10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO          .

COMMISSION FILE NO. 0-28218

AFFYMETRIX, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	77-0319159
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
3420 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code: (408) 731-5000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

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

COMMON SHARES OUTSTANDING ON OCTOBER 31, 2012: 70,691,322

AFFYMETRIX, INC.

TABLE OF CONTENTS

			Page No.
PART I. FINANCIAL INFORMATION			3
	Item 1.	Financial Statements	3
		Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011	3
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011	4
		Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2012 and 2011	5
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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	25
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION			34
	Item 1.	Legal Proceedings	34
	Item 1A.	Risk Factors	35
	Item 4.	Mine Safety Disclosures	48
	Item 5.	Other Information	48
	Item 6.	Exhibits	49
SIGNATURES			50

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,			December 31,
	2012			2011
	(Unaudited)			(See Note 1)
ASSETS:
Current assets:
Cash and cash equivalents	$	29,026		$	201,937
Restricted cash		691			692
Available-for-sale securities—short-term portion		2,575			7,937
Accounts receivable, net		52,534			44,021
Inventories—short-term portion		74,891			42,851
Deferred tax assets—short-term portion		379			364
Property and equipment, net—held for sale		5,000			9,000
Prepaid expenses and other current assets		15,078			7,785
Total current assets		180,174			314,587
Available-for-sale securities—long-term portion		7,337			54,501
Property and equipment, net		30,988			30,583
Inventories—long-term portion		14,668			-
Goodwill		159,420			-
Intangible assets, net		157,930			29,525
Deferred tax assets—long-term portion		3,445			450
Other long-term assets		16,224			8,369
Total assets	$	570,186		$	438,015
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities	$	56,852		$	44,774
Convertible notes—short-term portion		3,855			-
Term loan—short-term portion		6,375			-
Deferred revenue—short-term portion		10,749			9,852
Total current liabilities		77,831			54,626
Deferred revenue—long-term portion		3,453			3,959
Convertible notes—long-term portion		105,000			95,469
Term loan—long-term portion		76,500			-
Other long-term liabilities		22,345			9,127
Stockholders' equity:
Common stock		707			704
Additional paid-in capital		757,051			750,332
Accumulated other comprehensive income		4,420			2,492
Accumulated deficit		(477,121	)		(478,694	)
Total stockholders' equity		285,057			274,834
Total liabilities and stockholders' equity	$	570,186		$	438,015

See accompanying Notes to the Condensed Consolidated Financial Statements

3

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
REVENUE:
Product sales	$	72,685		$	57,001		$	189,681		$	182,608
Services and other		6,939			6,986			21,593			19,762
Total revenue		79,624			63,987			211,274			202,370
COSTS AND EXPENSES:
Cost of product sales		33,979			24,647			81,907			70,913
Cost of services and other		3,959			3,001			11,057			9,627
Research and development		16,498			15,328			43,417			46,894
Selling, general and administrative		36,302			26,915			104,752			80,802
Total costs and expenses		90,738			69,891			241,133			208,236
Loss from operations		(11,114	)		(5,904	)		(29,859	)		(5,866	)
Interest income and other, net		(3,933	)		(2,154	)		(1,631	)		(3,549	)
Interest expense		2,993			991			4,191			2,866
Loss before income taxes		(18,040	)		(9,049	)		(35,681	)		(12,281	)
Income tax (benefit) provision		(181	)		740			(37,254	)		1,141
Net (loss) income	$	(17,859	)	$	(9,789	)	$	1,573		$	(13,422	)
Basic net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02		$	(0.19	)
Diluted net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02		$	(0.19	)
Shares used in computing basic net (loss) income per common share		70,403			69,719			70,181			70,790
Shares used in computing diluted net (loss) income per common share		70,403			69,719			70,610			70,790

See accompanying Notes to the Condensed Consolidated Financial Statements

4

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net (loss) income	$	(17,859	)	$	(9,789	)	$	1,573		$	(13,422	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		3,024			(33	)		2,758			382
Unrealized gains (losses) on available-for-sale and non-marketable securities		251			398			(784	)		2,436
Reclassification adjustment for realized (losses) gains recognized in net (loss) income		-			(513	)		1,426			(1,586	)
Unrealized (losses) gains on cash flow hedges		(1,204	)		353			(1,472	)		303
Net change in other comprehensive (loss) income, net of tax		2,071			205			1,928			1,535
Comprehensive (loss) income	$	(15,788	)	$	(9,584	)	$	3,501		$	(11,887	)

See accompanying Notes to the Condensed Consolidated Financial Statements

5

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,573		$	(13,422	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		25,335			24,974
Amortization of inventory step-up in fair value		4,855			-
Share-based compensation		14,857			6,602
Deferred tax assets		(34,042	)		20
Impairment of property and equipment		4,000			-
Other non-cash transactions		1,336			4,402
Changes in operating assets and liabilities:
Accounts receivable, net		1,171			11,180
Inventories		(309	)		1,501
Prepaid expenses and other assets		1,014			3,253
Accounts payable and accrued liabilities		(16,603	)		(4,948	)
Deferred revenue		212			(1,755	)
Other long-term liabilities		(1,420	)		1,807
Net cash provided by operating activities		1,979			33,614
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired		(307,796	)		-
Purchases of available-for-sale securities		-			(78,951	)
Proceeds from sales of available-for-sale securities		52,063			27,974
Proceeds from maturities of available-for-sale securities		638			19,350
Proceeds from sale of property and equipment		-			400
Capital expenditures		(6,457	)		(4,920	)
Capital distribution from non-marketable investments		681			-
Purchase of technology rights		(2,303	)		(150	)
Net cash used in investing activities		(263,174	)		(36,297	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net		131			(650	)
Net proceeds from term loan		80,500			-
Payments of term loan		(2,125	)		-
Net proceeds from issuance of 4.00% convertible senior notes		101,062			-
Repurchase of 3.50% senior convertible notes		(91,614	)		(3	)
Net cash provided by (used in) financing activities		87,954			(653	)
Effect of exchange rate changes on cash and cash equivalents		330			243
Net decrease in cash and cash equivalents		(172,911	)		(3,093	)
Cash and cash equivalents at beginning of period		201,937			35,484
Cash and cash equivalents at end of period	$	29,026		$	32,391

See accompanying Notes to the Condensed Consolidated Financial Statements

6

AFFYMETRIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(UNAUDITED)

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 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. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The condensed consolidated financial statements include the accounts of Affymetrix, Inc. and its wholly owned subsidiaries ("Affymetrix" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included.

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying Condensed Consolidated Balance Sheet as of September 30, 2012, the Condensed Consolidated Statements of Operations, Comprehensive (Loss) Income for the three and nine months ended September 30, 2012 and 2011 and Cash Flows for the nine months ended September 30, 2012 are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 28, 2012. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the accompanying notes to those financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

As further discussed in Note 2. "Acquisition", the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2012 includes adjustments that were made during the three months ended September 30, 2012 upon finalization of the valuation of certain assets acquired and liabilities assumed from the acquisition of eBioscience Holdings, inc. ("eBioscience"). Such adjustments are considered to have occurred as of June 25, 2012 (the "Acquisition Date"). Thus, in future periods, the Company's financial statements as of June 30, 2012 and for the three and six months then ended will be recast to reflect these adjustments.

There have been no material changes to the Company's significant accounting policies as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 except as otherwise described below:

Business Combinations

The Company's condensed consolidated financial statements include the operations of an acquired business after the completion of the acquisition. The Company accounts for acquired businesses using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date, while transaction costs are expensed as incurred, except for any debt and equity issuance costs. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

Inventories

Inventory cost is computed on an adjusted standard basis (which approximates actual cost on a first-in, first-out basis). Provisions for slow moving, potentially excess and obsolete inventories are provided based on estimated demand requirements, product life cycle and development plans, component cost trends, product pricing, product expiration and quality issues.

Inventory that is not expected to be utilized until more than 12 months from the balance sheet date is classified as long-term. Estimating the level of inventory utilization for the upcoming 12 months requires management to exercise significant judgment. The Company maintains inventory levels in excess of 12 months for certain components of work-in-progress that have useful lives of up to 10 years. Carrying such levels of inventory impacts the Company's liquidity and cash flows since the inventory will not be converted to cash for more than one year.

7

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to thirteen years with the amortization recognized in either cost of revenue or operating expense, as appropriate. Finite-lived intangible assets are reviewed for impairment when facts or circumstances suggest that the carrying value of such assets may not be recoverable. Additionally, during each period, the Company evaluates the estimated remaining useful lives of purchased finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.

Goodwill and intangible assets with indefinite lives are not subject to amortization, but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. The Company first conducts an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it then conducts a two-step test for impairment of goodwill. In the first step, the Company compares the fair value of its reporting units to their carrying values. If the fair values of the reporting units exceed the carrying value of the net assets, goodwill is not considered impaired and no further analysis is required. If the carrying values of the net assets exceed the fair values of the reporting units, then the second step of the impairment test must be performed in order to determine the implied fair value of the goodwill. If the carrying value of the goodwill exceeds the implied fair value, then an impairment loss equal to the difference would be recorded. For 2012, the Company will perform its annual goodwill impairment test during the fourth quarter of 2012, unless other indicators arise that would require analysis prior to the fourth quarter. No indicators have arisen as of September 30, 2012.

Foreign Currency

Certain operations from foreign subsidiaries of the Company have a functional currency other than the U.S. dollar. All other subsidiaries have the U.S. dollar as their functional currency.

Assets and liabilities of non-U.S. subsidiaries that use the local currency as their functional currency are translated to U.S. dollars at exchange rates in effect at the balance sheet date with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income (loss) within stockholders' equity. Income and expense accounts are translated at average exchange rates during the year. For the three and nine months ended September 30, 2012, the amount of loss that was recognized in foreign currency translation adjustment included in accumulated other comprehensive income in stockholders' equity was $3.0 million and $2.8 million, respectively.

The Company's subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were insignificant and have been included in the Company's results of operations.

NOTE 2—ACQUISITION

On the Acquisition Date, pursuant to the terms of an Amended and Restated Agreement and Plan of Merger (the "Acquisition Agreement"), a wholly-owned subsidiary of the Company merged with and into eBioscience, with eBioscience surviving as a wholly-owned subsidiary of the Company (the "Acquisition"). eBioscience specializes in the development, manufacturing, marketing and distribution of research tools in the areas of flow cytometry, immunoassays, microscopic imaging and other protein-based analyses.

At the Acquisition Date, each share of eBioscience issued and outstanding common stock immediately prior to the Acquisition Date was cancelled and converted into the right to receive cash of $38.18 per each such previously issued and outstanding common share. Further, all options to purchase shares of eBioscience common stock that were outstanding immediately prior to the Acquisition Date became exercisable to the extent not fully vested and were cancelled and retired immediately prior to the Acquisition Date in exchange for cash of $38.18 per each such previously outstanding option, less the exercise price of such option.

The Acquisition was accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the tangible and identifiable intangible assets and liabilities of eBioscience were recorded at their respective fair values as of the Acquisition Date, including an amount for goodwill representing the difference between the Acquisition consideration and the fair value of the identifiable net assets.

At June 30, 2012, the Company had provisionally estimated fair values for the assets acquired and liabilities assumed at the Acquisition Date. The amounts reported were considered provisional as the Company was completing the valuation work required to allocate the purchase price and finalize the working capital adjustments. During the third quarter of 2012, with the help of third-party specialists, the valuation was finished and the determination of the fair value of acquired inventory, property and equipment, and intangible assets was completed. This resulted in purchase accounting adjustments (also referred to as "measurement period adjustments") to the Company's Condensed Consolidated Financial Statements as of and for the period ended June 30, 2012. Under GAAP, changes to the purchase price allocation during the measurement period are recognized as of the date of acquisition. The Company considers purchase accounting to be final except for provisional tax amounts that may change during the measurement period.

