plx_body10q-q112.htm

PLX TECHNOLOGY, INC.

INDEX TO

REPORT ON FORM 10-Q

FOR QUARTER ENDED MARCH 31, 2012

PART I. FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at March 31, 2012 and December 31, 2011	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011	4
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2012 and 2011	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 6.	Exhibits	39
Signature		40

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

	March 31,			December 31,
	2012			2011

ASSETS
Current Assets:
Cash and cash equivalents	$	11,591		$	12,097
Short-term marketable securities		4,540			7,549
Accounts receivable, net		13,942			11,074
Inventories		8,192			8,896
Other current assets		2,655			1,323
Total current assets		40,920			40,939
Property and equipment, net		12,663			12,291
Goodwill		21,338			21,338
Other acquired intangible assets, net		19,114			20,845
Long-term marketable securities		104			106
Other assets		937			1,299
Total assets	$	95,076		$	96,818

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	9,935		$	7,134
Accrued compensation and benefits		3,914			3,586
Accrued commissions		700			632
Short term note payable and capital lease obligation		434			5,115
Other accrued expenses		2,851			3,132
Total current liabilities		17,834			19,599
Long term borrowing against line of credit		9,000			2,000
Total liabilities		26,834			21,599

Stockholders' Equity:
Common stock, par value		45			45
Additional paid-in capital		185,822			185,323
Accumulated other comprehensive loss		(183	)		(147	)
Accumulated deficit		(117,442	)		(110,002	)
Total stockholders' equity		68,242			75,219
Total liabilities and stockholders' equity	$	95,076		$	96,818

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
	March 31,
	2012			2011
Net revenues	$	25,417		$	28,079
Cost of revenues		11,404			12,074
Gross margin		14,013			16,005

Operating expenses:
Research and development		11,063			12,860
Selling, general and administrative		8,625			7,125
Acquisition and restructuring related costs		-			2,621
Amortization of acquired intangible assets		1,731			2,444
Total operating expenses		21,419			25,050

Loss from operations		(7,406	)		(9,045	)
Interest income (expense) and other, net		(5	)		(66	)
Loss before provision for income taxes		(7,411	)		(9,111	)

Provision for income taxes		29			21

Net loss	$	(7,440	)	$	(9,132	)

Basic net loss per share	$	(0.17	)	$	(0.21	)
Shares used to compute basic per share amounts		44,729			44,511

Diluted net loss per share	$	(0.17	)	$	(0.21	)
Shares used to compute diluted per share amounts		44,729			44,511

See accompanying notes to condensed consolidated financial statements.

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2012			2011
Net loss	$	(7,440	)	$	(9,132	)
Unrealized loss on marketable securities, net		(6	)		(8	)
Foreign currency translation adjustments		(30	)		(12	)
Comprehensive net loss	$	(7,476	)	$	(9,152	)

See accompanying notes to condensed consolidated financial statements.

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2012			2011
Cash flows used in operating activities:
Net loss	$	(7,440	)	$	(9,132	)
Adjustments to reconcile net loss to net cash flows used in operating activities,
net of assets acquired and liabilities assumed:
Depreciation and amortization		861			893
Share-based compensation expense		413			514
Amortization of acquired intangible assets		1,731			2,444
Write-downs of inventories		239			370
Other non-cash items		24			78
Changes in operating assets and liabilities:
Accounts receivable		(2,868	)		1,327
Inventories		465			323
Other current assets		(1,332	)		890
Other assets		137			98
Accounts payable		2,801			76
Accrued compensation and benefits		328			(1,497	)
Other accrued expenses		103			1,225
Net cash used in operating activities		(4,538	)		(2,391	)

Cash flows from investing activities:
Purchases of marketable securities		(2,123	)		(505	)
Sales and maturities of marketable securities		5,104			5,817
Purchase of property and equipment		(1,008	)		(1,085	)
Net cash provided by investing activities		1,973			4,227

Cash flows from financing activities:
Borrowings against line of credit		7,000			-
Proceeds from exercise of common stock options		86			24
Principal payment on acquisition note		(4,848	)		-
Principal payments on capital lease obligations		(149	)		(140	)
Net cash provided by (used in) financing activities		2,089			(116	)

Effect of exchange rate fluctuations on cash and cash equivalents		(30	)		(11	)

Net increase in cash and cash equivalents		(506	)		1,709
Cash and cash equivalents at beginning of period		12,097			5,835
Cash and cash equivalents at end of period	$	11,591		$	7,544

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	-		$	6
Cash from income tax refunds	$	4		$	74
Cash paid for interest	$	150		$	10

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 March 31, 2012 and for the three month periods ended March 31, 2012 and 2011 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, 2011.

Use of Estimates

Accumulated Other Comprehensive Loss

The components of accumulated comprehensive loss was as follows (in thousands):

	March 31,			December 31,
	2012			2011
Unrealized gain on investments, net	$	3		$	9
Cumulative translation adjustments		(186	)		(156	)
Accumulated other comprehensive loss	$	(183	)	$	(147	)

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.

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. 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 three 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. The Company analyzes inventory at distributors, current stock rotation requests and past experience to determine the ending sales reserve required for this program. Provisions for reserves are charged directly against revenue and the related reserves are recorded as a reduction to accounts receivable.

For license and service agreements, the Company evaluates revenue agreements under the accounting guidance for multiple-deliverable revenue arrangements. A multiple-deliverable arrangement is separated into more than one unit of accounting if (a) the delivered item(s) has value to the customer on a stand-alone basis, and (b) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. If both of these criteria are not met, the arrangement is accounted for as a single unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The selling price for each element is based upon the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available, third party evidence (“TPE”) if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.

Revenues from the licensing of the Company’s intellectual property are recognized when the significant contractual obligations have been fulfilled.

On occasion, the Company enters into development service arrangements in which customer payments are tied to achievements of specific milestones. The Company has elected to use the milestone method of revenue recognition for development service agreements upon the achievement of substantive milestones. When determining if a milestone is substantive, the Company assesses whether the milestone consideration (a) is commensurate with the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item as a result of the outcome from the Company’s performance, (b) relates solely to past performance and (c) is reasonable relative to all deliverables and payments terms within the arrangement.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued a standard which revised the presentation of other comprehensive income (“OCI”). The new guidance requires entities to present net income and OCI in either a single continuous statement or in separate consecutive statements. The guidance does not change the components of net income or OCI, when OCI should be reclassified to net income, or the earnings per share calculation. This accounting guidance is effective for annual reporting periods beginning after December 15, 2011. The Company adopted this guidance as of January 1, 2012 using two consecutive statements.

2. Share-Based Compensation

Stock Option Plans

In May 2008, the Company’s stockholders approved the 2008 Equity Incentive Plan (“2008 Plan”). The 2008 Plan was amended by the Company’s stockholders in May 2010 to increase the number of shares reserved for issuance under the Plan by 1,500,000 shares. In May 2011, the 2008 Plan was amended again by the Company’s stockholders to increase the number of shares reserved for issuance under the Plan by 2,300,000 shares. Under the 2008 Plan, there is currently authorized for issuance and available for awards an aggregate of 5,000,000 shares of the Company’s common stock, plus up to an additional 2,407,369 shares that otherwise would have reverted to the share reserve of the Company’s prior incentive plan, the Company’s 1999 Stock Incentive Plan, subject to an overall, aggregate share reserve limit of 7,407,369 shares. 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. Generally, options vest over a four-year period and expire no more than seven years after the date of grant. The 2008 Plan has a term of ten years.

Employee Stock Ownership Plan

In January 2009, the Company established the PLX Technology, Inc. Employee Stock Ownership Plan (the “ESOP”). The ESOP is a tax-qualified defined contribution retirement plan that is non-contributory. PLX regular employees (other than nonresident aliens with no U.S.-source income, employees covered by a collective bargaining agreement, leased employees and employees of a non-participating subsidiary of PLX) who are at least 18 years old and have worked for PLX for at least 12 consecutive months are eligible to participate in the ESOP. The Company makes a cash contribution equal to a percentage of eligible compensation that is determined annually by the Board of Directors. Eligible compensation is limited to $150,000. The contributions are used to purchase common stock of the Company. Since the adoption of the ESOP, the Company has made annual contributions of 2% of each employee's eligible compensation up to a maximum of $3,000 for any single employee (2% of $150,000 of eligible compensation). Eligible participants received a share allocation at the end of the plan year based on the contributions plus an additional allocation for forfeitures that occurred during the plan year. The shares and forfeitures are allocated to each ESOP participant who is employed on the last day of the ESOP Plan Year (December 31) in the same proportion that the compensation (up to the $150,000 limit) of each ESOP participant bears to the eligible compensation of all ESOP participants.

