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 December 31, 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 January 24, 2014, 74,177,049 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 December 31, 2013 and March 31, 2013	3
	Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2013 and 2012	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended December 31, 2013 and 2012	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 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	38
Item 4.	Controls and Procedures	38
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
Signatures		60

2

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	December 31, 2013			March 31, 2013
	(unaudited)			(note)
ASSETS
Current assets:
Cash and cash equivalents	$	23,630		$	19,065
Short-term investments-available-for-sale	50,654			66,411
Accounts receivable, net	28,800			24,575
Inventories	10,482			12,900
Assets held for sale	14,260			—
Other current assets	17,829			17,998
Total current assets	145,655			140,949
Property and equipment, net	20,172			34,391
Goodwill	11,425			13,183
Purchased intangibles	167			11,991
Other assets	7,842			10,866
Total assets	$	185,261		$	211,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,210		$	17,650
Accrued payroll and related expenses	6,398			6,158
Veloce accrued liability	57,960			78,082
Other accrued liabilities	11,178			10,730
Deferred revenue	888			1,469
Total current liabilities	89,634			114,089
Veloce and other non-current liabilities	3,511			15,787
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 2,000, none issued and outstanding	—			—
Common stock, $0.01 par value:
Authorized shares — 375,000 at December 31, 2013 and March 31, 2013
Issued and outstanding shares — 74,171 at December 31, 2013 and 67,952 at March 31, 2013	740			680
Additional paid-in capital	5,971,775			5,926,630
Accumulated other comprehensive loss	(6,518		)	(737		)
Accumulated deficit	(5,873,881		)	(5,845,069		)
Total stockholders’ equity	92,116			81,504
Total liabilities and stockholders’ equity	$	185,261		$	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						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net revenues	$	54,844		$	51,698		$	164,379		$	139,316
Cost of revenues	21,644			22,958			65,383			61,874
Gross profit	33,200			28,740			98,996			77,442
Operating expenses:
Research and development	29,870			82,711			120,926			151,865
Selling, general and administrative	10,930			12,675			29,602			38,676
Gain on sale of TPack	—			—			(19,699		)	—
Amortization of purchased intangible assets	62			338			254			1,589
Restructuring charges, net	38			6,218			1,130			6,218
Total operating expenses	40,900			101,942			132,213			198,348
Operating loss	(7,700		)	(73,202		)	(33,217		)	(120,906		)
Interest income (expense), net	525			892			4,679			3,316
Other income (expense), net	92			1,366			309			1,539
Loss before income taxes	(7,083		)	(70,944		)	(28,229		)	(116,051		)
Income tax expense	201			618			581			458
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Basic and diluted net loss per share	$	(0.10	)	$	(1.08	)	$	(0.40	)	$	(1.81	)
Shares used in calculating basic and diluted net loss per share	73,989			66,113			71,986			64,489

See Accompanying Notes to Condensed Consolidated Financial Statements

4

APPLIED MICRO CIRCUITS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Other comprehensive loss, net of tax:
Unrealized gain (loss) on investments*	(179		)	(659		)	(5,404		)	196
Loss on foreign currency translation	(37		)	(127		)	(377		)	(249		)
Other comprehensiveloss, net of tax	(216		)	(786		)	(5,781		)	(53		)
Total comprehensive loss	$	(7,500	)	$	(72,348	)	$	(34,591	)	$	(116,562	)

* The amounts reclassified from accumulated other comprehensive loss and recorded in interest income (expense), net in the Condensed Consolidated Statement of Operations relating to short term investments were zero and $3.3 million for the three and nine months ended December 31, 2013, respectively, and $0.2 million and $1.4 million for the three and nine months ended December 31, 2012, respectively. Refer to Note 2, Certain Financial Statement Information, 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)

	Nine Months Ended
	December 31,
	2013			2012
Operating activities:
Net loss	$	(28,810	)	$	(116,509	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	7,728			7,247
Amortization of purchased intangibles	420			3,626
Stock-based compensation expense:
Stock options	1,985			3,024
Restricted stock units	11,445			18,521
Warrants	—			1,289
Veloce accrued liability	42,684			56,580
Acquisition related adjustment	—			(133		)
Gain on sale of TPack	(19,699		)	—
Net loss (gain) on disposals of property, equipment and other assets	27			(1,296		)
Non-cash restructuring costs	298			4,689
Tax effect on other comprehensive income	—			(130		)
Changes in operating assets and liabilities:
Accounts receivable	(4,459		)	5,304
Inventories	2,415			9,387
Assets held for sale	(14,260		)	—
Other assets	16,475			(2,758		)
Accounts payable	(4,423		)	(3,907		)
Accrued payroll and other accrued liabilities	610			887
Veloce accrued liability	(45,432		)	(15,928		)
Deferred revenue	(449		)	(841		)
Net cash used for operating activities	(33,445		)	(30,948		)
Investing activities:
Proceeds from sales and maturities of short-term investments	26,594			35,367
Purchases of short-term investments	(16,241		)	(17,834		)
Proceeds from sale of property, equipment and other assets	20			1,800
Purchase of property, equipment and other assets	(5,616		)	(8,454		)
Proceeds from sale of strategic equity investment	1,286			7,146
Purchases of strategic equity investment	—			(500		)
Proceeds from the sale of TPack, net	29,498			—
Funding of a note receivable	—			(500		)
Net cash provided by investing activities	35,541			17,025
Financing activities:
Proceeds from issuance of common stock	8,582			5,841
Funding of restricted stock units withheld for taxes	(5,518		)	(2,773		)
Repurchase of common stock	—			(653		)
Payment of contingent consideration	—			(485		)
Other	(595		)	(389		)
Net cash provided by financing activities	2,469			1,541
Net increase (decrease) in cash and cash equivalents	4,565			(12,382		)
Cash and cash equivalents at beginning of year	19,065			28,065
Cash and cash equivalents at end of period	$	23,630		$	15,683
Supplementary cash flow disclosures:
Cash paid for income taxes	$	609		$	662
Common stock issued for Veloce merger consideration	$	29,209		$	15,956

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 (the "Company") 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 4, Veloce, 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 their useful lives, which affect 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 July 2013, the FASB issued Accounting Standards Update 2013-11 amending Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists that will require the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in the condensed consolidated balance sheets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments will be effective for interim and annual periods beginning after December 15, 2013; however, early adoption and retrospective application are permitted. The Company does not expect the adoption of these amendments to have a significant impact on the Company’s Consolidated Financial Statements.

7

2. CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	December 31, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,281		$	25,278
Less: allowance for bad debts	(481		)	(703		)
	$	28,800		$	24,575

Inventories:

	December 31, 2013		March 31, 2013
	(In thousands)
Finished goods	$	4,513	$	7,247
Work in process	4,637		4,098
Raw materials	1,332		1,555
	$	10,482	$	12,900

Assets held for sale:

	December 31, 2013		March 31, 2013
	(In thousands)
Assets held for sale	$	14,260	$	—

As of December 31, 2013, the Company classified its headquarters building in Sunnyvale, California as assets held for sale in the Condensed Consolidated Balance Sheets at $14.3 million representing the carrying amount of the asset. In January 2014, the Company agreed to sell the headquarters building for a purchase price of $40.8 million in cash, subject to a limited set of certain closing conditions. See Note 9, Subsequent Events, to the Condensed Consolidated Financial Statements for details.

Other current assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	11,177	$	13,762
Executive deferred compensation assets	1,157		693
Deposits	653		828
Receivable from sale of strategic investment and TPack	3,353		1,331
Other	1,489		1,384
	$	17,829	$	17,998

Property and equipment:

8

	Useful Life	December 31, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	44,887		$	40,063
Leasehold improvements **	1-15	9,011			14,202
Computers, office furniture and equipment	3-7	43,992			43,485
Buildings **	31.5	—			2,756
Land **	—	—			9,800
		97,890			110,306
Less: accumulated depreciation and amortization		(77,718		)	(75,915		)
		$	20,172		$	34,391

* Includes capitalized mask costs.

** December 31, 2013 balances exclude $14.3 million, including land, building and leasehold improvements related to the Company's headquarters in Sunnyvale, California, which have been reclassified as assets held for sale and included under current assets.

Goodwill and purchased intangibles:

Goodwill is as follows:

	December 31, 2013		March 31, 2013
	(In thousands)
Goodwill	$	11,425	$	13,183

The reduction in goodwill of $1.8 million relates to the sale of TPack. See Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for details.

Purchase-related intangibles are as follows:

	December 31, 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		(6,163		)	167		0.7	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	$	(493,469	)	$	167		$	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 TPack. Please refer to Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for further discussion.

As of December 31, 2013, the estimated future amortization expense of purchased intangible assets to be charged to operating expenses was as follows (in thousands):

9

	Operating Expenses
Fiscal Years Ending March 31,
2014 (remainder of year)	$	63
2015	104
Total	$	167

Other assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,842	$	7,866
Strategic investments	3,000		3,000
	$	7,842	$	10,866

Other accrued liabilities:

	December 31, 2013		March 31, 2013
	(In thousands)
Employee related liabilities	$	1,902	$	2,236
Executive deferred compensation	1,415		1,284
Income taxes	1,254		903
Professional fees	2,033		3,840
Other	4,574		2,467
	$	11,178	$	10,730

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 nine months ended December 31, 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 are carried at adjusted 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

	December 31, 2013									March 31, 2013
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses							Gains		Losses
Cash	$	19,716	$	—	$	—		$	19,716	$	8,529	$	—	$	—		$	8,529
Cash equivalents	3,914		—		—			3,914		10,536		—		—			10,536
U.S. Treasury securities and agency bonds	11,747		8		(4		)	11,751		12,363		10		—			12,373
Corporate bonds	15,482		56		(4		)	15,534		15,567		63		(2		)	15,628
Mortgage-backed and asset-backed securities*	4,015		300		(47		)	4,268		3,655		355		(7		)	4,003
Closed-end bond funds	14,374		2,261		(818		)	15,817		21,914		5,340		(39		)	27,215
Preferred stock	2,406		878		—			3,284		4,878		2,314		—			7,192
	$	71,654	$	3,503	$	(873	)	$	74,284	$	77,442	$	8,082	$	(48	)	$	85,476
Reported as:
Cash and cash equivalents								$	23,630								$	19,065
Short-term investments available-for-sale								50,654									66,411
								$	74,284								$	85,476

* At December 31, 2013 and March 31, 2013, approximately $1.1 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):

	December 31, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	19,716	$	—	$	—	$	19,716	$	8,529	$	—	$	—	$	8,529
Cash equivalents	3,914		—		—		3,914		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,596		155		—		11,751		12,373		—		—		12,373
Corporate bonds	—		15,534		—		15,534		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,268		—		4,268		—		4,003		—		4,003
Closed-end bond funds	15,817		—		—		15,817		27,215		—		—		27,215
Preferred stock	—		3,284		—		3,284		—		7,192		—		7,192
	$	51,043	$	23,241	$	—	$	74,284	$	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 and nine months ended December 31, 2013 and 2012.

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):

	December 31, 2013				March 31, 2013
	Cost		Estimated Fair Value		Cost		Estimated Fair Value
Less than 1 year	$	7,259	$	7,411	$	9,205	$	9,217
Mature in 1 – 2 years	22,341		22,369		19,843		20,040
Mature in 3 – 5 years	707		771		1,575		1,649
Mature after 5 years	937		1,002		962		1,098
	$	31,244	$	31,553	$	31,585	$	32,004

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

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of December 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	$	2,566	$	(4	)	$	—	$	—		$	2,566	$	(4	)
Corporate bonds	2,811		(4		)	—		—			2,811		(4		)
Mortgage-backed and asset-backed securities	1,451		(47		)	6		—			1,457		(47		)
Closed-end bond funds	6,344		(721		)	377		(97		)	6,721		(818		)
	$	13,172	$	(776	)	$	383	$	(97	)	$	13,555	$	(873	)

	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 and nine months ended December 31, 2013 and 2012. 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 December 31, 2013 and March 31, 2013, the Company also had $3.5 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						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Beginning balance	$	187		$	370		$	220		$	454
Charged to costs of revenues	54			96			28			311
Cost incurred	(39		)	(108		)	(46		)	(407		)
Ending balance	$	202		$	358		$	202		$	358

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

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Interest income	$	519	$	685	$	1,389	$	1,915
Net realized gain on short-term investments	6		207		3,290		1,401
	$	525	$	892	$	4,679	$	3,316

Net loss per share:

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

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	73,989			66,113			71,986			64,489
Net effect of dilutive common share equivalents	—			—			—			—
Weighted average common shares outstanding, diluted	73,989			66,113			71,986			64,489
Basic and diluted net loss per share	$	(0.10	)	$	(1.08	)	$	(0.40	)	$	(1.81	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 3.8 million and 4.7 million equivalent shares for the three and nine months ended December 31, 2013, respectively, and 5.4 million and 8.7 million equivalent shares for the three and nine months ended December 31, 2012, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 1.8 million and 1.4 million shares for the three and nine months ended December 31, 2013, respectively, and 1.4 million and 0.7 million shares for the three and nine months ended December 31, 2012, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company incurred net losses in the periods presented.

Total equivalent shares excluded from the net loss per share computation are 5.6 million and 6.1 million for the three and nine months ended December 31, 2013, respectively, and 6.8 million and 9.4 million for the three and nine months ended December 31, 2012, respectively.

3. RESTRUCTURING CHARGES

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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.

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 the unamortized value of a software intellectual property license, which the Company does not intend to use to develop new products. As of December 31, 2013, the actual annual savings were within the range of originally expected savings of $8.0 million to $9.0 million for headcount expenses and $4.0 million to $5.0 million for other additional operational expenses. Total costs incurred and expected to be incurred as of December 31, 2013 in connection with the restructuring plan are $1.8 million.

August 2013 Restructuring Program

In August 2013, the Company implemented a restructuring program to reorganize its operations and reduced its workforce by approximately 20 employees. The plan included eliminating job redundancies, reducing the Company's workforce and impairing 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 $3.0 million annually and other additional operational expenses by $0.5 million annually. Total costs incurred and expected to be incurred as of December 31, 2013 in connection with the restructuring plan are $1.0 million.

The restructuring activity during the three and nine months ended December 31, 2013 relating to the December 2012 and August 2013 restructuring programs is as follows (in thousands):

	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
Restructuring charges	727			272			999
Non-cash items	—			(272		)	(272		)
Cash payments	(847		)	—			(847		)
Liability, September 30, 2013	$	187		$	—		$	187
Restructuring charges	38			—			38
Cash payments	(225		)	—			(225		)
Liability, December 31, 2013	—			—			—

4. VELOCE

On June 20, 2012 (the “Closing Date”), the Company completed its acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger (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 correlation 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 was updated during fiscal 2013 from a previous estimated maximum of approximately

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$135.0 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 percentage of completion of the milestone and the timing of when the performance milestones will 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.

The Company has completed the first and second performance milestones and assessed the third and final performance milestone relating to the Veloce project as probable of achievement as of December 31, 2013. As of December 31, 2013, the Company assessed that all the effort required for the third milestone had been completed. The consideration relating to the three performance milestones, excluding the value allocated to the Unallocated Veloce Units, in the amount of $169.3 million, has been recognized as research and development expense through December 31, 2013 compared to $117.0 million as of December 31, 2012. During the three and nine months ended December 31, 2013, as part of the above arrangement, the Company paid approximately $1.2 million and $45.4 million, respectively, in cash and issued approximately 25,000 shares and 3.8 million shares, respectively, valued at approximately $0.2 million and $29.2 million, respectively. During the three and nine months ended December 31, 2012, as part of the above arrangement, the Company paid approximately $1.1 million and $15.9 million, respectively, in cash and issued approximately 0.2 million shares and 2.8 million shares, respectively, valued at approximately $1.1 million and $15.9 million, respectively.