8

The results of operations of the acquired eBioscience business and the fair values of the assets acquired and liabilities assumed have been included in the Company's Condensed Consolidated Financial Statements since the date of the Acquisition. For the three and nine months ended September 30, 2012, the Company recorded $17.6 million and $19.0 million, respectively, in revenue and recognized a net loss of $4.7 million and $4.6 million, respectively, from eBioscience.

Purchase price

The Acquisition Date purchase price totaled $314.9 million and is net of $0.2 million proceeds received during the third quarter of 2012 for final working capital adjustments. Of the total purchase price, $8.3 million was accounted for as share-based compensation expense as a result of the accelerated vesting of certain eBioscience employee options immediately prior to the Acquisition and has been recognized in the accompanying Condensed Consolidated Statement of Operations under Selling, general and administrative expenses for the nine months ended September 30, 2012. The remaining $306.6 million was allocated to the net assets acquired from eBioscience. The Acquisition was financed through a combination of cash on hand, the liquidation of available-for-sale securities, proceeds from third-party financing (the "Term Loan") and the issuance of 4.00% Convertible Senior Notes (the "4.00% Notes"). Refer to Note 9. "Long-Term Debt Obligations" for further information.

The following table summarizes the accounting treatment of the purchase price paid (in thousands):

Purchase consideration	$	306,626
Share-based compensation expense		8,265
Total purchase price	$	314,891

Fair values of assets acquired and liabilities assumed

The following table summarizes the fair values of assets acquired, liabilities assumed and goodwill (in thousands) at the Acquisition Date, as well as retrospective purchase accounting adjustments (also referred to as "measurement period adjustments") made with respect to the six months ended June 30, 2012:

	Before
	Adjustment						After
	of Final						Adjustment
	Allocation			Measurement			of Final
	of Purchase			Period			Allocation of
	Price(1)			Adjustments(2)			Purchase Price
Cash and cash equivalents	$	7,095		$	-		$	7,095
Accounts receivable, net		9,488			(8	)		9,480
Inventories		52,060			(1,380	)		50,680
Prepaid expenses and other assets		7,844			56			7,900
Property and equipment		5,969			551			6,520
Intangible assets		159,755			(22,155	)		137,600
Other non-current assets		1,769			(328	)		1,441
Identifiable assets acquired		243,980			(23,264	)		220,716
Accounts payable and accrued liabilities		(18,681	)		(2,819	)		(21,500	)
Deferred tax liability		(55,542	)		8,264			(47,278	)
Other non-current liabilities		(3,241	)		-			(3,241	)
Identifiable liabilities acquired		(77,464	)		5,445			(72,019	)
Goodwill		140,325			17,604			157,929
Acquisition consideration	$	306,841		$	(215	)	$	306,626

(1) As previously reported in the notes to the Condensed Consolidated Financial Statements included in the Company's Quarterly Report on Form 10-Q as of June 30, 2012 and for the three and six months then ended.

(2) During the third quarter of 2012, the Company finalized the valuations and allocations of the fair value of certain assets and liabilities included in the Acquisition resulting in the purchase accounting adjustments detailed above.

9

The Company reduced the fair values of certain intangible assets by $22.2 million to better reflect market participant assumptions about the facts and circumstances existing as of the Acquisition Date.

The adjustments in the table above had a de minimis impact on the amortization of the affected intangible assets for the three and six-months ended June 30, 2012. However, the above change in domestic deferred tax liabilities resulted in a $7.2 million increase in the Company's domestic deferred tax asset valuation allowance. Adjustments to valuation allowances are further discussed in Note 12. "Income Taxes."

The above measurement period adjustments did not result from events that occurred after the Acquisition Date.

Inventories

The inventories acquired include an adjusted step-up in basis of approximately $29.0 million, which represents the fair value of the inventory less a reasonable profit margin on costs to complete and sell. The $29.0 million step-up in basis will be recognized as the inventory is sold, which is expected to be over a period of 12 to 23 months from the Acquisition Date.

Intangible Assets

The following table summarizes the fair value of definite-lived intangible assets acquired at the Acquisition Date and their estimated useful lives (in thousands, except for estimated useful lives):

			Estimated
	Fair Value		Useful Life
Purchased intangible assets:
Customer base	$	61,100	12 years
Developed technologies		58,000	12 years
Trademarks and tradenames		15,500	5 years
Other contractual agreements		3,000	2 years
Total	$	137,600

Purchased intangible assets were recorded at fair value determined using an income approach, which recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs. Indications of value are developed by discounting these benefits to their present worth at a discount rate that reflects the current return requirements of market participants.

Purchased intangible assets are finite-lived intangible assets and are being amortized over their estimated useful lives ranging from two to twelve years.

Deferred tax liabilities

Deferred tax liabilities assumed are primarily comprised of the tax impact of the temporary difference between the fair values of assets acquired and the historical tax basis of those assets. These temporary differences will reverse as the assets are amortized.

Goodwill

The excess of Acquisition consideration over the fair value of assets acquired and liabilities assumed represents goodwill. The Company believes the factors that contributed to goodwill include synergies that are specific to the Company's consolidated business, and not available to market participants, and the acquisition of a talented workforce that expands the Company's expertise in business development and the commercialization of cell and protein analysis products. The Company does not expect any portion of this goodwill to be deductible for tax purposes.

10

Liabilities

The above determination of fair value excludes potential amounts related to certain litigation in which eBioscience is currently involved. The Acquisition Agreement provides that eBioscience security holders shall, subject to certain limitations, indemnify Affymetrix against damages arising out of or resulting from intellectual property litigation brought against eBioscience by Life Technologies Corporation. The net assets acquired and results of operations do not reflect the potential outcome of this litigation, which is unable to be estimated at September 30, 2012. Under the terms of the Acquisition Agreement, $25.2 million of the purchase price was placed into escrow to secure eBioscience security holders' indemnification obligations to the Company.

Transaction costs

The Company cumulatively incurred approximately $9.0 million of Acquisition-related costs that are recognized as Selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Operations, of which $6.1 million was recognized during the nine months ended September 30, 2012 and $2.9 million was recognized in the year ended December 31, 2011.

Total underwriting and financing fees of approximately $8.5 million associated with the Term Loan and 4.00% Notes were also incurred and are discussed in Note 9. "Long-Term Debt Obligations."

Share-based compensation costs

The share-based compensation expense of $8.3 million recognized for the accelerated vesting of certain eBioscience options immediately vested prior to the Acquisition was recognized in the accompanying Condensed Consolidated Statements of Operations as Selling, general and administrative expense in during the nine months ended September 30, 2012.

Pro Forma Financial Information

The following pro forma financial information presents the combined results of operations for the three and nine months ended September 30, 2012 and 2011 as if the Acquisition had been completed on January 1, 2011, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition. The pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and eBioscience. Accordingly, these pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	79,624		$	82,122		$	247,021		$	256,035
Net loss		(17,643	)		(17,128	)		(36,399	)		(8,528	)
Basic and diluted earnings per share		(0.25	)		(0.25	)		(0.52	)		(0.12	)

The pro forma financial information includes non-recurring pro forma adjustments for share-based compensation expense of $8.3 million recognized for the accelerated vesting of certain eBioscience stock options immediately prior to the Acquisition, and an adjusted income tax benefit of $37.5 million that were excluded from the pro forma results for the nine months ended September 30, 2012 and included in the pro forma results for the nine months ended September 30, 2011.

The pro forma financial information also excludes non-recurring Acquisition-related transaction costs incurred by the Company of $0.2 million and $6.1 million, respectively, and by eBioscience of $0.1 million and $5.6 million, respectively. For the three and nine months ended September 30, 2011,  the Company did not incur any non-recurring Acquisition costs and eBioscience incurred 0.1 million.

11

NOTE 3—FAIR VALUE

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

A fair value hierarchy was established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

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

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

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 (in thousands)

			Significant
	Quoted Prices		Other
	In Active		Observable
	Markets		Inputs
	(Level 1)		(Level 2)		Total
September 30, 2012:
Assets:
U.S. government obligations and agency securities	$	-	$	7,362	$	7,362
U.S. corporate debt		-		663		663
Foreign corporate debt and equity securities		-		1,887		1,887
Total	$	-	$	9,912	$	9,912
Derivative assets	$	-	$	199	$	199
Liabilities:
Derivative liabilities	$	-	$	886	$	886
December 31, 2011:
Assets:
U.S. government obligations and agency securities	$	-	$	19,598	$	19,598
U.S. corporate debt		-		25,100		25,100
Foreign government obligations and agency securities		-		2,810		2,810
Foreign corporate debt and equity securities		105		14,825		14,930
Total	$	105	$	62,333	$	62,438
Derivative assets	$	-	$	940	$	940
Liabilities:
Derivative liabilities	$	-	$	217	$	217

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The Company's Level 2 input assumptions are determined based on review of third-party sources.

The fair value of the Company's derivative assets and liabilities is determined based on the estimated consideration the Company would pay or receive to terminate these agreements on the reporting date. The derivative assets and liabilities are located in other current assets and accrued liabilities, respectively, in the accompanying Condensed Consolidated Balance Sheets.

As of September 30, 2012 and December 31, 2011, the Company had no financial assets or liabilities measured on a recurring basis requiring Level 3 classification, including those that have unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets and liabilities.

Debt Obligations

Debt obligations are not recorded at fair value on a recurring basis and are carried at amortized cost. The fair value of debt obligations was based on recent transactions and categorized within Level 3 of the fair value hierarchy.

The fair values of the Company's 3.50% Senior Convertible Notes due 2039 (the "3.50% Notes") and 4.00% Notes are based on quoted market prices at the balance sheet date. At September 30, 2012, the fair value of the Company's remaining 3.50% Notes was $3.7 million and the fair value of the Company's 4.00% Notes was $102.3 million.

On June 25, 2012, the Company entered into a Credit Agreement and borrowed $85.0 million under the Term Loan. As of September 30, 2012, the fair value of the Term Loan approximated its carrying value of $82.9 million.

Property and Equipment, Net – Held for Sale

In the fourth quarter of 2011, the Company had entered into a non-binding letter of intent to sell its facility located in West Sacramento, California to a third-party. As a result of the letter of intent, the Company reclassified the facility from long-lived assets held and used to held-for-sale and recognized an impairment charge of $1.7 million to bring the carrying value of the facility to its estimated fair market value, which was the anticipated selling price under the non-binding letter of intent. During the three months ended September 30, 2012, the non-binding letter of intent was terminated.

The Company received several additional third-party offers to purchase the facility in West Sacramento, California during the third quarter of 2012, and based on the offers, the estimated fair value of the facility was deemed to be lower than the carrying cost and the Company recognized $4.0 million of impairment during the three months ended September 30, 2012. As of the filing date, the Company continues to negotiate with potential buyers.

NOTE 4—FINANCIAL INSTRUMENTS

Investments in Debt and Equity Securities

The fair values of the Company's available-for-sale securities are based on quoted market prices and are included in cash and cash equivalents, available-for-sale securities—short-term and available-for-sale securities—long-term on the Company's Condensed Consolidated Balance Sheets based on each respective security's maturity.

As described in further detail in Note 2. "Acquisition", during the second quarter of 2012, the Company liquidated the majority of its available-for-sale securities to finance the Acquisition. The available-for-sale securities were sold for total cash consideration of $52.0 million and the resulting net gain on sale of $0.5 million was recognized in Interest income and other, net in the accompanying Condensed Consolidated Statements of Operations.