Share-Based Compensation Expense

The fair value of share-based awards 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
	March 31,
	2012			2011
Risk-free interest rate		0.87	%		1.78	%
Expected volatility		60.80	%		61.60	%
Expected life (years)		4.35			4.32

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 Life: The Company’s expected life represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected life 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 believes that historical volatility best represents expected volatility due to the lack of market data consistently available to calculate implied volatility. The historical volatility is based on the weekly closing prices of its common stock over a period equal to the expected term of the option and is a strong indicator of the expected future 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 months ended March 31, 2012 and 2011 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table shows total share-based compensation and employee stock ownership plan expenses for the three months ended March 31, 2012 and 2011, included in the respective line items of the Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended
	March 31,
	2012		2011
Cost of revenues	$	13	$	11
Research and development		279		358
Selling, general and administrative		260		295
Total share-based compensation expense	$	552	$	664

A summary of option activity under the Company’s stock equity plans during the three months ended March 31, 2012 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, 2011		2,590,763			4,612,367		$	4.15		4.61	$	872,567
Granted		(30,500	)		30,500			3.23
Exercised		-			(41,557	)		2.08
Cancelled		244,995			(244,995	)		8.21

Outstanding at March 31, 2012		2,805,258			4,356,315		$	3.94		4.63	$	3,091,964

Exercisable at March 31, 2012					2,328,750		$	4.29		3.85	$	1,798,919

The Black-Scholes weighted average fair values of options granted during the three months ended March 31, 2012 and 2011 were $1.55 and $1.84, respectively.

The following table summarizes ranges of outstanding and exercisable options as of March 31, 2012:

	Options Outstanding						Options Exercisable
			Weighted Average
			Remaining		Weighted				Weighted
			Contractual Term		Average				Average
Range of Exercise Prices	Number		(in years)		Exercise Price		Number		Exercise Price
$1.50-$2.05		940,047		3.78	$	2.02		736,196	$	2.02
$2.06-$3.48		1,272,298		5.58		3.26		363,542		3.35
$3.49-$3.87		938,000		5.22		3.76		367,900		3.79
$3.88-$7.03		941,170		4.40		5.13		596,312		5.24
$7.04-$15.58		264,800		1.82		10.40		264,800		10.40
Total		4,356,315		4.63	$	3.94		2,328,750	$	4.29

The total intrinsic value of options exercised during the three months ended March 31, 2012 and 2011 was $47,000 and $22,000, respectively. The fair value of options vested during the three months ended March 31, 2012 was approximately $0.8 million. As of March 31, 2012, total unrecognized compensation costs related to nonvested stock options including estimated forfeitures was $1.3 million which is expected to be recognized as expense over a weighted average period of approximately 1.26 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):

	March 31,		December 31,
	2012		2011
Work-in-process	$	4,213	$	4,216
Finished goods		3,979		4,680
Total	$	8,192	$	8,896

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

4. Net Loss Per Share

The Company uses the treasury stock method to calculate the weighted average shares used in the diluted earnings per share. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended
	March 31,
	2012			2011

Net loss	$	(7,440	)	$	(9,132	)
Weighted average shares of common stock outstanding		44,729			44,511
Net loss per share - basic and diluted	$	(0.17	)	$	(0.21	)

As the Company incurred a net loss for the three month periods ended March 31, 2012 and 2011, the effect of dilutive securities, totaling 4.4 million and 4.8 million shares, respectively, has been excluded from the computation of diluted loss per share, as its impact would be anti-dilutive. Dilutive securities are comprised of options to purchase common stock.

5. Fair Value Measurements

The accounting guidance for fair value measurements provided a framework for measuring fair value and expands related disclosures. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The guidance also established a hierarchy which requires an entity to maximize the use of observable inputs, when available. The guidance 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.

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 upon quoted prices in markets that are not active and incorporate available trade, bid and other market information.

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 fair value of financial assets and liabilities measured on a recurring basis is as follows (in thousands):

			Fair Value Measurement as Reporting Date Using
			Quoted Prices in Active Markets		Significant Other		Significant
			for Identical Assets or Liabilities		Observable Inputs		Unobservable Inputs
	March 31, 2012		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	104	$	104	$	-	$	-
Certificate of deposit		2,137		2,137		-		-
Marketable securities		3,503		-		3,503		-
Total	$	5,744	$	2,241	$	3,503	$	-

			Fair Value Measurement as Reporting Date Using
			Quoted Prices in Active Markets		Significant Other		Significant
			for Identical Assets or Liabilities		Observable Inputs		Unobservable Inputs
	December 31, 2011		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	89	$	89	$	-	$	-
Certificate of deposit		2,988		2,988		-		-
Marketable securities		6,161		-		6,161		-
Total	$	9,238	$	3,077	$	6,161	$	-

6. Investments

As of March 31, 2012, 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 or prices quoted in markets that are not active, 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 is as follows (in thousands):

	March 31, 2012
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value

Certificate of deposit	$	2,137	$	-	$	-		$	2,137
Municipal bonds		2,208		3		(1	)		2,210
US treasury and government agencies securities		1,292		1		-			1,293
Total bonds, notes and equity securities	$	5,637	$	4	$	(1	)	$	5,640
Less amounts classified as cash equivalents									(996	)
Total short and long-term available-for-sale investments								$	4,644

Contractual maturity dates for investments:
Less than one year:									4,540
One to two years:									104
								$	4,644

	December 31, 2011
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gain		Loss		Fair Value

Certificate of deposit	$	2,988	$	-	$	-	$	2,988
Corporate bonds and notes		434		-		-		434
Municipal bonds		2,083		4		-		2,087
US treasury and government agencies securities		3,635		5		-		3,640
Total bonds, notes and equity securities	$	9,140	$	9	$	-	$	9,149
Less amounts classified as cash equivalents								(1,494	)
Total short and long-term available-for-sale investments							$	7,655

Contractual maturity dates for investments:
Less than one year:								7,549
One to two years:								106
							$	7,655

As of March 31, 2012 and December 31, 2011, the Company had an aggregate unrealized loss of less than $1,000.

The Company reviews its available for sale investments for impairment at the end of each period. Investments in debt securities, which make up the majority of the Company’s investments, are considered impaired when the fair value of the debt security is below its amortized cost. If an impairment exists and the Company determines it has intent to sell the debt security or if it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis, an other-than-temporary impairment loss is recognized in earnings to write the debt security down to its fair value. However, even if the Company does not expect to sell the debt security, it must evaluate expected cash flows to be received and determine if a credit loss exists. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts relating to factors other than credit losses are recognized in other comprehensive income (loss). The Company did not record any other-than-temporary write-downs in the accompanying financial statements.

7. Intangibles

The 2010 acquisition of Teranetics and the 2009 acquisition Oxford included the acquisition of $30.5 million and $9.1 million, respectively, of identifiable intangible assets other than goodwill. All of these intangibles are subject to amortization. There is no estimated residual value on any of the intangible assets.

The following table summarizes the gross carrying amount and accumulated amortization for each major intangible class and the weighted average amortization period, in total and by major intangible asset class, as of March 31, 2012 (in thousands):

	2012
	Gross Carrying		Accumulated			Net		Amortization	Estimated
	Value		Amortization			Value		Method	Useful Life
Existing and core technology
Oxford USB and Serial Connectivity	$	4,600	$	(4,600	)	$	-	Accelerated	3 years
Oxford Network Attached Storage Connectivity		3,800		(3,636	)		164	Accelerated	4 years
Teranetics Network PHY		20,100		(5,025	)		15,075	Straight-line	6 years
Trade Name
Oxford		600		(600	)		-	Straight-line	2 years
Teranetics		200		(150	)		50	Straight-line	2 years
Customer Relationships
Oxford		56		(56	)		-	Accelerated	1 year
Teranetics		10,200		(6,375	)		3,825	Accelerated	3.5 years
Totals	$	39,556	$	(20,442	)	$	19,114		4.8 years

The amortization expense for the three month periods ended March 31, 2012 and 2011 was $1.7 million and $2.4 million respectively.

