exercisable at the rate of 25% on the first anniversary of the date of grant and ratably on a monthly basis over a period of 36 months thereafter; subsequent option grants to existing employees generally vest and become exercisable ratably on a monthly basis over a period of 48 months measured from the date of grant.

In May 2009, Dr. Gopi, our CEO, was awarded 300,000 stock options for “Extraordinary Accomplishment.” The Black-Scholes value of these stock options is $1.1 million. These options will vest only if Company performance milestones are satisfied; otherwise they will expire unvested. The first milestone for 75,000 shares will vest only if we achieve an annual revenue target of $270 million or more for any fiscal year from fiscal 2010 through fiscal 2013. The next milestone for another 75,000 shares will vest only if we achieve an annual revenue target of $310 million or more for any fiscal year from fiscal 2010 through fiscal 2013 or an annual revenue target of $350 million or more for fiscal 2014. The last milestone for 150,000 shares will vest only if we achieve an annual operating margin of 13.5% of annual revenue or higher in fiscal 2013 or 15% or higher for any fiscal year from fiscal 2010 through fiscal 2012. The Company evaluates the probability of achieving the milestones and adjusts any stock option expense accordingly.

In February 2012, Dr. Gopi was awarded 500,000 restricted stock units. The Black-Scholes value of these stock options is $3.7 million. These options will vest only if the Company’s performance milestones relating to the Veloce merger are satisfied; otherwise they will expire unvested. The Company evaluates the probability of achieving the milestones and recognizes any stock option expense accordingly.

At September 30, 2012 and March 31, 2012, there were no shares of common stock subject to repurchase. Options are granted at prices at least equal to fair value of the Company’s common stock on the date of grant.

Option activity under the Company’s stock incentive plans during the six months ended September 30, 2012 is set forth below (in thousands, except per share data):

	Number of Shares			Weighted Average Exercise Price Per Share
Outstanding at the beginning of the year		4,164		$	10.67
Granted		40			5.58
Exercised		(14	)		5.14
Forfeited		(252	)		18.68
Outstanding at the end of the period		3,938		$	10.13
Vested and expected to vest at the end of the period		3,910		$	10.14
Vested at the end of the period		3,133		$	10.42

At September 30, 2012, the weighted average remaining contractual term for options outstanding and vested is 3.8 years each.

The aggregate pretax intrinsic value of options exercised during the six months ended September 30, 2012 was approximately $11,000. This intrinsic value represents the excess of the fair market value of the Company’s common stock on the date of exercise over the exercise price of such options.

The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of September 30, 2012 were as follows (in thousands, except exercise prices and years):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$ 1.68 - $ 7.12		939		3.28	$	6.40		553	$	6.03
7.13 - 8.07		854		4.06		7.71		816		7.70
8.08 - 11.86		938		5.10		10.34		654		10.15
11.87 - 14.40		829		3.34		12.94		732		13.03
14.41 - 24.16		378		2.44		18.15		378		18.15
$ 1.68 - $24.16		3,938		3.82	$	10.13		3,133	$	10.42

As of September 30, 2012, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $10,000 each. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) pursuant to its 1992 Plan, 2000 Equity Incentive Plan and 2011 Equity Incentive Plan as part of its regular annual employee equity compensation review program as well as to new hires. RSUs are share awards that, upon vesting, will deliver to the holder, shares of the Company’s common stock. Generally, RSUs vest ratably on a quarterly basis over four years from the date of grant. For employees hired after May 15, 2006, RSUs will vest on a quarterly basis over four years from the date of hire provided that no shares will vest during the first year of employment, at the end of which the shares that would have vested during that year will vest and the remaining shares will vest over the remaining 12 quarters.

In May 2009, the Company issued three-year performance-based RSU grants, or “EBITDA” Grants which were completed in fiscal 2012 and no additional grants will be made under this grant.

