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 June 30, 2013

OR

o 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  o

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  o

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

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

As of July 31, 2013, 73,111,558 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 June 30, 2013 and March 31, 2013	3
	Condensed Consolidated Statements of Operations for the three months ended June 30, 2013 and 2012	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2013 and 2012	5
	Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2013 and 2012	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	57
Signatures		58

2

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	June 30, 2013			March 31, 2013
	(unaudited)			(note)
ASSETS
Current assets:
Cash and cash equivalents	$	39,673		$	19,065
Short-term investments-available-for-sale	50,057			66,411
Accounts receivable, net	28,815			24,575
Inventories	12,715			12,900
Other current assets	20,178			17,998
Total current assets	151,438			140,949
Property and equipment, net	35,561			34,391
Goodwill	11,425			13,183
Purchased intangibles	292			11,991
Other assets	7,713			10,866
Total assets	$	206,429		$	211,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,299		$	17,650
Accrued payroll and related expenses	7,388			6,158
Veloce accrued liability	45,009			78,082
Other accrued liabilities	12,446			10,730
Deferred revenue	666			1,469
Total current liabilities	83,808			114,089
Veloce and other non-current liabilities	23,314			15,787
Commitments and contingencies (Note 8)
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 June 30, 2013 and March 31, 2013
Issued and outstanding shares — 70,343 at June 30, 2013 and 67,952 at March 31, 2013	704			680
Additional paid-in capital	5,938,270			5,926,630
Accumulated other comprehensive loss	(5,455		)	(737		)
Accumulated deficit	(5,834,212		)	(5,845,069		)
Total stockholders’ equity	99,307			81,504
Total liabilities and stockholders’ equity	$	206,429		$	211,380

Note: Amounts have been derived from the March 31, 2013 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
	June 30,
	2013			2012
Net revenues	$	54,148		$	41,294
Cost of revenues	22,342			18,355
Gross profit	31,806			22,939
Operating expenses:
Research and development	34,506			34,771
Selling, general and administrative	9,526			12,470
Gain on sale of TPack	(19,699		)	—
Amortization of purchased intangible assets	130			650
Restructuring charges, net	93			—
Total operating expenses	24,556			47,891
Operating income (loss)	7,250			(24,952		)
Interest income (expense), net	3,666			1,679
Other income (expense), net	129			83
Income (loss) before income taxes	11,045			(23,190		)
Income tax expense	188			200
Net income (loss)	$	10,857		$	(23,390	)
Basic net income (loss) per share	$	0.16		$	(0.37	)
Shares used in calculating basic income (loss) per share	69,360			62,409
Diluted net income (loss) per share	$	0.15		$	(0.37	)
Shares used in calculating diluted income (loss) per share	70,234			62,409

See Accompanying Notes to Condensed Consolidated Financial Statements

4

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three Months Ended
	June 30,
	2013			2012
Net income (loss)	$	10,857		$	(23,390	)
Other comprehensive loss, net of $0 tax for 2013 and 2012:
Unrealized loss on investments	(4,529		)	(501		)
Loss on foreign currency translation	(189		)	(118		)
Other comprehensive loss, net of $0 tax for 2013 and 2012:	(4,718		)	(619		)
Total comprehensive income (loss)	$	6,139		$	(24,009	)

* The amounts reclassified from accumulated other comprehensive loss and relating to short term investments, for the three months ended June 30, 2013 and 2012 were $3.2 million and $1.0 million, respectively and are recorded in Interest income (expense), net in the Condensed Consolidated Statement of Operations. Refer to Note 3 to the Condensed Consolidated Financial Statements for additional details.

See Accompanying Notes to Condensed Consolidated Financial Statements

5

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended
	June 30,
	2013			2012
Operating activities:
Net income (loss)	$	10,857		$	(23,390	)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation	2,624			2,439
Amortization of purchased intangibles	296			1,329
Stock-based compensation expense:
Stock options	602			1,488
Restricted stock units	3,112			6,201
Warrants	—			1,289
Veloce accrued liability	9,255			2,325
Acquisition related adjustment	—			(133		)
Gain on sale of TPack	(19,699		)	—
Net gain on disposals of property, equipment and other assets	(3		)	—
Non-cash restructuring costs	26			—
Changes in operating assets and liabilities:
Accounts receivable	(4,474		)	6,319
Inventories	185			650
Other assets	1,598			(1,045		)
Accounts payable	(687		)	(4,751		)
Accrued payroll and other accrued liabilities	4,149			164
Veloce accrued liability	(24,982		)	(12,748		)
Deferred revenue	(671		)	(597		)
Net cash used for operating activities	(17,812		)	(20,460		)
Investing activities:
Proceeds from sales and maturities of short-term investments	14,185			14,182
Purchases of short-term investments	(2,361		)	(4,326		)
Purchase of property, equipment and other assets	(279		)	(5,598		)
Proceeds from sale of strategic equity investment	—			7,144
Purchases of strategic equity investment	—			(500		)
Proceeds from the sale of TPack, net	29,498			—
Net cash provided by investing activities	41,043			10,902
Financing activities:
Proceeds from issuance of common stock	171			3,330
Funding of restricted stock units withheld for taxes	(2,382		)	(216		)
Repurchase of common stock	—			(654		)
Other	(412		)	(253		)
Net cash (used for) provided by financing activities	(2,623		)	2,207
Net increase (decrease) in cash and cash equivalents	20,608			(7,351		)
Cash and cash equivalents at beginning of year	19,065			28,065
Cash and cash equivalents at end of period	$	39,673		$	20,714
Supplementary cash flow disclosures:
Income taxes	$	52		$	131
Common stock issued for Veloce merger consideration	$	10,037		$	13,683

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 AppliedMicro and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods prior to its merger with the Company, 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 5 of Notes to the Condensed Consolidated Financial Statements. 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 Research and Development ("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;

• unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net;

• valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles, impairments of goodwill and apportionment of goodwill related to divestitures;

• Veloce accrued liability which considers: (i) estimating the total value of the expected Veloce consideration, (ii) determining the stage at which a milestone is deemed to be probable of attainment, (iii) the estimated progress towards achieving the milestone at the time such milestone was deemed probable of achievement, and (iv) estimating the approximate timing of the expected completion of the milestones and related payments;

• potential costs of litigation, which affects operating expenses;

• 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.

Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-02 (ASU 2013-02), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires an entity to present either on the face of the statement where comprehensive income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The adoption of ASU 2013-02, which involves presentation and disclosures only, did not have a significant impact on the Company's condensed consolidated financial statements.

2. Sale of TPack A/S

On April 22, 2013, the Company completed the sale of TPack and certain specified intellectual property assets owned by the Company related to TPack's business for an aggregate consideration of $33.5 million, payable in cash, which reflects the $34.0 million base purchase price as adjusted for the working capital adjustment mechanism set forth in the Purchase Agreement, and

remains subject to a potential final, non-material post-closing adjustments. In connection with the closing, there was a working capital adjustment of $0.5 million and the Company received a cash payment of $30.2 million. The remaining cash payment of $3.3 million of the aggregate consideration will be held back until March 31, 2014 to secure the Company's indemnification obligations subject to and in accordance with the terms of the Purchase Agreement. The distribution of this holdback amount is subject to any indemnification claims that the Buyer may have under the terms of the Purchase Agreement and final resolution of any such claims.

TPack operated as part of the Company's Connectivity reporting unit. The sale of TPack does not represent an exit from the Connectivity business. The Company will continue to sell Connectivity technology products as an ongoing part of its business, and as such the sale of TPack is not a discontinuance of an operation.

In connection with the divestiture, we recorded a preliminary gain of $19.7 million. The following table summarizes the components of the gain:

	(in thousands)
Total proceeds, net of working capital adjustment,	$	30,175
Net assets and liabilities	(184		)
Goodwill write off	(1,757		)
Intangibles write off	(11,404		)
Holdback amount	3,353
Legal fees and other costs	(484		)
Gain on sale of TPack	$	19,699

The total assets of TPack included $0.7 million of cash, cash equivalents and short term investments.

3. CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,278		$	25,278
Less: allowance for bad debts	(463		)	(703		)
	$	28,815		$	24,575

Inventories:

	June 30, 2013		March 31, 2013
	(In thousands)
Finished goods	$	6,247	$	7,247
Work in process	4,855		4,098
Raw materials	1,613		1,555
	$	12,715	$	12,900

8

Other current assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	12,765	$	13,762
Executive deferred compensation assets	700		693
Deposits	752		828
Receivable from sale of strategic investment and TPack	4,673		1,331
Other	1,288		1,384
	$	20,178	$	17,998

Property and equipment:

	Useful Life	June 30, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	45,077		$	40,063
Leasehold improvements	1-15	10,669			14,202
Computers, office furniture and equipment	3-7	44,980			43,485
Buildings	31.5	2,756			2,756
Land	—	9,800			9,800
		113,282			110,306
Less: accumulated depreciation and amortization		(77,721		)	(75,915		)
		$	35,561		$	34,391

* Includes capitalized mask costs.

Goodwill and purchased intangibles:

Goodwill is as follows:

	June 30, 2013		March 31, 2012
	(In thousands)
Goodwill	$	11,425	$	13,183

The reduction in Goodwill of $1.8 million relates to the sale of TPack. Please refer to Note 2 to the Condensed Consolidated Financial Statements for details of the sale of TPack.

Purchase-related intangibles were as follows:

	June 30, 2013								March 31, 2013
	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	$	425,000	$	(425,000	)	$	—	—	$	441,300	$	(431,771	)	$	9,529	3.5
Customer relationships	6,330		(6,038		)	292		1.2	12,830		(10,507		)	2,323		2.1
Patents/core technology rights/tradename	62,306		(62,306		)	—		—	63,206		(63,067		)	139		0.3
	$	493,636	$	(493,344	)	$	292		$	517,336	$	(505,345	)	$	11,991

9

During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of of TPack. Please refer to Note 2 to the Condensed Consolidated Notes to the Financial Statements for further discussion.

As of June 30, 2013, 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,
2014	$	—	$	188	$	188
2015	—		104		104
2016 and thereafter	—		—		—
Total	$	—	$	292	$	292

Other assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,713	$	7,866
Strategic investments	3,000		3,000
	$	7,713	$	10,866

Other accrued liabilities:

	June 30, 2013		March 31, 2013
	(In thousands)
Customer deposits*	$	688	$	237
Employee related liabilities	2,078		2,236
Executive deferred compensation	951		1,284
Income taxes	1,426		903
Professional fees	4,414		3,840
Other	2,889		2,230
	$	12,446	$	10,730

* 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 in which the Company does not have the ability to exercise significant influence are carried at 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 three months ended June 30, 2013 and 2012, the Company did not record any other-than-temporary impairment charges of its strategic investments and invested zero and $0.5 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 instrument (in thousands):

10

	June 30, 2013								March 31, 2013
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	26,533		—		—		26,533		10,536		—		—		10,536
U.S. Treasury securities and agency bonds	12,521		6		12		12,515		12,363		10		—		12,373
Corporate bonds	10,800		38		9		10,829		15,567		63		2		15,628
Mortgage-backed and asset-backed securities*	4,130		362		20		4,472		3,655		355		7		4,003
Closed-end bond funds	16,695		2,754		538		18,911		21,914		5,340		39		27,215
Preferred stock	2,406		924		—		3,330		4,878		2,314		—		7,192
	$	86,225	$	4,084	$	579	$	89,730	$	77,442	$	8,082	$	48	$	85,476
Reported as:
Cash and cash equivalents							$	39,673							$	19,065
Short-term investments available-for-sale							50,057								66,411
							$	89,730							$	85,476

* At June 30, 2013 and March 31, 2013, approximately $1.3 million and $1.4 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 instrument measured at fair value on a recurring basis (in thousands):

	June 30, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	25,378		1,155		—		26,533		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,951		564		—		12,515		12,373		—		—		12,373
Corporate bonds	—		10,829		—		10,829		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,472		—		4,472		—		4,003		—		4,003
Closed-end bond funds	18,911		—		—		18,911		27,215		—		—		27,215
Preferred stock	—		3,330		—		3,330		—		7,192		—		7,192
	$	69,380	$	20,350	$	—	$	89,730	$	57,625	$	27,851	$	—	$	85,476

There were no significant transfers in and out of Level 1 and Level 2 fair value measurement categories during the three months ended June 30, 2013 and 2012, respectively.

11

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):

	June 30, 2013				March 31, 2013
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	7,497	$	7,508	$	9,205	$	9,217
Mature in 1 – 2 years	17,140		17,147		19,843		20,040
Mature in 3 – 5 years	170		171		1,575		1,649
Mature after 5 years	2,644		2,990		962		1,098
	$	27,451	$	27,816	$	31,585	$	32,004

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 June 30, 2013	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	$	4,514	$	(12	)	$	—	$	—		$	4,514	$	(12	)
Corporate bonds	3,255		(9		)	—		—			3,255		(9		)
Mortgage-backed and asset-backed securities	1,780		(20		)	25		—			1,805		(20		)
Closed-end bond funds	5,795		(479		)	415		(59		)	6,210		(538		)
	$	15,344	$	(520	)	$	440	$	(59	)	$	15,784	$	(579	)

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of March 31, 2013	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	$	300	$	—		$	—	$	—		$	300	$	—
Corporate bonds	2,276		(2		)	113		—			2,389		(2		)
Mortgage-backed and asset-backed securities	647		(3		)	—		(4		)	647		(7		)
Closed-end bond funds	—		—			6,991		(39		)	6,991		(39		)
	$	3,223	$	(5	)	$	7,104	$	(43	)	$	10,327	$	(48	)

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 months ended June 30, 2013 and 2012, respectively. 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 the estimated date of recovery of its amortized cost. As of June 30, 2013 and March 31, 2013, the Company also had $4.1 million and $8.1 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):

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	Three Months Ended
	June 30,
	2013			2012
Beginning balance	$	220		$	454
Charged to costs of revenues	(15		)	130
Cost incurred	(2		)	(137		)
Ending balance	$	203		$	447

Interest income (expense), net (in thousands):

	Three Months Ended
	June 30,
	2013		2012
Interest income	$	468	$	675
Net realized gain on short-term investments	3,198		1,004
	$	3,666	$	1,679

Net income (loss) per share:

Shares used in basic net income (loss) per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net income (loss) per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of RSUs and outstanding warrants. The reconciliation of shares used to calculate basic and diluted net income (loss) per share consists of the following (in thousands, except per share data):

	Three Months Ended
	June 30,
	2013		2012
Net income (loss)	$	10,857	$	(23,390	)
Shares used in net income (loss) per share computation:
Weighted average common shares outstanding, basic	69,360		62,409
Net effect of dilutive common share equivalents	874		—
Weighted average common shares outstanding, diluted	70,234		62,409
Basic net income (loss) per share	$	0.16	$	(0.37	)
Diluted net income (loss) per share	$	0.15	$	(0.37	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 6.0 million and 10.4 million equivalent shares for the three months ended June 30, 2013 and 2012, respectively, have been excluded from the net income (loss) per share computation, as their impact would be anti-dilutive.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 0.3 million shares for the three months ended June 30, 2012 have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company incurred a net loss in the period presented.

Total equivalent shares excluded from the net income (loss) per share computation are 6.0 million and 10.7 million for the three months ended June 30, 2013 and 2012, respectively.

4. RESTRUCTURING CHARGES

The Company recognizes restructuring costs related to asset impairment and exit or disposal activities. Costs relating to facilities closure or lease commitments are recognized when the facility has been exited. Termination costs are recognized when the costs are deemed both probable and estimable.

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There were no new restructuring activity during the three months ended June 30, 2013 and 2012.

December 2012 Restructuring Program

In December 2012, the Company implemented a restructuring program to reorganize its operations and reduced its workforce by approximately 70 employees. The plan included eliminating job redundancies, reducing the Company's workforce and impairing an asset which related to the impairment of the unamortized value of a software intellectual property license, which the Company no longer intends to use to develop new products. The Company anticipates that the restructuring plan will reduce ongoing headcount expenses by approximately $8.0 million to $9.0 million annually and other additional operational expenses by $4.0 million to $5.0 million annually.

The restructuring activity during the three months ended June 30, 2013 relating to the December 2012 restructuring program is described below.

	Workforce Reduction			Asset Impairment		Total
Liability, March 31, 2013	$	548		$	—	$	548
Restructuring charges	93			—		93
Cash payments	(334		)	—		(334		)
Liability, June 30, 2013	$	307		$	—	$	307

5. 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, (the “Merger Agreement”). Veloce has been developing specific technology for the Company.

The terms of the Merger Agreement include the payment of the total consideration, payable to holders of Veloce common stock options that were vested on the Closing Date and holders of Veloce common stock and stock equivalents (collectively “Veloce Equity Holders”), and to Veloce stock equivalents that have not yet been allocated to individuals (“Unallocated Veloce Units”). The Merger Agreement further provides for payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to the Veloce development project.

The total estimated consideration to be paid is based upon the benchmarks achieved during simulations that were performed during the third quarter of fiscal 2013 and correlating of the results of the simulations to the contractual terms included in the Merger Agreement. As a result of higher than expected benchmarks achieved during simulations, the total estimated consideration to be paid has been updated during fiscal 2013 from a previous estimated maximum of approximately $135 million to the contractual maximum of $178.5 million. Significant judgment is required in assessing when a performance milestone is probable of achievement and estimating the timing of when the performance milestones will be completed. The Company has completed the first and second performance milestones relating to the Veloce project as of June 30, 2013. The total consideration relating to the first and second performance milestone, excluding the value allocated to the Unallocated Veloce Units, in the amount of $135.8 million, has been fully recognized as research and development expense through June 30, 2013 compared to $62.7 million as of June 30, 2012. During the three months ended June 30, 2013 and 2012, as part of the above arrangement, the Company paid approximately $25.0 million and $12.7 million, respectively, in cash and issued approximately 1.4 million shares and 2.4 million shares, respectively, valued at approximately $10.0 million and $13.7 million, respectively.

The third and final performance milestone is currently not yet believed to be probable of attainment as of June 30, 2013.

The consideration that the Company will be obligated to pay will be allocated equally to each of the Veloce Equity Holders and the Unallocated Veloce Units. The Company is contractually required to distribute all Unallocated Veloce Units within a certain time period. During the three months ended June 30, 2013, the Company distributed an additional 0.5 million Unallocated Veloce units which had a related expense of $5.7 million. Veloce Equity Holders subject to vesting requirements will receive their distribution upon satisfaction of such vesting requirements.

For accounting purposes, the costs to be incurred in connection with the development milestones relating to Veloce is considered compensatory and is recognized as R&D expense. Recognition of these costs as expense will generally occur when certain development and performance milestones become probable of achievement and are deemed earned. However, the value allocated to the Unallocated Veloce Units will not be recognized as R&D expense until distribution of the underlying units occurs. As of June 30, 2013 there were 0.7 million Unallocated Veloce Units that had not been allocated.

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Judgment is required in determining whether a performance milestone is probable of achievement, estimating the percentage of completion of the milestone, and the timing of when a performance milestone is expected to be completed. These determinations are based on discussions with internal technical personnel that address various qualitative and quantitative factors, including, but not limited to, overall complexity associated with the assessment, stage of development, progress made to date, results of testing, and consideration as to the nature of the remaining development work.

During the three months ended June 30, 2013 and 2012, total R&D expenses recognized were approximately $9.3 million and $2.3 million, respectively. Total R&D expenses expected to be recognized in connection with the first and second performance milestones is approximately $142.8 million, which includes the costs associated with the 0.7 million Unallocated Veloce Units that have not been expensed as these units have not been distributed as of June 30, 2013. Cumulative research and development expenses recognized in connection with the achievement of the first and second milestone through June 30, 2013 is $135.8 million. The Veloce accrued liability included on the Condensed Consolidated Balance Sheets is based upon the amount of R&D expense recognized in connection with the development of the Veloce performance milestones less amounts paid either in cash or our common stock. Veloce consideration that has been accrued as of June 30, 2013, is classified as long-term if payments of the consideration is expected to occur beyond a 12 month period.

6. 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. At June 30, 2013 there are no preferred shares outstanding.

Common Stock

At June 30, 2013, the Company had 375.0 million shares authorized for issuance and approximately 70.3 million shares issued and outstanding. At March 31, 2013, there were approximately 68.0 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 three months ended June 30, 2013 and 2012, no shares were issued under the 2012 plan. At June 30, 2013, 1.2 million shares were available for future issuance from the 2012 Plan.

Stock Repurchase Program

In August 2004, the Board of Directors 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 agreements. In October 2008, the Board of Directors increased the stock repurchase program by $100.0 million. There were no stock repurchases during the three months ended June 30, 2013. During the three months ended June 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 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. As of June 30, 2013, the Company had $15.9 million available in its stock repurchase program.

The Company did not enter into any structured stock repurchase agreements during the three months ended June 30, 2013 and 2012.

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

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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.

During the three months ended June 30, 2013 and 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 three months ended June 30, 2013 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	3,492		$	10.26
Granted	40		7.35
Exercised	(30	)	5.63
Forfeited	(333	)	9.69
Outstanding at the end of the period	3,169		$	10.32
Vested and expected to vest at the end of the period	3,163		$	10.33
Vested at the end of the period	2,955		$	10.40

At June 30, 2013, the weighted average remaining contractual term for options outstanding and vested is 3.3 years each.

The aggregate pretax intrinsic value of options exercised during the three months ended June 30, 2013 was approximately $0.1 million. 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 June 30, 2013 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 - $ 7.60	617	3.76	$	6.58	508	$	6.45
7.61 - 7.93	692	3.09	7.67		692	7.67
7.94 - 12.07	830	4.06	10.07		755	9.98
12.08 - 14.23	634	3.03	12.75		604	12.78
14.24 - 23.56	396	1.83	17.43		396	17.43
$  1.68 - $23.56	3,169	3.30	$	10.32	2,955	$	10.40

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As of June 30, 2013, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $2.4 million and $2.2 million, respectively. The aggregate pre-tax intrinsic values were calculated based on the closing price of the Company’s common stock of $8.80 on June 30, 2013.