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 and nine months ended December 31, 2013, the Company distributed an additional 1,400 and 0.5 million Unallocated Veloce Units which had a related expense of $20,000 and $5.9 million, respectively. Veloce Equity Holders subject to vesting requirements will receive their distribution upon satisfaction of such vesting requirements.

For accounting purposes, the costs incurred in connection with the development milestones relating to Veloce are considered compensatory and are recognized as R&D expense. Recognition of these costs as expense occurred when certain development and performance milestones became probable of achievement and were 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 December 31, 2013, 0.9 million Unallocated Veloce Units had not been allocated, and the maximum potential additional expense to be recognized associated with these Unallocated Veloce Units is approximately $9.2 million.

Total R&D expenses recognized related to Veloce were approximately $2.9 million and $42.7 million during the three and nine months ended December 31, 2013, respectively, and approximately $51.9 million and $56.6 million during the three and nine months ended December 31, 2012, 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 December 31, 2013 is classified as long-term if payments of the consideration are expected to occur beyond a 12 month period.

5. STOCKHOLDERS’ EQUITY

Preferred Stock

The Certificate of Incorporation allows for the issuance of up to two million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series of the designation of such series, without further vote or action by the stockholders. At December 31, 2013, there are no preferred shares outstanding.

Common Stock

At December 31, 2013, the Company had 375.0 million shares authorized for issuance and approximately 74.2 million shares issued and outstanding. At March 31, 2013, there were approximately 68.0 million shares issued and outstanding.

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Employee Stock Purchase Plan ("ESPP")

Under the Company's 1998 Employee Stock Purchase Plan ("1998 Plan"), the Company had 6.3 million shares reserved for issuance. 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 nine months ended December 31, 2013 and 2012, 0.3 million and zero shares were issued under the 2012 plan, respectively. In addition, during the nine months ended December 31, 2012, 0.4 million shares were issued under the 1998 plan. At December 31, 2013, 0.8 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 nine months ended December 31, 2013. During the nine months ended December 31, 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 December 31, 2013, the Company had $15.9 million available in its stock repurchase program.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These option plans include three stockholder-approved plans (1992 Stock Option Plan, 1997 Directors’ Stock Option Plan and 2011 Equity Incentive Plan) and four plans not approved by stockholders (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.

Option activity under the Company’s stock incentive plans during the nine months ended December 31, 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	(641	)	9.50
Cancelled	(420	)	11.36
Outstanding at the end of the period	2,471		$	10.22
Vested and expected to vest at the end of the period	2,470		$	10.22
Vested and exercisable at the end of the period	2,344		$	10.31

At December 31, 2013, the weighted average remaining contractual term for options outstanding and vested is 2.8 years.

The aggregate pretax intrinsic value of options exercised during the nine months ended December 31, 2013 was approximately $1.7 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.

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The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of December 31, 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	562	3.28	$	6.71	473	$	6.63
7.61 - 7.67	650	2.58	7.67		650	7.67
7.68 - 11.86	430	3.55	10.49		406	10.42
11.87 - 14.20	493	2.61	12.87		478	12.89
14.21 - 23.32	336	1.55	16.78		337	16.78
$  1.68 - $23.32	2,471	2.77	$	10.22	2,344	$	10.31

As of December 31, 2013, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $9.0 million and $8.4 million, respectively. The aggregate pre-tax intrinsic values were calculated based on the closing price of the Company’s common stock of $13.37 on December 31, 2013.

Restricted Stock Units ("RSUs")

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 April 2011, the Committee authorized three-year performance-based RSU grants, or “EBITDA2” Grants. 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 were 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 was 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 vested 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 had the opportunity to vest after 1 year. Unvested RSU shares remaining at the end of the program period expired unvested. 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 RSUs based on three underlying performance milestones. The value of these RSUs 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 December 31, 2013, the first two performance milestones have been completed and the third and final performance milestone was assessed as being probable of attainment, and the associated stock-based compensation expense has been recorded in the Company's Condensed Consolidated Financial Statements. In November 2013, Dr. Gopi was awarded an additional 500,000 RSUs of which 200,000 RSUs were vested on the grant date and the remaining 300,000 RSUs will vest upon the attainment of certain specified X-Gene and X-Weave commercialization goals. The value of these performance-based RSUs is $3.2 million.

In May and November 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 MSUs will vest between ranges of 0% and 150% based on the Company's relative TSR compared to the Index.

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In May 2013, the Committee authorized an annual incentive compensation plan the (“FY2014 Short Term Plan”), that, if earned, would become payable in RSUs on May 15, 2014. The FY 2014 Short Term Plan will pay out based on fiscal 2014 revenue and non-GAAP earnings per share metrics. The award payouts 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 nine months ended December 31, 2013 is set forth below (in thousands):

	Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	3,069
Vested	(2,048	)
Cancelled	(1,510	)
Outstanding at the end of the period	5,955

The weighted average remaining contractual term for the restricted stock units outstanding as of December 31, 2013 was 1.0 year.

As of December 31, 2013, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $79.6 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 $13.37 on December 31, 2013.

The aggregate pretax intrinsic value of RSUs released during the nine months ended December 31, 2013 was $18.8 million. This intrinsic value represents the fair market value of the Company’s common stock on the date of release.

Warrants

On May 17, 2009, the Company entered into a development agreement with Veloce pursuant to which Veloce agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company’s common stock (the “Warrant”). 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.

6. STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation activity using the modified prospective method. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value stock-based compensation for options and ESPP, and the fair market value of the Company's common stock for RSUs. The MSUs were 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. 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 Company did not grant options or employee stock purchase rights during the three months ended December 31, 2013 and 2012. The fair value of the options and employee stock purchase rights granted during the nine months ended December 31, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

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	Nine Months Ended December 31,
	Employee Stock Options						ESPP
	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		%	0.2		%
Volatility	49		%	54		%	57		%	50		%
Dividend yield	—		%	—		%	—		%	—		%
Weighted average fair value	$	2.95		$	2.47		$	3.67		$	1.50

The weighted average grant-date fair value per share of the restricted stock units awarded was $9.84 and $8.57 during the three and nine months ended December 31, 2013, respectively, compared to $6.13 and $5.71 during the three and nine months ended December 31, 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 increased 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 RSUs (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by type of award
Stock options	$	648	$	935	$	1,987		$	3,024
Restricted stock units	5,231		5,276		11,454			18,427
Total stock-based compensation	5,879		6,211		13,441			21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545

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				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	118	$	147	$	353		$	502
Research and development	1,545		2,814		4,867			10,733
Selling, general and administrative	4,216		3,250		8,221			10,216
Total stock-based compensation	$	5,879	$	6,211	$	13,441		$	21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545

The amount of unrecognized stock-based compensation cost estimated to be expensed from December 31, 2013 through fiscal 2018, including time and performance based awards that are expected to vest, is $21.7 million which will be recognized over a weighted-average period of 1.6 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.

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The stock based compensation expense of approximately $21.5 million for the nine months ended December 31, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See Note 4, Veloce, to the Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

7. CONTINGENCIES

Legal Proceedings

The Company is currently a party to certain 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 injunctions or other restrictions on the conduct of the Company’s business, 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 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 (the Operable Unit 3 or “OU3”) 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 and OU3, efforts to remediate the soil and groundwater at the Omega Site, as well as the extraction of chemical vapors from the soil and improving indoor air quality 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 July 2013, EPA rejected a good faith offer (“GFO”) to settle the matter that OPOG had submitted in February 2013. In October 2013, OPOG submitted a revised GFO that EPA currently is considering. Settlement negotiations between the parties are expected to continue through 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. In December 2013, OPOG retained legal counsel to pursue claims against other PRPs 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 January 2012, as a result of challenges made by certain PRPs to the criteria previously used to allocate liability among OPOG members, and of the departure of certain PRPs from OPOG, OPOG approved changes to the cost allocation structure that resulted in an increase to the Company’s proportional allocation of liability. In addition, the subsequent departure of one or more other PRPs from OPOG could have the effect of increasing the proportional liability of the remaining PRPs, including the Company. 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.

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In August 2013, a complaint was filed against the Company in the California Superior Court for Santa Clara County by Emulex Corporation (“Emulex”), a purchaser of certain Company products, alleging rights to indemnification by the Company for unspecified expenses incurred by Emulex in connection with patent infringement litigation brought against Emulex by Broadcom Corporation in 2009 and 2010. In September 2013, the Company filed an answer which, among other things, denied each of the allegations in the complaint and filed a cross complaint against Emulex seeking, among other things, damages for fraudulent inducement and a declaratory judgment that the Company has no duty to indemnify Emulex in the Broadcom litigation. Discovery has recently commenced in these actions.

8. 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 $3.4 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 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.

9. SUBSEQUENT EVENTS

On January 22, 2014, the “Company” entered into an agreement to sell its headquarters building and related parcel of land in Sunnyvale, California, for a purchase price of $40.8 million in cash. The closing of the sale is scheduled to occur on or before March 13, 2014, and is subject to a limited set of closing conditions. In connection with the execution of the agreement, the purchaser provided a non-refundable cash deposit of $7.0 million.

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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 and nine months ended December 31, 2013 and 2012. 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 and nine months ended December 31, 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^TM Server on a Chip^TM products and development platform, and other new products; our belief that our license for the ARM v8 architecture 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 and 100G solutions while continuing to service the OTN and SONET/SDH market; the timing and extent of customers’ transition away from older connectivity solutions and toward higher performance solutions; 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; our estimates regarding eventual actual costs compared to amounts accrued in our financial statements; 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 and our business, 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,

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Item 1A, “Risk Factors” and elsewhere in this report. Our actual results and actual events could differ materially from those anticipated in any forward-looking statement. Readers should not place undue reliance on any forward-looking statement.

OVERVIEW

The Company

Applied Micro Circuits Corporation (“AppliedMicro”, “APM”, “AMCC”, the “Company”, “we” or “our”) is a 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 expect to begin generating sales revenue from X-Gene production 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, we announced the 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 spans 100Gbps to 240Gbps 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 December 31, 2013, our business had two reporting units, Computing and Connectivity.

Since the start of fiscal 2013, we have invested a total of $308.3 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 and other economic and technological developments can severely impact our customers’ businesses 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”), we completed the acquisition of Veloce pursuant to the terms of the Agreement and Plan of Merger, (the “Merger Agreement”). Veloce has been developing specific technology for us.

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 and nine months ended December 31, 2013, as part of the above arrangement, we paid approximately $1.2 million and $45.4 million, respectively, in cash and issued approximately 25,000 shares and 3.8 million shares, respectively, valued at approximately $0.2 million and $29.2 million, respectively. During the three and nine months ended December 31, 2012, as part of the above arrangement, we paid approximately $1.1 million and $15.9 million, respectively, in cash and issued approximately 0.2 million shares and 2.8 million shares, respectively, valued at approximately $1.1 million and $15.9 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 $135.0 million to the contractual maximum of $178.5 million. The consideration that we are obligated to pay upon completion of the

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respective performance milestones can be settled in cash or our common stock (or a combination of cash and stock), at our election.

We have treated the Veloce merger as a “reorganization” under Section 368 of the Internal Revenue Code in our 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 occurred when certain development and performance milestones became probable of achievement and were 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 December 31, 2013, 0.9 million Unallocated Veloce Units had not been allocated, and the maximum potential additional expense to be recognized associated with these Unallocated Veloce Units is approximately $9.2 million.

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 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. We have completed the first and second performance milestones and assessed the third and final performance milestone relating to the Veloce project as probable of achievement as of December 31, 2013. As of December 31, 2013, the Company assessed that all the effort required for the third milestone had been completed.

Cumulative R&D expenses recognized in connection with the achievement of the three performance milestones through December 31, 2013 is $169.3 million. Total R&D expenses recognized were approximately $2.9 million and $42.7 million during the three and nine months ended December 31, 2013, respectively and approximately $51.9 million and $56.6 million during the three and nine months ended December 31, 2012, 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 December 31, 2013, is classified as long-term if payments of the consideration are expected to occur beyond a 12 month period.

As of December 31, 2013, $107.7 million has been paid and we expect that approximately an additional $50.4 million will be paid in cash and stock by March 31, 2014. The $107.7 million paid to date includes approximately $61.9 million in cash and the issuance of 6.7 million shares of common stock valued at approximately $45.8 million.

Summary Financials

The following tables present a summary of our results of operations for the three and nine months ended December 31, 2013 and 2012 (dollars in thousands):

	Three Months Ended December 31,
	2013					2012
	Amount			% of Net Revenue		Amount			% of Net Revenue		Increase (Decrease)			% Change
Net revenues	$	54,844		100.0	%	$	51,698		100.0	%	$	3,146		6.1	%
Cost of revenues	21,644			39.5		22,958			44.4		(1,314		)	(5.7	)
Gross profit	33,200			60.5		28,740			55.6		4,460			15.5
Total operating expenses	40,900			74.6		101,942			197.2		(61,042		)	(59.9	)
Operating loss	(7,700		)	(14.0	)	(73,202		)	(141.6	)	(65,502		)	(89.5	)
Interest and other income, net	617			1.1		2,258			4.4		(1,641		)	(72.7	)
Loss before income taxes	(7,083		)	(12.9	)	(70,944		)	(137.2	)	(63,861		)	(90.0	)
Income tax expense (benefit)	201			0.4		618			1.2		(417		)	(67.5	)
Net loss	$	(7,284	)	(13.3	)%	$	(71,562	)	(138.4	)%	$	(64,278	)	(89.8	)%

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	Nine Months Ended December 31,
	2013					2012
	Amount			% of Net Revenue		Amount			% of Net Revenue		Increase (Decrease)			% Change
Net revenues	$	164,379		100.0	%	$	139,316		100.0	%	$	25,063		18.0	%
Cost of revenues	65,383			39.8		61,874			44.4		3,509			5.7
Gross profit	98,996			60.2		77,442			55.6		21,554			27.8
Total operating expenses	132,213			80.4		198,348			142.4		(66,135		)	(33.3	)
Operating loss	(33,217		)	(20.2	)	(120,906		)	(86.8	)	(87,689		)	(72.5	)
Interest and other income, net	4,988			3.0		4,855			3.5		133			2.7
Loss before income taxes	(28,229		)	(17.2	)	(116,051		)	(83.3	)	(87,822		)	(75.7	)
Income tax expense (benefit)	581			0.4		458			0.3		123			26.9
Net loss	$	(28,810	)	(17.5	)%	$	(116,509	)	(83.6	)%	$	(87,699	)	(75.3	)%

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 70 days of inventory in the distributor channel at December 31, 2013 as compared to 51days at December 31, 2012. The increase in inventory days was primarily due to the timing of sell-through of distributor inventory.

The gross margins for our solutions have declined from time to time in the past. Factors that have caused downward pressure on 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 initial orders at less than optimal gross margins in order to facilitate the introduction and/or market penetration of our new or existing products. To maintain acceptable operating results, we seek to offset any reduction in gross margins of our products by reducing operating costs, increasing sales volume, developing and introducing new products and developing new generations and versions of existing products on a timely basis.

We classify our revenues into two categories based on the markets that the underlying products serve. The categories are Computing and Connectivity. We use this information to analyze our performance and success in these markets, including our strategy to focus on the transition to the high-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 was 89% and 11%, and 85% and 15% for the three and nine months ended December 31, 2013, respectively and 80% and 20%, and 77% and 23% for the three and nine months ended December 31, 2012, 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 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, performance, availability and pricing of competing products and technologies and the resulting effects on the sales, pricing and gross margins of our products;

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• changes in the timing and amounts of shipments due to our decision to phase out a particular product, which often results in near-term “last-time-buy” orders for the “end-of-life” product that would otherwise have been placed and shipped in later periods;

• 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 products 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.