In April 2011, the Committee authorized additional three-year performance-based RSU grants, or “EBITDA2” Grants. EBITDA2 Grants are similar to the EBITDA Grant program introduced in 2009. The Company evaluates the probability of achieving the milestones and adjusts any RSU expense which is included in stock-based compensation expense. As of September 30, 2012, the Company believes that that it would be highly unlikely for any EBITDA2 shares to vest during the three-year life of the program. Fiscal 2012 was declared zero attainment and vesting target shares have rolled over to fiscal 2013. The Company expects that all shares issued under the EBITDA2 program will expire unvested when the program concludes in May 2014.

In November 2011 and February 2012, the Committee authorized additional 18-month performance-based RSU grants, or “Performance Retention Grants”, which are intended to incentivize superior performance and retain key employees. In May 2012, the Committee authorized 12-month Performance Retention Grants. Vesting for the Performance Retention Grants is subject to (i) the accomplishment of goals and objectives of the individual’s business unit and (ii) individual performance as measured by the accomplishment of individual goals and objectives. The 18-month RSU shares vest 2/3 after one year, with certain unearned amounts able to roll over to the subsequent vesting period, and 1/3 after 18 months. The 12-month RSU shares will have the opportunity to vest after one year. Unvested RSU shares remaining at the end of the program period will expire unvested. The Company evaluates the probability of achieving the goals and objectives and adjusts any RSU expense which is included in stock-based compensation expense.

Restricted stock unit activity during the six months ended September 30, 2012 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year		9,244
Awarded		522
Vested		(327	)
Cancelled		(797	)
Outstanding at the end of the period		8,642

The weighted average remaining contractual term for the restricted stock units outstanding as of September 30, 2012 was 1.31 years.

As of September 30, 2012, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $43.7 million which includes performance based awards which are subject to milestone attainments. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

The aggregate pretax intrinsic value of RSUs released during the three months ended September 30, 2012 was $1.8 million. This intrinsic value represents the fair market value of the Company’s common stock on the date of release.

Warrants

On May 17, 2009, the Company entered into a development agreement with Veloce pursuant to which Veloce agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company’s common stock (the “Warrant”). The Warrant vesting schedule was amended in conjunction with the amended development agreement on November 8, 2010. In connection with the Merger Agreement amendment entered into on April 5, 2012, the Company and Veloce further modified the Warrant by fully accelerating the vesting schedule resulting in the recognition of approximately $1.3 million of stock compensation expense during the quarter ended June 30, 2012. All vested shares were subsequently sold and the proceeds distributed, prior to the acquisition of Veloce by the Company on June 20, 2012.

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Certain Financial Statement Information (Details 4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Goodwill
Goodwill related to TPack acquisition, as of September 30, 2012 and March 31, 2012	$ 13,183	$ 13,183	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Certain Financial Statement Information (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Accounts receivable
Accounts receivable	$ 15,211	$ 23,765
Less: allowance for bad debts	(936)	(1,099)
Accounts receivable, net	$ 14,275	$ 22,666	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements include all the accounts of Applied Micro Circuits Corporation (“AMCC”, “APM”, “AppliedMicro” or the “Company”), and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods as a variable interest entity (“VIE”) since the Company was determined to be its primary beneficiary. On June 20, 2012, the Company completed the acquisition of Veloce which became a wholly owned subsidiary of the Company as of this date. See note 4 of Notes to Condensed Consolidated Financial Statements for further details of the acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management 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 net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to its capitalized mask sets including its useful lives, which affects cost of goods sold and property and equipment or R&D expenses, if not capitalized; inventory valuation, warranty liabilities, and revenue reserves, which affects cost of sales, gross margin, and revenues; allowance for doubtful accounts, which affects operating expenses; the unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net; the valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles and impairments of goodwill; the valuation of the Veloce consideration which affects operating expenses; the potential costs of litigation, which affects operating expenses; the valuation of deferred income taxes, which affects income tax expense (benefit); and stock-based compensation, which affects gross margin and operating expenses. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from management’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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Contingencies