Estimated future amortization expense is as follows (in thousands):

Remainder of 2012	$	4,677
2013		4,662
2014		3,912
2015		3,350
2016		2,513
Total	$	19,114

8. Acquisition and Restructuring Costs

Acquisition Costs

For the three months ended March 31, 2011, the Company recorded $1.4 million of carve-out retention bonus expense associated with the 2010 acquisition of Teranetics. The Company also incurred $55,000 of third party acquisition related costs, primarily for outside legal and accounting costs. These expenses were included in operating expenses under acquisition and restructuring related costs in the Company’s Condensed Consolidated Statement of Operations.

Severance

In the three months ended March 31, 2011, the Company recorded approximately $0.5 million of severance and benefit related costs, included in acquisition and restructuring related costs in the Condensed Consolidated Statement of Operations, related to the termination of 14 employees worldwide as a result of the downsizing and refocus of the operations in the UK and cost control efforts as a result of the Teranetics acquisition. As of December 31, 2011, all of the $0.5 million severance and benefit related costs were paid.

Lease Terminations

In October 2010, associated with the acquisition of Teranetics, the Company assumed a building lease in San Jose, California which was vacated in March 2011. Given the then current lease rates and the available space in the area when the property was vacated, the Company recorded a $0.4 million liability, included in other accrued expenses in the Condensed Consolidated Balance Sheet, for the estimated fair value of the future lease costs through June 2012, reduced by estimated sublease rental and adjusted for deferred rent. The total adjusted cash payment was not materially different from the fair value. The lease accrual charge of $0.4 million was recorded in acquisition and restructuring related costs in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2011. The Company expects the lease liability to be fully paid by June 2012.

In connection with the downsizing of UK operations, the Company vacated the first floor of its building as of March 2011 and terminated the lease for this space. In March 2011, the Company recorded a $0.2 million liability, included in other accrued expenses in the Condensed Consolidated Balance Sheet, for future lease costs and early termination fees. The lease accrual charge of $0.2 million was recorded in acquisition and restructuring related costs in the Condensed Consolidated Statement of Operations. As of December 31, 2011 the lease liability was paid.

The following table summarizes the activity within the lease termination liability (in thousands):

Liability at December 31, 2011	$	281
Cash payments		(140	)
Liability at March 31, 2012	$	141

9. 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
	March 31,
	2012		2011
Revenues:
Taiwan	$	6,235	$	5,228
China		5,420		6,028
United States		3,721		6,138
Germany		3,614		3,826
Singapore		3,368		3,913
Other Asia Pacific		2,583		2,395
Europe, Middle East and Africa		431		501
The Americas - excluding United States		45		50
Total	$	25,417	$	28,079

There were no direct end customers that accounted for more than 10% of net revenues. Sales to the following distributors accounted for 10% or more of net revenues:

	Three Months Ended
	March 31,
	2012			2011
Avnet, Inc.		25	%		25	%
Excelpoint Systems Pte Ltd		24	%		25	%
Answer Technology, Inc.		22	%		16	%

* Less than 10%

The following distributors accounted for 10% or more of the total accounts receivable balance:

	March 31,
	2012			2011
Excelpoint Systems Pte Ltd		27	%		28	%
Answer Technology, Inc.		27	%		25	%
Avnet, Inc.		19	%		19	%

* Less than 10%

10. Line of Credit

On September 30, 2011, the Company entered into an agreement with Silicon Valley Bank to establish a two-year $10 million revolving loan facility. The facility provides for revolving advances based on a borrowing-base formula tied to the Company’s receivables and also provides for month-end and fiscal quarter-end advances beyond the borrowing-base formula subject to certain limitations and requirements. Borrowings under the credit facility bear interest at rates equal to the prime rate announced from time to time in The Wall Street Journal. As of March 31, 2012 the prime rate was 3.25%. The facility also provides for commitment, unused facility and letter-of-credit fees. The facility is secured by liens on the Company’s personal property assets except for intellectual property, which is subject to a negative pledge against encumbrance. As of March 31, 2012 there is $9.0 million outstanding against the facility and borrowing availability is $1.0 million. Interest payments are paid monthly with principal due at maturity.

The facility is subject to certain financial covenants for EBITDA, as defined in the agreement, and a monthly quick ratio computation (PLX’s cash, investments and accounts receivable divided by current liabilities). The Company was in compliance with all financial covenants associated with this facility as of March 31, 2012.

11. Contingencies

To date, Internet Machines LLC ("Internet Machines") has filed three separate lawsuits against PLX. The first suit was filed on February 2, 2010, which has been served on PLX, entitled Internet Machines LLC v. Alienware Corporation, et al., in the United States District Court for the Eastern District of Texas, Tyler Division (the “First Suit”). This First Suit alleges infringement by PLX and the other defendants in the lawsuit of two patents held by Internet Machines. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On May 14, 2010, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On December 6, 2010, the Court held a case-management conference and subsequently entered a scheduling order in this matter, and set the trial for February 2012.

On February 21, 2012, through February 29, 2012, the claims and defenses asserted in the First Suit were tried to a seven-member jury in the United States District Court for the Eastern District of Texas, Tyler Division. On February 29, 2012, the jury returned its verdict, finding the patents-in-suit valid and infringed and awarded money damages against PLX in the amount of $1.0 million. The Court has not entered a final judgment on the jury’s verdict, and the Company intends to vigorously seek reversal of the jury’s verdict through post-trial motions and, if necessary, on appeal.

Internet Machines' second lawsuit, which has also been served on PLX, was filed on October 17, 2010, again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Second Suit”). This Second Suit, entitled Internet Machines LLC v. ASUS Computer International, et al., alleges infringement by PLX of another patent held by Internet Machines. The complaint also asserts infringement claims against a separate group of defendants not named in the first Internet Machines lawsuit, and accuses those defendants of infringing the two patents asserted against PLX in the First Suit, as well as the additional patent listed in this Second Suit. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On December 28, 2010, the Company filed its answer to the live complaint in the second lawsuit and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit.

On May 17, 2011, Internet Machines filed a third lawsuit entitled Internet Machines LLC v. Avnet, Inc., et al., again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Third Suit”). The third lawsuit has been served on PLX and alleges that PLX infringes a fourth patent held by Internet Machines. This lawsuit also accuses a new group of defendants of infringing each of Internet Machines' patents at issue in the First and Second Suits, as well as the fourth patent asserted against PLX in this Third Suit. The complaint in the Third Suit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On September 27, 2011, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. All parties have appeared, but the Court has not set this matter for a scheduling conference.

On January 20, 2012, the Court entered an order consolidating the Second and Third Suits into one action. The Court further ordered that the schedule entered in the Third Suit would govern the consolidated action. As a result, the consolidated action is currently set for trial in February 2013. Because this consolidated lawsuit accuses PLX of infringing two separate patents not listed in the First Suit, and because the consolidated matter involves additional parties not named as defendants in the First Suit, this trial date is separate from the February 2012 trial mentioned above.

On March 25, 2011, a related entity, Internet Machines MC LLC, filed a lawsuit against PLX, entitled Internet Machines MC LLC v. PLX Technology, Inc., et al., in the United States District Court for the Eastern District of Texas, Marshall Division. Internet Machines MC LLC, however, did not serve the initial complaint on PLX. Instead, on August 26, 2011, Internet Machines MC LLC filed a first amended complaint, which has now been served on PLX, alleging infringement by PLX and the other defendants in the lawsuit of one patent held by Internet Machines MC LLC. The complaint in this lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines MC LLC's patents. On November 11, 2011, the Company filed its answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On March 5, 2012, the Court held an initial case-management conference in this matter. The Court has entered a scheduling order in this matter, and trial is currently set for July 2013.

As a result of the jury’s February 29, 2012 verdict on the First Suit, the Company accrued $1.0 million as of December 31, 2011. As noted above, the Court has not filed its final judgment on the jury’s verdict. It is reasonably possible that any change in the ruling as a result of post-trial motions or possible appeals could change the estimated liability. While it is not possible to determine the ultimate outcome of the remaining three suits, the Company believes that it has meritorious defenses with respect to the claims asserted against it and intends to vigorously defend its position, but it is unable to estimate a range of possible loss.