For these and other reasons, our net revenue and results of operations for the three and nine months ended December 31, 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				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Avnet (distributor)	27	%	27	%	28	%	28	%
Wintec (global logistics provider)	26	%	21	%	22	%	20	%

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

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

	Three Months Ended December 31,								Nine Months Ended December 31,
	2013				2012				2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Amount		% of Net Revenue		Amount		% of Net Revenue
United States of America	$	25,753	47.0	%	$	22,910	44.3	%	$	79,250	48.2	%	$	56,337	40.4	%
Taiwan	3,577		6.4		6,513		12.6		9,663		5.8		16,579		11.9
Hong Kong	5,301		9.7		4,487		8.7		14,980		9.1		16,405		11.8
China	552		1.0		290		0.6		2,993		1.8		1,879		1.4
Europe	9,576		17.5		9,556		18.5		28,532		17.4		26,345		18.9
Japan	6,011		11.0		2,142		4.1		15,095		9.2		6,180		4.4
Malaysia	1,484		2.7		1,413		2.7		4,377		2.7		3,758		2.7
Singapore	2,434		4.4		2,773		5.4		7,872		4.8		7,835		5.6
Other Asia	100		0.2		1,346		2.6		1,204		0.7		3,276		2.4
Other	56		0.1		268		0.5		413		0.3		722		0.5
	$	54,844	100.0	%	$	51,698	100.0	%	$	164,379	100.0	%	$	139,316	100.0	%

Increase in revenues for the three and nine months ended December 31, 2013 compared to the three and nine months ended December 31, 2012 is primarily due to improvements in customer demand and macro-economic conditions.

Research and Development. 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.

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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.

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):

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Adjustments to net loss:
Interest and other expense (income), net	(600		)	(689		)	(1,012		)	(2,023		)
Stock-based compensation expense	5,882			6,222			13,430			21,545
Warrant expense	—			—			—			1,289
Amortization of purchased intangibles	62			1,017			420			3,626
Restructuring charges, net	38			6,218			1,130			6,218
Veloce accrued liability	2,945			51,930			42,684			56,580
Impairment of marketable securities*	(17		)	(270		)	(3,976		)	(1,533		)
Depreciation and amortization	3,423			3,889			10,679			10,244
Gain on sale of assets	—			(1,299		)	—			(1,299		)
Gain on sale of TPack	—			—			(19,699		)	—
Other and income tax adjustment	202			618			594			325
Adjusted EBITDA	$	4,651		$	(3,926	)	$	15,440		$	(21,537	)

* 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. Impairments were previously recognized in accordance with GAPP and being unwound by sale/accretion of the underlying securities.

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 our 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 our control; they are unrelated to the ongoing operations of the business in the ordinary course; they are unusual or infrequent and we do 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, or "GAAP", in the United States 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 us.

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-

27

Gene product development related expenditures are excluded from the above, we derive the adjusted Non-GAAP income from our base business (“NGIBB”).

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

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
GAAP net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Adjustments:
Stock-based compensation expense	5,882			6,222			13,430			21,545
Warrant expense	—			—			—			1,289
Amortization of purchased intangibles	62			1,017			420			3,626
Restructuring charges, net	38			6,218			1,130			6,218
Gain on sale of assets	—			(1,299		)	—			(1,296		)
Veloce accrued liability	2,945			51,930			42,684			56,580
Acquisition related recoveries	—			—			—			(133		)
Impairment of marketable securities	(17		)	(270		)	(3,976		)	(1,533		)
Gain on sale of TPack	—			—			(19,699		)	—
Other and income tax adjustment	(48		)	832			(156		)	1,351
Total GAAP to Non-GAAP adjustments	8,862			64,650			33,833			87,647
Non-GAAP net income (loss)	1,578			(6,912		)	5,023			(28,862		)
X-Gene product development costs*	16,921			14,834			46,630			38,600
NGIBB	$	18,499		$	7,922		$	51,653		$	9,738
Diluted non-GAAP pro-forma income per share	$	0.24		$	0.12		$	0.70		$	0.15
Shares used in calculating diluted non-GAAP pro-forma income per share	75,754			67,495			73,430			65,225

* These amounts relate to direct expenditures associated with the X-Gene product development and do 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 us to our 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 GAAP in the United States 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. It also does not indicate the extent to which orders resulted from our product phase-out decisions, which can cause customers to place final, non-recurring “last time buy” orders for the “end of life” product. Our book-to-bill ratio at December 31, 2013, March 31, 2013 and December 31, 2012 was 0.9, 0.7 and 1.3 respectively.

CRITICAL ACCOUNTING POLICIES

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The preparation of financial statements in accordance with GAAP 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 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 Condensed 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) and the financial condition, credit rating, market liquidity conditions and near-term prospects of the issuer. If the fair value of a debt security is less than its amortized cost basis at the balance sheet date, an assessment would have to be made as to whether the impairment is other-than-temporary. If we decided to sell the security, an other-than-temporary impairment shall be considered to have occurred. However, if we do not intend to sell the debt security, we shall consider available evidence to assess whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost basis due to cash, working capital requirements, contractual or regulatory obligations indicate that the security will be required to be sold before a forecasted recovery occurs. If it is more likely than not that we are required to sell the security before recovery of its amortized cost basis, an other-than-temporary impairment is considered to have occurred. If we do not expect to recover the entire amortized cost basis of the security, we would not be able to assert that we will recover its amortized cost basis even if we do not intend to sell the security. Therefore, in those situations, an other-than-temporary impairment shall be considered to have occurred. We use present value cash flow models to determine whether the entire amortized cost basis of the security will be recovered. We will compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. An other-than-temporary impairment is said to have occurred if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. During the three and nine months ended December 31, 2013 and 2012, we did not record any other-than-temporary impairment charges. As of December 31, 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 $0.9 million as we believe that such unrealized losses are temporary. In addition, we had $3.5 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 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 estimate the timing of when the performance milestones will be completed. We rely on discussions with

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internal technical personnel and use 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 recognize expenses related to the estimated stage of development for the performance milestone, excluding the value relating to the Unallocated Veloce Units. As of December 31, 2013, the first and second performance milestones had been attained and the third and final performance milestone is believed to be probable of attainment. As of December 31, 2013, the Company assessed that all the effort required for the third milestone had been completed.

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 estimated value to Veloce was updated from a previous estimated maximum of $135 million to the contractual maximum of $178.5 million of which approximately $169.3 million has been recognized through December 31, 2013.

Total R&D expenses recognized were approximately $2.9 million and $42.7 million during the three and nine months ended December 31, 2013, respectively, and approximately $51.9 million and $56.6 million during the three and nine months ended December 31, 2012, respectively. See Note 4, "Veloce", to the 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 December 31, 2013, reducing our future demand estimate to six months would decrease our current inventory valuation by approximately $0.3 million and increasing our future demand forecast to 18 months would increase our current inventory valuation by approximately $32,000.

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.

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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.

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 and nine months ended December 31, 2013, total mask costs capitalized were $2.6 million and $3.8 million, respectively. During the three and nine months ended December 31, 2012, total mask costs capitalized was zero and $3.1 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 and nine months ended December 31, 2013, we have also granted Market Stock Units (“MSUs”). The fair value of these grants was determined using the Monte Carlo model and considers the following inputs: our 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 and Nine Months Ended December 31, 2013 to the Three and Nine Months Ended December 31, 2012

Net Revenues. Net revenues for the three and nine months ended December 31, 2013 were $54.8 million and $164.4 million, representing an increase of 6.1% and 18.0% from net revenues of $51.7 million and $139.3 million for the three and nine months ended December 31, 2012, respectively. We classify our revenues into two categories based on the markets that the underlying products serve. The categories are Computing and Connectivity. We use this information to analyze our performance and success in these markets. See the following tables (dollars in thousands):

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	Three Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase			% Change
Computing	$	28,821	52.6	%	$	29,536	57.1	%	$	(715	)	(2.4	)%
Connectivity	26,023		47.4		22,162		42.9		3,861			17.4
	$	54,844	100.0	%	$	51,698	100.0	%	$	3,146		6.1	%

	Nine Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase		% Change
Computing	$	80,063	48.7	%	$	75,749	54.4	%	$	4,314	5.7	%
Connectivity	84,316		51.3		63,567		45.6		20,749		32.6
	$	164,379	100.0	%	$	139,316	100.0	%	$	25,063	18.0	%

During the three and nine months ended December 31, 2013, our Computing revenues decreased by 2.4% and increased by 5.7%, respectively, and our Connectivity revenues increased by 17.4% and 32.6%, respectively, compared to the same period last year.Our Computing revenues for the nine months ended December 31, 2013 included a significant end-of-life order compared to the nine months ended December 31, 2012. The increase in Connectivity revenues was a result of higher demand for our new products due to increasing capital expenditure 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 and nine months ended December 31, 2013 and 2012 (dollars in thousands):

	Three months ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase (Decrease)			% Change
Net revenues	$	54,844	100.0	%	$	51,698	100.0	%	$	3,146		6.1	%
Cost of revenues	21,644		39.5		22,958		44.4		(1,314		)	(5.7	)
	$	33,200	60.5	%	$	28,740	55.6	%	$	4,460		15.5	%

	Nine Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase		% Change
Net revenues	$	164,379	100.0	%	$	139,316	100.0	%	$	25,063	18.0	%
Cost of revenues	65,383		39.8		61,874		44.4		3,509		5.7
	$	98,996	60.2	%	$	77,442	55.6	%	$	21,554	27.8	%

The gross profit percentage for the three and nine months ended December 31, 2013 was 60.5% and 60.2% compared to 55.6% each for the three and nine months ended December 31, 2012. The gross profit percentage, excluding the impact of amortization of purchased intangibles, was 60.5% and 60.3%, and 56.9% and 57.0%, respectively, for the three and nine months ended December 31, 2013 and 2012, respectively. The increase in our gross profit percentage was primarily due to favorable product mix and the absorption of fixed costs across higher overall revenues.

The amortization of purchased intangible assets included in cost of revenues during the three and nine months ended December 31, 2013 and 2012 was zero and $0.1 million, and $0.7 million and $2.0 million, respectively. The decrease during the three and nine months ended December 31, 2013 was primarily due to the impact of intangible assets written off due to the

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sale of TPack in April 2013 and certain purchased intangible assets being fully amortized during the fiscal year ended March 31, 2013.

Research and Development and Selling, General and Administrative Expenses. The following table presents R&D and SG&A expenses for the three and nine months ended December 31, 2013 and 2012 (dollars in thousands):

	Three Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Decrease			% Change
Research and development	$	29,870	54.5	%	$	82,711	160.0	%	$	(52,841	)	(63.9	)%
Selling, general and administrative	$	10,930	19.9	%	$	12,675	24.5	%	$	(1,745	)	(13.8	)%

	Nine Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Decrease			% Change
Research and development	$	120,926	73.6	%	$	151,865	109.0	%	$	(30,939	)	(20.4	)%
Selling, general and administrative	$	29,602	18.0	%	$	38,676	27.8	%	$	(9,074	)	(23.5	)%

Research and Development. The decrease of 63.9% or $52.8 million of R&D expenses for the three months ended December 31, 2013 compared to the three months ended December 31, 2012 was mainly due to $49.1 million decrease in Veloce related expenses, $2.6 million decrease in personnel costs and $1.3 million decrease in stock compensation expense.The decrease of 20.4% or $30.9 million of R&D expenses for the nine months ended December 31, 2013 compared to the nine months ended December 31, 2012 was mainly due to $14.0 million decrease in Veloce related expenses, $7.6 million decrease in personnel costs and $5.8 million decrease in stock compensation expense.

Research and development expense recognized in connection with the Veloce consideration was $2.9 million and $42.7 million, and $51.9 million and $56.6 million during the three and nine months ended December 31, 2013 and 2012, respectively. Refer to Note 4, Veloce, to the Condensed Consolidated Financial Statements for further details.

Selling, General and Administrative. The decrease in SG&A expenses of 13.8% or $1.7 million during the three months ended December 31, 2013, compared to the three months ended December 31, 2012 was mainly due to $1.8 million decrease in personnel costs and $1.0 million decrease in legal expenses, partially offset by $0.9 million increase in stock compensation expense. The decrease in SG&A expenses of 23.5% or $9.1 million for the nine months ended December 31, 2013 compared to the nine months ended December 31, 2012, was mainly due to $4.6 million decrease in personnel costs, $2.2 million decrease in legal expenses and $2.0 million decrease in stock compensation expense.

Stock-Based Compensation. The following table presents stock-based compensation expense for the three and nine months ended December 31, 2013 and 2012, which was included in the tables above (dollars in thousands):

	Three Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase (Decrease)			% Change
Costs of revenues	$	121	0.2	%	$	158	0.3	%	$	(37	)	(23.4	)%
Research and development	1,545		2.8		2,814		5.4		(1,269		)	(45.1	)
Selling, general and administrative	4,216		7.7		3,250		6.3		966			29.7
	$	5,882	10.7	%	$	6,222	12.0	%	$	(340	)	(5.5	)%

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	Nine Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Decrease			% Change
Costs of revenues	$	342	0.2	%	$	596	0.4	%	$	(254	)	(42.6	)%
Research and development	4,867		3.0		10,733		7.7		(5,866		)	(54.7	)
Selling, general and administrative	8,221		5.0		10,216		7.3		(1,995		)	(19.5	)
	$	13,430	8.2	%	$	21,545	15.4	%	$	(8,115	)	(37.7	)%

The decrease in stock-based compensation of 5.5% and 37.7% during the three and nine months ended December 31, 2013 compared to the three and nine months ended December 31, 2012 was primarily due to the effect of the expense that was recorded relating to our Performance Retention Grants during the three and nine months ended December 31, 2012, partially offset by the expense relating to Dr. Gopi's vested performance-based restricted stock units. 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 and nine months ended December 31, 2013 and 2012 (dollars in thousands):

	Three Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Decrease			% Change
Interest income (expense), net	$	525	1.0	%	$	892	1.7	%	$	(367	)	(41.1	)%
Other income (expense), net	$	92	0.2	%	$	1,366	2.6	%	$	(1,274	)	(93.3	)%

	Nine Months Ended December 31,
	2013				2012
	Amount		% of Net Revenue		Amount		% of Net Revenue		Increase (Decrease)			% Change
Interest income (expense), net	$	4,679	2.8	%	$	3,316	2.4	%	$	1,363		41.1	%
Other income (expense), net	$	309	0.2	%	$	1,539	1.1	%	$	(1,230	)	(79.9	)%

Interest Income (Expense), net. Interest income, net of management fees, reflects interest earned on cash and cash equivalents, short-term investments and marketable securities. The decrease in interest income, net for the three months ended December 31, 2013 compared to the three months ended December 31, 2012 was primarily due to our lower short-term investments available for sale balances. The increase in interest income, net for the nine months ended December 31, 2013 compared to the nine months ended December 31, 2012 was primarily due to realized gains from the sale of short-term investments and marketable securities, offset by lower interest income due to our lower short-term investments available-for-sale balances.

FINANCIAL CONDITION AND LIQUIDITY

As of December 31, 2013, our principal source of liquidity consisted of $74.3 million in cash, cash equivalents and short-term investments which is approximately $1.00 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 was $56.0 million as of December 31, 2013. Total cash, cash equivalents and short-term investments decreased by $11.2 million during the nine months ended December 31, 2013 mainly due to cash used for operations of $33.4 million, purchase of property, equipment and other assets of $5.6 million, funding of restricted stock units withheld taxes of $5.5 million and decrease in net unrealized gains of available-for-sale investments by $5.4 million, partially offset by net proceeds from the sale of TPack of $29.5 million and proceeds from issuance of common stock of $8.6 million. At December 31, 2013, we had contractual obligations not included on our balance sheet totaling $93.6 million, primarily related to facility leases, IP licenses, engineering design software tool licenses, non-cancelable inventory purchase commitments and liabilities for uncertain tax positions.