6 Months Ended

Sep. 30, 2012

Contingencies [Abstract]

CONTINGENCIES

7. CONTINGENCIES

Legal Proceedings

In 1993, the Company was named as a Potentially Responsible Party (“PRP”) along with more than 100 other companies that used an Omega Chemical Corporation waste treatment facility in Whittier, California (the “Omega Site”). The U.S. Environmental Protection Agency (“EPA”) has alleged that Omega failed to properly treat and dispose of certain hazardous waste materials at the Omega Site. The Company is a member of a large group of PRPs, known as the Omega Chemical Site PRP Organized Group (“OPOG”) that has agreed to fund certain on-going remediation efforts at the Omega Site. In February 2001, the U.S. District Court for the Central District of California (the “Court”) approved a consent decree between EPA and OPOG to study contamination and evaluate cleanup options at the Omega Site (the Operable Unit 1 or “OU1”). In January 2009, the Court approved two amendments to the consent decree, the first expanding the scope of work to mitigate volatile organic compounds affecting indoor air quality near the Omega Site and the second adding settling parties to the consent decree. Removal of waste materials from the Omega Site has been completed. As part of OU1, efforts to remediate the soil and groundwater at the Omega Site, including without limitation the extraction of chemical vapors from the soil in and around the site, are underway and are expected to be ongoing for several years. In addition, OPOG and EPA are investigating a regional groundwater contamination plume allegedly originating at the Omega Site (the Operable Unit 2 or “OU2”). In September 2011, EPA issued an interim Record of Decision specifying the interim clean-up actions EPA has chosen for OU2, and in September 2012, it issued a special notice letter that triggered the commencement of good faith settlement negotiations with OPOG. It is anticipated that such settlement negotiations will result in EPA and OPOG entering into a remediation consent decree with the Court regarding OU2. In November 2007, Angeles Chemical Company, located downstream from the Omega Site, filed a lawsuit (the “Angeles Litigation”) in the Court against OPOG and the PRPs for cost recovery and indemnification for future response costs allegedly resulting from the regional groundwater contamination plume described above. In March 2008, the Court granted OPOG’s motion to stay the Angeles Litigation pending EPA’s determination of how to investigate and remediate the regional groundwater. In November 2010, a toxic tort litigation (the “Aguirre Litigation”) was commenced against Omega and OPOG in Los Angeles Superior Court by a group of employees of the Tri-Cities Regional Occupational Program located near the Omega Site. The plaintiffs claimed, among other things, negligence, unlawful discharge of pollutants and public nuisance, and seek monetary damages for a variety of alleged injuries. In September 2012, the parties reached a final settlement of the Aguirre Litigation and the court dismissed the action with prejudice. The Company’s aggregate contribution allocation for the defense and settlement of the action was approximately $19,000. In 2010, certain PRP’s challenged the criteria previously used to allocate liability among the PRP’s. In December 2011, an allocation committee established by OPOG to review those criteria recommended changes to the cost allocation structure that would, upon final approval, increase the Company’s overall share of liability within the PRP group. In addition, the recent departure of one or more PRPs from OPOG could have the effect of increasing the proportional liability of the remaining PRPs, including the Company. In January 2012, as a result of the allocation criteria modifications and PRP departure from OPOG described above, the Company’s proportional allocation of liability was increased. Although the Company considers a loss relating to the Omega Site probable, its share of any financial obligations for the remediation of the Omega Site, including taking into account the allocation increases described above, is not currently believed to be material to the Company’s financial statements, based on the Company’s approximately 0.5% contribution to the total waste tonnage sent to the site and current estimates of the potential remediation costs. Based on currently available information, the Company has a loss accrual that is not material and believes that the actual amount of its costs will not be materially different from the amount accrued. However, proceedings are ongoing and the eventual outcome of the clean-up efforts and the pending litigation matters is uncertain at this time. Based on currently available information, the Company does not believe that any eventual outcome will have a material adverse effect on its operations.