The following is a summary of available-for-sale securities as of September 30, 2012 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. government obligations and agency securities	$	7,297	$	65	$	-	$	7,362
U.S. corporate debt		648		15		-		663
Foreign corporate debt and equity securities		1,849		38		-		1,887
Total available-for-sale securities	$	9,794	$	118	$	-	$	9,912

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The following is a summary of available-for-sale securities as of December 31, 2011 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
U.S. government obligations and agency securities	$	19,421	$	177	$	-		$	19,598
U.S. corporate debt		24,942		259		(101	)		25,100
Foreign government obligations and agency securities		2,805		6		(1	)		2,810
Foreign corporate debt and equity securities		15,157		41		(268	)		14,930
Total available-for-sale securities	$	62,325	$	483	$	(370	)	$	62,438

Contractual maturities of available-for-sale securities as of September 30, 2012 and December 31, 2011 are as follows (in thousands):

	September 30,		December 31,
	2012		2011
Less than one year	$	2,575	$	7,937
One to two years		5,717		25,785
More than two years		1,620		28,716
Total available-for-sale securities	$	9,912	$	62,438

The Company recognized no significant net realized gains and losses during the three months and nine months ended September 30, 2011. Realized gains and losses are included in Interest income and other, net in the accompanying Condensed Consolidated Statements of Operations.

Non-Marketable Securities

As of September 30, 2012 and December 31, 2011, the carrying amounts of the Company's non-marketable securities, totaling $5.0 million, equaled their estimated fair values. The estimated fair value was primarily determined to be the initial cost basis plus the Company's allocated share of results and any other-than-temporary impairment ("OTTI") charges that were recognized in prior periods. There was no OTTI recognized during the nine months ended September 30, 2012. During the nine months ended September 30, 2011, the Company recognized an impairment of $1.3 million in Interest income and other, net related to its investment in a limited partnership investment fund. Net investment results are included in interest income and other, net in the accompanying Condensed Consolidated Statements of Operations. Depending on market conditions, the Company may incur additional charges on this investment portfolio in the future.

Derivative Financial Instruments

The Company derives a portion of its revenues in foreign currencies, predominantly in Europe and Japan, as part of its ongoing business operations. In addition, a portion of its assets is held in the nonfunctional currencies of its subsidiaries. The Company enters into foreign currency forward contracts to manage a portion of the volatility related to transactions that are denominated in foreign currencies. The Company's foreign currency forward contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures. The Company's accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company recognizes derivatives on its accompanying Condensed Consolidated Balance Sheets at fair value. The effective portions of designated cash flow hedges are recorded in other comprehensive income ("OCI") until the hedged item is recognized in earnings. As of September 30, 2012, the Company's existing foreign currency forward exchange contracts mature within 12 months. The deferred amount related to the Company's derivatives currently recorded in OCI and expected to be recognized into earnings over the next 12 months is a net loss of $0.6 million. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings.

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Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in OCI associated with such derivative instruments are reclassified immediately into operations through other income and expense. Any subsequent changes in fair value of such derivative instruments are reflected in other income and expense unless they are re-designated as hedges of other transactions. The Company did not recognize any net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three and nine months ended September 30, 2012 and 2011.

Under the Credit Agreement as defined in Note 9. "Long-Term Obligations", the Company is required to maintain derivative contracts to protect against fluctuations in interest rates with respect to at least 35% of the aggregate principal amount of the Term Loan, as defined in Note 9. "Long-Term Obligations," then outstanding, with such derivative contracts being required to have at least a three-year term. Accordingly, the Company has entered into an interest rate swap (the "Interest Rate Swap") for which the notional amount was originally set at $27 million, with quarterly reduction to the notional amount consistent with the mandatory amortization schedule of the Term Loan. The Interest Rate Swap calls for quarterly fixed rate quarterly payments of 1.70% of the notional amount in exchange for a variable rate quarterly receipts equal to a 3 month LIBOR rate with a floor of 1.50%. The Interest Rate Swap terminates on June 25, 2015.

The Company did not designate the Interest Rate Swap as a hedging instrument and will recognize adjustments to fair value through Interest and other income on the accompanying Condensed Consolidated Statements of Operations at each reporting date. As of September 30, 2012, the fair value of the Interest Rate Swap was $0.1 million.

As of September 30, 2012 and December 31, 2011, the total notional values of the Company's derivative assets and liabilities were as follows (in thousands):

	September 30,		December 31,
	2012		2011
Euro	$	17,510	$	11,851
Japanese yen		10,619		7,008
British pound		5,043		4,459
Interest rate swap		27,519		-
Total	$	60,691	$	23,318

Other than the Interest Rate Swap, the Company did not have any derivative assets or liabilities that were not designated or qualifying as hedges as of September 30, 2012. As of December 31, 2011, the Company did not have any derivative assets or liabilities that were not designated or qualifying as hedges.

As a result of the use of derivative instruments, the Company is exposed to the risk that the counterparties may be unable to meet the terms of the underlying agreements. To mitigate this risk, only contracts with carefully selected highly-rated major financial institutions are entered into. In the event of non-performance by these counterparties, the asset position carrying values of the financial instruments represent the maximum amount of loss that can be incurred; however, no losses as a result of counterparty defaults are expected. The Company does not require and is not required to pledge collateral for these financial instruments. The Company does not enter into derivative contracts for trading or speculative purposes and is not party to any leveraged derivative instruments.

The following table shows the Company's derivative assets and liabilities measured at fair value as reflected on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30,		December 31,		Balance Sheet
	2012		2011		Location
Derivative assets:
Foreign exchange contracts	$	199	$	940	Other current assets
Derivative liabilities:
Foreign exchange contracts		812		217	Accrued expenses
Interest rate swap		74		-	Accrued expenses

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The following table shows the effect, net of tax, of the Company's derivative instruments on the accompanying Condensed Consolidated Statements of Operations and OCI for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Derivatives in cash flow hedging relationships:
Net (loss) gain recognized in OCI, net of tax (1)	$	(1,204	)	$	353			(1,472	)		303
Net gain reclassified from accumulated OCI into income, net of tax (2)		140			-			837			-
Net gain (loss) recognized in other income and expense (3)		40			(66	)		68			(79	)
Derivatives not designated as hedging relationships:
Net (loss) gain recognized in other income and expense (4)		(353	)		625			(479	)		(1,892	)

______________________

(1) Net change in the fair value of the effective portion classified in OCI

(2) Effective portion classified as revenue

(3) Ineffective portion and amount excluded from effectiveness testing classified as Interest and other, net

(4) Classified in Interest and other, net

NOTE 5—STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE

Share-based Compensation Plans

The Company has a share-based compensation program, most recently, the 2000 Amended and Restated Equity Incentive Plan (the "Plan"), that provides the Board of Directors broad discretion in creating equity incentives for employees, officers, directors and consultants. This program includes incentive and non-qualified stock options and non-vested stock awards (also known as restricted stock) granted under various stock plans. As of September 30, 2012, the Company had approximately 5.0 million shares of common stock reserved for future issuance under its share-based compensation plans including 2.0 million shares of common stock authorized for issuance under the Company's 2012 Inducement Plan that was adopted by the Board of Directors in June 2012. New shares are issued as a result of stock option exercises, restricted stock units vesting and restricted stock award grants.

The Company recognized share-based compensation expense as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Costs of sales	$	403	$	267	$	1,114	$	840
Research and development		307		503		980		1,541
Selling, general and administrative		1,549		1,458		12,763		4,221
Total share-based compensation expense	$	2,259	$	2,228	$	14,857	$	6,602

Included in selling, general and administrative share-based compensation expense for the nine months ended September 30, 2012 was $8.3 million related to the acceleration of unvested stock options in connection with the Acquisition.

As of September 30, 2012, $18.4 million of total unrecognized share-based compensation expense related to non-vested awards is expected to be recognized over the respective vesting terms of each award through 2016. The weighted‑average term of the unrecognized share-based compensation expense is 2.8 years.

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Stock Options

The fair value of options was estimated at the date of grant using the Black Scholes Merton option pricing model with the following weighted‑average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Risk free interest rate		0.6	%		1.2	%		0.6	%		1.8	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		67	%		67	%		67	%		67	%
Expected option term (in years)		4.6			4.5			4.6			4.5

The risk free interest rate for periods within the contractual life of the Company's stock options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term is derived from an analysis of the Company's historical exercise trends over ten years. The expected volatility for the three and nine months ended September 30, 2012 and 2011 is based on a blend of historical and market‑based implied volatility. Using the assumptions above, the weighted‑average grant date fair value of options granted during the three months ended September 30, 2012 and 2011, was $2.11 and $3.31, respectively, and during the nine months ended September 30, 2012 and 2011, was $2.19 and $3.05, respectively.

Performance-Based Awards

In 2011, the Compensation Committee of the Company's Board of Directors approved a grant of performance-based restricted stock units ("PRSUs") under the Plan to an executive officer that is earned annually in four equal tranches (the "Performance Period"). The PRSUs entitle the executive to receive a certain number of shares of the Company's common stock based on the Company's satisfaction of certain financial and strategic performance goals as set and approved by the Board of Directors annually during the first quarter of the specific performance period. Based on the achievement of the performance conditions during each Performance Period, the final settlement of the PRSU award will vest twelve months following the end of each Performance Period. The PRSU award will be forfeited if the performance goals are not met or if the executive officer is no longer employed at the vest date.

The number of shares underlying the PRSUs that were granted to the executive officer during 2011 totaled 240,000 shares. As of September 30, 2012, performance conditions pertaining to 60,000 shares of the PRSUs, with a grant date fair value of $6.71 per PRSU, were achieved and the fair value of the vested PRSU's is being amortized on a straight-line basis over the remaining service period. The Company expects that an additional 15,000 shares of the PRSUs, with a grant date fair value of $4.63 per PRSU, will vest and the fair value of such PRSU's is being amortized on a straight-line basis over the related service period. The total compensation cost related to PRSUs granted but not yet recognized was approximately $0.1 million as of September 30, 2012.

During July 2012, the Compensation Committee granted certain PRSUs following the acquisition of eBioscience referred to as an Acquisition Performance Share Program (the "Program"). The purpose of the Program is to align key management and senior leadership with stockholders' interests and to retain key employees. The measurement periods for the Program are the twelve month periods ended June 30, 2012 and June 30, 2013, respectively. Members of eBioscience management and other key employees are participating in the Program. Awards granted under the Program are granted in the form of performance shares pursuant to the terms of our Plan. If pre-determined eBioscience specific performance goals are met, shares of stock will be granted to the recipient, vesting one month following the performance period representing the date of certification of achievement, contingent upon the recipient's continued service to the Company.

For the nine months ended September 30, 2012, the Company awarded 911,500 PRSUs under the Program at a grant date fair value of $4.16 per PRSU and expects 100% of the PRSUs will vest. The fair value of the PRSUs is being amortized on a straight-line basis over the related service period. The total compensation cost related to PRSUs granted but not yet recognized was approximately $2.6 million as of September 30, 2012.

Employee Stock Purchase Plan

In August 2011, the Company's Board of Directors adopted the 2011 Employee Stock Purchase Plan ("ESPP") that was approved by the Company's stockholders on May 11, 2012. The ESPP reserved a total of 7.0 million shares of the Company's common stock for issuance under the plan and permits eligible employees to purchase common stock at a discount through payroll deductions.

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The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or the last day of the purchase period, whichever is lower. The offering periods are twelve months and include two six month purchase periods that result in a look-back for determining the purchase price of up to 12 months. Employees can invest up to 15% of their gross compensation through payroll deductions. In no event would an employee be permitted to purchase more than 750 shares of common stock during any six-month purchase period. The initial offering period commenced in November 2011. As of September 30, 2012, there were 279 participants in the plan and approximately 133,051 shares were issued under the ESPP during the period at a subscription date fair value of $4.23 per share. Included in total share-based compensation cost for the three and nine months ended September 30, 2012 was $0.1 million and $0.5 million, respectively, related to the ESPP.