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For the nine months ended December 31, 2013, we used $33.4 million of cash in our operations compared to $30.9 million used for our operations for the nine months ended December 31, 2012. Our net loss of $28.8 million for the nine months ended December 31, 2013 included $44.8 million of non-cash charges consisting of $7.7 million of depreciation, $0.4 million of amortization of purchased intangibles, $0.3 million of non-cash restructuring costs, $13.4 million of stock-based compensation and $42.7 million of additional Veloce compensation cost, partially offset by $19.7 million of net gain on sale of TPack. Our net loss of $116.5 million for the nine months ended December 31, 2012 included $93.4 million of non-cash charges consisting of $7.2 million of depreciation, $3.6 million of amortization of purchased intangibles, $22.8 million of stock-based compensation, $56.6 million of additional Veloce compensation cost and $4.7 million of restructuring costs offset by $1.3 million gain on asset disposals, $0.1 million relating to the tax effect on other comprehensive income and $0.1 million in acquisition related adjustment (relating to our TPack acquisition in fiscal 2011). The remaining change in operating cash flows for the nine months ended December 31, 2013 primarily reflected the decreases in inventory, other assets, accounts payable, Veloce accrued liability and deferred revenue, and increases in accounts receivable, assets held for sale and accrued payroll and other accrued liabilities. Our overall quarterly days sales outstanding was 47 days and 39 days for the three months ended December 31, 2013 and March 31, 2013, respectively. The primary reason for the increase in our days sales outstanding was the increase in the revenues generated during the last month of the quarter ended December 31, 2013 as compared to the same period for the quarter ended March 31, 2013.

Our investing activities provided $35.5 million in cash during the nine months ended December 31, 2013, compared to $17.0 million during the nine months ended December 31, 2012. During the nine months ended December 31, 2013, we used $5.6 million for the purchase of property and equipment and received proceeds of $29.5 million from the sale of TPack, net proceeds of $10.4 million from short-term investment activities and proceeds of $1.3 million from the sale of an equity investment. During the nine months ended December 31, 2012, we used $8.5 million for the purchase of property and equipment, $0.5 million for purchase of strategic investment and $0.5 million for the issuance of a note receivable offset by net proceeds of $17.5 million from short-term investment activities, $7.1 million from sales of strategic equity investment and $1.8 million from the sale of equipment and other assets.

Our financing activities provided $2.5 million in cash from during the nine months ended December 31, 2013 compared to $1.5 million during the nine months ended December 31, 2012. The major financing use of cash for the nine months ended December 31, 2013 was the withholding of restricted stock units for taxes of $5.5 million, offset by proceeds from the issuance of common stock of $8.6 million. The major financing uses of cash for the nine months ended December 31, 2012 were the $0.7 million for the repurchase of common stock, $0.5 million for the payment of a contingent consideration, $2.8 million for restricted stock units withheld for taxes and $0.4 million for other uses, partially offset by proceeds from the issuance of common stock of $5.8 million.

Sale of TPack

During the quarter ended June 30, 2013, we completed the sale of TPack and certain specified intellectual property assets owned by us related to TPack's business for an aggregate consideration of $33.5 million, net of working capital adjustments. During the quarter, we received a cash payment of $30.2 million. The remaining acquisition consideration of $3.4 million has been held back by the buyer until March 2014 to secure our indemnification obligations subject to and in accordance with the terms of the purchase agreement and is included in other current assets in the Condensed Consolidated Balance Sheet. In connection with this sale, we recorded a gain of $19.7 million for the three months ended June 30, 2013. Refer to Note 8, Sale of TPack A/S, 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 us.

The terms of the Merger Agreement include the payment of the total consideration, payable in shares of our 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 and nine months ended December 31, 2013, as part of the above arrangement, we paid approximately $1.2 million and $45.4 million, respectively, in cash and issued approximately 25,000 shares and 3.8 million shares, respectively, valued at approximately $0.2 million and $29.2 million, respectively. During the three and nine months ended December 31, 2012, as part of the above arrangement, we paid approximately $1.1 million and $15.9 million, respectively, in

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cash and issued approximately 0.2 million shares and 2.8 million shares, respectively, valued at approximately $1.1 million and $15.9 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 December 31, 2013, the first two performance milestones were completed, and the third and final performance milestone was believed to be probable of attainment. As of December 31, 2013, the Company assessed that all the effort required for the third milestone had been completed.

As of December 31, 2013, $107.7 million had been paid and we expect that approximately an additional $50.4 million will be paid in cash and stock by March 31, 2014. The $107.7 million paid to date includes approximately $61.9 million in cash and the issuance of 6.7 million shares of common stock valued at approximately $45.8 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.

The total estimated value of the Veloce merger consideration is based on our 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 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. The consideration that we will be obligated to pay will be payable 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 our 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.

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, than we currently anticipate, or if our normal operations or unforeseen events require us to expend more cash than currently anticipated. If our stock price declines, it could result in greater 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. Our liquidity could also be adversely affected if we are forced to liquidate our investments on short notice and not be able to realize fair market value and realize losses. There can be no assurance that any of the options that we currently believe to be available are now, or in the future will be, viable on commercially reasonable terms or at all. In January 2014, we agreed to sell our headquarters building and related parcel of land for a purchase price of $40.8 million in cash, subject to a limited set of closing conditions, and to lease a portion of the space from the purchaser upon the closing of the sale. In connection with the execution of the agreement, the purchaser provided a non-refundable cash deposit of $7.0 million. The closing is anticipated to occur on or before March 13, 2014.

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 our common stock. Under the program, we are 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 nine months ended December 31, 2013. During the nine months ended December 31, 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, we have 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 us. As of December 31, 2013, we had $15.9 million available in our stock repurchase program.

Other

Our aggregate fixed commitments payable over the next four years for licensing fees relating to our R&D efforts, including our licensed IP, technology, product design, test and verification tools, are approximately $18.9 million and are included in the table below.

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The following table summarizes our contractual operating leases and other purchase commitments as of December 31, 2013 (in thousands):

Fiscal Years Ending March 31,	Operating Leases		Other Purchase Commitments			Total
2014 (remainder of year) *	$	387	$	76,107	*	$	76,494
2015	1,042		10,966			12,008
2016	277		4,721			4,998
2017	83		—			83
Total minimum payments	$	1,789	$	91,794		$	93,583

* Includes liability for uncertain tax positions of $43.5 millionincluding 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 of December 31, 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 December 31, 2013, our investment portfolio included short-term securities classified as available-for-sale investments with an aggregate fair market value of $50.7 million and a cost basis of $48.0 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 December 31, 2013 (in thousands):

	Valuation of Securities Given an Interest Rate Decrease of X Basis Points (“BPS”)						Fair Value as of December 31, 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	$	52,759	$	52,144	$	51,456	$	50,654	$	49,836	$	49,022	$	48,213

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 nine months ended December 31, 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

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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.

As required by Exchange Act Rule 13a-15(b), we conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our CEO and CFO 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.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 7, Contingencies, 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 Quarterly 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 or unforeseen events require us to expend more cash than anticipated. As a result of any of the above, we may be faced with liquidity issues requiring us to pursue various options to raise additional capital or generate cash. In addition, we may elect to raise additional capital or generate additional cash in order to augment our cash reserves for purposes of enabling future business expansion and providing additional liquidity assurances to our current and prospective customers, suppliers and partners. There can be no assurance that any of the options that we currently believe to be available are now, or in the future will be, viable on commercially reasonable terms or at all. In January 2014, we agreed to sell our headquarters building and related parcel of land to a third party for a purchase price of $40.8 million in cash, subject to a limited set of closing conditions, and to lease a portion of the space from the purchaser upon the closing of the sale. However, we cannot guarantee that the closing will occur as currently anticipated.

During the nine months ended December 31,2013 and 2012, our cash used in operating activities was approximately $33.4 million and $30.9 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. Some of our existing products have experienced weakening overall demand, and revenues from these legacy products can be expected to decline further over time. Accordingly, our future operating results and ability to compete 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 and generate demand for 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.

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;

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• availability, quality, price, performance, power consumption, size and total cost of ownership of our products relative to competing products and technologies:

• 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;

• 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 instruction set architecture, or 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 successfully 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 approximately $178.5 million, assuming the achievement of the third and final post-closing product development milestone. There can be no guarantee that such milestone will be achieved on a timely basis or at all.

Even after the successful completion of the acquisition of Veloce as described above, we may fail to realize the benefits of the integration of the Veloce personnel and operations with the Company. The departure from us 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 provide 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. Currently, we have the ability to issue up to approximately 6.2 million additional shares of our common stock as Veloce acquisition consideration without 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

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of each payment date, and our available cash balances and liquidity requirements as of such dates, some of which are not 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, ecosystem 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;

• pricing decisions or other actions taken by competitors;

• 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 Nvidia, 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, and larger customer bases, workforces and intellectual property portfolios, 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. In addition, large competitors could use their existing market share and influence to discourage potential ecosystem partners and customers from supporting or purchasing our products. We and our customers also 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.

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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:

• 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 or anticipated smaller geometry 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 is 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 current manufacture of our new X-Gene products at 40 nanometers, and would be even higher when using anticipated smaller geometries such as 28 and 16 nanometers and more complicated processes such as FinFET. 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, fail to upgrade their technologies needed to manufacture our products, or otherwise fail to perform on a timely basis the manufacturing or operations services which we engaged them to perform, 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 and related service providers. As a result, we are subject to the risk that a producer or service provider will cease production of an older or lower-volume process that it uses to produce our parts, cease performing the supply services currently provided, or raise the

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prices it charges us. We cannot assure you that our external foundries and related service providers 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 or service levels increases.

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

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

Over the past several years, we have initiated several restructuring activities in an effort to reduce operating costs and such restructuring activities are likely to continue. 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 and in August 2013 we implemented an additional Board-approved restructuring plan that resulted in an additional reduction in force of approximately 5% 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, expose us to increased risk of legal claims by terminated employees, 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.

We may not be able to achieve higher levels of design integration or deliver new integrated circuit 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. 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, such as 16 nanometer, and more sophisticated designs, such as FinFET and FDSOI, are introduced to and become more prevalent in the industry, we expect to integrate greater levels of functionality into our IC products and to transition our IC products to increasingly smaller geometries.

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 and smaller versions of X-Gene and as we continue to transition our other IC products to smaller geometry processes and at competitive pricing. Transitions to more sophisticated designs, such as FinFET and FDSOI, could result in similar difficulties. We are dependent on our relationships with our foundries to transition to smaller geometry processes and new designs 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.

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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.

*Adverse economic and financial market conditions could harm our revenues, operating results and financial condition.

The economies of the United States and other countries have experienced an economic downturn for the last several years, which has negatively affected our business. 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 hinder the nascent global recovery, which could in turn adversely impact our business, operating results and financial condition.

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, our business, operating results and financial condition could suffer materially, 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. Because we expect to depend on new products for a substantial portion of our future revenues, this could have a material and adverse effect on us.

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 nine months ended December 31, 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.

Our sales are concentrated among a few large customers, and we expect that our largest customers will continue to account for a substantial portion of our net revenue for the foreseeable future. Adverse economic conditions affecting these large customers could have a particularly significant effect on our business and operating results. Among other things, these conditions could impair the ability of our customers to pay for our products, causing our allowances for doubtful accounts and write-offs of accounts receivable to increase. In addition, adverse economic conditions could cause our contract manufacturers and other suppliers to experience financial difficulties that negatively affect their operations and their ability to supply us with necessary products and services.

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 markets for the technologies or products they have under development are typically in the early stages and may never materialize. In some cases, we have determined to write off all or substantially all of the value of our investment, and similar risks exist with respect to the other companies in which we have invested.

*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 often 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;

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• changes in the timing and amounts of shipments due to our decision to phase out a particular product, which often results in near-term “last-time-buy” orders for the “end-of-life” product that would otherwise have been placed and shipped in later periods;

• 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 any 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;

• 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 due to technological changes, competitive developments, trends in our customers’ businesses or other factors;

• 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;

• decisions to phase out “end-of-life” particular products, which may result in higher near-term revenues due to customers’ final, “last-time-buy” orders, but a cessation of revenues from those products in later periods;

• 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

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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 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 market share in the Connectivity space will in fact be 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, and 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.

*Our business may suffer due to downturns in the technology industry, which is cyclical.

The technology equipment industry is cyclical and has in the past experienced significant and extended downturns. The most recent downturn caused a reduction in capital spending on information technology generally, which affected demand for our products. Future downturns may materially and adversely affect our business, operating results and financial condition. 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 and other communications services. We are also developing and introducing new products for the cloud server and data center market. If those end markets fail to grow as expected, or experience downturns, demand for our products would be reduced.

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

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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.

*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 55% and 54% of our revenues for the three and nine months ended December 31, 2013. Our largest distributor accounted for approximately 27% and 28% of our revenues for the three and nine months ended December 31, 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, 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				Nine months ended
	December 31,				December 31,
	2013		2012		2013		2012
Avnet (distributor)	27	%	27	%	28	%	28	%
Wintec (global logistics provider)	26	%	21	%	22	%	20	%

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, or due to other adverse intellectual property developments;

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• 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 our 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.

*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 we have more orders than we delivered (if greater than 1), have the same amount of orders than we delivered (equals 1), or have less orders than we 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 or the effect of changing lead times and product phase-out decisions on bookings. As lead times increase, customers will place orders sooner, and when we declare a product to be “end-of-life,” customers may place final, non-recurring orders for such product, thereby 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

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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 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 or end customers 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.

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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 and the first quarter of fiscal 2014, and the increase in R&D expense recognized in the second quarter of fiscal 2014;

• 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;

• 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, 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 December 31, 2013, we had $11.6 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 us, and certain specified intellectual property assets owned by us related to TPack's business 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. The remaining cash payment of $3.4 million of the aggregate consideration will be held back until March 31, 2014 to secure our indemnification obligations. Accordingly, we may not receive the held-back consideration in 2014 or at all. Refer to Note 12, Subsequent Event - Sale of TPack A/S, to the consolidated financial statements of our Form 10-K for the fiscal year ended March 31, 2013 and Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements of our Form 10-Q for the quarter ended December 31, 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 $2.0 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.

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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 approximately $178.5 million, assuming the achievement of the final performance milestone. There is no guarantee that the final milestone will be achieved on a timely basis or at all.

*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, Gennum Corporation by Semtech Corporation in March 2012, Standard Microsystems by Microchip Technology in August 2012, Passif Semiconductor by Apple in July 2013, and Volterra Semiconductor by Maxim Integrated in October 2013. We expect this consolidation to continue as companies attempt to benefit from economies of scale, gain improved or more comprehensive product portfolios, increase the size of their serviceable markets, and otherwise strengthen or hold their positions in an evolving technology landscape. In addition, we may become a target for a company looking to improve its competitive position. 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;

• 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 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

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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 December 31, 2013 the unrealized losses on these securities that were not previously written down as an other-than-temporary impairment charge were approximately $873,000, of which substantial 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 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 or from which we ship our 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

53

subject to U.S. laws and regulations governing international trade and exports. These laws and regulations include, but are 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 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 adverse 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 diversion of 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,

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our success will depend on effectively transitioning to certain new management and engineering personnel who are most capable of supporting that evolution. Since April 2013, we have experienced the departure, through retirement, resignation or termination, of our Chief Financial Officer and three engineering vice presidents, among other personnel. While we do not believe these departures have had or will have a material adverse effect on our business, the loss of additional senior executives or key engineers could, in combination with or independent of the departures previously noted, be significantly detrimental to our product development or operations. 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, manage and retain 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.