AppliedMicro TPack A/S, the Company’s wholly-owned subsidiary acquired in September 2010 (“TPack”), is involved in a contract dispute with Xtera Communications Inc. and its subsidiary Meriton Networks Canada Inc. (collectively, “Xtera”), regarding a software development and licensing agreement the parties entered into in September 2006. In August 2009, Xtera filed an action against TPack in the United States District Court for the Eastern Division of Texas, which was dismissed in October 2010 for lack of jurisdiction. In September 2009, TPack filed an action against Xtera in the Ontario Superior Court of Justice in Canada, which action was resumed in March 2011 following dismissal of the Texas action. In the Canadian action, TPack seeks contract damages from Xtera of approximately $1.0 million plus pre-judgment interest and expenses. In April 2011, Xtera filed a statement of defense and counter claim with the Ontario court, in which Xtera denies liability to TPack and seeks reimbursement of approximately $1.7 million in development fees and royalties previously paid to TPack, plus pre-judgment interest and expenses. Discovery in the legal proceedings is continuing. The Company does not currently anticipate that the TPack/Xtera legal proceedings will have a material adverse effect on the Company.

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Income Taxes

6 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

INCOME TAXES

8. INCOME TAXES

The total amount of unrecognized tax benefits as of July 1, 2012, was $43.3 million, including interest and penalties. The Company does not foresee significant changes to its estimated amount of liability associated with its uncertain tax positions within the next twelve months.

The Company’s income tax expense consists of state taxes and foreign taxes. The federal statutory income tax rate was 35% for the three and six months ended September 30, 2012 and 2011. The Company’s income tax benefit for the three and six months ended September 30, 2012 for the three and six month periods ended September 30, 2011 was $0.4 million and $0.2 million, respectively, as compared to income tax expense of $0.6 million and $0.4 million, respectively. The decrease in the income tax expense recorded for the six months ended September 30, 2012 compared to September 30, 2011, was primarily related to other comprehensive income. In applying the exception to the general principle of intra-period tax allocations under ASC 740-10, the Company considered income recognized in other comprehensive income. Accordingly, the allocation of the current year tax provision included recognizing $0.6 million tax benefit arising from the loss from continuing operations and the offsetting tax expense was allocated to other comprehensive income.

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Certain Financial Statement Information (Tables)

6 Months Ended

Sep. 30, 2012

Certain Financial Statement Information [Abstract]

Schedule of Accounts receivable

Accounts receivable:

	September 30, 2012			March 31, 2012
	(In thousands)
Accounts receivable	$	15,211		$	23,765
Less: allowance for bad debts		(936	)		(1,099	)
	$	14,275		$	22,666

Schedule of Inventories

Inventories:

	September 30, 2012		March 31, 2012
	(In thousands)
Finished goods	$	14,436	$	17,883
Work in process		3,338		3,818
Raw materials		663		1,543
	$	18,437	$	23,244

Schedule of Other current assets

Other current assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Prepaid expenses	$	21,388	$	20,353
Executive deferred compensation assets		1,362		1,344
Deposits		897		899
Proceeds receivable on sale of strategic investment		—		7,100
Other		2,803		1,409
	$	26,450	$	31,105

Schedule of Property and equipment

Property and equipment:

	Useful Life		September 30, 2012			March 31, 2012
	(In years)		(In thousands)
Machinery and equipment		5-7	$	36,732		$	36,600
Leasehold improvements		1-15		17,405			14,228
Computers, office furniture and equipment		3-7		43,031			43,929
Buildings		31.5		2,756			2,756
Land		—		9,800			9,800
				109,724			107,313
Less: accumulated depreciation and amortization				(71,866	)		(69,213	)
			$	37,858		$	38,100

Schedule of Goodwill

Goodwill and purchased intangibles:

Goodwill is as follows:

	(In thousands)
Goodwill related to TPack acquisition, as of September 30, 2012 and March 31 2012	$	13,183

Schedule of Purchased Intangible assets

Purchase-related intangibles were as follows:

	September 30, 2012									March 31, 2012
	Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life		Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life
	(In thousands)							(In years)		(In thousands)							(In years)
Developed technology/in-process research and development	$	441,300	$	(430,413	)	$	10,887		4.0	$	441,300	$	(429,054	)	$	12,246		4.6
Customer relationships		12,830		(9,982	)		2,848		2.8		12,830		(8,881	)		3,949		2.9
Patents/core technology rights/tradename		63,206		(62,917	)		289		1.0		63,206		(62,767	)		439		1.5
	$	517,336	$	(503,312	)	$	14,024			$	517,336	$	(500,702	)	$	16,634

Schedule of Estimated Future Amortization Expense of Purchased Intangible Assets

As of September 30, 2012, the estimated future amortization expense of purchased intangible assets to be charged to cost of sales and operating expenses was as follows (in thousands):

	Cost of Sales		Operating Expenses		Total
Fiscal Years Ending March 31,
2013 (remaining)	$	1,358	$	675	$	2,033
2014		2,717		1,189		3,906
2015		2,717		904		3,621
2016		2,717		369		3,086
2017 and thereafter		1,378		—		1,378
Total	$	10,887	$	3,137	$	14,024

Schedule of Other assets

Other assets:

	September 30, 2012		March 31, 2012
	(In thousands)
Non-current portion of prepaid expenses	$	5,769	$	4,193
Strategic investments		5,250		4,750
Other		—		1,331
	$	11,019	$	10,274

Schedule of Other Accrued Liabilities

Other accrued liabilities:

	September 30, 2012		March 31, 2012
	(In thousands)
Customer deposits*	$	75	$	415
Employee related liabilities		2,333		2,051
Executive deferred compensation		1,362		1,344
Income taxes		1,428		1,401
Professional fees		1,278		961
Contingent consideration		—		618
Other		1,730		2,262
	$	8,206	$	9,052

* Includes credit balances in Accounts Receivable that have been reclassified as Other Accrued Liabilities

Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments

Short-term investments:

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments (in thousands):

	September 30, 2012								March 31, 2012
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		13,008		—		—		13,008
U.S. Treasury securities and agency bonds		17,533		23		1		17,555		16,771		11		19		16,763
Corporate bonds		20,485		95		6		20,574		23,361		56		10		23,407
Mortgage-backed and asset-backed securities*		3,942		398		26		4,314		7,308		364		61		7,611
Closed-end bond funds		23,705		5,760		1,097		28,368		26,401		5,161		1,649		29,913
Preferred stock		4,878		2,006		—		6,884		6,209		1,878		—		8,087
	$	82,535	$	8,282	$	1,130	$	89,687	$	108,115	$	7,470	$	1,739	$	113,846
Reported as:
Cash and cash equivalents							$	11,992							$	28,065
Short-term investments available-for-sale								77,695								85,781
							$	89,687							$	113,846

* At September 30, 2012 and March 31, 2012, approximately $2.0 million and $4.6 million of the estimated fair value presented were mortgage-backed securities, respectively.

Schedule of Cash, Cash Equivalents and Available-For-Sale Investments by Type of Instruments Measured at Fair Value on Recurring Basis

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instruments measured at fair value on a recurring basis (in thousands):

	September 30, 2012								March 31, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	9,902	$	—	$	—	$	9,902	$	15,057	$	—	$	—	$	15,057
Cash equivalents		2,090		—		—		2,090		10,510		2,498		—		13,008
U.S. Treasury securities and agency bonds		17,555		—		—		17,555		16,763		—		—		16,763
Corporate bonds		—		20,574		—		20,574		—		23,407		—		23,407
Mortgage-backed and asset-backed securities		—		4,314		—		4,314		—		7,611		—		7,611
Closed-end bond funds		28,368		—		—		28,368		29,913		—		—		29,913
Preferred stock		—		6,884		—		6,884		—		8,087		—		8,087
	$	57,915	$	31,772	$	—	$	89,687	$	72,243	$	41,603	$	—	$	113,846