During the three and nine months ended September 30, 2012, the fair value of shares under the ESPP was estimated using the following assumptions:

Risk free interest rate	0.1	%
Expected dividend yield	0.0	%
Expected volatility	67	%
Expected term (in years)	0.8

NOTE 6—INVENTORIES

At September 30, 2012 and December 31, 2011, inventories consisted of the following (in thousands):

	September 30,		December 31,
	2012		2011
Raw materials	$	10,442	$	8,635
Work-in-process		40,740		10,554
Finished goods		38,377		23,662
Total	$	89,559	$	42,851
Short-term portion	$	74,891	$	42,851
Long-term portion	$	14,668	$	-

Inventory at September 30, 2012 includes $50.7 million of inventory acquired from eBioscience that includes an adjusted step-up in basis of $29.0 million as discussed in Note 2. "Acquisition." Amortization expense on the fair value step-up during the three and nine months ended September 30, 2012 was $4.5 million and $4.9 million, respectively.

NOTE 7—GOODWILL AND INTANGIBLE ASSETS

The gross carrying amounts and net book values of the Company's definite-lived intangible assets are as follows (in thousands):

	Carrying Value, Gross						Accumulated Amortization									Intangible Assets, Net				Weighted
	December 31,				September 30,		December 31,						September 30,			December 31,		September 30,		Average
	2011		Additions		2012		2011			Additions			2012			2011		2012		Useful Life
Customer relationships	$	14,600	$	61,752	$	76,352	$	(9,510	)	$	(2,979	)	$	(12,489	)	$	5,090	$	63,863	12 years
Developed technologies		17,653		58,635		76,288		(13,179	)		(4,521	)		(17,700	)		4,474		58,588	12 years
Trademarks and tradenames		2,300		15,510		17,810		(1,126	)		(3,503	)		(4,629	)		1,174		13,181	5 years
Other contractual agreements		-		3,030		3,030		-			(1,047	)		(1,047	)		-		1,983	2 years
Licenses		79,142		1,928		81,070		(60,355	)		(400	)		(60,755	)		18,787		20,315	Variable
Total definite-lived intangible assets	$	113,695	$	140,855	$	254,550	$	(84,170	)	$	(12,450	)	$	(96,620	)	$	29,525	$	157,930

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The expected future annual amortization expense of the Company's intangible assets is as follows (in thousands):

	Amortization
For the Year Ending December 31,	Expense
2012, remainder thereof	$	6,419
2013		23,473
2014		20,750
2015		14,609
2016		13,757
Thereafter		78,922
Total	$	157,930

The Company recognized goodwill of $157.9 million at the Acquisition Date in connection with the Acquisition. Refer to "Note 2. "Acquisition" for further details. Information in regards to changes in the Company's goodwill at September 30, 2012 is as follows (in thousands):

Balance at December 31, 2011	$	-
Additions:
Acquisition of eBioscience		157,929
Effects of foreign currency change		1,491
Balance at September 30, 2012	$	159,420

NOTE 8—WARRANTIES

The Company provides for anticipated warranty costs at the time the associated product revenue is recognized. Product warranty costs are estimated based upon the Company's historical experience and the applicable warranty period. The Company periodically reviews the adequacy of its warranty reserve and adjusts, if necessary, the warranty percentage and accrual based on actual experience and estimated costs to be incurred. Information in regards to the changes in the Company's product warranty liability for the nine months ended September 30, 2012 is as follows (in thousands):

Balance at December 31, 2011	$	1,500
Additions charged to cost of product sales		335
Repairs and replacements		(469	)
Balance at September 30, 2012	$	1,366

NOTE 9—LONG-TERM DEBT OBLIGATIONS

Term Loan

On June 25, 2012, the Company entered into a credit agreement (the "Credit Agreement") by, and among, Affymetrix and its domestic subsidiaries, and General Electric Capital Corporation ("GE Capital"), Silicon Valley Bank and other financial institutions party thereto from time to time (collectively, the "Lenders"), as well as certain securities affiliates of the Lenders. The Credit Agreement provides for the Term Loan in an aggregate principal amount of $85.0 million and a revolving credit facility in an aggregate principal amount of $15.0 million (the "Revolving Credit Facility" and, together with the Term Loan, the "Senior Secured Credit Facility"), each with a term of five years. As of September 30, 2012, the Company borrowed a total of $85.0 million under the Term Loan which was used to finance a portion of the Acquisition.

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At the option of the Company (subject to certain limitations), borrowings under the Credit Agreement bear interest at either a base rate or at the London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin. Under the Base Rate Option, interest will be at the base rate plus 4.00% per annum, calculated on the basis of the actual number of days elapsed in a year of 365 or 366 days (as applicable) and payable quarterly in arrears. The base rate will be equal to the greatest of (a) the rate last quoted by The Wall Street Journal (or another national publication selected by GE Capital) as the U.S. "Prime Rate," (b) the federal funds rate, plus 0.50% per annum and (c) LIBOR for an interest period of one month, plus 1.00% per annum. However, the base rate will not be less than a floor of 2.50% per annum. Under the LIBOR Option, interest will be determined based on interest periods to be selected by Affymetrix of one, two, three or six months (and, to the extent available to all relevant lenders, nine or 12 months) and will be equal to LIBOR, plus 5.00%, calculated based on the actual number of days elapsed in a 360-day year. However, LIBOR will be deemed not to be less than a floor of 1.50% per annum. Interest will be paid at the end of each interest period or, in the case of interest periods longer than three months, quarterly. During the three months ended September 30, 2012, the Company entered into its Interest Rate Swap as required by the terms of the Credit Agreement with a third-party lending institution. Refer to Note 4. "Financial Instruments–Interest Rate Swap" for further information. At September 30, 2012, the applicable interest rate was approximately 6.50%.

The loans and other obligations under the Senior Secured Credit Facility are (i) guaranteed by substantially all of the Company's domestic subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of Affymetrix and each guarantor (subject to certain exceptions and limitations).

The Credit Agreement requires the Company to maintain a fixed charge coverage ratio of at least 1.5 to 1.0, a senior leverage multiple not exceeding initially 2.00 to 1.00 and stepping down to 1.50 to 1.00 and a total leverage multiple not exceeding initially 4.75 to 1.00 and stepping down to 3.50 to 1.00. The Credit Agreement also includes other covenants, including negative covenants that, subject to certain exceptions, limit Affymetrix', and that of certain of its subsidiaries', ability to, among other things: (i) incur additional debt, including guarantees by the Company or its subsidiaries, (ii) make investments, pay dividends on capital stock, redeem or repurchase capital stock, redeem or repurchase the Company's senior convertible notes or any subordinated obligations, (iii) create liens and negative pledges, (iv) make capital expenditures, (v) dispose of assets, (vi) make acquisitions, (vii) create or permit restrictions on the ability of Affymetrix' subsidiaries to pay dividends or make distributions to Affymetrix, (viii) engage in transactions with affiliates, (ix) engage in sale and leaseback transactions, (x) consolidate or merge with or into other companies or sell all or substantially all the Company's assets and (xi) change their nature of business, their organizational documents or their accounting policies. As of September 30, 2012, the Company was in compliance with these covenants.

The Company is required to make the following mandatory prepayments: (a) annual prepayments in an amount equal to 50% of excess cash flow (as defined in the Credit Agreement), subject to a leverage-based stepdown, (b) prepayments in an amount equal to 100% of the net cash proceeds of issuances or incurrences of debt obligations of Affymetrix and its subsidiaries (other than debt incurrences expressly permitted by the Credit Agreement), (c) prepayments in an amount equal to 100% of the net proceeds of asset sales in excess of $2.5 million annually (subject to certain reinvestment rights) and (d) prepayments in an amount equal to any indemnification payments or similar payments received under the Acquisition Agreement, subject to certain exclusions. During the three months ended September 30, 2012, the Company made a payment of $2.1 million.

The Credit Agreement also contains events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-default and cross-acceleration to other indebtedness in excess of specified amounts, monetary judgment defaults in excess of specified amounts, bankruptcy or insolvency, actual or asserted invalidity or impairment of any part of the credit documentation (including the failure of any lien on a material portion of the collateral to remain perfected) and change of ownership or control defaults. In addition, the occurrence of a "fundamental change" under the indenture governing the 4.00% Notes or the indenture governing the Company's 3.50% Notes would be an event of default under the Credit Agreement. As of September 30, 2012, there have been no events of default under the Credit Agreement.

Additionally, the proceeds from the Term Loan are net of debt issuance costs of approximately $4.5 million that are being amortized over the 5-year term of the Senior Secured Credit Facility beginning on June 25, 2012.

As of September 30, 2012, the Company had an outstanding principal balance of $82.9 million and incurred $1.7 million and $1.8 million, respectively, in interest under the Senior Secured Credit Facility for the three and nine months ended September 30, 2012.

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The Term Loan will amortize in quarterly installments in amounts resulting in an annual amortization of 10% during the first year, 15% during the second year, 15% during the third year, 20% during the fourth year and 40% during the fifth year after June 25, 2012. The principal amount of unpaid maturities per the Credit Agreement is as follows (in thousands):

2012, remainder thereof	$	-
2013		9,563
2014		12,750
2015		13,812
2016		17,000
Thereafter		29,750
Total	$	82,875

4.00% Convertible Senior Notes

On June 25, 2012, the Company issued $105.0 million principal amount of 4.00% Convertible Senior Notes due July 1, 2019. The net proceeds, after debt issuance costs totaling $3.9 million from the 4.00% Notes offering, were $101.1 million. The 4.00% Notes bear interest of 4.00% per year payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2013 until the maturity date of July 1, 2019, unless converted, redeemed or repurchased earlier. The debt issuance costs are being amortized over the effective life of the 4.00% Notes, which is 7 years.

Holders of the 4.00% Notes may convert their 4.00% Notes into shares of the Company's stock at their option any time prior to the close of business on the business day immediately preceding the maturity date. The 4.00% Notes are initially convertible into approximately 170.0319 shares of the Company's common stock per $1,000 principal amount of notes, which equates to 17,857,143 shares of common stock, or an initial conversion price of $5.88 per share of common stock. The conversion rate is subject to certain customary anti-dilution adjustments. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances. Holders may also require the Company to repurchase for cash their notes upon certain fundamental changes.

On or after July 1, 2017, the Company can redeem for cash all or part of the 4.00% Notes if the last reported sale price per share of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending within 5 trading days prior to the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 4.00% Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

As of September 30, 2012, outstanding balance on the 4.00% Notes was $105.0 million and interest incurred for the three and nine months ended September 30, 2012 was $1.2 million and $1.3 million, respectively.

3.50% Senior Convertible Notes

During the first quarter of 2012, the Company repurchased approximately $91.6 million of aggregate principal amount of its 3.50% Notes in private transactions for total cash consideration of $92.1 million, including accrued interest of $0.5 million. Such notes were purchased at par and accelerated amortization of deferred financing costs of $0.3 million was recognized. Both the Company and the Holders of the remaining $3.9 million aggregate principal amount of 3.50% Notes have the option to settle the notes at a price equal to 100% of the outstanding principal amount plus accrued interest on January 15, 2013. For the three and nine months ended September 30, 2012, interest incurred on the 3.50% Notes was less than $0.1 million and $1.1 million, respectively.

NOTE 10—NET (LOSS) INCOME PER COMMON SHARE

Basic net (loss) income per common share is calculated using the weighted‑average number of common shares outstanding during the period less the weighted‑average shares subject to repurchase. Diluted net (loss) income per common share gives effect to dilutive common stock subject to repurchase, stock options (calculated based on the treasury stock method), shares under the Company's ESPP and convertible debt (calculated using an as-if-converted method). Potentially dilutive securities are excluded from shares used in computing diluted net (loss) income per common share if their effect would be anti-dilutive.