12. Income Taxes

A provision for income tax of $29,000 has been recorded for the three month period ended March 31, 2012, compared to a provision of $21,000 for the same period in 2011. Income tax expense for the three months ended March 31, 2012 and March 31, 2011 is a result of applying the estimated annual effective tax rate to cumulative profit before taxes adjusted for certain discrete items which are fully recognized in the period they occur and miscellaneous state income taxes. The Company excluded from its calculation of the effective tax rate losses in the US since it cannot benefit those losses.

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.

As of March 31, 2012, the Company had unrecognized tax benefits of approximately $4.4 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 three months ended March 31, 2012. 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 2007 through 2011 remain open to examination by the federal and most state tax authorities. Net operating loss and tax credit carryforwards generated in prior periods remain open to examination.

13. Subsequent Events

On April 30, 2012, Integrated Device Technology, Inc., a Delaware corporation (“IDT”), Pinewood Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of IDT (“Merger Sub”), Pinewood Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of IDT (“Merger LLC”) and PLX Technology, Inc., a Delaware corporation (“PLX”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, on and subject to the terms of the Merger Agreement, Merger Sub will commence an exchange offer (the “Offer”) to purchase all of the outstanding shares (the “Shares”) of PLX common stock, $0.001 par value, in exchange for consideration, per Share, comprised of (i) $3.50 in cash plus (ii) 0.525 of a share of IDT common stock (the sum of (i) and (ii) being the “Offer Price”), without interest and less any applicable withholding taxes.

Consummation of the Offer is subject to various conditions set forth in the Merger Agreement, including, but not limited to (i) at least a majority of shares of PLX common stock then outstanding (calculated on a fully diluted basis) being tendered into the Offer, (ii) the expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, (iii) the registration statement for IDT’s common stock issuable in connection with the Offer and Merger being declared effective by the Securities and Exchange Commission (the “SEC”) and the listing of such shares on Nasdaq and (iv) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) with respect to PLX’s business. The Offer is not subject to a financing condition.

The Offer will expire at midnight, New York time, on the later of (i) the 20th business day following and including the commencement date of the Offer and (ii) two business days following the end of the 30-day solicitation period (described below), unless extended in accordance with the terms of the Offer and the Merger Agreement and the applicable rules and regulations of the SEC.

Following consummation of the Offer, Merger Sub will merge with and into PLX with PLX surviving as a wholly-owned subsidiary of IDT (the “Merger,” and PLX after the merger, the “Surviving Corporation”). In the Merger, each outstanding Share that is not tendered and accepted pursuant to the Offer (other than the Shares held in the treasury of PLX and Shares as to which appraisal rights have been perfected in accordance with applicable law) will be cancelled and converted into the right to receive the Offer Price, on the terms and conditions set forth in the Merger Agreement. Following consummation of the Merger and subject to certain conditions, including the receipt of opinion of counsel to PLX regarding tax-free reorganization, the Surviving Corporation will merge with and into Merger LLC with Merger LLC surviving as a wholly-owned subsidiary of IDT (the “Second Merger”). If the Second Merger occurs, the transaction is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

The consummation of the Merger is subject to certain other conditions, including, if required under Delaware law, approval of the Merger Agreement by PLX stockholders. PLX has granted Merger Sub an option to purchase additional shares of PLX common stock in order to enable Merger Sub to achieve ownership of 90% of the outstanding PLX common stock, which is exercisable by Merger Sub after it purchases shares in the Offer. This would enable Merger Sub to merge into PLX pursuant to a “short-form” merger under the applicable provisions of Delaware law without a vote of PLX’s stockholders.

The Merger Agreement contains customary representations and warranties by IDT, Merger Sub, Merger LLC and PLX. The Merger Agreement also contains customary covenants and agreements, including with respect to the operations of the business of PLX and its subsidiaries between signing and closing, restrictions on the solicitation of proposals by PLX with respect to alternative transactions, governmental filings and approvals and other matters.

PLX has agreed to certain restrictions on its ability to solicit and respond to any other proposals to acquire PLX. Under the Merger Agreement, in general, PLX is permitted, under a “go-shop” provision, to solicit, provide information to, and engage in discussions with, third parties with respect to alternative acquisition proposals until 11:59 p.m. on May 30, 2012. PLX may negotiate with parties that submit qualifying competing proposals during the initial solicitation period for a further period expiring at 11:59 p.m. on June 14, 2012. The Offer is required to remain open until two business days following the completion of the 30-day “go-shop” period.

The Merger Agreement contains certain termination rights by PLX and IDT including, with respect to PLX, in the event that the board of directors of PLX determines to accept a Superior Proposal (as defined in the Merger Agreement). In connection with the termination of the Merger Agreement under specified circumstances, including with respect to the acceptance of a Superior Proposal by PLX, PLX will be required to pay Parent a termination fee of $13.20 million, which fee shall be $6.27 million with respect to the termination of the Merger Agreement in connection with a Superior Proposal prior to May 30, 2012 or if a transaction is entered into with a qualifying party who, prior to June 15, 2012, has made a qualifying proposal.

A copy of the Merger Agreement is attached as Exhibit 2.1 to the Form 8-K filed by PLX on April 30, 2012, to report the signing of the Merger Agreement. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement. Additional information relating to the Merger Agreement is also included in that Form 8-K and in other filings PLX and IDT have made and will make with the SEC relating to the Merger Agreement.

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, but excluding from such “safe harbor” any statements made or deemed made in connection with the agreement described in Note 13 of Notes to condensed Consolidated Financial Statements. Forward-looking statements include statements regarding our expectations or other prospective statements concerning the Merger Agreement and related transactions described in Note 13 of Notes to condensed Consolidated Financial Statements, future gross margin, our future research and development expenses, our expectations and plans for the 10G Ethernet over copper products that we are developing based on our acquisition of Teranetics, our future unrecognized tax benefits, 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, 2011.

OVERVIEW

PLX Technology, Inc. ("PLX" or the "Company"), a Delaware corporation established in 1986, designs, develops, manufactures, and sells integrated circuits that perform critical system connectivity functions. These interconnect products are fundamental building blocks for standards-based electronic equipment. We market our products to major customers that sell electronic systems in the enterprise, consumer, server, storage, communications, PC peripheral and embedded markets.

On April 30, 2012, we announced that we entered into an agreement to be acquired by IDT, summarized in Note 13 of Notes to Condensed Consolidated Financial Statements.

The explosive growth of cloud-based computing has provided a significant opportunity for PLX, since the data centers that house these systems are limited by their ability to offer high performance, low cost, low power, scalable interconnection. The level of integration is increasing, and the need for rapid expansion forces these customers to build their systems using standard-based, off-the-shelf devices. The industry has converged around two general purpose interconnection standards, PCI Express and Ethernet.

PLX is a market share leader in PCI Express switches and bridges. We recognized the trend towards this serial, switched interconnect technology early, launched products for this market long before our competitors, and have deployed multiple generations of products to serve a general-purpose market. In addition to enabling customer differentiation through our product features, the breadth of our product offering is in itself a significant benefit to our customers, since we can serve the complete needs of our customers with cost-effective solutions tailored to specific system requirements. PLX supplies an extensive portfolio of PCI Express switches; PCI Express bridges that allow backward compatibility to the previous PCI standard; and our newest bridge enables seamless interoperability between two of the most popular mainstream interconnects: PCI Express and USB 3.0. Our long experience with PCI Express connectivity products enables PLX to deliver reliable devices that operate in non-ideal real-world, system environments.

PLX has extended its penetration into the overall enterprise market through the October 2010 acquisition of Teranetics, Inc., a privately held fabless provider of high-performance mixed-signal semiconductors. Teranetics, the broadly recognized leader in 10 Gigabit Ethernet over copper physical layer (10GBase-T PHY) technology, delivered the industry’s first fully integrated single-chip implementation of single-port and dual-port 10GBase-T PHY silicon. We are currently developing the next generation of these products, which should provide a much more cost effective and lower power solution. It is expected that these products will become mainstream, growing much more rapidly than the current optical products that currently offer this speed. Given the widespread copper infrastructure for Ethernet in data centers, and the ability of the 10G PHYs to interoperate with the current 1G installed base, we anticipate solid demand for this technology.

PLX offers a complete solution consisting of semiconductor devices, software development kits, hardware design kits, software drivers, and firmware solutions that enable added-value features in our products. We differentiate our products by offering higher performance at lower power, by enabling a richer customer experience based on proprietary features that enable system-level customer advantages, and by providing capabilities that enable a customer to get to market more quickly.