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

55

hazardous waste material. We are a member of a large group of PRPs, known as OPOG, 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; and in September 2012, it issued a special notice letter that triggered the commencement of good faith settlement negotiations with OPOG. In July 2013, the EPA rejected a good faith offer (“GFO”) to settle the matter that OPOG had submitted in February 2013. In October 2013, OPOG submitted a revised GFO that EPA is currently reviewing. Settlement negotiations are expected to continue through fiscal year 2014. In December 2013, OPOG retained legal counsel to pursue claims against other PRPs for the regional groundwater contamination. 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 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 our 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 obligations 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 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,

56

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 our industry, the assertion of IP rights often results in the other party seeking to assert claims based on its own IP, which can be costly and disruptive. 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, pre-release products, documentation and other proprietary information, through the use of license agreements and other contracts and the implementation and enforcement of physical security measures. Despite these efforts, parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. In such event, any contracts we have in place with such parties might not provide us with adequate remedies to protect our intellectual property rights or to recover adequate damages for this loss. 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 acquirers have brought and may in the future bring legal actions asserting infringement of the acquired patents against 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

57

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 actual or potential liability, including without limitation defense costs, arising from third party IP infringement claims brought against them (see our discussion of the Emulex Corporation litigation under “Legal Proceedings” above); 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 current or future 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, expend substantial resources attempting to develop non-infringing products or technologies, 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 and 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 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.

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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

During the three months ended December 31, 2013, we issued 24,844 shares of common stock to former holders of Veloce common stock, common stock options and stock equivalents pursuant to the Veloce merger agreement, as described above. These shares were issued without registration under the Securities Act of 1933, as amended, pursuant to the exemption afforded by Section 3(a)(10) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits listed in the accompanying “Exhibit Index” are filed or incorporated by reference as part of this Form 10-Q.

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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:January 27, 2014

APPLIED MICRO CIRCUITS CORPORATION
By:	/S/    Douglas T. Ahrens
	Douglas T. Ahrens
	Vice President and Chief Financial Officer
	(Duly Authorized Signatory and Principal Financial and Accounting Officer)

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Exhibit Index

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of the Company.	S-1	10/10/1997	3.2
3.2	Certificate of Amendment of Certificate of Incorporation of the Company.	S-4	9/12/2000	3.3
3.3	Certificate of Amendment of Certificate of Incorporation of the Company.	8-K	12/11/2007	3.1
3.4	Amended and Restated Bylaws of the Company.	10-Q	11/3/2010	3.2
4.1	Specimen Stock Certificate.	S-1/A	11/12/1997	4.1
10.1	2011 Equity Incentive Plan, as amended and restated on October 23, 2013.	8-K	10/29/2013	10.76
10.2	Form of Restricted Stock Unit Award Grant Notice and Agreement under the 2011 Equity Incentive Plan	8-K	11/21/2013	10.1
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.				x
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.				x
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.				x
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.				x
101.INS	XBRL Instance Document				x
101.SCH	XBRL Taxonomy Extension Schema Document				x
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				x
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				x
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				x
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				x

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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: January 27, 2014

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

I, Douglas T. Ahrens, 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/ Douglas T. Ahrens

Douglas T. Ahrens

Vice President and Chief Financial Officer

Dated: January 27, 2014

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 December 31, 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: January 27, 2014

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), Douglas T. Ahrens, 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 December 31, 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/ Douglas T. Ahrens

Douglas T. Ahrens

Vice President and Chief Financial Officer

Dated: January 27, 2014

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Certain Financial Statement Information (Details Textual) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Mar. 31, 2013	Dec. 31, 2013 Options and Restricted Stock Units [Member]	Dec. 31, 2012 Options and Restricted Stock Units [Member]	Dec. 31, 2013 Options and Restricted Stock Units [Member]	Dec. 31, 2012 Options and Restricted Stock Units [Member]	Jan. 22, 2014 Subsequent Event [Member]
Certain Financial Statement Information [Line Items]
Property held-for-sale, sale price										$ 40,800,000
Gross Unrealized Gains	$ 3,503,000		$ 3,503,000		$ 8,082,000
Anti-dilutive securities that have been excluded from the net (loss) income, per share computation	5.6	6.8	6.1	9.4		3.8	5.4	4.7	8.7
Effect of dilutive securities that have been excluded from the net loss per share computation						1.8	1.4	1.4	0.7

XML

Stock-Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 5,879	$ 6,211	$ 13,441	$ 21,451
Stock-based compensation expensed from inventory	(3)	(11)	11	(94)
Total stock-based compensation expense	5,882	6,222	13,430	21,545
Stock Options [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	648	935	1,987	3,024
Restricted Stock Units [Member]
Summary of Stock-Based Compensation Expense of Stock Options and Restricted Stock Units
Stock options (including employee stock purchase program)	$ 5,231	$ 5,276	$ 11,454	$ 18,427

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Stockholders' Equity (Details Textual) (USD $)	1 Months Ended		9 Months Ended		104 Months Ended	12 Months Ended	1 Months Ended		9 Months Ended				9 Months Ended		9 Months Ended	12 Months Ended		1 Months Ended					9 Months Ended	1 Months Ended			1 Months Ended					9 Months Ended			1 Months Ended
	Oct. 31, 2008	Aug. 31, 2004	Dec. 31, 2013 Approved_Plan	Dec. 31, 2012	Mar. 31, 2013	Mar. 31, 2013 RSU plan post May 2006 [Member]	May 31, 2013 Minimum [Member] FY2014 Short Term Plan [Member]	May 31, 2013 Maximum [Member] FY2014 Short Term Plan [Member]	Dec. 31, 2012 Employee Stock Purchase Plan [Member]	Dec. 31, 2013 Employee Stock Purchase Plan [Member] 2012 Employee Stock Purchase Plan [Member]	Dec. 31, 2012 Employee Stock Purchase Plan [Member] 2012 Employee Stock Purchase Plan [Member]	Aug. 30, 2012 Employee Stock Purchase Plan [Member] 2012 Employee Stock Purchase Plan [Member]	Dec. 31, 2012 Employee Stock Purchase Plan [Member] 1998 Employee Stock Purchase Plan [Member]	Aug. 30, 2010 Employee Stock Purchase Plan [Member] 1998 Employee Stock Purchase Plan [Member]	Dec. 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]	May 31, 2012 Performance-Based RSU [Member]	Feb. 29, 2012 Performance-Based RSU [Member] milestone	Nov. 30, 2011 Performance-Based RSU [Member]	Dec. 31, 2013 Performance-Based RSU [Member] milestone	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]	Jun. 30, 2012 Common Stock Subject to Repurchase [Member]	May 31, 2013 Performance-Based MSU [Member] Minimum [Member]	May 31, 2013 Performance-Based MSU [Member] Maximum [Member]	Nov. 30, 2013 Officer [Member] Restricted Stock Units [Member]	Nov. 30, 2013 Officer [Member] Performance-Based RSU [Member]	Feb. 29, 2012 Officer [Member] Performance-Based RSU [Member]	Dec. 31, 2013 Veloce Technologies, Inc. [Member]	Dec. 31, 2012 Veloce Technologies, Inc. [Member]	May 17, 2009 Veloce Technologies, Inc. [Member]	May 31, 2012 First Vesting Period [Member]	May 31, 2013 First Vesting Period [Member] Performance-Based MSU [Member]	May 31, 2012 Second Vesting Period [Member]	May 31, 2013 Second Vesting Period [Member] Performance-Based MSU [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			375,000,000		375,000,000
Common stock, shares issued			74,171,000		67,952,000
Common stock reserved for issuance														6,300,000
Shares available for future issuance										800,000		1,800,000
Percentage of purchase price of common stock equal to fair market value										85.00%
Common stock, shares issued, employee stock purchase plan									0	300,000	0		400,000
Stock repurchase program, authorized amount		$ 200,000,000.0	$ 15,900,000
Increase in the amount authorized for stock purchase program	100,000,000.0
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			3
Number of plans unapproved by stockholders			4
Award expiration period, in years																				12 years		18 months		3 years	18 months
Vesting period, in years																4 years	4 years	1 year	18 months	1 year
Vested in first period of employment						0
Shares outstanding			2,471,000		3,492,000																					0
Weighted average remaining contractual term for options outstanding			2 years 9 months 12 days
Aggregate pretax intrinsic value of options exercised			1,700,000
Pre-tax intrinsic value of options outstanding			9,000,000
Pre-tax intrinsic value of options exercisable			8,400,000
Common stock, closing price per share			$ 13.37
Award vesting period, quarters																	12
Restricted stock units awarded															3,069,000														500,000	300,000	500,000
Number of milestones																					3
Grants in period, fair value																														3,200,000	3,700,000
Restricted stock units vested															2,048,000														200,000
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 0 months 12 days
Aggregate pre-tax intrinsic value of restricted stock units outstanding which includes performance based awards which are subject to milestone attainments			79,600,000
Share Based Compensation Arrangement by Share Based Payment Award Equity Other than Options Aggregate Pre Tax Intrinsic Value Released			18,800,000
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																												$ 1,300,000	$ 1,300,000
Award vesting percentage																																			66.67%		33.33%

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Certain Financial Statement Information Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 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	$ 74,284		$ 85,476
Cash, cash equivalents and available-for-sale investments measured at fair value on recurring basis	74,284		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	51,043		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	23,241		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	19,716		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	19,716		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	3,914		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	3,914		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	0		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	11,751		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	11,596		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	155		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	15,534		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	15,534		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	4,268	[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	4,268		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	15,817		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	15,817		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	3,284		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	3,284		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 December 31, 2013 and March 31, 2013, approximately $1.1 million and $1.4 million of the estimated fair value presented were mortgage-backed securities, respectively.

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Certain Financial Statement Information Other Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of Other current assets
Prepaid expenses	$ 11,177	$ 13,762
Executive deferred compensation assets	1,157	693
Deposits	653	828
Receivable from sale of strategic investment and TPack	3,353	1,331
Other	1,489	1,384
Other current assets, total	$ 17,829	$ 17,998	[1]

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

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Stock-Based Compensation (Details Textual) (USD $)	3 Months Ended			9 Months Ended		12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Mar. 31, 2013
Stock Based Compensation (Textual) [Abstract]
Weighted average grant-date fair value per share of the restricted stock units awarded	$ 9.84		$ 6.13	$ 8.57	$ 5.71
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Forfeiture Rate		6.70%				6.60%
Unearned stock-based compensation	$ 21,700,000			$ 21,700,000
Weighted-average period over which the unearned stock-based compensation is expected to be recognized, years				1 year 7 months 18 days
Stock-based compensation expense excluding acceleration of Veloce warrants	5,882,000		6,222,000	13,430,000	21,545,000
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				$ 1,300,000	$ 1,300,000

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Veloce (Details Textual) (Veloce Technologies Inc [Member], USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended	9 Months Ended		18 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Jun. 20, 2012
Veloce Technologies Inc [Member]
Veloce (Textual) [Abstract]
Total consideration to be transferred		$ 178.5	$ 178.5		$ 178.5		$ 135.0
Research and development expenses incurred	2.9	51.9	117.0	42.7	56.6	169.3
Payment of aggregate consideration as cash	1.2	1.1		45.4	15.9
Aggregate shares issued	0	200,000		3,800,000	2,800,000
Stock issued for acquisition, value	0.2	1.1		29.2	15.9
Issuance of additional units	1,400			500,000
Issuance of additional units, amount	0			5.9
Unallocated units	900,000			900,000		900,000
Unallocated units, maximum potential value	$ 9.2			$ 9.2		$ 9.2

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Certain Financial Statement Information Interest Income/Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of Interest Income, Net
Interest income	$ 519	$ 685	$ 1,389	$ 1,915
Net realized gain on short-term investments	6	207	3,290	1,401
Interest income, net	$ 525	$ 892	$ 4,679	$ 3,316

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Sale of TPack A/S (Details) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Apr. 22, 2013 TPack [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Divestiture of Interest in Consolidated Subsidiaries, Sales Price					$ 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)
Holdback amount					3,353,000
Legal fees and other costs					(484,000)
Gain on sale of TPack	0	0	19,699,000	0	19,699,000
Cash, cash equivalents and short term investments					$ 700,000

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Stock-Based Compensation (Details) (USD $)	9 Months Ended
	Dec. 31, 2013	Dec. 31, 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%	0.20%
Volatility	57.00%	50.00%
Dividend yield	0.00%	0.00%
Weighted average fair value	$ 3.67	$ 1.50

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Restructuring Charges

9 Months Ended

Dec. 31, 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.

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 the unamortized value of a software intellectual property license, which the Company does not intend to use to develop new products. As of December 31, 2013, the actual annual savings were within the range of originally expected savings of $8.0 million to $9.0 million for headcount expenses and $4.0 million to $5.0 million for other additional operational expenses. Total costs incurred and expected to be incurred as of December 31, 2013 in connection with the restructuring plan are $1.8 million.

August 2013 Restructuring Program

In August 2013, the Company implemented a restructuring program to reorganize its operations and reduced its workforce by approximately 20 employees. The plan included eliminating job redundancies, reducing the Company's workforce and impairing 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 $3.0 million annually and other additional operational expenses by $0.5 million annually. Total costs incurred and expected to be incurred as of December 31, 2013 in connection with the restructuring plan are $1.0 million.

The restructuring activity during the three and nine months ended December 31, 2013 relating to the December 2012 and August 2013 restructuring programs is as follows (in thousands):

	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
Restructuring charges	727			272			999
Non-cash items	—			(272		)	(272		)
Cash payments	(847		)	—			(847		)
Liability, September 30, 2013	$	187		$	—		$	187
Restructuring charges	38			—			38
Cash payments	(225		)	—			(225		)
Liability, December 31, 2013	—			—			—

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Stockholders' Equity Option Activity (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Dec. 31, 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	(641)
Number of Shares, Forfeited	(420)
Number of Shares, Outstanding at the end of the period	2,471
Number of Shares, Vested at the end of the period	2,470
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)	$ 9.50
Weighted Average Exercise Price Per Share, Forfeited (USD per share)	$ 11.36
Weighted Average Exercise Price Per Share, Outstanding at the end of the period (USD per share)	$ 10.22
Weighted Average Exercise Price Per Share, Vested at the end of the period (USD per share)	$ 10.22
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	2,344
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 10.31

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Certain Financial Statement Information Future Amortization Expense (Details) (Operating Expenses [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Operating Expenses [Member]
Schedule of Estimated Future Amortization Expense [Line Items]
2014 (remainder of year)	$ 63
2015	104
Total	$ 167

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Certain Financial Statement Information Purchased Intangibles (Details) (USD $) In Thousands, unless otherwise specified				0 Months Ended	9 Months Ended		12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2013	Mar. 31, 2013		Apr. 22, 2013 TPack [Member]	Dec. 31, 2013 Developed technology/in-process research and development [Member]		Mar. 31, 2013 Developed technology/in-process research and development [Member]	Dec. 31, 2013 Customer relationships [Member]	Mar. 31, 2013 Customer relationships [Member]	Dec. 31, 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	(493,469)	(505,345)			(425,000)	[1]	(431,771)	(6,163)	(10,507)	(62,306)	(63,067)
Intangible Assets, Net (Excluding Goodwill)	167	11,991	[2]		0	[1]	9,529	167	2,323	0	139
Weighted average remaining useful life					0 years	[1]	3 years 6 months	8 months 12 days	2 years 1 month 6 days	0 years	3 months 18 days
Intangibles write off				$ 11,404

[1] During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of TPack. Please refer to Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for further discussion.