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The following table sets forth a reconciliation of basic and diluted net (loss) income per common share (in thousands except per common share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012		2011
Net (loss) income	$	(17,859	)	$	(9,789	)	$	1,573	$	(13,422	)
Shares used in computing basic net (loss) income per common share		70,403			69,719			70,181		70,790
Add effect of dilutive securities:
Employee stock compensation plans		-			-			103		-
Common stock subject to repurchase		-			-			326		-
Shares used in computing diluted net (loss) income per common share		70,403			69,719			70,610		70,790
Basic net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)
Diluted net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)

The potential dilutive securities excluded from diluted earnings per common share were as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Employee stock compensation plans		6,435		6,214		6,331		6,214
Restricted stock subject to repurchase		4,041		1,794		3,724		1,794
Convertible notes		17,985		3,169		7,214		3,169
Total		28,461		11,177		17,269		11,177

NOTE 11—LEGAL PROCEEDINGS

The Company has been in the past, and continues to be, a party to litigation which has consumed, and may continue to consume, substantial financial and managerial resources. The Company could incur substantial costs and divert attention of management and technical personnel in defending against litigation, and any adverse ruling or perception of an adverse ruling could have a material adverse impact on the Company's stock price. The results of any litigation or any other legal proceedings are uncertain and as of the date of this report, the Company has not accrued any liability with respect to any of the litigation matters listed below:

E8 Pharmaceuticals LLC

On July 1, 2008, the Company was named as a defendant in a complaint filed by plaintiffs E8 Pharmaceuticals LLC and Massachusetts Institute of Technology ("MIT") in the United States District Court of Massachusetts. In the complaint, the plaintiffs allege that the Company is infringing one patent owned by MIT and licensed to E8 Pharmaceuticals by making and selling the Company's GeneChip® products to customers and teaching its customers how to use the products. The plaintiffs seek a permanent injunction enjoining the Company from further infringement, unspecified monetary damages, enhanced damages pursuant to 35 U.S.C. §284, costs, attorneys' fees and other relief as the court deems just and proper. On September 4, 2012, the District Court issued its ruling construing key claims of the patent at issue. The parties thereafter stipulated to the dismissal of plaintiffs' claims and the Company's counterclaims, and on September 21, 2012, the District Court dismissed the lawsuit in its entirety. On September 26, 2012, the plaintiffs filed an appeal with the United States Court of Appeals for the Federal Circuit. The Company will continue to vigorously defend against the plaintiffs' claims.

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Enzo Litigation

On October 28, 2003, Enzo Life Sciences, Inc., a wholly-owned subsidiary of Enzo Biochem, Inc. (collectively "Enzo"), filed a complaint against the Company that is pending in the United States District Court for the Southern District of New York for breach of contract, injunctive relief and declaratory judgment. The Enzo complaint relates to a 1998 distributorship agreement with Enzo under which the Company served as a non-exclusive distributor of certain reagent labeling kits supplied by Enzo. In its complaint, Enzo seeks monetary damages and an injunction against the Company from using, manufacturing or selling Enzo products and from inducing collaborators and customers to use Enzo products in violation of the 1998 agreement. Enzo also seeks the transfer of certain Affymetrix patents to Enzo.

On November 10, 2003, the Company filed a complaint against Enzo in the United States District Court for the Southern District of New York for declaratory judgment, breach of contract and injunctive relief relating to the 1998 agreement. In its complaint, the Company alleges that Enzo has engaged in a pattern of wrongful conduct against it and other Enzo labeling reagent customers by, among other things, asserting improperly broad rights in its patent portfolio, improperly using the 1998 agreement and distributorship agreements with others in order to corner the market for non-radioactive labeling reagents, and improperly using the 1998 agreement to claim ownership rights to the Company's proprietary technology. There is no trial date in the actions between Enzo and the Company.

On April 6, 2012, Enzo filed a complaint against the Company in the United States District Court for the District of Delaware. In the complaint, plaintiff alleges that Affymetrix is infringing U.S. Patent No. 7,064,197 by making and selling certain GeneChip® products. The plaintiff seeks a preliminary and permanent injunction enjoining the Company from further infringement and unspecified monetary damages. The Company will vigorously defend against the plaintiff's case.

Life Technologies Litigation

On October 12, 2010, Life Technologies Corporation filed a complaint against eBioscience in the United States District Court for the Southern District of California, alleging that eBioscience is infringing U.S. Patent Nos. 6,423,551, 6,699,723, and 6,927,069 related to certain eBioscience products. The plaintiff seeks a preliminary and permanent injunction enjoining eBioscience from further infringement and unspecified monetary damages. On August 30, 2012, Life Technologies Corporation filed a second complaint against eBioscience in the United States District Court for the Southern District of California, alleging that eBioscience is infringing U.S. Patent Nos. 8,071,359, 8,071,360, and 8,071,361, related to certain eBioscience products. The plaintiff seeks a preliminary and permanent injunction enjoining eBioscience from further infringement and further unspecified monetary damages. The Company is vigorously defending against these claims. Pursuant to the Acquisition Agreement, eBioscience security holders shall, subject to certain limitations, indemnify the Company against damages arising out of or resulting from the claims.

Administrative Proceedings

The Company's intellectual property is subject to a number of significant administrative actions. These proceedings could result in the Company's patent protection being significantly modified or reduced, and the incurrence of significant costs and the consumption of substantial managerial resources. For the nine months ended September 30, 2012, the Company did not incur significant costs in connection with administrative proceedings.

NOTE 12—INCOME TAXES

During the three and nine months ended September 30, 2012, the Company recognized an income tax benefit of $0.2 million and $37.3 million, respectively. The income tax benefit results primarily from a reduction in the valuation allowance recorded against the Company's net deferred tax assets of $37.5 million recorded during the second quarter of 2012, due to deferred tax liabilities recognized for the difference between the fair value and carrying basis of certain tangible and intangible assets obtained as part of the Acquisition, which can be used as a source of income to support realization of certain domestic deferred tax assets.

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Deferred tax liabilities recognized for the difference between the fair value and carrying basis of certain tangible and intangible assets obtained as part of the Acquisition can be used as a source of income when utilizing certain domestic deferred tax assets. The aforementioned purchase accounting adjustments that reduced certain tangible and intangible assets and reduced the related deferred tax liabilities discussed in Note 2. "Acquisition" resulted in an increase in the valuation allowance recorded against the Company's consolidated net deferred tax assets. Under Accounting Standards Codification ("ASC") 805-740, changes in an acquirer's valuation allowances that stem from a business combination should be recognized as an element of the acquirer's deferred income tax expense (benefit) in the reporting period that includes the business combination. As a result of the retrospective purchase accounting and related income tax valuation adjustments from the Acquisition, the Company recast its income tax benefit for the second quarter of 2012, lowering it by $7.2 million from net $44.3 million with a corresponding increase in valuation allowance.

For the nine months ended September 30, 2012, this income tax benefit was partially offset by an income tax provision of $0.2 million, respectively, which primarily consists of a provision for foreign taxes.

Due to the Company's history of cumulative operating losses, management concluded that, after considering all the available objective evidence, it is not more likely than not that all the Company's net deferred tax assets will be realized. Accordingly, all of the U.S. net deferred tax assets continue to be subject to a valuation allowance as of September 30, 2012.

As of September 30, 2012, excluding acquired unrecognized tax benefits of $2.1 million as a result of the Acquisition, there have been no material changes to the total amount of unrecognized tax benefits as compared to December 31, 2011.

NOTE 13—RELATED PARTY TRANSACTIONS

In December 2011, the Company entered into an agreement under which it assigned one patent application and related know-how to Cellular Research, Inc. ("Cellular Research"), a company founded by the Company's Chairman, Dr. Stephen P.A. Fodor. Dr. Fodor also owns a majority of the shares of Cellular Research. Pursuant to the agreement, Cellular Research shall pay single digit royalties to Affymetrix on sales of products covered by the assigned technology, and starting in December 2015, an annual minimum fee of $100,000. Affymetrix shall also have a right of first refusal to collaborate with Cellular Research for the development of certain new products and to supply arrays to Cellular Research under certain terms and conditions. As of September 30, 2012, no royalties had been earned pertaining to this agreement.

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

This Management's Discussion and Analysis of Financial Condition and Results of Operations as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 should be read in conjunction with our financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q and with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2011.

All statements in this quarterly report that are not historical are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act as amended, including statements regarding our "goals," "expectations," "beliefs," "intentions," "strategies" or the like. Such statements are based on our current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results or business conditions may differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, our capacity to identify and capitalize upon emerging market opportunities; risks relating to our ability to acquire new businesses and technologies and successfully integrate and realize the anticipated strategic benefits and cost savings or other synergies thereof, including our acquisition of eBioscience, in a cost-effective manner while minimizing the disruption to our business; risks that eBioscience's future performance may not be consistent with its historical performance; risks relating to our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness; risks relating to our ability to develop and successfully commercialize new products and services; uncertainties related to cost and pricing of Affymetrix products; fluctuations in overall capital spending in the academic and biotechnology sectors; changes in government funding policies; our dependence on collaborative partners; the size and structure of our current sales, technology and technical support organizations; uncertainties relating to our suppliers and manufacturing processes; risks relating to our ability to achieve and sustain higher levels of revenue, higher gross margins and reduced operating expenses; uncertainties relating to technological approaches; global credit and financial market conditions; personnel retention; uncertainties relating to the U.S. Food and Drug Administration ("FDA") and other regulatory approvals; competition; risks relating to intellectual property of others and the uncertainties of patent protection and litigation; volatility of the market price of our common stock; unpredictable fluctuations in quarterly revenues; and the risk factors disclosed under Part I, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by law.

OVERVIEW

We develop, manufacture and sell products and services for genetic analysis to the life science research and clinical healthcare markets. Researchers around the world use our technology to better understand the role that genes play in disease, the effectiveness and safety of therapies and many other biological factors that affect human well-being. We sell our products to some of the world's largest pharmaceutical, diagnostic and biotechnology companies, as well as leading academic, government and not-for-profit research institutions and almost 26,000 peer-reviewed papers have been published based on work using our products. Including eBioscience, we have about 1,200 employees worldwide and maintain sales and distribution operations across the United States, Europe, Asia and Latin America.

We offer a comprehensive line of products for two principal applications: gene expression and genotyping. Our product sales consist primarily of sales of instruments and related consumables. We have three instrument systems, GeneTitan®, GeneChip® and GeneAtlas™, that include instruments, consumables and software. Our GeneChip® instruments run arrays packaged in cartridges and our GeneTitan® and GeneAtlas^TM instruments run arrays packaged in a peg format.

We also offer a variety of assays for gene expression targeting low- to mid-plex markets that are downstream of our whole genome arrays and a range of reagent kits that are compatible with our platforms as well as the products of other vendors.

As further discussed below, through our acquisition of eBioscience, we are now able to complement our traditional businesses with a stronger offering of reagents for cell and protein analysis, and augment our foundation in molecular diagnostics, including our cytogenics offering. eBioscience develops, manufactures and markets reagents and antibodies that are fundamental for research application in immunology, oncology, cell biology and stem cell biology.

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We completed an internal reorganization of our operations into business units at the end of 2011, including Expression, Genetic Analysis and Clinical Applications, and Life Science Reagents. The business units are designed to create a high level of focus for identifying and executing on opportunities in our target markets.

Expression

Our Expression business unit develops and markets our gene expression products and services, including our in vitro transcription ("IVT") arrays and our QuantiGene line targeted at low-to-mid-plex markets. Expression revenue as a percentage of total revenue is expected to decline over time as demand for expression products used in the discovery and exploration markets decline. Accordingly, we reported declining sales of IVT arrays that historically has represented more than half of expression revenue in recent years.