We utilize a “fabless” semiconductor business model whereby we purchase wafers and packaged and tested semiconductor devices from independent manufacturing foundries. This approach 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 is generally between six and twelve months, though it can be longer in some circumstances. Furthermore, there is typically an additional six to twelve month or greater period after design completion before a customer requests 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 revenue 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 FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND MARCH 31, 2011

Net Revenues

The following table shows the revenue by type (in thousands) and as a percentage of net revenues:

	Three Months Ended
	March 31
	2012				2011
PCI Express Revenue	$	15,907	62.6	%	$	14,226	50.7	%
Network PHY Revenue		885	3.5	%		1,751	6.2	%
Connectivity Revenue		8,625	33.9	%		12,102	43.1	%
	$	25,417			$	28,079

Net revenues consist primarily of product revenues generated principally by sales of our semiconductor devices. In the first quarter of 2011, we recorded development service revenues of approximately $1.6 million primarily associated with our Network PHY technology, which was accounted for under the milestone method of revenue recognition. Net revenues for the three month months ended March 31, 2012 decreased 9.5%, or $2.7 million compared to same period in 2011. Excluding development service revenue, revenues decreased by 4.0%, or $1.1 million compared to 2011. The decrease was due to lower sales of our Storage products as a result of the hard disk drive shortage issue in the market and a decrease in our legacy Connectivity products, partially offset by higher sales of our PCI Express due to the ramp of our Gen 2 and Gen 3 products and increased sales of our Network PHY products.

There were no direct end customers that accounted for more than 10% of net revenues. Sales to the following distributors accounted for 10% or more of net revenues:

	Three Months Ended
	March 31,
	2012			2011
Avnet, Inc.		25	%		25	%
Excelpoint Systems Pte Ltd		24	%		25	%
Answer Technology, Inc.		22	%		16	%

* Less than 10%

Future demand for our products is uncertain and is highly dependent 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) packaging, 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.

	Three Months Ended
	March 31,
	2012			2011
	in thousands
Gross profit	$	14,013		$	16,005
Gross margin		55.1	%		57.0	%

Gross profit for the three months ended March 31, 2012 decreased by 12.5%, or $2.0 million compared to the same period in 2011. Excluding the first quarter 2011 development service revenue of $1.6 million which was recorded at 100% margin, gross profit decreased 2.8% or $0.4 million compared to 2011. The adjusted gross margin for the three months ended March 31, 2011 was 54.4% and gross profit was $14.4 million. The increase in product gross margin was due primarily to the decreased sales of the low margin Storage products within the Connectivity product grouping. The decrease in absolute dollars was due to the decrease in overall product sales.

We expect gross margin to increase slightly in the second quarter of 2012 as a result of product mix. Future gross profit and gross margin are highly dependent on the product and customer mix, timing of development service and IP mix, provisions and sales of previously written down 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.

	Three Months Ended
	March 31,
	2012			2011
	in thousands
R&D expenses	$	11,063		$	12,860
As a percentage of revenues		43.5	%		45.8	%

R&D expenses decreased by $1.8 million or 14.0% in the three months ended March 31, 2012 compared to the same period in 2011. The decrease in R&D in absolute dollars and as a percentage of revenue was primarily due to decreases in R&D spending on compensation and benefit expenses of $1.2 million as a result of the divestiture of the UK design team in the fourth quarter of 2011 and tape-out related activities of $0.4 million due to timing of projects taped-out.

We believe continued spending on research and development to develop new products is critical to our success. R&D spending will continue to fluctuate due to timing of projects and tape-out related activities.

Selling, General and Administrative Expenses

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

	Three Months Ended
	March 31,
	2012			2011
	in thousands
SG&A expenses	$	8,625		$	7,125
As a percentage of revenues		33.9	%		25.4	%

SG&A expenses increased by $1.5 million or 21.1% in the three months ended March 31, 2012 compared to the same period in 2011. The increase in SG&A in absolute dollars and a percentage of revenue was due primarily to an increase in legal fees of $1.8 million relating to the Internet Machines patent infringement lawsuit in which a significant portion of the increase was due to the February 2012 trial of the first suit, partially offset by a decrease in compensation and benefit expenses due to a decrease in headcount.

Due primarily to our entering into an agreement to be acquired by IDT summarized in Note 13 of Notes to Condensed Consolidated Financial Statements, we expect to incur, in the currently pending quarter and possibly additional future periods, significant additional expenses in connection with the transactions contemplated by the agreement. See Risk Factors below in this report under the caption “Risks Related to the Proposed Acquisition of the Company by IDT” for a discussion of risks related to the proposed acquisition.

Acquisition and Restructuring Related Costs

	Three Months Ended
	March 31,
	2012		2011
	in thousands
Carve-out retention bonus expense	$	-	$	1,376
Deal costs		-		55
Severance costs		-		501
Asset impairment		-		42
Lease commitment accrual		-		647
	$	-	$	2,621

We recorded acquisition related costs associated with the October 1, 2010 acquisition of Teranetics during the three months ended March 31, 2011 of $1.4 million. Approximately $5.3 million was carved out of the consideration as a bonus pool under the Teranetics Employee Retention Plan to be paid out over a period of time, to participants who were employees of Teranetics at the time of a change in control, provided they fulfilled certain future service requirements under the combined entity. In the three months ended March 31, 2011, we recorded $1.4 million in expense for this retention bonus plan. In the three months ended March 31, 2011, we also incurred $55,000 of third party acquisition related costs, primarily for outside legal and accounting costs.

In the three months ended March 31, 2011, we recorded approximately $0.5 million of severance and benefit related costs, included in acquisition and restructuring related costs in the Condensed Consolidated Statement of Operations, related to the termination of 14 employees as a result of the downsizing and refocus of the operations in the UK and cost control efforts as a result of the Teranetics acquisition.

In the three months ended March 31, 2011, in connection with the lease acquired in the Teranetics acquisition and the downsizing of the UK operations, we recorded lease commitment accrual and leasehold impairment charges of $0.6 million and $42,000, respectively. See Note 8 of the condensed consolidated financial statements for additional information.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets consists of amortization expense related to developed core technology, trade name and customer base acquired as a result of the Teranetics acquisition in October 2010 and the Oxford acquisition in January 2009.

	Three Months Ended
	March 31,
	2012			2011
	in thousands
Amortization of acquired intangible assets	$	1,731		$	2,444
As a percentage of revenues		6.8	%		8.7	%

Amortization of acquired intangible assets decreased by $0.7 million or 29.2% in the three months ended March 31, 2012 compared to the same period in 2011. The decrease in amortization expense was due to the accelerated amortization method for the Teranetics customer base, the fourth quarter 2011 acceleration of the Oxford NAS developed core technology as a result of the UK design team divestiture and the Oxford Serial and USB core technology becoming fully amortized in December 2011.

Interest Income (Expense) and Other, Net

	Three Months Ended
	March 31,
	2012			2011
	in thousands
Interest income	$	10		$	25
Interest expense		(24	)		(65	)
Other income (expense)		9			(26	)
	$	(5	)	$	(66	)

Interest income reflects interest earned on cash, cash equivalents and short-term and long-term investment balances. Interest income for the three months ended March 31, 2012 decreased by $15,000 or 60.0%, compared to the same period in 2011. The decrease was due to lower investment balances largely due to operating losses and the payment of the note related to the Teranetics acquisition.

Interest expense for the three months ended March 31, 2012 of $24,000 primarily consisted of interest recorded on the line of credit borrowings and capital lease obligations. For the same period in 2011, interest expense of $65,000 consisted of interest recorded on the notes associated with the acquisition of Teranetics and interest recorded on our capital lease obligations.

Other income includes foreign currency transaction gains and losses and other miscellaneous transactions. Other income may fluctuate significantly due to currency fluctuations.

Provision for Income Taxes

A provision for income tax of $29,000 has been recorded for the three month period ended March 31, 2011, compared to a provision of $21,000 for the same period in 2011. Income tax expense for the three months ended March 31, 2012 and March 31, 2011 is a result of applying the estimated annual effective tax rate to cumulative profit before taxes adjusted for certain discrete items which are fully recognized in the period they occur and miscellaneous state income taxes. We excluded from our calculation of the effective tax rate losses in the US since we cannot benefit those losses.

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.

As of March 31, 2012, we had unrecognized tax benefits of approximately $4.4 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 three months ended March 31, 2012. 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. We do not believe the amount of our unrecognized tax benefits will significantly change within the next twelve months.

