10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period endedDecember 29, 2013

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193

For the transition period from        to             

Commission File No. 0-14225

EXAR CORPORATION

(Exact Name of Registrant as specified in its charter)

Delaware	94-1741481
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

48720 Kato Road, Fremont, CA 94538

(Address of principal executive offices, Zip Code)

(510) 668-7000

(Registrant’s telephone number, including area code)

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  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations 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  ☒    No  ☐

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

Large accelerated filer    ☐            Accelerated filer    ☒

Non-accelerated filer    ☐          (Do not check if a smaller reporting company)          Smaller reporting company    ☐

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

The number of shares outstanding of the Registrant’s Common Stock was 47,483,455 as of February 3, 2014.

1

EXAR CORPORATION AND SUBSIDIARIES

INDEX TO

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 29, 2013

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 6.	Exhibits	52
	Signatures	53
	Index to Exhibits	54

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PART I – FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	December 29,			March 31,
	2013			2013
ASSETS
Current assets:
Cash and cash equivalents	$	21,070		$	14,718
Short-term marketable securities		154,702			190,587
Accounts receivable (net of allowances of $570 and $944)		21,699			12,614
Accounts receivable, related party (net of allowances of $462 and $346)		1,685			3,374
Inventories		24,950			19,430
Assets held for sale		13,083			—
Other current assets		3,645			3,177
Total current assets		240,834			243,900
Property, plant and equipment, net		8,784			24,100
Goodwill		29,573			10,356
Intangible assets, net		28,063			13,338
Other non-current assets		1,442			1,474
Total assets	$	308,696		$	293,168
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	14,824		$	9,455
Accrued compensation and related benefits		4,352			3,624
Deferred income and allowances on sales to distributors		1,861			2,399
Deferred income and allowances on sales to related party distributor		8,017			9,475
Other current liabilities		11,151			15,215
Total current liabilities		40,205			40,168
Long-term lease financing obligations		106			1,342
Other non-current obligations		11,530			11,204
Total liabilities		51,841			52,714
Commitments and contingencies (Notes 13, 14 and 15)
Stockholders' equity:
Common stock, $.0001 par value; 100,000,000 shares authorized; 47,501,051 and 46,607,246 shares outstanding		5			5
Additional paid-in capital		511,644			749,426
Accumulated other comprehensive loss		(980	)		(526	)
Treasury stock at cost, 0 and 19,924,369 shares		—			(248,983	)
Accumulated deficit		(253,814	)		(259,468	)
Total stockholders' equity		256,855			240,454
Total liabilities and stockholders’ equity	$	308,696		$	293,168

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 29,			December 30,			December 29,			December 30,
	2013			2012			2013			2012
Sales:
Net sales	$	21,846		$	22,235		$	70,682		$	63,210
Net sales, related party		8,844			8,764			26,653			27,662
Total net sales		30,690			30,999			97,335			90,872
Cost of sales:
Cost of sales		12,393			11,922			36,576			34,846
Cost of sales, related party		3,556			4,005			11,619			12,897
Amortization of purchased intangible assets and inventory step-up		1,898			801			5,346			2,578
Warranty reserve		—			—			1,440			—
Restructuring charges and exit costs		17			79			122			160
Total cost of sales		17,864			16,807			55,103			50,481
Gross profit		12,826			14,192			42,232			40,391
Operating expenses:
Research and development		6,929			5,376			20,263			16,598
Selling, general and administrative		9,086			8,645			26,407			24,066
Restructuring charges and exit costs		74			524			1,389			1,619
Net change in fair value of contingent consideration		58			—			(2,437	)		—
Total operating expenses		16,147			14,545			45,622			42,283
Loss from operations		(3,321	)		(353	)		(3,390	)		(1,892	)
Other income and expense, net:
Interest income and other, net		321			586			980			1,906
Interest expense		(39	)		(56	)		(117	)		(128	)
Total other income and expense, net		282			530			863			1,778
Income (Loss) before income taxes		(3,039	)		177			(2,527	)		(114	)
Benefit from income taxes		(1,405	)		(1,346	)		(8,181	)		(1,324	)
Net income (loss)	$	(1,634	)	$	1,523		$	5,654		$	1,210
Net income (loss) per share:
Basic	$	(0.03	)	$	0.03		$	0.12		$	0.03
Diluted	$	(0.03	)	$	0.03		$	0.12		$	0.03
Shares used in the computation of net income (loss) per share:
Basic		47,529			45,925			47,277			46,228
Diluted		47,529			46,438			48,815			46,623

See Accompanying Notes to Condensed Consolidated Financial Statements.

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EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 29,			December 30,			December 29,			December 30,
	2013			2012			2013			2012
Net income (loss)	$	(1,634	)	$	1,523		$	5,654		$	1,210
Changes in market value of investments, net of tax:
Changes in unrealized gain on investments		(77	)		(305	)		(495	)		(42	)
Reclassification adjustment for net realized gains (losses)		67			4			41			(149	)
Net change in market value of investments		(10	)		(301	)		(454	)		(191	)
Comprehensive income (loss)	$	(1,644	)	$	1,222		$	5,200		$	1,019

See Accompanying Notes to Condensed Consolidated Financial Statements.

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EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	December 29,			December 30,
	2013			2012
Cash flows from operating activities:
Net income	$	5,654		$	1,210
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization		9,386			8,333
Gain on sale of intangible asset		—			(223	)
Stock-based compensation expense		7,267			3,010
Release of deferred tax asset valuation allowance		(6,770	)		—
Net change in fair value of contingent consideration		(2,437	)		—
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable and accounts receivable, related party		(7,155	)		(3,669	)
Inventories		(3,764	)		(346	)
Other current and non-current assets		(558	)		47
Accounts payable		4,849			2,256
Accrued compensation and related benefits		659			182
Deferred income and allowance on sales to distributors and related party distributor		(1,996	)		(1,848	)
Other current and non-current liabilities		(5,992	)		(5,298	)
Net cash provided by (used in) operating activities		(857	)		3,654
Cash flows from investing activities:
Purchases of property, plant and equipment and intellectual property, net		(1,675	)		(1,253	)
Purchases of short-term marketable securities		(166,738	)		(132,955	)
Proceeds from maturities of short-term marketable securities		24,410			37,563
Proceeds from sales of short-term marketable securities		178,167			97,190
Acquisition, net of cash acquired		(23,111	)		—
Other disposal activities		125			235
Net cash provided by investing activities		11,178			780
Cash flows from financing activities:
Proceeds from issuance of common stock		3,971			4,699
Purchase of stock for withholding taxes on vested restricted stock		(1,042	)		—
Repurchase of common stock		(4,000	)		—
Payments of lease financing obligations		(2,898	)		(2,513	)
Net cash provided by (used in) financing activities		(3,969	)		2,186
Net increase in cash and cash equivalents		6,352			6,620
Cash and cash equivalents at the beginning of period		14,718			8,714
Cash and cash equivalents at the end of period	$	21,070		$	15,334
Supplemental disclosure of non-cash investing activities:
Issuance of common stock in connection with Cadeka acquisition	$	5,177		$	—

See Accompanying Notes to Condensed Consolidated Financial Statements.

6

EXAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION

Description of Business— Exar Corporation was incorporated in California in 1971 and reincorporated in Delaware in 1991. Exar Corporation and its subsidiaries (“Exar” or “we”) is a fabless semiconductor company that designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded, and Communications Infrastructure markets. Exar's product portfolio includes power management and connectivity components, high-performance analog and mixed-signal products, communications products and data compression and storage solutions.

Basis of Presentation and Use of Management Estimates—The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of December 29, 2013 and results of operations for the three and nine months ended December 29, 2013 and December 30, 2012, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year.

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2014 and 2013 consisted of 52 weeks. The third quarter of fiscal years 2014 and 2013 both consisted of 13 weeks.

NOTE 2.    RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the Financial Accounting Standards Board (“FASB”) issued amended standards that provided explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists. Under the amended standards, the unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward. These amended standard updates will be effective for our interim period beginning after December 15, 2013 and applied prospectively with early adoption permitted. We are currently evaluating the impact of this guidance on the presentation of our financial positions, results of operations and cash flows.

In February 2013, the FASB issued amended standards to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. These amended standards are effective for interim and annual reporting periods beginning after December 15, 2012. The adoption of this guidance did not have any material impact on our financial position, results of operations or cash flows.

NOTE 3.    BUSINESS COMBINATIONS

We periodically evaluate potential strategic acquisitions or arrangements to broaden our product offering and build upon our existing library of intellectual property, human capital and engineering talent in order to expand our capabilities in the areas in which we operate or to acquire complementary businesses.

We account for each business combination by applying the acquisition method, which requires (1) identifying the acquiree; (2) determining the acquisition date; (3) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest we have in the acquiree at their acquisition date fair value; and (4) recognizing and measuring goodwill or a gain from a bargain purchase.

7

Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, we typically account for the acquired contingencies using existing guidance for a reasonable estimate.

To establish fair value, we measure the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants. The measurement assumes the highest and best use of the asset by the market participants that would maximize the value of the asset or the group of assets within which the asset would be used at the measurement date, even if the intended use of the asset is different.

Acquisition related costs, including finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees are accounted for as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity securities are recognized in accordance with other applicable GAAP.

Acquisition of Cadeka

On July 5, 2013, we completed the acquisition of substantially all of the assets of Cadeka Technologies (Cayman) Holding Ltd., a privately held company organized under the laws of the Cayman Islands and all the outstanding stock of the subsidiaries of Cadeka, including the equity of its wholly owned subsidiary Cadeka Microcircuits, LLC, a Colorado limited liability company (“Cadeka”). With locations in Loveland, Colorado, Shenzhen and Wuxi, China, Cadeka designs, develops and markets high precision analog integrated circuits for use in industrial and high reliability applications. Cadeka’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our condensed consolidated financial statements beginning July 6, 2013. The pro forma effects of the portion of the Cadeka operations assumed through the transaction on our results of operations during fiscal years 2014 and 2013 were considered immaterial.

Consideration

The purchase consideration includes approximately 454,000 shares of our common stock issued to the shareholders of Cadeka (valued at $5.2 million) and a cash payment of $25.0 million (less an amount of $1.0 million, inclusive of 15,000 shares, held back temporarily to satisfy potential indemnity claims). An additional purchase price consideration earn-out (up to $5.0 million) may be earned over the next two fiscal years contingent upon achieving certain revenue targets, and may be paid in the form of cash, stock or both. The $5.2 million worth of shares issued at closing were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions and discounted to a present value. Final determination of the earn-out liability can range from zero to $5.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the preliminary purchase consideration is as follows (in thousands):

	Amount
Cash	$	25,000
Equity instruments		5,177
Estimated fair value of earn-out payments		4,660
Total consideration paid	$	34,837

In accordance with ASC 805, Business Combinations, the acquisition of Cadeka was recorded as a purchase business acquisition since Cadeka was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to net assets acquired at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant unobservable inputs (“Level 3 inputs”) determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 15% to 23%. The fair value of the contingent earn-out was a probability-based approach that includes significant Level 3 inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the preliminary fair value of consideration paid over the preliminary fair values of net assets acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $12.4 million prior to considering the impact on deferred tax assets and liabilities. The goodwill results largely of expected synergies from combining the operations of Cadeka with that of Exar and is not expected to be tax deductible. After considering the impact of deductible and taxable temporary tax differences on the acquired business, a deferred tax liability of $6.8 million was established primarily related to identified intangible asset basis differences, which resulted in a total goodwill amount recorded as part of the acquisition of $19.2 million. Additionally, in accordance with ASC 805, Business Combinations, we also evaluated the impact of the acquisition on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million.

8

Preliminary Purchase Price Allocation

The allocation of the total preliminary purchase price to Cadeka’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

The preliminary fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Cadeka acquisition was as follows (in thousands):

	Amount
Identifiable tangible assets (liabilities)
Cash	$	1,055
Accounts Receivable		241
Inventories		1,756
Property, plant and equipment		231
Other assets		3
Accounts payable and accruals		(7,400	)
Other short-term liabilities		(520	)
Long-term liabilities		(126	)
Total identifiable tangible assets (liabilities), net		(4,760	)
Identifiable intangible assets		20,380
Total identifiable assets, net		15,620
Goodwill		19,217
Fair value of total consideration transferred	$	34,837

The following table sets forth the components of identifiable intangible assets acquired in connection with the Cadeka acquisition (in thousands):

	Fair Value
Developed technologies	$	15,720
In-process research and development		2,280
Customer relations		2,170
Trade name		210
Total identifiable intangible assets	$	20,380

In valuing specific components of the acquisition, that includes deferred taxes, and intangibles required us to make estimates that may be adjusted in the future, if new information is obtained about circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. Thus, the purchase price allocation is considered preliminary and dependent upon the finalization of the valuation of assets acquired and liabilities assumed, including income tax effects. Final determination of these estimates could result in an adjustment to the preliminary purchase price allocation, with an offsetting adjustment to goodwill.

Acquisition Related Costs

Acquisition related costs, or deal costs, relating to Cadeka are included in the selling, general and administrative line on the condensed consolidated statement of operations for the nine months ended December 29, 2013 were approximately $0.4 million.

Acquisition of Altior

On March 22, 2013, we completed the acquisition of substantially all of the assets of Altior Inc. (“Altior”), a developer of data management solutions in Eatontown, New Jersey. Altior’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements beginning March 23, 2013. The pro forma effects of the portion of the Altior operations assumed through the transaction on our results of operations during fiscal years 2013 and 2012 were considered immaterial.

9

Consideration

The purchase consideration included approximately 358,000 of our shares issued to the shareholders of Altior, a cash payment of $1.0 million (of which $0.25 million was held back temporarily to satisfy potential indemnity claims), and additional purchase price consideration earn-outs which may be paid in the form of cash, shares or a combination thereof (not to exceed $20.0 million in aggregate) payable over the next three fiscal years contingent upon achieving certain revenue targets. The $3.7 million worth of shares issued as consideration were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions. Final determination of the earn-out liability can range from zero to $20.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date, will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the purchase consideration is as follows (in thousands):

	Amount
Cash	$	1,000
Equity instruments		3,740
Estimated fair value of earn-out payments		10,138
Total consideration paid	$	14,878

In accordance with ASC 805, Business Combinations, the acquisition of Altior was recorded as a purchase business acquisition since Altior was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to assets and liabilities assumed at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant Level 3 inputs determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 12% to 19%. The fair value of the contingent earn-outs was a probability-based approach that includes significant Level 3 inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the fair value of consideration paid over the fair values of net assets and liabilities acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $7.2 million. The goodwill consists largely of expected synergies from combining the operations of Altior with that of Exar and is deductible over 15 years for tax purposes.

Purchase Price Allocation

The allocation of the purchase price to Altior’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

The fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Altior acquisition was as follows (in thousands):

	Amount
Identifiable tangible assets
Inventories	$	126
Property, plant and equipment		140
Other assets		36
Accounts payable and accruals		(24	)
Other short-term liabilities		(51	)
Long-term liabilities		(61	)
Total identifiable tangible assets, net		166
Identifiable intangible assets – existing technology		7,540
Total identifiable assets, net		7,706
Goodwill		7,172
Fair value of total consideration transferred	$	14,878

Acquisition Related Costs

Acquisition related costs, or deal costs, relating to Altior are included in the selling, general and administrative line on the consolidated statement of operations for fiscal year 2013, which were immaterial.

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NOTE 4.    FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair value of contingent consideration arising from the acquisitions of Altior and Cadeka is classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs.

There were no transfers between Level 1, Level 2, and Level 3 during the fiscal quarter ended December 29, 2013.

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Our investment assets, measured at fair value on a recurring basis, as of the dates indicated below were as follows (in thousands, except for percentages):

	December 29, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	13,961	$	—	$	—	$	13,961
U.S. government and agency securities		11,537		21,254		—		32,791
State and local government securities		—		2,798		—		2,798
Corporate bonds and securities		4		72,721		—		72,725
Asset-backed securities		—		30,354		—		30,354
Mortgage-backed securities		—		16,034		—		16,034
Total investment assets	$	25,502	$	143,161	$	—	$	168,663
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	7,741	$	7,741
Acquisition-related contingent consideration – Cadeka	$	—	$	—	$	4,620	$	4,620
Total liabilities	$	—	$	—	$	12,361	$	12,361

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	5,042	$	—	$	—	$	5,042
U.S. government and agency securities		22,460		19,261		—		41,721
State and local government securities		—		2,935		—		2,935
Corporate bonds and securities		274		91,955		—		92,229
Asset-backed securities		—		30,966		—		30,966
Mortgage-backed securities		—		22,736		—		22,736
Total investment assets	$	27,776	$	167,853	$	—	$	195,629
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	10,138	$	10,138

The fair value of contingent consideration was determined based on a probability-based approach which includes projected revenues, percentage probability of occurrence and discount rate to present value payments. A significant increase (decrease) in the projected revenue, discount rate or probability of occurrence in isolation could result in a significantly higher (lower) fair value measurement. 

The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of December 29, 2013.

	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input
As of December 29, 2013
Acquisition-related contingent consideration – Altior	$	7,741	Combination of income and marketable approach	Revenue and Probability of Achievement
Acquisition-related contingent consideration – Cadeka	$	4,620	Combination of income and marketable approach	Revenue and Probability of Achievement

We calculate the fair value of the contingent consideration on a quarterly basis based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period.

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The change in the fair value of our Altior purchase consideration liability is as follows (in thousands):

	December 29, 2013
As of March 31, 2013	$	10,138
Less: Adjustment to purchase consideration		(2,397	)
As of December 29, 2013	$	7,741

The change in the fair value of our Cadeka purchase consideration liability is as follows (in thousands):

	December 29, 2013
As of March 31, 2013	$	—
Purchase contingent consideration		4,660
Less: Adjustment to purchase consideration		(40	)
As of December 29, 2013	$	4,620

We have focused our resources on developing and marketing our coprocessor products with the Altior software technology incorporated. These products, when compared to the Altior legacy FPGA-based products, will earn credit under the asset purchase agreement at a lower rate, resulting in a lower probability of meeting certain near-term earn-out targets. As a result, the fair value of the contingent consideration for Altior acquisition was reduced by $2.5 million and credited to operating expense in the three months ended September 29, 2013. In the third quarter of fiscal year 2014, the fair value of the contingent consideration was increased by $98,000 related to present value of the amount payable due to passage of time.

In the third quarter of fiscal year 2014 the fair value of the contingent consideration for the Cadeka was decreased by $40,000 related to changes in probability of achieving revenue targets and impact of change in present value of the amount payable due to passage of time.

Our cash, cash equivalents and short-term marketable securities as of the dates indicated below were as follows (in thousands):

	December 29, 2013		March 31, 2013
Cash and cash equivalents
Cash at financial institutions	$	7,109	$	9,676
Cash equivalents
Money market funds		13,961		5,042
Total cash and cash equivalents	$	21,070	$	14,718
Available-for-sale securities
U.S. government and agency securities	$	32,791	$	41,721
State and local government securities		2,798		2,935
Corporate bonds and securities		72,725		92,229
Asset-backed securities		30,354		30,966
Mortgage-backed securities		16,034		22,736
Total short-term marketable securities	$	154,702	$	190,587

Our marketable securities include U.S. government and agency securities, state and local government securities, corporate bonds and securities, and asset-backed and mortgage-backed securities. We classify investments as available-for-sale at the time of purchase and re-evaluate such designation as of each balance sheet date. We amortize premiums and accrete discounts to interest income over the life of the investment. Our available-for-sale securities, which we intend to sell as necessary to meet our liquidity requirements, are classified as cash equivalents if the maturity date is 90 days or less from the date of purchase and as short-term marketable securities if the maturity date is greater than 90 days from the date of purchase.

All marketable securities are reported at fair value based on the estimated or quoted market prices as of each balance sheet date, with unrealized gains or losses, net of tax effect, recorded in the condensed consolidated statements of comprehensive income (loss) except those unrealized losses that are deemed to be other than temporary which are reflected in the impairment charges on investments line item on the condensed consolidated statements of operations. There have been no such impairment charges in any of the periods presented.

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Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in the interest income and other net, line item on the condensed consolidated statements of operations.

Our net realized gains (losses) on marketable securities for the periods indicated below were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Gross realized gains	$	136		$	233		$	518		$	617
Gross realized losses		(69	)		(229	)		(477	)		(766	)
Net realized income (losses)	$	67		$	4		$	41		$	(149	)

The following table summarizes our investments in marketable securities as of the dates indicated below (in thousands):

	December 29, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	13,961	$	—	$	—		$	13,961
U.S. government and agency securities		32,840		1		(50	)		32,791
State and local government securities		2,797		5		(4	)		2,798
Corporate bonds and securities		72,730		60		(65	)		72,725
Asset-backed securities		30,396		14		(56	)		30,354
Mortgage-backed securities		16,064		19		(49	)		16,034
Total investments	$	168,788	$	99	$	(224	)	$	168,663

	March 31, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	5,042	$	—	$	—		$	5,042
U.S. government and agency securities		41,694		27		—			41,721
State and local government securities		2,927		10		(2	)		2,935
Corporate bonds and securities		92,059		215		(45	)		92,229
Asset-backed securities		30,932		61		(27	)		30,966
Mortgage-backed securities		22,646		194		(104	)		22,736
Total investments	$	195,300	$	507	$	(178	)	$	195,629

—————

(1) Gross of tax impact

Our asset-backed securities are comprised primarily of premium tranches of vehicle loans and credit card receivables, while our mortgage-backed securities are primarily from Federal agencies. We do not own auction rate securities nor do we own securities that are classified as subprime. As of December 29, 2013, we have sufficient liquidity and do not intend to sell these securities to fund normal operations or realize any significant losses in the short term; however, these securities are available for use, if needed, for current operations.

Management determines the appropriate classification of cash equivalents or short-term marketable securities at the time of purchase and reevaluates such classification as of each balance sheet date. The investments are adjusted for amortization of premiums and accretion of discounts to maturity and such accretion/amortization, which is immaterial for all periods presented, is included in the interest income and other, net line in the condensed consolidated statements of operations. Cash equivalents and short-term marketable securities are reported at fair value with the related unrealized gains and losses included in the accumulated other comprehensive losses line in the condensed consolidated balance sheets.

We periodically review our investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, our intent not to sell the security, and whether it is more likely than not that we will not have to sell the security before recovery of its cost basis. For the three and nine months ended December 29, 2013 and December 30, 2012, respectively, there were no investments identified with other than temporary declines in value.

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The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale by expected maturity as of the dates indicated below were as follows (in thousands):

	December 29, 2013				March 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year	$	61,616	$	61,615	$	61,011	$	61,029
Due in 1 to 5 years		107,172		107,048		134,289		134,600
Total	$	168,788	$	168,663	$	195,300	$	195,629

The following table summarizes the gross unrealized losses and fair values of our investments in an unrealized loss position as of the dates indicated below, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	December 29, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency securities	$	28,772	$	(50	)	$	—	$	—		$	28,772	$	(50	)
State and local government securities		1,516		(4	)		—		—			1,516		(4	)
Corporate bonds and securities		35,179		(65	)		—		—			35,179		(65	)
Asset-backed securities		15,301		(25	)		3,467		(31	)		18,768		(56	)
Mortgage-backed securities		8,249		(22	)		2,174		(27	)		10,423		(49	)
Total	$	89,017	$	(166	)	$	5,641	$	(58	)	$	94,658	$	(224	)

	March 31, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
State and local government securities	$	—	$	—		$	404	$	(2	)	$	404	$	(2	)
Corporate bonds and securities		29,609		(42	)		497		(3	)		30,106		(45	)
Asset-backed securities		10,008		(17	)		1,241		(10	)		11,249		(27	)
Mortgage-backed securities		2,911		(39	)		3,263		(65	)		6,174		(104	)
Total	$	42,528	$	(98	)	$	5,405	$	(80	)	$	47,933	$	(178	)

NOTE 5.    GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one reporting unit, we utilize an entity-wide approach to assess goodwill for impairment. As of December 29, 2013, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

The changes in the carrying amount of goodwill for fiscal years 2014 and 2013 were as follows (in thousands):

	December 29, 2013		March 31, 2013
Beginning balance	$	10,356	$	3,184
Goodwill additions		19,217		7,172
Ending balance	$	29,573	$	10,356

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The goodwill additions during the nine months ended December 29, 2013 consist of $19.2 million residual allocation from the Cadeka acquisition purchase price accounting. Goodwill additions during the fiscal year ended March 31, 2013 consisted of $7.2 million residual allocation from the Altior acquisition purchase price accounting.

Intangible Assets

Our purchased intangible assets as of the dates indicated below were as follows (in thousands):

	December 29, 2013							March 31, 2013
	Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets:
Existing technology	$	58,588	$	(35,647	)	$	22,941	$	42,858	$	(30,668	)	$	12,190
Customer relationships		5,075		(2,539	)		2,536		2,905		(2,079	)		826
Patents/Core technology		3,459		(3,328	)		131		3,459		(3,182	)		277
Distributor relationships		1,264		(1,264	)		—		1,264		(1,219	)		45
Tradenames		210		(35	)		175		—		—			—
Total intangible assets subject to amortization		68,596		(42,813	)		25,783		50,486		(37,148	)		13,338
In-process research and development		2,280		—			2,280		—		—			—
Total	$	70,876	$	(42,813	)	$	28,063	$	50,486	$	(37,148	)	$	13,338

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Patents/core technology is amortized over five to six years. Distributor relationships are amortized over six years. Customer relationships are amortized over five to seven years. Tradenames are amortized over three years. We expect the amortization of in-process research and development to start in fiscal year 2015. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indicator of impairment exists, we compare the carrying value of long-lived assets to our projection of future undiscounted cash flows attributable to such assets and, in the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge equal to the excess of the carrying value over the asset’s fair value. Although the assumptions used in projecting future revenues and gross margins are consistent with those used in our annual strategic planning process, intangible asset impairment charges might be required in future periods if our assumptions are not achieved.

As December 29, 2013, there were no indicators that required us to perform an intangible assets impairment review.

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Amortization expense	$	1,991	$	994	$	5,665	$	3,155

The total future amortization expenses for our purchased intangible assets are summarized below (in thousands):

Amortization Expense (by fiscal year)
2014 (3 months remaining)	$	1,991
2015		6,039
2016		4,863
2017		3,449
2018		3,255
2019 and thereafter		6,186
Total future amortization	$	25,783

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NOTE 6.    LONG-TERM INVESTMENT

Our long-term investment consists of our investment in Skypoint Telecom Fund II (US), L.P. (“Skypoint Fund”). Skypoint Fund is a venture capital fund that invested primarily in private companies in the telecommunications and/or networking industries. We account for this non-marketable equity investment under the cost method. We periodically review and determine whether the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

As of the dates indicated below, our long-term investment balance, which is included in the “Other non-current assets” line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	December 29, 2013			March 31, 2013
Beginning balance	$	1,288		$	1,273
Contributions		—			15
Distributions		(25	)		—
Ending balance	$	1,263		$	1,288

The carrying amount of $1.3 million as of December 29, 2013 reflects the net of the capital contributions, capital distributions and cumulative impairment charges. We have made $4.8 million in capital contributions to Skypoint Fund since we became a limited partner in July 2001. During the first quarter of fiscal year 2013, we contributed $15,000 to the fund.

In the three months ended December 29, 2013, Skypoint Fund informed us of the sale of one of the portfolio companies in the fund. Exar’s distribution from the sale was approximately $25,000. In accordance with the standard related to accounting for cost method investments, we recorded the distribution on the cost basis and reduced the carrying value of our investment in the Skypoint Fund.

The Partnership is currently in the dissolution phase. As of December 29, 2013, we do not have any further capital commitments.

Impairment

We evaluate our long-term investment for impairment whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year by comparing the carrying amount to the fair value of the underlying investments. If the carrying amount exceeds its fair value, the long term-investment is considered impaired and a second step is performed to measure the amount of impairment loss. We analyzed the fair value of the underlying investments of Skypoint Fund and as a result, no impairment was recorded during the third fiscal quarter of 2014.

NOTE 7.    RELATED PARTY TRANSACTIONS

Alonim Investments Inc. (“Alonim”), owns approximately 7.6 million shares, or approximately 16%, of our outstanding common stock as of December 29, 2013. As such, Alonim is our largest stockholder and any sales made to Alonim or its affiliates are considered related party transactions.

Related party contributions to our total net sales for the periods indicated below were as follows:

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Alonim		29%		28%		27%		30%

Related party receivables to our net accounts receivables were as follows as of the dates indicated below:

	December 29, 2013		March 31, 2013
Alonim		*		21%

—————

*     Related party receivables for this period were less than 10% of the net account balance.

Related party expenses for marketing promotional materials reimbursed were not significant for the three and nine months ended December 29, 2013 and December 30, 2012, respectively.

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We rent our Loveland, Colorado office from an entity, which is partially-owned by one of the founders of Cadeka, who is now one of our employees. We have recorded $34,000 and $103,000 in related party rent expense for the three and nine months ended December 29, 2013, respectively.

NOTE 8.    RESTRUCTURING CHARGES AND EXIT COSTS

2014 Restructuring Charges and Exit Costs

During the three and nine months ended December 29, 2013, we incurred restructuring charges and exit costs of $0.1 million and $1.5 million, respectively. The charges include $1.4 million of severance benefits and $0.2 million of lease termination and other costs. In the fourth quarter of fiscal 2014 we have started to implement an additional restructuring in order to reduce costs. The total charges from this restructuring have not yet been determined.

2013 Restructuring Charges and Exit Costs

In the fourth quarter of fiscal year 2013, we recorded $0.3 million restructuring charges and exit costs and released a $0.5 million liability related to Industrial Research Assistance Program with Canadian governmental agency. In the third, second and first quarters of fiscal year 2013, we recorded restructuring charges and exit costs of $0.6 million, $0.3 million and $0.9 million, respectively. Of the total restructuring charges and exit costs recorded in fiscal year 2013, $0.3 million was reflected in cost of sales and $1.3 million was reflected in operating expenses within our consolidated statements of operations.

