plx_body10q.htm

PLX TECHNOLOGY, INC.

INDEX TO

REPORT ON FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2008

PART I. FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	30
Signature		31

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

	September 30,			December 31,
	2008			2007

ASSETS
Current Assets:
Cash and cash equivalents	$	15,534		$	19,175
Short-term marketable securities		27,087			17,142
Accounts receivable, net		9,804			10,534
Inventories		7,370			7,422
Other current assets		4,634			3,788
Total current assets		64,429			58,061
Property and equipment, net		29,753			29,798
Goodwill		34,692			34,541
Other purchased intangible assets		984			1,577
Long-term marketable securities		1,394			10,246
Other assets		2,293			1,577
Total assets	$	133,545		$	135,800

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	3,545		$	4,447
Accrued compensation and benefits		2,366			2,237
Accrued commissions		483			652
Other accrued expenses		791			572
Total current liabilities		7,185			7,908

Commitment and contingencies

Stockholders' Equity:
Common stock, par value		28			29
Additional paid-in capital		131,392			134,503
Accumulated other comprehensive loss		(287	)		(82	)
Accumulated deficit		(4,773	)		(6,558	)
Total stockholders' equity		126,360			127,892
Total liabilities and stockholders' equity	$	133,545		$	135,800

See accompanying notes to condensed consolidated financial statements.

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Net revenues	$	20,790	$	21,216	$	66,895	$	59,620
Cost of revenues		8,630		8,108		27,034		23,489
Gross margin		12,160		13,108		39,861		36,131

Operating expenses:
Research and development		6,000		5,870		20,289		17,755
Selling, general and administrative		5,436		5,912		17,952		18,143
Amortization of purchased intangible assets		150		241		593		1,038
Total operating expenses		11,586		12,023		38,834		36,936

Income (loss) from operations		574		1,085		1,027		(805	)
Interest income and other, net		336		624		1,200		1,805

Income before provision for income taxes		910		1,709		2,227		1,000
Provision for income taxes		112		712		442		357

Net income	$	798	$	997	$	1,785	$	643

Basic net income per share	$	0.03	$	0.03	$	0.06	$	0.02
Shares used to compute basic per share amounts		28,009		28,748		28,270		28,689

Diluted net income per share	$	0.03	$	0.03	$	0.06	$	0.02
Shares used to compute diluted per share amounts		28,122		29,257		28,415		29,148

See accompanying notes to condensed consolidated financial statements.

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2008			2007
Cash flows from operating activities:
Net income	$	1,785		$	643
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization		1,684			1,480
Share-based compensation expense		2,533			3,375
Amortization of purchased intangible assets		593			1,038
Write-downs of inventories		465			643
Changes in pre-acquisition deferred tax balances		(151	)		-
Other non-cash items		(155	)		(142	)
Changes in operating assets and liabilities:
Accounts receivable		730			(359	)
Inventories		(413	)		(608	)
Other current assets		(846	)		(2,256	)
Other assets		(716	)		855
Accounts payable		(902	)		4,086
Accrued compensation and benefits		(40	)		(810	)
Other accrued expenses		219			315
Net cash provided by operating activities		4,786			8,260

Cash flows from investing activities:
Purchases of marketable securities		(28,500	)		(26,228	)
Sales and maturities of marketable securities		27,390			10,300
Purchase of property and equipment		(1,639	)		(2,258	)
Net cash (used in) investing activities		(2,749	)		(18,186	)

Cash flows from financing activities:
Proceeds from exercise of common stock options		846			917
Repurchase of common stock		(6,491	)		-
Net cash provided by (used in) financing activities		(5,645	)		917

Effect of exchange rate fluctuations on cash and cash equivalents		(33	)		(35	)

Net decrease in cash and cash equivalents		(3,641	)		(9,044	)
Cash and cash equivalents at beginning of period		19,175			32,804
Cash and cash equivalents at end of period	$	15,534		$	23,760

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	199		$	138

See accompanying notes to condensed consolidated financial statements.

PLX TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of PLX Technology, Inc. and its wholly-owned subsidiaries (collectively, “PLX” or the “Company”) as of September 30, 2008 and for the three and nine month periods ended September 30, 2008 and 2007 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring accruals) that management considers necessary for a fair presentation of the Company’s financial position, operating results and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year.

The unaudited condensed consolidated financial statements include all of the accounts of the Company and those of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

This financial data should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect various accounts, including but not limited to goodwill, income taxes, inventories, revenue recognition and related sales reserves, allowance for doubtful accounts, share-based compensation and warranty reserves as reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements.

Comprehensive Net Income (Loss)

The Company’s comprehensive net income for the three and nine month period ended September 30, 2008 and 2007 was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Net income	$	798		$	997		$	1,785		$	643
Unrealized gain (loss) on marketable securities, net		(130	)		4			(172	)		(28	)
Cumulative translation adjustments		(7	)		(9	)		(33	)		(35	)
Comprehensive net income	$	661		$	992		$	1,580		$	580

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery or customer acceptance, where applicable, has occurred, the fee is fixed or determinable, and collection is reasonably assured.

The Company recognizes revenue in accordance with Statements of Financial Accounting Standards (“SFAS”) No. 48, Revenue Recognition When Right of Return Exists. Revenue from product sales to direct customers and distributors is recognized upon shipment and transfer of risk of loss, if the Company believes collection is reasonably assured and all other revenue recognition criteria are met. The Company assesses the probability of collection based on a number of factors, including past transaction history and the customer’s creditworthiness. At the end of each reporting period, the sufficiency of allowances for doubtful accounts is assessed based on the age of the receivable and the individual customer’s creditworthiness.

The Company offers pricing protection to two distributors whereby the Company supports the distributor’s resale product margin on certain products held in the distributor’s inventory. In general, the Company analyzes current requests for credit in process, also known as ship and debits and inventory at the distributor to determine the ending sales reserve required for this program. The Company also offers stock rotation rights to two distributors such that they can return up to a total of 5% of products purchased every six months in exchange for other PLX products of equal value. In general, the Company analyzes current stock rotation requests and past experience, which has historically been insignificant, to determine the ending sales reserve required for this program. Reserves are reduced directly from revenue and recorded as a reduction to accounts receivable. In addition, the Company has arrangements with a small number of customers offering a rebate program on various products. The Company records rebates as a reduction of revenue under the guidelines of Emerging Issues Task Force (“EITF’) 01-9, Accounting for Consideration Given to a Customer (Including a Reseller of the Vendor’s Product).

Recent Accounting Pronouncements

In September 2006, FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosures about fair value measurements. For financial assets and liabilities, this statement is effective for fiscal periods beginning after November 15, 2007 and does not require any new fair value measures. In February 2008, the FASB Staff Position No. 157-2 was issued which delayed the effective date of SFAS 157 to fiscal years ending after November 15, 2008 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of SFAS 157 for financial assets and liabilities did not have a material impact on the Company’s financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure many financial instruments and certain other items that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did not have an effect on the Company’s financial position or results of operations as the Company did not elect this fair value option.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations – Revised 2007, which replaces FASB Statement No. 141, Business Combinations. SFAS 141(R) establishes principles and requirements intending to improve the relevance, representational faithfulness and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The impact of the adoption of SFAS 141(R) on the Company’s financial position or results of operations will depend on the nature and extent of business combinations that the Company completes, if any, in or after fiscal 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards to improve the relevance, comparability and transparency of financial information that a reporting entity provides in its consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company does not believe that the adoption of SFAS 160 will have a material impact on its financial position or results of operations.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS 142, Goodwill and Other Intangible Assests, and adds certain disclosures for an entity’s accounting policy of the treatment of the costs, period of extension, and total costs incurred. FSP 143-3 must be applied prospectively to intangible assets acquired after January 1, 2009. The Company is currently evaluating the impact that FSP 142-3 will have on its financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (the GAAP hierarchy). SFAS 162 will become effective November 15, 2008. The Company does not believe that the adoption of SFAS 162 will have a material impact on its financial position or results of operations.

2. Share-Based Compensation

Stock Option Plans

In May 2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (“2008 Plan”). Under the 2008 Plan, there is authorized for issuance and available for awards an aggregate of 1,200,000 shares of the Company’s common stock, plus the number of shares of the Company’s common stock available for issuance under the Company’s prior incentive plan, its 1999 Stock Incentive Plan, that are not subject to outstanding awards as of May 27, 2008. In addition, the share reserve under the 2008 Plan will be increased by the number of shares issuable pursuant to awards outstanding under the prior plan that would have otherwise reverted to the prior plan because it expires, are canceled or otherwise terminated without being exercised. Awards under the 2008 Plan may include stock options, restricted stock, stock appreciation rights, performance awards, restricted stock units and other awards, provided that with respect to full value awards, such as restricted stock or restricted stock units, no more than 300,000 shares may be issued in the form of full value awards during the term of the 2008 Plan. Awards under the 2008 Plan may be made to the Company’s officers and other employees, its board members and consultants that it hires. The 2008 Plan has a term of ten years.