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

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Stockholders' Equity Options Weighted Average Remaining Contractual Life and Exercise Price (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended	1 Months Ended		9 Months Ended
	Dec. 31, 2013	May 31, 2012 Performance-Based RSU [Member]	Nov. 30, 2011 Performance-Based RSU [Member]	Dec. 31, 2013 $ 1.68 - $ 7.60	Dec. 31, 2013 7.61 - 7.67	Dec. 31, 2013 7.68 - 11.86	Dec. 31, 2013 11.87 - 14.20	Dec. 31, 2013 14.21 - 23.32	Dec. 31, 2013 $ 1.68 - $23.32
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		12 years	18 months
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	$ 7.61	$ 7.68	$ 11.87	$ 14.21	$ 1.68
Range of Exercise Price, maximum (USD per share)				$ 7.60	$ 7.67	$ 11.86	$ 14.20	$ 23.32	$ 23.32
Number of Shares, Options Outstanding				562	650	430	493	336	2,471
Weighted average remaining contractual term for options outstanding	2 years 9 months 12 days			3 years 3 months 11 days	2 years 6 months 29 days	3 years 6 months 18 days	2 years 7 months 10 days	1 year 6 months 18 days	2 years 9 months 9 days
Weighted Average Exercise Price, Options Outstanding (USD per share)				$ 6.71	$ 7.67	$ 10.49	$ 12.87	$ 16.78	$ 10.22
Number of Shares, Options Exercisable				473	650	406	478	337	2,344
Weighted Average Exercise Price, Options Exercisable (USD per share)				$ 6.63	$ 7.67	$ 10.42	$ 12.89	$ 16.78	$ 10.31

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Certain Financial Statement Information Other Assets (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of other assets
Non-current portion of prepaid expenses	$ 4,842	$ 7,866
Strategic investments	3,000	3,000
Total other assets	$ 7,842	$ 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 Other Accrued Liabiliteis (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of other accrued liabilities
Employee related liabilities	$ 1,902	$ 2,236
Executive deferred compensation	1,415	1,284
Income taxes	1,254	903
Professional fees	2,033	3,840
Other	4,574	2,467
Total other accrued liabilities	$ 11,178	$ 10,730	[1]

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

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Certain Financial Statement Information

9 Months Ended

Dec. 31, 2013

Certain Financial Statement Information [Abstract]

CERTAIN FINANCIAL STATEMENT INFORMATION

CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable:

	December 31, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,281		$	25,278
Less: allowance for bad debts	(481		)	(703		)
	$	28,800		$	24,575

Inventories:

	December 31, 2013		March 31, 2013
	(In thousands)
Finished goods	$	4,513	$	7,247
Work in process	4,637		4,098
Raw materials	1,332		1,555
	$	10,482	$	12,900

Assets held for sale:

	December 31, 2013		March 31, 2013
	(In thousands)
Assets held for sale	$	14,260	$	—

As of December 31, 2013, the Company classified its headquarters building in Sunnyvale, California as assets held for sale in the Condensed Consolidated Balance Sheets at $14.3 million representing the carrying amount of the asset. In January 2014, the Company agreed to sell the headquarters building for a purchase price of $40.8 million in cash, subject to a limited set of certain closing conditions. See Note 9, Subsequent Events, to the Condensed Consolidated Financial Statements for details.

Other current assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	11,177	$	13,762
Executive deferred compensation assets	1,157		693
Deposits	653		828
Receivable from sale of strategic investment and TPack	3,353		1,331
Other	1,489		1,384
	$	17,829	$	17,998

Property and equipment:

	Useful Life	December 31, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	44,887		$	40,063
Leasehold improvements **	1-15	9,011			14,202
Computers, office furniture and equipment	3-7	43,992			43,485
Buildings **	31.5	—			2,756
Land **	—	—			9,800
		97,890			110,306
Less: accumulated depreciation and amortization		(77,718		)	(75,915		)
		$	20,172		$	34,391

* Includes capitalized mask costs.

** December 31, 2013 balances exclude $14.3 million, including land, building and leasehold improvements related to the Company's headquarters in Sunnyvale, California, which have been reclassified as assets held for sale and included under current assets.

Goodwill and purchased intangibles:

Goodwill is as follows:

	December 31, 2013		March 31, 2013
	(In thousands)
Goodwill	$	11,425	$	13,183

The reduction in goodwill of $1.8 million relates to the sale of TPack. See Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for details.

Purchase-related intangibles are as follows:

	December 31, 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		(6,163		)	167		0.7	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	$	(493,469	)	$	167		$	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 TPack. Please refer to Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for further discussion.

As of December 31, 2013, the estimated future amortization expense of purchased intangible assets to be charged to operating expenses was as follows (in thousands):

	Operating Expenses
Fiscal Years Ending March 31,
2014 (remainder of year)	$	63
2015	104
Total	$	167

Other assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,842	$	7,866
Strategic investments	3,000		3,000
	$	7,842	$	10,866

Other accrued liabilities:

	December 31, 2013		March 31, 2013
	(In thousands)
Employee related liabilities	$	1,902	$	2,236
Executive deferred compensation	1,415		1,284
Income taxes	1,254		903
Professional fees	2,033		3,840
Other	4,574		2,467
	$	11,178	$	10,730

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 nine months ended December 31, 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 are carried at adjusted cost.

Short-term investments:

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

	December 31, 2013									March 31, 2013
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses							Gains		Losses
Cash	$	19,716	$	—	$	—		$	19,716	$	8,529	$	—	$	—		$	8,529
Cash equivalents	3,914		—		—			3,914		10,536		—		—			10,536
U.S. Treasury securities and agency bonds	11,747		8		(4		)	11,751		12,363		10		—			12,373
Corporate bonds	15,482		56		(4		)	15,534		15,567		63		(2		)	15,628
Mortgage-backed and asset-backed securities*	4,015		300		(47		)	4,268		3,655		355		(7		)	4,003
Closed-end bond funds	14,374		2,261		(818		)	15,817		21,914		5,340		(39		)	27,215
Preferred stock	2,406		878		—			3,284		4,878		2,314		—			7,192
	$	71,654	$	3,503	$	(873	)	$	74,284	$	77,442	$	8,082	$	(48	)	$	85,476
Reported as:
Cash and cash equivalents								$	23,630								$	19,065
Short-term investments available-for-sale								50,654									66,411
								$	74,284								$	85,476

* At December 31, 2013 and March 31, 2013, approximately $1.1 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):

	December 31, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	19,716	$	—	$	—	$	19,716	$	8,529	$	—	$	—	$	8,529
Cash equivalents	3,914		—		—		3,914		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,596		155		—		11,751		12,373		—		—		12,373
Corporate bonds	—		15,534		—		15,534		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,268		—		4,268		—		4,003		—		4,003
Closed-end bond funds	15,817		—		—		15,817		27,215		—		—		27,215
Preferred stock	—		3,284		—		3,284		—		7,192		—		7,192
	$	51,043	$	23,241	$	—	$	74,284	$	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 and nine months ended December 31, 2013 and 2012.

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):

	December 31, 2013				March 31, 2013
	Cost		Estimated Fair Value		Cost		Estimated Fair Value
Less than 1 year	$	7,259	$	7,411	$	9,205	$	9,217
Mature in 1 – 2 years	22,341		22,369		19,843		20,040
Mature in 3 – 5 years	707		771		1,575		1,649
Mature after 5 years	937		1,002		962		1,098
	$	31,244	$	31,553	$	31,585	$	32,004

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

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of December 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	$	2,566	$	(4	)	$	—	$	—		$	2,566	$	(4	)
Corporate bonds	2,811		(4		)	—		—			2,811		(4		)
Mortgage-backed and asset-backed securities	1,451		(47		)	6		—			1,457		(47		)
Closed-end bond funds	6,344		(721		)	377		(97		)	6,721		(818		)
	$	13,172	$	(776	)	$	383	$	(97	)	$	13,555	$	(873	)

	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 and nine months ended December 31, 2013 and 2012. 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 December 31, 2013 and March 31, 2013, the Company also had $3.5 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						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Beginning balance	$	187		$	370		$	220		$	454
Charged to costs of revenues	54			96			28			311
Cost incurred	(39		)	(108		)	(46		)	(407		)
Ending balance	$	202		$	358		$	202		$	358

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

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Interest income	$	519	$	685	$	1,389	$	1,915
Net realized gain on short-term investments	6		207		3,290		1,401
	$	525	$	892	$	4,679	$	3,316

Net loss per share:

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

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	73,989			66,113			71,986			64,489
Net effect of dilutive common share equivalents	—			—			—			—
Weighted average common shares outstanding, diluted	73,989			66,113			71,986			64,489
Basic and diluted net loss per share	$	(0.10	)	$	(1.08	)	$	(0.40	)	$	(1.81	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 3.8 million and 4.7 million equivalent shares for the three and nine months ended December 31, 2013, respectively, and 5.4 million and 8.7 million equivalent shares for the three and nine months ended December 31, 2012, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 1.8 million and 1.4 million shares for the three and nine months ended December 31, 2013, respectively, and 1.4 million and 0.7 million shares for the three and nine months ended December 31, 2012, respectively, have been excluded from the net loss per share computation, as their impact would be anti-dilutive because the Company incurred net losses in the periods presented.

Total equivalent shares excluded from the net loss per share computation are 5.6 million and 6.1 million for the three and nine months ended December 31, 2013, respectively, and 6.8 million and 9.4 million for the three and nine months ended December 31, 2012, respectively.

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Certain Financial Statement Information Short-Term Investments (Details) (USD $)	9 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Mar. 31, 2013		Mar. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Cost method investment, ownership percentage (less than)	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	71,654,000			77,442,000
Available for sale Securities Gross Unrealized Gains	3,503,000			8,082,000
Available For Sale Securities Gross Unrealized Losses	(873,000)			(48,000)
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	74,284,000			85,476,000
Cash and cash equivalents	23,630,000		15,683,000	19,065,000	[1]	28,065,000
Short-term investments available-for-sale	50,654,000			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	19,716,000			8,529,000
Available for sale Securities Gross Unrealized Gains	0			0
Available For Sale Securities Gross Unrealized Losses	0			0
Cash and Cash equivalents, Estimated Fair Value	19,716,000			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	3,914,000			10,536,000
Available for sale Securities Gross Unrealized Gains	0			0
Available For Sale Securities Gross Unrealized Losses	0			0
Cash and Cash equivalents, Estimated Fair Value	3,914,000			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	11,747,000			12,363,000
Available for sale Securities Gross Unrealized Gains	8,000			10,000
Available For Sale Securities Gross Unrealized Losses	(4,000)			0
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	11,751,000			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	15,482,000			15,567,000
Available for sale Securities Gross Unrealized Gains	56,000			63,000
Available For Sale Securities Gross Unrealized Losses	(4,000)			(2,000)
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	15,534,000			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	4,015,000			3,655,000
Available for sale Securities Gross Unrealized Gains	300,000			355,000
Available For Sale Securities Gross Unrealized Losses	(47,000)			(7,000)
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	4,268,000	[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	14,374,000			21,914,000
Available for sale Securities Gross Unrealized Gains	2,261,000			5,340,000
Available For Sale Securities Gross Unrealized Losses	(818,000)			(39,000)
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	15,817,000			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 Securities Gross Unrealized Gains	878,000			2,314,000
Available For Sale Securities Gross Unrealized Losses	0			0
Cash, Cash equivalents and Short-term investments, Estimated Fair Value	3,284,000			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	$ 1,100,000	[2]		$ 1,400,000	[2]

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

[2] At December 31, 2013 and March 31, 2013, approximately $1.1 million and $1.4 million of the estimated fair value presented were mortgage-backed securities, respectively.

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Restructuring Charges (Details Textual) (USD $) In Millions, unless otherwise specified	1 Months Ended	9 Months Ended	1 Months Ended
	Dec. 31, 2012 December 2012 Restructuring Program [Member] employee	Dec. 31, 2013 December 2012 Restructuring Program [Member]	Dec. 31, 2012 December 2012 Restructuring Program [Member] Workforce Reduction [Member] Minimum [Member]	Dec. 31, 2012 December 2012 Restructuring Program [Member] Workforce Reduction [Member] Maximum [Member]	Dec. 31, 2012 December 2012 Restructuring Program [Member] Other Operational Expense [Member] Minimum [Member]	Dec. 31, 2012 December 2012 Restructuring Program [Member] Other Operational Expense [Member] Maximum [Member]	Sep. 30, 2013 August 2013 Restructuring Program [Member]	Aug. 31, 2013 August 2013 Restructuring Program [Member] employee	Aug. 31, 2013 August 2013 Restructuring Program [Member] Workforce Reduction [Member]	Aug. 31, 2013 August 2013 Restructuring Program [Member] Other Operational Expense [Member]
Restructuring Charges (Textual) [Abstract]
Number of positions eliminated	70							20
Anticipated reduction in expenses			$ 8.0	$ 9.0	$ 4.0	$ 5.0			$ 3.0	$ 0.5
Restructuring costs incurred to date and expected to be incurred		1.8
Restructuring costs expected to be recognized							$ 1.0

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Subsequent Events (Details) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	0 Months Ended
	Jan. 22, 2014
Subsequent Event [Member]
Subsequent Event [Line Items]
Property held-for-sale, sale price	$ 40.8
Proceeds from nonrefundable cash deposit	$ 7.0

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Current assets:
Cash and cash equivalents	$ 23,630	$ 19,065	[1]
Short-term investments-available-for-sale	50,654	66,411	[1]
Accounts receivable, net	28,800	24,575	[1]
Inventories	10,482	12,900	[1]
Assets held for sale	14,260	0
Other current assets	17,829	17,998	[1]
Total current assets	145,655	140,949	[1]
Property and equipment, net	20,172	34,391	[1]
Goodwill	11,425	13,183	[1]
Purchased intangibles	167	11,991	[1]
Other assets	7,842	10,866	[1]
Total assets	185,261	211,380	[1]
Current liabilities:
Accounts payable	13,210	17,650	[1]
Accrued payroll and related expenses	6,398	6,158	[1]
Veloce accrued liability	57,960	78,082	[1]
Other accrued liabilities	11,178	10,730	[1]
Deferred revenue	888	1,469	[1]
Total current liabilities	89,634	114,089	[1]
Veloce and other non-current liabilities	3,511	15,787	[1]
Commitments and contingencies (Note 7)			[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 December 31, 2013 and March 31, 2013; Issued and outstanding shares - 74,171 at December 31, 2013 and 67,952 at March 31, 2013	740	680	[1]
Additional paid-in capital	5,971,775	5,926,630	[1]
Accumulated other comprehensive loss	(6,518)	(737)	[1]
Accumulated deficit	(5,873,881)	(5,845,069)	[1]
Total stockholders’ equity	92,116	81,504	[1]
Total liabilities and stockholders’ equity	$ 185,261	$ 211,380	[1]

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

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Stockholders' Equity RSU Activity (Details) (Restricted Stock Units (RSUs) [Member])	9 Months Ended
	Dec. 31, 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	3,069,000
Restricted Stock Units Vested	(2,048,000)
Restricted Stock Units Cancelled	(1,510,000)
Restricted Stock Units Outstanding Number of Shares, Outstanding at the end of the period	5,955,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Operating activities:
Net loss	$ (28,810)		$ (116,509)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	7,728		7,247
Amortization of purchased intangibles	420		3,626
Stock-based compensation expense:
Stock options	1,985		3,024
Restricted stock units	11,445		18,521
Warrants	0		1,289
Veloce accrued liability	42,684		56,580
Acquisition related adjustment	0		(133)
Gain on sale of TPack	(19,699)		0
Net loss (gain) on disposals of property, equipment and other assets	27		(1,296)
Non-cash restructuring costs	298		4,689
Tax effect on other comprehensive income	0		(130)
Changes in operating assets and liabilities:
Accounts receivable	(4,459)		5,304
Inventories	2,415		9,387
Assets held for sale	(14,260)		0
Other assets	16,475		(2,758)
Accounts payable	(4,423)		(3,907)
Accrued payroll and other accrued liabilities	610		887
Veloce accrued liability	(45,432)		(15,928)
Deferred revenue	(449)		(841)
Net cash used for operating activities	(33,445)		(30,948)
Investing activities:
Proceeds from sales and maturities of short-term investments	26,594		35,367
Purchases of short-term investments	(16,241)		(17,834)
Proceeds from sale of property, equipment and other assets	20		1,800
Purchase of property, equipment and other assets	(5,616)		(8,454)
Proceeds from sale of strategic equity investment	1,286		7,146
Purchases of strategic equity investment	0		(500)
Proceeds from the sale of TPack, net	(29,498)		0
Funding of a note receivable	0		(500)
Net cash provided by investing activities	35,541		17,025
Financing activities:
Proceeds from issuance of common stock	8,582		5,841
Funding of restricted stock units withheld for taxes	(5,518)		(2,773)
Repurchase of common stock	0		(653)
Payment of contingent consideration	0		(485)
Other	(595)		(389)
Net cash provided by financing activities	2,469		1,541
Net increase (decrease) in cash and cash equivalents	4,565		(12,382)
Cash and cash equivalents at beginning of year	19,065	[1]	28,065
Cash and cash equivalents at end of period	23,630		15,683
Supplementary cash flow disclosures:
Cash paid for income taxes	609		662
Common stock issued for Veloce merger consideration	$ 29,209		$ 15,956