Our restructuring liabilities were included in the accounts payable, other current liabilities and other non-current obligations lines within our condensed consolidated balance sheets. The following table summarizes the activities affecting the liabilities as of the dates indicated below (in thousands):

	December 29, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination and other costs	$	2,860	$	158	$	(4	)	$	(1,581	)	$	1,433
Severance		426		1,353		—			(1,205	)		574
Balance at December 29, 2013	$	3,286	$	1,511	$	(4	)	$	(2,786	)	$	2,007

	March 31, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination costs and others	$	5,235	$	6	$	(56	)	$	(2,325	)	$	2,860
Severance		2,806		1,548		—			(3,928	)		426
Balance at March 31, 2013	$	8,041	$	1,554	$	(56	)	$	(6,253	)	$	3,286

NOTE 9.    BALANCE SHEET DETAIL

Our inventories consisted of the following as of the dates indicated below (in thousands):

	December 29, 2013		March 31, 2013
Work-in-process and raw materials	$	14,454	$	9,981
Finished goods		10,496		9,449
Total inventories	$	24,950	$	19,430

Our property, plant and equipment consisted of the following as of the dates indicated below (in thousands):

	December 29, 2013			March 31, 2013
Land	$	—		$	6,660
Building		860			16,224
Machinery and equipment		40,736			42,258
Software and licenses		17,377			17,566
Property, plant and equipment, total		58,973			82,708
Accumulated depreciation and amortization		(50,189	)		(58,608	)
Total property, plant and equipment, net	$	8,784		$	24,100

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Our other current liabilities consisted of the following as of the dates indicated below (in thousands):

	December 29, 2013		March 31, 2013
Fair value of earn-out liability – short-term	$	2,230	$	2,599
Accrued restructuring charges and exit costs		1,957		2,020
Short-term lease financing obligations		1,700		3,189
Accrued manufacturing expenses, royalties and licenses		1,669		2,370
Purchase consideration holdback		1,256		250
Accrued legal and professional services		866		746
Accrued sales and marketing expenses		573		576
Accrual for dispute resolution		—		2,727
Other		900		738
Total other current liabilities	$	11,151	$	15,215

Our other non-current obligations consisted of the following (in thousands) as of the dates indicated:

	December 29, 2013		March 31, 2013
Fair value of earn-out liability – long–term	$	10,131	$	7,539
Long-term taxes payable		749		2,225
Accrued restructuring charges and exit costs		14		1,266
Other		636		174
Total other non-current obligations	$	11,530	$	11,204

NOTE 10.    NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share reflects the potential dilution that would occur if outstanding stock options or warrants to purchase common stock were exercised for common stock, using the treasury stock method, and the common stock underlying outstanding restricted stock units (“RSUs”) was issued.

The following table summarizes our net income (loss) per share for the periods indicated below (in thousands, except per share amounts):

	Three Months Ended					Nine Months Ended
	December 29, 2013			December 30, 2012		December 29, 2013		December 30, 2012
Net income (loss)	$	(1,634	)	$	1,523	$	5,654	$	1,210
Shares used in computation of net income (loss) per share:
Basic		47,529			45,925		47,277		46,228
Effect of options and awards		—			513		1,538		395
Diluted		47,529			46,438		48,815		46,623
Net income (loss) per share
Basic	$	(0.03	)	$	0.03	$	0.12	$	0.03
Diluted	$	(0.03	)	$	0.03	$	0.12	$	0.03

All outstanding stock options and restricted stock units (“RSUs”) are potentially dilutive securities. In the three months ended December 29, 2013, all shares attributable to outstanding options and RSUs were excluded from the computation of diluted net loss per share, as inclusion of such shares would have an anti-dilutive effect. In the nine months ended December 29, 2013, approximately 1.1 million shares were excluded from the computation of diluted net income per share because they were determined to be anti-dilutive.

In the three and nine months ended December 30, 2012, approximately 3.2 million shares and 3.8 million shares, respectively, were excluded from the computation of diluted net income per share because they were determined to be anti-dilutive.

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NOTE 11.    COMMON STOCK REPURCHASES

From time to time, we acquire outstanding common stock in the open market to partially offset dilution from our equity award programs, to increase our return on invested capital and to bring our cash to a more appropriate level for our organization.

On August 28, 2007, we announced the approval of a share repurchase plan under which we were authorized to repurchase up to $100.0 million of our common stock.

On July 9, 2013, we announced the approval of a share repurchase program under which we were authorized to repurchase an additional $50.0 million of our common stock. The repurchase program does not have a termination date, and may be modified, extended or terminated at any time. We intend to retire all shares repurchased under the stock repurchase plan. The purchase price for the repurchased shares of Exar is reflected as a reduction of common stock and additional paid-in capital. We may continue to repurchase our common stock under the repurchase plan, which would reduce our cash, cash equivalents and/or short-term marketable securities available to fund future operations and to meet other liquidity requirements.

As of December 29, 2013, we had repurchased shares valued at $92.2 million under the August 2007 repurchase program. During the three and nine months ended December 29, 2013, we repurchased $2.0 million and $4.0 million of our common stock under the July 2013 repurchase program, respectively. The repurchased shares were retired immediately. The remaining authorized amount for the stock repurchase under the repurchase programs is $57.8 million.

Stock repurchase activities during the nine months ended December 29, 2013 were indicated below (in thousands, except per share amounts):

	Total number of Shares Purchased	Average Price Paid Per Share (or Unit)		Amount Paid for Purchase
Balances, March 31, 2013	9,564	$	9.22	$	88,189
Repurchases for nine months	309	$	12.94		4,000
Balances, December 29, 2013	9,873	$	9.34	$	92,189

—————

Note: The average price paid per share is based on the total price paid by Exar, which includes applicable broker fees.

NOTE 12.    STOCK-BASED COMPENSATION

Employee Stock Participation Plan (“ESPP”)

Our ESPP permits employees to purchase common stock through payroll deductions at a purchase price that is equal to 95% of our common stock price on the last trading day of each three-calendar-month offering period. Our ESPP is non-compensatory.

The following table summarizes our ESPP transactions during the fiscal periods presented (in thousands, except per share amounts):

	As of December 29,2013		Nine Months Ended December 29,2013
	Shares of Common Stock		Shares of Common Stock		Weighted Average Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,379
Issued				13	$	11.47

Equity Incentive Plans

We currently have two equity incentive plans, in which shares are available for future issuance, the Exar Corporation 2006 Equity Incentive Plan (“2006 Plan”) and the Sipex Corporation (“Sipex”) 2006 Equity Incentive Plan (“Sipex Plan”), the latter of which was assumed in connection with the August 2007 acquisition of Sipex.

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The 2006 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in common stock or units of common stock, as well as cash bonus awards. RSUs granted under the 2006 Plan are counted against authorized shares available for future issuance on a basis of two shares for every RSU issued. The 2006 Plan allows for performance-based vesting and partial vesting based upon the level of performance. Grants under the Sipex Plan are only available to former Sipex’s employees or employees we hired after the Sipex acquisition. At our annual meeting on September 15, 2010, our stockholders approved an amendment to the 2006 Plan to increase the aggregate share limit under the 2006 Plan by an additional 5.5 million shares to 8.3 million shares. At December 29, 2013, there were 2.0 million shares available for future grant under all our equity incentive plans.

Stock Option Activities

Our stock option transactions during the nine months ended December 29, 2013 were indicated below:

	Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		In-the-money Options Vested and Exercisable (in thousands)
Balance at March 31, 2013		6,212,333		$	7.48		5.04	$	19,199	$	1,481
Granted		1,460,300			12.38
Exercised		(535,832	)		7.12
Forfeited		(522,341	)		7.89
Cancelled		(10,834	)		10.92
Balance at December 29, 2013		6,603,626		$	8.56		5.07	$	21,985	$	2,062
Vested and expected to vest, December 29, 2013		6,184,803		$	8.46		5.00	$	21,073
Vested and exercisable, December 29, 2013		2,197,258		$	7.40		3.67	$	9,544

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value, which is based on the closing price of our common stock of $11.63 and $10.50 as of December 29, 2013 and March 31, 2013, respectively. These are the values which would have been received by option holders if all option holders exercised their options on that date.

In January 2012, we granted 480,000 performance-based stock options to our Chief Executive Officer, President and Director (“CEO”). The options are scheduled to vest in four equal annual installments at the end of fiscal years 2013 through 2016 if certain predetermined financial measures are met. If the financial measures are not met, each installment will be rolled over to the subsequent fiscal year for vesting except for the last installment. If the financial measures are not met for two consecutive years, the options will be forfeited except for the last installment which will be forfeited at the end of fiscal year 2016. We recorded $65,000 and $195,000of compensation expense for these options in the three and nine months ended December 29, 2013, respectively. We recorded $65,000 and $195,000 of compensation expense for these options in the three and nine months ended December 30, 2012, respectively.

Options exercised for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Intrinsic value of options exercised	$	805	$	304	$	2,699	$	879

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RSU Activities

Our RSU transactions during the nine months ended December 29, 2013 are summarized as follows:

	Shares			Weighted Average Grant- Date Fair Value		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at March 31, 2013		732,204		$	7.73		1.72	$	7,688
Granted		469,995			11.83
Issued and released		(311,406	)		9.48
Cancelled		(33,666	)		9.55
Unvested at December 29, 2013		857,127		$	9.27		1.65	$	9,968
Vested and expected to vest, December 29, 2013		761,615					1.60	$	8,858

The aggregate intrinsic value of RSUs represents the closing price per share of our stock at the end of the periods presented, multiplied by the number of unvested RSUs or the number of vested and expected to vest RSUs, as applicable, at the end of each period.

For RSUs, stock-based compensation expense was calculated based on our stock price on the date of grant, multiplied by the number of RSUs granted. The grant date fair value of RSUs less estimated forfeitures was recognized on a straight-line basis, over the vesting period.

In March 2012, we granted 300,000 performance-based RSUs to our CEO. The RSUs are scheduled to start vesting in three equal annual installments at the end of fiscal year 2013 through 2015 with three year vesting periods if certain predetermined financial measures are met. If the financial measures are not met, each installment will be forfeited at the end of its respective fiscal year. In the three and nine months ended December 29, 2013, we recorded $119,000and $641,000, respectively, of compensation expense for these awards. In the three and nine months ended December 30, 2012, we recorded $112,000 and $336,000, respectively, of compensation expense for these awards.

During fiscal year 2014, we granted 50,000 performance-based RSUs to certain executives. The RSUs are scheduled to start vesting in the three equal annual installments at the end of fiscal 2014 through 2017 with three year vesting periods if certain predetermined financial measures are met. In addition, the annual vesting requires continued service through each of the vesting dates. During the three and nine months ended December 29, 2013, we recorded $91,000 and $239,000 of compensation expense for these awards, respectively.

In August 2013, we announced the Fiscal Year 2014 Management Incentive Program (“2014 Incentive Program”). Under this program, each participant’s award is denominated in stock and subject to achievement of certain financial performance goals and the participant’s annual Management by Objective goals. In the three and nine months ended December 29, 2013, we recorded $0.2 million and $1.5 million of stock compensation expense related to the 2014 Incentive Program, respectively.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to stock options and RSUs during the fiscal periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Cost of sales	$	165	$	175	$	519	$	289
Research and development		566		328		1,395		437
Selling, general and administrative		1,826		986		5,353		2,284
Total Stock-based compensation expense	$	2,557	$	1,489	$	7,267	$	3,010

The amount of stock-based compensation cost capitalized in inventory was immaterial for all periods presented.

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Unrecognized Stock-Based Compensation Expense

The following table summarizes unrecognized stock-based compensation expense related to stock options and RSUs for the period indicated below as follows:

	December 29, 2013
	Amount (in thousands)		Weighted Average Expected Remaining Period (in years)
Options	$	8,180		2.7
RSUs		5,322		2.3
Total Stock-based compensation expense	$	13,502

Valuation Assumptions

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based compensation represent our estimates, but these estimates involve inherent uncertainties and the application of management’s judgment which include the expected term of the stock-based awards, stock price volatility and forfeiture rates. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

We used the following weighted average assumptions to calculate the fair values of options granted during the fiscal periods presented:

	Three Months Ended						Nine Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Expected term of options (years)		4.5			4.4		4.4	–	4.5	4.2	–	4.5
Risk-free interest rate		1.01	%		0.5	%	0.60%	–	1.12%	0.5%	–	0.6%
Expected volatility		32	%		41	%	32%	–	35%	41%	–	42%
Expected dividend yield		–			–			–			–
Weighted average estimated fair value	$	3.74		$	2.81		$	3.56		$	2.76

NOTE 13.    LEASE FINANCING OBLIGATIONS

We have acquired engineering design tools (“Design Tools”) under capital leases. We acquired Design Tools of $0.2 million in July 2013 under a 29-month license, $0.9 million in July 2012 under a three-year license, $4.5 million in December 2011 under a three-year license, $5.8 million in October 2011 under a three-year license, $1.0 million in June 2010 under a three-year license, $1.3 million in December 2009 under a 28-month license, and $1.1 million in July 2009 under a three-year license, all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item in the condensed consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets as of December 29, 2013 and March 31, 2013, respectively. The effective interest rates for the Design Tools range from 2.0% to 7.25%.

Amortization expense related to the Design Tools, which was recorded using the straight-line method over the remaining useful life for the periods indicated below was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Amortization expense	$	800	$	818	$	2,494	$	2,659

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Future minimum lease and sublease income payments for the lease financing obligations as of December 29, 2013 are as follows (in thousands):

Fiscal Years	Design Tools
2014 (3 months remaining)	$	370
2015		1,456
2016		59
2017		10
2018 and thereafter		6
Total minimum lease payments		1,901
Less: amount representing interest		95
Present value of minimum lease payments		1,806
Less: short-term lease financing obligations		1,700
Long-term lease financing obligations	$	106

Interest expense for the lease financing obligation for the periods indicated below was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Interest expense	$	39	$	35	$	115	$	107

In the course of our business, we enter into arrangements accounted for as operating leases related to rental of office space. Rent expenses for all operating leases for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Rent expense	$	229	$	149	$	658	$	456

Our future minimum lease payments for the lease operating obligations as of December 29, 2013 are as follows (in thousands):

Fiscal Years	Facilities
2014 (3 months remaining)	$	200
2015		552
2016		461
2017		150
2018 and thereafter		20
Total minimum lease payments	$	1,383

NOTE 14.    COMMITMENTS AND CONTINGENCIES

In 1986, Micro Power Systems Inc. (“MPSI”), a subsidiary that we acquired in June 1994, identified low-level groundwater contamination at its principal manufacturing site. The area and extent of the contamination appear to have been defined. MPSI previously reached an agreement with a prior tenant to share in the cost of ongoing site investigations and the operation of remedial systems to remove subsurface chemicals and well closure activities. In April 2012, the San Francisco Bay Regional Water Quality Control Board approved our application for low-threat closure and rescinded the previous cleanup order. All monitoring well closure activities on adjacent/neighboring sites have been completed. We have finalized and executed access environmental indemnity and tolling agreements, and deed restriction covenants with the property owner. The parties have agreed that onsite well closure activities can commence.

Outstanding liabilities for remediation activities, net of payments, consisted of the following as of the dates indicated (in thousands):

	December 29, 2013		March 31, 2013
Liabilities for remediation activities	$	31	$	76

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In early 2012, we received correspondences from the California Department of Toxic Substance Control (“DTSC”) regarding its ongoing investigation of hazardous wastes and hazardous waste constituents at a former regulated treatment facility in San Jose, California. In 1985, MPSI made two separate permitted hazmat deliveries to a licensed and regulated site for treatment. DTSC has requested that former/current property owners and companies, currently in excess of 50, that had hazardous waste treated at the site participate in further site assessment and limited remediation activities. We have entered into various agreements with other named generators, former property owners and DTSC limited to the investigation of the sites’ condition and evaluation, and selection of appropriate remedial measures. The designated environmental consulting firm is moving forward with the agreed preliminary site assessment and periodic status reporting. Given that this matter is in the early stages of investigation and discussions are ongoing, we are unable to ascertain our exposure, if any.

In a letter dated March 27, 2012, Exar was notified by the Alameda County Water District (“ACWD”) of the recent detection of volatile organic compounds at a site adjacent to a facility that was previously owned and occupied by Sipex. The letter was also addressed to prior and current property owners and tenants (collectively “Property Owners”). ACWD requested that the property owners carry out further site investigation activities to determine if the detected compounds are emanating from the site or simply flowing under it. In June 2012, the Property Owners filed with ACWD a report of its investigation/characterization activities and analytical data obtained. Accumulated data suggests that compounds of concern in groundwater appear to be from an offsite source. ACWD is investigating alternative upgradient sites. Given that this investigation is ongoing, we are unable to ascertain our exposure, if any.

We warrant all custom products and application specific products, including cards and boards, against defects in materials and workmanship for a period of 12 months, and occasionally we may provide an extended warranty from the delivery date. We warrant all of our standard products against defects in materials and workmanship for a period of 90 days from the date of delivery. Reserve requirements are recorded in the period of sale and are based on an assessment of the products sold with warranty, historical warranty costs incurred and customer/product specific circumstances. Our liability is generally limited, at our option, to replacing, repairing, or issuing a credit (if it has been paid for). Our warranty does not cover damage which results from accident, misuse, abuse, improper line voltage, fire, flood, lightning or other damage resulting from modifications, repairs or alterations performed other than by us, or resulting from failure to comply with our written operating and maintenance instructions. Warranty expense has historically been immaterial for our products. The remaining balance of warranty liabilities established for the return and replacement of certain older generation data compression products shipped in prior years was $1.2 million as of December 29, 2013, and warranty liability as of March 31, 2013 was immaterial.

As of the dates indicated below, our warranty reserve balance, which is included in the “Other current liabilities” line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	December 29, 2013			March 31, 2013
Beginning balance	$	50		$	90
Provisions for warranties issued		1,440		─
Settlements/adjustments		(328	)		(40	)
Ending balance	$	1,162		$	50

In the ordinary course of business, we may provide for indemnification of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us, services to be provided by us, intellectual property infringement claims made by third parties or, matters related to our conduct of the business. In addition, we have entered into indemnification agreements with our directors and certain of our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. We maintain director and officer liability insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers, and former directors and officers of acquired companies, in certain circumstances.

It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement and claims. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our condensed consolidated financial statements.

NOTE 15.    LEGAL PROCEEDINGS

From time to time, we are involved in various claims, legal actions and complaints arising in the normal course of business. Although the ultimate outcome of the matters discussed below and other matters is not presently determinable, management currently believes that the resolution of all such pending matters will not have a material adverse effect on our financial position, results of operations or cash flows.

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Two former employees of Exar’s French subsidiary have filed claims against that French subsidiary for alleged unfair dismissal in the French Labor Courts. We believe that the former employees were terminated in accordance with the requirements of French law and that the former employees’ claims are not supported by any relevant evidence. One matter is scheduled for trial in February, 2014. The other matter is in the early procedural stages. We intend to vigorously defend our positions.

NOTE 16.    INCOME TAXES

During the three months ended December 29, 2013, we recorded an income tax benefit of approximately $1.4 million, which was primarily due to the lapsing of statute of limitations in federal and state jurisdictions, offset by income tax expense in certain of our non-US operations. During the nine months ended December 29, 2013, we recorded an income tax benefit of approximately $8.2 million. The income tax benefit was primarily due to the impact of the acquisition of Cadeka on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million. In the three and nine months ended December 30, 2012, we recorded $1.3 million each of income tax benefit which mainly resulted from the release of a $1.3 million reserve for uncertain tax positions related to an NOL carryback refund. The reserve was released due to the expiration of the statute of limitations in U.S. tax jurisdictions.

During the three and nine months ended December 29, 2013, the unrecognized tax benefits each decreased by $1.4 million to $14.0 million. The current unrecognized tax benefit was primarily related to the release of foreign liabilities and interest due to the lapse of statute of limitations and R&D credits. If recognized, $11.4 million of these unrecognized tax benefits (net of federal benefit) would be recorded as a reduction of future income tax provision before consideration of changes in the valuation allowance for deferred tax assets.

Estimated interest and penalties related to the income taxes are classified as a component of the provision for income taxes in the condensed consolidated statement of operations. Accrued interest and penalties consisted of the following as of the dates indicated (in thousands):

	December 29, 2013		March 31, 2013
Accrued interest and penalties	$	97	$	228

Our major tax jurisdictions are the United States federal and various states, Canada, China and certain other foreign jurisdictions. The fiscal years 2003 through 2013 remain open and subject to examinations by the appropriate governmental agencies in the United States and certain foreign jurisdictions.

On November 6, 2012, California passed Proposition 39, which mandates most taxpayers to apportion their California income by using a single sales factor and requires all taxpayers to use market-based sourcing for sale receipts for tax years beginning or after January 1, 2013. The enacted law did not have a material impact on our financial position, results of operations or cash flows.

Per the 2012 Tax Relief Act enacted in January 2013, the federal R&D credit is retroactively extended through 2013. No R&D credit and related reserve is considered in the third quarter of fiscal year 2014 tax provision pending improvement in our future visibility of the incremental R&D expenses. However, as a full valuation allowance is placed on the deferred tax assets, there is no impact on the statement of operations.

NOTE 17.    SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one reportable segment which is comprised of one operating segment. We design, develop and market high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded Systems, and Communications Infrastructure markets. Our product portfolio includes power management and connectivity components, communications products, high precision or high speed analog ICs, and data compression and storage solutions.

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Our net sales by end market were summarized as follows as of the dates indicated below (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Industrial & Embedded Systems	$	18,429	$	16,119	$	52,870	$	48,130
Networking & Storage		7,104		9,300		27,284		23,391
Communications Infrastructure		5,089		5,270		16,762		18,735
Other		68		310		419		616
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Our foreign operations are conducted primarily through our wholly-owned subsidiaries in Canada, China, France, Germany, Japan, Malaysia, South Korea, Taiwan and the United Kingdom. Our principal markets include North America, Europe and the Asia Pacific region. Net sales by geographic areas represent direct sales principally to original equipment manufacturers (“OEM”), or their designated subcontract manufacturers, and to distributors (affiliated and unaffiliated) who buy our products and resell to their customers.

Our net sales by geographic area for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
China	$	11,566	$	10,749	$	33,860	$	31,458
United States		9,285		8,711		31,325		22,987
Singapore		3,138		3,245		10,068		10,561
Germany		2,456		2,662		8,124		8,865
Japan		1,575		1,499		4,415		4,367
Europe (excluding Germany)		907		1,111		2,431		3,654
Rest of world		1,763		3,022		7,112		8,980
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Substantially all of our long-lived assets at each of December 29, 2013 and March 31, 2013 were located in the United States.

The following distributors and customer accounted for 10% or more of our net sales in the periods indicated:

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Distributor A	26	%	28	%	26	%	30	%
Distributor B	21	%	10	%	23	%	10	%
Distributor C	13	%	10	%	11	%	10	%
Customer A	*		12	%	*		*

—————

*     Net sales for this distributor or customer for this period were less than 10% of our net sales.

No other distributor or customer accounted for 10% or more of the net sales for the three and nine months ended December 29, 2013 and December 30, 2012, respectively.

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The following distributors accounted for 10% or more of our net accounts receivable as of the dates indicated:

	December 29, 2013		March 31, 2013
Distributor A		*		21%
Distributor B		45%		20%
Distributor D		*		11%

—————

*     Accounts receivable for this distributor for this period were less than 10% of the net account balance.

No other distributor or customer accounted for 10% or more of the net accounts receivable as of December 29, 2013 and March 31, 2013, respectively.

NOTE 18.    ASSETS HELD FOR SALE

During fiscal year 2013, we started actively looking for potential buyers for our Fremont campus. In the first quarter of our fiscal year 2014, we reclassified the related property and land as held for sale as of June 30, 2013, as we met all criteria to classify these assets as held for sale as of that date. These assets have been recorded at their carrying amount since it is lower than their estimated fair value, less estimated selling costs (in thousands). As required under current accounting guidance, depreciation of the building ceased upon reclassification as an asset held for sale.

	December 29, 2013
Land	$	6,660
Building		6,423
Total assets held for sale	$	13,083

On July 9, 2013, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Ellis Partners LLC (“Ellis”). The Purchase Agreement provided for the sale of Exar’s Fremont campus to Ellis Partners and the leaseback by Exar of the building located at 48760 Kato Road. The Purchase Agreement was anticipated to close by the end of September 2013. Prior to closing, Ellis requested certain modifications to the Purchase Agreement that Exar deemed unacceptable. As a result, the Purchase Agreement terminated as of September 30, 2013. The Company intends to continue pursuing options to optimize its operating efficiency, including continuing to market the facilities for sale.

NOTE 19.    SUBSEQUENT EVENTS

On January 14, 2014, we acquired Stretch, Inc. (“Stretch”), a provider of software configurable processors supporting the video surveillance market. The transaction will provide Exar with the technology to deliver an end-to-end high-definition solution for both digital and analog transmission of data from the camera to the DVR or NVR in surveillance applications. Stretch was acquired via a reverse triangular merger for which the purchase consideration was $10,000 in cash. By acquiring Stretch, Exar acquired all of Stretch’s assets, consisting principally intellectual property, accounts receivable and inventory, as well as assumed all of Stretch’s liabilities and contractual obligations of approximately $10.0 million of which approximatetly $7.2 million has been paid subsequent to quarter-end.

Stretch’s results of operations and estimated fair value of assets acquired and liabilities assumed will be included in our condensed consolidated financial statements beginning January 14, 2014.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Part II, Item 1A.” below and elsewhere in this Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are generally written in the future tense and/or may generally be identified by words such as “will,” “may,” “should,” “would,” “could,” “expect,” “suggest,” “possible,” “potential,” “target,” “commit,” “continue,” “believe,” “anticipate,” “intend,” “project,” “projected,” “positioned,” “plan,” or other similar words. Forward-looking statements contained in this Quarterly Report include, among others, statements made in Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary” and elsewhere regarding (1) our future strategies and target market; (2) our future revenues, gross profits and margins; (3) our future research and development (“R&D”) efforts and related expenses; (4) our future selling, general and administrative expenses (“SG&A”); (5) our cash and cash equivalents, short-term marketable securities and cash flows from operations being sufficient to satisfy working capital requirements and capital equipment needs for at least the next 12 months; (6) our ability to continue to finance operations with cash flows from operations, existing cash and investment balances, and some combination of long-term debt and/or lease financing and sales of equity securities; (7) the possibility of future acquisitions and investments; (8) our ability to accurately estimate our assumptions used in valuing stock-based compensation; (9) our ability to estimate and reconcile distributors’ reported inventories to their activities; (10) our ability to estimate future cash flows associated with long-lived assets; and (11) the volatile global economic and financial market conditions. These statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our business, operating results and financial condition to differ materially and adversely from what is projected or implied by any forward- looking statement included in this Quarterly Report. Factors that could cause actual results to differ materially from those stated herein include, but are not limited to: the information contained under the caption “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 1A. Risk Factors,” as well as those risks discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013. We disclaim any obligation to update information in any forward-looking statement, except as required by law.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and notes thereto, included in this Quarterly Report and our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, as filed with the Securities and Exchange Commission (“SEC”). Our results of operations for the three and nine months ended December 29, 2013 are not necessarily indicative of results to be expected for any future period.

Business Overview

Exar Corporation (“Exar” or “we”) designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded Systems, and Communications Infrastructure markets. Exar’s product portfolio includes power management and connectivity components, high-performance analog and mixed-signal products, communications products, and data compression and storage solutions. Our comprehensive knowledge of end-user markets along with the underlying analog, mixed signal and digital technology has enabled us to provide innovative solutions designed to meet the needs of the evolving connected world. Applying both analog and digital technologies, our products are deployed in a wide array of applications such as industrial, instrumentation and medical equipment, networking and telecommunication systems, servers, enterprise storage systems, set top boxes and digital video recorders. We provide customers with a breadth of component products and sub-system solutions based on advanced silicon integration.

We market our products worldwide with sales offices and personnel located throughout the Americas, Europe, and Asia. Our products are sold in the United States through a number of manufacturers’ representatives and distributors. Internationally, our products are sold primarily through various regional and country specific distributors, as well as some manufacturers representatives. Globally, these channel partners are assisted and managed by our regional sales teams. In addition to our regional sales teams, we also employ a worldwide team of field application engineers to work directly with our customers.

Our international sales are denominated in U.S. dollars. Our international related operating expenses expose us to fluctuations in currency exchange rates because our foreign operating expenses are denominated in foreign currencies while our sales are denominated in U.S. dollars. Our operating results are subject to fluctuations as a result of several factors that could materially and adversely affect our future profitability as described in “Part II, Item 1A. Risk Factors—Our Financial Results May Fluctuate Significantly Because Of A Number Of Factors, Many Of Which Are Beyond Our Control.”

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2014 and 2013 both consist of 52 weeks. The third quarter of fiscal years 2014 and 2013 both consist of 13 weeks. All references to quarterly, three or nine months ended financial results are references to the results of the relevant fiscal period.

Prior to July 29, 2013, our common stock was principally listed and traded on the NASDAQ Global Select Market (the “NASDAQ”) under the ticker symbol “EXAR”. Our common stock was approved for listing on the New York Stock Exchange (the “NYSE”), and on July 29, 2013, we began trading our common stock on the NYSE. Our common stock has continued to trade on the NYSE under the ticker symbol “EXAR.” Our common stock ceased trading on the NASDAQ effective at the close of the market on July 26, 2013.