Share-Based Compensation Expense

The fair value of share-based awards to employees is calculated using the Black-Scholes option pricing model, which requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values.

The weighted-average fair value of share-based compensation to employees is based on the multiple option valuation approach. Forfeitures are estimated and it is assumed no dividends will be declared. The estimated fair value of share-based compensation awards to employees is amortized using the straight-line method over the vesting period of the options. The weighted-average fair value calculations are based on the following weighted average assumptions:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Risk-free interest rate		2.85	%		4.20	%		2.90	%		4.56	%
Expected volatility		0.55			0.57			0.54			0.59
Expected life (years)		4.47			4.35			4.47			4.35

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the observed and expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options in relation to stock price movements to derive an employee behavioral pattern used to forecast expected exercise patterns.

Expected Volatility: The Company calculates its expected volatility assumption required in the Black-Scholes model by blending the historical and implied volatility. The historical volatility is based on the weekly closing prices of our common stock over a period equal to the expected term of the option. Market based implied volatility is based on utilizing market data of actively traded options on our stock, from options at- or near-the-money traded options, at a point in time as close to the grant of the employee options as reasonably practical and with similar terms to the employee share option, or a remaining maturity of at least six months if no similar terms are available. The historical volatility of the price of our common stock over the expected term of the option is a strong indicator of the expected future volatility. In addition, implied volatility takes into consideration market expectations of how future volatility will differ from historical volatility. The Company does not believe that one estimate is more reliable than the other so the Company uses a 50/50 blend of historical volatility and market-based volatility.

These factors could change in the future, which would affect the share-based compensation expense in future periods.

As share-based compensation expense recognized in the unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company’s estimated forfeiture rate at September 30, 2008 and 2007 of 26% and 27%, respectively, was based on historical experience.

The following table shows total share-based compensation expense for the three and nine months ended September 30, 2008 and 2007, included in the respective line items of the Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Cost of revenues	$	14	$	12	$	47	$	43
Research and development		273		377		1,027		1,331
Selling, general and administrative		400		622		1,459		2,001
Total share-based compensation expense	$	687	$	1,011	$	2,533	$	3,375

A summary of option activity under the Company’s stock equity plans during the three and nine months ended September 30, 2008 is as follows:

									Weighted Average
									Remaining		Aggregate
	Options Available			Number of			Weighted Average		Contratual Term		Intrinsic
Options	for Grant			Shares			Exercise Price		(in years)		Value
Outstanding at December 31, 2007		1,142,597			3,999,473		$	11.38		4.79	$	2,663,803
Granted		(680,500	)		680,500			7.04
Exercised		-			(2,000	)		5.00
Cancelled		6,770			(6,770	)		9.94

Outstanding at March 31, 2008		468,867			4,671,203		$	10.75		4.87	$	928,805

Authorized		1,200,000			-
Granted		(59,000	)		59,000			8.26
Exercised		-			(110,895	)		7.25
Cancelled		301,041			(301,041	)		9.42

Outstanding at June 30, 2008		1,910,908			4,318,267		$	10.90		4.65	$	1,566,277

Authorized		-			-
Granted		(139,000	)		139,000			5.69
Exercised		-			(6,334	)		5.00
Cancelled		309,731			(309,731	)		8.42

Outstanding at September 30, 2008		2,081,639			4,141,202		$	10.92		4.37	$	464,206

Exercisable at September 30, 2008					2,840,643		$	11.83		3.76	$	464,206

The Black-Scholes weighted average fair values of options granted during the three months ended September 30, 2008 and 2007 were $2.67 and $5.52, respectively.

The Black-Scholes weighted average fair values of options granted during the nine months ended September 30, 2008 and 2007 were $3.03 and $5.36, respectively.

The following table summarizes ranges of outstanding and exercisable options as of September 30, 2008:

	Options Outstanding						Options Exercisable
			Weighted Average
			Remaining		Weighted				Weighted
			Contratual Term		Average				Average
Range of Exercise Prices	Number		(in years)		Exercise Price		Number		Exercise Price
$1.25-$7.03		849,461		5.60	$	5.66		289,461	$	3.68
$7.21-$9.00		893,205		3.09		8.50		804,378		8.51
$9.12-$10.21		1,016,666		5.43		9.81		641,767		9.65
$10.29-$16.65		995,687		4.50		13.62		718,854		14.22
$19.38-$25.94		386,183		1.54		24.03		386,183		24.03
Total		4,141,202		4.37	$	10.92		2,840,643	$	11.83

The total intrinsic value of options exercised during the three and nine months ended September 30, 2008 was approximately $2,000 and $0.2 million, respectively. For the same periods in 2007 the total intrinsic value of options exercised was $0.4 million and $0.8 million, respectively. The fair value of options vested during the three and nine months ended September 30, 2008 was approximately $0.9 million and $5.5 million, respectively. As of September 30, 2008, total unrecognized compensation costs related to nonvested stock options including estimated forfeitures was $1.8 million which is expected to be recognized as expense over a weighted average period of approximately 1.32 years.

3. Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or market (net realizable value). Inventories were as follows (in thousands):

	September 30,		December 31,
	2008		2007
Work-in-process	$	2,172	$	2,000
Finished goods		5,198		5,422
Total	$	7,370	$	7,422

The Company evaluates the need for potential inventory provisions by considering a combination of factors including the life of the product, sales history, obsolescence and sales forecasts.

4. Net Income Per Share

The Company uses the treasury stock method to calculate the weighted average shares used in the diluted earnings per share in accordance with SFAS No. 128, Earnings Per Share. The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007

Net income	$	798	$	997	$	1,785	$	643
Weighted average shares of common stock outstanding		28,009		28,748		28,270		28,689
Net income per share - basic	$	0.03	$	0.03	$	0.06	$	0.02
Shares used in computing basic net income per share		28,009		28,748		28,270		28,689
Dilutive effect of stock options		113		509		145		459
Shares used in computing diluted net income per share		28,122		29,257		28,415		29,148
Net income per share - diluted	$	0.03	$	0.03	$	0.06	$	0.02

Weighted average employee stock options to purchase approximately 4.0 million and 4.1 million shares for the three and nine month periods ended September 30, 2008, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the stock options was greater than the average share price of the Company’s common stock and, therefore, the effect would have been anti-dilutive.

Weighted average employee stock options to purchase approximately 2.3 million shares for the three and nine month periods ended September 30, 2007 were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the stock options was greater than the average share price of the Company’s common stock and, therefore, the effect would have been anti-dilutive.

5. Financial Instruments

Fair Value Measurements

The Company adopted SFAS No. 157, Fair Value Measurements, effective January 1, 2008, for financial assets and liabilities measured on a recurring basis. SFAS 157 applies to all financial assets and financial liabilities that are being measured on a recurring basis. SFAS 157 established a framework for measuring fair value and expands related disclosures. The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities. The fair value of available-for-sale securities included in the level 1 category is based on quoted prices that are readily and regularly available in an active market. The Level 1 category includes money market funds of $6.9 million, which are included in cash and cash equivalents in the condensed consolidated balance sheet.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well established independent pricing vendors and broker-dealers. The Level 2 category includes short-term and long-term investments of $32.9 million, which are comprised of corporate debt securities and government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing. The Company has no Level 3 financial assets measured at fair value on the condensed consolidated balance sheet as of September 30, 2008.

Investments

The Company accounts for its investments in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. As of September 30, 2008, the Company’s securities consisted of debt securities and were designated as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices, with unrealized gains and losses reported in a separate component of stockholders’ equity. The amortized cost of debt securities is adjusted for the amortization of premiums and the accretion of discounts to maturity, both of which are included in interest income. Realized gains and losses are recorded on the specific identification method.