Schedule of Cost and Estimated Fair Values of Available-For-Sale Securities with Stated Maturities by Contractual Maturity

The following is a summary of the cost and estimated fair values of available-for-sale securities with stated maturities, which include U.S. Treasury securities and agency bonds, corporate bonds and mortgage-backed and asset-backed securities, by contractual maturity (in thousands):

	September 30, 2012				March 31, 2012
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	16,038	$	16,190	$	16,683	$	16,722
Mature in 1 – 2 years		24,201		24,284		26,869		27,026
Mature in 3 – 5 years		484		522		2,421		2,496
Mature after 5 years		1,237		1,447		1,467		1,537
	$	41,960	$	42,443	$	47,440	$	47,781

Schedule of Gross Unrealized Losses

The following is a summary of gross unrealized losses (in thousands):

	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of September 30, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	2,456	$	—	$	—	$	—	$	2,456	$	—
Corporate bonds		898		4		248		2		1,146		6
Mortgage-backed and asset-backed securities		723		8		232		18		955		26
Closed-end bond funds		—		—		7,180		1,098		7,180		1,098
	$	4,077	$	12	$	7,660	$	1,118	$	11,737	$	1,130
	Less Than 12 Months of Unrealized Losses				12 Months or More of Unrealized Losses				Total
As of March 31, 2012	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities and agency bonds	$	8,938	$	19	$	—	$	—	$	8,938	$	19
Corporate bonds		5,463		10		—		—		5,463		10
Mortgage-backed and asset-backed securities		894		20		353		42		1,247		62
Closed-end bond funds		—		—		6,628		1,648		6,628		1,648
	$	15,295	$	49	$	6,981	$	1,690	$	22,276	$	1,739

Schedule of Warranty Reserve Activity

The following table summarizes warranty reserve activity (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Beginning balance	$	447		$	197		$	454		$	176
Charged to costs of revenues		85			99			215			305
Charges incurred		(162	)		(52	)		(299	)		(237	)
Ending balance	$	370		$	244		$	370		$	244

Schedule of Interest Income, Net

Interest income, net (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Interest income	$	568	$	1,127	$	1,230	$	2,089
Net realized gain on short-term investments		177		342		1,194		661
	$	745	$	1,469	$	2,424	$	2,750

Schedule of Other Income, Net

Other income, net (in thousands):

	Three Months Ended September 30,					Six Months Ended September 30,
	2012			2011		2012			2011
Net loss on disposals of property	$	(3	)	$	—	$	(10	)	$	(10	)
Other, net		93			48		183			133
	$	90		$	48	$	173		$	123

Schedule of Reconciliation of Shares Used to Calculate Basic and Diluted Net (Loss) Income Per Share

The reconciliation of shares used to calculate basic and diluted net loss per share consists of the following (in thousands, except per share data):

	Three Months Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(21,557	)	$	(1,152	)	$	(44,947	)	$	(8,029	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic		64,947			62,526			63,678			63,202
Net effect of dilutive common share equivalents		—			—			—			—
Weighted average common shares outstanding, diluted		64,947			62,526			63,678			63,202
Basic and diluted net loss per share	$	(0.33	)	$	(0.02	)	$	(0.71	)	$	(0.13	)

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Certain Financial Statement Information (Details 15) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Other Income, Net
Net loss on disposals of property	$ (3)		$ (10)	$ (10)
Other, net	93	48	183	133
Other income, net	$ 90	$ 48	$ 173	$ 123