Liquidity and Capital Resources

Cash and Investments

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 March 31, 2012 cash, cash equivalents, short and long-term marketable securities were $16.2 million, a decrease of $3.6 million from $19.8 million at December 31, 2011.

Operating Activities

Cash provided by (used in) operating activities primarily consists of net income (loss) adjusted for certain non-cash items including depreciation, amortization, share-based compensation expense, impairments, fair value remeasurements, provisions for excess and obsolete inventories, other non-cash items, and the effect of changes in working capital and other activities. Cash used in operating activities for the three months ended March 31, 2012 was $4.5 million compared to cash used in operating activities of $2.4 million in the same period in 2011. The increase in cash flow used in operations was primarily due to changes in our working capital. Our days sales outstanding increased due to strong shipments late in March 2012 as compared to the same period in 2011. The decrease in inventory reflects our efforts to control inventory levels. Our days payable outstanding increased due to timing of vendor payments. In addition to the changes in accounts receivables, inventories and accounts payable the increase in cash used in working capital related items is due to an increase in prepaid software licenses partially offset by a larger variable compensation payment in the first quarter of 2011.

Investing Activities

Our investing activities are primarily driven by investment of our excess cash, sales of investments, business acquisitions and capital expenditures. Capital expenditures have generally been comprised of purchases of engineering equipment, computer hardware, software, server equipment and furniture and fixtures. The cash provided by investing activities for the three months ended March 31, 2012 of $2.0 million was due to the sales and maturities of investments (net of purchases) of $3.0 million, partially offset by capital expenditures of $1.0 million. Cash provided by investing activities for the three months ended March 31, 2011 of $4.2 million was due to the sales and maturities of investments (net of purchases) of $5.3 million, partially offset by capital expenditures of $1.1 million.

Financing Activities

Cash provided by financing activities for the three months ended March 31, 2012 of $2.1 million was due to borrowings against the line of credit of $7.0 million and proceeds from the exercise of stock options of $0.1 million, partially offset by the payment of the note associated with the acquisition of Teranetics of $4.8 million and payments made on capital lease obligations of $0.2 million. Cash used in financing activities for the three month period ended March 31, 2011 of $0.1 million was due to the payments made on capital lease obligations of $0.1 million.

Obligations

As of March 31, 2012, we had the following significant contractual obligations and commercial commitments (in thousands):

	Payments due in
			Less than		1-3		More than
	Total		1 Year		Years		3 Years
Operating leases - facilities and equipment	$	674	$	336	$	328	$	10
Capital leases - IP and equipment		498		498		-		-
Software licenses		9,262		5,442		3,820		-
Inventory purchase commitments		9,975		9,975		-		-
Borrowing against line of credit		9,000		-		9,000		-
Total cash obligations	$	29,409	$	16,251	$	13,148	$	10

On September 30, 2011, we entered into an agreement with Silicon Valley Bank to establish a two-year $10 million revolving loan facility. Borrowings under the credit facility bear interest at rates equal to the prime rate announced from time to time in The Wall Street Journal. As of March 31, 2012 the prime rate was 3.25%. The facility also provides for commitment, unused facility and letter-of-credit fees. As of March 31, 2012, we have outstanding borrowings of $9.0 million. The facility is subject to certain financial covenants for EBITDA, as defined in the agreement, and a monthly quick ratio computation (PLX’s cash, investments and accounts receivable divided by current liabilities). We were in compliance with all financial covenants associated with this facility as of March 31, 2012. See Note 10 of the condensed consolidated financial statements for additional information.

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. 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 be difficult to obtain as a result of the pending transaction with IDT, and 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.

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.

As of March 31, 2012, 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. 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 three 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. We analyze inventory at distributors, current stock rotation requests and past experience, which has historically been insignificant, to determine the ending sales reserve required for this program. Provisions for reserves are charged directly against revenue and related reserves are recorded as a reduction to accounts receivable.

For license and service agreements, we evaluate revenue agreements under the accounting guidance for multiple-deliverable revenue arrangements. A multiple-deliverable arrangement is separated into more than one unit of accounting if (a) the delivered item(s) has value to the customer on a stand-alone basis, and (b) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. If both of these criteria are not met, the arrangement is accounted for as a single unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The selling price for each element is based upon the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available, third party evidence (“TPE”) if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.

Revenues from the licensing of our intellectual property are recognized when the significant contractual obligations have been fulfilled.

On occasion, we enter into development service arrangements in which customer payments are tied to achievements of specific milestones. We have elected to use the milestone method of revenue recognition for development service agreements upon the achievement of substantive milestones. When determining if a milestone is substantive, we assess whether the milestone consideration (a) is commensurate with our performance to achieve the milestone or the enhancement of the value of the delivered item as a result of the outcome from our performance, (b) relates solely to past performance and (c) is reasonable relative to all deliverables and payments terms within the arrangement.

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, sales forecasts and expected sales prices. 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.

Goodwill

Our methodology for allocating the purchase price related to business acquisitions is determined through established valuation techniques. Goodwill is measured as the excess of the cost of the acquisition over the amounts assigned to identifiable tangible and intangible assets acquired less assumed liabilities. We have one operating segment and business reporting unit, the sales of semiconductor devices, and we perform goodwill impairment tests annually during the fourth quarter and between annual tests if indicators of potential impairment exist.

Long-lived Assets

We review long-lived assets, principally property and equipment and identifiable intangibles, for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We evaluate recoverability of assets to be held and used by comparing the carrying amount of an asset to estimated future net undiscounted cash flows generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. In addition, if we determine the useful life of an asset is shorter than we had originally estimated, we accelerate the rate of depreciation over the assets’ new, shorter useful life.

Share-Based Compensation

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 calculate expected volatility using the historical volatility of 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 March 31, 2012, 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

Interest Rate Risk

We have an investment portfolio of fixed income securities, including amounts classified as cash equivalents, short-term investments and long-term investments of $5.6 million at March 31, 2012. 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 $25,000 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 March 31, 2012, 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 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 1. LEGAL PROCEEDINGS

To date, Internet Machines LLC ("Internet Machines") has filed three separate lawsuits against PLX. The first suit was filed on February 2, 2010, which has been served on PLX, entitled Internet Machines LLC v. Alienware Corporation, et al., in the United States District Court for the Eastern District of Texas, Tyler Division (the “First Suit”). This First Suit alleges infringement by PLX and the other defendants in the lawsuit of two patents held by Internet Machines. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On May 14, 2010, we filed our answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On December 6, 2010, the Court held a case-management conference and subsequently entered a scheduling order in this matter, and set the trial for February 2012.

On February 21, 2012, through February 29, 2012, the claims and defenses asserted in the First Suit were tried to a seven-member jury in the United States District Court for the Eastern District of Texas, Tyler Division. On February 29, 2012, the jury returned its verdict, finding the patents-in-suit valid and infringed and awarded money damages against PLX in the amount of $1.0 million. The Court has not entered a final judgment on the jury’s verdict, and we intend to vigorously seek reversal of the jury’s verdict through post-trial motions and, if necessary, on appeal.

Internet Machines' second lawsuit, which has also been served on PLX, was filed on October 17, 2010, again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Second Suit”). This Second Suit, entitled Internet Machines LLC v. ASUS Computer International, et al., alleges infringement by PLX of another patent held by Internet Machines. The complaint also asserts infringement claims against a separate group of defendants not named in the first Internet Machines lawsuit, and accuses those defendants of infringing the two patents asserted against PLX in the First Suit, as well as the additional patent listed in this Second Suit. The complaint in the lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On December 28, 2010, we filed our answer to the live complaint in the second lawsuit and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit.

On May 17, 2011, Internet Machines filed a third lawsuit entitled Internet Machines LLC v. Avnet, Inc., et al., again in the United States District Court for the Eastern District of Texas, Tyler Division (the “Third Suit”). The third lawsuit has been served on PLX and alleges that PLX infringes a fourth patent held by Internet Machines. This lawsuit also accuses a new group of defendants of infringing each of Internet Machines' patents at issue in the First and Second Suits, as well as the fourth patent asserted against PLX in this Third Suit. The complaint in the Third Suit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines' patents. On September 27, 2011, we filed our answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. All parties have appeared, but the Court has not set this matter for a scheduling conference.