The fair value of available-for-sale investments as of September 30, 2008 was as follows (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value

Commercial paper	$	1,699	$	-	$	(1	)	$	1,698
Corporate bonds and notes		9,899		34		(134	)		9,799
Municipal bonds		1,000		2		-			1,002
US treasury and government agencies securities		20,390		16		(26	)		20,380
Total bonds, notes and equity securities	$	32,988	$	52	$	(161	)	$	32,879
Less amounts classified as cash equivalents									(4,398	)
Total short and long-term available-for-sale investments								$	28,481

Contractual maturity dates for investments:
Less than one year:									31,485
One to two years:									1,394
								$	32,879

The fair value of available-for-sale investments as of December 31, 2007 was as follows (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value

Commercial paper	$	21,453	$	1	$	(2	)	$	21,452
Medium term notes		2,539		-		(6	)		2,533
Corporate bonds and notes		9,568		63		(24	)		9,607
US treasury and government agencies secutites		10,135		31		(1	)		10,165
Total bonds, notes and equity securities	$	43,695	$	95	$	(33	)	$	43,757
Less amounts classified as cash equivalents									(16,369	)
Total short and long-term available-for-sale investments								$	27,388

Contractual maturity dates for investments:
Less than one year:									33,511
One to two years:									10,246
								$	43,757

The Company compares the carrying value of its available for sale investments with their quoted market prices at the end of each period. If the quoted price of a marketable security has dropped significantly during a period or has been below our carrying value for an extended period of time, the Company reviews the investment to determine whether the decline is other than temporary. If the Company determines that the decline is other than temporary, the investment is written down to its market value as measured at the end of the period. Any resulting charge is included in the Company’s statement of operations in the related period.

6. Stock Repurchase

In September 2002, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company’s common stock. In July 2008, the Company’s Board of Directors authorized an additional 2,000,000 shares under the repurchase program. At the discretion of the management, the Company can repurchase the shares from time to time in the open market or in privately negotiated transactions. Approximately 774,000 shares were repurchased for approximately $1.9 million in cash in 2002 and 2003. The Company did not repurchase any additional shares from January 1, 2004 through December 31, 2007. In the three and nine months ended September 30, 2008 the Company repurchased 74,000 and 956,000 shares, respectively, for approximately $0.5 million and $6.5 million, respectively.

7. Segments of an Enterprise and Related Information

The Company has one operating segment, the sale of semiconductor devices. The Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) because he has final authority over resource allocation decisions and performance assessment. The CODM does not receive discrete financial information about individual components of the Company’s business. The majority of the Company’s assets are located in the United States.

Revenues by geographic region based on customer location were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Revenues:
United States	$	4,900	$	5,317	$	15,749	$	16,320
Singapore		3,737		3,406		12,052		9,709
Europe, Middle East and Africa		3,139		2,438		8,562		6,766
Taiwan		2,459		2,618		8,379		6,999
China		2,449		2,895		8,908		8,999
Other Asia Pacific		2,330		3,851		7,774		9,205
The Americas - excluding United States		1,776		691		5,471		1,622
Total	$	20,790	$	21,216	$	66,895	$	59,620

For the three months ended September 30, 2008, sales to Excelpoint Systems Pte Ltd, Avnet, Inc. and Answer Technology, Inc. accounted for 29%, 14% and 12%, respectively, of net revenues. As of September 30, 2008, the same distributors accounted for 36%, 8% and 13%, respectively, of the total accounts receivable balance. For the same period in 2007, Excelpoint Systems Pte Ltd and Answer Technology, Inc. accounted for 24% and 11%, respectively, of net revenues. As of September 30, 2007, the same distributors accounted for 20% and 16%, respectively, of the total accounts receivable balance. For both of these periods, no other individual direct customer or distributor represented greater than 10% of net revenues.

For the nine months ended September 30, 2008, sales to Excelpoint Systems Pte Ltd, Answer Technology, Inc. and Avnet, Inc. accounted for 29%, 12% and 12%, respectively, of net revenues. For the same period in 2007, Metatech and Excelpoint Systems Pte Ltd accounted for 23% and 11%, respectively, of net revenues. For both of these periods, no other individual direct customer or distributor represented greater than 10% of net revenues.

In the third quarter of 2007, the Company terminated Metatech and transitioned in Excelpoint Systems. The significant terms of the Company’s arrangement with Excelpoint are substantially similar to its prior arrangement with Metatech. Excelpoint is and Metatech was a stocking representative that could purchase PLX product and resell it or earn a commission on sales directly made by PLX to customers in its territory. Historically, commissions under this arrangement have never been material. Excelpoint is granted standard payment terms (between 30 and 45 days) without any price concessions or right of return. Excelpoint is covered under a standard warranty program which the Company offers to all of its customers. Revenue is recognized when the product is shipped to Excelpoint, as was the case with Metatech, and the change to Excelpoint did not change the Company’s revenue recognition policy for the relevant sales.

8. Income Taxes

A provision for income tax of $442,000 has been recorded for the nine month period ended September 30, 2008, compared to a provision of $357,000 for the same period in 2007. Income tax expense for the nine months ended September 30, 2008 relates to federal taxes, miscellaneous state income taxes and foreign income taxes currently payable adjusted for certain discrete items which are fully recognized in the period they occur. Income tax expense was calculated on a year-to-date discrete basis due to the uncertainty of fourth quarter operating estimates and the large variability to the annual effective rate based on small changes to ordinary income for the year. For the same period in 2007, the income tax expense was a result of applying the estimated annual effective tax rate to cumulative income before taxes.

The Company has determined that negative evidence supports the need for a full valuation allowance against its net deferred tax assets at this time. The Company will maintain a full valuation allowance until sufficient positive evidence exists to support a reversal of the valuation allowance.

The Company adopted FIN 48, regarding accounting for uncertain tax benefits, at the beginning of calendar year 2007. As of September 30, 2008, the Company had unrecognized tax benefits of approximately $1.9 million of which none, if recognized, would result in a reduction of the Company’s effective tax rate. There were no material changes in the amount of unrecognized tax benefits during the nine months ended September 30, 2008. Future changes in the balance of unrecognized tax benefits will have no impact on the effective tax rate as they are subject to a full valuation allowance. The Company does not believe the amount of its unrecognized tax benefits will significantly change within the next twelve months.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The tax years 1997 through 2007 remain open to examination by the federal and most state tax authorities due to certain acquired net operating loss and overall credit carryforward positions.

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

This Report on Form 10-Q contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations, hopes, intentions, beliefs or strategies regarding the future. Such forward-looking statements also include statements regarding our future gross margin, our future research and development expenses, our future selling, general and administrative expenses, our ability to meet our capital requirements for the next twelve months, our future capital requirements, current high turns fill requirements and our anticipation that sales to a small number of customers will account for a significant portion of our sales. Actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ include unexpected changes in the mix of our product sales, unexpected pricing pressures, unexpected capital requirements that may arise due to other possible acquisitions or other events, unanticipated changes in the businesses of our suppliers, and unanticipated cash shortfalls. Actual results could also differ for the reasons noted under the sub-heading “Factors That May Affect Future Operating Results” in Item 1A, Risk Factors in Part II of this report on Form 10-Q and in other sections of this report on Form 10-Q. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this report on Form 10-Q, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.

The following discussion should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

OVERVIEW

PLX Technology, Inc. ("PLX" or the "Company"), a Delaware corporation established in 1986, develops and supplies semiconductor devices that accelerate and manage the transfer of data in microprocessor-based systems including networking and telecommunications, enterprise storage, servers, personal computers (PCs), PC peripherals, consumer electronics, imaging and industrial products. We offer a complete solution consisting of three related types of products: semiconductor devices, software development kits and hardware design kits. Our semiconductor devices manage fast and reliable transfer of data in microprocessor based systems. Our software development kits and hardware design kits have been designed with the goal of promoting sales of our semiconductor devices by lowering customers' development costs and by accelerating their ability to bring new products to market.

PLX products shipping today provide I/O connectivity solutions mainly for the PCI Express, PCI, PCI-X, and USB standards. As new I/O standards evolve, we expect to support them where appropriate. More than 1,000 electronic equipment manufacturers use PLX semiconductor devices in a wide variety of applications.

Historically, PLX supplied bridges, controllers, and accelerators to the PCI, PCI-X and USB markets, which we refer to as our Legacy products. Today, PLX’s main focus is supplying the needs of the growing demand for PCI Express Switches. PCI Express is a serial point to point technology that requires switches to route the traffic similar to Ethernet. PCI and PCI-X did not require these devices. This has opened up a new market for suppliers like PLX.

We utilize a “fabless” semiconductor business model whereby we purchase wafers or packaged and tested semiconductor devices from independent manufacturing foundries. The advantage of this approach, in our opinion, allows us to focus on defining, developing and marketing our products and eliminates the need for us to invest large amounts of capital in manufacturing facilities and work-in-process inventory.