Our primary goal in our expression business is to stabilize revenue by adding new products to our array-based expression portfolio and rejuvenating our mid-plex cell and tissue assays. We have also expanded the use of our GeneAtlas^TM instrument, a desk-top entry-level microarray system, by widening the range of arrays that can be run on it.

Genetic Analysis and Clinical Applications

Our Genetic Analysis and Clinical Applications business unit develops and markets our genotyping and cytogenetics products. Our Axiom genotyping platform and SNP 6.0 products are targeted at the genotyping markets in human research and the agricultural biotechnology industry. In mid 2011, we launched our new CytoScan™ HD array which is targeted specifically at the cytogenetics market. We intend to continue to invest in cytogenetics and Axiom products in 2012 to continue growing our revenues in this business unit.

Life Science Reagents

Our Life Science Reagents business unit develops and markets reagents, enzymes, purification kits and biochemicals used by life science researchers, and is primarily targeted at the life science reagent markets.

Corporate

Our Corporate business unit primarily derives revenue from royalty arrangements, as well as field revenue from services provided by us to customers. We expect royalty revenue to decrease over time as fewer royalty arrangements are entered into and patents expire.

Acquisition of eBioscience Holding Company, Inc.

On June 25, 2012, we completed our acquisition of eBioscience Holding Company, Inc. ("eBioscience"), a privately-held company based in San Diego, California engaged in the development, manufacture and sale of flow cytometry and immunoassay reagents for immunology and oncology research and diagnostics (the "Acquisition") pursuant to an Amended and Restated Agreement and Plan of Merger dated May 3, 2012 (the "Acquisition Agreement").

We believe the Acquisition is a good strategic fit for Affymetrix, allowing us to expand our addressable markets and continue to diversify our business beyond genomics discovery into cell and protein analysis. We believe eBioscience will enable us to further expand into downstream markets where validation and testing activity leverages the results of basic discovery research to achieve a more thorough understanding of disease states, and ultimately, new and/or improved diagnostics and therapeutics.

We intend to operate eBioscience as a separate business unit to minimize or avoid any disruption of services, while taking advantage of immediate opportunities to create efficiencies. We expect to achieve certain commercial synergies between the two companies, including cross-selling opportunities and complementary distribution channels, as well as realize benefits from certain research and development synergies.

The Acquisition purchase price was adjusted to a total of $314.9 million, reflecting a decrease of $0.2 million arising from a working capital adjustment recorded in the three months ended September 30, 2012, plus $17.5 million in other fees and expenses incurred since the transaction began, including $8.5 million of underwriting and financing fees, and was financed through a combination of cash on hand, the liquidation of available-for-sale securities, proceeds from a term loan (the "Term Loan") of aggregate principal amount of $85.0 million provided under our Senior Secured Credit Facility (the "Senior Secured Credit Facility") and the issuance of $105.0 million principal amount of our 4.00% Convertible Senior Notes due 2019 (the "4.00% Notes").

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Overview of the Third Quarter of 2012

In the third quarter of 2012, we reported $79.6 million in revenue, including $17.6 million from eBioscience, as compared to $64.0 million in the third quarter of 2011. We reported net loss of approximately $17.9 million, or $0.25 per diluted share, in the third quarter of 2012 compared to a net loss of $9.8 million, or $0.14 per diluted share, in the same period of 2011, primarily due to a tightening academic funding environment worldwide, which negatively affected our revenue, as well as expenses related to the Acquisition, including interest expense of $2.9 million paid on the Term Loan and 4.00% Notes, release of inventory step-up of $4.5 million, amortization expense of $5.0 million on acquired intangible assets, non-recurring integration costs of $1.6 million and other Acquisition-related costs of $0.3 million. In addition, the third quarter of 2012 included a $4.0 million impairment charge on property held for sale.

Our primary goal is to expand our revenue base by entering new markets, growing our customer base and successfully commercializing our established and acquired technologies, including from eBioscience. We continue shifting our focus to the validation, translational and routine testing markets which we believe are currently expanding at a higher compound annual growth rate than the discovery and exploration markets and will provide opportunities for more recurring revenue growth in the future. We seek to expand our product line with new products that combine automated instrumentation, powerful new biological assays, and new array designs and content.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management has discussed the development, selection and disclosure of significant estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, refer to Note 1. "Summary of Significant Accounting Policies" in the Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Except as otherwise noted above, during the three and nine months ended September 30, 2012, there have been no significant changes in our critical accounting policies and estimates compared to the disclosures in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2011.

RESULTS OF OPERATIONS

The following discussion compares the historical results of operations for the three and nine months ended September 30, 2012 and 2011.

REVENUE

The components of revenue are as follows:

Dollars in thousands	Three Months Ended				Dollar			Percentage			Nine Months Ended				Dollar		Percentage
	September 30,				change			change			September 30,				change		change
	2012		2011		from 2011			from 2011			2012		2011		from 2011		from 2011
Consumables	$	68,039	$	52,930	$	15,109			29	%	$	176,518	$	170,131	$	6,387		4	%
Instruments		4,646		4,071		575			14			13,163		12,477		686		5
Product sales		72,685		57,001		15,684			28			189,681		182,608		7,073		4
Services and other revenue		6,939		6,986		(47	)		(1	)		21,593		19,762		1,831		9
Total revenue	$	79,624	$	63,987		15,637			24	%	$	211,274	$	202,370		8,904		4	%

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Excluding third quarter revenue from eBioscience of $17.6 million, total product sales decreased $1.9 million in the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 primarily due to lower overall chip sales volumes, partially offset by an increase in instrument revenue.

Excluding year-to-date revenue from eBioscience of $19.0 million, total product sales decreased $11.9 million in the nine months ended September 30, 2012 as compared to the same period in 2011 primarily due to decreased consumable sales resulting from lower overall chip and reagent sales volumes.

Services and other revenue remained flat for the three months ended September 30, 2012 as compared to the same period in 2011. For the nine months ended September 30, 2012, services and other revenue was higher primarily due to higher scientific services revenue and a one-time royalty payment of $0.8 million that was received in the second quarter of 2012.

The following table summarizes revenue by business unit:

Dollars in thousands	Three Months Ended				Dollar			Percentage			Nine Months Ended				Dollar			Percentage
	September 30,				change			change			September 30,				change			change
	2012		2011		from 2011			from 2011			2012		2011		from 2011			from 2011
Expression	$	27,343	$	30,769	$	(3,426	)		(11	%)	$	89,465	$	103,647	$	(14,182	)		(14	%)
Genetic analysis and clinical applications		21,210		18,314		2,896			16			60,181		53,796		6,385			12
Life science reagents		8,098		8,355		(257	)		(3	)		24,297		25,896		(1,599	)		(6	)
eBioscience		17,578		-		17,578			100			18,953		-		18,953			100
Corporate		5,395		6,549		(1,154	)		(18	)		18,378		19,031		(653	)		(3	)
Total product sales	$	79,624	$	63,987	$	15,637			24	%	$	211,274	$	202,370	$	8,904			4	%

Percentage of revenue	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Expression		34	%		48	%		42	%		51	%
Genetic analysis and clinical applications		27			29			28			27
Life science reagents		10			13			12			13
eBioscience		22			-			9			-
Corporate		7			10			9			9
Total product sales		100	%		100	%		100	%		100	%

Expression  During the three months ended September 30, 2012, Expression revenue decreased by $3.4 million primarily due to a decline in Genechip revenue of $4.2 million, which was driven by a lower volume of sales on our in vitro transcription (IVT) arrays and lower average selling price on our miRNA arrays. The decline in Expression revenue was partially offset by higher instrument revenue of $0.6 million.

The decrease of $14.2 million in Expression revenue for the nine months ended September 30, 2012 also was primarily due to the lower volume of sales of our IVT arrays. Additionally, revenue from Expression instruments declined by $1.0 million due to lower average selling price. These decreases were partially offset by higher revenue of $1.1 million reported on our QuantiGene line products.

Genetic Analysis and Clinical Applications  Genetic Analysis and Clinical Applications revenue increased for the three months ended September 30, 2012 as compared to the same period in 2011, primarily due to $4.1 million and $3.5 million increases in revenue on our CytoGenetics and Axiom products, respectively, partially offset by a decline in sales of our SNP 6.0 arrays of $2.6 million. Revenue from clinical applications as a percentage of Genetic Analysis and Clinical Applications continued to increase.

For the nine months ended September 30, 2012, revenue also increased over the prior year period primarily due to increased revenue from our Cytogenetics and Axiom products of $16.2 million and $2.8 million, respectively, as well as higher instrument sales of $2.0 million, partially offset by a decline in sales of our SNP 6.0 arrays of $9.8 million.

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Life Science Reagents  For the three and nine months ended September 30, 2012, Life Science Reagents revenue decreased due to lower volume of sales.

Corporate Corporate revenue decreased during the three months ended September 30, 2012, driven primarily by lower royalty revenue.

For the nine months ended September 30, 2012, Corporate revenue decreased by $0.7 million due to lower royalty revenue during the third quarter, partially offset by a one-time royalty payment of $0.8 million received during the second quarter of 2012 and a net realized gain of $0.8 million from designated cash flow hedges.

GROSS MARGIN

Dollars in thousands	Three Months Ended						Dollar/Point			Nine Months Ended						Dollar/Point
	September 30,						change from			September 30,						change from
	2012			2011			2011			2012			2011			2011
Total gross margin on product sales	$	38,706		$	32,354		$	6,352		$	107,774		$	111,695		$	(3,921	)
Total gross margin on services and other revenue		2,980			3,985			(1,005	)		10,536			10,135			401
Product gross margin as a percentage of products sales		53	%		57	%		(4	)		57	%		61	%		(4	)
Service and other revenue gross margin as a percentage of services and other revenue		43	%		57	%		(14	)		49	%		51	%		(2	)

Product gross margin increased during the three months ended September 30, 2012 as compared to 2011 was primarily due to the addition of eBioscience results that included a $4.5 million release of inventory step-up. The increase was offset by lower volume of sales and shift in mix to lower margin products. The decrease in product gross margin of $3.9 million for the nine months ended September 30, 2012 as compared to the same period in 2011 is primarily due to lower volume of sales and product mix. The decrease was partially offset by lower excess and obsolescence costs for products with finite lives and favorable cost absorption.

Service and other gross margin decreased during the three months ended September 30, 2012 as compared to the same period in 2011 primarily due to lower revenue from royalties, which have a 100% margin. This decrease was partially offset by higher scientific services activity. For the nine months ended September 30, 2012, services and gross margin was higher primarily due to increased scientific service activity, partially offset by lower revenue from royalties.

RESEARCH AND DEVELOPMENT EXPENSES

Dollars in thousands	Three Months Ended				Dollar		Percentage			Nine Months Ended				Dollar			Percentage
	September 30,				change		change			September 30,				change			change
	2012		2011		from 2011		from 2011			2012		2011		from 2011			from 2011
Research and development	$	16,498	$	15,328	$	1,170		8	%	$	43,417	$	46,894	$	(3,477	)		(7	%)

The increase in research and development expenses for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 was due primarily to the addition of eBioscience, increased costs on supplies of $1.8 million and consulting and purchased services of $0.9 million, related to clinical trials during the quarter. This increase was partially offset by savings in headcount-related costs of $1.7 million.

For the nine months ended September 30, 2012, research and development expenses excluding eBioscience expenses were lower as compared to the same period in 2011 primarily due to savings in headcount-related expenses of $4.8 million and variable compensation costs of $0.7 million. These decreases were partially offset by increases in spending on supplies related to various projects of $2.2 million and consulting and purchased services of $1.4 million, all related to clinical trials.