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

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Certain Financial Statement Information Gross Unrealized Losses (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	$ 13,172	$ 3,223
Less than 12 Months of Unrealized Losses, Gross Unrealized Losses	(776)	(5)
12 Months or More of Unrealized Losses, Estimated Fair Value	383	7,104
12 Months or More of Unrealized Losses, Gross Unrealized Losses	(97)	(43)
Total, Estimated Fair Value	13,555	10,327
Total Gross Unrealized Losses	(873)	(48)
Gross Unrealized Gains	3,503	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	2,566	300
Less than 12 Months of Unrealized Losses, Gross Unrealized Losses	(4)	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	2,566	300
Total Gross Unrealized Losses	(4)	0
Gross Unrealized Gains	8	10
Corporate bonds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	2,811	2,276
Less than 12 Months of Unrealized Losses, Gross Unrealized Losses	(4)	(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	2,811	2,389
Total Gross Unrealized Losses	(4)	(2)
Gross Unrealized Gains	56	63
Mortgage-backed and asset-backed securities [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	1,451	647
Less than 12 Months of Unrealized Losses, Gross Unrealized Losses	(47)	(3)
12 Months or More of Unrealized Losses, Estimated Fair Value	6	0
12 Months or More of Unrealized Losses, Gross Unrealized Losses	0	(4)
Total, Estimated Fair Value	1,457	647
Total Gross Unrealized Losses	(47)	(7)
Gross Unrealized Gains	300	355
Closed-end bond funds [Member]
Schedule of Gross Unrealized Losses
Less Than 12 Months of Unrealized Losses, Estimated Fair Value	6,344	0
Less than 12 Months of Unrealized Losses, Gross Unrealized Losses	(721)	0
12 Months or More of Unrealized Losses, Estimated Fair Value	377	6,991
12 Months or More of Unrealized Losses, Gross Unrealized Losses	(97)	(39)
Total, Estimated Fair Value	6,721	6,991
Total Gross Unrealized Losses	(818)	(39)
Gross Unrealized Gains	$ 2,261	$ 5,340

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Certain Financial Statement Information Accounts Receivable (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of Accounts receivable
Accounts receivable	$ 29,281	$ 25,278
Less: allowance for bad debts	(481)	(703)
Accounts receivable, net	$ 28,800	$ 24,575	[1]

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

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Certain Financial Statement Information Warranty (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of Warranty Reserve Activity
Beginning balance	$ 187	$ 370	$ 220	$ 454
Charged to costs of revenues	54	96	28	311
Charges incurred	(39)	(108)	(46)	(407)
Ending balance	$ 202	$ 358	$ 202	$ 358

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Certain Financial Statement Information Assets Held for Sale (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Certain Financial Statement Information [Abstract]
Assets held for sale	$ 14,260	$ 0

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Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 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 (the "Company") 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 4, Veloce, 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 their useful lives, which affect 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 July 2013, the FASB issued Accounting Standards Update 2013-11 amending Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists that will require the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in the condensed consolidated balance sheets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments will be effective for interim and annual periods beginning after December 15, 2013; however, early adoption and retrospective application are permitted. The Company does not expect the adoption of these amendments to have a significant impact on the Company’s Consolidated Financial Statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 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	74,171,000	67,952,000
Common stock, shares outstanding	74,171,000	67,952,000

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Certain Financial Statement Information (Tables)

9 Months Ended

Dec. 31, 2013

Certain Financial Statement Information [Abstract]

Schedule of Accounts receivable

Accounts receivable:

	December 31, 2013			March 31, 2013
	(In thousands)
Accounts receivable	$	29,281		$	25,278
Less: allowance for bad debts	(481		)	(703		)
	$	28,800		$	24,575

Schedule of Inventories

Inventories:

	December 31, 2013		March 31, 2013
	(In thousands)
Finished goods	$	4,513	$	7,247
Work in process	4,637		4,098
Raw materials	1,332		1,555
	$	10,482	$	12,900

Schedule of Assets Held-for-sale

Assets held for sale:

	December 31, 2013		March 31, 2013
	(In thousands)
Assets held for sale	$	14,260	$	—

Schedule of Other current assets

Other current assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Prepaid expenses	$	11,177	$	13,762
Executive deferred compensation assets	1,157		693
Deposits	653		828
Receivable from sale of strategic investment and TPack	3,353		1,331
Other	1,489		1,384
	$	17,829	$	17,998

Schedule of Property and equipment

Property and equipment:

	Useful Life	December 31, 2013			March 31, 2013
	(In years)	(In thousands)
Machinery and equipment *	5-7	$	44,887		$	40,063
Leasehold improvements **	1-15	9,011			14,202
Computers, office furniture and equipment	3-7	43,992			43,485
Buildings **	31.5	—			2,756
Land **	—	—			9,800
		97,890			110,306
Less: accumulated depreciation and amortization		(77,718		)	(75,915		)
		$	20,172		$	34,391

* Includes capitalized mask costs.

** December 31, 2013 balances exclude $14.3 million, including land, building and leasehold improvements related to the Company's headquarters in Sunnyvale, California, which have been reclassified as assets held for sale and included under current assets.

Schedule of Goodwill

Goodwill is as follows:

	December 31, 2013		March 31, 2013
	(In thousands)
Goodwill	$	11,425	$	13,183

Schedule of Purchased intangible assets

Purchase-related intangibles are as follows:

	December 31, 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		(6,163		)	167		0.7	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	$	(493,469	)	$	167		$	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 TPack. Please refer to Note 8, Sale of TPack A/S, to the Condensed Consolidated Financial Statements for further discussion.

Schedule of Estimated future amortization expense of purchased intangible assets

As of December 31, 2013, the estimated future amortization expense of purchased intangible assets to be charged to operating expenses was as follows (in thousands):

	Operating Expenses
Fiscal Years Ending March 31,
2014 (remainder of year)	$	63
2015	104
Total	$	167

Schedule of Other assets

Other assets:

	December 31, 2013		March 31, 2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,842	$	7,866
Strategic investments	3,000		3,000
	$	7,842	$	10,866

Schedule of Other accrued liabilities

Other accrued liabilities:

	December 31, 2013		March 31, 2013
	(In thousands)
Employee related liabilities	$	1,902	$	2,236
Executive deferred compensation	1,415		1,284
Income taxes	1,254		903
Professional fees	2,033		3,840
Other	4,574		2,467
	$	11,178	$	10,730

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):

	December 31, 2013									March 31, 2013
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses							Gains		Losses
Cash	$	19,716	$	—	$	—		$	19,716	$	8,529	$	—	$	—		$	8,529
Cash equivalents	3,914		—		—			3,914		10,536		—		—			10,536
U.S. Treasury securities and agency bonds	11,747		8		(4		)	11,751		12,363		10		—			12,373
Corporate bonds	15,482		56		(4		)	15,534		15,567		63		(2		)	15,628
Mortgage-backed and asset-backed securities*	4,015		300		(47		)	4,268		3,655		355		(7		)	4,003
Closed-end bond funds	14,374		2,261		(818		)	15,817		21,914		5,340		(39		)	27,215
Preferred stock	2,406		878		—			3,284		4,878		2,314		—			7,192
	$	71,654	$	3,503	$	(873	)	$	74,284	$	77,442	$	8,082	$	(48	)	$	85,476
Reported as:
Cash and cash equivalents								$	23,630								$	19,065
Short-term investments available-for-sale								50,654									66,411
								$	74,284								$	85,476

* At December 31, 2013 and March 31, 2013, approximately $1.1 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):

	December 31, 2013								March 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	19,716	$	—	$	—	$	19,716	$	8,529	$	—	$	—	$	8,529
Cash equivalents	3,914		—		—		3,914		9,508		1,028		—		10,536
U.S. Treasury securities and agency bonds	11,596		155		—		11,751		12,373		—		—		12,373
Corporate bonds	—		15,534		—		15,534		—		15,628		—		15,628
Mortgage-backed and asset-backed securities	—		4,268		—		4,268		—		4,003		—		4,003
Closed-end bond funds	15,817		—		—		15,817		27,215		—		—		27,215
Preferred stock	—		3,284		—		3,284		—		7,192		—		7,192
	$	51,043	$	23,241	$	—	$	74,284	$	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):

	December 31, 2013				March 31, 2013
	Cost		Estimated Fair Value		Cost		Estimated Fair Value
Less than 1 year	$	7,259	$	7,411	$	9,205	$	9,217
Mature in 1 – 2 years	22,341		22,369		19,843		20,040
Mature in 3 – 5 years	707		771		1,575		1,649
Mature after 5 years	937		1,002		962		1,098
	$	31,244	$	31,553	$	31,585	$	32,004

Schedule of Gross unrealized losses

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

	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
As of December 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	$	2,566	$	(4	)	$	—	$	—		$	2,566	$	(4	)
Corporate bonds	2,811		(4		)	—		—			2,811		(4		)
Mortgage-backed and asset-backed securities	1,451		(47		)	6		—			1,457		(47		)
Closed-end bond funds	6,344		(721		)	377		(97		)	6,721		(818		)
	$	13,172	$	(776	)	$	383	$	(97	)	$	13,555	$	(873	)

	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						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Beginning balance	$	187		$	370		$	220		$	454
Charged to costs of revenues	54			96			28			311
Cost incurred	(39		)	(108		)	(46		)	(407		)
Ending balance	$	202		$	358		$	202		$	358

Schedule of Interest income, net

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

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Interest income	$	519	$	685	$	1,389	$	1,915
Net realized gain on short-term investments	6		207		3,290		1,401
	$	525	$	892	$	4,679	$	3,316

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 loss per share consists of the following (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2013			2012			2013			2012
Net loss	$	(7,284	)	$	(71,562	)	$	(28,810	)	$	(116,509	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	73,989			66,113			71,986			64,489
Net effect of dilutive common share equivalents	—			—			—			—
Weighted average common shares outstanding, diluted	73,989			66,113			71,986			64,489
Basic and diluted net loss per share	$	(0.10	)	$	(1.08	)	$	(0.40	)	$	(1.81	)

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Document and Entity Information	9 Months Ended
	Dec. 31, 2013	Jan. 24, 2014
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	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		74,177,049

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Restructuring Charges (Tables)

9 Months Ended

Dec. 31, 2013

Restructuring and Related Activities [Abstract]

Schedule of restructuring activity

The restructuring activity during the three and nine months ended December 31, 2013 relating to the December 2012 and August 2013 restructuring programs is as follows (in thousands):

	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
Restructuring charges	727			272			999
Non-cash items	—			(272		)	(272		)
Cash payments	(847		)	—			(847		)
Liability, September 30, 2013	$	187		$	—		$	187
Restructuring charges	38			—			38
Cash payments	(225		)	—			(225		)
Liability, December 31, 2013	—			—			—

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Income Statement [Abstract]
Net revenues	$ 54,844	$ 51,698	$ 164,379	$ 139,316
Cost of revenues	21,644	22,958	65,383	61,874
Gross profit	33,200	28,740	98,996	77,442
Operating expenses:
Research and development	29,870	82,711	120,926	151,865
Selling, general and administrative	10,930	12,675	29,602	38,676
Gain on sale of TPack	0	0	(19,699)	0
Amortization	62	338	254	1,589
Restructuring charges, net	38	6,218	1,130	6,218
Total operating expenses	40,900	101,942	132,213	198,348
Operating loss	(7,700)	(73,202)	(33,217)	(120,906)
Interest income (expense), net	525	892	4,679	3,316
Other income (expense), net	92	1,366	309	1,539
Loss before income taxes	(7,083)	(70,944)	(28,229)	(116,051)
Income tax expense	201	618	581	458
Net loss	$ (7,284)	$ (71,562)	$ (28,810)	$ (116,509)
Basic and diluted net loss per share (in dollars per share)	$ (0.10)	$ (1.08)	$ (0.40)	$ (1.81)
Shares used in calculating basic and diluted net loss per share (in shares)	73,989	66,113	71,986	64,489

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Stock-Based Compensation

9 Months Ended

Dec. 31, 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 for options and ESPP, and the fair market value of the Company's common stock for RSUs. The MSUs were 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. 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 Company did not grant options or employee stock purchase rights during the three months ended December 31, 2013 and 2012. The fair value of the options and employee stock purchase rights granted during the nine months ended December 31, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Nine Months Ended December 31,
	Employee Stock Options						ESPP
	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		%	0.2		%
Volatility	49		%	54		%	57		%	50		%
Dividend yield	—		%	—		%	—		%	—		%
Weighted average fair value	$	2.95		$	2.47		$	3.67		$	1.50

The weighted average grant-date fair value per share of the restricted stock units awarded was $9.84 and $8.57 during the three and nine months ended December 31, 2013, respectively, compared to $6.13 and $5.71 during the three and nine months ended December 31, 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 increased 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 RSUs (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by type of award
Stock options	$	648	$	935	$	1,987		$	3,024
Restricted stock units	5,231		5,276		11,454			18,427
Total stock-based compensation	5,879		6,211		13,441			21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545

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				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	118	$	147	$	353		$	502
Research and development	1,545		2,814		4,867			10,733
Selling, general and administrative	4,216		3,250		8,221			10,216
Total stock-based compensation	$	5,879	$	6,211	$	13,441		$	21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545

The amount of unrecognized stock-based compensation cost estimated to be expensed from December 31, 2013 through fiscal 2018, including time and performance based awards that are expected to vest, is $21.7 million which will be recognized over a weighted-average period of 1.6 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 stock based compensation expense of approximately $21.5 million for the nine months ended December 31, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See Note 4, Veloce, to the Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.

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Stockholders' Equity

9 Months Ended

Dec. 31, 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 December 31, 2013, there are no preferred shares outstanding.

Common Stock

At December 31, 2013, the Company had 375.0 million shares authorized for issuance and approximately 74.2 million shares issued and outstanding. At March 31, 2013, there were approximately 68.0 million shares issued and outstanding.

Employee Stock Purchase Plan ("ESPP")

Under the Company's 1998 Employee Stock Purchase Plan ("1998 Plan"), the Company had 6.3 million shares reserved for issuance. 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 nine months ended December 31, 2013 and 2012, 0.3 million and zero shares were issued under the 2012 plan, respectively. In addition, during the nine months ended December 31, 2012, 0.4 million shares were issued under the 1998 plan. At December 31, 2013, 0.8 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 nine months ended December 31, 2013. During the nine months ended December 31, 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 December 31, 2013, the Company had $15.9 million available in its stock repurchase program.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These option plans include three stockholder-approved plans (1992 Stock Option Plan, 1997 Directors’ Stock Option Plan and 2011 Equity Incentive Plan) and four plans not approved by stockholders (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.