We rely on a combination of direct sales personnel, distributors and manufacturers’ representatives throughout the world to sell a significant portion of our products. We pay manufacturers’ representatives a commission on sales while we sell products to distributors at a discount from the selling price.

The time period between initial customer evaluation and design completion can range from six to twelve months or more. Furthermore, there is typically an additional six to twelve month or greater period after design completion before a customer orders volume production of our products. Due to the variability and length of these design cycles and variable demand from customers, we may experience significant fluctuations in new orders from month to month. In addition, we typically make inventory purchases prior to receiving customer orders. Consequently, if anticipated sales and shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our results for that quarter and potentially future quarters would be materially and adversely affected.

Our long-term success will depend on our ability to successfully introduce new products. While new products typically generate little or no revenues during the first twelve months following their introduction, our revenues in subsequent periods depend upon these new products. Due to the lengthy sales cycle and additional time before our customers request volume production, significant revenues from our new products typically occur twelve to twenty-four months after product introduction. As a result, revenues from newly introduced products have, in the past, produced a small percentage of our total revenues in the year the product was introduced. See –“Our Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected Revenues” in Item 1A, Risk Factors, in Part II of this report on Form 10-Q.

RESULTS OF OPERATIONS

The following table summarizes historical results of operations as a percentage of net revenues for the periods shown.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		41.5			38.2			40.4			39.4
Gross margin		58.5			61.8			59.6			60.6

Operating expenses:
Research and development		28.9			27.7			30.3			29.8
Selling, general and administrative		26.1			27.9			26.8			30.4
Amortization of purchased intangible assets		0.7			1.1			0.9			1.7
Total operating expenses		55.7			56.7			58.0			61.9

Income (loss) from operations		2.8			5.1			1.6			(1.3	)
Interest income and other, net		1.6			2.9			1.8			3.0

Income before provision for income taxes		4.4			8.0			3.4			1.7
Provision for income taxes		0.5			3.4			0.7			0.6

Net income		3.9	%		4.6	%		2.7	%		1.1	%

Net Revenues

The following table shows the revenue by product type as a percentage of net revenues:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Revenues:
Legacy Products		55.6	%		63.5	%		52.7	%		67.8	%
PCI Express		44.4	%		36.5	%		47.3	%		32.2	%

Net revenues consist of product revenues generated principally by sales of our semiconductor devices. Net revenues for the three months ended September 30, 2008 were $20.8 million, a decrease of 2.0% from $21.2 million for the three months ended September 30, 2007. The decrease was due primarily to decreased sales of our Legacy products due to customer migration to PCI Express, end of life of customers’ products and general demand fluctuations, partially offset by the increase sales of our PCI Express products due to an increase of customers in volume production.

For the three months ended September 30, 2008, sales to Excelpoint Systems Pte Ltd, Avnet, Inc. and Answer Technology, Inc. accounted for 29%, 14% and 12%, respectively, of net revenues. For the same period in 2007, Excelpoint Systems Pte Ltd and Answer Technology, Inc. accounted for 24% and 11%, respectively, of net revenues. For both of these periods, no other individual direct customer or distributor represented greater than 10% of net revenues.

Net revenues for the nine months ended September 30, 2008 were $66.9 million, an increase of 12.2% from $59.6 million for the nine months ended September 30, 2007. The increase was due primarily to increased sales of our PCI Express products due to an increase of customers in volume production, partially offset by the decreased sales of our Legacy products due to customer migration to PCI Express, end of life of customers’ products and general demand fluctuations.

In the third quarter of 2007, we terminated Metatech and transitioned in Excelpoint Systems. The significant terms of our arrangement with Excelpoint are substantially similar to our prior arrangement with Metatech. Excelpoint is and Metatech was a stocking representative that could purchase PLX product and resell it or earn a commission on sales directly made by PLX to customers in its territory. Historically, commissions under this arrangement have never been material. Excelpoint is granted standard payment terms (between 30 and 45 days) without any price concessions or right of return. Excelpoint is covered under a standard warranty program which we offer to all of our customers. Revenue is recognized when the product is shipped to Excelpoint, as was the case with Metatech, and the change to Excelpoint did not change our revenue recognition policy for the relevant sales.

We have recently experienced a broad decrease in order rates across most product lines, markets and end customers, and therefore expect a decrease in fourth quarter sales. Future demand for our products is uncertain and is highly dependant on general economic conditions and the demand for products that contain our chips. Customer demand for semiconductors can change quickly and unexpectedly. Our revenue levels have been highly dependent on the amount of new orders that are received for products to be delivered to the customer within the same quarter, also called “turns fill” orders. Because of the long cycle time to build our products and our lack of visibility into demand when turns fill orders are high, it is difficult to predict which products to build to match future demand. We believe the current high turns fill requirements will continue indefinitely. The high turns fill orders pattern, together with the uncertainty of product mix and pricing, makes it difficult to predict future levels of sales and profitability and may require us to carry higher levels of inventory.

Gross Margin

Gross margin represents net revenues less the cost of revenues. Cost of revenues includes the cost of (1) purchasing semiconductor devices or wafers from our independent foundries, (2) package, assembly and test services from our independent foundries, assembly contractors and test contractors and (3) our operating costs associated with the procurement, storage, and shipment of products as allocated to production.

Gross margin for the three months ended September 30, 2008 was 58.5%, as compared to 61.8% for the same period in 2007. In absolute dollars, gross margin decreased by $0.9 million or 7.2% to $12.2 million for the three months ended September 30, 2008 from $13.1 million for the same period in 2007. The decrease in absolute dollars as well as a percentage is due primarily to the decreased Legacy product shipments, increased product and customer mix of our PCI Express products and a provision for inventory of $0.2 million recorded against a single Legacy product.

Gross margin for the nine months ended September 30, 2008 was 59.6%, as compared to 60.6% for the same period in 2007. In absolute dollars, gross margin increased by $3.8 million or 10.4% to $39.9 million for the nine months ended September 30, 2008 from $36.1 million for the same period in 2007. The increase in absolute dollars is due primarily to increased PCI Express product shipments while the decrease as a percentage was primarily due to increased product and customer mix of our PCI Express products.

Future gross profit and gross margin are highly dependent on the product and customer mix, provisions and recoveries of excess or obsolete inventory, the position of our products in their respective life cycles and specific manufacturing costs. Accordingly, we are not able to predict future gross profit levels or gross margins with certainty.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of tape-out costs at our independent foundries, salaries and related costs, including share-based compensation and expenses for outside engineering consultants.

R&D as a percentage of net revenues increased to 28.9% for the three months ended September 30, 2008, as compared to 27.7% for the same period in 2007. In absolute dollars, R&D expenses increased by $0.1 million or 2.2% to $6.0 million for the three months ended September 30, 2008 from $5.9 million for the same period in 2007. The increase in R&D as a percentage of revenue as well as the increase in absolute dollars is due primarily to an increase in R&D spending on engineering tools of $0.5 million partially offset by decreases in tape-out related costs of $0.2 million and share-based compensation and bonus expenses of $0.2 million.

R&D as a percentage of net revenues increased to 30.3% for the nine months ended September 30, 2008, as compared to 29.8% for the same period in 2007. In absolute dollars, R&D expenses increased by $2.5 million or 14.3% to $20.3 million for the nine months ended September 30, 2008 from $17.8 million for the same period in 2007. The increase in R&D as a percentage of revenue as well as the increase in absolute dollars is due primarily to increases in R&D spending on engineering tools of $1.1 million and consulting fees of $1.0 million associated with new product designs and salary and related expenses of $0.9 million resulting from higher headcount and annual rate increases partially offset by a decrease in share-based compensation expense of $0.3 million.

We believe continued spending on research and development to develop new products is critical to our success and, consequently, expect research and development expenses to increase in absolute dollars in future periods.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and related costs, share-based compensation and commissions to manufactures’ representatives, as well as professional fees, trade show and other promotional expenses.

SG&A as a percentage of net revenues decreased to 26.1% for the three months ended September 30, 2008, as compared to 27.9% for the same period in 2007. In absolute dollars, SG&A expenses decreased $0.5 million or 8.1% to $5.4 million for the three months ended September 30, 2008 from $5.9 million for the same period in 2007. The decrease in SG&A as a percentage as well as the decrease in absolute dollars is due primarily to decreases in share-based compensation expense of $0.2 million, travel expenses of $0.1 million and commission expenses to manufacturers’ representatives of $0.1 million due to lower revenues and commission rates.