Restricted Stock Units

The Company has granted 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. Fiscal 2012 and 2013 were declared as zero attainment years and vesting target shares have rolled over to fiscal 2014. 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 generally 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 1 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. This program has concluded and no further grants will be made under this program.

In February 2012, Dr. Gopi was awarded 500,000 performance-based restricted stock units based on three underlying performance milestones. The value of these restricted stock units is $3.7 million. The award associated with each underlying milestone 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 expense accordingly. As of June 30, 2013, two of the performance milestones have been completed and the associated stock-based compensation expense has been recorded in the Company's consolidated financial statements.

In May 2013, the Committee authorized performance-based market stock units or "MSUs". The MSUs will be earned, if at all, based on the Company's Total Shareholder Return (“TSR”) compared to that of the SPDR S&P Semiconductor Index ("Index”) over a two-year performance period (for half of the MSU award) and a three-year performance period (for the remaining half of the MSU award). The MSU's will vest between ranges of 0% and 150% based on the Company's relative TSR compared to the index. The MSUs will be valued using the Monte Carlo pricing model, which uses the Company's stock price, the Index value, expected volatilities of the Company's stock price and the index, correlation coefficients and risk free interest rates to determine the fair value.

In May 2013, the Committee authorized the short-term incentive compensation plan the(“FY2014 Short Term Plan”), that, if earned, would become payable on May 15, 2014. The FY 2014 Short Term Plan will pay-out based on FY 2014 revenue and non-GAAP earnings per share metrics. The award pay-outs for each corporate financial measure will range from 50% to 150% of the pre-established target level based on the Company's actual performance for fiscal 2014.

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Restricted stock unit activity during the three months ended June 30, 2013 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	1,670
Vested	(1,247	)
Cancelled	(483	)
Outstanding at the end of the period	6,384

The weighted average remaining contractual term for the restricted stock units outstanding as of June 30, 2013 was 1.2 years.

As of June 30, 2013, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $56.2 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 $8.80 on June 30, 2013.

The aggregate pretax intrinsic value of RSUs released during the three months ended June 30, 2013 was $9.6 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”). 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.

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7. 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 Restricted Stock Units ("RSUs"), for 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 during the three months ended June 30, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:

	Three Months Ended June 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2013			2012			2013			2012
Expected life (years)	4.4			4.5			0.5			0.5
Risk-free interest rate	0.6		%	0.7		%	0.1		%	0.1		%
Volatility	49		%	54		%	50		%	56		%
Dividend yield	—			—			—			—
Weighted average fair value	$	2.95		$	2.47		$	2.47		$	2.40

The weighted average grant-date fair value per share of the restricted stock units awarded was $7.03 and $5.46 during the three months ended June 30, 2013 and 2012, 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, 2013, the Company revised its estimated forfeiture rate used in determining the amount of stock-based compensation from 6.6% to 6.7% as a result of an increase 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
	June 30,
	2013			2012
Stock-based compensation expense by type of award
Stock options	$	602		$	1,488
Restricted stock units	3,124			6,120
Total stock-based compensation	3,726			7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

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

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	Three Months Ended
	June 30,
	2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	108		$	180
Research and development	1,798			4,205
Selling, general and administrative	1,820			3,223
Total stock-based compensation	$	3,726		$	7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2016, including time and performance based awards that are expected to vest, at June 30, 2013 is $19.1 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.8 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 $7.7 million for the three months ended June 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See Note 6 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

8. CONTINGENCIES

Legal Proceedings

The Company is currently a party to various legal proceedings, including those noted in this section. While the Company presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm the Company's financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to inherent uncertainties, unfavorable rulings or other events that could occur. In addition, legal proceedings are expensive to prosecute and defend against and can divert Management attention and Company resources away from the Company's business objectives. Unfavorable resolutions could include monetary damages against the Company, or preclude the Company from recovering the damages it seeks in legal proceedings it has commenced. It is also possible that the Company could conclude it is in the best interests of its stockholders, employees, and customers to settle one or more such matters, and any such settlement could include substantial payments or the surrender of rights to collect substantial payments from third parties. However, the Company has not reached this conclusion with respect to any particular matter at this time.

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 the 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. In February 2013, OPOG submitted a good faith settlement offer to EPA, with settlement negotiations between the parties expected to continue in fiscal year 2014. It is anticipated that such settlement negotiations will result in EPA and OPOG entering into a remediation consent decree with the Court regarding OU2. OPOG is expected to vote in December 2013 on whether to retain legal counsel to pursue claims against other potentially responsible parties for the regional groundwater contamination.  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

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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 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 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.

In April 2013, the contract litigation between AppliedMicro TPack A/S, the Company’s wholly-owned subsidiary, Xtera Communications Inc. and its subsidiary Meriton Networks Canada Inc., which previously was commenced in September 2009 in the Ontario Superior Court of Justice in Canada was fully settled and dismissed with prejudice and without costs.

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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 condensed 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 months ended June 30, 2013. A brief description is provided of transactions and events that impact the comparability of the results being analyzed.

• Liquidity and capital resources. 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 unaudited condensed consolidated financial statements and notes thereto included in this quarterly report. All statements included or incorporated by reference in this quarterly report, for the three months ended June 30, 2013, other than statements or characterizations of historical fact, are forward-looking statements. 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.

These forward-looking statements include, but are not limited to, statements regarding: anticipated trends and challenges in our business and the markets in which we operate; expectations regarding the growth of next-generation cloud infrastructure and global data center traffic, energy consumption and total cost of ownership, anticipated market penetration for ARM-based cloud servers; the timing, anticipated features and benefits of, and our plans and strategy for, our X-Gene Server on a Chip products and development platform; our belief that our license for the ARM v8 will allow us to introduce new products into high growth markets where a combination of low power and high computational abilities are important; our strategy, including our focus on the development of products associated with our X-Gene architecture and our current connectivity investments in high growth 10G, 40G, 100G solutions while continuing to service the OTN and SONET/SDH market; the anticipated amount, form and timing of consideration to be paid in connection with our acquisition of Veloce, including our assessment of the timing and probability of achievement of milestones under the Veloce merger agreement, and related impact on our share dilution, research and development expense and operating results; our sales and marketing strategy; our expectations regarding adequacy of leased facilities; the impact of seasonal fluctuations and economic conditions on our business; our intellectual property; our expectations as to expenses, liquidity and capital resources, including without limitation our expected sources and uses of cash and substantial need for additional financing; our gross margin and how we may try to offset reductions in gross margin; factors affecting demand for our products; our ability to attract and retain qualified personnel; our restructuring program and related expense; and the impact of accounting pronouncements and our critical accounting policies, judgments, estimates and assumptions on our financial results.

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. In addition, the forward-looking statements included below are based upon statements made by industry experts, analysts, and other third party sources. 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.

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OVERVIEW

The Company

Applied Micro Circuits Corporation (“AppliedMicro”, “APM”, “AMCC”, the “Company”, “we” or “our”) is a global leader in computing and connectivity solutions that span embedded computing, Telco, and solutions for next-generation cloud infrastructure and data centers. Our products include the X-Gene^TM ARM^® 64-bit Server on a Chip^TM solution, or X-Gene, designed for cloud data center and enterprise applications. X-Gene began sampling in silicon to several current and prospective customers and ecosystem partners in March 2013. We currently expect X-Gene to be in production by the end of calendar year 2013 and to begin generating sales revenue during calendar year 2014. We believe that X-Gene is the first, and currently the only, ARM 64-bit server solution sampling today. In addition to having a time-to-market advantage, we believe X-Gene will lead the next generation cloud data center silicon market by addressing the need for high performance, lower total cost of ownership silicon and system solutions.

In July 2013, the company announced its X-Weave family of products, designed to meet the needs of public cloud, private cloud and enterprise data centers. The X-Weave family of products span 100Gbps to 240 Gbps of connectivity with unique multi protocol features and high density.

X-Gene builds upon our solid base business of providing energy efficient, sustainable computing and connectivity solutions. Our embedded computing products are deployed in applications in markets such as control- and data-plane functionality, wireless access points, residential gateways, wireless base-stations, storage controllers, network attached storage, network switches and routing products, and multi-function printers. Our connectivity products address high growth segments including 10, 40, and 100Gbps solutions serving data center and service provider market opportunities. Our connectivity products include framer/mapper devices for Optical Transport Network (“OTN”) equipment and physical layer devices that transmit and receive signals in a very high-speed serial format.

Our corporate headquarters are located in Sunnyvale, California. Sales and engineering offices are located throughout the world. As of June 30, 2013, our business had two reporting units, Computing and Connectivity.

Since the start of fiscal 2013, we have invested a total of $221.9 million in the Research and Development ("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 including our ARM 64-bit based server product development. 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 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, (the “Merger Agreement”). Veloce has been developing specific technology for the Company.

The terms of the Merger Agreement include the payment of the total consideration, payable to holders of Veloce common stock options that were vested on the Closing Date and holders of Veloce common stock and stock equivalents (collectively “Veloce Equity Holders”), and to Veloce stock equivalents that had not yet been allocated to individuals (“Unallocated Veloce Units”). During the three months ended June 30, 2013 and 2012, as part of the above arrangement, we paid approximately $25.0 million and $12.7 million in cash and issued approximately 1.4 million and 2.4 million shares valued at approximately $10.0 million and $13.7 million, respectively.

The total estimated consideration to be paid is based upon the benchmarks achieved during simulations that were performed during the third quarter of fiscal 2013 and correlating the results of the simulations to the contractual terms included in the Merger Agreement. As a result of higher than expected benchmarks achieved during simulations, the total estimated consideration to be paid was updated during fiscal 2013 from a previous estimated maximum of approximately $135 million to the contractual maximum of $178.5 million. The consideration that we will be obligated to pay, will be payable upon completion of the respective performance milestones and can be settled in cash or the Company's common stock (or a combination of cash and stock), at the election of the Company.

The Company has treated the Veloce merger as a “reorganization” under Section 368 of the Internal Revenue Code in its and Veloce's tax returns. We believe that the requirements to qualify as a reorganization under the Code will be met.

For accounting purposes, the costs to be incurred in connection with the development milestones relating to Veloce is considered compensatory and is recognized as R&D expense. Recognition of these costs as expense will generally occur when

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certain development and performance milestones become probable of achievement and are deemed earned. However, the value allocated to the Unallocated Veloce Units will not be recognized as R&D expense until distribution of the underlying units occurs.

As of June 30, 2013, the Company has completed the first and second performance milestones. The third and final performance milestone is currently not yet believed to be probable of attainment as of June 30, 2013.

Total R&D expenses expected to be recognized in connection with the first and second performance milestones is approximately $142.8 million, which includes the costs associated with the Unallocated Veloce Units. As of June 30, 2013, approximately 0.7 million Unallocated Veloce Units have not yet been allocated. Cumulative R&D expenses recognized in connection with the achievement of the first and second milestone through June 30, 2013 is $135.8 million. During the three months ended June 30, 2013 and 2012, expenses recognized in connection with the achievement of the first and second performance milestones was $9.3 million and $2.3 million, respectively. The Veloce accrued liability included on the Condensed Consolidated Balance Sheets is based upon the amount of R&D expense recognized in connection with the development of the Veloce performance milestones less amounts paid either in cash or our common stock. Veloce consideration that has been accrued as of June 30, 2013 and 2012, is classified as long-term if payments of the consideration is expected to occur beyond a 12 month period.

Approximately$142.8 million of Veloce consideration is expected to be payable upon the attainment of the first two Veloce development and performance milestones and is expected to be paid over multiple quarters. As of June 30, 2013, $68.1 million has been paid and we expect that approximately an additional $40 million will be paid in cash and stock by September 30, 2013. The $68.1 million paid to date includes approximately $41.5 million in cash and the issuance of 4.4 million shares of common stock valued at approximately $26.6 million. Additional consideration may become payable if the third and final performance milestone is completed.

Summary Financials

The following tables present a summary of our results of operations for the three months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount			% of Net Revenue		Increase (Decrease)			% Change
Net revenues	$	54,148	100.0	%	$	41,294		100.0	%	$	12,854		31.1	%
Cost of revenues	22,342		41.3		18,355			44.4		3,987			21.7
Gross profit	31,806		58.7		22,939			55.6		8,867			38.7
Total operating expenses	24,556		45.3		47,891			116.0		(23,335		)	(48.7	)
Operating income (loss)	7,250		13.4		(24,952		)	(60.4	)	32,202			129.1
Interest and other income, net	3,795		7.0		1,762			4.3		2,033			115.4
Income (loss) before income taxes	11,045		20.4		(23,190		)	(56.1	)	34,235			147.6
Income tax expense	188		0.3		200			0.5		(12		)	(6.0	)
Net income (loss)	$	10,857	20.1	%	$	(23,390	)	(56.6	)%	$	34,247		146.4	%

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, excluding non-cancelable non-returnable inventory we had approximately 66 days of inventory in the distributor channel at June 30, 2013 as compared to 53 days at June 30, 2012. The increase in inventory days was primarily due to the timing of sell-through of distributor inventory and the buildup of inventory in the distributor channel for our newer products.

The gross margins for our solutions have from time to time, in the past declined. Some factors that has caused 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.

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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 data center market.

We are continuing to focus our current connectivity investments on high growth 10G, 40G and faster Ethernet solutions, data center, 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 portion of our business represented by connectivity revenues attributable to our OTN and 10 gigabit or faster Ethernet products and that is attributable to our SONET/SDH and Legacy Switch products for the three months ended June 30, 2013 and 2012 was 86% and 14% and 75% and 25%, respectively.

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;

• 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 months ended June 30, 2013 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
	June 30,
	2013		2012
Avnet (distributor)	38	%	28	%
Wintec (global logistics provider)	18	%	18	%

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

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Net revenues by geographic region, which are primarily denominated in U.S. dollars, were as follows (in thousands):

	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue
United States of America*	$	29,161	53.9	%	$	16,145	39.1	%
Taiwan	3,074		5.7		5,100		12.4
Hong Kong	4,213		7.8		5,729		13.9
China*	745		1.4		532		1.3
Europe*	7,593		14.0		6,958		16.8
Japan	3,748		6.9		2,208		5.3
Malaysia	1,244		2.3		945		2.3
Singapore	3,041		5.6		2,403		5.8
Other Asia	977		1.8		906		2.2
Other	352		0.6		368		0.9
	$	54,148	100.0	%	$	41,294	100.0	%

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

Research and Development. 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 including amounts relating to Veloce, costs related to engineering licenses and design tools, subcontracting costs and facilities expenses. 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. We currently expect that 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. We currently expect that future acquisitions of products, technologies or businesses may result in substantial additional on-going SG&A costs.

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 income (loss), less interest income, income taxes, depreciation and amortization, stock-based compensation, amortization of intangibles and other one-time and/or non-cash items.

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

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	Three Months Ended
	June 30,
	2013			2012
Net Income(loss)	$	10,857		$	(23,390	)
Adjustments to net income(loss):
Interest and other income, net	(776		)	(673		)
Stock-based compensation expense	3,714			7,689
Warrant expense	—			1,289
Amortization of purchased intangibles	296			1,329
Restructuring charges, net	93			—
Veloce accrued liability	9,255			2,325
Impairment of marketable securities*	(3,019		)	(1,089		)
Depreciation and amortization	2,624			2,805
Gain on sale of TPack	(19,699		)	—
Other and income tax adjustment	186			67
Adjusted EBITDA	$	3,531		$	(9,648	)

* 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, Veloce accrued liability, gain on sale of TPack 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” which are expected to expire unvested when the program concludes in May 2014). 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.

We also assess the performance of our business on a non-GAAP basis, excluding the impact of expenditures relating to our X-Gene product development costs. Non-GAAP net income (loss) is derived by excluding certain items required by GAAP, such as stock-based compensation charges, amortization of purchased intangibles, Veloce accrued liability, restructuring charges, impairment of marketable securities, income taxes, and other one-time and/or non-cash items. In addition, when X-Gene product development related expenditures are excluded from the above, we derive the adjusted Non-GAAP income from our base business (“NGIBB”).

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The following table reconciles GAAP net income (loss) to the NGIBB (in thousands except for per share data):

	Three Months Ended
	June 30,
	2013			2012
GAAP Net Income/(loss)	$	10,857		$	(23,390	)
Adjustments:
Stock-based compensation expense	3,714			7,689
Warrant expense	—			1,289
Amortization of purchased intangibles	296			1,329
Restructuring charges, net	93			—
Veloce accrued liability	9,255			2,325
Impairment of marketable securities	(3,019		)	(1,089		)
Gain on sale of TPack	(19,699		)	—
Other and income tax adjustment	(62		)	420
Total GAAP to Non-GAAP adjustments	(9,422		)	11,963
Non-GAAP net income (loss)	1,435			(11,427		)
X-Gene product development costs*	14,528			11,730
NGIBB	$	15,963		$	303
Diluted non-GAAP proforma income (loss) per share	$	0.23		$	0.00
Shares used in calculating diluted non-GAAP proforma income per share	70,234			62,722

*These amounts relate to direct expenditures associated with the X-Gene product development and does not include costs incurred relating to the Veloce accrued liability.

We believe that NGIBB is a useful supplemental measure for investors as it helps them view the performance of the ongoing base business without the effect of unusual or infrequent costs including non-cash expenditures and also excluding an unusual and very significant R&D project. The measure is useful for investors to evaluate and compare the results of operations of the Company to its peers in a more meaningful way and allows investors to assess the health and performance of the base business.

NGIBB 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. NGIBB should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and may not be consistent with the presentation used by other companies.

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 orders will result in future revenues and the effect of changing lead times on bookings. Our book-to-bill ratio at June 30, 2013, March 31, 2013 and June 30, 2012 was 1.1, 0.7 and 1.2 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 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

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judgments we use in 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 months ended June 30, 2013 and 2012, we did not record any other-than-temporary impairment charges. As of June 30, 2013, we did not record an impairment charge in connection with other securities in a continuous loss position (fair value less than carrying value) with unrealized losses of $0.6 million as we believe that such unrealized losses are temporary. In addition, we also had $4.1 million in unrealized gains.

Veloce Consideration

We periodically evaluate the progress of the development work that is being performed in connection with our contractual arrangement with Veloce. Based on such an evaluation as well as considering various other qualitative factors, we estimate the total value of the development work being performed, and assess the timing and probability of attaining contractually defined performance milestones.

Upon assessing a performance milestone as probable of achievement, R&D expense is recognized based upon the estimated stage of development of that milestone and the estimated value associated with each performance milestone. The amount of R&D costs recognized in connection with the Veloce consideration excludes any value relating to Veloce common stock that has not been allocated to individuals. Payment of the Veloce consideration will occur based upon when a performance milestone is completed, and upon satisfaction of vesting requirements, if applicable. Significant judgment is required to estimate the total value of the Veloce development work, assess when a performance milestone is probable of achievement and estimating the timing of when the performance milestones will be completed. We rely on discussions with internal technical personnel and using various qualitative and quantitative factors, including, but not limited to, overall complexity, stage of development and progress made to date, results of testing, and consideration as to the nature of the remaining development work, to assess probability of attaining the performance milestones defined in the Merger Agreement. If based on our assessment we believe attainment of a performance milestone is probable, we will recognize expenses related to the estimated stage of development for the performance milestone, excluding the value relating to the Unallocated Veloce Units. As of June 30, 2013, the first and second performance milestones had been attained and the third and final performance milestone is currently not yet believed to be probable of attainment.

The estimated total value of the Veloce consideration is currently based upon the benchmarks that were achieved during simulations that were performed during the third quarter of fiscal 2013 and correlating the results of the simulations to the contractual terms included in the Merger Agreement. As a result of higher than expected benchmarks achieved during simulations, the total

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estimated value to Veloce has been updated from a previous estimated maximum of $135 million to the contractual maximum of $178.5 million.

Total R&D expenses to be recognized relating to the completion of the first and second performance milestones is approximately $142.8 million of which approximately $135.8 million has been recognized through June 30, 2013. During the three months ended June 30, 2013 and 2012, expenses recognized in connection with first and second performance milestones were $3.3 million and $6.0 million, and $2.3 million and nil, respectively. See Note 5 to the Notes to Condensed Consolidated Financial Statements.

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 FASB ASC paragraph 330-10-35-14. To illustrate the sensitivity of inventory valuations to future estimates, as of June 30, 2013, reducing our future demand estimate to six months would decrease our current inventory valuation by approximately $1.7 million and increasing our future demand forecast to 18 months would increase our current inventory valuation by approximately $0.6 million.

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 that it is more likely than not that the fair value of an asset or asset group is less than its carrying value and 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 customers' 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 intellectual property ("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.

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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 costs 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 months ended June 30, 2013 and 2012, total mask costs capitalized were $1.2 million and $1.9 million, respectively.

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 the Black-Scholes option pricing model which is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. 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.

During the three months ended June 30, 2013, we have also granted Market Stock Units (“MSU”). The fair value of these grants was determined using the Monte Carlo model and considers the following inputs: the Company's stock price, the SPDR S&P Semiconductor Index value, expected volatilities of our stock price and the Index, correlation coefficients and risk free interest rates. Expense recognized relating to these grants is recorded ratably over the vesting term, net of estimated forfeitures.