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Third Quarter Fiscal 2014 Overview

Quarterly revenues of $30.7 million for the third quarter of fiscal 2014 decreased $3.3 million or 10% from the previous quarter’s revenue of $34.0 million and remained consistent with revenue reported in the third quarter of fiscal year 2013. Net loss of $1.6 million decreased $8.1 million from net income in the second quarter of fiscal year 2014 and decreased $3.2 million from the third quarter of fiscal year 2013. The previous quarter included a $6.8 million tax benefit as a result of the reversal of a portion of our valuation on deferred tax assets due to the assumption of a deferred tax liability in the Cadeka acquisition. Basic loss per share of $0.03 per share in the third quarter of fiscal year 2014 decreased $0.17 per share from the earnings per share in the second quarter of fiscal year 2014 due to reduced revenue and decreased $0.06 per share from the earnings per share reported in the third quarter of fiscal year 2013 due to increased operating expenses.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies during the three and nine months ended December 29, 2013, as compared to the previous disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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Results of Operations 

Our Statements of Operations data and percentage of revenue were as follows for the periods presented (in thousands, except percentages):

	Three months
	December 29, 2013			December 30,  2012			Change
Net Sales	$	30,690		$	30,999		$	(309	)	(1	)%
Cost of sales:
Cost of sales		12,393			11,922			471		4	%
Cost of sales-related party		3,556			4,005			(449	)	(11	)%
Amortization of purchased intangible assets and inventory step-up		1,898			801			1,097		137	%
Restructuring charges and exit costs		17			79			(62	)	(78	)%
Total cost of sales		17,864			16,807			1,057		6	%
Gross profit		12,826			14,192			(1,366	)	(10	)%
Operating expenses:
Research and development		6,929			5,376			1,553		29	%
Selling, general and administrative		9,086			8,645			441		5	%
Restructuring charges and exit costs		74			524			(450	)	(86	)%
Net change in fair value of contingent consideration		58			—			58		—
Total operating expenses		16,147			14,545			1,602		11	%
Loss from operations		(3,321	)		(353	)		(2,968	)	(841	)%
Interest income and other, net		321			586			(265	)	(45	)%
Interest expense		(39	)		(56	)		(17	)	(30	)%
Income (Loss) before income taxes		(3,039	)		177			(3,216	)	(1,817	)%
(Benefit from) Provision for income taxes		(1,405	)		(1,346	)		(59	)	(4	)%
Net income (loss)	$	(1,634	)	$	1,523		$	(3,157	)	(207	)%

	Nine months
	December 29, 2013			December 30, 2012			Change
Net Sales	$	97,335		$	90,872		$	6,463		7	%
Cost of sales:
Cost of sales		36,576			34,846			1,730		5	%
Cost of sales-related party		11,619			12,897			(1,278	)	(10	)%
Amortization of purchased intangible assets and inventory step-up		5,346			2,578			2,768		107	%
Warranty reserve		1,440			—			1,440		—
Restructuring charges and exit costs		122			160			(38	)	(24	)%
Total cost of sales		55,103			50,481			4,622		9	%
Gross profit		42,232			40,391			1,841		5	%
Operating expenses:
Research and development		20,263			16,598			3,665		22	%
Selling, general and administrative		26,407			24,066			2,341		10	%
Restructuring charges and exit costs		1,389			1,619			(230	)	(14	)%
Net change in fair value of contingent consideration		(2,437	)		—			(2,437	)	—
Total operating expenses		45,622			42,283			3,339		8	%
Loss from operations		(3,390	)		(1,892	)		(1,498	)	(79	)%
Interest income and other, net		980			1,906			(926	)	(49	)%
Interest expense		(117	)		(128	)		(11	)	(9	)%
Income (Loss) before income taxes		(2,527	)		(114	)		(2,413	)	(2,117	)%
(Benefit from) Provision for income taxes		(8,181	)		(1,324	)		(6,857	)	(518	)%
Net income (loss)	$	5,654		$	1,210		$	4,444		367	%

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Revenue

Our net sales by end market in dollars and as a percentage of net sales were as follows for the periods presented (in thousands, except percentages):

	Three Months Ended										Nine Months Ended
	December 29, 2013				December 30, 2012				Change		December 29, 2013				December 30, 2012				Change
Net Sales:
Industrial & Embedded Systems	$	18,429	60	%	$	16,119	52	%	14	%	$	52,870	55	%	$	48,130	53	%	10	%
Networking & Storage		7,104	23	%		9,300	30	%	(24)	%		27,284	28	%		23,391	26	%	17	%
Communications Infrastructure		5,089	17	%		5,270	17	%	(3)	%		16,762	17	%		18,735	20	%	(11)	%
Other		68	—			310	1	%	(78)	%		419	—			616	1	%	(32)	%
Total	$	30,690	100	%	$	30,999	100	%			$	97,335	100	%	$	90,872	100	%

Geographically, our net sales in dollars and as a percentage of total net sales were as follows for the periods presented (in thousands, except percentages):

	Three Months Ended										Nine Months Ended
	December 29, 2013				December 30, 2012				Change		December 29, 2013				December 30, 2012				Change
Net Sales:
Asia	$	17,899	58	%	$	18,326	59	%	(2)	%	$	54,884	56	%	$	54,867	60	%	—
Americas		9,428	31	%		8,900	29	%	6	%		31,896	33	%		23,486	26	%	36	%
Europe		3,363	11	%		3,773	12	%	(11)	%		10,555	11	%		12,519	14	%	(16)	%
Total	$	30,690	100	%	$	30,999	100	%			$	97,335	100	%	$	90,872	100	%

Revenue for the three months ended December 29, 2013 remained consistent with the same period a year ago. Revenue for the nine months ended December 29, 2013 increased $6.5 million, compared to the same period a year ago. The increase was primarily due to overall demand increase from customers and distributors in our major end markets, with the exception of the Communication Infrastructure end market. The revenue decrease in Communication Infrastructure market was primarily due to decrease in average selling prices.   

Revenue from Americas for the three and nine months ended December 29, 2013 increased $0.5 million and $8.4 million, respectively, as compared to the same period a year ago. The increase was primarily due to increased shipment volume in the Network & Storage market. Revenue from Europe for the three and nine months ended December 29, 2013 decreased $0.4 million and $2.0 million, respectively, as compared to the same period a year ago. The decrease was primarily due to decrease in average selling price in the Communication Infrastructure market.

Gross Profit

Gross profit as a percentage of net sales for the three months ended December 29, 2013 decreased by approximately 4% as compared to the same period a year ago. The decrease was primarily due to inclusion of amortization expense related to Altior and Cadeka purchased intangible assets for the three months ended December 29, 2013. Gross profit as a percentage of net sales for the nine months ended December 29, 2013 remained consistent with the same period a year ago.

We believe that gross profit will fluctuate as a percentage of net sales and in absolute dollars due to, among other factors, the inclusion of the amortization of the costs of acquired intangibles, product and manufacturing costs, warranty costs related to our product sales, provision for excess and obsolete inventory, our ability to leverage fixed operational costs, shipment volumes, competitive pricing pressure on our products, and currency fluctuations.

Research and Development (“R&D”)

R&D expenses for the three and nine months ended December 29, 2013 increased $1.6 million and $3.7 million, respectively, as compared to the same period a year ago. The increase was primarily a result of the inclusion of the former Altior and Cadeka operations.

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We have a contractual agreement under which certain of our R&D costs are eligible for reimbursement. Reimbursements under this arrangement are offset against R&D expenses. For both the third quarter of fiscal years 2014 and 2013, we offset $0.5 million of R&D expenses in connection with this agreement, respectively. For both the nine months of fiscal years 2014 and 2013, we offset $1.5 million of R&D expenses in connection with this agreement, respectively.

We believe that R&D expenses will slightly increase in absolute dollars due to, among other factors, the inclusion of costs associated with acquired operations, increased investment in software development, variable compensation, incentives, annual merit increases and fluctuations in reimbursements under a research and development contract.

Selling, General and Administrative (“SG&A”)

SG&A expenses for the three and nine months ended December 29, 2013 increased $0.4 million and $2.3 million, respectively, as compared with the same period a year ago mainly due to change in the fair value of Altior and Cadeka earn-out liabilities and the inclusion of the former Altior and Cadeka operations.

We believe that SG&A expenses will slightly increase in absolute dollars due to, among other factors, the inclusion of costs associated with acquired operations, variable commissions, legal costs, variable compensation, incentives and annual merit increases.

Restructuring Charges and Exit Costs

Restructuring charges and exit costs for the three and nine months ended December 29, 2013 decreased $0.5 million and $0.3 million, respectively due to effect of efforts to sell and market our campus in Fremont, California, offset by decrease in severance fees, as compared to the same period a year ago.See “Note 8 – Restructuring Charges and Exit Costs.”

Interest Income and Other, Net

Interest income and other, net primarily consists of interest income; foreign exchange gains or losses; and realized gains or losses on marketable securities.

The decrease in interest income and other, net during the three and nine months ended December 29, 2013, as compared to the same period a year ago was primarily attributable to the decrease in interest income as a result of lower yield related to our cash and short-term investments.

Interest Expense

We have acquired engineering design tools (“Design Tools”) under capital leases recorded in the property, plant and equipment, net line item in the condensed consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets. The effective interest rates for the Design Tools range from 2.0% to 7.25%. See “Note 13 – Lease Financing Obligations.”

Interest expenses recorded for the Design Tools capital lease obligations were $39,000 and $115,000 for the three and nine months ended December 29, 2013, respectively. Interest expenses recorded for the Design Tools capital lease obligations were $35,000 and $107,000 for the three and nine months ended December 30, 2012, respectively.

Provision for Income Taxes

During the three months ended December 29, 2013, we recorded an income tax benefit of approximately $1.4 million, which was primarily due to the lapsing of statute of limitations in federal and state jurisdictions, offset by income tax expense in certain of our non-US operations. During the nine months ended December 29, 2013, we recorded an income tax benefit of approximately $8.2 million. The income tax benefit was primarily due to the impact of the acquisition of Cadeka on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million.

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Liquidity and Capital Resources

	Nine Months Ended
	December 29, 2013			December 30, 2012
	(dollars in thousands)
Cash and cash equivalents	$	21,070		$	15,334
Short-term investments		154,702			185,784
Total cash, cash equivalents and short-term investments	$	175,772		$	201,118
Percentage of total assets		57	%		73	%
Net cash provided by (used in) operating activities	$	(857	)	$	3,654
Net cash provided by investing activities		11,178			780
Net cash provided by (used in) financing activities		(3,969	)		2,186
Net increase in cash and cash equivalents	$	6,352		$	6,620

Fiscal Year 2014

Our net income was approximately $5.7 million for the nine months ended December 29, 2013. After adjustments for non-cash items and changes in working capital, we used $0.9 million of cash from operating activities.

Significant non-cash charges included:

● depreciation and amortization expenses of $9.4 million;

● stock-based compensation expense of $7.3 million;

● release of deferred tax asset valuation of $6.8 million; and

● net change in fair value of contingent consideration for Altior acquisition of $2.4 million.

Working capital changes included:

● a $7.2 million increase in accounts receivable primarily due to the increase in shipments in the latter part of the quarter and timing on cash collection; and

● a $3.8 million increase in inventory due to demand change for the future quarter.

In the nine months ended December 29, 2013, net cash provided by investing activities was $11.2 million. Proceeds of $202.6 million from sales and maturities of investments and $0.1 million from sale of intellectual property were offset by $166.7 million purchase of investments, $23.1 million acquisition of Cadeka and $1.7 million used for purchases of property, plant and equipment and intellectual property.

In the nine months ended December 29, 2013, net cash used in financing activities reflects $4.0 million repurchased of our common stocks and $2.9 million repayment of lease financing obligations offset by $2.9 million of net proceeds received from our employee stock plans.

Fiscal Year 2013

Our net income was approximately $1.2 million for the nine months ended December 30, 2012. After adjustments for non-cash items and changes in working capital, we generated $3.7 million of cash from operating activities.

Significant non-cash charges included:

● depreciation and amortization expenses of $8.3 million; and

● stock-based compensation expense of $3.0 million.

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Working capital changes included:

● a $3.7 million increase in accounts receivable primarily due to the timing of shipments and certain large customer payments;

● a $0.3 million increase in inventory due to expected increase in future shipments; and

● a $4.1 million decrease in accrued restructuring charges and exit costs, primarily due to payments made.

In the nine months ended December 30, 2012, net cash provided by investing activities was $0.8 million. Proceeds of $134.8 million from sales and maturities of investments were offset by $133.0 million purchase of investments and $1.3 million used for purchases of property, plant and equipment and intellectual property.

In the nine months ended December 30, 2012, net cash provided by financing activities reflects $4.7 million of proceeds associated with our employee stock plans partially offset by the $2.5 million repayment of lease financing obligations.

To date, inflation has not had a significant impact on our operating results.

We anticipate that we will continue to finance our operations with cash flows from operations, existing cash and investment balances.

We believe that our cash and cash equivalents, short-term marketable securities and expected cash flows from operations will be sufficient to satisfy working capital requirements, capital equipment, intellectual property, and stock repurchase needs for at least the next 12 months. However, should the demand for our products decrease in the future, the availability of cash flows from operations may be limited, which could have a material adverse effect on our financial condition and results of operations. From time to time, we evaluate potential acquisitions, strategic arrangements and equity investments that we believe are complementary to our design expertise and market strategy. To the extent that we pursue or position ourselves to pursue these transactions, we could consume a significant portion of our capital resources or choose to seek additional equity or debt financing. Additional financing may not be available on terms acceptable to us or at all. The sale of additional equity or convertible debt could result in dilution to our stockholders.

Recent Accounting Pronouncements

Please refer to “Part I, Item 1. Financial Statements” and “Notes to Condensed Consolidated Financial Statements, Note 2 – Recent Accounting Pronouncements.”

Off-Balance Sheet Arrangements

We have not utilized special purpose entities to facilitate off-balance sheet financing arrangements. However, we have, in the normal course of business, entered into agreements which impose warranty obligations with respect to our products or which obligate us to provide indemnification of varying scope and terms to customers, vendors, lessors and business partners, our directors and executive officers, purchasers of assets or subsidiaries, and other parties with respect to certain matters. These arrangements may constitute “off-balance sheet transactions” as defined in Section 303(a)(4) of Regulation S-K. Please see “Note 14–Commitments and Contingencies” to the condensed consolidated financial statements for further discussion of our product warranty liabilities and indemnification obligations.

As discussed in “Note 14–Commitments and Contingencies,” during the normal course of business, we make certain indemnities and commitments under which we may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property, indemnities to our customers in connection with the delivery, design, manufacture and sale of our products, indemnities to our directors and officers in connection with legal proceedings, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to other parties to certain acquisition agreements. The duration of these indemnities and commitments varies, and in certain cases, is indefinite. We believe that substantially all of our indemnities and commitments provide for limitations on the maximum potential future payments we could be obligated to make. However, we are unable to estimate the maximum amount of liability related to our indemnities and commitments because such liabilities are contingent upon the occurrence of events which are not reasonably determinable.

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Contractual Obligations and Commitments

Our contractual obligations and commitments at December 29, 2013 were as follows (in thousands):

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Purchase commitments (1)	$	29,736	$	26,305	$	700	$	700	$	2,031
Operating lease commitments (2)		1,383		635		707		41		—
Total	$	31,119	$	26,940	$	1,407	$	741	$	2,031

—————

(1)	Our contracts with our suppliers generally require us to provide purchase order commitments that are generally binding and cannot be canceled.
(2)	We lease many of our office facilities for various terms under operating lease agreements. The leases expire at various dates from fiscal year 2014 through fiscal year 2018.

Other commitments

As of December 29, 2013, our unrecognized tax benefits were $14.0 million, of which $0.7 million was classified as other non-current obligations. See “Note 16 – Income Taxes.”

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Fluctuations. We are exposed to foreign currency fluctuations primarily through our foreign operations. This exposure is the result of foreign operating expenses being denominated in foreign currency. Operational currency requirements are typically forecasted for a one-month period. If there is a need to hedge this risk, we may enter into transactions to purchase currency in the open market or enter into forward currency exchange contracts.

If our foreign operations forecasts are overstated or understated during periods of currency volatility, we could experience unanticipated currency gains or losses. At December 29, 2013 and December 30, 2012, we did not have significant foreign currency denominated net assets or net liabilities positions and had no foreign currency contracts outstanding.

Investment Risk and Interest Rate Sensitivity. We maintain investment portfolio holdings of various issuers, types, and maturity dates with two professional management institutions. The fair value of these investments on any given day during the investment term may vary as a result of market interest rate fluctuations. Our investment portfolio consisted of cash equivalents, money market funds and fixed income securities of $168.7 million as December 29, 2013 and $195.6 million as of March 31, 2013. These securities, like all fixed income instruments, are subject to interest rate risk and will vary in value as market interest rates fluctuate. If market interest rates were to increase or decline immediately and uniformly by 10% or less from levels as of December 29, 2013, the increase or decline in the fair value of the portfolio would not be material. At December 29, 2013, the difference between the fair value and the underlying cost of the investments portfolio was an unrealized loss of $1.0 million, net of taxes.

Our short-term investments are classified as “available-for-sale” securities and the cost of securities sold is based on the specific identification method. At December 29, 2013, short-term investments consisted of corporate bonds and securities, asset and mortgage-backed securities, U.S. government agency securities, U.S. Treasury securities and state and local government securities of $154.7 million.

ITEM 4.     CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (“Disclosure Controls”)

Disclosure Controls, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods as specified in the SEC’s rules and forms. In addition, Disclosure Controls are designed to ensure the accumulation and communication of information required to be disclosed in reports filed or submitted under the Exchange Act to our management, including the Chief Executive Officer (our principal executive officer) (“CEO”) and Chief Financial Officer (our principal financial officer) (“CFO”), to allow timely decisions regarding required disclosure.

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 We evaluated the effectiveness of the design and operation of our Disclosure Controls, as defined by the rules and regulations of the SEC (“Evaluation”), as of the end of the period covered by this Quarterly Report on Form 10-Q. This Evaluation was performed under the supervision and with the participation of management, including our CEO, as principal executive officer, and CFO, as principal financial officer.

Attached as Exhibits 31.1 and 31.2 of this Quarterly Report on Form 10-Q are the certifications of the CEO and the CFO, respectively, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (“Certifications”). This section of the Quarterly Report on Form 10-Q provides information concerning the Evaluation referred to in the Certifications and should be read in conjunction with the Certifications.

Based on the Evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at the reasonable assurance level as of December 29, 2013.

Inherent Limitations on the Effectiveness of Disclosure Controls

Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all errors and all fraud. Disclosure Controls, no matter how well conceived, managed, utilized and monitored, can provide only reasonable assurance that the objectives of such controls are met. Therefore, because of the inherent limitation of Disclosure Controls, no evaluation of such controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

The disclosure in “Notes to Condensed Consolidated Financial Statements, Note 15– Legal Proceedings” contained in “Part I, Item 1. Financial Statements” is hereby incorporated by reference. 

ITEM 1A.    RISK FACTORS

We are subject to the following risks, as well as others, that could materially and adversely affect our business, results of operations and financial condition. The following risk factors and other information included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended March 31, 2013 should be carefully considered. The risks and uncertainties described below, in the Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 2013 and September 29, 2013 and in our Annual Report on Form 10-K for our fiscal year ended March 31, 2013 are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations if circumstances change. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

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

Our financial results may fluctuate significantly as a result of a number of factors, many of which are difficult or impossible to control or predict, which include:

• the continuing effects of economic uncertainty;

• the cyclical nature of the general economy and the semiconductor industry;

• difficulty in predicting revenues and ordering the correct mix of components from suppliers due to limited visibility into customers and channel partners;

• changes in the mix of product sales as our margins vary by product;

• fluctuations in the capitalization and amortization of unabsorbed manufacturing costs;

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• the impact of our revenue recognition policies on reported results and warranty costs related to our product sales;

• the reduction, rescheduling, cancellation or timing of orders by our customers, distributors and channel partners due to, among others, the following factors:

• management of customer, subcontractor, logistic provider and/or channel inventory;

• delays in shipments from our foundries and subcontractors causing supply shortages;

• inability of our foundries and subcontractors to provide quality products, in adequate quantities and in a timely manner;

• dependency on a single product with a single customer and/or distributor;

• volatility of demand for equipment sold by our large customers, which in turn, introduces demand volatility for our products;

• demand disruption if customers change or modify their complex subcontract manufacturing supply chain;

• demand disruption in customer demand due to technical or quality issues with our devices or components in their system;

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

• disruption in sales or distribution channels;

• our ability to maintain and expand distributor relationships;

• changes in sales and implementation cycles for our products;

• the ability of our suppliers and customers to remain solvent, obtain financing or fund capital expenditures as a result of the recent global economic slowdown;

• risks associated with entering new markets;

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

• loss of market share by our customers;

• competitive pressures on selling prices or product availability;

• pressures on selling prices overseas due to foreign currency exchange fluctuations;

• erosion of average selling prices coupled with the inability to sell newer products with higher average selling prices, resulting in lower overall revenue and margins;

• delays in product releases;

• market and/or customer acceptance of our products;

• consolidation among our competitors, our customers and/or our customers’ customers;

• changes in our customers’ end user concentration or requirements;

• loss of one or more major customers;

• significant changes in ordering pattern by major customers;

• our or our channel partners’ or logistic providers’ ability to maintain and manage appropriate inventory levels;

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• the availability and cost of materials, services or processing capabilities, including foundry, assembly and test capacity, needed by us from our foundries and other manufacturing suppliers;

• disruptions in our or our customers’ supply chain due to natural disasters, fire, outbreak of communicable diseases, labor disputes, civil unrest or other reasons;

• delays in successful transfer of manufacturing processes to our subcontractors;

• fluctuations in the manufacturing output, yields, and capacity of our suppliers;

• fluctuation in suppliers’ capacity due to reorganization, relocation or shift in business focus, financial constraints, or other reasons;

• problems, costs, or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design and device integration;

• our ability to successfully introduce and transfer into production new products and/or integrate new technologies;

• excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize or inventory becomes obsolete;

• increased manufacturing costs;

• higher mask tooling costs associated with advanced technologies; and/or

• the amount and timing of our investment in research and development;

• costs and business disruptions associated with stockholder or regulatory issues;

• the timing and amount of employer payroll tax to be paid on our employees’ gains on exercise of stock options;

• an inability to generate profits to utilize net operating losses;

• increased costs and time associated with compliance with new accounting rules or new regulatory requirements;

• changes in accounting or other regulatory rules, such as the requirement to record assets and liabilities at fair value;

• write-off of some or all of our goodwill and other intangible assets;

• fluctuations in interest rates and/or market values of our marketable securities;

• litigation costs associated with the defense of suits brought or complaints made against us or enforcement of our rights;

• change in fair value of contingent consideration; and/or

• changes in or continuation of certain tax provisions.

If we are unable to grow or secure and convert a significant portion of our design wins into revenue, our business, financial condition and results of operations would be materially and adversely impacted.

We continue to secure design wins for new and existing products. Such design wins are necessary for revenue growth. However, many of our design wins may never generate revenues if end-customer projects are unsuccessful in the market place, the end-customer terminates the project, which may occur for a variety of reasons or the end-customer selects a competitive solution. Mergers, consolidations, changing market requirements and cost reduction activities among our customers may lead to termination of certain projects before the associated design win generates revenue. If design wins do generate revenue, the time lag between the design win and meaningful revenue is typically between six months to longer than 18 months. If we fail to grow and convert a significant portion of our design wins into substantial revenue, our business, financial condition and results of operations could be materially and adversely impacted. Under continued uncertain global economic conditions, our design wins could be delayed even longer than the typical lag period and our eventual revenue could be less than anticipated from products that were introduced within the last eighteen to thirty-six months, which would likely materially and adversely affect our business, financial condition and results of operations.

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Global capital, credit market, employment, and general economic and political conditions, and resulting declines in consumer confidence and spending, could have a material adverse effect on our business, operating results and financial condition.

Because our customers, suppliers and other business partners are in many countries around the world, we must monitor general global conditions for impact on our business. Economies throughout global regions continue to be volatile and, in many countries, inconsistent with trends in the U.S. or other stable economies. In Europe uncertainty continues regarding the ability of certain countries to service their level of debt. In recent quarters in China and certain other Asian countries growth has continued but at a slower pace than earlier in the recovery. Political conditions in individual countries or across regions can also impact our business.

We cannot predict the timing, severity or duration of any economic slowdown or recovery or the impact of any such events on our vendors, customers or us. If the economy or markets in which we operate deteriorate from current levels, many related factors could have a material adverse effect on our business, operating results, and financial condition, including the following:

• slower spending by our target markets and economic fluctuations may result in reduced demand for our products, reduced orders for our products, order cancellations, lower revenues, increased inventories, and lower gross margins;

• if recent restructuring activities insufficiently lower our operating expense or we fail to execute on our growth strategy, our restructuring efforts may not be successful and we may not be able to realize the cost savings and other anticipated benefits; 

• if we further reduce our workforce or curtail or redirect research and development efforts, it may adversely impact our ability to respond rapidly to product development or growth opportunities;

• we may be unable to predict the strength or duration of market conditions or the effects of consolidation of our customers or competitors in their industries, which may result in project delays or cancellations;

• we may be unable to find suitable investments that are safe or liquid, or that provide a reasonable return resulting in lower interest income or longer investment horizons, and disruptions to capital markets or the banking system may also impair the value of investments or bank deposits we currently consider safe or liquid;

• the failure of financial institution counterparties to honor their obligations to us under credit instruments could jeopardize our ability to rely on and benefit from those instruments, and our ability to replace those instruments on the same or similar terms may be limited under poor market conditions;

• continued volatility in the markets and prices for commodities, such as gold, and raw materials we use in our products and in our supply chain, could have a material adverse effect on our costs, gross margins, and profitability;

• if distributors of our products experience declining revenues, experience difficulty obtaining financing in the capital and credit markets to purchase our products or experience severe financial difficulty, it could result in insolvency, reduced orders for our products, order cancellations, inability to timely meet payment obligations to us, extended payment terms, higher accounts receivable, reduced cash flows, greater expenses associated with collection efforts and increased bad debt expenses;

• if contract manufacturers or foundries of our products or other participants in our supply chain experience difficulty obtaining financing in the capital and credit markets to purchase raw materials or to finance general working capital needs, it may result in delays or non-delivery of shipments of our products;

• potential shutdowns or over capacity constraints by our third-party foundry, assembly and test subcontractors could result in longer lead-times, higher buffer inventory levels and degraded on-time delivery performance; and/or

• the current macroeconomic environment also limits our visibility into future purchases by our customers and renewals of existing agreements, which may necessitate changes to our business model.

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If we fail to develop, introduce or enhance products that meet evolving needs or which are necessitated by technological advances, or we are unable to grow revenue in our served markets, then our business, financial condition and results of operations could be materially and adversely impacted.

The markets for our products are characterized by a number of factors, some of which are listed below:

• changing or disruptive technologies;

• evolving and competing industry standards;

• changing customer requirements;

• increasing price pressure from lower priced solutions;

• increasing product development costs;

• finite market windows for product introductions;

• design-to-production cycles;

• increasing functional integration;

• competitive solutions, stronger customer engagement or broader product offering;

• fluctuations in capital equipment spending levels and/or deployment;

• rapid adjustments in customer demand and inventory;

• moderate to slow growth;

• frequent product introductions and enhancements; and/or

• changing competitive landscape (due to consolidation, financial viability, etc.).

Our growth depends in large part on our continued development and timely release of new products for our core markets. We must: (1) anticipate customer and market requirements and changes in technology and industry standards; (2) properly define, develop and introduce new products on a timely basis; (3) gain access to and use technologies in a cost-effective manner; (4) have suppliers produce quality products consistent with our requirements; (5) continue to expand and retain our technical and design expertise; (6) introduce and cost-effectively deliver new products in line with our customer product introduction requirements; (7) differentiate our products from our competitors’ offerings; and (8) gain customer acceptance of our products. In addition, we must continue to have our products designed into our customers’ future products and maintain close working relationships with key customers to define and develop new products that meet their evolving needs. Moreover, we must respond in a rapid and cost-effective manner to shifts in market demands to increased functional integration and other changes. Migration from older products to newer products may result in earnings volatility as revenues from older products decline and revenues from newer products begin to grow.

Products for our customers’ applications are subject to continually evolving industry standards and new technologies. Our ability to compete will depend in part on our ability to identify and ensure compliance with these industry standards. The emergence of new standards could render our products incompatible with other products that meet those standards. We could be required to invest significant time, effort and expense to develop and qualify new products to ensure compliance with industry standards.

The process of developing and supporting new products is complex, expensive and uncertain, and if we fail to accurately predict, understand and execute to our customers’ changing needs and emerging technological trends, our business, financial condition and results of operations may be harmed. In addition, we may make significant investments to define new products according to input from our customers who may choose a competitor’s or an internal solution or cancel their projects. We may not be able to identify new product opportunities successfully, develop and bring to market new products, achieve design wins, ensure when and which design wins actually get released to production, or respond effectively to technological changes or product announcements by our competitors. In addition, we may not be successful in developing or using new technologies or may incorrectly anticipate market demand and develop products that achieve little or no market acceptance. Our pursuit of technological advances may require substantial time and expense and may ultimately prove unsuccessful. Failure in any of these areas may materially and adversely harm our business, financial condition and results of operations.

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We derive a substantial portion of our revenues from distributors, especially from our two primary distributors, Future Electronics Inc. (“Future”), a related party, and Arrow Electronics, Inc. (“Arrow”). Our revenues would likely decline significantly if our primary distributors elected not to or we were unable to effectively promote or sell our products or if they elected to cancel, reduce or defer purchases of our products.

Future and Arrow have historically accounted for a significant portion of our revenues and they are our two primary distributors worldwide. We anticipate that sales of our products to these distributors will continue to account for a significant portion of our revenues. The loss of either Future or Arrow as a distributor, for any reason, or a significant reduction in orders from either of them would materially and adversely affect our business, financial condition and results of operations.

Sales to Future and Arrow are made under agreements that provide protection against price reduction for their inventory of our products. As such, we could be exposed to significant liability if the inventory value of the products held by Future and Arrow declined dramatically. Our distributor agreements with Future and Arrow do not contain minimum purchase commitments. As a result, Future and Arrow could cease purchasing our products with short notice or cease distributing our products. In addition, they may defer or cancel orders without penalty, which would likely cause our revenues to decline and materially and adversely impact our business, financial condition and results of operations.

We depend on third-party subcontractors to manufacture our products. We utilize wafer foundries for processing our wafers and assembly and test subcontractors for manufacturing and testing our integrated circuit products and board assembly subcontractors for our board-level products. Any disruption in or loss of our subcontractors’ capacity to manufacture and test our products subjects us to a number of risks, including the potential for an inadequate supply of products and higher materials costs. These risks may lead to delayed product delivery or increased costs, which could materially and adversely impact our business, financial condition and results of operations.

We do not own or operate a semiconductor fabrication facility or a foundry. We utilize various foundries for different processes. Our products are based on complementary metal oxide semiconductor (“CMOS”) processes, bipolar processes and bipolar-CMOS (“BiCMOS”) processes. Our foundries produce semiconductors for many other companies (many of which have greater volume requirements than us), and therefore, we may not have access on a timely basis to sufficient capacity or certain process technologies and we have from time to time, experienced extended lead times on some products. In addition, we rely on our foundries’ continued financial health and ability to continue to invest in smaller geometry manufacturing processes and additional wafer processing capacity.

Many of our new products are designed to take advantage of smaller geometry manufacturing processes. Due to the complexity and increased cost of migrating to smaller geometries, as well as process changes, we could experience interruptions in production or significantly reduced yields causing product introduction or delivery delays. If such delays occur, our products may have delayed market acceptance or customers may select our competitors’ products during the design process.

New and current process technologies or products can be subject to wide variations in manufacturing yields and efficiency. Our foundries or the foundries of our suppliers may experience unfavorable yield variances or other manufacturing problems that result in product introduction or delivery delays. Further, if the products manufactured by our foundries contain production defects, reliability issues or quality or compatibility problems that are significant to our customers, our reputation may be damaged and customers may cancel orders or be reluctant to continue to buy our products, which could adversely affect our ability to retain and attract new customers. In addition, these defects or bugs could interrupt or delay sales of affected products, which could materially and adversely affect our business, financial condition and results of operations.

Our foundries and test and assembly subcontractors manufacture our products on a purchase order basis. We provide our foundries with rolling forecasts of our production requirements; however, the ability of our foundries to provide wafers is limited by the foundries’ available capacity. Our third-party foundries may not allocate sufficient capacity to satisfy our requirements. In addition, we may not continue to do business with our foundries on terms as favorable as our current terms.

Furthermore, any reduction or elimination of any primary source or sources of fully processed wafers could result in a material delay in the shipment of our products, lost sales opportunities, and increased costs. Any delays or shortages would likely materially and adversely impact our business, financial condition and results of operations. In particular, the products produced from the wafers manufactured by our supplier in Hangzhou, China currently constitute a significant part of our total revenue, and so any delay, reduction or elimination of our ability to obtain wafers from this supplier could materially and adversely impact our business, financial condition and results of operations.