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Dollars in thousands	Three Months Ended				Dollar		Percentage			Nine Months Ended				Dollar		Percentage
	September 30,				change		change			September 30,				change		change
	2012		2011		from 2011		from 2011			2012		2011		from 2011		from 2011
Selling, general and administrative	$	36,302	$	26,915	$	9,387		35	%	$	104,752	$	80,802	$	23,950		30	%

The increase in selling, general and administrative expenses in the three and nine months ended September 30, 2012 as compared to the same period in 2011 was primarily due to the addition of eBioscience and expenses related to the Acquisition and subsequent integration activity: Acquisitions and integration costs were $1.9 million and $7.6 million, respectively. Amortization charges increased $2.5 million and $2.7 million, respectively, as a result of intangible assets acquired from eBioscience. An $8.3 million share-based compensation charge was recorded at the Acquisition Date due to the acceleration of the eBioscience stock options during the second quarter of 2012.

These increases were partially offset by net reduced spending on facilities costs and lower depreciation costs of $2.9 million and $4.0 million, respectively, primarily as a result of our plant consolidation activities with respect to our Oakmead facilities in 2011.

INTEREST INCOME AND OTHER, NET

Dollars in thousands	Three Months Ended						Dollar			Percentage			Nine Months Ended						Dollar			Percentage
	September 30,						change			change			September 30,						change			change
	2012			2011			from 2011			from 2011			2012			2011			from 2011			from 2011
Interest income	$	26		$	704		$	(678	)		(96	%)	$	605		$	1,981		$	(1,376	)		(69	%)
Realized (loss) income on equity investments, net		(33	)		(704	)		671			95			489			(1,776	)		2,265			128
Currency income (loss), net		76			(113	)		189			167			(994	)		(1,892	)		898			47
Other		(4,002	)		(2,041	)		(1,961	)		(96	)		(1,731	)		(1,862	)		131			7
Total interest income and other, net	$	(3,933	)	$	(2,154	)	$	(1,779	)		83	%	$	(1,631	)	$	(3,549	)	$	1,918			54	%

he decrease in interest income and other, net in the three months ended September 30, 2012 as compared to the same period in 2011 was primarily due to an impairment charge of $4.0 million recognized on our West Sacramento facility during the third quarter of 2012, as compared to a note receivable for $2.2 million that was fully reserved during the third quarter of 2011. Interest income decreased as compared to 2011 as a result of the sale of most of our available-for-sale securities during the eBioscience acquisition while realized losses on sales of equity investments also decreased due to an other-than-temporary impairment that was recognized on our available-for-sale securities of $0.7 million in 2011.

During the nine months ended September 30, 2012, interest income and other, net increased primarily due to the receipt of $2.2 million for the notes receivable that was previously fully reserved and the gain on sale of available-for-sale securities described above, as well as an expense of $1.2 million that was recorded during the first quarter of 2011 related to our non-marketable investment in a limited partnership fund whereas no such charge was recognized in 2012. In addition, currency losses decreased by $0.9 million primarily due to the strengthening of the U.S. dollar against other foreign currencies and the net results of our hedging activities. These increases were partially offset by a decrease in interest income of $1.4 million due to the sale of available-for-sale securities described above.

We continue to monitor the liquidity and financing activities of strategic non-marketable investments to determine if any impairment exists. It is uncertain whether or not we will realize any long-term benefits associated with these strategic investments.

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INTEREST EXPENSE

Dollars in thousands	Three Months Ended				Dollar		Percentage			Nine Months Ended				Dollar		Percentage
	September 30,				change		change			September 30,				change		change
	2012		2011		from 2011		from 2011			2012		2011		from 2011		from 2011
Interest expense	$	2,993	$	991	$	2,002		202	%	$	4,191	$	2,866	$	1,325		46	%

Interest expense increased during the three and nine months ended September 30, 2012 as compared to the same periods in 2011 due to the interest costs on the debt obligations incurred in connection with the Acquisition. This was partially offset by the sale of repurchase of $91.6 million in aggregate principal amount of our 3.50% Notes in the first quarter of 2012.

INCOME TAX PROVISION

Dollars in thousands	Three Months Ended					Dollar			Percentage			Nine Months Ended					Dollar			Percentage
	September 30,					change			change			September 30,					change			change
	2012			2011		from 2011			from 2011			2012			2011		from 2011			from 2011
Income tax provision	$	(181	)	$	740	$	(921	)		(124	%)	$	(37,254	)	$	1,141	$	(38,395	)		(3,365	%)

During the three and nine months ended September 30, 2012, we recognized an income tax benefit of $0.1 million and $37.3 million, respectively. The income tax benefit results primarily from a reduction in the valuation allowance recorded against our net deferred tax assets of $37.5 million recorded during the second quarter of 2012, due to deferred tax liabilities recognized for the difference between the fair value and carrying basis of certain tangible and intangible assets obtained in the Acquisition, which can be used as a source of income to support realization of certain domestic deferred tax assets. As a result of retrospective purchase accounting and related income tax valuation adjustments from the Acquisition, we recast our income tax benefit for the second quarter of 2012, lowering it by $7.2 million from net $44.3 million with a corresponding increase in valuation allowance. Refer to Note 12. "Income Taxes" for further information.

For the nine months ended September 30, 2012, this income tax benefit was partially offset by an income tax provision of $0.2 million, respectively, which primarily consists of a provision for foreign taxes.

Due to our history of cumulative operating losses, management concluded that, after considering all the available objective evidence, it is not more likely than not that all of our net deferred tax assets will be realized. Accordingly, all of our U.S. net deferred tax assets continue to be subject to a valuation allowance as of September 30, 2012.

As of September 30, 2012, excluding acquired unrecognized tax benefits of $2.1 million as a result of the Acquisition, there have been no material changes to the total amount of unrecognized tax benefits as compared to December 31, 2011.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our operations primarily through product sales; sales of equity and debt securities such as our 3.50% and 4.00% Notes, collaborative agreements; interest income; licensing of our technology; and, when necessary, financing arrangements with third party creditors.

Our cash outflows have generally been as follows: cash used in operating activities such as research and development programs, sales and marketing activity, compensation and benefits of our employees and other working capital needs; cash paid for acquisitions; cash paid for litigation activity and settlements; and cash used for the payment of principle on debt obligations and repurchases of our convertible notes as well as interest payments on our long-term debt obligations.

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As of September 30, 2012, we had cash, cash equivalents, and available-for-sale securities of approximately $39.6 million. We also have access, subject to compliance with certain covenants, to an additional $15.0 million revolving credit facility, provided under our Senior Secured Credit Facility. We anticipate that our existing capital resources along with the cash to be generated from operations will enable us to maintain currently planned operations, debt repayments or convertible notes repurchases, and capital expenditures for the foreseeable future. These expectations are based on our current operating and financing plans, which are subject to change, and therefore we could require further funding. Factors that may cause us to require additional funding may include, but are not limited to: financing arrangements that we may enter into in connection with future acquisitions; a decline in cash generated by sales of our products and services; our ability to maintain existing collaborative and customer arrangements and establish and maintain new collaboration and customer arrangements; the progress of our research and development programs; initiation or expansion of research programs and collaborations; the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; the effectiveness of product commercialization activities and arrangements; the purchase of patent licenses; and other factors.

On June 25, 2012, we completed our acquisition of eBioscience for approximately $307.8 million, representing the purchase price of $314.9 million less $7.1 million cash transferred from eBioscience. The Acquisition was financed through a combination of cash on hand, the liquidation of available-for-sale securities, the proceeds, net of debt issuance costs, from our Term Loan of $80.5 million provided under our Senior Secured Credit Facility and the proceeds from the issuance, net of underwriting fees, of our 4.00% Notes of $101.1 million. During the nine months ended September 30, 2012, we made $5.4 million of cash payments for legal, advisory and other costs related to the Acquisition. Refer to Note 9. "Long-Term Debt Obligations" for further details regarding the Term Loan, our Senior Secured Credit Facility and the 4.00% Notes.

From time to time, we may seek to retire, repurchase or exchange common stock or convertible notes in open market purchases, privately negotiated transactions dependent on market conditions, liquidity, and contractual obligations and other factors. We did not retire, repurchase or exchange any of our common stock during the three and nine months ended September 30, 2012. During the first quarter of 2012, we repurchased approximately $91.6 million of aggregate principal amount of our 3.50% Notes at par plus accrued and unpaid interest for total cash consideration of $92.1 million, including accrued interest of $0.5 million. Affymetrix and the Holders of the remaining $3.9 million aggregate principal amount of 3.50% Notes have the option to settle the notes at a price equal to 100% of the outstanding principal amount plus accrued interest on January 15, 2013.

Cashflow (in thousands)

	Nine Months Ended
	September 30,
	2012			2011
Net cash provided by operating activities	$	1,979		$	33,614
Net cash used in investing activities		(263,174	)		(36,297	)
Net cash provided by (used in) financing activities		87,954			(653	)
Effect of foreign currency translation on cash and cash equivalents		330			243
Net decrease in cash and cash equivalents	$	(172,911	)	$	(3,093	)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2012 was comprised of net income of $1.6 million, non-cash charges of $16.3 million and a decrease in operating assets of $15.9 million. Adjustments for non-cash expenses include depreciation and amortization expense of $25.3 million, share-based compensation expense of $14.9 million that includes a non-recurring share-based compensation expense of $8.3 million related to the accelerated vesting of eBioscience stock options, and an income tax benefit of $34.0 million that includes the release of valuation allowance of $37.5 million related to the Acquisition. Cash used in Accounts payable and accrued liabilities include certain non-recurring activity relating to the Acquisition, including $9.7 million cash payments for legal, advisory and other costs related to the Acquisition.

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Investing Activities

During the second quarter of 2012, we completed our acquisition of eBioscience for $307.8 million, representing a purchase price of $314.9 million less $7.1 million cash transferred from eBioscience. The Acquisition was partially funded through the proceeds from sales of available-for-sale securities of $52.0 million. Other investing activities for the nine months ended September 30, 2012 included capital expenditures of $6.5 million and purchases of technology rights of $2.3 million. We monitor the level of cash and cash equivalents as compared to available-for-sale securities to manage the return on funds. Management of our portfolio and sale of securities for purposes of funding the Acquisition resulted in net sales of available-for-sale securities during the nine months ended of 2012.

Financing Activities

To fund the Acquisition, we obtained a Term Loan of an aggregate principal amount of $85.0 million provided under our Senior Secured Credit Facility and issued $105.0 million in principal amount of our 4.00% Notes. Proceeds net of debt issuance costs from our Term Loan were $80.5 million and proceeds net of underwriting fees from the issuance of our 4.00% Notes were $101.1 million. The Term Loan is subject to certain financing and operating covenants and amortizes over a 5 year period. Refer to Note 9. "Long-Term Debt Obligations" in this Quarterly Report on Form 10-Q for further details, regarding the Term Loan, our Senior Secured Credit Facility and our 4.00% Notes. In addition to certain mandatory payments, from time to time, we also may make early payments on the outstanding principal amount of our Term Loan. As of September 30, 2012, we made a payment of $2.1 million.

During the first quarter of 2012, we completed the repurchase of approximately $91.6 million in aggregate principal amount of the 3.50% Notes and paid to the holders of the 3.50% Notes aggregate consideration of $92.1 million, including accrued interest of $0.5 million.