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 Months Ended June 30, 2013 to the Three Months Ended June 30, 2012

Net Revenues. Net revenues for the three months ended June 30, 2013 and 2012 were $54.1 million and $41.3 million, representing an increase of 31.1%. 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 June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase		% Change
Computing	$	26,492	48.9	%	$	22,438	54.3	%	$	4,054	18.1	%
Connectivity	27,656		51.1		18,856		45.7		8,800		46.7
	$	54,148	100.0	%	$	41,294	100.0	%	$	12,854	31.1	%

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During the three months ended June 30, 2013, our Computing revenues increased by 18.1% and our Connectivity revenues increased by 46.7 % compared to the same period last year. The overall revenue increase was spread across both the Computing and Connectivity product families. Our Computing revenues for the three months ended June 30, 2013 included a significant end-of-life order, compared to the quarter ended June 30, 2012. The increase in both Computing and Connectivity was a result of higher demand for our products due to overall improving macro conditions and improved demand for our connectivity products due to increasing capital expenditure spending on OTN and Ethernet in Telecom and Datacenter infrastructures.

Gross Profit. The following table presents net revenues, cost of revenues and gross profit for the three months ended June 30, 2013 and 2012 (dollars in thousands):

	Three months ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase (Decrease)		% Change
Net revenues	$	54,148	100.0	%	$	41,294	100.0	%	$	12,854	31.1	%
Cost of revenues	22,342		41.3		18,355		44.4		3,987		21.7
	$	31,806	58.7	%	$	22,939	55.6	%	$	8,867	38.7	%

The gross profit percentage for the three months ended June 30, 2013 was 58.7% compared to 55.6% for the three months ended June 30, 2012. The increase in our gross profit percentage, excluding the impact of amortization of purchased intangibles, was 59.2% and 57.2%, respectively, for the three months ended June 30, 2013 and 2012, respectively. The increase in our gross profit percentage was primarily due to favorable product mix and higher overall revenues that have an impact on the absorption of fixed costs.

The amortization of purchased intangible assets included in cost of revenues during the three months ended June 30, 2013 and 2012 was $0.1 million and $0.7 million, respectively. The decrease during the three months ended June 30, 2013 and 2012 was primarily due to the impact of intangible assets written off due to the sale of TPack in April 2013, and certain purchased intangible assets being fully amortized during the fiscal year ended March 31, 2013 resulting in a lower amortization charge in the three months ended June 30, 2013.

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 months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase/Decrease			% Change
Research and development	$	34,506	63.7	%	$	34,771	84.2	%	$	(265	)	(0.8	)%
Selling, general and administrative	$	9,526	17.6	%	$	12,470	30.2	%	$	(2,944	)	(23.6	)%

Research and Development. The decrease of 0.8% or $0.3 million of R&D expenses for the three months ended June 30, 2013 compared to the three months ended June 30, 2012, was mainly due to a reduction in personnel costs of $2.1 million, $0.6 million in direct project costs, $2.4 million reduction in stock compensation expense, warrant expense of $1.3 million in June 2012, offset by an increase of $7.0 million in Veloce related expenses.

Research and development expense recognized in connection with the Veloce consideration was $9.3 million and $2.3 million, during the three months ended June 30, 2013 and 2012. Refer to Note 5 to the Notes to Condensed Consolidated Financial Statements for further details relating to Veloce.

Selling, General and Administrative. The decrease in SG&A expenses of 23.6% or $2.9 million during the three months ended June 30, 2013, compared to the three months ended June 30, 2012 was mainly due to a $1.0 million reduction in personnel costs, $1.4 million reduction in stock compensation expense and $0.3 million reduction in sales commissions.

Stock-Based Compensation. The following table presents stock-based compensation expense for the three months ended June 30, 2013 and 2012, which was included in the tables above (dollars in thousands):

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	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase/Decrease			% Change
Costs of revenues	$	96	0.2	%	$	261	0.6	%	$	(165	)	(63.2	)%
Research and development	1,798		3.3		4,205		10.2		(2,407		)	(57.2	)
Selling, general and administrative	1,820		3.4		3,223		7.8		(1,403		)	(43.5	)
	$	3,714	6.9	%	$	7,689	18.6	%	$	(3,975	)	(51.7	)%

The decrease in stock-based compensation of 51.7% during the three months ended June 30, 2013 compared to the three months ended June 30, 2012 was primarily due to the effect of the expense that was recorded relating to our Performance Retention Grants during the three months ended June 30, 2012. Stock-based compensation expense will continue to have a potentially significant adverse impact on our reported results of operations, although it will have no impact on our overall cash flows.

Interest and Other Income, net. The following table presents interest and other income (expense), net for the three months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended June 30,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase (Decrease)		% Change
Interest income (expense), net	$	3,666	6.8	%	$	1,679	4.1	%	$	1,987	118.3	%
Other income (expense), net	$	129	0.2	%	$	83	0.2	%	$	46	55.4	%

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 increase in interest income, net for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was primarily due to realized gains from the sale of short-term investments and marketable securities which was partially offset by lower interest income due to our lower cash, cash equivalents and short-term investments available-for-sale balances.

FINANCIAL CONDITION AND LIQUIDITY

As of June 30, 2013, our principal source of liquidity consisted of $89.7 million in cash, cash equivalents and short-term investments which is approximately $1.28 per share of outstanding common stock as compared to $1.26 per share at March 31, 2013. Working capital, defined as net current assets minus net current liabilities, as of June 30, 2013 was $67.6 million. Total cash, cash equivalents, and short-term investments increased by $4.3 million during the three months ended June 30, 2013, primarily due to net proceeds from the sale of TPack of $29.5 million, proceeds from stock issuance of $0.2 million offset by cash used for operations of $17.8 million, purchase of property and equipment of $0.3 million, the funding of restricted stock units withheld for taxes of $2.4 million and a decline in net unrealized gains of $4.5 million. At June 30, 2013, we had contractual obligations not included on our balance sheet totaling $70.3 million, primarily related to facility leases, IP licenses, engineering design software tool licenses, non-cancelable inventory purchase commitments and liabilities for uncertain tax positions.

For the three months ended June 30, 2013, we used $17.8 million of cash in our operations compared to $20.5 million used for our operations for the three months ended June 30, 2012. Our net income of $10.9 million for the three months ended June 30, 2013 included $15.9 million of non-cash items consisting of $2.6 million of depreciation, $0.3 million of amortization of purchased intangibles, $3.7 million of stock-based compensation, $9.3 million of additional Veloce compensation cost. Our net loss of $23.4 million for the three months ended June 30, 2012 included $14.9 million of non-cash charges consisting of $2.4 million of depreciation, $1.3 million of amortization of purchased intangibles and $9.0 million of stock-based compensation and $2.3 million of additional Veloce compensation cost offset by a $0.1 million reduction to the estimated fair value of our contingent consideration. The remaining change in operating cash flows for the three months ended June 30, 2013 primarily reflected increases in accounts receivable, accounts payable, accrued payroll and other accrued liabilities, and decreases in inventories, other assets, Veloce accrued liability and deferred revenue. Our overall quarterly days sales outstanding was 48 days and 39 days for the three months ended June 30, 2013 and March 31, 2013, respectively. Increase in the revenues generated during the last month of the quarter ended June 30, 2013 as compared to the same period for the quarter ended March 31, 2013 was the primary reason for the increase in our days' sales outstanding.

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We provided $41.0 million in cash from our investing activities during the three months ended June 30, 2013, compared to providing $10.9 million during the three months ended June 30, 2012. During the three months ended June 30, 2013, we used $0.3 million for the purchase of property and equipment, and provided $29.5 million for the proceeds from the sale of TPack and net proceeds of $11.8 million from short-term investment activities. During the three months ended June 30, 2012, we generated $9.9 million for net short-term investment activities offset by $5.6 million for the purchase of property and equipment and $6.6 million from proceeds of strategic investments.

We used $2.6 million in cash for our financing activities during the three months ended June 30, 2013, compared to providing $2.2 million during the three months ended June 30, 2012. The major financing use of cash for the three months ended June 30, 2013 was restricted stock units withheld for taxes of $2.4 million and other uses of cash of $0.4 million offset by proceeds from the issuance of common stock of $0.2 million. The major financing use of cash for the three months ended June 30, 2012 was $0.7 million for the repurchase of common stock, and $0.2 million for restricted stock units withheld for taxes, offset by $3.3 million in proceeds from the issuance of common stock.

Sale of TPack

During the quarter ended June 30, 2013, the Company completed the sale of TPack and certain specified intellectual property assets owned by the Company related to TPack's business for an aggregate consideration of $33.5 million, net of working capital adjustments. During the quarter, the Company received a cash payment of $30.2 million. The remaining value of the transaction of $3.3 million has been held back by the buyer until March 2014 to secure the Company's indemnification obligations subject to and in accordance with the terms of the purchase agreement. In connection with this sale, the Company recorded a gain of $19.7 million for the three months ended June 30, 2013. Refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements for details.

Acquisition of Veloce

On June 20, 2012 (the “Closing Date”), we completed our acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, (the “Merger Agreement”). Veloce has been developing specific technology for the Company.

The terms of the Merger Agreement include the payment of the total consideration, payable in shares of Company common stock and/or cash (at our election) to the holders of Veloce common stock, Veloce stock options that were vested on the Closing Date, and Veloce stock equivalents (collectively “Veloce Equity Holders”), and to Veloce stock equivalents that have not yet been allocated to individuals (“Unallocated Veloce Units”).

During the three months ended June 30, 2013 and 2012, as part of the above arrangement, we paid approximately $25.0 million and $12.7 million, respectively, in cash and issued approximately 1.4 million shares and 2.4 million shares, respectively, valued at approximately 10.0 million and $13.7 million, respectively.

Payment of the remaining Veloce consideration will occur based upon when each performance milestone is completed and when satisfaction of vesting requirements, if applicable, are met. As of June 30, 2013, the first two performance milestones were completed, and the third and final performance milestone was not yet believed to be probable of attainment as of June 30, 2013.

Approximately $142.8 million of Veloce consideration is expected to be payable upon the attainment of the first two Veloce development and performance milestones and is expected to be paid over multiple quarters. As of June 30, 2013, $68.1 million has been paid and we expect that an additional $40.0 million is expected to be paid by September 30, 2013. The $68.1 million paid to date includes approximately $41.5 million in cash and the issuance of 4.4 million shares of common stock valued at approximately $26.6 million. Additional consideration may become payable if we are able to complete the third and final performance milestone. The Veloce accrued liability included on the Condensed Consolidated Balance Sheets is based upon the amount of R&D expense recognized in connection with the development of the Veloce performance milestones less amounts paid either in cash or our common stock.

The total estimated value of the Veloce merger consideration is based on the Company achieving certain performance benchmarks defined under the Merger Agreement within a certain time period. We performed various simulations during the third quarter of fiscal 2013. The results of the simulations exceeded expectations for certain of the benchmarks defined under the Merger Agreement, and as a result the estimated maximum value of the Veloce merger consideration was increased from approximately $135.0 million to the contractual maximum of $178.5 million, based on the Company's current expectations regarding the achievement of such product development milestones. As such, the total estimated value of the Veloce merger consideration has been updated to be in the range of $135.8 million to $178.5 million, depending upon the actual achievement of the product development milestones and technical performance results. The consideration that we will be obligated to pay, will be payable

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upon completion of the respective performance milestones, the issuance of the remaining Veloce stock equivalents and any vesting requirements, if applicable, and can be settled in cash or the Company's common stock, at the election of management.

Liquidity

We currently 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. We expect to satisfy the Veloce-related payment obligations using a combination of cash and the issuance of shares of common stock. We expect our resources to be sufficient to make the above described Veloce-related payments while maintaining adequate cash to run our operations. In April 2013, we completed the sale of our wholly owned subsidiary, TPack A/S, for an aggregate consideration of $33.5 million, payable in cash. In connection with the closing, we received a cash payment of $30.2 million.

Our available liquidity could be adversely affected, however, if we decide to satisfy the Veloce liability using a greater proportion of cash rather than our common stock, or if our normal operations require us to expend more cash than currently expected. If our stock price declines, it could result in a higher dilution to our stockholders. As a result of any of the above, we could elect or be required to pursue various options to raise additional capital or generate cash. There can be no assurance that any of the options that we currently believe to be available will be viable in the future on commercially reasonable terms or at all.

Stock Repurchase Program

In August 2004, the Board of Directors 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 agreements. In October 2008, the Board of Directors increased the stock repurchase program by $100.0 million. There were no stock repurchases during the three months ended June 30, 2013. During the three months ended June 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 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 weighted average price of $10.04 per share. All repurchased shares were retired upon delivery to the Company. As of June 30, 2013, the Company had $15.9 million available in its stock repurchase program.

The Company did not enter into any structured stock repurchase agreements during the three months ended June 30, 2013 and 2012.

Other

Our aggregate fixed commitments payable over the next four years for operating leases, licensing fees relating to our R&D efforts, including our licensed IP, technology, product design, test and verification tools, are approximately $27.0 million. These amounts are also included in the table below.

The following table summarizes our contractual operating leases and other purchase commitments as of June 30, 2013 (in thousands):

	Operating Leases		Other Purchase Commitments			Total
Fiscal Years Ending March 31, 2014	$	1,266	$	57,551	*	$	58,817
2015	929		6,305			7,234
2016	216		3,971			4,187
2017	39		14			53
Total minimum payments	$	2,450	$	67,841		$	70,291

* 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 June 30, 2013.

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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 condensed 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 June 30, 2013, our investment portfolio included short-term securities classified as available-for-sale investments with an aggregate fair market value of $50.1 million and a cost basis of $46.6 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.

The following table presents the hypothetical changes in fair value of our short-term investments held at June 30, 2013 (in thousands):

	Valuation of Securities Given an Interest Rate Decrease of X Basis Points (“BPS”)						Fair Value as of June 30, 2013		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	$	48,528	$	51,461	$	50,770	$	50,057	$	49,262	$	48,528	$	52,116

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 three months ended June 30, 2013. Gains and losses are recognized in income or expenses in the condensed consolidated statements of operations in the current period.

ITEM 4. CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission 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 timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures 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.

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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 our Vice President, Controller and Chief Accounting Officer, acting as the Company's Principal Financial Officer on an interim basis, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our CEO and our Vice President, Controller and Chief Accounting Officer, acting as the Company's Principal Financial Officer on an interim basis, concluded that as of such date 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 8 of Notes to the Condensed 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 Annual 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 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, 2013 filed with the SEC on June 11, 2013.

*Our liquidity may deteriorate based on our future uses of cash

Although we currently believe we have adequate liquidity to meet our capital requirements and fund our operations for at least the next twelve months, our cash balances could decrease significantly if we decide to pay for the remainder of the Veloce acquisition consideration using a greater proportion of cash, instead of our common stock, than is currently anticipated, or if our normal operations require us to expend more cash than anticipated. As a result of any of the above, we may be faced with liquidity issues and could elect or be required to pursue various options to raise additional capital or generate cash. There can be no assurance that any of the options that we currently believe to be available will be viable in the future on commercially reasonable terms or at all.

During the three months ended June 30,2013 and 2012, our cash used in operating activities was approximately $17.8 million and $20.5 million, respectively.

If we are unable to timely develop new products or new versions of 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 less competitive or 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. In particular, our inability to productize our X-Gene^TM Server on a Chip^TM solution and related products in a timely manner would have a material adverse effect on our financial results and condition.

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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 and 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 manufacturing services purchased from and the technology components and tools licensed from third party suppliers;

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

• availability, quality, price, performance, power consumption, 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;

• maintaining compliance and compatibility with new and changing industry standards and requirements;

• our maintaining close working relationships with key customers so that they will design our products into their future products;

• our ability to develop, gain access to and use leading technologies in a cost-effective and timely manner; and

• our retention of key technical and design expertise within our employee ranks.

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^™ and other server processor products, we are a licensee of the ARM v8 64-bit architecture and will depend upon our continuing license rights to that ISA, including without limitation the timely completion and delivery by ARM of various updates and other deliverables under the license agreement. Furthermore, the development and commercialization of new products incorporating ARM architecture could be delayed if the ecosystem partners who rely on this architecture are unable to successfully establish their own operations on a timely basis including their continued access to and the use of the ARM architectural licenses or if they are unable to work closely with ARM in developing their products.

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

In June 2012, we completed the acquisition of Veloce under a merger agreement we entered into with Veloce in May 2009, as amended in November 2010 and April 2012. Pursuant to the merger agreement, the purchase price is estimated to be in the range of $135.8 million up to $178.5 million, depending upon the achievement and timing of multiple post-closing product development milestones and technical performance results. At this time, the eventual outcome of such milestones and performance results 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.

Even after the successful completion of the acquisition of Veloce as described above, we may fail to appropriately sustain the integration of the Veloce personnel and operations with that of the Company. The departure from the Company of one or more Veloce management or engineering personnel could materially adversely affect our product development efforts for X-Gene and next-generation products. Although we have spent considerable time and resources in the developmental effort, eventually we may be unsuccessful in developing, marketing and selling 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 would have a material adverse impact on our financial results and condition.

*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, discharging our remaining purchase price obligations in the Veloce acquisition) through the use of stock, adopting additional equity incentive plans and raising equity capital. Any issuance of our common stock will result in immediate dilution of our stockholders. In addition, the issuance of a significant amount of our common stock may result in additional regulatory requirements, such as stockholder approval. During the second quarter of fiscal 2014, we expect to issue approximately 2.4 million additional shares of our common stock as part of the Veloce acquisition consideration. Thereafter, we have the ability to issue up to approximately 6.1 million additional shares of our common stock as Veloce acquisition consideration without

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obtaining stockholder approval. In the event stockholder approval is required but not obtained, we likely will be forced to use a greater portion of our cash than currently anticipated in order to satisfy our Veloce payment obligations. The actual amount and timing of additional share issuances to be made in connection with Veloce acquisition payments will be based upon numerous factors including, without limitation, the total amount of acquisition consideration to be paid, the market price of our common stock as of each payment date, and our available cash balances and liquidity requirements as of such dates, none of which are determinable at this time.

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 rapid technological advances, price erosion, changing customer preferences, deregulation, 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.

We designed X-Gene for existing and emerging cloud and enterprise data centers. Existing data centers currently rely primarily on Xeon server processors and related chipsets developed and marketed by Intel. As a result, we will compete with Intel in the existing cloud and enterprise server infrastructure market. In the cloud and enterprise server market, we will compete with Intel Xeon in addition to low-power server silicon products from Intel, AMD, and a number of ARM-based server silicon vendors, including Calxeda, Cavium, Texas Instruments and others. In the embedded computing silicon solutions market, we compete with technology companies such as Broadcom, Cavium and Freescale Semiconductor. In addition, some of our customers and potential customers have internal integrated circuit designs or manufacturing capabilities with which we compete. In the connectivity silicon solutions market segment, we compete primarily against companies such as Broadcom, Cortina and PMC-Sierra. Many of these companies have substantially greater financial, marketing and distribution resources than we have. 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.

Many of our competitors have longer operating histories and presences in key markets, greater name recognition, larger customer bases and in some cases operate their own fabrication facilities. 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 and our customers face intense price pressure and competition from companies in lower cost countries such as China. In response to these price pressures, our customers could require us to reduce prices which could impact our financial results adversely. Furthermore, our discrete legacy products are being and could continue to be integrated into ASICs or combined into single chip solutions that could cause our revenues from such products to decline at a faster rate. As a result of each of these factors, 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, which could have a material adverse effect on our business, financial condition and results of operations.

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 our dependence on third-party manufacturing and supply relationships, including:

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• pricing of foundry services and or other supply chain vendors or packaging and test service vendors such as TSMC, IBM, ASE, SPIL, etc.;

• reduced control over the supply chain process, delivery schedules and quality;

• inadequate manufacturing yields and excessive costs;

• the risks associated with transitioning our manufacturing supply from one foundry or other supplier to another;

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

• difficulties selecting and integrating new subcontractors;

• the 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 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 and manufacturing, packaging and test service providers generally operate 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 our competitors that use their own fabrication facilities or provide larger volumes of business to their outside foundries. A manufacturing disruption or capacity constraint experienced by one or more of our outside foundries or service providers or a disruption of our relationship with an outside foundry or service provider, including discontinuance of our products by that foundry or service provider, would negatively impact the production and cost structure of certain of our products for a substantial period of time.

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.

Each of 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 silicon solutions, 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. This risk is substantially higher with respect to the anticipated manufacture of our new X-Gene products at 40 nanometers and smaller geometries such as 28 nanometers. 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 would 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 or raise the prices it charges us. 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.

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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. In particular, in December 2012, we implemented a Board-approved restructuring plan that resulted in an aggregate reduction in force of approximately 10% of our employee headcount. Additional reductions in force and senior level employee replacements are likely to occur as we continue to realign our business organization, operations and product lines. Employees whose positions were or will be 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 employment, 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, current 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 or remain competitive.

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

Currently, we are shipping samples of our X-Gene 40 nanometer product and we have a 28 nanometer version of the product under development. 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. We have designed IC products, such as X-Gene, to be manufactured at 40 nanometer process technologies and are currently developing the next generation of X-Gene to be manufactured at 28 nanometers. We have in the past experienced 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 with respect to the 28 nanometer version of X-Gene and as we continue to transition our other IC products to smaller geometry processes and at competitive pricing. We are dependent on our relationships with our foundries to transition to smaller geometry processes successfully and at competitive pricing. 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 and at competitive pricing, 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 declined in the past and may do so again in the future. 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.