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Our reliance on our wafer foundries, assembly and test subcontractors and board assembly subcontractors involves the following risks, among others:

• a manufacturing disruption or reduction or elimination of any existing source(s) of semiconductor manufacturing materials or processes, which might include the potential closure, product and /or process discontinuation, change of ownership, change in business conditions or relationships, change of management or consolidation by one of our foundries;

• disruption of manufacturing or assembly or test services due to vendor transition, relocation or limited capacity of the foundries or subcontractors;

• inability to obtain, develop or ensure the continuation of technologies needed to manufacture our products;

• extended time required to identify, qualify and transfer to alternative manufacturing sources for existing or new products or the possible inability to obtain an adequate alternative;

• failure of our foundries or subcontractors to obtain raw materials and equipment;

• increasing cost of commodities, such as gold, raw materials and energy resulting in higher wafer or package costs;

• long-term financial and operating stability of the foundries or their suppliers or subcontractors and their ability to invest in new capabilities and expand capacity to meet increasing demand, to remain solvent or to obtain financing in tight credit markets;

• continuing measures taken by our suppliers such as reductions in force, pay reductions, forced time off or shut down of production for extended periods of time to reduce and/or control operating expenses in response to weakened customer demand;

• subcontractors’ inability to transition to smaller package types or new package compositions;

• a sudden, sharp increase in demand for semiconductor devices, which could strain the foundries’ or subcontractors’ manufacturing resources and cause delays in manufacturing and shipment of our products;

• manufacturing quality control or process control issues, including reduced control over manufacturing yields, production schedules and product quality;

• potential misappropriation of our intellectual property;

• disruption of transportation to and from Asia where most of our foundries and subcontractors are located;

• political, civil, labor or economic instability;

• embargoes or other regulatory limitations affecting the availability of raw materials, equipment or changes in tax laws, tariffs, services and freight rates; and/or

• compliance with U.S., local or international regulatory requirements.

Other additional risks associated with subcontractors include:

• subcontractors imposing higher minimum order quantities for substrates;

• potential increase in assembly and test costs;

• our board level product volume may not be attractive to preferred manufacturing partners, which could result in higher pricing, extended lead times or having to qualify an alternative vendor;

• difficulties in selecting, qualifying and integrating new subcontractors;

• inventory and delivery management issues relating to hub arrangements;

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• entry into “take-or-pay” agreements; and/or

• limited warranties from our subcontractors for products assembled and tested for us.

If we are unable to accurately forecast demand for our products, we may be unable to efficiently manage our inventory.

Due to the absence of substantial non-cancelable backlog, we typically plan our production and inventory levels based on customer forecasts, internal evaluation of customer demand and current backlog, which can fluctuate substantially. Due to a number of factors such as customer changes in delivery schedules and quantities actually purchased, cancellation of orders, distributor returns or price reductions, our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period. The still unsettled, uncertain and weak economy may increase the risk of purchase order cancellations or delays, product returns and price reductions. We may not be able to meet our expected revenue levels or results of operations if there is a reduction in our order backlog for any particular period and we are unable to replace those anticipated sales during the same period. Our forecast accuracy can be adversely affected by a number of factors, including inaccurate forecasting by our customers, changes in market conditions, new part introductions by our competitors, loss of previous design wins, adverse changes in our scheduled product order mix and demand for our customers’ products or models. As a consequence of these factors and other inaccuracies inherent in forecasting, inventory imbalances periodically occur that result in surplus amounts of some of our products and shortages of others. Such shortages can adversely impact customer relations and surpluses can result in larger-than-desired inventory levels, either of which can materially and adversely impact our business, financial condition and results of operations. Due to the unpredictability of global economic conditions and increased difficulty in forecasting demand for our products, we could experience an increase in inventory levels.

In instances where we have hub agreements with certain vendors, the inability of our partners to provide accurate and timely information regarding inventory and related shipments of the inventory may impact our ability to maintain the proper amount of inventory at the hubs, forecast usage of the inventory and record accurate revenue recognition which could materially and adversely impact our business, financial conditions and the results of operations.

If our distributors or sales representatives stop selling or fail to successfully promote our products, our business, financial condition and results of operations could be materially and adversely impacted.

We sell many of our products through sales representatives and distributors, many of which sell directly to OEMs, contract manufacturers and end customers. Our non-exclusive distributors and sales representatives may carry our competitors’ products, which could adversely impact or limit sales of our products. Additionally, they could reduce or discontinue sales of our products or may not devote the resources necessary to sell our products in the volumes and within the time frames that we expect. Our agreements with distributors contain limited provisions for return of our products, including stock rotations whereby distributors may return a percentage of their purchases from us based upon a percentage of their most recent three or six months of shipments. In addition, in certain circumstances upon termination of the distributor relationship, distributors may return some portion of their prior purchases. The loss of business from any of our significant distributors or the delay of significant orders from any of them, even if only temporary, could materially and adversely impact our business, financial conditions and results of operations.

Moreover, we depend on the continued viability and financial resources of these distributors and sales representatives, some of which are small organizations with limited working capital. In turn, these distributors and sales representatives are subject to general economic and semiconductor industry conditions. We believe that our success will continue to depend on these distributors and sales representatives. If some or all of our distributors and sales representatives experience financial difficulties, or otherwise become unable or unwilling to promote and sell our products, our business, financial condition and results of operations could be materially and adversely impacted.

Certain of our distributors may rely heavily on the availability of short-term capital at reasonable rates to fund their ongoing operations. If this capital is not available, or is only available on onerous terms, certain distributors may not be able to pay for inventory received or we may experience a reduction in orders from these distributors, which would likely cause our revenue to decline and materially and adversely impact our business, financial condition and results of operations.

We depend in part on the continued service of our key engineering and executive management personnel and our ability to identify, hire, incentivize and retain qualified personnel. If we lose key employees or fail to identify, hire, incentivize and retain these individuals, our business, financial condition and results of operations could be materially and adversely impacted.

Our future success depends, in part, on the continued service of our key design, engineering, technical, sales, marketing and executive personnel and our ability to identify, hire, motivate and retain such qualified personnel, as well as effectively and quickly replace key personnel with qualified successors with competitive incentive compensation packages.

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Under certain circumstances, including a company acquisition, significant restructuring or business downturn, current and prospective employees may experience uncertainty about their future roles with us. Volatility or lack of positive performance in our stock price and the ability or willingness to offer meaningful competitive equity compensation and incentive plans or in amounts consistent with market practices may also adversely affect our ability to retain and incentivize key employees. In addition, competitors may recruit our employees, as is common in the high tech sector. If we are unable to retain personnel that are critical to our future operations, we could face disruptions in operations, loss of existing customers, loss of key information, expertise or know-how, unanticipated additional recruiting and training costs, and potentially higher compensation costs.

Competition for skilled employees having specialized technical capabilities and industry-specific expertise is intense and continues to be a considerable risk inherent in the markets in which we compete. At times, competition for such employees has been particularly notable in California and People’s Republic of China (“PRC”). Further, the PRC historically has different managing principles from Western style management and financial reporting concepts and practices, as well as different banking, computer and other control systems, making the successful identification and employment of qualified personnel particularly important, and hiring and retaining a sufficient number of such qualified employees may be difficult. As a result of these factors, we may experience difficulty in establishing and maintaining management, legal and financial controls, collecting financial data, books of account and records and instituting business practices that meet Western standards and regulations, which could materially and adversely impact our business, financial condition and results of operations.

Our employees are employed “at-will”, which means that they can terminate their employment at any time. Our international locations are subject to local labor laws, which are often significantly different from U.S. labor laws and which may under certain conditions, result in large separation costs upon termination. Further, employing individuals in international locations is subject to other risks inherent in international operations, such as those discussed with respect to international sales below, among others. The failure to recruit and retain, as necessary, key design engineers and technical, sales, marketing and executive personnel could materially and adversely impact our business, financial condition and results of operations.

Stock-based awards are critical to our ability to recruit, retain and motivate highly skilled talent. In making employment decisions, particularly in the semiconductor industry and the geographies where our employees are located, a key consideration of current and potential employees is the value of the equity awards they receive in connection with their employment. If we are unable to offer employment packages with a competitive equity award component, our ability to attract highly skilled employees would be harmed. In addition, volatility in our stock price could result in a stock option’s exercise price exceeding the market value of our common stock or a deterioration in the value of restricted stock units granted, thus lessening the effectiveness of stock-based awards for retaining and motivating employees. Similarly, decreases in the number of unvested in-the-money stock options held by existing employees, whether because our stock price has declined, options have vested, or because the size of follow-on option grants has decreased, may make it more difficult to retain and motivate employees. Consequently, we may not continue to successfully attract and retain key employees, which could have an adverse effect on our business, financial condition and results of operations.

We have made, and in the future may make, acquisitions and significant strategic equity investments, which may involve a number of risks. If we are unable to address these risks successfully, such acquisitions and investments could have a material adverse effect on our business, financial condition and results of operations.

We have undertaken a number of strategic acquisitions, have made strategic investments in the past, and may make further strategic acquisitions and investments from time to time in the future. The risks involved with these acquisitions and investments include:

• the possibility that we may not receive a favorable return on our investment or incur losses from our investment or the original investment may become impaired;

• revenues or synergies could fall below projections or fail to materialize as assumed;

• failure to satisfy or set effective strategic objectives;

• the possibility of litigation arising from or in connection with these acquisitions;

• our assumption of known or unknown liabilities or other unanticipated events or circumstances; and/or

• the diversion of management’s attention from day-to-day operations of the business and the resulting potential disruptions to the ongoing business.

Additional risks involved with acquisitions include:

• difficulties in integrating and managing various functional areas such as sales, engineering, marketing, and operations;

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• difficulties in incorporating or leveraging acquired technologies and intellectual property rights in new products;

• difficulties or delays in the transfer of product manufacturing flows and supply chains of acquired businesses;

• failure to retain and integrate key personnel;

• failure to retain and maintain relationships with existing customers, distributors, channel partners and other parties;

• failure to manage and operate multiple geographic locations both effectively and efficiently;

• failure to coordinate research and development activities to enhance and develop new products and services in a timely manner that optimize the assets and resources of the combined company;

• difficulties in creating uniform standards, controls (including internal control over financial reporting), procedures, policies and information systems;

• unexpected capital equipment outlays and continuing expenses related to technical and operational integration;

• difficulties in entering markets or retaining current markets in which we have limited or no direct prior experience or where competitors in such markets may have stronger market positions;

• insufficient revenues to offset increased expenses associated with acquisitions;

• under-performance problems with an acquired company;

• issuance of common stock that would dilute our current stockholders’ percentage ownership;

• reduction in liquidity and interest income on lower cash balances;

• recording of goodwill and intangible assets that will be subject to periodic impairment testing and potential impairment charges against our future earnings;

• incurring amortization expenses related to certain intangible assets; and/or

• incurring large and immediate write-offs of assets.

Strategic equity investments also involve risks associated with third parties managing the funds and the risk of poor strategic choices or execution of strategic or operating plans.

We may not address these risks successfully without substantial expense, delay or other operational or financial problems, or at all. Any delays or other such operations or financial problems could materially and adversely impact our business, financial condition and results of operations.

Our business may be materially and adversely impacted if we fail to effectively utilize and incorporate acquired technologies.

We have acquired and may in the future acquire intellectual property in order to expand our serviceable markets, accelerate our time to market, and to accelerate to gain market share for new and existing products. Acquisitions of intellectual property may involve risks relating to, among other things, valuation of innovative capabilities, successful technical integration into new products, loss of key technical personnel, compliance with contractual obligations, market acceptance of new product features or capabilities, and achievement of planned return on investment. Successful technical integration in particular requires a variety of capabilities that we may not currently have, such as available technical staff with sufficient time to devote to integration, the requisite skills to understand the acquired technology and the necessary support tools to effectively utilize the technology. The timely and efficient integration of acquired technology may be adversely impacted by inherent design deficiencies or application requirements. The potential failure of or delay in product introduction utilizing acquired intellectual property could lead to an impairment of capitalized intellectual property acquisition costs, which could materially and adversely impact our business, financial condition and results of operations.

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Because a significant portion of our total assets were, and may again be with future potential acquisitions, represented by goodwill and other intangible assets, which are subject to mandatory annual impairment evaluations, we could be required to write-off some or all of our goodwill and other intangible assets, which could materially and adversely impact our business, financial condition and results of operations.

A significant portion of the purchase price for any business combination may be allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of consummation. As required by U.S. Generally Accepted Accounting Principles (“GAAP”), the excess purchase price, if any, over the fair value of these assets less liabilities typically would be allocated to goodwill. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We typically conduct our annual analysis of our goodwill at the reporting unit level in the fourth quarter of our fiscal year.

The assessment of goodwill and other intangible assets impairment is a subjective process. Estimations and assumptions regarding the number of reporting units, future performance, results of our operations and comparability of our market capitalization and net book value will be used. Changes in estimates and assumptions could impact fair value resulting in an impairment, which could materially and adversely impact our business, financial condition and results of operations.

Because some of our integrated circuit and board level products have lengthy sales cycles, we may experience substantial delays between incurring expenses related to product development and the revenue derived from these products.

A portion of our revenue is derived from selling integrated circuits and board level products to end customer equipment vendors. Due to their product development cycle, we have typically experienced at least an eighteen-month time lapse between our initial contact with a customer and realizing volume shipments. In such instances, we first work with customers to achieve a design win, which may take six months or longer. Our customers then complete their design, test and evaluation process and begin to ramp-up production, a period which typically lasts an additional six months. The customers of equipment manufacturers may also require a period of time for testing and evaluation, which may cause further delays. As a result, a significant period of time may elapse between our research and development efforts and realization of revenue, if any, from volume purchasing of our products by our customers. Due to the length of the end customer equipment vendors’ product development cycle, the risks of project cancellation by our customers, price erosion or volume reduction are common aspects of such engagements.

The complexity of our products may lead to errors, defects and bugs, which could subject us to significant costs or damages and adversely affect market acceptance of our products.

Although we, our customers and our suppliers rigorously test our products, they may contain undetected errors, performance weaknesses, defects or bugs when first introduced, as new versions are released when manufacturing or process changes are made. If any of our products contain design or production defects, or reliability issues, quality or compatibility problems that are significant to our customers, our reputation may be damaged and customers may be reluctant to continue to design in or buy our products, which could adversely affect our ability to retain and attract new customers. In addition, these defects or bugs could interrupt or delay sales of affected products, which could materially and adversely affect our business, financial condition and results of operations.

If defects or bugs are discovered after commencement of commercial production, we may be required to make significant expenditures of capital and other resources to resolve the problems. This could result in significant additional development costs and the diversion of technical and other resources from our other business development efforts. We could also incur significant costs to repair or replace defective products or may agree to be liable for certain damages incurred. These costs or damages could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to compete effectively with existing or new competitors, we will experience fewer customer orders, reduced revenues, reduced gross margins and lost market share.

We compete in markets that are intensely competitive, and which are subject to both rapid technological change, continued price erosion and changing business terms with regard to risk allocation. Our competitors include many large domestic and foreign companies that may have substantially greater financial, market share, technical and management resources, name recognition and leverage than we have. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to promote the sale of their products.

We have experienced increased competition at the design stage, where customers evaluate alternative solutions based on a number of factors, including price, performance, product features, technologies, and availability of long-term product supply and/or roadmap guarantee. Additionally, we experience, and may in the future experience, in some cases, severe pressure on pricing from competitors or on-going cost reduction expectations from customers. Such circumstances may make some of our products unattractive due to price or performance measures and result in the loss of our design opportunities or a decrease in our revenue and margins.

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Also, competition from new companies, including those from emerging economy countries, with significantly lower costs could affect our selling price and gross margins. In addition, if competitors in Asia continue to reduce prices on commodity products, it would adversely affect our ability to compete effectively in that region. Specifically, we have licensed rights to a supplier in China to market our commodity connectivity products, which could reduce our sales in the future should they become a meaningful competitor. Loss of competitive position could result in price reductions, fewer customer orders, reduced revenues, reduced gross margins and loss of market share, any of which would adversely affect our operating results and financial condition.

Furthermore, many of our existing and potential customers internally develop solutions which attempt to perform all or a portion of the functions performed by our products. To remain competitive, we continue to evaluate our manufacturing operations for opportunities for additional cost savings and technological improvements. If we or our contract partners are unable to successfully implement new process technologies and to achieve volume production of new products at acceptable yields, our business, financial condition and results of operations may be materially and adversely affected.

Our stock price is volatile.

The market price of our common stock has fluctuated significantly at times. In the future, the market price of our common stock could be subject to significant fluctuations due to, among other reasons:

• our anticipated or actual operating results;

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

• technological innovations by us or our competitors;

• investor perception of the semiconductor sector;

• loss of or changes to key executives;

• product delays or setbacks by us, our customers or our competitors;

• potential supply disruptions;

• sales channel interruptions;

• concentration of sales among a small number of customers;

• conditions in our customers’ markets and the semiconductor markets;

• the commencement and/or results of litigation;

• changes in estimates of our performance by securities analysts;

• decreases in the value of our investments or long-lived assets, thereby requiring an asset impairment charge against earnings;

• repurchasing shares of our common stock;

• announcements of merger or acquisition transactions; and/or

• general global economic and capital market conditions.

In the past, securities and class action litigation has been brought against companies following periods of volatility in the market prices of their securities. We may be the target of one or more of these class action suits, which could result in significant costs and divert management’s attention, thereby materially and adversely impacting our business, financial condition and results of operations.

In addition, at times the stock market has experienced extreme price, volume and value fluctuations that affect the market prices of the stock of many high technology companies, including semiconductor companies, that are unrelated or disproportionate to the operating performance of those companies. Any such fluctuations may harm the market price of our common stock.

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Occasionally, we enter into agreements that expose us to potential damages that exceed the value of the agreement.

We have given certain customers increased indemnification protection for product deficiencies or intellectual property infringement that is in excess of our standard limited warranty and indemnification provisions and could result in costs that are in excess of the original contract value. In an attempt to limit this liability, we have purchased insurance coverage to partially offset some of these potential additional costs; however, our insurance coverage could be insufficient in terms of amount and/or coverage to prevent us from suffering material losses if the indemnification amounts are large enough or if there are coverage issues.

As of December 29, 2013, affiliates of Future, Alonim Investments Inc. and two of its affiliates (collectively “Alonim”), beneficially own approximately 16% of our common stock and Soros Fund Management LLC, as principal investment manager for Quantum Partners LP (“Soros”), beneficially owns approximately 13% of our common stock. As such, Alonim and Soros are our largest stockholders. These substantial ownership positions provide the opportunity for Alonim and Soros to significantly influence matters requiring stockholder approval, which may or may not be in our best interests or the interest of our other stockholders. In addition, Alonim is an affiliate of Future and an executive officer of Future is on our board of directors, which could lead to actual or perceived influence from Future.

Alonim and Soros each own a significant percentage of our outstanding shares. Due to such ownership, Alonim and Soros, acting independently or jointly, have not in the past, but may in the future, exert strong influence over actions requiring the approval of our stockholders, including the election of directors, many types of change of control transactions and amendments to our charter documents. Further, if one of these stockholders were to sell or even propose to sell a large number of their shares, the market price of our common stock could decline significantly.

Although we have no reason to believe it to be the case, the interests of these significant stockholders could conflict with our best interests or the interests of the other stockholders. For example, the significant ownership percentages of these two stockholders could have the effect of delaying or preventing a change of control or otherwise discouraging a potential acquirer from obtaining control of us, regardless of whether the change of control is supported by us and our other stockholders. Conversely, by virtue of their percentage ownership of our stock, Alonim and/or Soros could facilitate a takeover transaction that our board of directors and/or other stockholders did not approve.

Further, Alonim is an affiliate of Future, our largest distributor, and Pierre Guilbault, executive vice president and chief financial officer of Future, is a member of our board of directors. These relationships could also result in actual or perceived attempts to influence management or take actions beneficial to Future which may or may not be beneficial to us or in our best interests. Future could attempt to obtain terms and conditions more favorable than those we would typically provide to other distributors because of its relationship with us. Any such actual or perceived preferential treatment could materially and adversely affect our business, financial condition and results of operations.

Earthquakes and other natural disasters, may damage our facilities or those of our suppliers and customers.

The occurrence of natural disasters in certain regions, such as the recent natural disasters in Asia, could adversely impact our manufacturing and supply chain, our ability to deliver products on a timely basis (or at all) to our customers and the cost of or demand for our products. Our corporate headquarters in Fremont, California is located near major earthquake faults that have experienced seismic activity and is approximately 170 miles from a nuclear power plant. In addition, some of our other offices, customers and suppliers are in locations, which may be subject to similar natural disasters. In the event of a major earthquake or other natural disaster near our offices, our operations could be disrupted. Similarly, a major earthquake or other natural disaster, such as the earthquakes in Japan or flooding in Thailand, affecting one or more of our major customers or suppliers could adversely impact the operations of those affected, which could disrupt the supply or sales of our products and harm our business, financial condition and results of operations.

Any error in our sell-through revenue recognition judgment or estimates could lead to inaccurate reporting of our net sales, gross profit, deferred income and allowances on sales to distributors and net income.

Sell-through revenue recognition is highly dependent on receiving pertinent and accurate data from our distributors in a timely fashion. Distributors provide us periodic data regarding the product, price, quantity, and end customer when products are resold as well as the quantities of our products they still have in stock. We must use estimates and apply judgment to reconcile distributors’ reported inventories to their activities. Any error in our judgment could lead to inaccurate reporting of our net sales, gross profit, deferred income and allowances on sales to distributors and net income, which could have an adverse effect on our business, financial condition and results of operations.

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A breach of our security systems may have a material adverse effect on our business.

Our Information systems are designed to maintain and protect our customers’, suppliers’ and employees’ confidential and business intelligence data as well as our proprietary information and technology. We may experience cyber-attacks and other security breaches, and as a result, unauthorized parties may obtain access to our information systems. Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm our or business partner’s competitive position.  Any significant system or network disruption, including but not limited to, new system implementations, computer viruses or worms, security breaches, or unexpected energy blackouts could have a material adverse impact on our operations, sales and operating results. Maintaining the security integrity of  our enterprise network is paramount for us, our customers and our suppliers. We have implemented measures to manage, monitor and detect our risks related to such disruptions, but despite precautionary efforts such disruptions could still occur and negatively impact our operations and financial results. In addition, we may incur additional costs to remedy any damages caused by these disruptions or security breaches.

We may be unable to protect our intellectual property rights, which could harm our competitive position.

Our ability to compete is affected by our ability to protect our intellectual property rights. We rely on a combination of patents, trademarks, copyrights, mask work registrations, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual property rights. Despite these efforts, we may be unable to protect our proprietary information. Such intellectual property rights may not be recognized or if recognized, may not be commercially feasible to enforce. Moreover, our competitors may independently develop technology that is substantially similar or superior to our technology.

More specifically, our pending patent applications or any future applications may not be approved, and any issued patents may not provide us with competitive advantages or may be challenged by third parties. If challenged, our patents may be found to be invalid or unenforceable, and the patents of others may have an adverse effect on our ability to do business. Furthermore, others may independently develop similar products or processes, duplicate our products or processes or design around any patents that may be issued to us.

We could be required to pay substantial damages or could be subject to various equitable remedies if it were proven that we infringed the intellectual property rights of others.

As a general matter, semiconductor companies may from time to time become involved with ongoing litigation regarding patents and other intellectual property rights. If a third party were to prove that our technology infringed its intellectual property rights, we could be required to pay substantial damages for past infringement and could be required to pay license fees or royalties on future sales of our products. If we were required to pay such license fees whenever we sold our products, such fees could exceed our revenue. In addition, if it was proven that we willfully infringed a third party’s proprietary rights, we could be held liable for three times the amount of the damages that we would otherwise have to pay. Such intellectual property litigation could also require us to:

• stop selling, incorporating or using our products that use the infringed intellectual property;

• obtain a license to make, sell or use the relevant technology from the owner of the infringed intellectual property, which license may not be available on commercially reasonable terms, if at all; and/or

• redesign our products so as not to use the infringed intellectual property, which may not be technically or commercially feasible.

The defense of infringement claims and lawsuits, regardless of their outcome, would likely be expensive and could require a significant portion of management’s time. In addition, rather than litigating an infringement matter, we may determine that it is in our best interests to settle the matter. Terms of a settlement may include the payment of damages and our agreement to license technology in exchange for a license fee and ongoing royalties. These fees could be substantial. If we were required to pay damages or otherwise became subject to equitable remedies, our business, financial condition and results of operations would suffer. Similarly, if we were required to pay license fees to third parties based on a successful infringement claim brought against us, such fees could exceed our revenue.

Our results of operations could vary as a result of the methods, estimations and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties, assumptions and changes in rulemaking by regulatory bodies; and factors may arise over time that lead us to change our methods, estimates, and judgments. Changes in those methods, estimates and judgments could materially and adversely impact our business, financial condition and results of operations.

50

Our revenue reporting is highly dependent on receiving pertinent and accurate data from our distributors in a timely fashion. Distributors provide us periodic data regarding the product, price, quantity and end customer when products are resold as well as the quantities of our products they still have in stock. We must use estimates and apply judgment to reconcile distributors’ reported inventories to their activities. Any error in our judgment could lead to inaccurate reporting of our net sales, gross profit, deferred income and allowances on sales to distributors and net income.

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based compensation represent our estimates, but these estimates involve inherent uncertainties and the application of management judgments, which include the expected term of the stock-based awards, stock price volatility and forfeiture rates. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

On an on-going basis, we use estimates and judgment to evaluate valuation of inventories, income taxes, intangible assets goodwill, long-lived assets and contingent consideration liabilities in preparing our condensed consolidated financial statements. Actual results could differ from these estimates and material effects on operating results and financial position may result.

The final determination of our income tax liability may be materially different from our income tax provision, which could have an adverse effect on our results of operations.

Our future effective tax rates may be adversely affected by a number of factors including:

• the jurisdictions in which profits are determined to be earned and taxed;

• the resolution of issues arising from tax audits with various tax authorities;

• changes in the valuation of our deferred tax assets and liabilities;

• adjustments to estimated taxes upon finalization of various tax returns;

• increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairment of goodwill in connection with acquisitions;

• changes in available tax credits;

• changes in stock-based compensation expense;

• changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles; and/or

• the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes.

Any significant increase in our future effective tax rates could adversely impact net income for future periods. In addition, the U.S. Internal Revenue Service (“IRS”) and other tax authorities regularly examine our income tax returns. Our business, financial condition and results of operations could be materially and adversely impacted if these assessments or any other assessments resulting from the examination of our income tax returns by the IRS or other taxing authorities are not resolved in our favor.

We have acquired significant Net Operating Loss (“NOL”) carryforwards as a result of our acquisitions. The utilization of acquired NOL carryforwards is subject to the IRS’s complex limitation rules that carry significant burdens of proof. Limitations include certain levels of a change in ownership. As a publicly traded company, such change in ownership may be out of our control. Our eventual ability to utilize our estimated NOL carryforwards is subject to IRS scrutiny and our future results may not benefit as a result of potential unfavorable IRS rulings.

51

Our engagement with foreign customers could cause fluctuations in our operating results, which could materially and adversely impact our business, financial condition and results of operations.

International sales have accounted for, and will likely continue to account for a significant portion of our revenues, which subjects us to the following risks, among others:

• changes in or compliance with regulatory requirements;

• tariffs, embargoes, directives and other trade barriers which impact our or our customers’ business operations;

• timing and availability of export or import licenses;

• disruption of services due to political, civil, labor or economic instability;

• disruption of services due to natural disasters outside the United States;

• disruptions to customer operations outside the United States due to the outbreak of communicable diseases;

• difficulties in accounts receivable collections;

• difficulties in staffing and managing foreign subsidiary and branch operations;

• difficulties in managing sales channel partners;

• difficulties in obtaining governmental approvals for our products;

• limited intellectual property protection;

• foreign currency exchange fluctuations;

• the burden of complying with foreign laws and treaties;

• contractual or indemnity issues that are materially different from our standard sales terms; and/or

• potentially adverse tax consequences.

In addition, because sales of our products have been denominated primarily in U.S. dollars, increases in the value of the U.S. dollar as compared with local currencies could make our products more expensive to customers in the local currency of a particular country resulting in pricing pressures on our products. Increased international activity in the future may result in foreign currency denominated sales. Furthermore, because some of our customers’ purchase orders and agreements are governed by foreign laws, we may be limited in our ability, or it may be too costly for us, to enforce our rights under these agreements and to collect damages, if awarded.

We may be exposed to additional credit risk as a result of the addition of significant direct customers through acquisitions.

From time to time one of our customers has contributed more than 10% of our quarterly net sales. A number of our customers are OEMs, or the manufacturing subcontractors of OEMs, which might result in an increase in concentrated credit risk with respect to our trade receivables and therefore, if a large customer were to be unable to pay, it could materially and adversely impact our business, financial condition and results of operations.

Compliance with new regulations regarding the use of conflict minerals could adversely impact the supply and cost of certain metals used in manufacturing our products.

In August 2012, the U.S. Securities and Exchange Commission (“SEC”) issued final rules for compliance with Section 1502 of the Dodd-Frank Act, and outlined what publicly-traded companies in the U.S. have to disclose regarding their use of conflict minerals in their products. According to the rule, companies that utilize any of the 3TG (tin, tantalum, tungsten and gold) minerals in their products need to conduct a reasonable country of origin inquiry to determine if the minerals are coming from the conflict zones in and around the Democratic Republic of Congo. The first filings are due May 31, 2014 for calendar year 2013. The implementation of these new regulations may limit the sourcing and availability of some metals used in the manufacture of our products and may affect our ability to obtain products in sufficient quantities or at competitive prices.

ITEM 6.        EXHIBITS

(a)Exhibits required by Item 601 of Regulation S-K

See the Exhibit Index, which follows the signature page to this Quarterly Report on Form 10-Q.

52

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q of Exar Corporation to be signed on its behalf by the undersigned thereunto duly authorized.

		EXAR CORPORATION (Registrant)
February 6, 2014	By	/s/ Ryan A. Benton
		Ryan A. Benton Senior Vice President and Chief Financial Officer (On the Registrant’s Behalf and as Principal Financial and Accounting Officer)

53

INDEX TO EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Restated Certificate of Incorporation of Exar Corporation	8-K	0-14225	3.3	9/17/2010
3.2	Bylaws of Exar Corporation	8-K	0-14225	3.1	3/16/2012
3.3	Amendment to Employment Agreement between the Company and Louis DiNardo, dated December 31, 2013					X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)					X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 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. Section 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

54 

EX-3

Exhibit 3.3

AMENDMENT
to
EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is dated as of December 31, 2013, by and between Exar Corporation, a Delaware corporation (the “Company”), and Louis DiNardo (the “Executive”).

WHEREAS, the Executive is currently employed by the Company pursuant to that certain Employment Agreement, effective as of January 3, 2012 (the “Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Agreement to extend the term of the Agreement through April 2, 2017, increase the Executive’s base salary and provide for grants of new equity awards to the Executive, as provided herein.

NOW, THEREFORE, the parties agree as follows:

1.     Section 2 of the Agreement is hereby amended and restated to read in its entirety as follows:

“2. Period of Employment. The “Period of Employment” shall be a period commencing on the Effective Date and ending at the close of business on April 2, 2017, subject to earlier termination in accordance with the provisions of Section 5 below (the “Termination Date”).”