On March 25, 2011, a related entity, Internet Machines MC LLC, filed a lawsuit against PLX, entitled Internet Machines MC LLC v. PLX Technology, Inc., et al., in the United States District Court for the Eastern District of Texas, Marshall Division. Internet Machines MC LLC, however, did not serve the initial complaint on PLX. Instead, on August 26, 2011, Internet Machines MC LLC filed a first amended complaint, which has now been served on PLX, alleging infringement by PLX and the other defendants in the lawsuit of one patent held by Internet Machines MC LLC. The complaint in this lawsuit seeks unspecified compensatory damages, treble damages and attorneys' fees, as well as injunctive relief against further infringement of Internet Machines MC LLC's patents. On November 11, 2011, we filed our answer to the live complaint and asserted counterclaims, seeking declaratory judgments of non-infringement and invalidity of the patents-in-suit. On March 5, 2012, the Court held an initial case-management conference in this matter. The Court has entered a scheduling order in this matter, and trial is currently set for July 2013.

As a result of the jury’s February 29, 2012 verdict on the First Suit, we accrued $1.0 million as of December 31, 2011. As noted above, the Court has not filed its final judgment on the jury’s verdict. It is reasonably possible that any change in the ruling as a result of post-trial motions or possible appeals could change the estimated liability. While it is not possible to determine the ultimate outcome of the remaining three suits, we believe that we have meritorious defenses with respect to the claims asserted against us and intend to vigorously defend our position, but we are unable to estimate a range of possible loss.

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, 2011, and are included herein in their entirety.

RISKS RELATED TO THE PROPOSED ACQUISITION OF THE COMPANY BY IDT

Failure To Complete, Or Delays In Completing, The Transaction With IDT Announced On April 30, 2012, Could Materially And Adversely Affect The Company’s Business, Results Of Operations, Financial Condition And Stock Price

On April 30, 2012, Integrated Device Technology, Inc., a Delaware corporation (“IDT”), Pinewood Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of IDT, Pinewood Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of IDT and PLX Technology, Inc., a Delaware corporation (“PLX”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, on and subject to the terms of the Merger Agreement, Pinewood Acquisition Corp. will commence an exchange offer (the “Offer”) to purchase all of the outstanding shares of PLX common stock in exchange for consideration, per Share, comprised of (i) $3.50 in cash plus (ii) 0.525 of a share of IDT common stock (the sum of (i) and (ii) being the “Offer Price”), without interest and less any applicable withholding taxes.

Consummation of the Offer is subject to various conditions set forth in the Merger Agreement, including, but not limited to (i) at least a majority of shares of PLX common stock then outstanding (calculated on a fully diluted basis) being tendered into the Offer, (ii) the expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, (iii) the registration statement for IDT’s common stock issuable in connection with the Offer and Merger being declared effective by the SEC, and the listing of such shares on NASDAQ, and (iv) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) with respect to PLX’s business. The Offer is not subject to a financing condition.

A copy of the Merger Agreement is included as an exhibit to a Form 8-K we filed on April 30, 2012, to report the Merger Agreement, and the references in this report to the Merger Agreement are qualified in their entirety by reference to the full text of the Merger Agreement. The Offer has not commenced as of the date of filing this report. PLX and IDT will be filing with the SEC documents that will contain important information for PLX stockholders and other interested persons relating to the Offer. The discussion of risks below is not an offer to sell or the solicitation of an offer to buy any securities or otherwise participate in the Offer.

We cannot assure at this time that the parties will be able to complete the Offer and mergers contemplated by the Merger Agreement (with other related transactions contemplated by the Merger Agreement, the “Transaction”) as contemplated under the Merger Agreement or at all. Risks related to the pending status of the Transaction, and/or failure to complete the Transaction, include the following:

·	If the Transaction is not completed, PLX would not realize the potential benefits of the Transaction, which could have a negative effect on our stock price;

·	PLX will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the Transaction, whether or not it is consummated;

Under certain circumstances relating to superior proposals as described in the Merger Agreement (and there are no assurances as to when or whether superior proposals might be made or on what terms), PLX must pay a termination fee to IDT in the amount of $13.20 million or $6.27 million if Merger Agreement is terminated by PLX;

·	The attention of PLX management and employees may be diverted from day-to-day operations during the period up to the completion of the merger;

·	Both ordinary course and other transactions may be disrupted by uncertainty over when or if the Transaction will be completed;

·	Our customers, suppliers and other third parties may seek to modify or terminate existing agreements, or delay entering into new agreements, as a result of the announcement of the Transaction;

·	Under the Merger Agreement, PLX is subject to certain restrictions on the conduct of its business prior to completing the Transaction, which restrictions could adversely affect our ability to conduct business as it otherwise would have done without these restrictions; and

·	Our ability to retain current key employees or attract new employees may be harmed by uncertainties associated with the Transaction.

The occurrence of any of these events individually or in combination could materially and adversely affect our business, results of operations, financial condition and stock price.

Lawsuits May Be Filed Against PLX, The Members Of Its Board Of Directors, IDT And Possibly Others Challenging The Transaction, And An Adverse Judgment In Any Such Lawsuit May Prevent The Offer From Being Consummated Or The Transaction From Being Completed On The Desired Schedule, And Could Result In Significant Additional Expenses To PLX

Proposed acquisitions of publicly traded target companies, such as the Transaction, frequently lead to lawsuits filed against the parties and/or their management, based on allegations of breach of fiduciary care and loyalty allegedly resulting from a failure to maximize shareholder value, allegations that the process of entering into the transaction breach alleged duties, allegations that the documents filed by the parties with the SEC contain misstatements or omissions that should be corrected, or other claims.

There can be no assurance that PLX and other potential defendants in these lawsuits will be successful in their defenses. An unfavorable outcome in any of the lawsuits could prevent or delay completion of the Transaction and/or result in substantial costs.

If The Transaction Is Completed, The Combined Company May Not Perform As PLX Or Investors May Expect, Which Could Have An Adverse Effect On The Price Of IDT Common Shares, Which PLX Stockholders Will Receive As Part Of The Offer Price

The integration of PLX into IDT’s existing operations may be a complex, time-consuming and expensive process and could disrupt IDT’s existing operations. IDT may not realize the anticipated benefits of the Transaction. IDT may encounter the following risks which could materially and adversely affect the results of operations, business, financial condition and stock price of the combined company:

·	conflicts between business cultures;

·	difficulties and delays in the integration of operations, personnel, technologies, products, and other systems of the acquired business;

·	the diversion of management’s attention from normal daily operations of the business;

·	complexities associated with managing the larger, more complex, combined business;

·	large one-time write-offs;

·	the incurrence of contingent liabilities;

·	contractual and/or intellectual property disputes;

·	lost sales and customers as a result of customers of either of the two companies deciding not to do business with the combined company;

·	problems, defects or other issues relating to acquired products or technologies that become known to the combined company following the consummation of the offer or the mergers;

·	conflicts in distribution, marketing or other important relationships;

·	difficulties caused by entering geographic and business markets in which IDT has no or only limited experience;

·	acquired products and services that may not attract customers;

·	loss of key employees and disruptions among employees that may erode employee morale;

·	inability to implement uniform standards, controls, policies and procedures; or

·	failure to achieve anticipated levels of revenue, profitability or productivity.

IDT’s operating expenses may increase significantly over the near term due to the Transaction. To the extent that the expenses increase but revenues do not, there are unanticipated expenses related to the integration process, or there are significant costs associated with presently unknown liabilities, IDT’s business, operating results and financial condition may be adversely affected. Failure to minimize the numerous risks associated with the post-acquisition integration strategy also may adversely affect the trading price of IDT’s common stock.

The Announcement And Pendency Of The IDT Transaction Could Cause Disruptions In The Businesses Of IDT Or PLX, Which Could Have An Adverse Effect On Their Respective Business And Financial Results, And Consequently On The Combined Company

IDT and PLX have operated and, until the consummation of the initial merger (as described in the Merger Agreement), will continue to operate, independently. Uncertainty about the effect of the Transaction on customers, suppliers and employees may have an adverse effect on IDT or PLX, and consequently on the combined company. In response to the announcement of the offer and mergers, existing or prospective customers or suppliers of IDT or PLX may:

·	delay, defer or cease purchasing products or services from or providing products or services to IDT, PLX or the combined company;

·	delay or defer other decisions concerning IDT, PLX or the combined company; or

·	otherwise seek to change the terms on which they do business with IDT, PLX or the combined company.