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*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 have experienced an economic downturn for the last several years. While the U.S. economy has recently begun to rebound from the economic downturn, we cannot predict whether this recovery will be sustained or will reverse course. Deteriorating economic conditions in certain countries, including several countries 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 resulted in a decline in our near term revenues. 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 in turn 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 (loss) income. Our portfolio primarily includes fixed income securities, closed end bond funds, mutual funds and preferred stock, the values of which are subject to market price volatility. The deterioration of these market prices may have an unfavorable impact on our portfolio and may cause us to record impairment charges to our earnings. During the fiscal year ended March 31, 2013, we recorded approximately $1.1 million in other-than-temporary impairment charges of our short term investments and marketable securities. During the fiscal quarter ended June 30, 2013 , we did not record any other-than-temporary impairment charges. If market prices continue to decline or securities continue to be in a loss position over time, we may recognize impairments in the fair value of our investments.

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. We expect that our largest customers will continue to account for a substantial portion of our net revenue for the foreseeable future. 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, include those discussed elsewhere in this “Risk Factors” section, as well as the following:

• 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 product orders;

• 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, including without limitation our X-Gene products, 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, including without limitation failure of X-Gene to be commercially accepted at the levels we anticipate;

• risks associated with our or our customers' dependence on third-party manufacturing and supply relationships;

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• increases in the costs of mask sets and products or the discontinuance of products, services or components by our suppliers;

• 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 architectural licenses, technology access fees and mask set costs;

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

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

• 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;

• the effects of changes in accounting standards; and

• the availability of ecosystem partners.

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. 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 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.

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 correlates to overall semiconductor industry conditions and product lead times. Because turns business is difficult to predict, varying levels of turns business make

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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 operating results may suffer.

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

There can be no assurance that the recent slowdown in the adoption of technology, including without limitation optical transport network (OTN) technology, in our Connectivity business will reverse itself the near future. It is possible that any reversal of the slowdown will take longer than previously anticipated, 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.

We are continuing to focus our current connectivity investments on high growth 10G and faster Ethernet solutions, data center, 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.

If the technology sector and the Internet do not continue to grow, our business will suffer.

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 economic 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 potential 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.

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 and 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.

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*Our business is dependent on selling to distributors and any disruption in their operations could materially harm our business

Sales to distributors accounted for approximately 58% of our revenues for the three months ended June 30, 2013. Our largest distributor accounted for approximately 38% of our revenues for the three months ended June 30, 2013 . We do not have long-term agreements with our distributors and either party can terminate the relationship with little advance notice.

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.

*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 net revenues in any particular period. Based on direct shipments, net revenues to customers that were equal to or greater than 10% of total net revenues were as follows:

	Three Months Ended
	June 30,
	2013		2012
Avnet (distributor)	38	%	28	%
Wintec (global logistics provider)	18	%	18	%

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

• customers may stop incorporating our products into their own products with limited notice to us;

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

• the timing and success of new product introductions by customers ;

• some of our customers may reduce or eliminate future purchase orders or design wins placed with us as an adverse reaction to our having sold patents to third parties that thereafter asserted the acquired patents in infringement actions brought against such customers;

• 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 or may establish 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; and

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

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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*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.

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, from time to time some of our suppliers deliver to us based on allocations which in turn causes 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.

In addition, 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.

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. 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.

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, which cannot be guaranteed. The design win may never result in an actual order or sale of our products. If we fail to generate revenues after incurring substantial expenses to develop a product, our business and operating results would suffer.

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, and 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

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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 are unable to further expand our share of these markets or accurately anticipate or react timely or properly to emerging trends, our revenues may not grow and could decline.

Our target markets, including the data center market, 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, 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, as well as the divestitures of subsidiaries or operations that no longer are material to our core business. Merger and acquisition activities involve numerous risks and we may not be able to conduct these activities 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 and increasing equity investments in companies developing such products, technologies or businesses, and divesting business units or subsidiaries and selling product lines and technologies that are no longer material to our core business, are all part of our long-term business strategy. The risks involved with merger and acquisition, equity investment and divestiture 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;

• potential difficulties resulting from the divestiture of business operations, with respect to protecting the confidentiality of proprietary information and trade secrets not subject to the divestiture;

• difficulties and risks associated with the methods, estimates and judgments we use in applying critical accounting policies, such as the valuation of merger consideration affecting operating expenses as reflected in the reduction in R&D expense recognized in the fourth quarter of fiscal 2013;

• 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;

• both expected and unanticipated adverse effects from the loss of technologies, patents and other intellectual property, and personnel relating to divested subsidiaries, product lines and businesses;

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

• costs associated with acquisitions, investments and divestitures;

• difficulties associated with combining, integrating or separating acquired or divested operations, products or technologies;

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• 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 and the effect of divesting subsidiaries and businesses on our revenues and margins.

In addition, as a result of our acquisition and investment activities, 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 unanticipated third-party litigation and other unknown liabilities and unanticipated costs, events or circumstances;

• incur adverse tax consequences;

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

• incur large one-time charges and immediate write-offs.

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

Our past acquisitions required us to capitalize significant amounts of goodwill and purchased intangible assets. As a result of the past 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. Additionally, the past deterioration in market values has 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 June 30, 2013, we had $11.7 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 April 2013, we completed the sale of 100% of the issued and outstanding shares of TPack A/S, a limited liability company organized under the laws of Denmark and a wholly-owned subsidiary of the Company, and certain specified intellectual property assets owned by the Company related to TPack's business for an aggregate consideration of $33.5 million, payable in cash. In connection with the closing, the Company received a cash payment of $30.2 million. The remaining cash payment of $3.3 million of the aggregate consideration will be held back until March 31, 2014 to secure the Company's indemnification obligations. Refer to Footnote 12 to Notes to Consolidated Financial Statements in our Form 10-K and Footnote 2 of the notes to the condensed consolidated financial statements of our form 10-Q for the quarter ended June 30, 2013 for details of the sale.

In January 2013, we sold certain assets relating to our active optical technology platform to Volex Plc for a purchase price of approximately $2 million. Pursuant to the asset sale, AppliedMicro and Volex will share ownership of the associated active optical patent portfolio and are expected to collaborate on certain next-generation optical interconnect products and solutions.

In June 2012, we acquired Veloce for an initial consideration of $60.4 million with additional consideration payable based upon the achievement and timing of multiple post-closing product development milestones and technical performance results. Pursuant to the merger agreement, the purchase price is currently estimated to be in the range of $135.8 million up to $178.5 million, depending upon the actual achievement of such milestones and performance results. At this time, the eventual outcome of one milestone 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.

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 are subject to certain risks, including:

• foreign currency exchange fluctuations to the extent that this impacts our customers purchasing power;

• changes in regulatory requirements;

• tariffs, rising protectionism and other trade barriers;

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• 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;

• 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

• uncertain economic conditions that may worsen or sustain improvements which trail those in the United States.

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, other U.S. and foreign 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 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 (loss) income, 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. As of June 30, 2013 the unrealized losses on these securities that were not previously written down as an other-than-temporary impairment charge were approximately $579,000, of which substantially the entire amount has been at an unrealized loss for less 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 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

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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.

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, both before and after commencement of commercial production, despite testing by us, our suppliers or our customers. Any such problems could result in:

• delays in development, manufacture and roll-out of new products;

• 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 import and 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 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 import or export regulations can result in penalties which may include denial of import or 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. We cannot predict whether quotas, duties, taxes or other charges or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries.

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

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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. In addition, as a result of the reduction in the number of employees assigned to financial reporting and regulatory compliance functions in connection with recently completed and anticipated future restructuring activities, we may be at increased risk of failures in our internal control systems. 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, 2013. We cannot be certain in future periods that any control deficiencies that may constitute one or more “significant deficiencies” (as defined by the relevant auditing standards) or material weaknesses in our internal control over financial reporting will not be identified by us or our independent registered public accounting firm. If we fail to maintain the adequacy of our internal controls, including any failure to implement or difficulty in implementing required new or improved controls, our business and results of operations could be harmed, the results of operations we report could be subject to adjustments, and we could fail to be able to provide reasonable assurance as to our financial results or the effectiveness of our internal controls or meet our reporting obligations. 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. Any restatement or actual or perceived weakness or conditions in our internal control over financial reporting, or in management's assessment thereof, could result in a loss of public confidence in our reported financial information, and have a material adverse effect on our business, the market price of our common stock, and our ability to access capital markets, and may result in litigation claims, regulatory actions and may otherwise divert management attention and resources.

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. In addition, as our core business and technologies continue to evolve, including without limitation with respect to our growth and expansion into next-generation cloud infrastructure and data center markets, our success will depend on effectively transitioning to certain new management and engineering personnel most capable of supporting that evolution. 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 identify, 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. Also, the departure from the Company of one or more Veloce management or engineering personnel could materially adversely affect our product development efforts for X-Gene and next-generation products.

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 and other legal obligations to us. Our efforts to enforce these contractual covenants and legal obligations has required, and may in the future require, us to incur significant litigation expenses and devote significant management attention. Furthermore, 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.

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. 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.

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

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A significant portion of our R&D and supply chain operations are located in Asia. These areas are subject to natural disasters such as earthquakes, floods and tsunamis, like those that struck Japan and Thailand. In addition, our headquarters and satellite offices in California are located in areas containing known earthquake fault lines. We do not have earthquake insurance for these facilities, because adequate coverage is not offered at economically justifiable rates. A significant natural disaster, shortage of water or other catastrophic event affecting us, our suppliers or our customers 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, litigation costs and remediation expenses 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 ongoing 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 contamination. 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 September 2012, a toxic tort litigation that was commenced in 2010 against Omega and the PRP group by individuals alleging injuries caused by the Omega Site that was settled and dismissed with prejudice.

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 addition, in January 2012, as a result of the PRP group's modification of its liability allocation formulae and the withdrawal of PRP group members, 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 (“Dodd-Frank”), 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 July

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2013, the U.S. Court of Appeals for the District of Columbia rejected a challenge to the conflict minerals rules that had been brought in October 2012 by the National Association of Manufacturers and the U. S. Chamber of Commerce. In January 2013, the SEC's conflicts minerals disclosure rules became effective, requiring companies to make their first conflict minerals disclosures on or before May 31, 2014 for the 2013 calendar year. We are currently evaluating the disclosure requirements in order to comply with these disclosures, if any, within the prescribed time frame.

In the semiconductor industry, these minerals are most commonly found in gold and other metals. As there may be only a limited number of suppliers offering “conflict free” metals, we cannot be sure that our contract manufacturers and other suppliers 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 any of our issued patents will adequately protect the IP in our products and processes, will provide us with competitive advantages, will not be challenged by third parties or that, if challenged, any such patents will be found to be valid or enforceable. In addition, there can be no assurance our pending patent applications or any future applications will be approved or that we will successfully prepare and file patent applications with respect to new inventions potentially subject to patent protection. 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.

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, licensees 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.

In the past we have sold to third parties, including non-practicing entities (also known as "NPEs" or "patent trolls"), 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. Certain NPE acquirors have brought and may in the future bring legal actions asserting infringement of the acquired patents against

53

various defendants, including customers or potential customers of ours. Although we are expressly licensed and our customers are similarly protected 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 by products other than ours (e.g., products internally developed by the customer or purchased from third-party suppliers other than us), have reacted adversely to us 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 us. 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.

In addition, 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 that our products are infringing or misappropriating the IP rights of third parties. The semiconductor industry is characterized by substantial litigation regarding patent and other IP rights. Currently we are 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, NPEs 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, we have been or currently are subject to the following:

• having information about our products and technologies subpoenaed, and our employees deposed, 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;

• claims, contractual or otherwise, 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; and

• demands from customers that we enter into “springing licenses” that prospectively grant such customers and related parties automatic license rights to any patents we sell or otherwise divest control over in specified transactions.

Such claims and demands could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations.

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:

• fluctuations in our anticipated or actual operating results;

• our announcement of actual results or financial outlook that are higher or lower than market or analyst expectations;

• changes in the economic performance or market valuations of other semiconductor companies or companies perceived by investors to be comparable to us;

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

• fluctuations in the anticipated or actual operating results or growth rates 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, or loss of coverage, by securities analysts;

• positive or negative commentary about our business or prospects by industry bloggers and journalists;

• volume fluctuations due to inconsistent trading volume levels of our shares;

• announcements of merger or acquisition transactions;

• management changes;

• our inclusion in certain stock indices; and

• general economic and market conditions.

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

54

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 past decline and inconsistent recovery 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.

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.

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

None 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

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None.

56

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.
10.76	Shiva Natarajan Interim Chief Financial Officer Agreement
10.77	Robert Gargus Separation Agreement
10.78	Robert Gargus Advisory Agreement
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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 8, 2013

APPLIED MICRO CIRCUITS CORPORATION
By:	/S/    SHIVA K. NATARAJAN
	Shiva K. Natarajan
	Vice President and Interim Chief Financial Officer
	(Duly Authorized Signatory and Principal Financial and Accounting Officer)

58

Exhibit Index

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.
10.76	Shiva Natarajan Interim Chief Financial Officer Agreement
10.77	Robert Gargus Separation Agreement
10.78	Robert Gargus Advisory Services Agreement
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.

59

EX-10.76

Exhibit 10.76

Agreement with Shiva Natarajan regarding appointment as Interim Chief Financial Officer

The following is a summary of the material terms of the compensation awarded by the Company to Shiva Natarajan, the Company's Vice President, Controller, and Chief Accounting Officer, in connection with his appointment, effective June 24, 2013, as the Company's Chief Financial Officer on an interim basis: Effective June 16, 2013, Mr. Natarajan's annual base salary was $275,000, which will not be impacted by Mr. Natarajan's acceptance of the Interim Chief Financial Officer position. In consideration of Mr. Natarajan agreeing to accept the role of Interim Chief Financial Officer and commencing with the quarterly report on Form 10-Q to be filed for the quarter ending June 30, 2013, the Company will pay to Mr. Natarajan a cash bonus in the amount of $25,000 for each quarterly report on Form 10-Q filed before the start of a replacement Chief Financial Officer and for the first two quarterly reports on Form 10-Q (or Form 10-K, as the case may be) filed after the start of a replacement CFO (subject to Mr. Natarajan's continued employment). The Company also intends to award Mr. Natarajan 50,000 restricted stock units on August 15, 2013 which will vest in equal installments on a quarterly basis over a four-year period with a vesting commencement date of November 15, 2013, subject to his continued employment with the Company and the other terms of the grant agreement.

EX-10.77

EX10.77

June 24, 2013

Mr. Robert Gargus

Re: Resignation Letter Agreement

Dear Bob:

The intent of this letter agreement (“Agreement”) is to fully and finally set forth our mutual agreement regarding the voluntary resignation of your employment with Applied Micro Circuits Corporation (including its direct and indirect subsidiaries, “AppliedMicro” or the “Company”) and your continuing obligations following such resignation, including the entry by you and the Company into an advisory services agreement effective as of the resignation date (“Services Agreement”). To the extent the express terms of this Agreement are different from those set forth in your employment letter agreement with AppliedMicro dated September 14, 2005 (the “Employment Agreement”), the Employment Agreement will be deemed modified and amended; otherwise all terms of the Employment Agreement remain in full force and effect.

You have the right to consult with an attorney before signing this document. You have up to twenty-one (21) days from the date of receipt of this Agreement to consider it. After signing this Agreement, you may revoke it within seven (7) days. The Agreement will become effective on the eighth day after you sign it.

Separation Date. By mutual agreement, your employment and officer positions with AppliedMicro will terminate on June 24, 2013 (the “Separation Date”), which will be the effective date of your resignation from AppliedMicro and the commencement date of your Services Agreement. You have informed the Company you currently intend to treat your resignation as a retirement. AppliedMicro’s public disclosure on Form 8-K of the terms of your departure will include a reference to your retirement. You will be provided with the opportunity to review and comment upon the wording of the Form 8-K prior to its filing, although the Company reserves sole control over the final wording and filing date of the disclosure. The Company does not currently intend to issue a press release announcing your departure (although it reserves the right to do so in its sole discretion).

You will continue to be paid all regular base salary through the Separation Date. Taxes and other legally required deductions will be withheld from these salary payments. Outstanding accrued PTO, if any, will be fully paid out on the Separation Date. In addition, (a) the options to purchase shares of AppliedMicro Common Stock (“Option Shares”) granted to you under the Applied Micro 2002 Equity Incentive Plan and the stock option agreements between you and the Company (collectively, the “Option Agreements”), and (b) the restricted stock units (“RSUs”) granted to you under the Applied Micro 2011 Equity Incentive Plan and the RSU award agreements between you and the Company (collectively, the “RSU Agreements”), will continue to vest in accordance with their terms through the Separation Date.

You agree to submit all expense reimbursement requests to the Company within thirty (30) days after the Separation Date, which the Company will process in accordance with its standard procedures. All amounts contributed by you to the AMCC Deferred Compensation Plan (the “deferred Comp Plan”), including severance amounts payable under this Agreement, will be subject to and governed by the terms and conditions of the Deferred Comp Plan and your annual enrollment forms submitted under the Plan, including your enrollment form dated December 14, 2012.

1

Subject to and in partial consideration for your signing the Services

Agreement and a release agreement as described below, on the eighth (8^th) day following the date you sign this Agreement (and provided you have not rescinded it) you will receive the following benefits (collectively, the “Separation Date Benefits”):

(i) a cash severance payment in the amount of $320,000, payable by the Company on a pre-tax basis into your Deferred Comp Plan account in accordance with the terms and conditions thereof;

(ii) twelve (12) full months (measured from the Separation Date)of vesting acceleration of your time-based Option Shares (i.e., 13,475 options exercisable at $11.86 per share);

(iii) four (4) full quarters (measured from the Separation Date) of vesting acceleration of your time-based RSUs (i.e., 10,150 RSUs);

(iv) fifteen (15) full months (measured from the Separation Date) of Option Shares exercise extension period;

(v) twelve (12) full months (expiring June 30, 2014) of extended health insurance coverage, which will consist of the same coverage extended to you and your dependants as of immediately before your resignation and including Execucare coverage; and

(vi) you will be permitted to keep the Macintosh laptop, iPhone and iPad previously issued to you by the Company, subject to their being wiped of AppliedMicro proprietary information (to the Company’s satisfaction), and the Company will continue to pay or reimburse you for your iPhone telephone charges for a period of sixty (60) days following the Separation Date (at a rate not to exceed your prior average billing rates).

In addition, for so long as you treat your resignation as a bona fide retirement, you will be eligible under AppliedMicro’s Retiree Medical Benefits Policy to extended health insurance coverage (at your cost)until age 65, subject to your compliance with the terms and conditions of such Policy.

The parties’ agreement above regarding the resignation of your employment on the Separation Date will not trigger or otherwise give rise to any additional vesting acceleration or severance payment provisions set forth in the Option Agreements, the RSU Agreements, or the Company’s Executive Severance Benefit Plan or any other severance payment obligations.

Releases. In partial exchange for receiving the compensation described above, you agree to sign and deliver to the Company on the date hereof the Release Agreement attached as Exhibit A hereto.

Post-Employment Obligations. Each of your duties and obligations set forth in the Inventions, Confidentiality and Trade Secrets Agreement dated October 10, 2005 between you and the Company (the “Inventions Agreement”) shall survive the Separation Date and the termination of your employment in accordance with the terms of such agreement.

Wages, Benefits & Insurances Cease. Following the expiration of your 12-months extended health insurance coverage described above, you may have the right to further extend your health insurance at your cost under the COBRA or Cal-COBRA law. (You will be notified of your COBRA rights in a

2

separate written communication.) Other than the Separation Date Benefits and other compensation expressly set forth in this Agreement, you will receive no other wages, insurances, bonuses, commissions, vacation pay, benefits, or other monies or benefits from the Company for your employment through the Separation Date, and you agree that you are entitled to no other wages, benefits, severance payments, insurances, bonuses, commissions, vacation pay or other monies of any kind or nature from the Company, except as expressly provided herein.

Common Stock. As of the Separation Date, and giving effect to the vesting acceleration described above, you will have approximately 300,323 vested and exercisable Option Shares and zero unvested Option Shares granted under the Option Agreements and approximately 227,250 unvested RSUs (including both time-based and performance-based) granted under the RSU Agreements, in each case without giving effect to any stock splits or consolidations. These figures are subject to verification by Stock Administration. Except as specifically amended or superseded by this Agreement, all other terms of the Option Agreements and RSU Agreements remain in full force and effect. Your vested Option Shares may be exercised up to 15 months after the Separation Date, in accordance with and subject to this Agreement and the other applicable terms and conditions of the Option Agreements.

Nondisparagement. You acknowledge, confirm and agree to abide by the nondisparagement covenant set forth in Section 8.4 of the Services Agreement. In addition, Paramesh Gopi agrees not to make any derogatory or adverse statements, written or oral, regarding you to anyone.

Confidentiality. You agree that all matters relating to this Agreement and the Services Agreement are confidential and subject to the nondisclosure provisions of the Inventions Agreement and Section 4 of the Services Agreement. You agree that the terms and conditions of this Agreement and the Services Agreement are unique to you and confirm that you have not and will not disclose such terms and conditions to any person or entity with the sole exception of your attorneys, spouse, financial advisor and tax authorities. You specifically agree not to discuss such terms and conditions with any existing or former employees of the Company (other than the CEO, CFO, GC and VP of HR), or any stockholders or customers of the Company of which you are aware. Any breach of this section or the nondisparagement section above may be treated by the Company as a material breach of the Services Agreement.

Dispute Resolution. You and the Company agree that any dispute between you (including any claims you may have against any officer, director or employee of the Company or any subsidiary thereof), including without limitation any dispute arising directly or indirectly out of the matters described in this letter agreement shall be resolved by final and binding arbitration pursuant to and in accordance with the Arbitration Agreement entered into between you and the Company, a copy of which is attached hereto as Exhibit B.