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Certain Financial Statement Information (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Other current assets
Prepaid expenses	$ 21,388	$ 20,353
Executive deferred compensation assets	1,362	1,344
Deposits	897	899
Proceeds receivable on sale of strategic investment		7,100
Other	2,803	1,409
Other current assets, total	$ 26,450	$ 31,105	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Certain Financial Statement Information (Details 7) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of other assets
Non-current portion of prepaid expenses	$ 5,769	$ 4,193
Strategic investments	5,250	4,750
Other		1,331
Other assets	$ 11,019	$ 10,274	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended			123 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2001	Sep. 30, 2011	Jun. 30, 2012
Income Taxes (Textual) [Abstract]
Unrecognized tax benefits including interest and penalties							$ 43,300,000
Federal statutory income tax rate	35.00%	35.00%	35.00%	35.00%
Income tax (benefit) expense	(360,000)	581,000	(160,000)	391,000	391,000	581,000
Tax benefit recognized			$ 600,000
Period for considering change in estimated liability for uncertain tax provisions			12 months

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Stockholders' Equity (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Sep. 30, 2012
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Weighted average remaining contractual term for options outstanding	3 years 9 months 18 days
$ 1.68 - $ 7.12 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	1.68
Range of Exercise Price, maximum	7.12
Number of Shares, Options Outstanding	939
Weighted average remaining contractual term for options outstanding	3 years 3 months 11 days
Weighted Average Exercise Price, Options Outstanding	6.40
Number of Shares, Options Exercisable	553
Weighted Average Exercise Price, Options Exercisable	6.03
$ 7.13 - $ 8.07 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	7.13
Range of Exercise Price, maximum	8.07
Number of Shares, Options Outstanding	854
Weighted average remaining contractual term for options outstanding	4 years 22 days
Weighted Average Exercise Price, Options Outstanding	7.71
Number of Shares, Options Exercisable	816
Weighted Average Exercise Price, Options Exercisable	7.70
$ 8.08 - $ 11.86 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	8.08
Range of Exercise Price, maximum	11.86
Number of Shares, Options Outstanding	938
Weighted average remaining contractual term for options outstanding	5 years 1 month 6 days
Weighted Average Exercise Price, Options Outstanding	10.34
Number of Shares, Options Exercisable	654
Weighted Average Exercise Price, Options Exercisable	10.15
$ 11.87 - $ 14.40 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	11.87
Range of Exercise Price, maximum	14.40
Number of Shares, Options Outstanding	829
Weighted average remaining contractual term for options outstanding	3 years 4 months 2 days
Weighted Average Exercise Price, Options Outstanding	12.94
Number of Shares, Options Exercisable	732
Weighted Average Exercise Price, Options Exercisable	13.03
$ 14.41 - $ 24.16 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	14.41
Range of Exercise Price, maximum	24.16
Number of Shares, Options Outstanding	378
Weighted average remaining contractual term for options outstanding	2 years 5 months 9 days
Weighted Average Exercise Price, Options Outstanding	18.15
Number of Shares, Options Exercisable	378
Weighted Average Exercise Price, Options Exercisable	18.15
$ 1.68 - $ 24.16 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum	1.68
Range of Exercise Price, maximum	24.16
Number of Shares, Options Outstanding	3,938
Weighted average remaining contractual term for options outstanding	3 years 9 months 26 days
Weighted Average Exercise Price, Options Outstanding	10.13
Number of Shares, Options Exercisable	3,133
Weighted Average Exercise Price, Options Exercisable	10.42

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Condensed Consolidated Statements of Comprehensive Loss(Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (21,557)	$ (1,152)	$ (44,947)	$ (8,029)
Other comprehensive gain (loss), net of tax:
Loss on foreign currency translation	(6)	(108)	(122)	(199)
Unrealized gain (loss) on investments	1,358	(2,176)	855	(1,724)
Other comprehensive gain (loss), net of tax	1,352	(2,284)	733	(1,923)
Total comprehensive loss	$ (20,205)	$ (3,436)	$ (44,214)	$ (9,952)

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Veloce

6 Months Ended

Sep. 30, 2012

Veloce [Abstract]