Option activity under the Company’s stock incentive plans during the nine months ended December 31, 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	(641	)	9.50
Cancelled	(420	)	11.36
Outstanding at the end of the period	2,471		$	10.22
Vested and expected to vest at the end of the period	2,470		$	10.22
Vested and exercisable at the end of the period	2,344		$	10.31

At December 31, 2013, the weighted average remaining contractual term for options outstanding and vested is 2.8 years.

The aggregate pretax intrinsic value of options exercised during the nine months ended December 31, 2013 was approximately $1.7 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 December 31, 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	562	3.28	$	6.71	473	$	6.63
7.61 - 7.67	650	2.58	7.67		650	7.67
7.68 - 11.86	430	3.55	10.49		406	10.42
11.87 - 14.20	493	2.61	12.87		478	12.89
14.21 - 23.32	336	1.55	16.78		337	16.78
$  1.68 - $23.32	2,471	2.77	$	10.22	2,344	$	10.31

As of December 31, 2013, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $9.0 million and $8.4 million, respectively. The aggregate pre-tax intrinsic values were calculated based on the closing price of the Company’s common stock of $13.37 on December 31, 2013.

Restricted Stock Units ("RSUs")

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 April 2011, the Committee authorized three-year performance-based RSU grants, or “EBITDA2” Grants. 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 were 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 was 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 vested 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 had the opportunity to vest after 1 year. Unvested RSU shares remaining at the end of the program period expired unvested. 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 RSUs based on three underlying performance milestones. The value of these RSUs 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 December 31, 2013, the first two performance milestones have been completed and the third and final performance milestone was assessed as being probable of attainment, and the associated stock-based compensation expense has been recorded in the Company's Condensed Consolidated Financial Statements. In November 2013, Dr. Gopi was awarded an additional 500,000 RSUs of which 200,000 RSUs were vested on the grant date and the remaining 300,000 RSUs will vest upon the attainment of certain specified X-Gene and X-Weave commercialization goals. The value of these performance-based RSUs is $3.2 million.

In May and November 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 MSUs will vest between ranges of 0% and 150% based on the Company's relative TSR compared to the Index.

In May 2013, the Committee authorized an annual incentive compensation plan the (“FY2014 Short Term Plan”), that, if earned, would become payable in RSUs on May 15, 2014. The FY 2014 Short Term Plan will pay out based on fiscal 2014 revenue and non-GAAP earnings per share metrics. The award payouts 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 nine months ended December 31, 2013 is set forth below (in thousands):

	Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	3,069
Vested	(2,048	)
Cancelled	(1,510	)
Outstanding at the end of the period	5,955

The weighted average remaining contractual term for the restricted stock units outstanding as of December 31, 2013 was 1.0 year.

As of December 31, 2013, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $79.6 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 $13.37 on December 31, 2013.

The aggregate pretax intrinsic value of RSUs released during the nine months ended December 31, 2013 was $18.8 million. This intrinsic value represents the fair market value of the Company’s common stock on the date of release.

Warrants

On May 17, 2009, the Company entered into a development agreement with Veloce pursuant to which Veloce agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company’s common stock (the “Warrant”). 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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Certain Financial Statement Information Inventories (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Mar. 31, 2013
Schedule of Inventories
Finished goods	$ 4,513	$ 7,247
Work in process	4,637	4,098
Raw materials	1,332	1,555
Inventories, total	$ 10,482	$ 12,900	[1]

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

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Stockholders' Equity (Tables)

9 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Schedule of Option Activity Under Stock Incentive Plans

Option activity under the Company’s stock incentive plans during the nine months ended December 31, 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	(641	)	9.50
Cancelled	(420	)	11.36
Outstanding at the end of the period	2,471		$	10.22
Vested and expected to vest at the end of the period	2,470		$	10.22
Vested and exercisable at the end of the period	2,344		$	10.31

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 December 31, 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	562	3.28	$	6.71	473	$	6.63
7.61 - 7.67	650	2.58	7.67		650	7.67
7.68 - 11.86	430	3.55	10.49		406	10.42
11.87 - 14.20	493	2.61	12.87		478	12.89
14.21 - 23.32	336	1.55	16.78		337	16.78
$  1.68 - $23.32	2,471	2.77	$	10.22	2,344	$	10.31

Schedule of Restricted Stock Unit Activity

Restricted stock unit activity during the nine months ended December 31, 2013 is set forth below (in thousands):

	Number of Shares
Outstanding at the beginning of the year	6,444
Awarded	3,069
Vested	(2,048	)
Cancelled	(1,510	)
Outstanding at the end of the period	5,955

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Subsequent Events

9 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

On January 22, 2014, the “Company” entered into an agreement to sell its headquarters building and related parcel of land in Sunnyvale, California, for a purchase price of $40.8 million in cash. The closing of the sale is scheduled to occur on or before March 13, 2014, and is subject to a limited set of closing conditions. In connection with the execution of the agreement, the purchaser provided a non-refundable cash deposit of $7.0 million.

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Contingencies

9 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

CONTINGENCIES

Legal Proceedings

The Company is currently a party to certain 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 injunctions or other restrictions on the conduct of the Company’s business, 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 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 (the Operable Unit 3 or “OU3”) 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 and OU3, efforts to remediate the soil and groundwater at the Omega Site, as well as the extraction of chemical vapors from the soil and improving indoor air quality 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 July 2013, EPA rejected a good faith offer (“GFO”) to settle the matter that OPOG had submitted in February 2013. In October 2013, OPOG submitted a revised GFO that EPA currently is considering. Settlement negotiations between the parties are expected to continue through 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. In December 2013, OPOG retained legal counsel to pursue claims against other PRPs 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 January 2012, as a result of challenges made by certain PRPs to the criteria previously used to allocate liability among OPOG members, and of the departure of certain PRPs from OPOG, OPOG approved changes to the cost allocation structure that resulted in an increase to the Company’s proportional allocation of liability. In addition, the subsequent departure of one or more other PRPs from OPOG could have the effect of increasing the proportional liability of the remaining PRPs, including the Company. 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 August 2013, a complaint was filed against the Company in the California Superior Court for Santa Clara County by Emulex Corporation (“Emulex”), a purchaser of certain Company products, alleging rights to indemnification by the Company for unspecified expenses incurred by Emulex in connection with patent infringement litigation brought against Emulex by Broadcom Corporation in 2009 and 2010. In September 2013, the Company filed an answer which, among other things, denied each of the allegations in the complaint and filed a cross complaint against Emulex seeking, among other things, damages for fraudulent inducement and a declaratory judgment that the Company has no duty to indemnify Emulex in the Broadcom litigation. Discovery has recently commenced in these actions.

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Sale of TPack A/S

9 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

SALE OF TPACK A/S

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 $3.4 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 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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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation

The Condensed Consolidated Financial Statements include all the accounts of AppliedMicro (the "Company") 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 4, Veloce, 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 their useful lives, which affect 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 Cost and Fair Value of Available-for-Sale Securities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 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	$ 7,259	$ 9,205
Mature in 1 - 2 years, Cost	22,341	19,843
Mature in 3 - 5 years, Cost	707	1,575
Mature after 5 years, Cost	937	962
Cost, Total	31,244	31,585
Less than 1 year, Fair Value	7,411	9,217
Mature in 1 - 2 years, Fair Value	22,369	20,040
Mature in 3 - 5 years, Fair Value	771	1,649
Mature after 5 years, Fair Value	1,002	1,098
Fair Value, Total	$ 31,553	$ 32,004

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Contingencies (Details)	1 Months Ended		9 Months Ended
	Jan. 31, 2012	Jan. 31, 2009 Amendments	Dec. 31, 2013 Company
Contingencies (Textual) [Abstract]
Companies named as Potentially Responsible Parties (more than)			100
Amendments approved to consent decree		2
Percent of contribution to the total waste	0.50%

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Sale of TPack A/S (Tables)

9 Months Ended

Dec. 31, 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 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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Certain Financial Statement Information Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified					9 Months Ended
	Dec. 31, 2013		Mar. 31, 2013		Dec. 31, 2013 Machinery and Equipment [Member] Minimum [Member]	Dec. 31, 2013 Machinery and Equipment [Member] Maximum [Member]	Dec. 31, 2013 Leasehold Improvements [Member] Minimum [Member]	Dec. 31, 2013 Leasehold Improvements [Member] Maximum [Member]	Dec. 31, 2013 Computers, Office Furniture and Equipment [Member] Minimum [Member]	Dec. 31, 2013 Computers, Office Furniture and Equipment [Member] Maximum [Member]	Dec. 31, 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	$ 44,887	[1]	$ 40,063	[1]
Leasehold improvements	9,011	[2]	14,202
Computers, office furniture and equipment	43,992		43,485
Buildings	0	[2]	2,756
Land	0	[2]	9,800
Property and equipment, gross	97,890		110,306
Less: accumulated depreciation and amortization	(77,718)		(75,915)
Property and equipment, net	$ 20,172		$ 34,391	[3]

[1] Includes capitalized mask costs.

[2] December 31, 2013 balances exclude $14.3 million, including land, building and leasehold improvements related to the Company's headquarters in Sunnyvale, California, which have been reclassified as assets held for sale and included under current assets.

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

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Stock-Based Compensation (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 5,879	$ 6,211	$ 13,441	$ 21,451
Stock-based compensation expensed from inventory	3	11	(11)	94
Total stock-based compensation expense	5,882	6,222	13,430	21,545
Cost of Revenues [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	118	147	353	502
Research and Development [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	1,545	2,814	4,867	10,733
Selling, General and Administrative [Member]
Summary of Stock-Based Compensation Expense
Stock based compensation	$ 4,216	$ 3,250	$ 8,221	$ 10,216

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Restructuring Charges (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Restructuring Reserve [Roll Forward]
Liability, beginning balance	$ 187	$ 307	$ 548		$ 548
Restructuring charges	38	999	93	6,218	1,130	6,218
Non-cash items		(272)
Cash payments	(225)	(847)	(334)
Liability, ending balance	0	187	307		0
Workforce Reduction
Restructuring Reserve [Roll Forward]
Liability, beginning balance	187	307	548		548
Restructuring charges	38	727	93
Non-cash items		0
Cash payments	(225)	(847)	(334)
Liability, ending balance	0	187	307		0
Asset Impairment
Restructuring Reserve [Roll Forward]
Liability, beginning balance	0	0	0		0
Restructuring charges	0	272	0
Non-cash items		(272)
Cash payments	0	0	0
Liability, ending balance	$ 0	$ 0	$ 0		$ 0

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
Net loss	$ (7,284)		$ (71,562)		$ (28,810)		$ (116,509)
Other comprehensive loss, net of tax:
Unrealized gain (loss) on investments	(179)	[1]	(659)	[1]	(5,404)	[1]	196	[1]
Loss on foreign currency translation	(37)		(127)		(377)		(249)
Other comprehensive loss, net of tax	(216)		(786)		(5,781)		(53)
Total comprehensive loss	(7,500)		(72,348)		(34,591)		(116,562)
Reclassification adjustment from AOCI to earnings, short term investments	$ (6)		$ (207)		$ (3,290)		$ (1,401)

[1] The amounts reclassified from accumulated other comprehensive loss and recorded in interest income (expense), net in the Condensed Consolidated Statement of Operations relating to short term investments were zero and $3.3 million for the three and nine months ended December 31, 2013, respectively, and $0.2 million and $1.4 million for the three and nine months ended December 31, 2012, respectively. Refer to Note 2, Certain Financial Statement Information, to the Condensed Consolidated Financial Statements for additional details.

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Veloce

9 Months Ended

Dec. 31, 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 correlation 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 was updated during fiscal 2013 from a previous estimated maximum of approximately $135.0 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 percentage of completion of the milestone and the timing of when the performance milestones will 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.

The Company has completed the first and second performance milestones and assessed the third and final performance milestone relating to the Veloce project as probable of achievement as of December 31, 2013. As of December 31, 2013, the Company assessed that all the effort required for the third milestone had been completed. The consideration relating to the three performance milestones, excluding the value allocated to the Unallocated Veloce Units, in the amount of $169.3 million, has been recognized as research and development expense through December 31, 2013 compared to $117.0 million as of December 31, 2012. During the three and nine months ended December 31, 2013, as part of the above arrangement, the Company paid approximately $1.2 million and $45.4 million, respectively, in cash and issued approximately 25,000 shares and 3.8 million shares, respectively, valued at approximately $0.2 million and $29.2 million, respectively. During the three and nine months ended December 31, 2012, as part of the above arrangement, the Company paid approximately $1.1 million and $15.9 million, respectively, in cash and issued approximately 0.2 million shares and 2.8 million shares, respectively, valued at approximately $1.1 million and $15.9 million, respectively.

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 and nine months ended December 31, 2013, the Company distributed an additional 1,400 and 0.5 million Unallocated Veloce Units which had a related expense of $20,000 and $5.9 million, respectively. Veloce Equity Holders subject to vesting requirements will receive their distribution upon satisfaction of such vesting requirements.

For accounting purposes, the costs incurred in connection with the development milestones relating to Veloce are considered compensatory and are recognized as R&D expense. Recognition of these costs as expense occurred when certain development and performance milestones became probable of achievement and were 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 December 31, 2013, 0.9 million Unallocated Veloce Units had not been allocated, and the maximum potential additional expense to be recognized associated with these Unallocated Veloce Units is approximately $9.2 million.

Total R&D expenses recognized related to Veloce were approximately $2.9 million and $42.7 million during the three and nine months ended December 31, 2013, respectively, and approximately $51.9 million and $56.6 million during the three and nine months ended December 31, 2012, 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 December 31, 2013 is classified as long-term if payments of the consideration are expected to occur beyond a 12 month period.

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Certain Financial Statement Information Goodwill (Details) (USD $) In Thousands, unless otherwise specified				9 Months Ended
	Dec. 31, 2013	Mar. 31, 2013		Dec. 31, 2013 TPack [Member]
Schedule of Goodwill
Goodwill	$ 11,425	$ 13,183	[1]
Goodwill write off				$ 1,800

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

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Certain Financial Statement Information Net Income/Loss Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of Reconciliation of Shares Used to Calculate Basic and Diluted Net (Loss) Income Per Share
Net loss (USD)	$ (7,284)	$ (71,562)	$ (28,810)	$ (116,509)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	73,989	66,113	71,986	64,489
Net effect of dilutive common share equivalents	0	0	0	0
Weighted average common shares outstanding, diluted	73,989	66,113	71,986	64,489
Basic and diluted net loss per share (in dollars per share)	$ (0.10)	$ (1.08)	$ (0.40)	$ (1.81)

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Stock-Based Compensation (Tables)

9 Months Ended

Dec. 31, 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 Company did not grant options or employee stock purchase rights during the three months ended December 31, 2013 and 2012. The fair value of the options and employee stock purchase rights granted during the nine months ended December 31, 2013 and 2012 is estimated as of the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Nine Months Ended December 31,
	Employee Stock Options						ESPP
	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		%	0.2		%
Volatility	49		%	54		%	57		%	50		%
Dividend yield	—		%	—		%	—		%	—		%
Weighted average fair value	$	2.95		$	2.47		$	3.67		$	1.50

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 RSUs (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by type of award
Stock options	$	648	$	935	$	1,987		$	3,024
Restricted stock units	5,231		5,276		11,454			18,427
Total stock-based compensation	5,879		6,211		13,441			21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545

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				Nine Months Ended
	December 31,				December 31,
	2013		2012		2013			2012
Stock-based compensation expense by cost centers
Cost of revenues	$	118	$	147	$	353		$	502
Research and development	1,545		2,814		4,867			10,733
Selling, general and administrative	4,216		3,250		8,221			10,216
Total stock-based compensation	$	5,879	$	6,211	$	13,441		$	21,451
Stock-based compensation (capitalized to) expensed from inventory	3		11		(11		)	94
Total stock-based compensation expense	$	5,882	$	6,222	$	13,430		$	21,545