General Provisions. Upon the mutual execution and delivery of this Agreement and the Services Agreement, the Company will reimburse you for your actual expenses incurred in reviewing and finalizing these documents, not to exceed an aggregate of one thousand dollars ($1,000). This Agreement will be governed pursuant to the laws of the State of California. This Agreement (together with the Services Agreement) constitutes the entire understanding of the parties on the subjects covered, and cannot be modified except in writing and executed by you and the Chief Executive Officer of Applied Micro. Your signature below expressly warrants that you have read and fully understand this Agreement, and that you have had the opportunity to consult legal counsel of your own choosing. You are not executing this Agreement in reliance on any promises, representations or inducements other than those in this document and you are doing so voluntarily, free of any coercion. Should any provision of

3

this Agreement be held invalid or illegal, such invalidity or illegality will not invalidate the whole of this Agreement, but, rather, the Agreement will be construed as if it did not contain the invalid or illegal part (and, where applicable, enforcing each provision to the maximum extent deemed valid and legal) and the rights and obligations of the parties will be construed and enforced accordingly.

Sincerely,

Applied Micro Circuits Corporation

___________________________________________        _____________________

Name: __________________________________          Date

Title: ____________________________________

Accepted & Agreed:

/s/ Robert Gargus

Robert     Gargus                 Date

4

EXHIBIT A

RELEASE AGREEMENT

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Resignation Letter Agreement dated effective June 24, 2013 (the “Letter Agreement”).

I understand that this Release, together with the Letter Agreement, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.

I hereby confirm my obligations under the Company’s Employee Proprietary Information and Inventions Agreement.

In exchange for the consideration to be provided to me under the Letter Agreement to which I am not otherwise entitled, I hereby generally and completely release Applied Micro Circuits Corporation and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public

5

policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as amended).

Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; (2) any rights which are not waivable as a matter of law; or (3) my rights to enforce the terms and conditions of the Letter Agreement (including the Services Agreement described therein). In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given for the Released Claims is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) the Released Claims do not apply to any rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have 21 days to consider this Release (although I may choose to voluntarily to sign it sooner); (d) I have seven days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company; and (e) the Release will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release (“Effective Date”).

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave benefits and protections for which I am eligible, and I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than 21 days following the date it is provided to me, and I must not revoke it thereafter.

EMPLOYEE

6

____/S/ ROBERT GARGUS___________

Name:_ROBERT GARGUS____________________

DATE: __________________________________

7

EX-10.78

Contractor Name: Robert Gargus    

Effective Date: June 24, 2013

Exhibit 10.78

ADVISORY SERVICES AGREEMENT

THIS ADVISORY SERVICES AGREEMENT is between Applied Micro Circuits Corporation, a Delaware corporation having its principal place of business at 215 Moffett Park Drive, Sunnyvale, CA 94089, and its subsidiaries, successors or assignees (“Client”), and the undersigned Robert Gargus, an individual residing at (“Contractor”).

A. Client and Contractor are parties to an Employment Letter Agreement dated September 14, 2005, as amended to date (the “Employment Agreement”).

B. By mutual agreement of Client and Contractor, Contractor resigned his employment with Client effective as of June 24, 2013.

C. In connection with such resignation, Client and Contractor entered into a Separation Agreement dated effective as of the resignation date (“Separation Agreement”).

D. At this time Client desires to procure from Contractor, and Contractor desires to provide to Client, certain advisory services as an independent contractor during the twelve month period following the Effective Date.

1.ENGAGEMENT OF SERVICES. During the period commencing on the Effective Date and ending on the first anniversary thereof (the “Term”), Contractor shall perform the services specified in Exhibit A attached hereto and made a part hereof. All such services and deliverables set forth in Exhibit A, as well as all tangible and intangible results of Contractor’s performance of services pursuant hereto, are herein referred to, individually and collectively, as the “Projects”. The manner and means by which Contractor chooses to complete the Projects are in Contractor's sole discretion and control. Contractor agrees to exercise the highest degree of professionalism, and to utilize his expertise and creative talents in completing such Projects. In completing the Projects, Contractor agrees to provide his own equipment, tools and other materials at his own expense. Client will make its facilities and equipment available to Contractor when necessary, in each case at mutually approved times. Contractor shall perform the services necessary to complete the Projects in a timely and professional manner consistent with industry standards. Contractor may not subcontract or otherwise delegate his obligations under this Agreement without Client's prior written consent.

2.COMPENSATION. Client will pay Contractor a fee for services rendered under this Agreement as set forth in Exhibit A. Contractor will be reimbursed for any

reasonable expenses incurred in connection with the performance of services under this Agreement provided Contractor submits verification of such expenses as Client may require. Client will reimburse Contractor for previously approved expenses within thirty (30) days of the date of Contractor’s invoice.

3.INDEPENDENT CONTRACTOR RELATIONSHIP. Contractor’s relationship with Client will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Contractor is not the agent of Client and is not authorized to make any representation, contract, or commitment on behalf of Client. Contractor will not be entitled to any of the benefits that Client may make available to its employees, such as group insurance, profit-sharing or retirement benefits, except as expressly set forth in the Separation Agreement. Contractor will be solely responsible for all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to Contractor’s performance of services and receipt of fees under this Agreement. Client will regularly report amounts paid to Contractor by filing Form 1099-MISC with the Internal Revenue Service as required by law. Because Contractor is an independent contractor, Client will not withhold or make payments for social security; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Contractor’s behalf. Contractor agrees to accept exclusive liability for complying with all applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Contractor under this Agreement. Contractor hereby agrees to indemnify and defend Client against any and all such taxes or contributions, including penalties and interest.

4. TRADE SECRETS - INTELLECTUAL PROPERTY RIGHTS.

4.1Proprietary Information. Contractor agrees during the term of this Agreement and thereafter that he will take all steps reasonably necessary to hold Client’s Proprietary Information in trust and confidence, will not use Proprietary Information in any manner or for any purpose not expressly set forth in this Agreement, and will not disclose any such Proprietary Information to any third party without first obtaining Client’s express written consent on a case-by-case basis. By way of illustration but not limitation “Proprietary Information” includes (a) trade secrets, inventions, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs

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and techniques (hereinafter, “Inventions”); (b) unpublished information relating to business plans, budgets, financial statements, accounting matters, prices and costs, investments, licenses, suppliers, customers, research, development, new products, marketing, sales and support; (c) information regarding the skills and compensation of Client’s directors, officers, employees and contractors; and (d) the terms and conditions of this Agreement and the Separation Agreement. Notwithstanding the other provisions of this Agreement, nothing received by Contractor will be considered to be Client Proprietary Information if (1) it has been published or is otherwise readily available to the public other than by a breach of this Agreement; (2) it has been rightfully received by Contractor from an unaffiliated third party without confidential limitations; or (3) it was known to Contractor prior to its first receipt from Client.

4.2Third Party Information. Contractor understands that Client has received and will in the future receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Client’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Contractor agrees to hold Third Party Information in confidence and not to disclose to anyone (other than Client personnel who need to know such information in connection with their work for Client) or to use, except in connection with Contractor’s work for Client, Third Party Information unless expressly authorized in writing by an officer of Client.

4.3No Conflict of Interest. Contractor agrees during the term of this Agreement not to accept work or enter into a contract or accept an obligation, inconsistent or incompatible with Contractor’s obligations under this Agreement or the scope of services rendered for Client. Contractor further agrees not to disclose to Client, or bring onto Client’s premises, or induce Client to use any confidential information that belongs to anyone other than Client or Contractor.

4.4Ownership of Client Work Product and Inventions. As used in this Agreement, the term “Work Product” means any Invention, whether or not patentable, and all related know-how, designs, mask works, trademarks, formulae, processes, manufacturing techniques, trade secrets, ideas, artwork, software or other copyrightable or patentable works. Contractor agrees to disclose promptly in writing to Client, or any person designated by Client, all Work Product that is solely or jointly conceived, made, reduced to practice, or learned by Contractor in the course of any work performed for Client (“Client Work Product”). Contractor agrees that any and all Inventions conceived, written, created or first reduced to practice in the performance of work under this Agreement shall be the sole and exclusive property of Client.

4.5Disclosure of Prior Work Product and Background Technology. Contractor represents that any Work Product relating to Client’s business or any Project which Contractor has made, conceived or reduced to

practice at the time of signing this Agreement and which had not previously been assigned to Client (“Prior Work Product”) has been disclosed in writing to Client during the course of his prior employment with Client.

4.6Assignment of Client Work Product. Contractor hereby irrevocably assigns to Client all right, title and interest worldwide in and to the Client Work Product and all applicable intellectual property rights related to the Client Work Product, including without limitation, copyrights, trademarks, trade secrets, patents, moral rights, contract and licensing rights (the “Proprietary Rights”). As directed by Client, Contractor agrees to assign all of its right, title and interest in and to any Client Work Product to a Third Party, including without limitation the United States or any other government body or agency. Except as set forth below, Contractor retains no rights to use the Client Work Product and agrees not to challenge the validity of Client’s ownership in the Client Work Product. Contractor hereby grants to Client a non-exclusive, royalty-free, irrevocable and world-wide right, with rights to sublicense through multiple tiers of sublicensees, to distribute, reproduce, make derivative works of, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, have made, use, sell, import and offer for sale any Prior Work Product incorporated or used in the Client Work Product for the purpose of developing and marketing Client products.

4.7Waiver or Assignment of Other Rights. If Contractor has any rights to the Client Work Product that cannot be assigned to Client, Contractor unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Client with respect to such rights, and agrees, at Client’s request and expense, to consent to and join in any action to enforce such rights. If Contractor has any right to the Client Work Product that cannot be assigned to Client or waived by Contractor, Contractor unconditionally and irrevocably grants to Client during the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license, with rights to sublicense through multiple levels of sublicensees, to reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, such rights.

4.8Assistance. Contractor agrees to cooperate with Client or its designee(s), both during and after the term of this Agreement, in the procurement and maintenance of Client's rights in Client Work Product and to execute, when requested, any other documents deemed necessary by Client to carry out the purposes of this Agreement.

4.9Enforcement of Proprietary Rights. Contractor will assist Client in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Client Work Product in any and all countries. To that end Contractor will execute, verify and deliver such documents and perform such other acts

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(including appearances as a witness) as Client may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Contractor will execute, verify and deliver assignments of such Proprietary Rights to Client or its designee. Contractor’s obligation to assist Client with respect to Proprietary Rights relating to such Client Work Product in any and all countries shall continue beyond the termination of this Agreement, but Client shall compensate Contractor at a reasonable rate after such termination for the time actually spent by Contractor at Client’s request on such assistance.

4.10Execution of Documents. In the event Client is unable for any reason, after reasonable effort, to secure Contractor’s signature on any document needed in connection with the actions specified in the preceding Sections 4.8 and 4.9, Contractor hereby irrevocably designates and appoints Client and its duly authorized officers and agents as his agent and attorney in fact, which appointment is coupled with an interest, to act for and in his behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by Contractor. Contractor hereby waives and quitclaims to Client any and all claims, of any nature whatsoever, which Contractor now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to Client.

5.CONTRACTOR REPRESENTATIONS AND WARRANTIES. Contractor hereby represents and warrants that (a) the Client Work Product will be an original work of Contractor and not require an assignment of rights of any third parties; (b) Contractor will not grant, directly or indirectly, any rights or interest and whatsoever in the Client Work Product to third parties; (c) Contractor has full right and power to enter into and perform this Agreement without the consent of any third party.

6.INDEMNIFICATION. Contractor will indemnify and hold harmless Client, its officers, directors, employees, sublicensees, customers and agents from any and all claims, losses, liabilities, damages, expenses and costs (including attorneys’ fees and court costs) which result from a breach or alleged breach of any representation or warranty of Contractor (a “Claim”) set forth in Section 5 of this Agreement, provided that Client gives Contractor written notice of any such Claim and Contractor has the right to participate in the defense of any such Claim at its expense.

7. TERMINATION.

7.1Termination by Client. Client may terminate this Agreement prior to completion of the Term at its convenience and without any breach by Contractor (a “Termination without Cause”) upon fifteen (15) days’ prior written notice to Contractor. In the event Client effects a

Termination without Cause prior to completion of the Term, subject to and conditioned upon Contractor executing and delivering Client’s standard form full general release agreement, the vesting of the RSU grant set forth in Section 6(ii) of Exhibit A will accelerate in full effective upon the termination date. Client may also terminate this Agreement immediately in its sole discretion upon Contractor’s material breach of Section 4, Section 7.3, Section 8.3 and/or Section 8.4. This Agreement shall automatically terminate on the first anniversary of the Effective Date.

7.2Termination by Contractor. Contractor may terminate this Agreement at any time that there is no uncompleted Project Assignment in effect upon fifteen (15) days’ prior written notice to Client.

7.3Noninterference with Business. During the term and for a period of two (2) years immediately following termination of this Agreement by either party, Contractor agrees (i) not to solicit or induce, directly or indirectly, any employee or independent contractor to terminate or breach an employment, contractual or other relationship with Client, and (ii) not to solicit or induce, directly or indirectly, or provide any information or assistance to any third party or parties with respect to, an Acquisition (defined below) or a Change in Control (defined below) of Client, except in compliance with the express prior written request of Client. As used herein, “Acquisition” shall mean the merger, acquisition, stock purchase or sale of all or any substantial portion of the assets of Client, and “Change of Control” shall mean the removal of or failure to re-elect at least a majority of the current members of the Board of Directors of Client.

7.4Return of Client Property. Upon termination of the Agreement or earlier as requested by Client, Contractor will deliver to Client any and all drawings, notes, memoranda, specifications, devices (other than the devices expressly transferred to Contractor under the Separation Agreement), formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Client Work Product, Third Party Information or Proprietary Information of Client. Contractor further agrees that any property situated on Client's premises and owned by Client, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Client personnel at any time with or without notice.

8. ADDITIONAL COMPLIANCE COVENANTS AND CONSENTS

8.1Government Contracts. In the event that Contractor shall perform services under this Agreement in connection with any Government contract in which Client may be the prime contractor or subcontractor, Contractor agrees to abide by all laws, rules and regulations relating thereto. To the extent that any such law, rule or regulation requires that a provision or clause be included in this Agreement, Contractor agrees that such provision or clause

2.

shall be added to this Agreement and the same shall then become a part of this Agreement.

8.2Export Laws. Contractor agrees not to export, directly or indirectly, any U.S. source technical data acquired from Client or any products utilizing such data to countries outside the United States, which export may be in violation of the United States export laws or regulations.

8.3FCPA. Contractor agrees to perform the Projects at all times in accordance with, and shall not violate nor permit any of its agents or representatives to violate, the terms or provisions of the Foreign Corrupt Practices Act of 1977 or any other applicable anti-bribery or anti-corruption law of the United States or any foreign jurisdiction.

8.4Non-Disparagement. Contractor agrees that, from and after the Effective Date, he will not, directly or indirectly, in any capacity or manner, make, express, transmit, speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that might reasonably be construed to be derogatory or critical of, or negative toward, the Company or any of its directors, officers, subsidiaries, employees, agents or representatives. Notwithstanding the foregoing, nothing in this Section 8.4 or elsewhere in this Agreement shall prohibit Contractor from making any statement or disclosure required under the federal securities laws or other applicable laws; provided, however, that Contractor must provide written notice to Client at least two business days prior to making any such statement or disclosure required by or under the federal securities laws or other applicable laws that would otherwise be prohibited by the provisions of this Section 8.4.

9. GENERAL PROVISIONS.

9.1Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California as applied to transactions taking place wholly within California between California residents. Client and Contractor agree that any dispute between them arising directly or indirectly out of the matters described in this Agreement shall be resolved by final and binding arbitration pursuant to and in accordance with the Arbitration Agreement attached as Exhibit B to the Separation Agreement.

9.2Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

9.3No Assignment. This Agreement may not be assigned by Contractor without Client’s consent, and any such attempted assignment shall be void and of no effect.

9.4Notices. All notices, requests and other communications under this Agreement must be in writing, and must be mailed by registered or certified mail, postage prepaid and return receipt requested, or delivered by hand to the party to whom such notice is required or permitted to be given. If mailed, any such notice will be considered to have been given three (3) business days after it was mailed, as evidenced by the postmark. If delivered by hand, any such notice will be considered to have been given when received by the party to whom notice is given, as evidenced by written and dated receipt of the receiving party. The mailing address for notice to either party will be the address shown in the opening paragraph of this Agreement. Either party may change its mailing address by notice as provided by this section.

9.5Legal Fees. If any dispute arises between the parties with respect to the matters covered by this Agreement which leads to a proceeding to resolve such dispute, the prevailing party in such proceeding shall be entitled to receive its reasonable attorneys’ fees, expert witness fees and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief it may be awarded.

9.6Injunctive Relief. A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to Client for which there may be no adequate remedy at law, and Client is therefore entitled to seek injunctive relief as well as such other and further relief as may be appropriate.

9.7Survival. The following provisions shall survive termination of this Agreement: Section 4, Section 5, Section 6, Section 7.3, Section 7.4, Section 8.4, and Section 9.

9.8Waiver. No waiver by either party of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by either party of any right under this Agreement shall be construed as a waiver of any other right. Neither party shall be required to give notice to enforce strict adherence to all terms of this Agreement.

9.9    No Implied Contracts or Commitments. Contractor acknowledges and agrees that neither the entering into of this Agreement nor any of the terms or provisions hereof are intended to imply any long-

3.

term consulting arrangement with Client or any promise or commitment by Client or any of its subsidiaries to hire Contractor as an employee, upon completion of any of the Projects or at all. Any such subsequent employment relationship, if any, would be conditioned upon and subject to a separate written agreement duly executed by Client (or its subsidiary, as applicable) and Contractor.

9.10    Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. The terms of this Agreement will govern all Projects and services undertaken by Contractor for Client.

IN WITNESS WHEREOF, the parties have caused this Advisory Services Agreement to be executed as indicated below.

CLIENT:

APPLIED MICRO CIRCUITS CORPORATION

By:    _____________________________________

Name:    _____________________________________

Title:    _____________________________________

CONTRACTOR:

ROBERT GARGUS

_____/s/ Robert Gargus_________________________

Signature

4.

EXHIBIT A

PROJECT ASSIGNMENT

1.    Contractor’s principal Client contact:

Name: Paramesh Gopi

Title: Chief Executive Officer

2. Services: Contractor will serve Client as a financial, accounting and regulatory compliance consultant during the term of this Agreement.

3.    Approximate time to be devoted to Client under this Agreement:

Effective Date to December 31, 2013: Five (5) hours per week

January 1, 2014 to Expiration of Term: Three (3) hours per week

4. No-Conflict:

Contractor shall promptly disclose all material business activities/engagements of Contractor relating to companies actually or prospectively engaged in Client Business. Contractor shall not accept any non-Client related activities and engagements that are in competition or conflict with any Client Business that exists on the Effective Date. As used herein, “Client Business” means the development, marketing or sale of semiconductor products for server on a chip, embedded computing or connectivity applications. Subject to the foregoing, Client will not unreasonably withhold its consent for Contractor to serve on the Board of Directors of or otherwise provide services (as a consultant or employee) to third party companies engaged in Client Business.

5.    Scope of Work; Description of Projects:

During the Term, Contractor shall use commercially reasonable efforts to:

(i)    At Client’s request, advise and assist Client with respect to SEC Corp Fin and PCAOB compliance, investigation and disclosure matters.

(ii)    At Client’s request, advise and assist CEO and Controller with respect to accounting and audit matters and Audit Committee presentation and disclosure matters.

(iii)    At Client’s request, assist the CEO and CFO in streamlining APM finance department functions, strengthening the finance business team and improving finance department performance.

(iv)    At Client’s request, assist Client with respect to 1934 Act report preparation and filing.

(v)     At Client’s request, assist CEO and CFO with investor relations matters.

(vi)    At Client’s request, perform such other services as shall be mutually agreed upon by Contractor and Client during the remainder of the Term.

6. Compensation package:

(i)    Vesting continuation during the Term of all time-based restricted stock unit (“RSU”) awards previously granted to Contractor during the term of his employment, in accordance with the terms and conditions of the applicable grant agreements and equity incentive plans, conditional on Contractor’s performance of services under this Agreement as of such vesting date and provided this Agreement is not terminated by either party prior to each such vesting date.

(ii)     Equity grant of Five Thousand (5,000) RSUs, which shall vest 100% on the first

5.

anniversary of the Effective Date, conditional on Contractor’s performance of services under this Agreement through such date and provided this Agreement is not terminated by either party prior to such date (except as provided in Section 7.1 of the Agreement).

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 out 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: August 8, 2013

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

I, Shiva K. Natarajan, 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/ SHIVA K. NATARJAN

Shiva K. Natarajan

Vice President and Interim Chief Financial Officer

Dated: August 8, 2013

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 June 30, 2013 (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: August 8, 2013

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), Shiva K. Natarajan, Interim 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 June 30, 2013 (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/ SHIVA K NATARJAN

Shiva K. Natarajan

Vice President and Interim Chief Financial Officer

Dated: August 8, 2013

XML

Certain Financial Statement Information (Tables)

3 Months Ended

Jun. 30, 2013

Certain Financial Statement Information [Abstract]

Schedule of Accounts receivable

Accounts receivable:

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,278		$	25,278
Less: allowance for bad debts	(463		)	(703		)
	$	28,815		$	24,575

Schedule of Inventories

Inventories:

	June 30, 2013		March 31, 2013
	(In thousands)
Finished goods	$	6,247	$	7,247
Work in process	4,855		4,098
Raw materials	1,613		1,555
	$	12,715	$	12,900

Schedule of Other current assets

Other current assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	12,765	$	13,762
Executive deferred compensation assets	700		693
Deposits	752		828
Receivable from sale of strategic investment and TPack	4,673		1,331
Other	1,288		1,384
	$	20,178	$	17,998

Schedule of Property and equipment

Property and equipment:

	Useful Life	June 30, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	45,077		$	40,063
Leasehold improvements	1-15	10,669			14,202
Computers, office furniture and equipment	3-7	44,980			43,485
Buildings	31.5	2,756			2,756
Land	—	9,800			9,800
		113,282			110,306
Less: accumulated depreciation and amortization		(77,721		)	(75,915		)
		$	35,561		$	34,391

* Includes capitalized mask costs.