2.     Effective January 3, 2014, the Executive’s Base Salary shall be increased to an annualized rate of $600,000, provided that such Base Salary increase shall not be taken into account for purposes of determining the Executive’s target Incentive Bonus under Section 3.2 of the Agreement for the Company’s 2014 fiscal year (but shall be taken into account for purposes of determining the Executive’s target Incentive Bonus for the Company’s 2015 fiscal year).

3.     A new Section 3.3(c) is hereby added to the Agreement to read in its entirety as follows:

“(i)     2013 Time-Based Stock Option. Effective December [__], 2013 (the “December 2013 Grant Date”), the Compensation Committee approved the grant to the Executive of an option to purchase 200,000 shares of the Company’s Common Stock. The exercise price per share for such option is equal to the closing price (in regular trading) of a share of the Common Stock on the December 2013 Grant Date. Such option is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code and will vest with respect to 1/12^th of the shares covered by the option on February 3, 2016, and as to the remaining 11/12ths of the shares covered by the option on the third (3^rd) day of each of the eleven (11) consecutive months thereafter, subject in each case to the Executive’s active and continuous service to the Company through the applicable vesting date. The maximum term of such option is seven (7) years from the date of grant. Such option shall be granted under the Plan and shall be subject to such further terms and conditions as set forth in a written stock option agreement to be entered into by the Company and the Executive to evidence such option (which agreement shall preserve the Executive’s rights hereunder with respect to outstanding equity awards upon a termination of his employment as provided in Sections 3.3(a) and 5.3(b) hereof).

(ii)     2014 Market-Based Stock Option. Effective on the first trading day in January 2014 (the “January 2014 Grant Date”) and subject to the Executive’s active and continuous service with the Company through the January 2014 Grant Date, the Compensation Committee has approved the grant to the Executive of an option to purchase 140,000 shares of the Company’s common stock. The exercise price per share for such option will be equal to the closing price (in regular trading) of a share of the Common Stock on the January 2014 Grant Date. Such option will be intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code and will vest with respect to all of the shares subject to the option on the last day of the Company’s 2017 fiscal year, provided that the closing price of a share of the Company’s common stock (in regular trading) equals or exceeds $18.00 for a period of at least forty-five (45) consecutive trading days during such fiscal year and subject to the Executive’s active and continuous service with the Company through the last day of such fiscal year. If such option vests at the end of the 2017 fiscal year in accordance with the foregoing provisions and if one-fourth of the stock option referred to in Section 3.3(a)(ii) above that was eligible to vest based on the Company’s stock price during the 2016 fiscal year as set forth therein did not vest at the end of the 2016 fiscal year in accordance with its terms, such portion of that stock option shall also vest at the end of the 2017 fiscal year. The maximum term of such option will be seven (7) years from the date of grant of the option. Such option shall be granted under the Plan and shall be subject to such further terms and conditions as set forth in a written stock option agreement to be entered into by the Company and the Executive to evidence such option (which agreement shall preserve the Executive’s rights hereunder with respect to outstanding equity awards upon a termination of his employment as provided in Sections 3.3(a) and 5.3(b) hereof).

(iii)     2013 RSU Award. Effective on the December 2013 Grant Date, the Compensation Committee approved the grant to the Executive of 100,000 RSUs, which will vest in two (2) equal installments on the last day of each of the Company’s 2016 fiscal year and 2017 fiscal year, subject in each case to the Executive’s active and continuous service to the Company through the applicable vesting date; provided, however, that if, prior to the last day of the Company’s 2017 fiscal year, both (a) a Triggering Transaction (as defined below) occurs that produces a consolidated company with revenue for a period of four (4) consecutive fiscal quarters in the aggregate in excess of $240,000,000, and (b) the projected profits and synergies as presented by the Executive and approved by the Board in writing is accomplished by reaching ninety percent (90%) or more of the stated goals (as determined by the Compensation Committee in its sole discretion) within four (4) quarters after the consummation of such Triggering Transaction, such RSU grant, to the extent then outstanding and unvested, shall be fully vested as of the date both such goals have been achieved (subject to the Executive’s active and continuous service to the Company through such vesting date). Such RSU award shall be granted under the Plan and shall be subject to such further terms and conditions as set forth in a written award agreement to be entered into by the Company and the Executive to evidence the award (which agreement shall preserve the Executive’s rights hereunder with respect to outstanding equity awards upon a termination of his employment as provided in Section 5.3(b) hereof). For purposes of this RSU grant, a “Triggering Transaction” shall mean (i) any merger or consolidation of the Company in which the stockholders of the Company immediately prior to the transaction do not own more than sixty percent (60%) of the outstanding voting power of the Company (or its successor) immediately after such transaction, (ii) the sale of all or substantially all of the assets of the Company, or (iii) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than sixty percent (60%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders.”

2

4.     Except as expressly modified herein, the Agreement shall remain in full force and effect in accordance with its original terms.

5.     Capitalized terms that are not defined herein shall have the meanings ascribed to them in the Agreement.

6.     This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]

3

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered on the day and year first above written.

EXAR CORPORATION
By:
	Richard L. Leza
	Chairman of the Board

 

EXECUTIVE

Louis DiNardo

4

EX-31

EXHIBIT 31.1 

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

I, Louis DiNardo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exar 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(s) 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(s) 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.

Date: February 6, 2014

/s/    Louis DiNardo

Louis DiNardo 

Chief Executive Officer, President and Director

(Principal Executive Officer)

EX-31

EXHIBIT 31.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, Ryan A. Benton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exar 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(s) 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(s) 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.

Date: February 6, 2014

/s/ Ryan A. Benton

Ryan A. Benton

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Louis DiNardo, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Exar Corporation on Form 10-Q for the period ended December 29, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Exar Corporation.

Date: February 6, 2014

/s/    Louis DiNardo        

Louis DiNardo         

Chief Executive Officer, President and Director

(Principal Executive Officer)

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Ryan A. Benton, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Exar Corporation on Form 10-Q for the period ended December 29, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Exar Corporation.

Date: February 6, 2014

/s/ Ryan A. Benton

Ryan A. Benton

Senior Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Note 16 - Income Taxes (Tables)

9 Months Ended

Dec. 29, 2013

Income Tax Disclosure [Abstract]

Schedule Of Interest And Penalty Realted To Underpayment Of Tax [Table Text Block]

	December 29, 2013		March 31, 2013
Accrued interest and penalties	$	97	$	228

XML

Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	$ 89,017	$ 42,528
Gross Unrealized Losses Less than 12 Months	(166)	(98)
Fair Value Greater than 12 Months	5,641	5,405
Gross Unrealized Losses Greater than 12 Months	(58)	(80)
Fair Value Total	94,658	47,933
Gross Unrealized Losses Total	(224)	(178)
US Government Corporation And Agencies [Member]
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	28,772
Gross Unrealized Losses Less than 12 Months	(50)
Fair Value Total	28,772
Gross Unrealized Losses Total	(50)
US States and Political Subdivisions Debt Securities [Member]
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	1,516
Gross Unrealized Losses Less than 12 Months	(4)
Fair Value Greater than 12 Months		404
Gross Unrealized Losses Greater than 12 Months		(2)
Fair Value Total	1,516	404
Gross Unrealized Losses Total	(4)	(2)
Corporate Debt Securities [Member]
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	35,179	29,609
Gross Unrealized Losses Less than 12 Months	(65)	(42)
Fair Value Greater than 12 Months		497
Gross Unrealized Losses Greater than 12 Months		(3)
Fair Value Total	35,179	30,106
Gross Unrealized Losses Total	(65)	(45)
Asset-backed Securities [Member]
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	15,301	10,008
Gross Unrealized Losses Less than 12 Months	(25)	(17)
Fair Value Greater than 12 Months	3,467	1,241
Gross Unrealized Losses Greater than 12 Months	(31)	(10)
Fair Value Total	18,768	11,249
Gross Unrealized Losses Total	(56)	(27)
Collateralized Mortgage Backed Securities [Member]
Note 4 - Fair Value (Details) - Summary of the Gross Unrealized Losses and Fair Values of Investments [Line Items]
Fair Value Less than 12 Months	8,249	2,911
Gross Unrealized Losses Less than 12 Months	(22)	(39)
Fair Value Greater than 12 Months	2,174	3,263
Gross Unrealized Losses Greater than 12 Months	(27)	(65)
Fair Value Total	10,423	6,174
Gross Unrealized Losses Total	$ (49)	$ (104)

XML

Note 4 - Fair Value (Details) - Quantitative Information About the Inputs and Valuation Methodologies (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Combination of Income and Marketable Approach [Member] | Altior [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Acquisition-related contingent consideration – fair value	$ 7,741
Combination of Income and Marketable Approach [Member] | Cadeka [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Acquisition-related contingent consideration – fair value	4,620
Altior [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Acquisition-related contingent consideration – fair value	7,741	10,138
Cadeka [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Acquisition-related contingent consideration – fair value	$ 4,620

XML

Note 9 - Balance Sheet Detail (Details) - Other Noncurrent Obligations (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Other Noncurrent Obligations [Abstract]
Fair value of earn-out liability – long–term	$ 10,131	$ 7,539
Long-term taxes payable	749	2,225
Accrued restructuring charges and exit costs	14	1,266
Other	636	174
Total other non-current obligations	$ 11,530	$ 11,204

XML

Note 5 - Goodwill and Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended	0 Months Ended	9 Months Ended	1 Months Ended	12 Months Ended	9 Months Ended
	Dec. 29, 2013	Jul. 05, 2013 Cadeka [Member]	Dec. 29, 2013 Cadeka [Member]	Mar. 22, 2013 Altior [Member]	Mar. 31, 2013 Altior [Member]	Dec. 29, 2013 Distributor Relationships [Member]	Dec. 29, 2013 Trade Names [Member]	Dec. 29, 2013 Minimum [Member] Existing Technology [Member]	Dec. 29, 2013 Minimum [Member] Patented Technology [Member]	Dec. 29, 2013 Minimum [Member] Customer Relationships [Member]	Dec. 29, 2013 Maximum [Member] Existing Technology [Member]	Dec. 29, 2013 Maximum [Member] Patented Technology [Member]	Dec. 29, 2013 Maximum [Member] Customer Relationships [Member]
Note 5 - Goodwill and Intangible Assets (Details) [Line Items]
Number of Reportable Segments	1
Goodwill, Acquired During Period (in Dollars)		$ 19.2	$ 19.2	$ 7.2	$ 7.2
Finite-Lived Intangible Asset, Useful Life						6 years	3 years	2 years	5 years	5 years	9 years	6 years	7 years

XML

Note 12 - Stock-Based Compensation (Details) - Options Exercised (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Options Exercised [Abstract]
Intrinsic value of options exercised	$ 805	$ 304	$ 2,699	$ 879

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Note 4 - Fair Value (Details) (USD $)	3 Months Ended
	Dec. 29, 2013	Sep. 29, 2013
Altior [Member]
Note 4 - Fair Value (Details) [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Asset	$ 98,000	$ 2,500,000
Cadeka [Member]
Note 4 - Fair Value (Details) [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Asset	$ (40,000)

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Note 9 - Balance Sheet Detail (Tables)

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Schedule of Inventory, Current [Table Text Block]

	December29, 2013		March 31, 2013
Work-in-process and raw materials	$	14,454	$	9,981
Finished goods		10,496		9,449
Total inventories	$	24,950	$	19,430

Property, Plant and Equipment [Table Text Block]

	December29, 2013			March 31, 2013
Land	$	—		$	6,660
Building		860			16,224
Machinery and equipment		40,736			42,258
Software and licenses		17,377			17,566
Property, plant and equipment, total		58,973			82,708
Accumulated depreciation and amortization		(50,189	)		(58,608	)
Total property, plant and equipment, net	$	8,784		$	24,100

Other Current Liabilities [Table Text Block]

	December29, 2013		March 31, 2013
Fair value of earn-out liability – short-term	$	2,230	$	2,599
Accrued restructuring charges and exit costs		1,957		2,020
Short-term lease financing obligations		1,700		3,189
Accrued manufacturing expenses, royalties and licenses		1,669		2,370
Purchase consideration holdback		1,256		250
Accrued legal and professional services		866		746
Accrued sales and marketing expenses		573		576
Accrual for dispute resolution		—		2,727
Other		900		738
Total other current liabilities	$	11,151	$	15,215

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Noncurrent [Text Block]

	December29, 2013		March 31, 2013
Fair value of earn-out liability – long–term	$	10,131	$	7,539
Long-term taxes payable		749		2,225
Accrued restructuring charges and exit costs		14		1,266
Other		636		174
Total other non-current obligations	$	11,530	$	11,204

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Note 12 - Stock-Based Compensation (Details) - Summary of RSU Transactions (Restricted Stock Units (RSUs) [Member], USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Restricted Stock Units (RSUs) [Member]
Note 12 - Stock-Based Compensation (Details) - Summary of RSU Transactions [Line Items]
Shares		732,204
Weighted Average Grant Date Fair Value (in Dollars per share)		$ 7.73
Weighted Average Remaining Contractual Term	1 year 237 days	1 year 262 days
Aggregate Intrinsic Value (in Dollars)		$ 7,688
Granted	469,995
Granted (in Dollars per share)	$ 11.83
Issued and released	(311,406)
Issued and released (in Dollars per share)	$ 9.48
Cancelled	(33,666)
Cancelled (in Dollars per share)	$ 9.55
Vested and expected to vest, December 29, 2013	761,615
Vested and expected to vest, December 29, 2013	1 year 219 days
Vested and expected to vest, December 29, 2013 (in Dollars)	8,858
Shares	857,127
Weighted Average Grant Date Fair Value (in Dollars per share)	$ 9.27
Weighted Average Remaining Contractual Term	1 year 237 days	1 year 262 days
Aggregate Intrinsic Value (in Dollars)	$ 9,968

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Note 11 - Common Stock Repurchases (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended	6 Months Ended	3 Months Ended	9 Months Ended
	Jul. 09, 2013	Aug. 28, 2007	Dec. 29, 2013 August 2007 Repurchase Plan [Member]	Dec. 29, 2013 July 2013 Repurchase Program [Member]	Dec. 29, 2013 July 2013 Repurchase Program [Member]
Note 11 - Common Stock Repurchases (Details) [Line Items]
Stock Repurchase Program, Authorized Amount	$ 50.0	$ 100.0
Stock Repurchased During Period, Value			92.2	2.0	4.0
Stock Repurchase Program, Remaining Authorized Repurchase Amount			$ 57.8

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Note 14 - Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013	Apr. 01, 2012
Commitments and Contingencies Disclosure [Abstract]
Product Warranty Accrual	$ 1,162	$ 50	$ 90

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Note 5 - Goodwill and Intangible Assets (Details) - Purchased Intangible Assets (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	$ 68,596	$ 50,486
Accumulated Amoritzation	(42,813)	(37,148)
Net Carrying Amount	25,783	13,338
Total	70,876	50,486
Total	(42,813)	(37,148)
Total	28,063	13,338
Research and Development [Member]
Finite-Lived Intangible Assets [Line Items]
In-process research and development	2,280
Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	58,588	42,858
Accumulated Amoritzation	(35,647)	(30,668)
Net Carrying Amount	22,941	12,190
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	5,075	2,905
Accumulated Amoritzation	(2,539)	(2,079)
Net Carrying Amount	2,536	826
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	3,459	3,459
Accumulated Amoritzation	(3,328)	(3,182)
Net Carrying Amount	131	277
Distributor Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	1,264	1,264
Accumulated Amoritzation	(1,264)	(1,219)
Net Carrying Amount		45
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	210
Accumulated Amoritzation	(35)
Net Carrying Amount	$ 175

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Note 12 - Stock-Based Compensation (Details) - Summary of ESPP Transactions (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Dec. 29, 2013
Summary of ESPP Transactions [Abstract]
Authorized to issue	4,500
Reserved for future issuance	1,379
Issued	13
Issued (in Dollars per share)	$ 11.47

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Note 13 - Lease Financing Obligations (Details) - Summary of Interest Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Note 13 - Lease Financing Obligations (Details) - Summary of Interest Expense [Line Items]
Interest expense	$ 39	$ 56	$ 117	$ 128
Design Tools [Member]
Note 13 - Lease Financing Obligations (Details) - Summary of Interest Expense [Line Items]
Interest expense	$ 39	$ 35	$ 115	$ 107

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Note 12 - Stock-Based Compensation (Details) - Summary of Unrecognized Stock-Based Compensation Expense Related to Stock Options and RSUs (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 29, 2013
Note 12 - Stock-Based Compensation (Details) - Summary of Unrecognized Stock-Based Compensation Expense Related to Stock Options and RSUs [Line Items]
Total Stock-based compensation expense	$ 13,502
Employee Stock Option [Member]
Note 12 - Stock-Based Compensation (Details) - Summary of Unrecognized Stock-Based Compensation Expense Related to Stock Options and RSUs [Line Items]
Options	8,180
Options	2 years 255 days
RSUs	2 years 255 days
Restricted Stock Units (RSUs) [Member]
Note 12 - Stock-Based Compensation (Details) - Summary of Unrecognized Stock-Based Compensation Expense Related to Stock Options and RSUs [Line Items]
Options	2 years 109 days
RSUs	$ 5,322
RSUs	2 years 109 days

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Note 13 - Lease Financing Obligations (Details) - Summary of Rent Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Summary of Rent Expense [Abstract]
Rent expense	$ 229	$ 149	$ 658	$ 456

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Note 12 - Stock-Based Compensation (Details) - Summary of Stock Option Transactions (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Summary of Stock Option Transactions [Abstract]
Options outstanding		6,212,333
Weighted Average Exercise Price of Options Outstanding (in Dollars per share)		$ 7.48
Weighted Average Remaining Contractual Term of Options Outstanding	5 years 25 days	5 years 14 days
Aggregate Intrinsic Value (in Dollars)		$ 19,199
In the Money Options Vested and Exercisable		1,481,000
Granted	1,460,300
Granted (in Dollars per share)	$ 12.38
Exercised	(535,832)
Exercised (in Dollars per share)	$ 7.12
Forfeited	(522,341)
Forfeited (in Dollars per share)	$ 7.89
Cancelled	(10,834)
Cancelled (in Dollars per share)	$ 10.92
Vested and expected to vest, December 29, 2013	6,184,803
Vested and expected to vest, December 29, 2013 (in Dollars per share)	$ 8.46
Vested and expected to vest, December 29, 2013	5 years
Vested and expected to vest, December 29, 2013 (in Dollars)	21,073
Vested and exercisable, December 29, 2013	2,197,258
Vested and exercisable, December 29, 2013 (in Dollars per share)	$ 7.40
Vested and exercisable, December 29, 2013	3 years 244 days
Vested and exercisable, December 29, 2013 (in Dollars)	9,544
Options outstanding	6,603,626
Weighted Average Exercise Price of Options Outstanding (in Dollars per share)	$ 8.56
Aggregate Intrinsic Value (in Dollars)	$ 21,985
In the Money Options Vested and Exercisable	2,062,000

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Note 10 - Net Income (Loss) Per Share (Details) (Stock Options and RSUs [Member]) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Stock Options and RSUs [Member]
Note 10 - Net Income (Loss) Per Share (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3.2	1.1	3.8

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Note 19 - Subsequent Events

9 Months Ended

Dec. 29, 2013

Policy Text Block [Abstract]

Subsequent Events, Policy [Policy Text Block]

NOTE 19.    SUBSEQUENT EVENTS

On January 14, 2014, we acquired Stretch, Inc. (“Stretch”), a provider of software configurable processors supporting the video surveillance market. The transaction will provide Exar with the technology to deliver an end-to-end high-definition solution for both digital and analog transmission of data from the camera to the DVR or NVR in surveillance applications. Stretch was acquired via a reverse triangular merger for which the purchase consideration was $10,000 in cash. By acquiring Stretch, Exar acquired all of Stretch’s assets, consisting principally intellectual property, accounts receivable and inventory, as well as assumed all of Stretch’s liabilities and contractual obligations of approximately $10.0 million of which approximatetly $7.2 million has been paid subsequent to quarter-end.

Stretch’s results of operations and estimated fair value of assets acquired and liabilities assumed will be included in our condensed consolidated financial statements beginning January 14, 2014.

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Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013	Dec. 30, 2012	Apr. 01, 2012
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Cash at financial institutions	$ 7,109	$ 9,676
Money market funds	13,961	5,042
Total cash and cash equivalents	21,070	14,718	15,334	8,714
Short-term marketable securities	154,702	190,587
US Government Agencies Short-term Debt Securities [Member]
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Short-term marketable securities	32,791	41,721
US States and Political Subdivisions Debt Securities [Member]
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Short-term marketable securities	2,798	2,935
Corporate Debt Securities [Member]
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Short-term marketable securities	72,725	92,229
Asset-backed Securities [Member]
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Short-term marketable securities	30,354	30,966
Collateralized Mortgage Backed Securities [Member]
Note 4 - Fair Value (Details) - Summary of Cash, Cash Equivalents and Short-Term Marketable Securities [Line Items]
Short-term marketable securities	$ 16,034	$ 22,736

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Note 3 - Business Combinations (Details) (USD $)	3 Months Ended		6 Months Ended	9 Months Ended		0 Months Ended		1 Months Ended	9 Months Ended	12 Months Ended	0 Months Ended	9 Months Ended	1 Months Ended	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 29, 2013	Dec. 30, 2012	Jul. 05, 2013 Prior to Considering Impact on Deferred Tax Assets and Liabilities [Member] Cadeka [Member]	Jul. 05, 2013 Potential Indemnity Claims [Member] Cadeka [Member]	Mar. 22, 2013 Potential Indemnity Claims [Member] Altior [Member]	Dec. 29, 2013 Potential Indemnity Claims [Member]	Mar. 31, 2013 Potential Indemnity Claims [Member]	Jul. 05, 2013 Cadeka [Member]	Dec. 29, 2013 Cadeka [Member]	Mar. 22, 2013 Altior [Member]	Dec. 29, 2013 Altior [Member]	Mar. 31, 2013 Altior [Member]	Jul. 05, 2013 Minimum [Member] Cadeka [Member]	Mar. 22, 2013 Minimum [Member] Altior [Member]	Jul. 05, 2013 Maximum [Member] Cadeka [Member]	Mar. 22, 2013 Maximum [Member] Altior [Member]
Note 3 - Business Combinations (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares)							(15,000)				454,000		358,000
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable											$ 5,200,000
Payments to Acquire Businesses, Gross							(1,000,000)	(250,000)	1,256,000	250,000	25,000,000	25,000,000	1,000,000	1,000,000
Business Acquisition Potential Cash Payment											5,000,000		20,000,000			0	0	5,000,000	20,000,000
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned											5,200,000	5,177,000	3,700,000	3,740,000
Acquired Intangible Assets Discount Rate																15.00%	12.00%	23.00%	19.00%
Goodwill, Acquired During Period (in Dollars)						12,400,000					19,200,000	19,200,000	7,200,000		7,200,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities Noncurrent											6,800,000
Income Tax Expense (Benefit)	(1,405,000)	(1,346,000)	(6,800,000)	(8,181,000)	(1,324,000)						(6,800,000)
Business Combination, Acquisition Related Costs												$ 400,000

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Note 12 - Stock-Based Compensation (Details) (USD $)	9 Months Ended		1 Months Ended	3 Months Ended		9 Months Ended				3 Months Ended	9 Months Ended	1 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended	9 Months Ended		0 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Jan. 31, 2012 Employee Stock Option [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Employee Stock Option [Member] Chief Executive Officer [Member]	Dec. 30, 2012 Employee Stock Option [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Employee Stock Option [Member] Chief Executive Officer [Member]	Dec. 30, 2012 Employee Stock Option [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Employee Stock Option [Member]	Mar. 31, 2013 Employee Stock Option [Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Executive Management Incentive Program [Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Executive Management Incentive Program [Member]	Mar. 31, 2012 Restricted Stock Units (RSUs) [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Chief Executive Officer [Member]	Dec. 30, 2012 Restricted Stock Units (RSUs) [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Chief Executive Officer [Member]	Dec. 30, 2012 Restricted Stock Units (RSUs) [Member] Chief Executive Officer [Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Executives[Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member] Executives[Member]	Dec. 29, 2013 Restricted Stock Units (RSUs) [Member]	Sep. 15, 2010 Equity Incentive Plans [Member]	Dec. 29, 2013 Equity Incentive Plans [Member]
Note 12 - Stock-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	95.00%
Number Of Stock-Based Compensation Equity Incentive Plans	2
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in Shares)																				5,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	4,500,000																			8,300,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)																					2,000,000
Share Price (in Dollars per share)								$ 11.63	$ 10.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	1,460,300		480,000
Share-based Compensation	$ 7,267,000	$ 3,010,000		$ 65,000	$ 65,000	$ 195,000	$ 195,000			$ 200,000	$ 1,500,000		$ 119,000	$ 112,000	$ 641,000	$ 336,000	$ 91,000	$ 239,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in Shares)												300,000						50,000	469,995
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period												3 years						3 years

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Note 17 - Segment and Geographic Information (Details) - Major Distributors and Customer of Net Revenue	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Revenue, Major Customer [Line Items]
Net Revenue			10.00%
Distributor A [Member] | Net Revenue [Member]
Revenue, Major Customer [Line Items]
Net Revenue	26.00%	28.00%	26.00%	30.00%
Distributor B [Member] | Net Revenue [Member]
Revenue, Major Customer [Line Items]
Net Revenue	21.00%	10.00%	23.00%	10.00%
Distributor C [Member] | Net Revenue [Member]
Revenue, Major Customer [Line Items]
Net Revenue	13.00%	10.00%	11.00%	10.00%
Customer A [Member] | Net Revenue [Member]
Revenue, Major Customer [Line Items]
Net Revenue		12.00%			[1]

[1] Net sales for this distributor or customer for this period were less than 10% of our net sales.

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Note 13 - Lease Financing Obligations (Tables)

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Schedule Of Amortization Expense [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Amortization expense	$	800	$	818	$	2,494	$	2,659

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

Fiscal Years	Design Tools
2014 (3 months remaining)	$	370
2015		1,456
2016		59
2017		10
2018 and thereafter		6
Total minimum lease payments		1,901
Less: amount representing interest		95
Present value of minimum lease payments		1,806
Less: short-term lease financing obligations		1,700
Long-term lease financing obligations	$	106

Schedule of Interest Expense [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Interest expense	$	39	$	35	$	115	$	107

Schedule of Rent Expense [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Rent expense	$	229	$	149	$	658	$	456

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Fiscal Years	Facilities
2014 (3 months remaining)	$	200
2015		552
2016		461
2017		150
2018 and thereafter		20
Total minimum lease payments	$	1,383

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Note 4 - Fair Value (Details) - Summary of Investments in Marketable Securities (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Dec. 29, 2013		Mar. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 168,788		$ 195,300
Unrealized Gross Gains	99	[1]	507	[1]
Unrealized Gross Losses	(224)	[1]	(178)	[1]
Fair Value	168,663		195,629
US Government Corporation And Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	32,840		41,694
Unrealized Gross Gains	1	[1]	27	[1]
Unrealized Gross Losses	(50)	[1]		[1]
Fair Value	32,791		41,721
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,797		2,927
Unrealized Gross Gains	5	[1]	10	[1]
Unrealized Gross Losses	(4)	[1]	(2)	[1]
Fair Value	2,798		2,935
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	72,730		92,059
Unrealized Gross Gains	60	[1]	215	[1]
Unrealized Gross Losses	(65)	[1]	(45)	[1]
Fair Value	72,725		92,229
Asset-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	30,396		30,932
Unrealized Gross Gains	14	[1]	61	[1]
Unrealized Gross Losses	(56)	[1]	(27)	[1]
Fair Value	30,354		30,966
Collateralized Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,064		22,646
Unrealized Gross Gains	19	[1]	194	[1]
Unrealized Gross Losses	(49)	[1]	(104)	[1]
Fair Value	16,034		22,736
Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	13,961		5,042
Unrealized Gross Gains		[1]		[1]
Unrealized Gross Losses		[1]		[1]
Fair Value	$ 13,961		$ 5,042

[1] Gross of tax impact

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Note 9 - Balance Sheet Detail (Details) - Inventories (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Inventories [Abstract]
Work-in-process and raw materials	$ 14,454	$ 9,981
Finished goods	10,496	9,449
Total inventories	$ 24,950	$ 19,430

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Note 6 - Long-Term Investment (Details) - Long-Term Investments (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Long-Term Investments [Abstract]
Long term investment	$ 1,288	$ 1,273
Contributions		15
Distributions	(25)
Long term investment	$ 1,263	$ 1,288

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Note 4 - Fair Value (Details) - Investment Assets Measured at Fair Value (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Assets:
Investment Assets	$ 168,663	$ 195,629
Liabilities	12,361
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment Assets	11,537	22,460
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	21,254	19,261
US Government Agencies Debt Securities [Member]
Assets:
Investment Assets	32,791	41,721
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	2,798	2,935
US States and Political Subdivisions Debt Securities [Member]
Assets:
Investment Assets	2,798	2,935
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment Assets	4	274
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	72,721	91,955
Corporate Debt Securities [Member]
Assets:
Investment Assets	72,725	92,229
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	30,354	30,966
Asset-backed Securities [Member]
Assets:
Investment Assets	30,354	30,966
Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	16,034	22,736
Collateralized Mortgage Backed Securities [Member]
Assets:
Investment Assets	16,034	22,736
Altior [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Liabilities	7,741	10,138
Altior [Member]
Assets:
Liabilities	7,741	10,138
Cadeka [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Liabilities	4,620
Cadeka [Member]
Assets:
Liabilities	4,620
Fair Value, Inputs, Level 1 [Member]
Assets:
Investment Assets	25,502	27,776
Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Assets:
Investment Assets	13,961	5,042
Fair Value, Inputs, Level 2 [Member]
Assets:
Investment Assets	143,161	167,853
Fair Value, Inputs, Level 3 [Member]
Assets:
Liabilities	12,361
Money Market Funds [Member]
Assets:
Investment Assets	$ 13,961	$ 5,042

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Note 3 - Business Combinations

9 Months Ended

Dec. 29, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 3.    BUSINESS COMBINATIONS

We periodically evaluate potential strategic acquisitions or arrangements to broaden our product offering and build upon our existing library of intellectual property, human capital and engineering talent in order to expand our capabilities in the areas in which we operate or to acquire complementary businesses.

We account for each business combination by applying the acquisition method, which requires (1) identifying the acquiree; (2) determining the acquisition date; (3) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest we have in the acquiree at their acquisition date fair value; and (4) recognizing and measuring goodwill or a gain from a bargain purchase.

Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, we typically account for the acquired contingencies using existing guidance for a reasonable estimate.

To establish fair value, we measure the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants. The measurement assumes the highest and best use of the asset by the market participants that would maximize the value of the asset or the group of assets within which the asset would be used at the measurement date, even if the intended use of the asset is different.

Acquisition related costs, including finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees are accounted for as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity securities are recognized in accordance with other applicable GAAP.