SG&A as a percentage of net revenues decreased to 26.8% for the nine months ended September 30, 2008, as compared to 30.4% for the same period in 2007. In absolute dollars, SG&A expenses decreased $0.1 million or 1.1% to $18.0 million for the nine months ended September 30, 2008 from $18.1 million for the same period in 2007. The decrease in SG&A as a percentage of revenue as well as the decrease in absolute dollars is due primarily to a decrease in share-based compensation expense.

Amortization of Purchased Intangible Assets

Amortization of purchased intangible assets consists of amortization expense related to developed/core technology and customer base acquired as a result of the HiNT Corporation acquisition in May 2003 and NetChip Technology, Inc. acquisition in May 2004. Amortization of purchased intangible remained flat at $0.2 million for the three months ended September 30, 2008 compared to the same period in 2007.

Amortization of purchased intangible assets decreased by $0.4 million or 42.9% to $0.6 million for the nine months ended September 30, 2008 from $1.0 million for the same period in 2007. The decrease is due to the customer base acquired as a result of the NetChip Technology, Inc. acquisition in May 2004 becoming fully amortized in May 2007 and the developed core technology acquired as a result of the HiNT Corporation acquisition in May 2003 becoming fully amortized in May 2008.

Interest Income and Other, Net

Interest income reflects interest earned on cash, cash equivalents and short-term and long-term investment balances. Interest income and other decreased by $0.3 million to $0.3 million for the three months ended September 30, 2008 from $0.6 million from the same period in 2007. The decrease was primarily due to lower cash balances as a result of the stock repurchases and interest rate fluctuations.

Interest income and other decreased by $0.6 million to $1.2 million for the nine months ended September 30, 2008 from $1.8 million from the same period in 2007. The decrease was primarily due to lower cash balances as a result of the stock repurchases and interest rate fluctuations.

Provision for Income Taxes

Income tax expense of $442,000 has been recorded for the nine month period ended September 30, 2008, compared to provision of $357,000 for the same period in 2007. Income tax expense for the nine months ended September 30, 2008 relates to federal taxes, miscellaneous state income taxes and foreign income taxes currently payable adjusted for certain discrete items which are fully recognized in the period they occur. Income tax expense was calculated on a year-to-date discrete basis due to the uncertainty of fourth quarter operating estimates and the large variability to the annual effective rate based on small changes to ordinary income for the year. For the same period in 2007, the income tax expense was a result of applying the estimated annual effective tax rate to cumulative income before taxes.

We have determined that negative evidence supports the need for a full valuation allowance against our net deferred tax assets at this time. We will maintain a full valuation allowance until sufficient positive evidence exists to support a reversal of the valuation allowance.

We adopted FIN 48, regarding accounting for uncertain tax benefits, at the beginning of calendar year 2007. As of September 30, 2008, we have unrecognized tax benefits of approximately $1.9 million of which none, if recognized, would result in a reduction of our effective tax rate. There were no material changes in the amount of unrecognized tax benefits during the nine months ended September 30, 2008. Future changes in the remaining balance of unrecognized tax benefits will have no impact on the effective tax rate as they are subject to a full valuation allowance. We do not expect that the amount of our unrecognized tax benefits will significantly change within the next twelve months.

We are subject to taxation in the United States and various states and foreign jurisdictions. The tax years 1997 through 2007 remain open to examination by the federal and most state tax authorities due to certain acquired net operating loss and overall credit carryforward positions.

Liquidity and Capital Resources

In summary, our cash flows were (in thousands):

	Nine Months Ended
	September 30,
	2008			2007
Net cash provided by operating activities	$	4,786		$	8,260
Net cash (used in) investing activities		(2,749	)		(18,186	)
Net cash provided by (used in) financing activities		(5,645	)		917
Effect of exchange rate fluctuations on cash and cash equivalents		(33	)		(35	)

We invest excess cash predominantly in debt instruments that are highly liquid, of high-quality investment grade, and predominantly have maturities of less than one year with the intent to make such funds readily available for operating purposes. As of September 30, 2008 cash, cash equivalents, short and long-term marketable securities were $44.0 million, a decrease of $2.6 million from $46.6 million at December 31, 2007.

Cash provided by operating activities primarily consists of net income adjusted for certain non-cash items including depreciation, amortization, share-based compensation expense, provisions for excess and obsolete inventories, changes in pre-acquisition deferred tax balances, other non-cash items, and the effect of changes in working capital and other activities. Cash provided by operating activities for the nine months ended September 30, 2008 of $4.8 million consisted primarily of net income of $1.8 million adjusted for non-cash items of $5.0 and a decrease in accounts receivable of $0.7 million partially offset by increases in current assets of $0.8 million and other assets of $0.7 million due to an increase in software and IP licenses and a decrease in accounts payable of $0.9 million. Cash provided by operating activities for the nine months ended September 30, 2007 of $8.3 million consisted primarily of net income of $0.6 million adjusted for non-cash items of $6.4 million and an increase in accounts payable of $4.1 million partially offset by an increase in other current assets of $2.3 million due to an increase in software and IP licenses.

Cash used in investing activities for the nine months ended September 30, 2008 of $2.7 million was due to capital expenditures of $1.6 million primarily to provide infrastructure for new product designs and purchases of marketable securities (net of sales and maturities of investments) of $1.1 million. Cash used in investing activities for the nine months ended September 30, 2007 of $18.2 million was due to purchases of marketable securities (net of sales and maturities of investments) of $15.9 million and capital expenditures of $2.3 million. Capital expenditures have generally been comprised of purchases of engineering equipment, computer hardware, software, server equipment and furniture and fixtures.

Cash used in financing activities for the nine months ended September 30, 2008 of $5.6 million was due to common stock repurchases of $6.5 million partially offset by proceeds from the exercise of stock options of $0.9 million. Cash provided by financing for the nine months ended September 30, 2007 of $0.9 million was due to proceeds from the exercise of stock options.

The negative effect of exchange rates on cash and cash equivalents for the nine months ended September 30, 2008 and 2007 was due to the weakening of the U.S. dollar against other foreign currencies.

As of September 30, 2008, we had the following significant contractual obligations and commercial commitments (in thousands):

	Payments due in
			Less than		1-3
	Total		1 Year		Years
Operating leases - facilities and equipment	$	137	$	109	$	28
Software licenses		1,500		862		638
Inventory purchase commitments		3,343		3,343		-
Total cash obligations	$	4,980	$	4,314	$	666

We believe that our existing resources, together with cash generated from our operations will be sufficient to meet our capital requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including the inventory levels we maintain, the level of investment we make in new technologies and improvements to existing technologies and the levels of monthly expenses required to launch new products. From time to time, we may also evaluate potential acquisitions and equity investments complementary to our technologies and market strategies. To the extent that existing resources and future earnings are insufficient to fund our future activities, we may need to raise additional funds through public or private financings. Additional funds may not be available or, if available, we may not be able to obtain them on terms favorable to us and our stockholders.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. The U.S. Securities and Exchange Commission (“SEC”) has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies which involve the use of estimates, judgments and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery or customer acceptance, where applicable, has occurred, the fee is fixed or determinable, and collection is reasonably assured.

We recognize revenue in accordance with Statements of Financial Accounting Standards (“SFAS”) No. 48, Revenue Recognition When Right of Return Exists. Revenue from product sales to direct customers and distributors is recognized upon shipment and transfer of risk of loss, if we believe collection is reasonably assured and all other revenue recognition criteria are met. We assess the probability of collection based on a number of factors, including past transaction history and the customer’s creditworthiness. At the end of each reporting period, the sufficiency of allowances for doubtful accounts is assessed based on the age of the receivable and the individual customer’s creditworthiness.

We offer pricing protection to two distributors whereby the Company supports the distributor’s resale product margin on certain products held in the distributor’s inventory. In general, we analyze current requests for credit in process, also known as ship and debits and inventory at the distributor to determine the ending sales reserve required for this program. We also offer stock rotation rights to two distributors such that they can return up to a total of 5% of products purchased every six months in exchange for other PLX products of equal value. In general, we analyze current stock rotation requests and past experience, which has historically been insignificant, to determine the ending sales reserve required for this program. Reserves are reduced directly from revenue and recorded as a reduction to accounts receivable. In addition, we have arrangements with a small number of customers offering a rebate program on various products. We record rebates as a reduction of revenue under the guidelines of Emerging Issues Task Force (“EITF’) 01-9, Accounting for Consideration Given to a Customer (Including a Reseller of the Vendor’s Product).