VELOCE

4. VELOCE

On June 20, 2012 (the “Closing Date”), the Company completed its acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, entered into as of May 17, 2009 (the “Initial Agreement”), as amended by Amendment No. 1 to Agreement and Plan of Merger, entered into as of November 8, 2010 (the “First Amendment”), and Amendment No. 2 to Agreement and Plan of Merger, entered into as of April 5, 2012 (the “Second Amendment” and, collectively with the Initial Agreement and the First Amendment, the “Merger Agreement”). The First Amendment was amended, restated and replaced in its entirety by the Second Amendment.

The terms of the Merger Agreement include the payment of initial consideration of up to $60.4 million, payable in shares of Company common stock and/or cash (at the Company’s election) to holders of Veloce common stock options that were vested on the Closing Date, to Veloce stockholders and holders of Veloce stock equivalents. Following the closing, the Company paid part of the consideration by issuing approximately 2.4 million shares of its common stock and paying approximately $12.7 million in cash, with the balance of the $60.4 million to be paid, using a similar ratio of Company shares and cash, over the next two to three years upon the satisfaction of additional vesting requirements. During the three and six months ended September 30, 2012, as part of the above arrangement, the company issued 0.2 million shares and 2.6 million shares respectively, and paid approximately $2.1 million and $14.8 million in cash, respectively.

For accounting purposes, the consideration payable for the acquisition of Veloce is considered compensatory and will be recognized as research and development expense. Recognition of these costs will occur when certain development and performance milestones become probable of achievement and earned. As of March 31, 2012, one significant performance and development milestone set forth under the Merger Agreement was considered probable of achievement and the Company therefore recorded the initial consideration of $60.4 million, which was recognized as research and development expense. During the three and six months ended September 30, 2012, the Company recognized an additional $2.3 million and $4.7 million, respectively, of research and development expense in connection with progress achieved against certain product development milestones included in the Second Amendment. No other product development milestones included in the Merger Agreement were considered probable of achievement as of September 30, 2012.

The Second Amendment further provides for potential payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to Company products on which Veloce has worked. The additional payments would be payable in partial amounts upon the achievement of each such milestone. The Company currently expects aggregate additional payments to range from a minimum of $4.7 million to a maximum of $75 million, based on the Company’s current expectations relating to the achievement of such product development milestones. Any such additional payments may be payable in shares of Company common stock and/or cash (at the Company’s election).

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Certain Financial Statement Information (Details 8) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of other accrued liabilities
Customer deposits	$ 75	$ 415
Employee related liabilities	2,333	2,051
Executive deferred compensation	1,362	1,344
Income taxes	1,428	1,401
Professional fees	1,278	961
Contingent consideration		618
Other	1,730	2,262
Other accrued liabilities	$ 8,206	$ 9,052	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.

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Veloce (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012
Veloce (Additional Textual) [Abstract]
Estimated purchase price payable, relating to product development milestones, Minimum	$ 4.7		$ 4.7
Estimated purchase price payable, relating to product development milestones, Maximum	75		75
Minimum [Member]
Veloce (Textual) [Abstract]
Payment Period			2 years
Maximum [Member]
Veloce (Textual) [Abstract]
Payment Period			3 years
Veloce Technologies, Inc. [Member]
Veloce (Textual) [Abstract]
Estimated purchase price payable to acquiree company	60.4		60.4
Aggregate shares issued	0.2	2.4	2.6
Payment of aggregate consideration as cash	2.1	12.7	14.8
Agreed additional consideration payment to cover certain increased expenses	$ 2.3		$ 4.7

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Certain Financial Statement Information (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Schedule of Inventories
Finished goods	$ 14,436	$ 17,883
Work in process	3,338	3,818
Raw materials	663	1,543
Inventories, total	$ 18,437	$ 23,244	[1]

[1] Note: Amounts have been derived from the March 31, 2012 audited consolidated financial statements.