Acquisition of Cadeka

On July 5, 2013, we completed the acquisition of substantially all of the assets of Cadeka Technologies (Cayman) Holding Ltd., a privately held company organized under the laws of the Cayman Islands and all the outstanding stock of the subsidiaries of Cadeka, including the equity of its wholly owned subsidiary Cadeka Microcircuits, LLC, a Colorado limited liability company (“Cadeka”). With locations in Loveland, Colorado, Shenzhen and Wuxi, China, Cadeka designs, develops and markets high precision analog integrated circuits for use in industrial and high reliability applications. Cadeka’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our condensed consolidated financial statements beginning July 6, 2013. The pro forma effects of the portion of the Cadeka operations assumed through the transaction on our results of operations during fiscal years 2014 and 2013 were considered immaterial.

Consideration

The purchase consideration includes approximately 454,000 shares of our common stock issued to the shareholders of Cadeka (valued at $5.2 million) and a cash payment of $25.0 million (less an amount of $1.0 million, inclusive of 15,000 shares, held back temporarily to satisfy potential indemnity claims). An additional purchase price consideration earn-out (up to $5.0 million) may be earned over the next two fiscal years contingent upon achieving certain revenue targets, and may be paid in the form of cash, stock or both. The $5.2 million worth of shares issued at closing were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions and discounted to a present value. Final determination of the earn-out liability can range from zero to $5.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the preliminary purchase consideration is as follows (in thousands):

	Amount
Cash	$	25,000
Equity instruments		5,177
Estimated fair value of earn-out payments		4,660
Total consideration paid	$	34,837

In accordance with ASC 805, Business Combinations, the acquisition of Cadeka was recorded as a purchase business acquisition since Cadeka was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to net assets acquired at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant unobservable inputs (“Level 3 inputs”) determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 15% to 23%. The fair value of the contingent earn-out was a probability-based approach that includes significant Level 3 inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the preliminary fair value of consideration paid over the preliminary fair values of net assets acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $12.4 million prior to considering the impact on deferred tax assets and liabilities. The goodwill results largely of expected synergies from combining the operations of Cadeka with that of Exar and is not expected to be tax deductible. After considering the impact of deductible and taxable temporary tax differences on the acquired business, a deferred tax liability of $6.8 million was established primarily related to identified intangible asset basis differences, which resulted in a total goodwill amount recorded as part of the acquisition of $19.2 million. Additionally, in accordance with ASC 805, Business Combinations, we also evaluated the impact of the acquisition on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million.

Preliminary Purchase Price Allocation

The allocation of the total preliminary purchase price to Cadeka’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

The preliminary fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Cadeka acquisition was as follows (in thousands):

	Amount
Identifiable tangible assets (liabilities)
Cash	$	1,055
Accounts Receivable		241
Inventories		1,756
Property, plant and equipment		231
Other assets		3
Accounts payable and accruals		(7,400	)
Other short-term liabilities		(520	)
Long-term liabilities		(126	)
Total identifiable tangible assets (liabilities), net		(4,760	)
Identifiable intangible assets		20,380
Total identifiable assets, net		15,620
Goodwill		19,217
Fair value of total consideration transferred	$	34,837

The following table sets forth the components of identifiable intangible assets acquired in connection with the Cadeka acquisition (in thousands):

	Fair Value
Developed technologies	$	15,720
In-process research and development		2,280
Customer relations		2,170
Trade name		210
Total identifiable intangible assets	$	20,380

In valuing specific components of the acquisition, that includes deferred taxes, and intangibles required us to make estimates that may be adjusted in the future, if new information is obtained about circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. Thus, the purchase price allocation is considered preliminary and dependent upon the finalization of the valuation of assets acquired and liabilities assumed, including income tax effects. Final determination of these estimates could result in an adjustment to the preliminary purchase price allocation, with an offsetting adjustment to goodwill.

Acquisition Related Costs

Acquisition related costs, or deal costs, relating to Cadeka are included in the selling, general and administrative line on the condensed consolidated statement of operations for the nine months ended December 29, 2013 were approximately $0.4 million.

Acquisition of Altior

On March 22, 2013, we completed the acquisition of substantially all of the assets of Altior Inc. (“Altior”), a developer of data management solutions in Eatontown, New Jersey. Altior’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements beginning March 23, 2013. The pro forma effects of the portion of the Altior operations assumed through the transaction on our results of operations during fiscal years 2013 and 2012 were considered immaterial.

Consideration

The purchase consideration included approximately 358,000 of our shares issued to the shareholders of Altior, a cash payment of $1.0 million (of which $0.25 million was held back temporarily to satisfy potential indemnity claims), and additional purchase price consideration earn-outs which may be paid in the form of cash, shares or a combination thereof (not to exceed $20.0 million in aggregate) payable over the next three fiscal years contingent upon achieving certain revenue targets. The $3.7 million worth of shares issued as consideration were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions. Final determination of the earn-out liability can range from zero to $20.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date, will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the purchase consideration is as follows (in thousands):

	Amount
Cash	$	1,000
Equity instruments		3,740
Estimated fair value of earn-out payments		10,138
Total consideration paid	$	14,878

In accordance with ASC 805, Business Combinations, the acquisition of Altior was recorded as a purchase business acquisition since Altior was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to assets and liabilities assumed at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant Level 3 inputs determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 12% to 19%. The fair value of the contingent earn-outs was a probability-based approach that includes significant Level 3 inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the fair value of consideration paid over the fair values of net assets and liabilities acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $7.2 million. The goodwill consists largely of expected synergies from combining the operations of Altior with that of Exar and is deductible over 15 years for tax purposes.

Purchase Price Allocation

The allocation of the purchase price to Altior’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

The fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Altior acquisition was as follows (in thousands):

	Amount
Identifiable tangible assets
Inventories	$	126
Property, plant and equipment		140
Other assets		36
Accounts payable and accruals		(24	)
Other short-term liabilities		(51	)
Long-term liabilities		(61	)
Total identifiable tangible assets, net		166
Identifiable intangible assets – existing technology		7,540
Total identifiable assets, net		7,706
Goodwill		7,172
Fair value of total consideration transferred	$	14,878

Acquisition Related Costs

Acquisition related costs, or deal costs, relating to Altior are included in the selling, general and administrative line on the consolidated statement of operations for fiscal year 2013, which were immaterial.

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Note 7 - Related Party Transaction (Details) (USD $)	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012	Mar. 31, 2013
Note 7 - Related Party Transaction (Details) [Line Items]
Common Stock, Shares, Outstanding (in Shares)	47,501,051		47,501,051		46,607,246
Percent of Accounts Receivable	10.00%		10.00%
Operating Leases, Rent Expense (in Dollars)	$ 229,000	$ 149,000	$ 658,000	$ 456,000
Alonim Investments [Member]
Note 7 - Related Party Transaction (Details) [Line Items]
Common Stock, Shares, Outstanding (in Shares)	7,600,000		7,600,000
Percentage Of Common Stock Shares Outstanding	16.00%		16.00%
Cadeka [Member]
Note 7 - Related Party Transaction (Details) [Line Items]
Operating Leases, Rent Expense (in Dollars)	$ 34,000		$ 103,000

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Note 3 - Business Combinations (Details) - Summary of Consideration Paid (USD $)	0 Months Ended	9 Months Ended	1 Months Ended	9 Months Ended
	Jul. 05, 2013 Cadeka [Member]	Dec. 29, 2013 Cadeka [Member]	Mar. 22, 2013 Altior [Member]	Dec. 29, 2013 Altior [Member]
Note 3 - Business Combinations (Details) - Summary of Consideration Paid [Line Items]
Cash	$ 25,000,000	$ 25,000,000	$ 1,000,000	$ 1,000,000
Equity instruments	5,200,000	5,177,000	3,700,000	3,740,000
Estimated Fair value of earn-out payments		4,660,000		10,138,000
Total consideration paid		$ 34,837,000		$ 14,878,000

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Note 5 - Goodwill and Intangible Assets (Tables)

9 Months Ended

Dec. 29, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

	December 29, 2013		March 31, 2013
Beginning balance	$	10,356	$	3,184
Goodwill additions		19,217		7,172
Ending balance	$	29,573	$	10,356

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	December29, 2013							March 31, 2013
	Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets:
Existing technology	$	58,588	$	(35,647	)	$	22,941	$	42,858	$	(30,668	)	$	12,190
Customer relationships		5,075		(2,539	)		2,536		2,905		(2,079	)		826
Patents/Core technology		3,459		(3,328	)		131		3,459		(3,182	)		277
Distributor relationships		1,264		(1,264	)		—		1,264		(1,219	)		45
Tradenames		210		(35	)		175		—		—			—
Total intangible assets subject to amortization		68,596		(42,813	)		25,783		50,486		(37,148	)		13,338
In-process research and development		2,280		—			2,280		—		—			—
Total	$	70,876	$	(42,813	)	$	28,063	$	50,486	$	(37,148	)	$	13,338

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Amortization expense	$	1,991	$	994	$	5,665	$	3,155

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization Expense (by fiscal year)
2014 (3 months remaining)	$	1,991
2015		6,039
2016		4,863
2017		3,449
2018		3,255
2019 and thereafter		6,186
Total future amortization	$	25,783

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Note 4 - Fair Value (Tables)

9 Months Ended

Dec. 29, 2013

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	December 29, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	13,961	$	—	$	—	$	13,961
U.S. government and agency securities		11,537		21,254		—		32,791
State and local government securities		—		2,798		—		2,798
Corporate bonds and securities		4		72,721		—		72,725
Asset-backed securities		—		30,354		—		30,354
Mortgage-backed securities		—		16,034		—		16,034
Total investment assets	$	25,502	$	143,161	$	—	$	168,663
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	7,741	$	7,741
Acquisition-related contingent consideration – Cadeka	$	—	$	—	$	4,620	$	4,620
Total liabilities	$	—	$	—	$	12,361	$	12,361

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	5,042	$	—	$	—	$	5,042
U.S. government and agency securities		22,460		19,261		—		41,721
State and local government securities		—		2,935		—		2,935
Corporate bonds and securities		274		91,955		—		92,229
Asset-backed securities		—		30,966		—		30,966
Mortgage-backed securities		—		22,736		—		22,736
Total investment assets	$	27,776	$	167,853	$	—	$	195,629
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	10,138	$	10,138

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input
As of December 29, 2013
Acquisition-related contingent consideration – Altior	$	7,741	Combination of income and marketable approach	Revenue and Probability of Achievement
Acquisition-related contingent consideration – Cadeka	$	4,620	Combination of income and marketable approach	Revenue and Probability of Achievement

Schedule of Change in Fair Value of Purchase Consideration Liability [Table Text Block]

	December 29, 2013
As of March 31, 2013	$	10,138
Less: Adjustment to purchase consideration		(2,397	)
As of December 29, 2013	$	7,741

	December 29, 2013
As of March 31, 2013	$	—
Purchase contingent consideration		4,660
Less: Adjustment to purchase consideration		(40	)
As of December 29, 2013	$	4,620

Marketable Securities [Table Text Block]

	December29, 2013		March 31, 2013
Cash and cash equivalents
Cash at financial institutions	$	7,109	$	9,676
Cash equivalents
Money market funds		13,961		5,042
Total cash and cash equivalents	$	21,070	$	14,718
Available-for-sale securities
U.S. government and agency securities	$	32,791	$	41,721
State and local government securities		2,798		2,935
Corporate bonds and securities		72,725		92,229
Asset-backed securities		30,354		30,966
Mortgage-backed securities		16,034		22,736
Total short-term marketable securities	$	154,702	$	190,587

Realized Gain (Loss) on Investments [Table Text Block]

	Three Months Ended						Nine Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Gross realized gains	$	136		$	233		$	518		$	617
Gross realized losses		(69	)		(229	)		(477	)		(766	)
Net realized income (losses)	$	67		$	4		$	41		$	(149	)

Available-for-sale Securities [Table Text Block]

	December 29, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	13,961	$	—	$	—		$	13,961
U.S. government and agency securities		32,840		1		(50	)		32,791
State and local government securities		2,797		5		(4	)		2,798
Corporate bonds and securities		72,730		60		(65	)		72,725
Asset-backed securities		30,396		14		(56	)		30,354
Mortgage-backed securities		16,064		19		(49	)		16,034
Total investments	$	168,788	$	99	$	(224	)	$	168,663

	March 31, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	5,042	$	—	$	—		$	5,042
U.S. government and agency securities		41,694		27		—			41,721
State and local government securities		2,927		10		(2	)		2,935
Corporate bonds and securities		92,059		215		(45	)		92,229
Asset-backed securities		30,932		61		(27	)		30,966
Mortgage-backed securities		22,646		194		(104	)		22,736
Total investments	$	195,300	$	507	$	(178	)	$	195,629

Investments Classified by Contractual Maturity Date [Table Text Block]

	December 29, 2013				March 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year	$	61,616	$	61,615	$	61,011	$	61,029
Due in 1 to 5 years		107,172		107,048		134,289		134,600
Total	$	168,788	$	168,663	$	195,300	$	195,629

Schedule of Unrealized Loss on Investments [Table Text Block]

	December 29, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency securities	$	28,772	$	(50	)	$	—	$	—		$	28,772	$	(50	)
State and local government securities		1,516		(4	)		—		—			1,516		(4	)
Corporate bonds and securities		35,179		(65	)		—		—			35,179		(65	)
Asset-backed securities		15,301		(25	)		3,467		(31	)		18,768		(56	)
Mortgage-backed securities		8,249		(22	)		2,174		(27	)		10,423		(49	)
Total	$	89,017	$	(166	)	$	5,641	$	(58	)	$	94,658	$	(224	)

	March 31, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
State and local government securities	$	—	$	—		$	404	$	(2	)	$	404	$	(2	)
Corporate bonds and securities		29,609		(42	)		497		(3	)		30,106		(45	)
Asset-backed securities		10,008		(17	)		1,241		(10	)		11,249		(27	)
Mortgage-backed securities		2,911		(39	)		3,263		(65	)		6,174		(104	)
Total	$	42,528	$	(98	)	$	5,405	$	(80	)	$	47,933	$	(178	)

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Note 19 - Subsequent Events (Details) (Subsequent Event [Member], Stretch [Member], USD $)	0 Months Ended
	Jan. 14, 2014
Subsequent Event [Member] | Stretch [Member]
Note 19 - Subsequent Events (Details) [Line Items]
Payments to Acquire Businesses, Gross	$ 10,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities	10,000,000
Business Combination, Repayment of Obligations Acquired	$ 7,200,000

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Note 5 - Goodwill and Intangible Assets (Details) - Changes in the Carrying Amount of Goodwill (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Changes in the Carrying Amount of Goodwill [Abstract]
Balance	$ 10,356	$ 3,184
Goodwill additions	19,217	7,172
Balance	$ 29,573	$ 10,356

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Note 3 - Business Combinations (Details) - Fair Value Allocated to Tangible and Identifiable Intangible Assets (USD $) In Thousands, unless otherwise specified				9 Months Ended
	Dec. 29, 2013	Mar. 31, 2013	Apr. 01, 2012	Dec. 29, 2013 Altior [Member]	Dec. 29, 2013 Cadeka [Member]
Note 3 - Business Combinations (Details) - Fair Value Allocated to Tangible and Identifiable Intangible Assets [Line Items]
Cash				$ 1,055
Accounts Receivable				241
Inventories				1,756	126
Property, plant and equipment				231	140
Other assets				3	36
Accounts payable and accruals				(7,400)	(24)
Other short-term liabilities				(520)	(51)
Long-term liabilities				(126)	(61)
Total identifiable tangible assets, net				(4,760)	166
Identifiable intangible assets				7,540	20,380
Total identifiable assets, net				7,706	15,620
Goodwill	29,573	10,356	3,184	7,172	19,217
Fair value of total consideration transferred				$ 14,878	$ 34,837

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Note 6 - Long-Term Investment (Tables)

9 Months Ended

Dec. 29, 2013

Investments Schedule [Abstract]

Investment Holdings, Schedule of Investments [Text Block]

	December29, 2013			March 31, 2013
Beginning balance	$	1,288		$	1,273
Contributions		—			15
Distributions		(25	)		—
Ending balance	$	1,263		$	1,288

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Note 7 - Related Party Transaction (Tables)

9 Months Ended

Dec. 29, 2013

Total Net Sales [Member]

Note 7 - Related Party Transaction (Tables) [Line Items]

Schedule of Related Party Transactions [Table Text Block]

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Alonim		29%		28%		27%		30%

Net Accounts Receivable [Member]

Note 7 - Related Party Transaction (Tables) [Line Items]

Schedule of Related Party Transactions [Table Text Block]

	December29, 2013		March 31, 2013
Alonim		*		21%

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Note 2 - Recent Accounting Pronouncements

9 Months Ended

Dec. 29, 2013

Policy Text Block [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

NOTE 2.    RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the Financial Accounting Standards Board (“FASB”) issued amended standards that provided explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists. Under the amended standards, the unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward. These amended standard updates will be effective for our interim period beginning after December 15, 2013 and applied prospectively with early adoption permitted. We are currently evaluating the impact of this guidance on the presentation of our financial positions, results of operations and cash flows.

In February 2013, the FASB issued amended standards to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. These amended standards are effective for interim and annual reporting periods beginning after December 15, 2012. The adoption of this guidance did not have any material impact on our financial position, results of operations or cash flows.

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Note 8 - Restructuring Charges and Exit Costs (Tables)

9 Months Ended

Dec. 29, 2013

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs [Table Text Block]

	December 29, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination and other costs	$	2,860	$	158	$	(4	)	$	(1,581	)	$	1,433
Severance		426		1,353		—			(1,205	)		574
Balance at December 29, 2013	$	3,286	$	1,511	$	(4	)	$	(2,786	)	$	2,007

	March 31, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination costs and others	$	5,235	$	6	$	(56	)	$	(2,325	)	$	2,860
Severance		2,806		1,548		—			(3,928	)		426
Balance at March 31, 2013	$	8,041	$	1,554	$	(56	)	$	(6,253	)	$	3,286

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Note 13 - Lease Financing Obligations (Details) (USD $) In Millions, unless otherwise specified	Jul. 31, 2013	Jul. 31, 2012	Dec. 30, 2011	Oct. 31, 2011	Jun. 30, 2010	Dec. 31, 2009	Jul. 31, 2009	Dec. 29, 2013 Minimum [Member]	Dec. 29, 2013 Maximum [Member]
Note 13 - Lease Financing Obligations (Details) [Line Items]
Capital Lease Obligations	$ 0.2	$ 0.9	$ 4.5	$ 5.8	$ 1.0	$ 1.3	$ 1.1
Capital Lease License Term	29 months	3 years	3 years	3 years	3 years	28 months	3 years
Debt Instrument, Interest Rate, Effective Percentage								2.00%	7.25%

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Note 17 - Segment and Geographic Information (Tables)

9 Months Ended

Dec. 29, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Industrial & Embedded Systems	$	18,429	$	16,119	$	52,870	$	48,130
Networking & Storage		7,104		9,300		27,284		23,391
Communications Infrastructure		5,089		5,270		16,762		18,735
Other		68		310		419		616
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
China	$	11,566	$	10,749	$	33,860	$	31,458
United States		9,285		8,711		31,325		22,987
Singapore		3,138		3,245		10,068		10,561
Germany		2,456		2,662		8,124		8,865
Japan		1,575		1,499		4,415		4,367
Europe (excluding Germany)		907		1,111		2,431		3,654
Rest of world		1,763		3,022		7,112		8,980
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December 30, 2012		December29, 2013		December 30, 2012
Distributor A	26	%	28	%	26	%	30	%
Distributor B	21	%	10	%	23	%	10	%
Distributor C	13	%	10	%	11	%	10	%
Customer A	*		12	%	*		*

Schedule Of Major Distributors [Table Text Block]

	December29, 2013		March 31, 2013
Distributor A		*		21%
Distributor B		45%		20%
Distributor D		*		11%

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Note 4 - Fair Value (Details) - Amortized Cost and Estimated Fair Value of Cash Equivalents and Marketable Securities (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Amortized Cost and Estimated Fair Value of Cash Equivalents and Marketable Securities [Abstract]
Less than 1 year	$ 61,616	$ 61,011
Less than 1 year	61,615	61,029
Due in 1 to 5 years	107,172	134,289
Due in 1 to 5 years	107,048	134,600
Total	168,788	195,300
Total	$ 168,663	$ 195,629

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Note 10 - Net Income (Loss) Per Share (Details) - Summary of Net Income (Loss) per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Summary of Net Income (Loss) per Share [Abstract]
Net income (loss) (in Dollars)	$ (1,634)	$ 1,523	$ 5,654	$ 1,210
Shares used in computation of net income (loss) per share:
Basic	47,529	45,925	47,277	46,228
Effect of options and awards		513	1,538	395
Diluted	47,529	46,438	48,815	46,623
Net income (loss) per share
Basic (in Dollars per share)	$ (0.03)	$ 0.03	$ 0.12	$ 0.03
Diluted (in Dollars per share)	$ (0.03)	$ 0.03	$ 0.12	$ 0.03

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Current assets:
Cash and cash equivalents	$ 21,070	$ 14,718
Short-term marketable securities	154,702	190,587
Accounts receivable (net of allowances of $570 and $944)	21,699	12,614
Accounts receivable, related party (net of allowances of $462 and $346)	1,685	3,374
Inventories	24,950	19,430
Assets held for sale	13,083
Other current assets	3,645	3,177
Total current assets	240,834	243,900
Property, plant and equipment, net	8,784	24,100
Goodwill	29,573	10,356
Intangible assets, net	28,063	13,338
Other non-current assets	1,442	1,474
Total assets	308,696	293,168
Current liabilities:
Accounts payable	14,824	9,455
Accrued compensation and related benefits	4,352	3,624
Deferred income and allowances on sales to distributors	1,861	2,399
Deferred income and allowances on sales to related party distributor	8,017	9,475
Other current liabilities	11,151	15,215
Total current liabilities	40,205	40,168
Long-term lease financing obligations	106	1,342
Other non-current obligations	11,530	11,204
Total liabilities	51,841	52,714
Commitments and contingencies (Notes 13, 14 and 15)
Stockholders' equity:
Common stock, $.0001 par value; 100,000,000 shares authorized; 47,501,051 and 46,607,246 shares outstanding	5	5
Additional paid-in capital	511,644	749,426
Accumulated other comprehensive loss	(980)	(526)
Treasury stock at cost, 0 and 19,924,369 shares		(248,983)
Accumulated deficit	(253,814)	(259,468)
Total stockholders' equity	256,855	240,454
Total liabilities and stockholders’ equity	$ 308,696	$ 293,168

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Note 3 - Business Combinations (Details) - Components of Identifiable Intangible Assets (Cadeka [Member], USD $) In Thousands, unless otherwise specified	Dec. 29, 2013
Acquired Finite-Lived Intangible Assets [Line Items]
Identifiable intangible assets	$ 20,380
Developed Technology Rights [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Identifiable intangible assets	15,720
In Process Research and Development [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Identifiable intangible assets	2,280
Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Identifiable intangible assets	2,170
Trade Names [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Identifiable intangible assets	$ 210

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Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	$ 30,690	$ 30,999	$ 97,335	$ 90,872
China [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	11,566	10,749	33,860	31,458
United States [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	9,285	8,711	31,325	22,987
Singapore [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	3,138	3,245	10,068	10,561
Germany [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	2,456	2,662	8,124	8,865
Japan [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	1,575	1,499	4,415	4,367
Europe (excluding Germany) [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	907	1,111	2,431	3,654
Rest Of World [Member]
Note 17 - Segment and Geographic Information (Details) - Net Sales by Geographic Area [Line Items]
Net sales	$ 1,763	$ 3,022	$ 7,112	$ 8,980

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012
Cash flows from operating activities:
Net income	$ 5,654,000	$ 1,210,000
Depreciation and amortization	9,386,000	8,333,000
Gain on sale of intangible asset		(223,000)
Stock-based compensation expense	7,267,000	3,010,000
Release of deferred tax asset valuation allowance	(6,770,000)
Net change in fair value of contingent consideration	(2,437,000)
Accounts receivable and accounts receivable, related party	(7,155,000)	(3,669,000)
Inventories	(3,764,000)	(346,000)
Other current and non-current assets	(558,000)	47,000
Accounts payable	4,849,000	2,256,000
Accrued compensation and related benefits	659,000	182,000
Deferred income and allowance on sales to distributors and related party distributor	(1,996,000)	(1,848,000)
Other current and non-current liabilities	(5,992,000)	(5,298,000)
Net cash provided by (used in) operating activities	(857,000)	3,654,000
Cash flows from investing activities:
Purchases of property, plant and equipment and intellectual property, net	(1,675,000)	(1,253,000)
Purchases of short-term marketable securities	(166,738,000)	(132,955,000)
Proceeds from maturities of short-term marketable securities	24,410,000	37,563,000
Proceeds from sales of short-term marketable securities	178,167,000	97,190,000
Acquisition, net of cash acquired	(23,111,000)
Other disposal activities	125,000	235,000
Net cash provided by investing activities	11,178,000	780,000
Cash flows from financing activities:
Proceeds from issuance of common stock	3,971,000	4,699,000
Purchase of stock for withholding taxes on vested restricted stock	(1,042,000)
Repurchase of common stock	(4,000,000)
Payments of lease financing obligations	(2,898,000)	(2,513,000)
Net cash provided by (used in) financing activities	(3,969,000)	2,186,000
Net increase in cash and cash equivalents	6,352,000	6,620,000
Cash and cash equivalents at the beginning of period	14,718,000	8,714,000
Cash and cash equivalents at the end of period	21,070,000	15,334,000
Cadeka [Member]
Cash flows from financing activities:
Issuance of common stock in connection with Cadeka acquisition	$ 5,177,000

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Note 17 - Segment and Geographic Information (Details)	3 Months Ended	9 Months Ended
	Dec. 29, 2013	Dec. 29, 2013
Segment Reporting [Abstract]
Number of Reportable Segments		1
Number of Operating Segments		1
Concentration Risk, Percentage		10.00%
Percent of Accounts Receivable	10.00%	10.00%

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Note 5 - Goodwill and Intangible Assets (Details) - Estimated Future Amortization Expenses for Purchased Intangible Assets (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Amortization Expense (by fiscal year)
2014 (3 months remaining)	$ 1,991
2015	6,039
2016	4,863
2017	3,449
2018	3,255
2019 and thereafter	6,186
Total future amortization	$ 25,783	$ 13,338

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Note 18 - Assets Held For Sale (Details) - Related Assets Reclassified as Held for Sale (USD $) In Thousands, unless otherwise specified	Sep. 29, 2013
Long Lived Assets Held-for-sale [Line Items]
Assets Held For Sale	$ 13,083
Land [Member]
Long Lived Assets Held-for-sale [Line Items]
Assets Held For Sale	6,660
Building [Member]
Long Lived Assets Held-for-sale [Line Items]
Assets Held For Sale	$ 6,423

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Note 11 - Common Stock Repurchases (Tables)

9 Months Ended

Dec. 29, 2013

Stockholders' Equity Note [Abstract]

Schedule of Share-based Compensation, Activity [Table Text Block]

	Total number of Shares Purchased	Average Price Paid Per Share (or Unit)		Amount Paid for Purchase
Balances, March 31, 2013	9,564	$	9.22	$	88,189
Repurchases for nine months	309	$	12.94		4,000
Balances, December 29, 2013	9,873	$	9.34	$	92,189

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Note 8 - Restructuring Charges and Exit Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended					9 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended	9 Months Ended		3 Months Ended
	Dec. 29, 2013	Mar. 31, 2013	Dec. 30, 2012	Sep. 30, 2012	Jul. 01, 2012	Dec. 29, 2013	Dec. 29, 2013 Cost of Sales [Member]	Dec. 30, 2012 Cost of Sales [Member]	Dec. 29, 2013 Cost of Sales [Member]	Dec. 30, 2012 Cost of Sales [Member]	Mar. 31, 2013 Cost of Sales [Member]	Dec. 29, 2013 Operating Expense [Member]	Dec. 30, 2012 Operating Expense [Member]	Dec. 29, 2013 Operating Expense [Member]	Dec. 30, 2012 Operating Expense [Member]	Mar. 31, 2013 Operating Expense [Member]	Dec. 29, 2013 Employee Severance [Member]	Dec. 29, 2013 Facility Closing [Member]	Mar. 31, 2013 Industrial Research Assistance Program [Member]
Note 8 - Restructuring Charges and Exit Costs (Details) [Line Items]
Restructuring Charges	$ 100	$ 300	$ 600	$ 300	$ 900	$ 1,500	$ 17	$ 79	$ 122	$ 160	$ 300	$ 74	$ 524	$ 1,389	$ 1,619	$ 1,300	$ 1,400	$ 200	$ (500)

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Note 16 - Income Taxes

9 Months Ended

Dec. 29, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 16.    INCOME TAXES

During the three months ended December 29, 2013, we recorded an income tax benefit of approximately $1.4 million, which was primarily due to the lapsing of statute of limitations in federal and state jurisdictions, offset by income tax expense in certain of our non-US operations. During the nine months ended December 29, 2013, we recorded an income tax benefit of approximately $8.2 million. The income tax benefit was primarily due to the impact of the acquisition of Cadeka on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million. In the three and nine months ended December 30, 2012, we recorded $1.3 million each of income tax benefit which mainly resulted from the release of a $1.3 million reserve for uncertain tax positions related to an NOL carryback refund. The reserve was released due to the expiration of the statute of limitations in U.S. tax jurisdictions.

During the three and nine months ended December 29, 2013, the unrecognized tax benefits each decreased by $1.4 million to $14.0 million. The current unrecognized tax benefit was primarily related to the release of foreign liabilities and interest due to the lapse of statute of limitations and R&D credits. If recognized, $11.4 million of these unrecognized tax benefits (net of federal benefit) would be recorded as a reduction of future income tax provision before consideration of changes in the valuation allowance for deferred tax assets.

Estimated interest and penalties related to the income taxes are classified as a component of the provision for income taxes in the condensed consolidated statement of operations. Accrued interest and penalties consisted of the following as of the dates indicated (in thousands):

	December 29, 2013		March 31, 2013
Accrued interest and penalties	$	97	$	228

Our major tax jurisdictions are the United States federal and various states, Canada, China and certain other foreign jurisdictions. The fiscal years 2003 through 2013 remain open and subject to examinations by the appropriate governmental agencies in the United States and certain foreign jurisdictions.

On November 6, 2012, California passed Proposition 39, which mandates most taxpayers to apportion their California income by using a single sales factor and requires all taxpayers to use market-based sourcing for sale receipts for tax years beginning or after January 1, 2013. The enacted law did not have a material impact on our financial position, results of operations or cash flows.

Per the 2012 Tax Relief Act enacted in January 2013, the federal R&D credit is retroactively extended through 2013. No R&D credit and related reserve is considered in the third quarter of fiscal year 2014 tax provision pending improvement in our future visibility of the incremental R&D expenses. However, as a full valuation allowance is placed on the deferred tax assets, there is no impact on the statement of operations.