Inventory Valuation

We evaluate the need for potential inventory provisions by considering a combination of factors, including the life of the product, sales history, obsolescence, and sales forecasts. Any adverse changes to our future product demand may result in increased provisions, resulting in decreased gross margin. In addition, future sales on any of our previously written down inventory may result in increased gross margin in the period of sale.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on length of time the receivables are past due. Generally, our customers have between thirty to forty five days to remit payment of invoices. We record reserves for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. Once we have exhausted collection efforts, we will reduce the related accounts receivable against the allowance established for that receivable. We have certain customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customers’ creditworthiness or other matters affecting the collectibility of amounts due from such customers could have a material adverse affect on our results of operations in the period in which such changes or events occur. Historically, our write-offs have been insignificant.

Share-Based Compensation

We recognize share-based compensation expense in accordance with SFAS No. 123(R), Share-Based Payment. We estimate the value of employee stock options on the date of grant using the Black-Scholes model. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the expected stock price volatility over the term of the awards and the actual and projected employee stock option exercise behaviors. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. We calculated our expected volatility assumption required in the Black-Scholes model by blending the historical volatility of our stock with the implied volatility for traded options on our stock. We estimate the amount of forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Taxes

We account for income taxes using the asset and liability method. Deferred taxes are determined based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. As of September 30, 2008, we carried a valuation allowance for the entire deferred tax asset as a result of uncertainties regarding the realization of the asset balance. We will maintain a full valuation allowance against our deferred tax assets until sufficient positive evidence exists to support a reversal of the valuation allowance.

Future taxable income and/or tax planning strategies may eliminate all or a portion of the need for the valuation allowance. In the event we determine we are able to realize our deferred tax asset, an adjustment to the valuation allowance may increase income in the period such determination is made.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have an investment portfolio of fixed income securities, including amounts classified as cash equivalents, short-term investments and long-term investments of $39.8 million at September 30, 2008. These securities are subject to interest rate fluctuations and will decrease in market value if interest rates increase.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We invest primarily in high quality, short-term and long-term debt instruments. A hypothetical 100 basis point increase in interest rates would result in less than a $6,000 decrease (less than 1%) in the fair value of our available-for-sale securities.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Based on their evaluation as of September 30, 2008, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and instructions for Form 10-Q and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal controls.

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

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

This quarterly report on Form 10-Q contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking statements as a result of certain factors, including those set forth below. The following risk factors have been updated from those set forth in Item 1A. of Part I of our Annual Report on Form 10-K for the year ended December 31, 2007, and are restated in full.

Our Operating Results May Fluctuate Significantly Due To Factors Which Are Not Within Our Control

We have recently experienced a broad decrease in order rates across most product lines, markets and end customers, and expect a decrease in fourth quarter sales.

Our quarterly operating results have fluctuated significantly in the past and are expected to fluctuate significantly in the future based on a number of factors, many of which are not under our control. Our operating expenses, which include product development costs and selling, general and administrative expenses, are relatively fixed in the short-term. If our revenues are lower than we expect because we sell fewer semiconductor devices, delay the release of new products or the announcement of new features, or for other reasons, we may not be able to quickly reduce our spending in response.

Other circumstances that can affect our operating results include:

·	the timing of significant orders, order cancellations and reschedulings;

·	the loss of one or more significant customers;

·	introduction of products and technologies by our competitors;

·	the availability of production capacity at the fabrication facilities that manufacture our products;

·	our significant customers could lose market share that may affect our business;

·	integration of our product functionality into our customers’ products;

·	our ability to develop, introduce and market new products and technologies on a timely basis;

·	unexpected issues that may arise with devices in production;

·	shifts in our product mix toward lower margin products;

·	changes in our pricing policies or those of our competitors or suppliers, including decreases in unit average selling prices of our products;

·	the availability and cost of materials to our suppliers;

·	general macro economic conditions; and

·	political climate.

These factors are difficult to forecast, and these or other factors could adversely affect our business. Any shortfall in our revenues would have a direct impact on our business. In addition, fluctuations in our quarterly results could adversely affect the market price of our common stock in a manner unrelated to our long-term operating performance.

The Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances In The Demand For Our Products

In the past, the semiconductor industry has been characterized by significant downturns and wide fluctuations in supply and demand. Also, during this time, the industry has experienced significant fluctuations in anticipation of changes in general economic conditions. This cyclicality has led to significant variances in product demand and production capacity. It has also accelerated erosion of average selling prices per unit on some of our products. We may experience periodic fluctuations in our future financial results because of industry-wide conditions.

Because A Substantial Portion Of Our Net Sales Is Generated By A Small Number Of Large Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our Net Revenues And Earnings Will Be Harmed

Historically, a relatively small number of customers have accounted for a significant portion of our net revenues in any particular period. For the three months ended September 30, 2008, Excelpoint Systems Pte Ltd, Avnet, Inc. and Answer Technology, Inc. accounted for 29%, 14% and 12%, respectively, of net revenues. For the same period in 2007, Excelpoint Systems Pte Ltd and Answer Technology, Inc. accounted for 24% and 11%, respectively, of net revenues. For the nine months ended September 30, 2008, Excelpoint Systems Pte Ltd, Answer Technology, Inc. and Avnet, Inc. accounted for 29%, 12% and 12%, respectively, of net revenues. For the same period in 2007, Metatech and Excelpoint Systems Pte Ltd accounted for 23% and 11%, respectively, of net revenues. For both periods, no other individual direct customer or distributor represented greater than 10% of net revenues in any period presented.

During 2007 we terminated our relationship with our largest distributor and transitioned in a new replacement distributor. If this new distributor is not able to sustain the same volume support it could have a material adverse effect on our business, as we may not be successful in servicing our customers directly or through manufacturers’ representatives.

We have no long-term volume purchase commitments from any of our significant customers. We cannot be certain that our current customers will continue to place orders with us, that orders by existing customers will continue at the levels of previous periods or that we will be able to obtain orders from new customers. In addition, some of our customers supply products to end-market purchasers and any of these end-market purchasers could choose to reduce or eliminate orders for our customers' products. This would in turn lower our customers' orders for our products.

We anticipate that sales of our products to a relatively small number of customers will continue to account for a significant portion of our net sales. Due to these factors, the following have in the past and may in the future reduce our net sales or earnings:

·	the reduction, delay or cancellation of orders from one or more of our significant customers;

·	the selection of competing products or in-house design by one or more of our current customers;

·	the loss of one or more of our current customers; or

·	a failure of one or more of our current customers to pay our invoices.

Intense Competition In The Markets In Which We Operate May Reduce The Demand For Or Prices Of Our Products

Competition in the semiconductor industry is intense. If our main target market, the microprocessor-based systems market, continues to grow, the number of competitors may increase significantly. In addition, new semiconductor technology may lead to new products that can perform similar functions as our products. Some of our competitors and other semiconductor companies may develop and introduce products that integrate into a single semiconductor device the functions performed by our semiconductor devices. This would eliminate the need for our products in some applications.

In addition, competition in our markets comes from companies of various sizes, many of which are significantly larger and have greater financial and other resources than we do and thus can better withstand adverse economic or market conditions. Therefore, we cannot assure you that we will be able to compete successfully in the future against existing or new competitors, and increased competition may adversely affect our business. See “Business -- Products,” and “-- Competition” in Part I of Item I of our Form 10-K for the year ended December 31, 2007.

Our Independent Manufacturers May Not Be Able To Meet Our Manufacturing Requirements

We do not manufacture any of our semiconductor devices. Therefore, we are referred to in the semiconductor industry as a “fabless” producer of semiconductors. Consequently, we depend upon third party manufacturers to produce semiconductors that meet our specifications. We currently have third party manufacturers principally located in Japan, Korea, Taiwan, Singapore and Malaysia, that can produce semiconductors which meet our needs. However, as the semiconductor industry continues to progress towards smaller manufacturing and design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may introduce new problems and delays that may affect product development and deliveries. Due to the nature of the semiconductor industry and our status as a “fabless” semiconductor company, we could encounter fabrication-related problems that may affect the availability of our semiconductor devices, delay our shipments or may increase our costs.

None of our semiconductor devices are currently manufactured by more than one supplier. We place our orders on a purchase order basis and do not have a long term purchase agreement with any of our existing suppliers. In the event that the supplier of a semiconductor device was unable or unwilling to continue to manufacture this product in the required volume, we would have to identify and qualify a substitute supplier. Introducing new products or transferring existing products to a new third party manufacturer or process may result in unforeseen device specification and operating problems. These problems may affect product shipments and may be costly to correct. Silicon fabrication capacity may also change, or the costs per silicon wafer may increase. Manufacturing-related problems may have a material adverse effect on our business.