Schedule of Goodwill

Goodwill is as follows:

	June 30, 2013		March 31, 2012
	(In thousands)
Goodwill	$	11,425	$	13,183

Schedule of Purchased intangible assets

Purchase-related intangibles were as follows:

	June 30, 2013								March 31, 2013
	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	$	425,000	$	(425,000	)	$	—	—	$	441,300	$	(431,771	)	$	9,529	3.5
Customer relationships	6,330		(6,038		)	292		1.2	12,830		(10,507		)	2,323		2.1
Patents/core technology rights/tradename	62,306		(62,306		)	—		—	63,206		(63,067		)	139		0.3
	$	493,636	$	(493,344	)	$	292		$	517,336	$	(505,345	)	$	11,991

During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of of TPack. Please refer to Note 2 to the Condensed Consolidated Notes to the Financial Statements for further discussion.

Schedule of Estimated future amortization expense of purchased intangible assets

As of June 30, 2013, 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,
2014	$	—	$	188	$	188
2015	—		104		104
2016 and thereafter	—		—		—
Total	$	—	$	292	$	292

Schedule of Other assets

Other assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,713	$	7,866
Strategic investments	3,000		3,000
	$	7,713	$	10,866

Schedule of Other accrued liabilities

Other accrued liabilities:

	June 30, 2013		March 31, 2013
	(In thousands)
Customer deposits*	$	688	$	237
Employee related liabilities	2,078		2,236
Executive deferred compensation	951		1,284
Income taxes	1,426		903
Professional fees	4,414		3,840
Other	2,889		2,230
	$	12,446	$	10,730

* 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

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

	June 30, 2013								March 31, 2013
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	26,533		—		—		26,533		10,536		—		—		10,536
U.S. Treasury securities and agency bonds	12,521		6		12		12,515		12,363		10		—		12,373
Corporate bonds	10,800		38		9		10,829		15,567		63		2		15,628
Mortgage-backed and asset-backed securities*	4,130		362		20		4,472		3,655		355		7		4,003
Closed-end bond funds	16,695		2,754		538		18,911		21,914		5,340		39		27,215
Preferred stock	2,406		924		—		3,330		4,878		2,314		—		7,192
	$	86,225	$	4,084	$	579	$	89,730	$	77,442	$	8,082	$	48	$	85,476
Reported as:
Cash and cash equivalents							$	39,673							$	19,065
Short-term investments available-for-sale							50,057								66,411
							$	89,730							$	85,476

* At June 30, 2013 and March 31, 2013, approximately $1.3 million and $1.4 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 instrument measured at fair value on a recurring basis (in thousands):

	June 30, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	25,378		1,155		—		26,533		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,951		564		—		12,515		12,373		—		—		12,373
Corporate bonds	—		10,829		—		10,829		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,472		—		4,472		—		4,003		—		4,003
Closed-end bond funds	18,911		—		—		18,911		27,215		—		—		27,215
Preferred stock	—		3,330		—		3,330		—		7,192		—		7,192
	$	69,380	$	20,350	$	—	$	89,730	$	57,625	$	27,851	$	—	$	85,476

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):

	June 30, 2013				March 31, 2013
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	7,497	$	7,508	$	9,205	$	9,217
Mature in 1 – 2 years	17,140		17,147		19,843		20,040
Mature in 3 – 5 years	170		171		1,575		1,649
Mature after 5 years	2,644		2,990		962		1,098
	$	27,451	$	27,816	$	31,585	$	32,004

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 June 30, 2013	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	$	4,514	$	(12	)	$	—	$	—		$	4,514	$	(12	)
Corporate bonds	3,255		(9		)	—		—			3,255		(9		)
Mortgage-backed and asset-backed securities	1,780		(20		)	25		—			1,805		(20		)
Closed-end bond funds	5,795		(479		)	415		(59		)	6,210		(538		)
	$	15,344	$	(520	)	$	440	$	(59	)	$	15,784	$	(579	)

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of March 31, 2013	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	$	300	$	—		$	—	$	—		$	300	$	—
Corporate bonds	2,276		(2		)	113		—			2,389		(2		)
Mortgage-backed and asset-backed securities	647		(3		)	—		(4		)	647		(7		)
Closed-end bond funds	—		—			6,991		(39		)	6,991		(39		)
	$	3,223	$	(5	)	$	7,104	$	(43	)	$	10,327	$	(48	)

Schedule of Warranty reserve activity

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

	Three Months Ended
	June 30,
	2013			2012
Beginning balance	$	220		$	454
Charged to costs of revenues	(15		)	130
Cost incurred	(2		)	(137		)
Ending balance	$	203		$	447

Schedule of Interest income, net

Interest income (expense), net (in thousands):

	Three Months Ended
	June 30,
	2013		2012
Interest income	$	468	$	675
Net realized gain on short-term investments	3,198		1,004
	$	3,666	$	1,679

Schedule of Reconciliation of shares used to calculate basic and diluted net loss per share

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

	Three Months Ended
	June 30,
	2013		2012
Net income (loss)	$	10,857	$	(23,390	)
Shares used in net income (loss) per share computation:
Weighted average common shares outstanding, basic	69,360		62,409
Net effect of dilutive common share equivalents	874		—
Weighted average common shares outstanding, diluted	70,234		62,409
Basic net income (loss) per share	$	0.16	$	(0.37	)
Diluted net income (loss) per share	$	0.15	$	(0.37	)

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net revenues	$ 54,148	$ 41,294
Cost of revenues	22,342	18,355
Gross profit	31,806	22,939
Operating expenses:
Research and development	34,506	34,771
Selling, general and administrative	9,526	12,470
Gain on sale of TPack	(19,699)	0
Amortization of purchased intangible assets	130	650
Restructuring charges, net	93	0
Total operating expenses	24,556	47,891
Operating income (loss)	7,250	(24,952)
Interest income (expense), net	3,666	1,679
Other income (expense), net	129	83
Income (loss) before income taxes	11,045	(23,190)
Income tax expense	188	200
Net income (loss)	$ 10,857	$ (23,390)
Basic net income (loss) per share (in dollars per share)	$ 0.16	$ (0.37)
Shares used in calculating basic income (loss) per share	69,360	62,409
Diluted net income (loss) per share (in dollars per share)	$ 0.15	$ (0.37)
Shares used in calculating diluted income (loss) per share	70,234	62,409

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Restructuring Charges

3 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES

The Company recognizes restructuring costs related to asset impairment and exit or disposal activities. Costs relating to facilities closure or lease commitments are recognized when the facility has been exited. Termination costs are recognized when the costs are deemed both probable and estimable.

There were no new restructuring activity during the three months ended June 30, 2013 and 2012.

December 2012 Restructuring Program

In December 2012, the Company implemented a restructuring program to reorganize its operations and reduced its workforce by approximately 70 employees. The plan included eliminating job redundancies, reducing the Company's workforce and impairing an asset which related to the impairment of the unamortized value of a software intellectual property license, which the Company no longer intends to use to develop new products. The Company anticipates that the restructuring plan will reduce ongoing headcount expenses by approximately $8.0 million to $9.0 million annually and other additional operational expenses by $4.0 million to $5.0 million annually.

The restructuring activity during the three months ended June 30, 2013 relating to the December 2012 restructuring program is described below.

	Workforce Reduction			Asset Impairment		Total
Liability, March 31, 2013	$	548		$	—	$	548
Restructuring charges	93			—		93
Cash payments	(334		)	—		(334		)
Liability, June 30, 2013	$	307		$	—	$	307

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Certain Financial Statement Information (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of Other current assets
Prepaid expenses	$ 12,765	$ 13,762
Executive deferred compensation assets	700	693
Deposits	752	828
Receivable from sale of strategic investment and TPack	4,673	1,331
Other	1,288	1,384
Other current assets, total	$ 20,178	$ 17,998	[1]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Restructuring Charges (Tables)

3 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

Schedule of restructuring activity

The restructuring activity during the three months ended June 30, 2013 relating to the December 2012 restructuring program is described below.

	Workforce Reduction			Asset Impairment		Total
Liability, March 31, 2013	$	548		$	—	$	548
Restructuring charges	93			—		93
Cash payments	(334		)	—		(334		)
Liability, June 30, 2013	$	307		$	—	$	307

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Stock-Based Compensation (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 3,726	$ 7,608
Stock-based compensation expensed from inventory	(12)	81
Total stock-based compensation expense	3,714	7,689
Cost of Revenues [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	108	180
Research and Development [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	1,798	4,205
Selling, General and Administrative [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 1,820	$ 3,223

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Certain Financial Statement Information (Details Textual) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Certain Financial Statement Information (Textual) [Abstract]
Anti-dilutive securities that have been excluded from the net (loss) income, per share computation	6.0	10.7
Options and Restricted Stock Units [Member]
Certain Financial Statement Information (Textual) [Abstract]
Anti-dilutive securities that have been excluded from the net (loss) income, per share computation	6.0	10.4
Effect of dilutive securities that have been excluded from the net loss per share computation		0.3

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Certain Financial Statement Information (Details 5) (USD $) In Thousands, unless otherwise specified			0 Months Ended	3 Months Ended			12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Apr. 22, 2013 TPack [Member]	Jun. 30, 2013 TPack [Member]	Jun. 30, 2013 Developed technology/in-process research and development [Member]		Mar. 31, 2013 Developed technology/in-process research and development [Member]	Jun. 30, 2013 Customer relationships [Member]	Mar. 31, 2013 Customer relationships [Member]	Jun. 30, 2013 Patents/core technology rights/tradename [Member]	Mar. 31, 2013 Patents/core technology rights/tradename [Member]
Schedule of Purchased Intangible assets
Gross Assets	$ 493,636	$ 517,336			$ 425,000	[1]	$ 441,300	$ 6,330	$ 12,830	$ 62,306	$ 63,206
Accumulated Amortization and Impairments	(493,344)	(505,345)			(425,000)	[1]	(431,771)	(6,038)	(10,507)	(62,306)	(63,067)
Net Assets	292	11,991			0	[1]	9,529	292	2,323	0	139
Weighted average remaining useful life					0 years	[1]	3 years 6 months	1 year 2 months 12 days	2 years 1 month 6 days	0 years	3 months 18 days
Intangibles write off			$ (11,404)	$ 11,400

[1] During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of of TPack. Please refer to Note 2 to the Condensed Consolidated Notes to the Financial Statements for further discussion.

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Certain Financial Statement Information (Details 4) (USD $) In Thousands, unless otherwise specified				3 Months Ended
	Jun. 30, 2013	Mar. 31, 2013		Jun. 30, 2013 TPack [Member]
Schedule of Goodwill
Goodwill	$ 11,425	$ 13,183	[1]
Goodwill write off				$ 1,757

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Stock-Based Compensation (Details) (USD $)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Employee Stock Options [Member]
Schedule of Weighted-Average Assumptions Used to Estimate the Fair Value of Stock Options
Expected life	4 years 4 months 24 days	4 years 6 months
Risk-free interest rate	0.60%	0.70%
Volatility	49.00%	54.00%
Dividend yield	0.00%	0.00%
Weighted average fair value	$ 2.95	$ 2.47
Employee Stock Purchase Plans [Member]
Schedule of Weighted-Average Assumptions Used to Estimate the Fair Value of Stock Options
Expected life	6 months	6 months
Risk-free interest rate	0.10%	0.10%
Volatility	50.00%	56.00%
Dividend yield	0.00%	0.00%
Weighted average fair value	$ 2.47	$ 2.40

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Certain Financial Statement Information (Details 12) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	$ 15,344	$ 3,223
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	(520)	(5)
12 Months or More of Unrealized Losses, Estimated Fair Value	440	7,104
12 Months or More of Unrealized Losses, Gross Unrealized Losses	(59)	(43)
Total, Estimated Fair Value	15,784	10,327
Total, Gross Unrealized Losses	(579)	(48)
Gross unrealized gains	4,084	8,082
U.S Treasury securities and agency bonds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	4,514	300
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	(12)	0
12 Months or More of Unrealized Losses, Estimated Fair Value	0	0
12 Months or More of Unrealized Losses, Gross Unrealized Losses	0	0
Total, Estimated Fair Value	4,514	300
Total, Gross Unrealized Losses	(12)	0
Gross unrealized gains	6	10
Corporate bonds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	3,255	2,276
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	(9)	(2)
12 Months or More of Unrealized Losses, Estimated Fair Value	0	113
12 Months or More of Unrealized Losses, Gross Unrealized Losses	0	0
Total, Estimated Fair Value	3,255	2,389
Total, Gross Unrealized Losses	(9)	(2)
Gross unrealized gains	38	63
Mortgage-backed and asset-backed securities [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	1,780	647
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	(20)	(3)
12 Months or More of Unrealized Losses, Estimated Fair Value	25	0
12 Months or More of Unrealized Losses, Gross Unrealized Losses	0	(4)
Total, Estimated Fair Value	1,805	647
Total, Gross Unrealized Losses	(20)	(7)
Gross unrealized gains	362	355
Closed-end bond funds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	5,795	0
Less Than 12 Months of Unrealized Losses, Gross Unrealized Losses	(479)	0
12 Months or More of Unrealized Losses, Estimated Fair Value	415	6,991
12 Months or More of Unrealized Losses, Gross Unrealized Losses	(59)	(39)
Total, Estimated Fair Value	6,210	6,991
Total, Gross Unrealized Losses	(538)	(39)
Gross unrealized gains	$ 2,754	$ 5,340

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Restructuring Charges Restructuring Charges (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Restructuring Reserve [Roll Forward]
Liability, beginning balance	$ 548
Restructuring charges	93	0
Cash payments	(334)
Liability, ending balance	307
Workforce Reduction
Restructuring Reserve [Roll Forward]
Liability, beginning balance	548
Restructuring charges	93
Cash payments	(334)
Liability, ending balance	307
Asset Impairment
Restructuring Reserve [Roll Forward]
Liability, beginning balance	0
Restructuring charges	0
Cash payments	0
Liability, ending balance	$ 0

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Stock-Based Compensation (Details Textual) (USD $)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Based Compensation (Textual) [Abstract]
Weighted average grant-date fair value per share of the restricted stock units awarded	$ 7.03	$ 5.46
Unearned stock-based compensation	$ 19,100,000
Weighted-average period over which the unearned stock-based compensation is expected to be recognized, years	1 year 9 months 18 days
Stock-based compensation expense excluding acceleration of Veloce warrants	3,714,000	7,689,000
Stock-based compensation expense related to the acceleration of Veloce warrants	0	1,289,000
Veloce Technologies Inc [Member]
Stock Based Compensation (Textual) [Abstract]
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	6.60%
Maximum [Member]
Stock Based Compensation (Textual) [Abstract]
Estimated forfeiture rate used in determining the amount of stock-based compensation	6.70%

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Certain Financial Statement Information (Details 9) (USD $)	3 Months Ended
	Jun. 30, 2013		Jun. 30, 2012	Mar. 31, 2013		Dec. 31, 2012	Mar. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Percentage of voting interest						20.00%
Investments in non-marketable equity investments, cost method	$ 0		$ 500,000
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, Cash equivalents and Short-term investments, Amortized Cost	86,225,000			77,442,000
Available-for-sale investments, Gross Unrealized Gains	4,084,000			8,082,000
Available-for-sale investments, Gross Unrealized Losses	579,000			48,000
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	89,730,000			85,476,000
Cash and cash equivalents	39,673,000		20,714,000	19,065,000	[1]		28,065,000
Short-term investments available-for-sale	50,057,000			66,411,000	[1]
Cash [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, Cash equivalents and Short-term investments, Amortized Cost	13,140,000			8,529,000
Available-for-sale investments, Gross Unrealized Gains	0			0
Available-for-sale investments, Gross Unrealized Losses	0			0
Cash and Cash equivalents, Estimated Fair Value	13,140,000			8,529,000
Cash equivalents [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, Cash equivalents and Short-term investments, Amortized Cost	26,533,000			10,536,000
Available-for-sale investments, Gross Unrealized Gains	0			0
Available-for-sale investments, Gross Unrealized Losses	0			0
Cash and Cash equivalents, Estimated Fair Value	26,533,000			10,536,000
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	12,521,000			12,363,000
Available-for-sale investments, Gross Unrealized Gains	6,000			10,000
Available-for-sale investments, Gross Unrealized Losses	12,000			0
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	12,515,000			12,373,000
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	10,800,000			15,567,000
Available-for-sale investments, Gross Unrealized Gains	38,000			63,000
Available-for-sale investments, Gross Unrealized Losses	9,000			2,000
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	10,829,000			15,628,000
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	4,130,000			3,655,000
Available-for-sale investments, Gross Unrealized Gains	362,000			355,000
Available-for-sale investments, Gross Unrealized Losses	20,000			7,000
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	4,472,000	[2]		4,003,000	[2]
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	16,695,000			21,914,000
Available-for-sale investments, Gross Unrealized Gains	2,754,000			5,340,000
Available-for-sale investments, Gross Unrealized Losses	538,000			39,000
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	18,911,000			27,215,000
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	2,406,000			4,878,000
Available-for-sale investments, Gross Unrealized Gains	924,000			2,314,000
Available-for-sale investments, Gross Unrealized Losses	0			0
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	3,330,000			7,192,000
Mortgage-backed securities [Member]
Schedule of cash, cash equivalents and available-for-sale investments by type of instruments
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	$ 1,300,000	[2]		$ 1,400,000	[2]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

[2] At June 30, 2013 and March 31, 2013, approximately $1.3 million and $1.4 million of the estimated fair value presented were mortgage-backed securities, respectively.

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Stockholders' Equity (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013
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 3 months 18 days
$ 1.68 - $ 7.60 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 1.68
Range of Exercise Price, maximum (USD per share)	$ 7.60
Number of Shares, Options Outstanding	617
Weighted average remaining contractual term for options outstanding	3 years 9 months 3 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 6.58
Number of Shares, Options Exercisable	508
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 6.45
$ 7.61 - $ 7.93 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 7.61
Range of Exercise Price, maximum (USD per share)	$ 7.93
Number of Shares, Options Outstanding	692
Weighted average remaining contractual term for options outstanding	3 years 1 month 2 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 7.67
Number of Shares, Options Exercisable	692
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 7.67
$ 7.94 - $ 12.07 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 7.94
Range of Exercise Price, maximum (USD per share)	$ 12.07
Number of Shares, Options Outstanding	830
Weighted average remaining contractual term for options outstanding	4 years 0 months 21 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 10.07
Number of Shares, Options Exercisable	755
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 9.98
$ 12.08 - $ 14.23 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 12.08
Range of Exercise Price, maximum (USD per share)	$ 14.23
Number of Shares, Options Outstanding	634
Weighted average remaining contractual term for options outstanding	3 years 0 months 10 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 12.75
Number of Shares, Options Exercisable	604
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 12.78
$ 14.24 - $ 23.56 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 14.24
Range of Exercise Price, maximum (USD per share)	$ 23.56
Number of Shares, Options Outstanding	396
Weighted average remaining contractual term for options outstanding	1 year 9 months 29 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 17.43
Number of Shares, Options Exercisable	396
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 17.43
$ 1.68 - $ 23.56 [Member]
Weighted Average Remaining Contractual Life and Weighted Average Per Share Exercise Price of Options Outstanding and Options Exercisable
Range of Exercise Price, minimum (USD per share)	$ 1.68
Range of Exercise Price, maximum (USD per share)	$ 23.56
Number of Shares, Options Outstanding	3,169
Weighted average remaining contractual term for options outstanding	3 years 3 months 18 days
Weighted Average Exercise Price, Options Outstanding (USD per share)	$ 10.32
Number of Shares, Options Exercisable	2,955
Weighted Average Exercise Price, Options Exercisable (USD per share)	$ 10.40

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Certain Financial Statement Information (Details 3) (USD $) In Thousands, unless otherwise specified					3 Months Ended
	Jun. 30, 2013		Mar. 31, 2013		Jun. 30, 2013 Machinery and Equipment [Member] Minimum [Member]	Jun. 30, 2013 Machinery and Equipment [Member] Maximum [Member]	Jun. 30, 2013 Leasehold Improvements [Member] Minimum [Member]	Jun. 30, 2013 Leasehold Improvements [Member] Maximum [Member]	Jun. 30, 2013 Computers, Office Furniture and Equipment [Member] Minimum [Member]	Jun. 30, 2013 Computers, Office Furniture and Equipment [Member] Maximum [Member]	Jun. 30, 2013 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	$ 45,077	[1]	$ 40,063	[1]
Leasehold improvements	10,669		14,202
Computers, office furniture and equipment	44,980		43,485
Buildings	2,756		2,756
Land	9,800		9,800
Property and equipment, gross	113,282		110,306
Less: accumulated depreciation and amortization	(77,721)		(75,915)
Property and equipment, net	$ 35,561		$ 34,391	[2]

[1] Includes capitalized mask costs.