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Note 12 - Stock-Based Compensation (Tables)

9 Months Ended

Dec. 29, 2013

Note 12 - Stock-Based Compensation (Tables) [Line Items]

Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity [Table Text Block]

	As of December29,2013		Nine Months Ended December29,2013
	Shares of Common Stock		Shares of Common Stock		Weighted Average Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,379
Issued				13	$	11.47

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Intrinsic value of options exercised	$	805	$	304	$	2,699	$	879

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

	Shares			Weighted Average Grant- Date Fair Value		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at March 31, 2013		732,204		$	7.73		1.72	$	7,688
Granted		469,995			11.83
Issued and released		(311,406	)		9.48
Cancelled		(33,666	)		9.55
Unvested at December 29, 2013		857,127		$	9.27		1.65	$	9,968
Vested and expected to vest, December 29, 2013		761,615					1.60	$	8,858

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Cost of sales	$	165	$	175	$	519	$	289
Research and development		566		328		1,395		437
Selling, general and administrative		1,826		986		5,353		2,284
Total Stock-based compensation expense	$	2,557	$	1,489	$	7,267	$	3,010

Schedule of Unrecognized Compensation Cost, Nonvested Awards [Table Text Block]

	December29, 2013
	Amount (in thousands)		Weighted Average Expected Remaining Period (in years)
Options	$	8,180		2.7
RSUs		5,322		2.3
Total Stock-based compensation expense	$	13,502

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended						Nine Months Ended
	December29, 2013			December30, 2012			December29, 2013			December30, 2012
Expected term of options (years)		4.5			4.4		4.4	–	4.5	4.2	–	4.5
Risk-free interest rate		1.01	%		0.5	%	0.60%	–	1.12%	0.5%	–	0.6%
Expected volatility		32	%		41	%	32%	–	35%	41%	–	42%
Expected dividend yield		–			–			–			–
Weighted average estimated fair value	$	3.74		$	2.81		$	3.56		$	2.76

Employee Stock Option [Member]

Note 12 - Stock-Based Compensation (Tables) [Line Items]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		In-the-money Options Vested and Exercisable (in thousands)
Balance at March 31, 2013		6,212,333		$	7.48		5.04	$	19,199	$	1,481
Granted		1,460,300			12.38
Exercised		(535,832	)		7.12
Forfeited		(522,341	)		7.89
Cancelled		(10,834	)		10.92
Balance at December 29, 2013		6,603,626		$	8.56		5.07	$	21,985	$	2,062
Vested and expected to vest, December 29, 2013		6,184,803		$	8.46		5.00	$	21,073
Vested and exercisable, December 29, 2013		2,197,258		$	7.40		3.67	$	9,544

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Note 17 - Segment and Geographic Information (Details) - Major Distributors of Net Account Receivables	9 Months Ended		12 Months Ended
	Dec. 29, 2013		Mar. 31, 2013
Note 17 - Segment and Geographic Information (Details) - Major Distributors of Net Account Receivables [Line Items]
Net Accounts Receivable	10.00%
Distributor A [Member] | Accounts Receivable [Member]
Note 17 - Segment and Geographic Information (Details) - Major Distributors of Net Account Receivables [Line Items]
Net Accounts Receivable			21.00%
Distributor B [Member] | Accounts Receivable [Member]
Note 17 - Segment and Geographic Information (Details) - Major Distributors of Net Account Receivables [Line Items]
Net Accounts Receivable	45.00%		20.00%
Distributor D [Member] | Accounts Receivable [Member]
Note 17 - Segment and Geographic Information (Details) - Major Distributors of Net Account Receivables [Line Items]
Net Accounts Receivable		[1]	11.00%

[1] Accounts receivable for this distributor for this period were less than 10% of the net account balance.

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Note 18 - Assets Held For Sale

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Other Assets Disclosure [Text Block]

NOTE 18.    ASSETS HELD FOR SALE

During fiscal year 2013, we started actively looking for potential buyers for our Fremont campus. In the first quarter of our fiscal year 2014, we reclassified the related property and land as held for sale as of June 30, 2013, as we met all criteria to classify these assets as held for sale as of that date. These assets have been recorded at their carrying amount since it is lower than their estimated fair value, less estimated selling costs (in thousands). As required under current accounting guidance, depreciation of the building ceased upon reclassification as an asset held for sale.

	December29, 2013
Land	$	6,660
Building		6,423
Total assets held for sale	$	13,083

On July 9, 2013, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Ellis Partners LLC (“Ellis”). The Purchase Agreement provided for the sale of Exar’s Fremont campus to Ellis Partners and the leaseback by Exar of the building located at 48760 Kato Road. The Purchase Agreement was anticipated to close by the end of September 2013. Prior to closing, Ellis requested certain modifications to the Purchase Agreement that Exar deemed unacceptable. As a result, the Purchase Agreement terminated as of September 30, 2013. The Company intends to continue pursuing options to optimize its operating efficiency, including continuing to market the facilities for sale.

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Note 9 - Balance Sheet Detail (Details) - Property, Plant and Equipment (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Gross	$ 58,973	$ 82,708
Accumulated depreciation and amortization	(50,189)	(58,608)
Total property, plant and equipment, net	8,784	24,100
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Gross		6,660
Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Gross	860	16,224
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Gross	40,736	42,258
Software and Software Development Costs [Member]
Property, Plant and Equipment [Line Items]
Property, Plant, and Equipment, Gross	$ 17,377	$ 17,566

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Note 1 - Organization and Basis Of Presentation

9 Months Ended

Dec. 29, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION

Description of Business— Exar Corporation was incorporated in California in 1971 and reincorporated in Delaware in 1991. Exar Corporation and its subsidiaries (“Exar” or “we”) is a fabless semiconductor company that designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded, and Communications Infrastructure markets. Exar's product portfolio includes power management and connectivity components, high-performance analog and mixed-signal products, communications products and data compression and storage solutions.

Basis of Presentation and Use of Management Estimates—The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of December 29, 2013 and results of operations for the three and nine months ended December 29, 2013 and December 30, 2012, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year.

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2014 and 2013 consisted of 52 weeks. The third quarter of fiscal years 2014 and 2013 both consisted of 13 weeks.

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Accounts receivable, allowances (in Dollars)	$ 570	$ 944
Common stock par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares outstanding	47,501,051	46,607,246
Treasury stock at cost, shares	0	19,924,369
Related Party [Member]
Accounts receivable, allowances (in Dollars)	$ 462	$ 346

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Note 11 - Common Stock Repurchases

9 Months Ended

Dec. 29, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 11.    COMMON STOCK REPURCHASES

From time to time, we acquire outstanding common stock in the open market to partially offset dilution from our equity award programs, to increase our return on invested capital and to bring our cash to a more appropriate level for our organization.

On August 28, 2007, we announced the approval of a share repurchase plan under which we were authorized to repurchase up to $100.0 million of our common stock.

On July 9, 2013, we announced the approval of a share repurchase program under which we were authorized to repurchase an additional $50.0 million of our common stock. The repurchase program does not have a termination date, and may be modified, extended or terminated at any time. We intend to retire all shares repurchased under the stock repurchase plan. The purchase price for the repurchased shares of Exar is reflected as a reduction of common stock and additional paid-in capital. We may continue to repurchase our common stock under the repurchase plan, which would reduce our cash, cash equivalents and/or short-term marketable securities available to fund future operations and to meet other liquidity requirements.

As of December 29, 2013, we had repurchased shares valued at $92.2 million under the August 2007 repurchase program. During the three and nine months ended December 29, 2013, we repurchased $2.0 million and $4.0 million of our common stock under the July 2013 repurchase program, respectively. The repurchased shares were retired immediately. The remaining authorized amount for the stock repurchase under the repurchase programs is $57.8 million.

Stock repurchase activities during the nine months ended December 29, 2013 were indicated below (in thousands, except per share amounts):

	Total number of Shares Purchased	Average Price Paid Per Share (or Unit)		Amount Paid for Purchase
Balances, March 31, 2013	9,564	$	9.22	$	88,189
Repurchases for nine months	309	$	12.94		4,000
Balances, December 29, 2013	9,873	$	9.34	$	92,189

Note: The average price paid per share is based on the total price paid by Exar, which includes applicable broker fees.

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Note 16 - Income Taxes (Details) - Estimated Interest and Penalties Related to the Underpayment of Income Taxes (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Estimated Interest and Penalties Related to the Underpayment of Income Taxes [Abstract]
Accrued interest and penalties	$ 97	$ 228

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Note 14 - Commitments and Contingencies (Details) - Warranty Reserve Balance (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Warranty Reserve Balance [Abstract]
Beginning balance	$ 50	$ 90
Provisions for warranties issued	1,440
Settlements/adjustments	(328)	(40)
Ending balance	$ 1,162	$ 50

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Document And Entity Information	9 Months Ended
	Dec. 29, 2013	Feb. 03, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Exar Corporation
Document Type	10-Q
Current Fiscal Year End Date	--03-30
Entity Common Stock, Shares Outstanding		47,483,455
Amendment Flag	false
Entity Central Index Key	0000753568
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 29, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Note 12 - Stock-Based Compensation

9 Months Ended

Dec. 29, 2013

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

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

NOTE 12.    STOCK-BASED COMPENSATION

Employee Stock Participation Plan (“ESPP”)

Our ESPP permits employees to purchase common stock through payroll deductions at a purchase price that is equal to 95% of our common stock price on the last trading day of each three-calendar-month offering period. Our ESPP is non-compensatory.

The following table summarizes our ESPP transactions during the fiscal periods presented (in thousands, except per share amounts):

	As of December29,2013		Nine Months Ended December29,2013
	Shares of Common Stock		Shares of Common Stock		Weighted Average Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,379
Issued				13	$	11.47

Equity Incentive Plans

We currently have two equity incentive plans, in which shares are available for future issuance, the Exar Corporation 2006 Equity Incentive Plan (“2006 Plan”) and the Sipex Corporation (“Sipex”) 2006 Equity Incentive Plan (“Sipex Plan”), the latter of which was assumed in connection with the August 2007 acquisition of Sipex.

The 2006 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in common stock or units of common stock, as well as cash bonus awards. RSUs granted under the 2006 Plan are counted against authorized shares available for future issuance on a basis of two shares for every RSU issued. The 2006 Plan allows for performance-based vesting and partial vesting based upon the level of performance. Grants under the Sipex Plan are only available to former Sipex’s employees or employees we hired after the Sipex acquisition. At our annual meeting on September 15, 2010, our stockholders approved an amendment to the 2006 Plan to increase the aggregate share limit under the 2006 Plan by an additional 5.5 million shares to 8.3 million shares. At December 29, 2013, there were 2.0 million shares available for future grant under all our equity incentive plans.

Stock Option Activities

Our stock option transactions during the nine months ended December 29, 2013 were indicated below:

	Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)		In-the-money Options Vested and Exercisable (in thousands)
Balance at March 31, 2013		6,212,333		$	7.48		5.04	$	19,199	$	1,481
Granted		1,460,300			12.38
Exercised		(535,832	)		7.12
Forfeited		(522,341	)		7.89
Cancelled		(10,834	)		10.92
Balance at December 29, 2013		6,603,626		$	8.56		5.07	$	21,985	$	2,062
Vested and expected to vest, December 29, 2013		6,184,803		$	8.46		5.00	$	21,073
Vested and exercisable, December 29, 2013		2,197,258		$	7.40		3.67	$	9,544

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value, which is based on the closing price of our common stock of $11.63 and $10.50 as of December 29, 2013 and March 31, 2013, respectively. These are the values which would have been received by option holders if all option holders exercised their options on that date.

In January 2012, we granted 480,000 performance-based stock options to our Chief Executive Officer, President and Director (“CEO”). The options are scheduled to vest in four equal annual installments at the end of fiscal years 2013 through 2016 if certain predetermined financial measures are met. If the financial measures are not met, each installment will be rolled over to the subsequent fiscal year for vesting except for the last installment. If the financial measures are not met for two consecutive years, the options will be forfeited except for the last installment which will be forfeited at the end of fiscal year 2016. We recorded $65,000 and $195,000 of compensation expense for these options in the three and nine months ended December 29, 2013, respectively. We recorded $65,000 and $195,000 of compensation expense for these options in the three and nine months ended December 30, 2012, respectively.

Options exercised for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Intrinsic value of options exercised	$	805	$	304	$	2,699	$	879

RSU Activities

Our RSU transactions during the nine months ended December 29, 2013 are summarized as follows:

	Shares			Weighted Average Grant- Date Fair Value		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at March 31, 2013		732,204		$	7.73		1.72	$	7,688
Granted		469,995			11.83
Issued and released		(311,406	)		9.48
Cancelled		(33,666	)		9.55
Unvested at December 29, 2013		857,127		$	9.27		1.65	$	9,968
Vested and expected to vest, December 29, 2013		761,615					1.60	$	8,858

The aggregate intrinsic value of RSUs represents the closing price per share of our stock at the end of the periods presented, multiplied by the number of unvested RSUs or the number of vested and expected to vest RSUs, as applicable, at the end of each period.

For RSUs, stock-based compensation expense was calculated based on our stock price on the date of grant, multiplied by the number of RSUs granted. The grant date fair value of RSUs less estimated forfeitures was recognized on a straight-line basis, over the vesting period.

In March 2012, we granted 300,000 performance-based RSUs to our CEO. The RSUs are scheduled to start vesting in three equal annual installments at the end of fiscal year 2013 through 2015 with three year vesting periods if certain predetermined financial measures are met. If the financial measures are not met, each installment will be forfeited at the end of its respective fiscal year. In the three and nine months ended December 29, 2013, we recorded $119,000 and $641,000, respectively, of compensation expense for these awards. In the three and nine months ended December 30, 2012, we recorded $112,000 and $336,000, respectively, of compensation expense for these awards.

During fiscal year 2014, we granted 50,000 performance-based RSUs to certain executives. The RSUs are scheduled to start vesting in the three equal annual installments at the end of fiscal 2014 through 2017 with three year vesting periods if certain predetermined financial measures are met. In addition, the annual vesting requires continued service through each of the vesting dates. During the three and nine months ended December 29, 2013, we recorded $91,000 and $239,000 of compensation expense for these awards, respectively.

In August 2013, we announced the Fiscal Year 2014 Management Incentive Program (“2014 Incentive Program”). Under this program, each participant’s award is denominated in stock and subject to achievement of certain financial performance goals and the participant’s annual Management by Objective goals. In the three and nine months ended December 29, 2013, we recorded $0.2 million and $1.5 million of stock compensation expense related to the 2014 Incentive Program, respectively.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to stock options and RSUs during the fiscal periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Cost of sales	$	165	$	175	$	519	$	289
Research and development		566		328		1,395		437
Selling, general and administrative		1,826		986		5,353		2,284
Total Stock-based compensation expense	$	2,557	$	1,489	$	7,267	$	3,010

The amount of stock-based compensation cost capitalized in inventory was immaterial for all periods presented.

Unrecognized Stock-Based Compensation Expense

The following table summarizes unrecognized stock-based compensation expense related to stock options and RSUs for the period indicated below as follows:

	December29, 2013
	Amount (in thousands)		Weighted Average Expected Remaining Period (in years)
Options	$	8,180		2.7
RSUs		5,322		2.3
Total Stock-based compensation expense	$	13,502

Valuation Assumptions

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based compensation represent our estimates, but these estimates involve inherent uncertainties and the application of management’s judgment which include the expected term of the stock-based awards, stock price volatility and forfeiture rates. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

We used the following weighted average assumptions to calculate the fair values of options granted during the fiscal periods presented:

	Three Months Ended						Nine Months Ended
	December29, 2013			December30, 2012			December29, 2013			December30, 2012
Expected term of options (years)		4.5			4.4		4.4	–	4.5	4.2	–	4.5
Risk-free interest rate		1.01	%		0.5	%	0.60%	–	1.12%	0.5%	–	0.6%
Expected volatility		32	%		41	%	32%	–	35%	41%	–	42%
Expected dividend yield		–			–			–			–
Weighted average estimated fair value	$	3.74		$	2.81		$	3.56		$	2.76

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Note 12 - Stock-Based Compensation (Details) - Summary Stock-Based Compensation Expense Related to Stock Options and RSUs (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 2,557	$ 1,489	$ 7,267	$ 3,010
Cost of Sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	165	175	519	289
Research and Development Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	566	328	1,395	437
Selling, General and Administrative Expenses [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,826	$ 986	$ 5,353	$ 2,284

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Note 14 - Commitments and Contingencies (Details) - Outstanding Liabilities for Remediation Activities, Net of Payments (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Outstanding Liabilities for Remediation Activities, Net of Payments [Abstract]
Liabilities for remediation activities	$ 31	$ 76

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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. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Sales:
Net sales	$ 21,846	$ 22,235	$ 70,682	$ 63,210
Net sales, related party	8,844	8,764	26,653	27,662
Total net sales	30,690	30,999	97,335	90,872
Cost of sales:
Cost of sales	12,393	11,922	36,576	34,846
Cost of sales, related party	3,556	4,005	11,619	12,897
Amortization of purchased intangible assets and inventory step-up	1,898	801	5,346	2,578
Warranty reserve			1,440
Restructuring charges and exit costs	100	600	1,500
Total cost of sales	17,864	16,807	55,103	50,481
Gross profit	12,826	14,192	42,232	40,391
Operating expenses:
Research and development	6,929	5,376	20,263	16,598
Selling, general and administrative	9,086	8,645	26,407	24,066
Net change in fair value of contingent consideration	58		(2,437)
Total operating expenses	16,147	14,545	45,622	42,283
Loss from operations	(3,321)	(353)	(3,390)	(1,892)
Other income and expense, net:
Interest income and other, net	321	586	980	1,906
Interest expense	(39)	(56)	(117)	(128)
Total other income and expense, net	282	530	863	1,778
Income (Loss) before income taxes	(3,039)	177	(2,527)	(114)
Benefit from income taxes	(1,405)	(1,346)	(8,181)	(1,324)
Net income (loss)	$ (1,634)	$ 1,523	$ 5,654	$ 1,210
Net income (loss) per share:
Basic (in Dollars per share)	$ (0.03)	$ 0.03	$ 0.12	$ 0.03
Diluted (in Dollars per share)	$ (0.03)	$ 0.03	$ 0.12	$ 0.03
Shares used in the computation of net income (loss) per share:
Basic (in Shares)	47,529	45,925	47,277	46,228
Diluted (in Shares)	47,529	46,438	48,815	46,623

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Note 6 - Long-Term Investment

9 Months Ended

Dec. 29, 2013

Investments Schedule [Abstract]

Investment [Text Block]

NOTE 6.    LONG-TERM INVESTMENT

Our long-term investment consists of our investment in Skypoint Telecom Fund II (US), L.P. (“Skypoint Fund”). Skypoint Fund is a venture capital fund that invested primarily in private companies in the telecommunications and/or networking industries. We account for this non-marketable equity investment under the cost method. We periodically review and determine whether the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

As of the dates indicated below, our long-term investment balance, which is included in the “Other non-current assets” line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	December29, 2013			March 31, 2013
Beginning balance	$	1,288		$	1,273
Contributions		—			15
Distributions		(25	)		—
Ending balance	$	1,263		$	1,288

The carrying amount of $1.3 million as of December 29, 2013 reflects the net of the capital contributions, capital distributions and cumulative impairment charges. We have made $4.8 million in capital contributions to Skypoint Fund since we became a limited partner in July 2001. During the first quarter of fiscal year 2013, we contributed $15,000 to the fund.

In the three months ended December 29, 2013, Skypoint Fund informed us of the sale of one of the portfolio companies in the fund. Exar’s distribution from the sale was approximately $25,000. In accordance with the standard related to accounting for cost method investments, we recorded the distribution on the cost basis and reduced the carrying value of our investment in the Skypoint Fund.

The Partnership is currently in the dissolution phase. As of December 29, 2013, we do not have any further capital commitments.

Impairment

We evaluate our long-term investment for impairment whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year by comparing the carrying amount to the fair value of the underlying investments. If the carrying amount exceeds its fair value, the long term-investment is considered impaired and a second step is performed to measure the amount of impairment loss. We analyzed the fair value of the underlying investments of Skypoint Fund and as a result, no impairment was recorded during the third fiscal quarter of 2014.

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Note 5 - Goodwill and Intangible Assets

9 Months Ended

Dec. 29, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 5.    GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one reporting unit, we utilize an entity-wide approach to assess goodwill for impairment. As of December 29, 2013, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

The changes in the carrying amount of goodwill for fiscal years 2014 and 2013 were as follows (in thousands):

	December 29, 2013		March 31, 2013
Beginning balance	$	10,356	$	3,184
Goodwill additions		19,217		7,172
Ending balance	$	29,573	$	10,356

The goodwill additions during the nine months ended December 29, 2013 consist of $19.2 million residual allocation from the Cadeka acquisition purchase price accounting. Goodwill additions during the fiscal year ended March 31, 2013 consisted of $7.2 million residual allocation from the Altior acquisition purchase price accounting.

Intangible Assets

Our purchased intangible assets as of the dates indicated below were as follows (in thousands):

	December29, 2013							March 31, 2013
	Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets:
Existing technology	$	58,588	$	(35,647	)	$	22,941	$	42,858	$	(30,668	)	$	12,190
Customer relationships		5,075		(2,539	)		2,536		2,905		(2,079	)		826
Patents/Core technology		3,459		(3,328	)		131		3,459		(3,182	)		277
Distributor relationships		1,264		(1,264	)		—		1,264		(1,219	)		45
Tradenames		210		(35	)		175		—		—			—
Total intangible assets subject to amortization		68,596		(42,813	)		25,783		50,486		(37,148	)		13,338
In-process research and development		2,280		—			2,280		—		—			—
Total	$	70,876	$	(42,813	)	$	28,063	$	50,486	$	(37,148	)	$	13,338

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Patents/core technology is amortized over five to six years. Distributor relationships are amortized over six years. Customer relationships are amortized over five to seven years. Tradenames are amortized over three years. We expect the amortization of in-process research and development to start in fiscal year 2015. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indicator of impairment exists, we compare the carrying value of long-lived assets to our projection of future undiscounted cash flows attributable to such assets and, in the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge equal to the excess of the carrying value over the asset’s fair value. Although the assumptions used in projecting future revenues and gross margins are consistent with those used in our annual strategic planning process, intangible asset impairment charges might be required in future periods if our assumptions are not achieved.

As December 29, 2013, there were no indicators that required us to perform an intangible assets impairment review.

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Amortization expense	$	1,991	$	994	$	5,665	$	3,155

The total future amortization expenses for our purchased intangible assets are summarized below (in thousands):

Amortization Expense (by fiscal year)
2014 (3 months remaining)	$	1,991
2015		6,039
2016		4,863
2017		3,449
2018		3,255
2019 and thereafter		6,186
Total future amortization	$	25,783

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Note 17 - Segment and Geographic Information

9 Months Ended

Dec. 29, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 17.    SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one reportable segment which is comprised of one operating segment. We design, develop and market high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded Systems, and Communications Infrastructure markets. Our product portfolio includes power management and connectivity components, communications products, high precision or high speed analog ICs, and data compression and storage solutions.

Our net sales by end market were summarized as follows as of the dates indicated below (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Industrial & Embedded Systems	$	18,429	$	16,119	$	52,870	$	48,130
Networking & Storage		7,104		9,300		27,284		23,391
Communications Infrastructure		5,089		5,270		16,762		18,735
Other		68		310		419		616
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Our foreign operations are conducted primarily through our wholly-owned subsidiaries in Canada, China, France, Germany, Japan, Malaysia, South Korea, Taiwan and the United Kingdom. Our principal markets include North America, Europe and the Asia Pacific region. Net sales by geographic areas represent direct sales principally to original equipment manufacturers (“OEM”), or their designated subcontract manufacturers, and to distributors (affiliated and unaffiliated) who buy our products and resell to their customers.

Our net sales by geographic area for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
China	$	11,566	$	10,749	$	33,860	$	31,458
United States		9,285		8,711		31,325		22,987
Singapore		3,138		3,245		10,068		10,561
Germany		2,456		2,662		8,124		8,865
Japan		1,575		1,499		4,415		4,367
Europe (excluding Germany)		907		1,111		2,431		3,654
Rest of world		1,763		3,022		7,112		8,980
Total net sales	$	30,690	$	30,999	$	97,335	$	90,872

Substantially all of our long-lived assets at each of December 29, 2013 and March 31, 2013 were located in the United States.

The following distributors and customer accounted for 10% or more of our net sales in the periods indicated:

	Three Months Ended				Nine Months Ended
	December29, 2013		December 30, 2012		December29, 2013		December 30, 2012
Distributor A	26	%	28	%	26	%	30	%
Distributor B	21	%	10	%	23	%	10	%
Distributor C	13	%	10	%	11	%	10	%
Customer A	*		12	%	*		*

*     Net sales for this distributor or customer for this period were less than 10% of our net sales.

No other distributor or customer accounted for 10% or more of the net sales for the three and nine months ended December 29, 2013 and December 30, 2012, respectively.

The following distributors accounted for 10% or more of our net accounts receivable as of the dates indicated:

	December29, 2013		March 31, 2013
Distributor A		*		21%
Distributor B		45%		20%
Distributor D		*		11%

*     Accounts receivable for this distributor for this period were less than 10% of the net account balance.

No other distributor or customer accounted for 10% or more of the net accounts receivable as of December 29, 2013 and March 31, 2013, respectively.

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Note 13 - Lease Financing Obligations

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Debt and Capital Leases Disclosures [Text Block]

NOTE 13.    LEASE FINANCING OBLIGATIONS

We have acquired engineering design tools (“Design Tools”) under capital leases. We acquired Design Tools of $0.2 million in July 2013 under a 29-month license, $0.9 million in July 2012 under a three-year license, $4.5 million in December 2011 under a three-year license, $5.8 million in October 2011 under a three-year license, $1.0 million in June 2010 under a three-year license, $1.3 million in December 2009 under a 28-month license, and $1.1 million in July 2009 under a three-year license, all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item in the condensed consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets as of December 29, 2013 and March 31, 2013, respectively. The effective interest rates for the Design Tools range from 2.0% to 7.25%.

Amortization expense related to the Design Tools, which was recorded using the straight-line method over the remaining useful life for the periods indicated below was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Amortization expense	$	800	$	818	$	2,494	$	2,659

Future minimum lease and sublease income payments for the lease financing obligations as of December 29, 2013 are as follows (in thousands):

Fiscal Years	Design Tools
2014 (3 months remaining)	$	370
2015		1,456
2016		59
2017		10
2018 and thereafter		6
Total minimum lease payments		1,901
Less: amount representing interest		95
Present value of minimum lease payments		1,806
Less: short-term lease financing obligations		1,700
Long-term lease financing obligations	$	106

Interest expense for the lease financing obligation for the periods indicated below was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Interest expense	$	39	$	35	$	115	$	107

In the course of our business, we enter into arrangements accounted for as operating leases related to rental of office space. Rent expenses for all operating leases for the periods indicated below were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December29, 2013		December30, 2012		December29, 2013		December30, 2012
Rent expense	$	229	$	149	$	658	$	456

Our future minimum lease payments for the lease operating obligations as of December 29, 2013 are as follows (in thousands):

Fiscal Years	Facilities
2014 (3 months remaining)	$	200
2015		552
2016		461
2017		150
2018 and thereafter		20
Total minimum lease payments	$	1,383

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Note 13 - Lease Financing Obligations (Details) - Amortization Expense Related to the Design Tools (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Note 13 - Lease Financing Obligations (Details) - Amortization Expense Related to the Design Tools [Line Items]
Amortization expense	$ 1,898	$ 801	$ 5,346	$ 2,578
Design Tools [Member]
Note 13 - Lease Financing Obligations (Details) - Amortization Expense Related to the Design Tools [Line Items]
Amortization expense	$ 800	$ 818	$ 2,494	$ 2,659

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Note 9 - Balance Sheet Detail

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Supplemental Balance Sheet Disclosures [Text Block]

NOTE 9.    BALANCE SHEET DETAIL

Our inventories consisted of the following as of the dates indicated below (in thousands):

	December29, 2013		March 31, 2013
Work-in-process and raw materials	$	14,454	$	9,981
Finished goods		10,496		9,449
Total inventories	$	24,950	$	19,430

Our property, plant and equipment consisted of the following as of the dates indicated below (in thousands):

	December29, 2013			March 31, 2013
Land	$	—		$	6,660
Building		860			16,224
Machinery and equipment		40,736			42,258
Software and licenses		17,377			17,566
Property, plant and equipment, total		58,973			82,708
Accumulated depreciation and amortization		(50,189	)		(58,608	)
Total property, plant and equipment, net	$	8,784		$	24,100

Our other current liabilities consisted of the following as of the dates indicated below (in thousands):

	December29, 2013		March 31, 2013
Fair value of earn-out liability – short-term	$	2,230	$	2,599
Accrued restructuring charges and exit costs		1,957		2,020
Short-term lease financing obligations		1,700		3,189
Accrued manufacturing expenses, royalties and licenses		1,669		2,370
Purchase consideration holdback		1,256		250
Accrued legal and professional services		866		746
Accrued sales and marketing expenses		573		576
Accrual for dispute resolution		—		2,727
Other		900		738
Total other current liabilities	$	11,151	$	15,215

Our other non-current obligations consisted of the following (in thousands) as of the dates indicated:

	December29, 2013		March 31, 2013
Fair value of earn-out liability – long–term	$	10,131	$	7,539
Long-term taxes payable		749		2,225
Accrued restructuring charges and exit costs		14		1,266
Other		636		174
Total other non-current obligations	$	11,530	$	11,204

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Note 6 - Long-Term Investment (Details) (USD $)	12 Months Ended			3 Months Ended
	Mar. 31, 2013	Dec. 29, 2013	Apr. 01, 2012	Dec. 29, 2013 Skypoint Fund [Member]	Jul. 01, 2012 Skypoint Fund [Member]
Note 6 - Long-Term Investment (Details) [Line Items]
Long-term Investments	$ 1,288,000	$ 1,263,000	$ 1,273,000
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures				4,800,000
Payments to Acquire Long-term Investments	15,000				15,000
Non-Marketable Equity Investment, Distribution				$ 25,000

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Note 7 - Related Party Transaction

9 Months Ended

Dec. 29, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 7.    RELATED PARTY TRANSACTIONS

Alonim Investments Inc. (“Alonim”), owns approximately 7.6 million shares, or approximately 16%, of our outstanding common stock as of December 29, 2013. As such, Alonim is our largest stockholder and any sales made to Alonim or its affiliates are considered related party transactions.

Related party contributions to our total net sales for the periods indicated below were as follows:

	Three Months Ended				Nine Months Ended
	December 29, 2013		December 30, 2012		December 29, 2013		December 30, 2012
Alonim		29%		28%		27%		30%

Related party receivables to our net accounts receivables were as follows as of the dates indicated below:

	December29, 2013		March 31, 2013
Alonim		*		21%

*     Related party receivables for this period were less than 10% of the net account balance.