Customers Are Requiring That We Offer Our Products In Lead-Free Packages

Governmental regulations in certain countries and customers' intention to produce products that are less harmful to the environment has resulted in a requirement from many of our customers to purchase integrated circuits that do not contain lead. We have responded by offering our products in lead-free versions. While the lead-free versions of our products are expected to be friendlier to the environment, the ultimate impact is uncertain. The transition to lead-free products may produce sudden changes in demand depending on the packaging method used, which may result in excess inventory of products packaged using traditional methods. This may have an adverse affect on our results of operations. In addition, the cost of manufacturing the lead-free products is higher compared to the products packaged using more traditional materials which would result in higher costs to us if additional changes in demand occur.

Lower Demand For Our Customers’ Products Will Result In Lower Demand For Our Products

Demand for our products depends in large part on the development and expansion of the high-performance microprocessor-based systems markets including networking and telecommunications, enterprise storage, imaging and industrial applications. The size and rate of growth of these microprocessor-based systems markets may in the future fluctuate significantly based on numerous factors. These factors include the adoption of alternative technologies, capital spending levels and general economic conditions. Demand for products that incorporate high-performance microprocessor-based systems may not grow.

Our Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our Expected Revenues

Our customers typically perform numerous tests and extensively evaluate our products before incorporating them into their systems. The time required for test, evaluation and design of our products into a customer’s equipment can range from six to twelve months or more. It can take an additional six to twelve months or more before a customer commences volume shipments of equipment that incorporates our products. Because of this lengthy sales cycle, we may experience a delay between the time when we increase expenses for research and development and sales and marketing efforts and the time when we generate higher revenues, if any, from these expenditures.

In addition, the delays inherent in our lengthy sales cycle raise additional risks of customer decisions to cancel or change product plans. When we achieve a design win, there can be no assurance that the customer will ultimately ship products incorporating our products. Our business could be materially adversely affected if a significant customer curtails, reduces or delays orders during our sales cycle or chooses not to release products incorporating our products.

Failure To Have Our Products Designed Into The Products Of Electronic Equipment Manufacturers Will Result In Reduced Sales

Our future success depends on electronic equipment manufacturers that design our semiconductor devices into their systems. We must anticipate market trends and the price, performance and functionality requirements of current and potential future electronic equipment manufacturers and must successfully develop and manufacture products that meet these requirements. In addition, we must meet the timing requirements of these electronic equipment manufacturers and must make products available to them in sufficient quantities. These electronic equipment manufacturers could develop products that provide the same or similar functionality as one or more of our products and render these products obsolete in their applications.

We do not have purchase agreements with our customers that contain minimum purchase requirements. Instead, electronic equipment manufacturers purchase our products pursuant to short-term purchase orders that may be canceled without charge. We believe that in order to obtain broad penetration in the markets for our products, we must maintain and cultivate relationships, directly or through our distributors, with electronic equipment manufacturers that are leaders in the embedded systems markets. Accordingly, we will incur significant expenditures in order to build relationships with electronic equipment manufacturers prior to volume sales of new products. If we fail to develop relationships with additional electronic equipment manufacturers to have our products designed into new microprocessor-based systems or to develop sufficient new products to replace products that have become obsolete, our business would be materially adversely affected.

Defects In Our Products Could Increase Our Costs And Delay Our Product Shipments

Our products are complex. While we test our products, these products may still have errors, defects or bugs that we find only after commercial production has begun. We have experienced errors, defects and bugs in the past in connection with new products.

Our customers may not purchase our products if the products have reliability, quality or compatibility problems. This delay in acceptance could make it more difficult to retain our existing customers and to attract new customers. Moreover, product errors, defects or bugs could result in additional development costs, diversion of technical and other resources from our other development efforts, claims by our customers or others against us, or the loss of credibility with our current and prospective customers. In the past, the additional time required to correct defects has caused delays in product shipments and resulted in lower revenues. We may have to spend significant amounts of capital and resources to address and fix problems in new products.

We must continuously develop our products using new process technology with smaller geometries to remain competitive on a cost and performance basis. Migrating to new technologies is a challenging task requiring new design skills, methods and tools and is difficult to achieve.

Failure Of Our Products To Gain Market Acceptance Would Adversely Affect Our Financial Condition

We believe that our growth prospects depend upon our ability to gain customer acceptance of our products and technology. Market acceptance of products depends upon numerous factors, including compatibility with other products, adoption of relevant interconnect standards, perceived advantages over competing products and the level of customer service available to support such products. There can be no assurance that growth in sales of new products will continue or that we will be successful in obtaining broad market acceptance of our products and technology.

We expect to spend a significant amount of time and resources to develop new products and refine existing products. In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of the prospect of deriving revenues from the sale of any new products. Our ability to commercially introduce and successfully market any new products is subject to a wide variety of challenges during this development cycle, including start-up bugs, design defects and other matters that could delay introduction of these products to the marketplace. In addition, since our customers are not obligated by long-term contracts to purchase our products, our anticipated product orders may not materialize, or orders that do materialize may be cancelled. As a result, if we do not achieve market acceptance of new products, we may not be able to realize sufficient sales of our products in order to recoup research and development expenditures. The failure of any of our new products to achieve market acceptance would harm our business, financial condition, results of operation and cash flows.

A Large Portion Of Our Revenues Is Derived From Sales To Third-Party Distributors Who May Terminate Their Relationships With Us At Any Time

We depend on distributors to sell a significant portion of our products. For the nine months ended September 30, 2008 and 2007, sales through distributors accounted for approximately 78% and 76%, respectively, of our net revenues. Some of our distributors also market and sell competing products. Distributors may terminate their relationships with us at any time. Our future performance will depend in part on our ability to attract additional distributors that will be able to market and support our products effectively, especially in markets in which we have not previously distributed our products. We may lose one or more of our current distributors or may not be able to recruit additional or replacement distributors. The loss of one or more of our major distributors could have a material adverse effect on our business, as we may not be successful in servicing our customers directly or through manufacturers’ representatives.

The Demand For Our Products Depends Upon Our Ability To Support Evolving Industry Standards

A majority of our revenues are derived from sales of products, which rely on the PCI Express, PCI, PCI-X and USB standards. If markets move away from these standards and begin using new standards, we may not be able to successfully design and manufacture new products that use these new standards. There is also the risk that new products we develop in response to new standards may not be accepted in the market. In addition, these standards are continuously evolving, and we may not be able to modify our products to address new specifications. Any of these events would have a material adverse effect on our business.

We Must Make Significant Research And Development Expenditures Prior To Generating Revenues From Products

To establish market acceptance of a new semiconductor device, we must dedicate significant resources to research and development, production and sales and marketing. We incur substantial costs in developing, manufacturing and selling a new product, which often significantly precede meaningful revenues from the sale of this product. Consequently, new products can require significant time and investment to achieve profitability. Investors should understand that our efforts to introduce new semiconductor devices or other products or services may not be successful or profitable. In addition, products or technologies developed by others may render our products or technologies obsolete or noncompetitive.

We record as expenses the costs related to the development of new semiconductor devices and other products as these expenses are incurred. As a result, our profitability from quarter to quarter and from year to year may be adversely affected by the number and timing of our new product launches in any period and the level of acceptance gained by these products.

Our Transition To A New Chief Executive Officer May Not Be Successful

Our board of directors appointed Ralph Schmitt as our Chief Executive Officer and as a member of our Board of Directors, effective November 3, 2008. Mike Salameh, who is retiring as chief executive officer, will continue as a full-time employee for a short transition period and then continue to serve as a member of the board of directors. While we have planned carefully for this transition, there are no assurances that we will be able to implement a smooth transition to our new Chief Executive Officer. Any failure to effectively transition the Chief Executive Officer position could have a material adverse effect on our business, results of operations or financial condition.

We Could Lose Key Personnel Due To Competitive Market Conditions And Attrition

Our success depends to a significant extent upon our senior management and key technical and sales personnel. The loss of one or more of these employees could have a material adverse effect on our business. We do not have employment contracts with any of our executive officers.

Our success also depends on our ability to attract and retain qualified technical, sales and marketing, customer support, financial and accounting, and managerial personnel. Competition for such personnel in the semiconductor industry is intense, and we may not be able to retain our key personnel or to attract, assimilate or retain other highly qualified personnel in the future. In addition, we may lose key personnel due to attrition, including health, family and other reasons. We have experienced, and may continue to experience, difficulty in hiring and retaining candidates with appropriate qualifications. If we do not succeed in hiring and retaining candidates with appropriate qualifications, our business could be materially adversely affected.