[2] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013		Jun. 30, 2012
Operating activities:
Net income (loss)	$ 10,857		$ (23,390)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation	2,624		2,439
Amortization of purchased intangibles	296		1,329
Stock-based compensation expense:
Stock options	602		1,488
Restricted stock units	3,112		6,201
Warrants	0		1,289
Veloce accrued liability	9,255		2,325
Acquisition related adjustment	0		(133)
Gain on sale of TPack	(19,699)		0
Net gain on disposals of property, equipment and other assets	(3)		0
Non-cash restructuring costs	26		0
Changes in operating assets and liabilities:
Accounts receivable	(4,474)		6,319
Inventories	185		650
Other assets	1,598		(1,045)
Accounts payable	(687)		(4,751)
Accrued payroll and other accrued liabilities	4,149		164
Veloce accrued liability	(24,982)		(12,748)
Deferred revenue	(671)		(597)
Net cash used for operating activities	(17,812)		(20,460)
Investing activities:
Proceeds from sales and maturities of short-term investments	14,185		14,182
Purchases of short-term investments	(2,361)		(4,326)
Purchase of property, equipment and other assets	(279)		(5,598)
Proceeds from sale of strategic equity investment	0		7,144
Purchases of strategic equity investment	0		(500)
Proceeds from the sale of TPack, net	(29,498)		0
Net cash provided by investing activities	41,043		10,902
Financing activities:
Proceeds from issuance of common stock	171		3,330
Funding of restricted stock units withheld for taxes	(2,382)		(216)
Repurchase of common stock	0		(654)
Other	(412)		(253)
Net cash (used for) provided by financing activities	(2,623)		2,207
Net increase (decrease) in cash and cash equivalents	20,608		(7,351)
Cash and cash equivalents at beginning of year	19,065	[1]	28,065
Cash and cash equivalents at end of period	39,673		20,714
Supplementary cash flow disclosures:
Income taxes	52		131
Common stock issued for Veloce merger consideration	$ 10,037		$ 13,683

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Sale of TPack A/S Sale of TPack A/S

3 Months Ended

Jun. 30, 2013

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Sale of TPack A/S

On April 22, 2013, the Company completed the sale of TPack and certain specified intellectual property assets owned by the Company related to TPack's business for an aggregate consideration of $33.5 million, payable in cash, which reflects the $34.0 million base purchase price as adjusted for the working capital adjustment mechanism set forth in the Purchase Agreement, and remains subject to a potential final, non-material post-closing adjustments. In connection with the closing, there was a working capital adjustment of $0.5 million and the Company received a cash payment of $30.2 million. The remaining cash payment of $3.3 million of the aggregate consideration will be held back until March 31, 2014 to secure the Company's indemnification obligations subject to and in accordance with the terms of the Purchase Agreement. The distribution of this holdback amount is subject to any indemnification claims that the Buyer may have under the terms of the Purchase Agreement and final resolution of any such claims.

TPack operated as part of the Company's Connectivity reporting unit. The sale of TPack does not represent an exit from the Connectivity business. The Company will continue to sell Connectivity technology products as an ongoing part of its business, and as such the sale of TPack is not a discontinuance of an operation.

In connection with the divestiture, we recorded a preliminary gain of $19.7 million. The following table summarizes the components of the gain:

	(in thousands)
Total proceeds, net of working capital adjustment,	$	30,175
Net assets and liabilities	(184		)
Goodwill write off	(1,757		)
Intangibles write off	(11,404		)
Holdback amount	3,353
Legal fees and other costs	(484		)
Gain on sale of TPack	$	19,699

The total assets of TPack included $0.7 million of cash, cash equivalents and short term investments.

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Veloce

3 Months Ended

Jun. 30, 2013

Variable Interest Entity, Measure of Activity [Abstract]

VELOCE

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, (the “Merger Agreement”). Veloce has been developing specific technology for the Company.

The terms of the Merger Agreement include the payment of the total consideration, payable to holders of Veloce common stock options that were vested on the Closing Date and holders of Veloce common stock and stock equivalents (collectively “Veloce Equity Holders”), and to Veloce stock equivalents that have not yet been allocated to individuals (“Unallocated Veloce Units”). The Merger Agreement further provides for payments of additional merger consideration contingent upon the achievement of certain post-closing product development milestones relating to the Veloce development project.

The total estimated consideration to be paid is based upon the benchmarks achieved during simulations that were performed during the third quarter of fiscal 2013 and correlating of the results of the simulations to the contractual terms included in the Merger Agreement. As a result of higher than expected benchmarks achieved during simulations, the total estimated consideration to be paid has been updated during fiscal 2013 from a previous estimated maximum of approximately $135 million to the contractual maximum of $178.5 million. Significant judgment is required in assessing when a performance milestone is probable of achievement and estimating the timing of when the performance milestones will be completed. The Company has completed the first and second performance milestones relating to the Veloce project as of June 30, 2013. The total consideration relating to the first and second performance milestone, excluding the value allocated to the Unallocated Veloce Units, in the amount of $135.8 million, has been fully recognized as research and development expense through June 30, 2013 compared to $62.7 million as of June 30, 2012. During the three months ended June 30, 2013 and 2012, as part of the above arrangement, the Company paid approximately $25.0 million and $12.7 million, respectively, in cash and issued approximately 1.4 million shares and 2.4 million shares, respectively, valued at approximately $10.0 million and $13.7 million, respectively.

The third and final performance milestone is currently not yet believed to be probable of attainment as of June 30, 2013.

The consideration that the Company will be obligated to pay will be allocated equally to each of the Veloce Equity Holders and the Unallocated Veloce Units. The Company is contractually required to distribute all Unallocated Veloce Units within a certain time period. During the three months ended June 30, 2013, the Company distributed an additional 0.5 million Unallocated Veloce units which had a related expense of $5.7 million. Veloce Equity Holders subject to vesting requirements will receive their distribution upon satisfaction of such vesting requirements.

For accounting purposes, the costs to be incurred in connection with the development milestones relating to Veloce is considered compensatory and is recognized as R&D expense. Recognition of these costs as expense will generally occur when certain development and performance milestones become probable of achievement and are deemed earned. However, the value allocated to the Unallocated Veloce Units will not be recognized as R&D expense until distribution of the underlying units occurs. As of June 30, 2013 there were 0.7 million Unallocated Veloce Units that had not been allocated.

Judgment is required in determining whether a performance milestone is probable of achievement, estimating the percentage of completion of the milestone, and the timing of when a performance milestone is expected to be completed. These determinations are based on discussions with internal technical personnel that address various qualitative and quantitative factors, including, but not limited to, overall complexity associated with the assessment, stage of development, progress made to date, results of testing, and consideration as to the nature of the remaining development work.

During the three months ended June 30, 2013 and 2012, total R&D expenses recognized were approximately $9.3 million and $2.3 million, respectively. Total R&D expenses expected to be recognized in connection with the first and second performance milestones is approximately $142.8 million, which includes the costs associated with the 0.7 million Unallocated Veloce Units that have not been expensed as these units have not been distributed as of June 30, 2013. Cumulative research and development expenses recognized in connection with the achievement of the first and second milestone through June 30, 2013 is $135.8 million. The Veloce accrued liability included on the Condensed Consolidated Balance Sheets is based upon the amount of R&D expense recognized in connection with the development of the Veloce performance milestones less amounts paid either in cash or our common stock. Veloce consideration that has been accrued as of June 30, 2013, is classified as long-term if payments of the consideration is expected to occur beyond a 12 month period.

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Certain Financial Statement Information

3 Months Ended

Jun. 30, 2013

Certain Financial Statement Information [Abstract]

CERTAIN FINANCIAL STATEMENT INFORMATION

CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,278		$	25,278
Less: allowance for bad debts	(463		)	(703		)
	$	28,815		$	24,575

Inventories:

	June 30, 2013		March 31, 2013
	(In thousands)
Finished goods	$	6,247	$	7,247
Work in process	4,855		4,098
Raw materials	1,613		1,555
	$	12,715	$	12,900

Other current assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	12,765	$	13,762
Executive deferred compensation assets	700		693
Deposits	752		828
Receivable from sale of strategic investment and TPack	4,673		1,331
Other	1,288		1,384
	$	20,178	$	17,998

Property and equipment:

	Useful Life	June 30, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	45,077		$	40,063
Leasehold improvements	1-15	10,669			14,202
Computers, office furniture and equipment	3-7	44,980			43,485
Buildings	31.5	2,756			2,756
Land	—	9,800			9,800
		113,282			110,306
Less: accumulated depreciation and amortization		(77,721		)	(75,915		)
		$	35,561		$	34,391

* Includes capitalized mask costs.

Goodwill and purchased intangibles:

Goodwill is as follows:

	June 30, 2013		March 31, 2012
	(In thousands)
Goodwill	$	11,425	$	13,183

The reduction in Goodwill of $1.8 million relates to the sale of TPack. Please refer to Note 2 to the Condensed Consolidated Financial Statements for details of the sale of TPack.

Purchase-related intangibles were as follows:

	June 30, 2013								March 31, 2013
	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	$	425,000	$	(425,000	)	$	—	—	$	441,300	$	(431,771	)	$	9,529	3.5
Customer relationships	6,330		(6,038		)	292		1.2	12,830		(10,507		)	2,323		2.1
Patents/core technology rights/tradename	62,306		(62,306		)	—		—	63,206		(63,067		)	139		0.3
	$	493,636	$	(493,344	)	$	292		$	517,336	$	(505,345	)	$	11,991

During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of of TPack. Please refer to Note 2 to the Condensed Consolidated Notes to the Financial Statements for further discussion.

As of June 30, 2013, 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,
2014	$	—	$	188	$	188
2015	—		104		104
2016 and thereafter	—		—		—
Total	$	—	$	292	$	292

Other assets:

	June 30, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,713	$	7,866
Strategic investments	3,000		3,000
	$	7,713	$	10,866

Other accrued liabilities:

	June 30, 2013		March 31, 2013
	(In thousands)
Customer deposits*	$	688	$	237
Employee related liabilities	2,078		2,236
Executive deferred compensation	951		1,284
Income taxes	1,426		903
Professional fees	4,414		3,840
Other	2,889		2,230
	$	12,446	$	10,730

* 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 in which the Company does not have the ability to exercise significant influence are carried at 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 three months ended June 30, 2013 and 2012, the Company did not record any other-than-temporary impairment charges of its strategic investments and invested zero and $0.5 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 instrument (in thousands):

	June 30, 2013								March 31, 2013
	Amortized Cost		Gross Unrealized				Estimated Fair Value		Amortized Cost		Gross Unrealized				Estimated Fair Value
			Gains		Losses						Gains		Losses
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	26,533		—		—		26,533		10,536		—		—		10,536
U.S. Treasury securities and agency bonds	12,521		6		12		12,515		12,363		10		—		12,373
Corporate bonds	10,800		38		9		10,829		15,567		63		2		15,628
Mortgage-backed and asset-backed securities*	4,130		362		20		4,472		3,655		355		7		4,003
Closed-end bond funds	16,695		2,754		538		18,911		21,914		5,340		39		27,215
Preferred stock	2,406		924		—		3,330		4,878		2,314		—		7,192
	$	86,225	$	4,084	$	579	$	89,730	$	77,442	$	8,082	$	48	$	85,476
Reported as:
Cash and cash equivalents							$	39,673							$	19,065
Short-term investments available-for-sale							50,057								66,411
							$	89,730							$	85,476

* At June 30, 2013 and March 31, 2013, approximately $1.3 million and $1.4 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 instrument measured at fair value on a recurring basis (in thousands):

	June 30, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	13,140	$	—	$	—	$	13,140	$	8,529	$	—	$	—	$	8,529
Cash equivalents	25,378		1,155		—		26,533		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,951		564		—		12,515		12,373		—		—		12,373
Corporate bonds	—		10,829		—		10,829		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,472		—		4,472		—		4,003		—		4,003
Closed-end bond funds	18,911		—		—		18,911		27,215		—		—		27,215
Preferred stock	—		3,330		—		3,330		—		7,192		—		7,192
	$	69,380	$	20,350	$	—	$	89,730	$	57,625	$	27,851	$	—	$	85,476

There were no significant transfers in and out of Level 1 and Level 2 fair value measurement categories during the three months ended June 30, 2013 and 2012, respectively.

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):

	June 30, 2013				March 31, 2013
	Cost		Fair Value		Cost		Fair Value
Less than 1 year	$	7,497	$	7,508	$	9,205	$	9,217
Mature in 1 – 2 years	17,140		17,147		19,843		20,040
Mature in 3 – 5 years	170		171		1,575		1,649
Mature after 5 years	2,644		2,990		962		1,098
	$	27,451	$	27,816	$	31,585	$	32,004

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 June 30, 2013	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	$	4,514	$	(12	)	$	—	$	—		$	4,514	$	(12	)
Corporate bonds	3,255		(9		)	—		—			3,255		(9		)
Mortgage-backed and asset-backed securities	1,780		(20		)	25		—			1,805		(20		)
Closed-end bond funds	5,795		(479		)	415		(59		)	6,210		(538		)
	$	15,344	$	(520	)	$	440	$	(59	)	$	15,784	$	(579	)

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of March 31, 2013	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	$	300	$	—		$	—	$	—		$	300	$	—
Corporate bonds	2,276		(2		)	113		—			2,389		(2		)
Mortgage-backed and asset-backed securities	647		(3		)	—		(4		)	647		(7		)
Closed-end bond funds	—		—			6,991		(39		)	6,991		(39		)
	$	3,223	$	(5	)	$	7,104	$	(43	)	$	10,327	$	(48	)

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 months ended June 30, 2013 and 2012, respectively. 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 the estimated date of recovery of its amortized cost. As of June 30, 2013 and March 31, 2013, the Company also had $4.1 million and $8.1 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
	June 30,
	2013			2012
Beginning balance	$	220		$	454
Charged to costs of revenues	(15		)	130
Cost incurred	(2		)	(137		)
Ending balance	$	203		$	447

Interest income (expense), net (in thousands):

	Three Months Ended
	June 30,
	2013		2012
Interest income	$	468	$	675
Net realized gain on short-term investments	3,198		1,004
	$	3,666	$	1,679

Net income (loss) per share:

Shares used in basic net income (loss) per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net income (loss) per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of RSUs and outstanding warrants. The reconciliation of shares used to calculate basic and diluted net income (loss) per share consists of the following (in thousands, except per share data):

	Three Months Ended
	June 30,
	2013		2012
Net income (loss)	$	10,857	$	(23,390	)
Shares used in net income (loss) per share computation:
Weighted average common shares outstanding, basic	69,360		62,409
Net effect of dilutive common share equivalents	874		—
Weighted average common shares outstanding, diluted	70,234		62,409
Basic net income (loss) per share	$	0.16	$	(0.37	)
Diluted net income (loss) per share	$	0.15	$	(0.37	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 6.0 million and 10.4 million equivalent shares for the three months ended June 30, 2013 and 2012, respectively, have been excluded from the net income (loss) per share computation, as their impact would be anti-dilutive.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 0.3 million shares for the three months ended June 30, 2012 have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company incurred a net loss in the period presented.

Total equivalent shares excluded from the net income (loss) per share computation are 6.0 million and 10.7 million for the three months ended June 30, 2013 and 2012, respectively.

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Veloce (Details) (USD $) Share data in Millions, unless otherwise specified	0 Months Ended	3 Months Ended		12 Months Ended	46 Months Ended
	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 20, 2012
Veloce (Textual) [Abstract]
Stock Issued		$ 10,037,000	$ 13,683,000
Forecast [Member]
Veloce (Textual) [Abstract]
Total research and development expenses expected to be incurred		142,800,000		142,800,000
Veloce Technologies, Inc. [Member]
Veloce (Textual) [Abstract]
Total consideration to be transferred						178,500,000	135,000,000
Research and development expenses incurred	62,700,000	9,300,000	2,300,000	135,800,000	135,800,000
Payment of aggregate consideration as cash		25,000,000	12,700,000
Aggregate shares issued		1.4	2.4
Stock Issued		10,037,000	13,700,000
Issuance of additional units		0.5
Issuance of additional units, amount		$ 5,700,000
Unallocated units		0.7		0.7

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Certain Financial Statement Information (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Schedule of estimated future amortization expense of purchased intangible assets
2014	$ 188
2015	104
2016 and thereafter	0
Total	292
Cost of Sales [Member]
Schedule of estimated future amortization expense of purchased intangible assets
2014	0
2015	0
2016 and thereafter	0
Total	0
Operating Expenses [Member]
Schedule of estimated future amortization expense of purchased intangible assets
2014	188
2015	104
2016 and thereafter	0
Total	$ 292

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Certain Financial Statement Information (Details 10) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Mar. 31, 2013
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	$ 89,730		$ 85,476
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis	89,730		85,476
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	69,380		57,625
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	20,350		27,851
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	0		0
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	13,140		8,529
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	13,140		8,529
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	0		0
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	0		0
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	26,533		10,536
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	25,378		9,508
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	1,155		1,028
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	0		0
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	12,515		12,373
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	11,951		12,373
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	564		0
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	0		0
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	10,829		15,628
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, cash equivalents and short term investments, measured at fair value on a recurring basis	0		0
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	10,829		15,628
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	0		0
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	4,472	[1]	4,003	[1]
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, cash equivalents and short term investments, measured at fair value on a recurring basis	0		0
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	4,472		4,003
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	0		0
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	18,911		27,215
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	18,911		27,215
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		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	0		0
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	3,330		7,192
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, cash equivalents and short term investments, measured at fair value on a recurring basis	0		0
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	3,330		7,192
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	$ 0		$ 0

[1] At June 30, 2013 and March 31, 2013, approximately $1.3 million and $1.4 million of the estimated fair value presented were mortgage-backed securities, respectively.

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Certain Financial Statement Information (Details 15) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Schedule of Reconciliation of Shares Used to Calculate Basic and Diluted Net (Loss) Income Per Share
Net loss (USD)	$ 10,857	$ (23,390)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	69,360	62,409
Net effect of dilutive common share equivalents	874	0
Weighted average common shares outstanding, diluted	70,234	62,409
Basic and diluted net loss per share (USD per share)	$ 0.16	$ (0.37)
Diluted net income (loss) per share (in dollars per share)	$ 0.15	$ (0.37)

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Contingencies (Details)	1 Months Ended		12 Months Ended
	Jan. 31, 2012	Jan. 31, 2009 Amendments	Mar. 31, 2013 Company
Contingencies (Textual) [Abstract]
Companies named as Potentially Responsible Parties			100
Amendments approved to consent decree		2
Percent of contribution to the total waste	0.50%

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Stockholders' Equity (Details Textual) (USD $)	3 Months Ended		12 Months Ended			1 Months Ended	12 Months Ended	1 Months Ended	3 Months Ended				1 Months Ended	3 Months Ended			3 Months Ended	12 Months Ended			1 Months Ended				1 Months Ended			3 Months Ended	1 Months Ended								3 Months Ended		1 Months Ended		0 Months Ended	1 Months Ended		12 Months Ended	104 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2013 Approved_Plan	Mar. 31, 2013 RSU plan post May 2006 [Member]	Mar. 31, 2013 Minimum [Member]	May 31, 2013 Minimum [Member] FY2014 Short Term Plan [Member]	Mar. 31, 2013 Maximum [Member]	May 31, 2013 Maximum [Member] FY2014 Short Term Plan [Member]	Jun. 30, 2013 Employee Stock Purchase Plan [Member]	Jun. 30, 2012 Employee Stock Purchase Plan [Member]	Aug. 30, 2012 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]	Jun. 30, 2013 Stock Repurchase Program - Open Market [Member]	Apr. 30, 2011 Company's 2011 Equity Incentive Plan [Member] Minimum [Member]	Apr. 30, 2011 Company's 2011 Equity Incentive Plan [Member] Maximum [Member]	Jun. 30, 2013 Restricted Stock Units [Member]	Mar. 31, 2013 Restricted Stock Units [Member]	Mar. 31, 2013 Restricted Stock Units [Member] RSU plan prior to May 2006 [Member]	Mar. 31, 2013 Restricted Stock Units [Member] RSU plan post May 2006 [Member] quarter	Nov. 30, 2011 Restricted Stock Units [Member] Minimum [Member] November 2011 and February 2012 Plan [Member]	Nov. 30, 2011 Restricted Stock Units [Member] Maximum [Member] November 2011 and February 2012 Plan [Member]	Jun. 30, 2013 Common Stock Subject to Repurchase [Member]	Jun. 30, 2012 Common Stock Subject to Repurchase [Member]	May 31, 2012 Performance-Based RSU [Member]	Feb. 29, 2012 Performance-Based RSU [Member] milestone	Nov. 30, 2011 Performance-Based RSU [Member]	Jun. 30, 2013 Performance-Based RSU [Member] milestone	May 31, 2009 Performance-Based RSU [Member] May 2009 Plan [Member]	Apr. 30, 2011 Performance-Based RSU [Member] April 2011 Plan [Member]	Feb. 29, 2012 Performance-Based RSU [Member] November 2011 and February 2012 Plan [Member]	May 31, 2013 Performance-Based MSU [Member] Minimum [Member]	May 31, 2013 Performance-Based MSU [Member] Maximum [Member]	May 31, 2013 Performance-Based MSU [Member] First Vesting Period [Member]	May 31, 2013 Performance-Based MSU [Member] Second Vesting Period [Member]	Feb. 29, 2012 Officer [Member] Performance-Based RSU [Member]	Jun. 30, 2013 Veloce Technologies, Inc. [Member]	May 17, 2009 Veloce Technologies, Inc. [Member]	May 31, 2012 First Vesting Period [Member]	May 31, 2012 Second Vesting Period [Member]	Mar. 31, 2013 August 2004 [Member]	Oct. 31, 2008 August 2004 [Member]	Aug. 31, 2004 August 2004 [Member]	Mar. 31, 2013 August 2004 [Member]	Mar. 31, 2013 August 2004 [Member]
Stockholders Equity [Line Items]
Preferred stock, shares authorized for issuance	2,000,000		2,000,000
Preferred stock, shares outstanding	0		0
Common stock, shares authorized for issuance	375,000,000		375,000,000
Common stock, shares issued	70,343,000		67,952,000
Common stock, shares outstanding	70,343,000		67,952,000
Common stock reserved for issuance									4,800,000			6,300,000
Shares available for future issuance											1,800,000				4,200,000	10,900,000
Percentage of purchase price of common stock equal to fair market value									85.00%
Common stock, shares issued, employee stock purchase plan									0	0			1,200,000
Stock repurchase program, authorized amount																																									$ 15,900,000		$ 200,000,000
Increase in the amount authorized for stock purchase program																																										100,000,000
Stock repurchase program, shares repurchased														0																														100,000	17,300,000
Stock repurchase program, weighted average price per share																																												$ 5.18	$ 10.04
Number of stockholder-approved plans			2
Number of plans unapproved by stockholders			4
Options expiration period, in years			10 years
Vesting period, in years																		4 years	4 years	4 years	1 year	18 months			1 year
Vesting and exercisable rate of new hire grants, percentage			25.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in First Period of Employment				0
Vesting and exercisable rate of new hire grants, grant date					36 months		48 months
Shares outstanding	3,169,000		3,492,000																				0	0
Weighted average remaining contractual term for options outstanding	3 years 3 months 18 days
Aggregate pretax intrinsic value of options exercised	100,000
Pre-tax intrinsic value of options outstanding	2,400,000
Pre-tax intrinsic value of options exercisable	2,200,000
Common stock, closing price per share	$ 8.80																$ 8.80
Award vesting period, quarters																				12
Term of award																									P12M		18-month		P3Y	P3Y	P18M
Restricted stock units awarded																	1,670,000																			500,000
Number of milestones																										3
Aggregate intrinsic value																																				3,700,000
Number of milestones completed																												2
Award performance period																																		2 years	3 years
Award vesting percentage																																0.00%	150.00%
Award pay out percentage						50.00%		150.00%
Weighted average remaining contractual term for the restricted stock units outstanding, in years	1 year 2 months 12 days
Aggregate pre-tax intrinsic value of restricted stock units outstanding which includes performance based awards which are subject to milestone attainments	56,200,000
Share Based Compensation Arrangement by Share Based Payment Award Equity Other than Options Aggregate Pre Tax Intrinsic Value Released	9,600,000
Number of years of development work to be performed																																						5 years
Stock-based compensation expense related to the acceleration of Veloce warrants	$ 0	$ 1,289,000																																			$ 1,289,000
Award vesting percentage																																							66.67%	33.33%

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Mar. 31, 2013
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	375,000,000	375,000,000
Common stock, shares issued	70,343,000	67,952,000
Common stock, shares outstanding	70,343,000	67,952,000

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Contingencies

3 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

CONTINGENCIES

Legal Proceedings

The Company is currently a party to various legal proceedings, including those noted in this section. While the Company presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm the Company's financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to inherent uncertainties, unfavorable rulings or other events that could occur. In addition, legal proceedings are expensive to prosecute and defend against and can divert Management attention and Company resources away from the Company's business objectives. Unfavorable resolutions could include monetary damages against the Company, or preclude the Company from recovering the damages it seeks in legal proceedings it has commenced. It is also possible that the Company could conclude it is in the best interests of its stockholders, employees, and customers to settle one or more such matters, and any such settlement could include substantial payments or the surrender of rights to collect substantial payments from third parties. However, the Company has not reached this conclusion with respect to any particular matter at this time.