Any such delays or changes to terms could materially and adversely affect the business, results of operations and financial condition of either company or, if the Transaction is completed, the combined company.

In addition, as a result of the Transaction, current and prospective employees could experience uncertainty about their future with IDT, PLX or the combined company. These uncertainties may impair the ability of each company to retain, recruit or motivate key personnel.

PLX And IDT Will Incur Significant Costs In Connection With The Transaction, Whether Or Not It Is Consummated, And The Integration Of PLX Into IDT May Result In Significant Expenses And Accounting Charges That Adversely Affect IDT’s Operating Results And Financial Condition

PLX and IDT will incur substantial expenses related to the Transaction, whether or not the Transaction is completed. PLX estimates that it will incur direct transaction costs of approximately $4.8 million in connection with the Transaction, approximately $2.3 million of which is not contingent upon consummation of the Transaction. Moreover, in the event that the Merger Agreement is terminated, PLX may, under some circumstances, be required to pay IDT a $13.20 million or $6.27 million termination fee. Payment of these expenses by PLX as a standalone entity would adversely affect PLX’s operating results and financial condition and would likely adversely affect its stock price.

In accordance with generally accepted accounting principles, IDT will account for the acquisition of PLX using the acquisition method of accounting. IDT’s financial results may be adversely affected by the resulting accounting charges incurred in connection with the offer and the mergers. IDT may also incur additional costs associated with combining the operations of IDT and PLX, which may be substantial but which cannot be readily estimate at this time.

The price of IDT’s common stock could decline to the extent IDT’s financial results are materially and adversely affected by the expenses and costs of the Transaction. The consummation of the Transaction may result in dilution of future earnings per share to IDT’s stockholders, decline in operating results, or a weaker financial condition compared to that which would have been achieved by IDT on a stand-alone basis.

Consummation Of The Offer May Adversely Affect The Liquidity Of The Shares Of PLX Common Stock Not Tendered In The Offer

If the Offer is completed but not all shares of PLX common stock are tendered in the Offer, the number of PLX stockholders and the number of shares of PLX common stock publicly held will be greatly reduced. As a result, the closing of the Offer could adversely affect the liquidity and market value of the remaining shares of PLX common stock held by the public.

OTHER RISKS RELATING TO OUR BUSINESS

Global Economic Conditions May Continue to Have an Adverse Effect on Our Businesses and Results of Operations

In late 2008 and 2009, the severe tightening of the credit markets, turmoil in the financial markets, and weakening global economy contributed to slowdowns in the industries in which we operate. Economic uncertainty exacerbated negative trends in spending and caused certain customers to push out, cancel, or refrain from placing orders, which reduced revenue. We have seen market conditions improve since the second half of 2009 and throughout most of 2010; however, we are seeing the rate of growth has slowed as inventory levels have balanced themselves out in 2011 and into 2012. Difficulties in obtaining capital and uncertain market conditions may lead to the inability of some customers to obtain affordable financing, resulting in lower sales. Customers with liquidity issues may lead to additional bad debt expense. These conditions may also similarly affect key suppliers, which could affect their ability to deliver parts and result in delays in the availability of product. Further, these conditions and uncertainty about future economic conditions make it challenging for us to forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations. In addition, we maintain an investment portfolio that is subject to general credit, liquidity, market and interest rate risks that may be exacerbated by deteriorating financial market conditions and, as a result, the value and liquidity of the investment portfolio could be negatively impacted and lead to impairment. If the current improving economic conditions are not sustained or begin to deteriorate again, or if we are not able to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, our business, financial condition or results of operations may be materially and adversely affected.

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

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 macroeconomic 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. See Note 9 of the condensed consolidated financial statements for customer concentrations.

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, 2011.

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 located in China, Japan, Korea, Malaysia, Singapore and Taiwan, 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.

Only a small number 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 our products 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.

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 and consumer 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 three months ended March 31, 2012 and 2011, sales through distributors accounted for approximately 88% and 86%, 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, Serial ATA, Ethernet, 1394 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.

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.

See Note 11 of the condensed consolidated financial statements for a description of the four lawsuits filed against us by a company alleging patent infringement.

During the course of the litigations as well as any other future intellectual property litigations, we will incur costs associated with defending or prosecuting these matters. These litigations could also divert the efforts of our technical and management personnel, whether or not they are determined in our favor. In addition, if it is determined in such a litigation that we have infringed the intellectual property rights of others, 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.

The Delay Or Failure Of The 10G Ethernet Over Copper Market Acceptance Would Adversely Affect Our Financial Condition

We expect to continue to invest a significant amount of time and resources in the development of products for the 10G Ethernet over copper technology. These expenditures are made well in advance of revenues derived from these products. Although we anticipate solid demand for products for the 10G Ethernet over copper technology, market acceptance of the technology, and products for it, 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. LAN on Motherboard (“LOM”) integrated circuits made by others are critical components to building out the 10G Ethernet over copper market and the development of this market has been slower than anticipated. While we have seen progress in this market, the continued delay or failure of the adoption of this technology would have a material adverse effect on our business. There can be no assurance that there will be market acceptance of this technology or our products for it and the delay or failure in achieving such acceptance would have a material adverse effect on our business. In addition, products or technologies developed by others may render our products or technologies obsolete or noncompetitive.

Acquisitions Could Adversely Affect Our Financial Condition And Could Expose Us To Unanticipated Liabilities

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

·	potentially dilutive issuances of equity securities;

·	large acquisition-related write-offs;

·	potential patent and trademark infringement claims against the acquired company;

·	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;

·	the incurrence of additional operating losses and expenses of potential companies we may acquire;

·	possible delay or failure to achieve expected synergies;

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

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

·	potential loss of key employees.

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 85% of our revenues for the three months ended March 31, 2012. In 2011 and 2010, sales outside of the United States accounted for approximately 79% and 82% of our revenues, respectively. Sales outside of the United States may fluctuate in future periods and are expected 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.

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 and long lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment annually during the fourth quarter and between annual tests in certain circumstances. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill, amortizable intangible assets or other long lived 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 have recorded goodwill and other intangible assets related to the acquisitions of Oxford and Teranetics, and may do so in connection with any potential future acquisitions. We may be required to record a significant charge in our financial statements during the period in which any additional impairment of our goodwill, amortizable intangible assets or other long lived 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 6. EXHIBITS

Exhibit Number		Description

2.1		Agreement and Plan of Merger, dated as of April 30, 2012, between Integrated Device Technology, Inc., Pinewood Acquisition Corp., Pinewood Merger Sub, LLC and PLX Technology, Inc., incorporated herein by this reference from Exhibit 2.1 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 1.01. Except as filed therewith, the exhibits and schedules to the agreement, as set forth in the agreement, have not been filed pursuant to Item 601(b)(2) of Regulation S-K. PLX agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

2.2		Tender and Support Agreement, dated as of April 30, 2012, between Integrated Device Technology, Inc., Pinewood Acquisition Corp. and the stockholders of PLX Technology, Inc. party thereto, incorporated herein by this reference from Exhibit 99.2 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 1.01.

10.1		PLX Severance Plan for Executive Management, incorporated herein by this reference from Exhibit 10.1 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 5.02.

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 Financial 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.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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: May 8, 2012

By /s/ Arthur O. Whipple

Arthur O. Whipple

Chief Financial Officer

(Principal Financial Officer and duly authorized signatory)

EXHIBIT INDEX

Exhibit Number		Description

2.1		Agreement and Plan of Merger, dated as of April 30, 2012, between Integrated Device Technology, Inc., Pinewood Acquisition Corp., Pinewood Merger Sub, LLC and PLX Technology, Inc., incorporated herein by this reference from Exhibit 2.1 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 1.01. Except as filed therewith, the exhibits and schedules to the agreement, as set forth in the agreement, have not been filed pursuant to Item 601(b)(2) of Regulation S-K. PLX agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

2.2		Tender and Support Agreement, dated as of April 30, 2012, between Integrated Device Technology, Inc., Pinewood Acquisition Corp. and the stockholders of PLX Technology, Inc. party thereto, incorporated herein by this reference from Exhibit 99.2 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 1.01.

10.1		PLX Severance Plan for Executive Management, incorporated herein by this reference from Exhibit 10.1 to the PLX Form 8-K filed on April 30, 2012, reporting the agreement under Item 5.02.

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 Financial 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.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

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