The Successful Marketing And Sales Of Our Products Depend Upon Our Third Party Relationships, Which Are Not Supported By Written Agreements

When marketing and selling our semiconductor devices, we believe we enjoy a competitive advantage based on the availability of development tools offered by third parties. These development tools are used principally for the design of other parts of the microprocessor-based system but also work with our products. We will lose this advantage if these third party tool vendors cease to provide these tools for existing products or do not offer them for our future products. This event could have a material adverse effect on our business. We have no written agreements with these third parties, and these parties could choose to stop providing these tools at any time.

Our Limited Ability To Protect Our Intellectual Property And Proprietary Rights Could Adversely Affect Our Competitive Position

Our future success and competitive position depend upon our ability to obtain and maintain proprietary technology used in our principal products. Currently, we have limited protection of our intellectual property in the form of patents and rely instead on trade secret protection. Our existing or future patents may be invalidated, circumvented, challenged or licensed to others. The rights granted there under may not provide competitive advantages to us. In addition, our future patent applications may not be issued with the scope of the claims sought by us, if at all. Furthermore, others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned or licensed by us. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in foreign countries where we may need protection. We cannot be sure that steps taken by us to protect our technology will prevent misappropriation of the technology.

We may from time to time receive notifications of claims that we may be infringing patents or other intellectual property rights owned by third parties. While there is currently no intellectual property litigation pending against us, litigation could result in significant expenses to us and adversely affect sales of the challenged product or technology. This litigation could also divert the efforts of our technical and management personnel, whether or not the litigation is determined in our favor. In addition, we may not be able to develop or acquire non-infringing technology or procure licenses to the infringing technology under reasonable terms. This could require expenditures by us of substantial time and other resources. Any of these developments would have a material adverse effect on our business.

Our Potential Future Acquisitions May Not Be Successful Because Of Our Limited Experience With Acquisitions In The Past

As part of our business strategy, we expect to review acquisition prospects that would complement our existing product offerings, improve market coverage or enhance our technological capabilities. Future acquisitions could result in any or all of the following:

·	potentially dilutive issuances of equity securities;

·	large acquisition-related write-offs;

·	the incurrence of debt and contingent liabilities or amortization expenses related to other intangible assets;

·	difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies;

·	diversion of management’s attention from other business concerns;

·	risks of entering geographic and business markets in which we have no or limited prior experience; and

·	potential loss of key employees of acquired organizations.

We have had limited experience with acquisitions in the past and may not be able to successfully integrate any businesses, products, technologies or personnel that may be acquired in the future. Our failure to do so could have a material adverse effect on our business.

Because We Sell Our Products To Customers Outside Of The United States And Because Our Products Are Incorporated With Products Of Others That Are Sold Outside Of The United States We Face Foreign Business, Political And Economic Risks

Sales outside of the United States accounted for approximately 77% of our revenues for the nine months ended September 30, 2008. In 2007 and 2006, sales outside of the United States accounted for approximately 71% and 75% of our revenues, respectively. Sales outside of the United States may fluctuate in future periods and may continue to account for a large portion of our revenues. In addition, equipment manufacturers who incorporate our products into their products sell their products outside of the United States, thereby exposing us indirectly to foreign risks. Further, most of our semiconductor products are manufactured outside of the United States. Accordingly, we are subject to international risks, including:

·	difficulties in managing distributors;

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

·	political and economic instability;

·	foreign currency exchange fluctuations;

·	difficulties in accounts receivable collections;

·	potentially adverse tax consequences;

·	timing and availability of export licenses;

·	changes in regulatory requirements, tariffs and other barriers;

·	difficulties in obtaining governmental approvals for telecommunications and other products; and

·	the burden of complying with complex foreign laws and treaties.

Because sales of our products have been denominated to date exclusively in United States dollars, increases in the value of the United States dollar will increase the price of our products so that they become relatively more expensive to customers in the local currency of a particular country, which could lead to a reduction in sales and profitability in that country.

A Downturn In The Global Economy May Adversely Affect Our Revenues, Results Of Operations And Financial Condition

Demand for semiconductor components is increasingly dependent upon the rate of growth in the global economy. If the rate of global economic growth slows, or contracts, customer demand for products could be adversely affected, which in turn could adversely affect revenues, results of operations and financial condition. Many factors could adversely affect regional or global economic growth. Some of the factors that could slow global economic growth include:

·	rising interest rates and poor availability of credit,

·	a slowdown in the rate of growth of the United States economy,

·	a slowdown in the rate of growth of other developed nation economies,

·	a significant act of terrorism which disrupts global trade or consumer confidence,

·	geopolitical tensions including war and civil unrest,

·	reduced levels of economic activity or

·	disruption of international transportation.

The recent challenging economic conditions also may impair the ability of our customers to pay for products and services they have purchased or would like to purchase. As a result, revenues may decline and reserves for doubtful accounts and write-offs of accounts receivable may increase. We maintain an investment portfolio of various holdings, types, and maturities. These investments are subject to general credit, liquidity, market, and interest rate risks. If the global credit market continues to deteriorate, our investment portfolio may be impacted and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring an impairment charge which could adversely impact our financial results.

We May Be Required To Record A Significant Charge To Earnings If Our Goodwill Or Amortizable Intangible Assets Become Impaired

Under generally accepted accounting principles, we review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable, include a persistent decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, which would adversely impact our results of operations.

Our Principal Stockholders Have Significant Voting Power And May Take Actions That May Not Be In The Best Interests Of Our Other Stockholders

Our executive officers, directors and other principal stockholders, in the aggregate, beneficially own a substantial amount of our outstanding common stock. Although these stockholders do not have majority control, they currently have, and likely will continue to have, significant influence with respect to the election of our directors and approval or disapproval of our significant corporate actions. This influence over our affairs might be adverse to the interests of other stockholders. In addition, the voting power of these stockholders could have the effect of delaying or preventing a change in control of PLX.

The Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely Affect The Rights Of The Holders Of Our Common Stock

Anti-takeover provisions of Delaware law and our Certificate of Incorporation may make a change in control of PLX more difficult, even if a change in control would be beneficial to the stockholders. These provisions may allow the Board of Directors to prevent changes in the management and control of PLX.

As part of our anti-takeover devices, our Board of Directors has the ability to determine the terms of preferred stock and issue preferred stock without the approval of the holders of the common stock. Our Certificate of Incorporation allows the issuance of up to 5,000,000 shares of preferred stock. There are no shares of preferred stock outstanding. However, because the rights and preferences of any series of preferred stock may be set by the Board of Directors in its sole discretion without approval of the holders of the common stock, the rights and preferences of this preferred stock may be superior to those of the common stock. Accordingly, the rights of the holders of common stock may be adversely affected. Consistent with Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future.

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

In September 2002, our Board of Directors authorized the repurchase of up to 2,000,000 shares of common stock. In July 2008, our Board of Directors authorized an additional 2,000,000 shares under the repurchase program. At the discretion of the management, we can repurchase the shares from time to time in the open market or in privately negotiated transactions. Approximately 774,000 shares were repurchased for approximately $1.9 million in cash in 2002 and 2003. We did not repurchase any additional shares from January 1, 2004 through December 31, 2007. In the three and nine months ended September 30, 2008 we repurchased 74,000 and 956,000 shares, respectively, for approximately $0.5 million and $6.5 million, respectively.

The stock repurchase activity under the stock repurchase program during the three months ended September 30, 2008 is summarized as follows (in thousands, except per share amounts):

					Total Number of		Maximum Number Of
					Shares Purchased		Shares That May
	Total Number of		Average Price		As Part of Publicly		Yet Be Purchased
Period	Shares Purchased		Paid Per Share		Announced Plan		Under The Plan
July 1, 2008 - July 31, 2008		74		6.91		74		2,269
August 1, 2008 - August 31, 2008		-		-		-		2,269
September 1, 2008 - September 30, 2008		-		-		-		2,269
Total		74				74		2,269

ITEM 6. EXHIBITS

Exhibit
Number		Description

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Finanical Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURE

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

PLX TECHNOLOGY, INC.

Date: October 30, 2008

By /s/ Arthur O. Whipple

Arthur O. Whipple

Chief Financial Officer

(Principal Financial Officer and duly authorized signatory)

EXHIBIT INDEX

Exhibit
Number		Description

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Finanical Officer Pursuant to 18 U.S.C. Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Delaware	94-3008334
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)