Related party expenses for marketing promotional materials reimbursed were not significant for the three and nine months ended December 29, 2013 and December 30, 2012, respectively.

We rent our Loveland, Colorado office from an entity, which is partially-owned by one of the founders of Cadeka, who is now one of our employees. We have recorded $34,000 and $103,000 in related party rent expense for the three and nine months ended December 29, 2013, respectively.

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Note 8 - Restructuring Charges and Exit Costs

9 Months Ended

Dec. 29, 2013

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

NOTE 8.    RESTRUCTURING CHARGES AND EXIT COSTS

2014 Restructuring Charges and Exit Costs

During the three and nine months ended December 29, 2013, we incurred restructuring charges and exit costs of $0.1 million and $1.5 million, respectively. The charges include $1.4 million of severance benefits and $0.2 million of lease termination and other costs. In the fourth quarter of fiscal 2014 we have started to implement an additional restructuring in order to reduce costs. The total charges from this restructuring have not yet been determined.

2013 Restructuring Charges and Exit Costs

In the fourth quarter of fiscal year 2013, we recorded $0.3 million restructuring charges and exit costs and released a $0.5 million liability related to Industrial Research Assistance Program with Canadian governmental agency. In the third, second and first quarters of fiscal year 2013, we recorded restructuring charges and exit costs of $0.6 million, $0.3 million and $0.9 million, respectively. Of the total restructuring charges and exit costs recorded in fiscal year 2013, $0.3 million was reflected in cost of sales and $1.3 million was reflected in operating expenses within our consolidated statements of operations.

Our restructuring liabilities were included in the accounts payable, other current liabilities and other non-current obligations lines within our condensed consolidated balance sheets. The following table summarizes the activities affecting the liabilities as of the dates indicated below (in thousands):

	December 29, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination and other costs	$	2,860	$	158	$	(4	)	$	(1,581	)	$	1,433
Severance		426		1,353		—			(1,205	)		574
Balance at December 29, 2013	$	3,286	$	1,511	$	(4	)	$	(2,786	)	$	2,007

	March 31, 2013
	Beginning balance		Additions/ adjustments		Non-cash charges			Payments			Ending balance
Lease termination costs and others	$	5,235	$	6	$	(56	)	$	(2,325	)	$	2,860
Severance		2,806		1,548		—			(3,928	)		426
Balance at March 31, 2013	$	8,041	$	1,554	$	(56	)	$	(6,253	)	$	3,286

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Note 10 - Net Income (Loss) Per Share

9 Months Ended

Dec. 29, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 10.    NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share reflects the potential dilution that would occur if outstanding stock options or warrants to purchase common stock were exercised for common stock, using the treasury stock method, and the common stock underlying outstanding restricted stock units (“RSUs”) was issued.

The following table summarizes our net income (loss) per share for the periods indicated below (in thousands, except per share amounts):

	Three Months Ended					Nine Months Ended
	December29, 2013			December30, 2012		December29, 2013		December30, 2012
Net income (loss)	$	(1,634	)	$	1,523	$	5,654	$	1,210
Shares used in computation of net income (loss) per share:
Basic		47,529			45,925		47,277		46,228
Effect of options and awards		—			513		1,538		395
Diluted		47,529			46,438		48,815		46,623
Net income (loss) per share
Basic	$	(0.03	)	$	0.03	$	0.12	$	0.03
Diluted	$	(0.03	)	$	0.03	$	0.12	$	0.03

All outstanding stock options and restricted stock units (“RSUs”) are potentially dilutive securities. In the three months ended December 29, 2013, all shares attributable to outstanding options and RSUs were excluded from the computation of diluted net loss per share, as inclusion of such shares would have an anti-dilutive effect. In the nine months ended December 29, 2013, approximately 1.1 million shares were excluded from the computation of diluted net income per share because they were determined to be anti-dilutive.

In the three and nine months ended December 30, 2012, approximately 3.2 million shares and 3.8 million shares, respectively, were excluded from the computation of diluted net income per share because they were determined to be anti-dilutive.

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Note 7 - Related Party Transaction (Details) - Related Party Receivables to Net Accounts Receivables	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013 Net Accounts Receivable [Member] Alonim [Member]
Related Party Transaction [Line Items]
Alonim	10.00%	21.00%

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Note 13 - Lease Financing Obligations (Details) - Lease financing (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013	Mar. 31, 2013
Lease financing [Abstract]
2014 (3 months remaining)	$ 370
2015	1,456
2016	59
2017	10
2018 and thereafter	6
Total minimum lease payments	1,901
Less: amount representing interest	95
Present value of minimum lease payments	1,806
Less: short-term lease financing obligations	1,700	3,189
Long-term lease financing obligations	$ 106

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Note 8 - Restructuring Charges and Exit Costs (Details) - Summary of Activities Affecting Liabilities (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Restructuring Cost and Reserve [Line Items]
Beginning balance	$ 3,286	$ 8,041
Additions/adjustments	1,511	1,554
Non-cash charges	(4)	(56)
Payments	(2,786)	(6,253)
Ending balance	2,007	3,286
Lease Contract Termination Costs [Member]
Restructuring Cost and Reserve [Line Items]
Beginning balance	2,860	5,235
Additions/adjustments	158	6
Non-cash charges	(4)	(56)
Payments	(1,581)	(2,325)
Ending balance	1,433	2,860
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Beginning balance	426	2,806
Additions/adjustments	1,353	1,548
Payments	(1,205)	(3,928)
Ending balance	$ 574	$ 426

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Note 7 - Related Party Transaction (Details) - Related Party Contributions to Total Net Sales	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Related Party Transaction [Line Items]
Alonim			10.00%
Total Net Sales [Member] | Alonim [Member]
Related Party Transaction [Line Items]
Alonim	29.00%	28.00%	27.00%	30.00%

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Note 16 - Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013
Note 16 - Income Taxes (Details) [Line Items]
Income Tax Expense (Benefit)	$ (1,405,000)	$ (1,346,000)	$ (6,800,000)	$ (8,181,000)	$ (1,324,000)
Unrecognized Tax Benefits, Period Increase (Decrease)	(1,400,000)			(1,300,000)		(1,400,000)
Unrecognized Tax Benefits	14,000,000		14,000,000	14,000,000		14,000,000
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit	11,400,000		11,400,000	11,400,000		11,400,000
Net Operating Loss Carryback Refund [Member]
Note 16 - Income Taxes (Details) [Line Items]
Income Tax Expense (Benefit)		(1,300,000)			(1,300,000)
Unrecognized Tax Benefits, Period Increase (Decrease)	$ (1,300,000)
Minimum [Member]
Note 16 - Income Taxes (Details) [Line Items]
Open Tax Year	2003
Maximum [Member]
Note 16 - Income Taxes (Details) [Line Items]
Open Tax Year	2013

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Note 10 - Net Income (Loss) Per Share (Tables)

9 Months Ended

Dec. 29, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended					Nine Months Ended
	December29, 2013			December30, 2012		December29, 2013		December30, 2012
Net income (loss)	$	(1,634	)	$	1,523	$	5,654	$	1,210
Shares used in computation of net income (loss) per share:
Basic		47,529			45,925		47,277		46,228
Effect of options and awards		—			513		1,538		395
Diluted		47,529			46,438		48,815		46,623
Net income (loss) per share
Basic	$	(0.03	)	$	0.03	$	0.12	$	0.03
Diluted	$	(0.03	)	$	0.03	$	0.12	$	0.03

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Note 4 - Fair Value (Details) - Net Realized Gains (Losses) on Marketable Securities (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Net Realized Gains (Losses) on Marketable Securities [Abstract]
Gross realized gains	$ 136	$ 233	$ 518	$ 617
Gross realized losses	(69)	(229)	(477)	(766)
Net realized income (losses)	$ 67	$ 4	$ 41	$ (149)

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Note 15 - Legal Proceedings

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

NOTE 15.    LEGAL PROCEEDINGS

From time to time, we are involved in various claims, legal actions and complaints arising in the normal course of business. Although the ultimate outcome of the matters discussed below and other matters is not presently determinable, management currently believes that the resolution of all such pending matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Two former employees of Exar’s French subsidiary have filed claims against that French subsidiary for alleged unfair dismissal in the French Labor Courts. We believe that the former employees were terminated in accordance with the requirements of French law and that the former employees’ claims are not supported by any relevant evidence. One matter is scheduled for trial in February, 2014. The other matter is in the early procedural stages. We intend to vigorously defend our positions.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Dec. 29, 2013

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation and Use of Management Estimates—The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of December 29, 2013 and results of operations for the three and nine months ended December 29, 2013 and December 30, 2012, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year.

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2014 and 2013 consisted of 52 weeks. The third quarter of fiscal years 2014 and 2013 both consisted of 13 weeks.

Business Combinations Policy [Policy Text Block]

We periodically evaluate potential strategic acquisitions or arrangements to broaden our product offering and build upon our existing library of intellectual property, human capital and engineering talent in order to expand our capabilities in the areas in which we operate or to acquire complementary businesses.

We account for each business combination by applying the acquisition method, which requires (1) identifying the acquiree; (2) determining the acquisition date; (3) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest we have in the acquiree at their acquisition date fair value; and (4) recognizing and measuring goodwill or a gain from a bargain purchase.

Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, we typically account for the acquired contingencies using existing guidance for a reasonable estimate.

To establish fair value, we measure the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants. The measurement assumes the highest and best use of the asset by the market participants that would maximize the value of the asset or the group of assets within which the asset would be used at the measurement date, even if the intended use of the asset is different.

Acquisition related costs, including finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees are accounted for as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity securities are recognized in accordance with other applicable GAAP.

Fair Value Measurement, Policy [Policy Text Block]

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one reporting unit, we utilize an entity-wide approach to assess goodwill for impairment. As of December 29, 2013, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

Earnings Per Share, Policy [Policy Text Block]

Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share reflects the potential dilution that would occur if outstanding stock options or warrants to purchase common stock were exercised for common stock, using the treasury stock method, and the common stock underlying outstanding restricted stock units (“RSUs”) was issued.

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Note 17 - Segment and Geographic Information (Details) - Net Sales by End Market (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Segment Reporting Information [Line Items]
Net sales	$ 30,690	$ 30,999	$ 97,335	$ 90,872
Industrial And Embedded Systems [Member]
Segment Reporting Information [Line Items]
Net sales	18,429	16,119	52,870	48,130
Networking And Storage [Member]
Segment Reporting Information [Line Items]
Net sales	7,104	9,300	27,284	23,391
Communications Infrastructure [Member]
Segment Reporting Information [Line Items]
Net sales	5,089	5,270	16,762	18,735
Other Markets [Member]
Segment Reporting Information [Line Items]
Net sales	$ 68	$ 310	$ 419	$ 616

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Note 4 - Fair Value (Details) - Change in Fair Value of Altior Purchase Consideration Liability (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Dec. 29, 2013	Dec. 29, 2013	Dec. 29, 2013 Adjustment to Purchase Consideration [Member] Altior [Member]	Dec. 29, 2013 Adjustment to Purchase Consideration [Member] Cadeka [Member]	Dec. 29, 2013 Purchase [Member] Cadeka [Member]	Dec. 29, 2013 Altior [Member]	Mar. 31, 2013 Altior [Member]	Dec. 29, 2013 Cadeka [Member]
Note 4 - Fair Value (Details) - Change in Fair Value of Altior Purchase Consideration Liability [Line Items]
Acquisition-related contingent consideration						$ 7,741	$ 10,138	$ 4,620
Adjustments To Purchase Consideration	$ 58	$ (2,437)	$ (2,397)	$ (40)	$ 4,660

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Note 18 - Assets Held For Sale (Tables)

9 Months Ended

Dec. 29, 2013

Disclosure Text Block Supplement [Abstract]

Disclosure of Long Lived Assets Held-for-sale [Table Text Block]

	December29, 2013
Land	$	6,660
Building		6,423
Total assets held for sale	$	13,083

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Net income (loss)	$ (1,634)	$ 1,523	$ 5,654	$ 1,210
Changes in market value of investments, net of tax:
Changes in unrealized gain on investments	(77)	(305)	(495)	(42)
Reclassification adjustment for net realized gains (losses)	67	4	41	(149)
Net change in market value of investments	(10)	(301)	(454)	(191)
Comprehensive income (loss)	$ (1,644)	$ 1,222	$ 5,200	$ 1,019

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Note 13 - Lease Financing Obligations (Details) - Operating lease (USD $) In Thousands, unless otherwise specified	Dec. 29, 2013
Operating lease [Abstract]
2014 (3 months remaining)	$ 200
2015	552
2016	461
2017	150
2018 and thereafter	20
Total minimum lease payments	$ 1,383

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Note 4 - Fair Value

9 Months Ended

Dec. 29, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 4.    FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair value of contingent consideration arising from the acquisitions of Altior and Cadeka is classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs.

There were no transfers between Level 1, Level 2, and Level 3 during the fiscal quarter ended December 29, 2013.

Our investment assets, measured at fair value on a recurring basis, as of the dates indicated below were as follows (in thousands, except for percentages):

	December 29, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	13,961	$	—	$	—	$	13,961
U.S. government and agency securities		11,537		21,254		—		32,791
State and local government securities		—		2,798		—		2,798
Corporate bonds and securities		4		72,721		—		72,725
Asset-backed securities		—		30,354		—		30,354
Mortgage-backed securities		—		16,034		—		16,034
Total investment assets	$	25,502	$	143,161	$	—	$	168,663
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	7,741	$	7,741
Acquisition-related contingent consideration – Cadeka	$	—	$	—	$	4,620	$	4,620
Total liabilities	$	—	$	—	$	12,361	$	12,361

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	5,042	$	—	$	—	$	5,042
U.S. government and agency securities		22,460		19,261		—		41,721
State and local government securities		—		2,935		—		2,935
Corporate bonds and securities		274		91,955		—		92,229
Asset-backed securities		—		30,966		—		30,966
Mortgage-backed securities		—		22,736		—		22,736
Total investment assets	$	27,776	$	167,853	$	—	$	195,629
Liabilities:
Acquisition-related contingent consideration – Altior	$	—	$	—	$	10,138	$	10,138

The fair value of contingent consideration was determined based on a probability-based approach which includes projected revenues, percentage probability of occurrence and discount rate to present value payments. A significant increase (decrease) in the projected revenue, discount rate or probability of occurrence in isolation could result in a significantly higher (lower) fair value measurement. 

The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of December 29, 2013.

	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input
As of December 29, 2013
Acquisition-related contingent consideration – Altior	$	7,741	Combination of income and marketable approach	Revenue and Probability of Achievement
Acquisition-related contingent consideration – Cadeka	$	4,620	Combination of income and marketable approach	Revenue and Probability of Achievement

We calculate the fair value of the contingent consideration on a quarterly basis based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period.

The change in the fair value of our Altior purchase consideration liability is as follows (in thousands):

	December 29, 2013
As of March 31, 2013	$	10,138
Less: Adjustment to purchase consideration		(2,397	)
As of December 29, 2013	$	7,741

The change in the fair value of our Cadeka purchase consideration liability is as follows (in thousands):

	December 29, 2013
As of March 31, 2013	$	—
Purchase contingent consideration		4,660
Less: Adjustment to purchase consideration		(40	)
As of December 29, 2013	$	4,620

We have focused our resources on developing and marketing our coprocessor products with the Altior software technology incorporated. These products, when compared to the Altior legacy FPGA-based products, will earn credit under the asset purchase agreement at a lower rate, resulting in a lower probability of meeting certain near-term earn-out targets. As a result, the fair value of the contingent consideration for Altior acquisition was reduced by $2.5 million and credited to operating expense in the three months ended September 29, 2013. In the third quarter of fiscal year 2014, the fair value of the contingent consideration was increased by $98,000 related to present value of the amount payable due to passage of time.

In the third quarter of fiscal year 2014 the fair value of the contingent consideration for the Cadeka was decreased by $40,000 related to changes in probability of achieving revenue targets and impact of change in present value of the amount payable due to passage of time.

Our cash, cash equivalents and short-term marketable securities as of the dates indicated below were as follows (in thousands):

	December29, 2013		March 31, 2013
Cash and cash equivalents
Cash at financial institutions	$	7,109	$	9,676
Cash equivalents
Money market funds		13,961		5,042
Total cash and cash equivalents	$	21,070	$	14,718
Available-for-sale securities
U.S. government and agency securities	$	32,791	$	41,721
State and local government securities		2,798		2,935
Corporate bonds and securities		72,725		92,229
Asset-backed securities		30,354		30,966
Mortgage-backed securities		16,034		22,736
Total short-term marketable securities	$	154,702	$	190,587

Our marketable securities include U.S. government and agency securities, state and local government securities, corporate bonds and securities, and asset-backed and mortgage-backed securities. We classify investments as available-for-sale at the time of purchase and re-evaluate such designation as of each balance sheet date. We amortize premiums and accrete discounts to interest income over the life of the investment. Our available-for-sale securities, which we intend to sell as necessary to meet our liquidity requirements, are classified as cash equivalents if the maturity date is 90 days or less from the date of purchase and as short-term marketable securities if the maturity date is greater than 90 days from the date of purchase.

All marketable securities are reported at fair value based on the estimated or quoted market prices as of each balance sheet date, with unrealized gains or losses, net of tax effect, recorded in the condensed consolidated statements of comprehensive income (loss) except those unrealized losses that are deemed to be other than temporary which are reflected in the impairment charges on investments line item on the condensed consolidated statements of operations. There have been no such impairment charges in any of the periods presented.

Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in the interest income and other net, line item on the condensed consolidated statements of operations.

Our net realized gains (losses) on marketable securities for the periods indicated below were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Gross realized gains	$	136		$	233		$	518		$	617
Gross realized losses		(69	)		(229	)		(477	)		(766	)
Net realized income (losses)	$	67		$	4		$	41		$	(149	)

The following table summarizes our investments in marketable securities as of the dates indicated below (in thousands):

	December 29, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	13,961	$	—	$	—		$	13,961
U.S. government and agency securities		32,840		1		(50	)		32,791
State and local government securities		2,797		5		(4	)		2,798
Corporate bonds and securities		72,730		60		(65	)		72,725
Asset-backed securities		30,396		14		(56	)		30,354
Mortgage-backed securities		16,064		19		(49	)		16,034
Total investments	$	168,788	$	99	$	(224	)	$	168,663

	March 31, 2013
	Amortized Cost		Unrealized Gross Gains (1)		Unrealized Gross Losses (1)			Fair Value
Money market funds	$	5,042	$	—	$	—		$	5,042
U.S. government and agency securities		41,694		27		—			41,721
State and local government securities		2,927		10		(2	)		2,935
Corporate bonds and securities		92,059		215		(45	)		92,229
Asset-backed securities		30,932		61		(27	)		30,966
Mortgage-backed securities		22,646		194		(104	)		22,736
Total investments	$	195,300	$	507	$	(178	)	$	195,629

(1) Gross of tax impact

Our asset-backed securities are comprised primarily of premium tranches of vehicle loans and credit card receivables, while our mortgage-backed securities are primarily from Federal agencies. We do not own auction rate securities nor do we own securities that are classified as subprime. As of December 29, 2013, we have sufficient liquidity and do not intend to sell these securities to fund normal operations or realize any significant losses in the short term; however, these securities are available for use, if needed, for current operations.

Management determines the appropriate classification of cash equivalents or short-term marketable securities at the time of purchase and reevaluates such classification as of each balance sheet date. The investments are adjusted for amortization of premiums and accretion of discounts to maturity and such accretion/amortization, which is immaterial for all periods presented, is included in the interest income and other, net line in the condensed consolidated statements of operations. Cash equivalents and short-term marketable securities are reported at fair value with the related unrealized gains and losses included in the accumulated other comprehensive losses line in the condensed consolidated balance sheets.

We periodically review our investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, our intent not to sell the security, and whether it is more likely than not that we will not have to sell the security before recovery of its cost basis. For the three and nine months ended December 29, 2013 and December 30, 2012, respectively, there were no investments identified with other than temporary declines in value.

The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale by expected maturity as of the dates indicated below were as follows (in thousands):

	December 29, 2013				March 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year	$	61,616	$	61,615	$	61,011	$	61,029
Due in 1 to 5 years		107,172		107,048		134,289		134,600
Total	$	168,788	$	168,663	$	195,300	$	195,629

The following table summarizes the gross unrealized losses and fair values of our investments in an unrealized loss position as of the dates indicated below, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	December 29, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency securities	$	28,772	$	(50	)	$	—	$	—		$	28,772	$	(50	)
State and local government securities		1,516		(4	)		—		—			1,516		(4	)
Corporate bonds and securities		35,179		(65	)		—		—			35,179		(65	)
Asset-backed securities		15,301		(25	)		3,467		(31	)		18,768		(56	)
Mortgage-backed securities		8,249		(22	)		2,174		(27	)		10,423		(49	)
Total	$	89,017	$	(166	)	$	5,641	$	(58	)	$	94,658	$	(224	)

	March 31, 2013
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
State and local government securities	$	—	$	—		$	404	$	(2	)	$	404	$	(2	)
Corporate bonds and securities		29,609		(42	)		497		(3	)		30,106		(45	)
Asset-backed securities		10,008		(17	)		1,241		(10	)		11,249		(27	)
Mortgage-backed securities		2,911		(39	)		3,263		(65	)		6,174		(104	)
Total	$	42,528	$	(98	)	$	5,405	$	(80	)	$	47,933	$	(178	)

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Note 5 - Goodwill and Intangible Assets (Details) - Aggregate Amortization Expenses for Purchased Intangible Assets (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Aggregate Amortization Expenses for Purchased Intangible Assets [Abstract]
Amortization expense	$ 1,991	$ 994	$ 5,665	$ 3,155

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Note 12 - Stock-Based Compensation (Details) - Weighted Average Assumptions (USD $)	3 Months Ended		9 Months Ended
	Dec. 29, 2013	Dec. 30, 2012	Dec. 29, 2013	Dec. 30, 2012
Note 12 - Stock-Based Compensation (Details) - Weighted Average Assumptions [Line Items]
Expected term of options (years)	4 years 6 months	4 years 146 days
Risk-free interest rate	1.01%	0.50%
Expected volatility	32.00%	41.00%
Weighted average estimated fair value (in Dollars per share)	$ 3.74	$ 2.81	$ 3.56	$ 2.76
Minimum [Member]
Note 12 - Stock-Based Compensation (Details) - Weighted Average Assumptions [Line Items]
Expected term of options (years)			4 years 146 days	4 years 73 days
Risk-free interest rate			0.60%	0.50%
Expected volatility			32.00%	41.00%
Maximum [Member]
Note 12 - Stock-Based Compensation (Details) - Weighted Average Assumptions [Line Items]
Expected term of options (years)			4 years 6 months	4 years 6 months
Risk-free interest rate			1.12%	0.60%
Expected volatility			35.00%	42.00%

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Note 9 - Balance Sheet Detail (Details) - Other Current Liabilities (USD $)	9 Months Ended	12 Months Ended
	Dec. 29, 2013	Mar. 31, 2013
Note 9 - Balance Sheet Detail (Details) - Other Current Liabilities [Line Items]
Fair value of earn-out liability – short-term	$ 2,230,000	$ 2,599,000
Accrued restructuring charges and exit costs	1,957,000	2,020,000
Short-term lease financing obligations	1,700,000	3,189,000
Accrued manufacturing expenses, royalties and licenses	1,669,000	2,370,000
Accrued legal and professional services	866,000	746,000
Accrued sales and marketing expenses	573,000	576,000
Accrual for dispute resolution		2,727,000
Other	900,000	738,000
Total other current liabilities	11,151,000	15,215,000
Potential Indemnity Claims [Member]
Note 9 - Balance Sheet Detail (Details) - Other Current Liabilities [Line Items]
Purchase consideration holdback	$ 1,256,000	$ 250,000

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Note 3 - Business Combinations (Tables)

9 Months Ended

Dec. 29, 2013

Business Combinations [Abstract]

Schedule Of Consideration Paid [Table Text Block]

	Amount
Cash	$	25,000
Equity instruments		5,177
Estimated fair value of earn-out payments		4,660
Total consideration paid	$	34,837

	Amount
Cash	$	1,000
Equity instruments		3,740
Estimated fair value of earn-out payments		10,138
Total consideration paid	$	14,878

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	Amount
Identifiable tangible assets (liabilities)
Cash	$	1,055
Accounts Receivable		241
Inventories		1,756
Property, plant and equipment		231
Other assets		3
Accounts payable and accruals		(7,400	)
Other short-term liabilities		(520	)
Long-term liabilities		(126	)
Total identifiable tangible assets (liabilities), net		(4,760	)
Identifiable intangible assets		20,380
Total identifiable assets, net		15,620
Goodwill		19,217
Fair value of total consideration transferred	$	34,837

	Amount
Identifiable tangible assets
Inventories	$	126
Property, plant and equipment		140
Other assets		36
Accounts payable and accruals		(24	)
Other short-term liabilities		(51	)
Long-term liabilities		(61	)
Total identifiable tangible assets, net		166
Identifiable intangible assets – existing technology		7,540
Total identifiable assets, net		7,706
Goodwill		7,172
Fair value of total consideration transferred	$	14,878

Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

	Fair Value
Developed technologies	$	15,720
In-process research and development		2,280
Customer relations		2,170
Trade name		210
Total identifiable intangible assets	$	20,380

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Note 11 - Common Stock Repurchases (Details) - Stock repurchase activities (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Dec. 29, 2013
Note 11 - Common Stock Repurchases (Details) - Stock repurchase activities [Line Items]
Repurchases for nine months (in Dollars)	$ 4,000
Repurchases [Member]
Note 11 - Common Stock Repurchases (Details) - Stock repurchase activities [Line Items]
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 12.94
Repurchases for nine months	309
Repurchases for nine months (in Dollars per share)	$ 12.94
Repurchases for nine months (in Dollars)	4,000
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 12.94
Beginning Balance [Member]
Note 11 - Common Stock Repurchases (Details) - Stock repurchase activities [Line Items]
Total number of Shares Purchased	9,564
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 9.22
Amount Paid for Purchase (in Dollars)	88,189
Repurchases for nine months (in Dollars per share)	$ 9.22
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 9.22
Ending Balance [Member]
Note 11 - Common Stock Repurchases (Details) - Stock repurchase activities [Line Items]
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 9.34
Repurchases for nine months (in Dollars per share)	$ 9.34
Total number of Shares Purchased	9,873
Average Price Paid Per Share (or Unit) (in Dollars per share)	$ 9.34
Amount Paid for Purchase (in Dollars)	$ 92,189

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Note 14 - Commitments and Contingencies (Tables)

9 Months Ended

Dec. 29, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Remediation Liabilities [Table Text Block]

	December29, 2013		March 31, 2013
Liabilities for remediation activities	$	31	$	76

Schedule of Product Warranty Liability [Table Text Block]

	December 29, 2013			March 31, 2013
Beginning balance	$	50		$	90
Provisions for warranties issued		1,440		─
Settlements/adjustments		(328	)		(40	)
Ending balance	$	1,162		$	50

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Note 14 - Commitments and Contingencies

9 Months Ended

Dec. 29, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 14.    COMMITMENTS AND CONTINGENCIES

In 1986, Micro Power Systems Inc. (“MPSI”), a subsidiary that we acquired in June 1994, identified low-level groundwater contamination at its principal manufacturing site. The area and extent of the contamination appear to have been defined. MPSI previously reached an agreement with a prior tenant to share in the cost of ongoing site investigations and the operation of remedial systems to remove subsurface chemicals and well closure activities. In April 2012, the San Francisco Bay Regional Water Quality Control Board approved our application for low-threat closure and rescinded the previous cleanup order. All monitoring well closure activities on adjacent/neighboring sites have been completed. We have finalized and executed access environmental indemnity and tolling agreements, and deed restriction covenants with the property owner. The parties have agreed that onsite well closure activities can commence.

Outstanding liabilities for remediation activities, net of payments, consisted of the following as of the dates indicated (in thousands):

	December29, 2013		March 31, 2013
Liabilities for remediation activities	$	31	$	76

In early 2012, we received correspondences from the California Department of Toxic Substance Control (“DTSC”) regarding its ongoing investigation of hazardous wastes and hazardous waste constituents at a former regulated treatment facility in San Jose, California. In 1985, MPSI made two separate permitted hazmat deliveries to a licensed and regulated site for treatment. DTSC has requested that former/current property owners and companies, currently in excess of 50, that had hazardous waste treated at the site participate in further site assessment and limited remediation activities. We have entered into various agreements with other named generators, former property owners and DTSC limited to the investigation of the sites’ condition and evaluation, and selection of appropriate remedial measures. The designated environmental consulting firm is moving forward with the agreed preliminary site assessment and periodic status reporting. Given that this matter is in the early stages of investigation and discussions are ongoing, we are unable to ascertain our exposure, if any.

In a letter dated March 27, 2012, Exar was notified by the Alameda County Water District (“ACWD”) of the recent detection of volatile organic compounds at a site adjacent to a facility that was previously owned and occupied by Sipex. The letter was also addressed to prior and current property owners and tenants (collectively “Property Owners”). ACWD requested that the property owners carry out further site investigation activities to determine if the detected compounds are emanating from the site or simply flowing under it. In June 2012, the Property Owners filed with ACWD a report of its investigation/characterization activities and analytical data obtained. Accumulated data suggests that compounds of concern in groundwater appear to be from an offsite source. ACWD is investigating alternative upgradient sites. Given that this investigation is ongoing, we are unable to ascertain our exposure, if any.

We warrant all custom products and application specific products, including cards and boards, against defects in materials and workmanship for a period of 12 months, and occasionally we may provide an extended warranty from the delivery date. We warrant all of our standard products against defects in materials and workmanship for a period of 90 days from the date of delivery. Reserve requirements are recorded in the period of sale and are based on an assessment of the products sold with warranty, historical warranty costs incurred and customer/product specific circumstances. Our liability is generally limited, at our option, to replacing, repairing, or issuing a credit (if it has been paid for). Our warranty does not cover damage which results from accident, misuse, abuse, improper line voltage, fire, flood, lightning or other damage resulting from modifications, repairs or alterations performed other than by us, or resulting from failure to comply with our written operating and maintenance instructions. Warranty expense has historically been immaterial for our products. The remaining balance of warranty liabilities established for the return and replacement of certain older generation data compression products shipped in prior years was $1.2 million as of December 29, 2013, and warranty liability as of March 31, 2013 was immaterial.

As of the dates indicated below, our warranty reserve balance, which is included in the “Other current liabilities” line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	December 29, 2013			March 31, 2013
Beginning balance	$	50		$	90
Provisions for warranties issued		1,440		─
Settlements/adjustments		(328	)		(40	)
Ending balance	$	1,162		$	50

In the ordinary course of business, we may provide for indemnification of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us, services to be provided by us, intellectual property infringement claims made by third parties or, matters related to our conduct of the business. In addition, we have entered into indemnification agreements with our directors and certain of our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. We maintain director and officer liability insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers, and former directors and officers of acquired companies, in certain circumstances.

It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement and claims. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our condensed consolidated financial statements.