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 the 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. In February 2013, OPOG submitted a good faith settlement offer to EPA, with settlement negotiations between the parties expected to continue in fiscal year 2014. It is anticipated that such settlement negotiations will result in EPA and OPOG entering into a remediation consent decree with the Court regarding OU2. OPOG is expected to vote in December 2013 on whether to retain legal counsel to pursue claims against other potentially responsible parties for the regional groundwater contamination.  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 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 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.

In April 2013, the contract litigation between AppliedMicro TPack A/S, the Company’s wholly-owned subsidiary, Xtera Communications Inc. and its subsidiary Meriton Networks Canada Inc., which previously was commenced in September 2009 in the Ontario Superior Court of Justice in Canada was fully settled and dismissed with prejudice and without costs.

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net income (loss)	$ 10,857,000	$ (23,390,000)
Other comprehensive loss, net of $0 tax for 2013 and 2012:
Unrealized loss on investments	(4,529,000)	(501,000)
Loss on foreign currency translation	(189,000)	(118,000)
Other comprehensive loss, net of $0 tax for 2013 and 2012:	(4,718,000)	(619,000)
Total comprehensive income (loss)	6,139,000	(24,009,000)
Other comprehensive loss, income tax provision	0	0
Reclassification adjustment from AOCI to earnings, short term investments	$ 3,200,000	$ 1,000,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Current assets:
Cash and cash equivalents	$ 39,673	$ 19,065	[1]
Short-term investments-available-for-sale	50,057	66,411	[1]
Accounts receivable, net	28,815	24,575	[1]
Inventories	12,715	12,900	[1]
Other current assets	20,178	17,998	[1]
Total current assets	151,438	140,949	[1]
Property and equipment, net	35,561	34,391	[1]
Goodwill	11,425	13,183	[1]
Purchased intangibles	292	11,991	[1]
Other assets	7,713	10,866	[1]
Total assets	206,429	211,380	[1]
Current liabilities:
Accounts payable	18,299	17,650	[1]
Accrued payroll and related expenses	7,388	6,158	[1]
Veloce accrued liability	45,009	78,082	[1]
Other accrued liabilities	12,446	10,730	[1]
Deferred revenue	666	1,469	[1]
Total current liabilities	83,808	114,089	[1]
Veloce and other non-current liabilities	23,314	15,787	[1]
Commitments and contingencies (Note 8)			[1]
Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 2,000, none issued and outstanding	0	0	[1]
Common stock, $0.01 par value: Authorized shares - 375,000 at June 30, 2013 and March 31, 2013; Issued and outstanding shares - 70,343 at June 30, 2013 and 67,952 at March 31, 2013	704	680	[1]
Additional paid-in capital	5,938,270	5,926,630	[1]
Accumulated other comprehensive loss	(5,455)	(737)	[1]
Accumulated deficit	(5,834,212)	(5,845,069)	[1]
Total stockholders’ equity	99,307	81,504	[1]
Total liabilities and stockholders’ equity	$ 206,429	$ 211,380	[1]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Certain Financial Statement Information (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of other assets
Non-current portion of prepaid expenses	$ 4,713	$ 7,866
Strategic investments	3,000	3,000
Total other assets	$ 7,713	$ 10,866	[1]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Certain Financial Statement Information (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of Inventories
Finished goods	$ 6,247	$ 7,247
Work in process	4,855	4,098
Raw materials	1,613	1,555
Inventories, total	$ 12,715	$ 12,900	[1]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Stockholders' Equity (Details 3) (Restricted Stock Units (RSUs) [Member])	3 Months Ended
	Jun. 30, 2013
Restricted Stock Units (RSUs) [Member]
Schedule of Restricted Stock Unit Activity
Restricted Stock Units Outstanding Number of Shares, Outstanding at the beginning of the year	6,444,000
Restricted Stock Units Awarded	1,670,000
Restricted Stock Units Vested	(1,247,000)
Restricted Stock Units Cancelled	(483,000)
Restricted Stock Units Outstanding Number of Shares, Outstanding at the end of the period	6,384,000

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Restructuring Charges (Details Textual) (USD $) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended
	Dec. 31, 2012 employee	Mar. 31, 2014 Workforce Reduction Minimum [Member] Forecast [Member]	Mar. 31, 2014 Workforce Reduction Maximum [Member] Forecast [Member]	Mar. 31, 2014 Other Operational Expense [Member] Minimum [Member] Forecast [Member]	Mar. 31, 2014 Other Operational Expense [Member] Maximum [Member] Forecast [Member]
Restructuring Charges (Textual) [Abstract]
Number of positions eliminated	70
Anticipated reduction in expenses		$ 8.0	$ 9.0	$ 4.0	$ 5.0

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Certain Financial Statement Information (Details 13) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Schedule of Warranty Reserve Activity
Beginning balance	$ 220	$ 454
Charged to costs of revenues	(15)	130
Charges incurred	(2)	(137)
Ending balance	$ 203	$ 447

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Certain Financial Statement Information (Details 14) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Schedule of Interest Income, Net
Interest income	$ 468	$ 675
Net realized gain on short-term investments	3,198	1,004
Interest income, net	$ 3,666	$ 1,679

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Stock-Based Compensation

3 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

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 Restricted Stock Units ("RSUs"), for 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 during the three months ended June 30, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:

	Three Months Ended June 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2013			2012			2013			2012
Expected life (years)	4.4			4.5			0.5			0.5
Risk-free interest rate	0.6		%	0.7		%	0.1		%	0.1		%
Volatility	49		%	54		%	50		%	56		%
Dividend yield	—			—			—			—
Weighted average fair value	$	2.95		$	2.47		$	2.47		$	2.40

The weighted average grant-date fair value per share of the restricted stock units awarded was $7.03 and $5.46 during the three months ended June 30, 2013 and 2012, 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, 2013, the Company revised its estimated forfeiture rate used in determining the amount of stock-based compensation from 6.6% to 6.7% as a result of an increase 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
	June 30,
	2013			2012
Stock-based compensation expense by type of award
Stock options	$	602		$	1,488
Restricted stock units	3,124			6,120
Total stock-based compensation	3,726			7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

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

	Three Months Ended
	June 30,
	2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	108		$	180
Research and development	1,798			4,205
Selling, general and administrative	1,820			3,223
Total stock-based compensation	$	3,726		$	7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2016, including time and performance based awards that are expected to vest, at June 30, 2013 is $19.1 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.8 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 $7.7 million for the three months ended June 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See Note 6 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

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Certain Financial Statement Information (Details 8) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Mar. 31, 2013
Schedule of other accrued liabilities
Customer deposits	$ 688	[1]	$ 237	[1]
Employee related liabilities	2,078		2,236
Executive deferred compensation	951		1,284
Income taxes	1,426		903
Professional fees	4,414		3,840
Other	2,889		2,230
Total other accrued liabilities	$ 12,446		$ 10,730	[2]

[1] Includes credit balances in Accounts Receivable that have been reclassified as Other Accrued Liabilities

[2] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Stockholders' Equity (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013
Schedule of Option Activity Under Stock Incentive Plans
Number of Shares, Outstanding at the beginning of the year	3,492
Number of Shares, Granted	40
Number of Shares, Exercised	(30)
Number of Shares, Forfeited	(333)
Number of Shares, Outstanding at the end of the period	3,169
Vested and expected to vest at the end of the period	3,163
Number of Shares, Vested at the end of the period	2,955
Schedule of Weighted Average Exercise Price Per Share Under Stock Incentive Plans
Weighted Average Exercise Price Per Share, Outstanding at the beginning of the year (USD per share)	$ 10.26
Weighted Average Exercise Price Per Share, Granted (USD per share)	$ 7.35
Weighted Average Exercise Price Per Share, Exercised (USD per share)	$ 5.63
Weighted Average Exercise Price Per Share, Forfeited (USD per share)	$ 9.69
Weighted Average Exercise Price Per Share, Outstanding at the end of the period (USD per share)	$ 10.32
Weighted Average Exercise Price Per Share, Vested and expected to vest at the end of the period (USD per share)	$ 10.33
Weighted Average Exercise Price Per Share, Vested at the end of the period (USD per share)	$ 10.40

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Sale of TPack A/S Sale of TPack A/S (Tables)

3 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

In connection with the divestiture, we recorded a preliminary gain of $19.7 million. The following table summarizes the components of the gain:

	(in thousands)
Total proceeds, net of working capital adjustment,	$	30,175
Net assets and liabilities	(184		)
Goodwill write off	(1,757		)
Intangibles write off	(11,404		)
Holdback amount	3,353
Legal fees and other costs	(484		)
Gain on sale of TPack	$	19,699

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Stockholders' Equity

3 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

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. At June 30, 2013 there are no preferred shares outstanding.

Common Stock

At June 30, 2013, the Company had 375.0 million shares authorized for issuance and approximately 70.3 million shares issued and outstanding. At March 31, 2013, there were approximately 68.0 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 three months ended June 30, 2013 and 2012, no shares were issued under the 2012 plan. At June 30, 2013, 1.2 million shares were available for future issuance from the 2012 Plan.

Stock Repurchase Program

In August 2004, the Board of Directors 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 agreements. In October 2008, the Board of Directors increased the stock repurchase program by $100.0 million. There were no stock repurchases during the three months ended June 30, 2013. During the three months ended June 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 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. As of June 30, 2013, the Company had $15.9 million available in its stock repurchase program.

The Company did not enter into any structured stock repurchase agreements during the three months ended June 30, 2013 and 2012.

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.

During the three months ended June 30, 2013 and 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 three months ended June 30, 2013 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	3,492		$	10.26
Granted	40		7.35
Exercised	(30	)	5.63
Forfeited	(333	)	9.69
Outstanding at the end of the period	3,169		$	10.32
Vested and expected to vest at the end of the period	3,163		$	10.33
Vested at the end of the period	2,955		$	10.40

At June 30, 2013, the weighted average remaining contractual term for options outstanding and vested is 3.3 years each.

The aggregate pretax intrinsic value of options exercised during the three months ended June 30, 2013 was approximately $0.1 million. 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 June 30, 2013 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 - $ 7.60	617	3.76	$	6.58	508	$	6.45
7.61 - 7.93	692	3.09	7.67		692	7.67
7.94 - 12.07	830	4.06	10.07		755	9.98
12.08 - 14.23	634	3.03	12.75		604	12.78
14.24 - 23.56	396	1.83	17.43		396	17.43
$  1.68 - $23.56	3,169	3.30	$	10.32	2,955	$	10.40

As of June 30, 2013, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $2.4 million and $2.2 million, respectively. The aggregate pre-tax intrinsic values were calculated based on the closing price of the Company’s common stock of $8.80 on June 30, 2013.

Restricted Stock Units

The Company has granted 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. Fiscal 2012 and 2013 were declared as zero attainment years and vesting target shares have rolled over to fiscal 2014. 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 generally 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 1 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. This program has concluded and no further grants will be made under this program.

In February 2012, Dr. Gopi was awarded 500,000 performance-based restricted stock units based on three underlying performance milestones. The value of these restricted stock units is $3.7 million. The award associated with each underlying milestone 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 expense accordingly. As of June 30, 2013, two of the performance milestones have been completed and the associated stock-based compensation expense has been recorded in the Company's consolidated financial statements.

In May 2013, the Committee authorized performance-based market stock units or "MSUs". The MSUs will be earned, if at all, based on the Company's Total Shareholder Return (“TSR”) compared to that of the SPDR S&P Semiconductor Index ("Index”) over a two-year performance period (for half of the MSU award) and a three-year performance period (for the remaining half of the MSU award). The MSU's will vest between ranges of 0% and 150% based on the Company's relative TSR compared to the index. The MSUs will be valued using the Monte Carlo pricing model, which uses the Company's stock price, the Index value, expected volatilities of the Company's stock price and the index, correlation coefficients and risk free interest rates to determine the fair value.

In May 2013, the Committee authorized the short-term incentive compensation plan the(“FY2014 Short Term Plan”), that, if earned, would become payable on May 15, 2014. The FY 2014 Short Term Plan will pay-out based on FY 2014 revenue and non-GAAP earnings per share metrics. The award pay-outs for each corporate financial measure will range from 50% to 150% of the pre-established target level based on the Company's actual performance for fiscal 2014.

Restricted stock unit activity during the three months ended June 30, 2013 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	1,670
Vested	(1,247	)
Cancelled	(483	)
Outstanding at the end of the period	6,384

The weighted average remaining contractual term for the restricted stock units outstanding as of June 30, 2013 was 1.2 years.

As of June 30, 2013, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $56.2 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 $8.80 on June 30, 2013.

The aggregate pretax intrinsic value of RSUs released during the three months ended June 30, 2013 was $9.6 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”). 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.

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Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include all the accounts of AppliedMicro and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods prior to its merger with the Company, 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 5 of Notes to the Condensed Consolidated Financial Statements. 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 Research and Development ("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;

• unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net;

• valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles, impairments of goodwill and apportionment of goodwill related to divestitures;

• Veloce accrued liability which considers: (i) estimating the total value of the expected Veloce consideration, (ii) determining the stage at which a milestone is deemed to be probable of attainment, (iii) the estimated progress towards achieving the milestone at the time such milestone was deemed probable of achievement, and (iv) estimating the approximate timing of the expected completion of the milestones and related payments;

• potential costs of litigation, which affects operating expenses;

• 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.

Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-02 (ASU 2013-02), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires an entity to present either on the face of the statement where comprehensive income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The adoption of ASU 2013-02, which involves presentation and disclosures only, did not have a significant impact on the Company's condensed consolidated financial statements.

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Stock-Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 3,726	$ 7,608
Stock-based compensation expensed from inventory	12	(81)
Total stock-based compensation expense	3,714	7,689
Stock Options [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	602	1,488
Restricted Stock Units [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 3,124	$ 6,120

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Certain Financial Statement Information (Details 11) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of cost and estimated fair values of available-for-sale securities with stated maturities by contractual maturity
Less than 1 year, Cost	$ 7,497	$ 9,205
Mature in 1 - 2 years, Cost	17,140	19,843
Mature in 3 - 5 years, Cost	170	1,575
Mature after 5 years, Cost	2,644	962
Cost, Total	27,451	31,585
Less than 1 year, Fair Value	7,508	9,217
Mature in 1 - 2 years, Fair Value	17,147	20,040
Mature in 3 - 5 years, Fair Value	171	1,649
Mature after 5 years, Fair Value	2,990	1,098
Fair Value, Total	$ 27,816	$ 32,004

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Stockholders' Equity (Tables)

3 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Schedule of Option Activity Under Stock Incentive Plans

Option activity under the Company’s stock incentive plans during the three months ended June 30, 2013 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	3,492		$	10.26
Granted	40		7.35
Exercised	(30	)	5.63
Forfeited	(333	)	9.69
Outstanding at the end of the period	3,169		$	10.32
Vested and expected to vest at the end of the period	3,163		$	10.33
Vested at the end of the period	2,955		$	10.40

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 June 30, 2013 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 - $ 7.60	617	3.76	$	6.58	508	$	6.45
7.61 - 7.93	692	3.09	7.67		692	7.67
7.94 - 12.07	830	4.06	10.07		755	9.98
12.08 - 14.23	634	3.03	12.75		604	12.78
14.24 - 23.56	396	1.83	17.43		396	17.43
$  1.68 - $23.56	3,169	3.30	$	10.32	2,955	$	10.40

Schedule of Restricted Stock Unit Activity

Restricted stock unit activity during the three months ended June 30, 2013 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	1,670
Vested	(1,247	)
Cancelled	(483	)
Outstanding at the end of the period	6,384

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

The condensed consolidated financial statements include all the accounts of AppliedMicro and its wholly-owned subsidiaries including Veloce Technologies Inc. (“Veloce”), which was consolidated in prior accounting periods prior to its merger with the Company, 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 5 of Notes to the Condensed Consolidated Financial Statements. 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 Research and Development ("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;

• unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affects interest income (expense), net;

• valuation of purchased intangibles and goodwill, which affects amortization and impairments of purchased intangibles, impairments of goodwill and apportionment of goodwill related to divestitures;

• Veloce accrued liability which considers: (i) estimating the total value of the expected Veloce consideration, (ii) determining the stage at which a milestone is deemed to be probable of attainment, (iii) the estimated progress towards achieving the milestone at the time such milestone was deemed probable of achievement, and (iv) estimating the approximate timing of the expected completion of the milestones and related payments;

• potential costs of litigation, which affects operating expenses;

• 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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Certain Financial Statement Information (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Schedule of Accounts receivable
Accounts receivable	$ 29,278	$ 25,278
Less: allowance for bad debts	(463)	(703)
Accounts receivable, net	$ 28,815	$ 24,575	[1]

[1] Amounts have been derived from the March 31, 2013 audited consolidated financial statements.

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Stock-Based Compensation (Tables)

3 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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

The fair value of the options granted during the three months ended June 30, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:

	Three Months Ended June 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2013			2012			2013			2012
Expected life (years)	4.4			4.5			0.5			0.5
Risk-free interest rate	0.6		%	0.7		%	0.1		%	0.1		%
Volatility	49		%	54		%	50		%	56		%
Dividend yield	—			—			—			—
Weighted average fair value	$	2.95		$	2.47		$	2.47		$	2.40

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
	June 30,
	2013			2012
Stock-based compensation expense by type of award
Stock options	$	602		$	1,488
Restricted stock units	3,124			6,120
Total stock-based compensation	3,726			7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

Summary of Stock-Based Compensation Expense

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

	Three Months Ended
	June 30,
	2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	108		$	180
Research and development	1,798			4,205
Selling, general and administrative	1,820			3,223
Total stock-based compensation	$	3,726		$	7,608
Stock-based compensation (capitalized to)/expensed from inventory	(12		)	81
Total stock-based compensation expense	$	3,714		$	7,689

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Document and Entity Information	3 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
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	Jun. 30, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		73,111,558

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Sale of TPack A/S Sale of TPack A/S (Details) (USD $)	3 Months Ended		0 Months Ended	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Apr. 22, 2013 TPack [Member]	Jun. 30, 2013 TPack [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Adjusted sale price of entity			$ 33,500,000
Agreed upon price for sale of entity			34,000,000
Working capital adjustment to sale price			500,000
Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract]
Total proceeds, net of working capital adjustment			30,175,000
Net assets and liabilities			(184,000)
Goodwill write off			(1,757,000)
Intangibles write off			(11,404,000)	11,400,000
Holdback amount			3,353,000
Legal fees and other costs			(484,000)
Gain on sale of TPack	19,699,000	0	19,699,000
Cash, cash equivalents and short term investments			$ 700,000