Other financing activities generally consist of stock option exercise activity under our employee stock plan. Cash used in the issuance of stock under our employee stock plan, net of treasury shares withheld for taxes, was $0.1 million for the nine months ended September 30, 2012.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

As of September 30, 2012, we had no off-balance sheet arrangements. Other than the debt obligations related to the Acquisition disclosed in Note 9. "Long-Term Debt Obligations" and the repurchase of $91.6 million of aggregate principal amount of our 3.50% Notes during the first quarter of 2012, there have been no significant changes to our aggregate contractual obligations as compared to the disclosures in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Rate Risk

We derive a portion of our revenues in foreign currencies, predominantly in Europe and Japan. In addition, a portion of our assets are held in nonfunctional currencies of our subsidiaries. We use currency forward contracts to manage a portion of the currency exposures created from our activities denominated in foreign currencies. Our hedging program is designed to reduce, but does not entirely eliminate, the impact of currency exchange rate movements. See Note 2. "Summary of Significant Accounting Policies – Derivative Instruments" in the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2011 for further information.

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Interest Rate Risk

In addition to our market risk discloses in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2011, we also face interest rate risk relating to the increase or decrease in the amount of interest we must pay on our outstanding debt instruments. On June 25, 2012, we entered into a Senior Secured Credit Facility, which provides for a Term Loan and revolving credit facility. As further explained in Note 9. "Long-Term Debt Obligations," outstanding borrowings under the Senior Secured Credit Facility bear interest at variable interest rates and therefore the interest we pay will fluctuate as changes occur in certain benchmark interest rates. As of September 30, 2012, we had borrowed a total of $85.0 million under the Term Loan provided under the Senior Secured Credit Facility. Under the Credit Agreement, we are required to maintain derivative contracts to protect against fluctuations in interest rates with respect to at least 35% of the aggregate principal amount of the Term Loan then outstanding and such derivative contracts shall provide for not less than a three year term. Accordingly, we entered into an interest rate swap (the "Interest Rate Swap") for which the notional amount was originally set at $27 million, with quarterly reduction to the notional amount consistent with the mandatory amortization schedule of the Term Loan. The Interest Rate Swap calls for quarterly fixed rate payments of 1.70% of the notional amount in exchange for a variable rate receipts equal to a 3-month LIBOR rate with a floor of 1.50%. The Interest Rate Swap terminates on June 25, 2015. We do not believe a hypothetical 10% increase in interest rates as of September 30, 2012 would have had a material impact on our interest expense.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure controls and procedures.

Affymetrix's management carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)), as of the end of our last fiscal quarter. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to Affymetrix and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Affymetrix's management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

Affymetrix's management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in Affymetrix's internal control over financial reporting. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Note 11. "Legal Proceedings" to our Condensed Consolidated Financial Statements elsewhere in this Quarterly Report on Form 10-Q, and is incorporated by reference herein.

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ITEM 1A. RISK FACTORS

Risks Related to Our Business

Risks Related to the Growth of Our Business

If we do not continually develop and commercialize new or enhanced products and services, our business may not grow.

Our success depends in large part on our continual, timely development and commercialization of new or enhanced products and services that address evolving market requirements and are attractive to customers. The life science and clinical diagnostic research markets are characterized by rapid and significant technological changes, frequent new product introductions and enhancements, evolving industry standards and changing customer needs. Standardization of tools and systems for genetic research is still ongoing and we cannot assure you that our products will emerge as the standard for genetic research. Other companies may introduce new technologies, techniques, products or services that render our products or services obsolete or uneconomical. If we do not appropriately innovate and invest in new technologies, then our technologies will become dated and our customers could move to new technologies offered by our competitors.

As a result, we are continually looking to develop, license or acquire new or enhanced technologies, products and services to further broaden and deepen our offerings. Some of the factors affecting market acceptance of our products and services include:

· availability, quality and price as compared to competitive technologies, products and services;

· the functionality of new and existing products and services, and whether they address market requirements;

· the timing of introduction of our technologies, products and services as compared to competitive technologies, products and services;

· the existence of product defects;

· scientists' and customers' opinions of the utility of our products and services and our ability to incorporate their feedback into future products and services;

· citation of our products in published research; and

· general trends in life science and clinical diagnostics research and life science informatics software development.

Our new or enhanced technologies, products or services may not be accepted by customers in our target markets. For example, once we have developed or obtained a new technology, we may fail to successfully commercialize new products and services based on that technology, particularly to the extent that our new products and services compete with established technologies or the products and services of more established competitors. Risks relating to product adoptions include the inability to accurately forecast demand and difficulties in managing different sales and support requirements due to the type or complexity of the new products.

Further, many of our current and potential customers have limited budgets. Accordingly, we cannot assure you that the successful introduction of new or enhanced products or services will not adversely affect sales of our current products and services or that customers that currently purchase our products or services will increase their aggregate spending as a result of the introduction of new products and services.

Emerging opportunities in molecular diagnostics may not develop as quickly as we expect and we depend, in part, on the efforts of our partners to be successful.

The clinical applications of our technologies for diagnosing and enabling informed disease management options in the treatment of disease is an emerging opportunity in molecular diagnostics. At this time, we cannot be certain that molecular diagnostic markets will develop as quickly as we expect. Although we believe that there will be clinical applications of our technologies that will be utilized for diagnosing and enabling informed disease management options in the treatment of disease, there can be no certainty of the technical or commercial success our technologies will achieve in such markets.

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Our success in the molecular diagnostics market depends, in part, on our collaborative relationships and the ability of our collaborative partners to achieve regulatory approval for such products in the United States and in overseas markets and successfully market and sell products using our technologies.

Our growth depends, in part, on our ability to acquire new businesses and technologies and successfully integrate acquisitions, which may absorb significant resources and may not be successful.

As part of our strategy to develop and identify new technologies, products and services, we have acquired and may continue to acquire new businesses and technologies. Our integration of the operations of acquired businesses requires significant efforts, including the coordination of information technologies, research and development, sales and marketing, operations, manufacturing and finance. In particular, the success of our acquisition of eBioscience will depend, in part, on our ability to successfully integrate eBioscience's business and operations and fully realize the anticipated benefits and synergies from combining our businesses and eBioscience. Such anticipated benefits and synergies of the Acquisition may not be realized fully or at all or may take longer to realize than expected, which could materially adversely affect our business, results of operations and financial condition. Our efforts to successfully integrate acquisitions may result in additional expenses and divert significant amounts of management's time from other projects.

Our failure to manage successfully and coordinate the growth of the combined company could also have an adverse impact on our business. In addition, there is no guarantee that businesses we acquire will become profitable or remain so. If our acquisitions do not meet our initial expectations, we may record impairment charges.

Factors that will affect the success of our acquisitions include:

· our ability to retain key employees of the acquired company;

· the performance of the acquired business, technology, product or service;

· our ability to integrate operations, financial and other systems;

· the ability of the combined company to achieve synergies among its constituent companies, such as increasing sales of the combined company's products and services, achieving expected cost savings and effectively combining technologies to develop new products and services;

· any disruption in order fulfillment or loss of sales due to integration processes, including relationships with suppliers or distributors;

· the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies;

· any decrease in customer and distributor loyalty and product orders caused by dissatisfaction with the combined companies' product lines and sales and marketing practices, including price increases; and

· our assumption of known contingent liabilities that are realized, known liabilities that prove greater than anticipated, or unknown liabilities that come to light, to the extent that the realization of any of these liabilities increases our expenses or adversely affects our business or financial position.

Any difficulties and costs associated with the integration of eBioscience could negatively affect our results of operations and ability to execute our strategy.

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If we experience difficulties in integrating eBioscience with our existing operations or are not able to achieve the anticipated benefits and synergies of the Acquisition, our business and results of operations could be negatively affected. In addition, it is possible that the ongoing integration process could result in the loss of key employees, errors or delays in systems implementation, the disruption of our ongoing business or the acquired business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits and synergies of the Acquisition. Integration efforts also may divert management attention and resources. In addition, we will incur transaction fees and costs related to formulating and implementing integration plans. For example, pursuant to certain of our agreements with a collaborative partner, we will be required to migrate certain eBioscience products to incorporate our collaborative partner's technologies. We continue to assess the magnitude of these costs and additional unanticipated costs may be incurred in the integration of eBioscience. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies or synergies related to the integration of the businesses, should allow us to offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.

Risks Related to our Indebtedness

Our indebtedness could materially adversely affect our business, financial condition and results of operations.

We funded the Acquisition, in part, by incurring a substantial amount of indebtedness from the Term Loan provided under our Senior Secured Credit Facility and issuance of the 4.00% Notes. Refer to Note 9. "Long Term Debt Obligations" in this Quarterly Report on Form 10-Q for further information regarding the Term Loan, the Senior Secured Credit Facility and the 4.00% Notes.

This substantial amount of indebtedness could materially adversely affect us, including by decreasing our business flexibility and increasing our borrowing costs. The indebtedness we incurred in connection with the Acquisition is expected to significantly increase our interest expense, leverage and debt service requirements. The increased levels of indebtedness may reduce funds available for investment in product development, sales and marketing activities as well as capital expenditures. The increase in our borrowing costs may create competitive disadvantages for us relative to other companies with lower debt levels. In addition, the agreements governing the Senior Secured Credit Facility contain restrictive covenants imposing operating and financial restrictions on us, including restrictions that may limit our ability to finance future operations or capital needs or to engage in other business activities. See the risk factor below entitled "We may not be able to finance future needs or adapt our business plan to changes because of restrictions placed on us by our Senior Secured Credit Facility and future instruments governing our indebtedness."

In addition, our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

If an event of default occurs under the Senior Secured Credit Facility, the 4.00% Notes, or any other debt financing agreement, we may be required to immediately repay all outstanding borrowings, together with accrued interest and other fees. We may not be able to repay all amounts due in the event these amounts are declared due upon an event of default.

In addition, despite our current consolidated debt levels, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, including our Senior Secured Credit Facility.

We may not be able to finance future needs or adapt our business plan to changes because of restrictions placed on us by the Senior Secured Credit Facility and future instruments governing our indebtedness.

The terms of our Senior Secured Credit Facility include various covenants that limit our ability, and that of our subsidiaries, to, among other things:

· incur additional debt, including guarantees by us or our subsidiaries;

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· make investments, pay dividends on our capital stock, redeem or repurchase our capital stock, redeem or repurchase the notes or any subordinated obligations;

· create liens;

· make capital expenditures;

· dispose of assets;

· make acquisitions;

· create or permit restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us;

· engage in transactions with affiliates;

· engage in sale and leaseback transactions; and

· consolidate or merge with or into other companies or sell all or substantially all of our assets.

Our ability to comply with covenants contained in the Senior Secured Credit Facility and any future agreements governing other indebtedness to which we are or may become a party may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The Senior Secured Credit Facility will require us to comply with financial performance covenants, including, without limitation, a minimum fixed charge coverage ratio, maximum senior leverage multiple and maximum total leverage multiple. Additionally, the Senior Secured Credit Facility contains numerous affirmative covenants, including covenants regarding payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Any additional indebtedness we incur in the future may subject us to further covenants.

Our failure to comply with these covenants could result in a default under the agreements governing the relevant indebtedness. In addition, unless cured or waived, the default could result in an acceleration under our other instruments that contain cross-acceleration or cross-default provisions, which could require us to repay or repurchase indebtedness, together with accrued interest, prior to the date it otherwise is due and that could adversely affect our financial condition. If a default occurs under the Senior Secured Credit Facility, the lenders could cause all of the outstanding debt obligations under the facility to become due and payable, which would result in a default under our 3.50% Notes and the 4.00% Notes and could lead to an acceleration of obligations related to such notes. Upon a default or cross-default, the agent, at the direction of some or all of the lenders under the Senior Secured Credit Facility, could foreclose against the collateral. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

Risks Related to Our Sales

We face significant competition, and our failure to compete effectively could adversely affect our sales and results of operations.

We compete with companies that develop, manufacture and market genetic analysis tools for the life science and clinical healthcare markets. We face significant competition as our competitors and new companies develop new, improved or more economical products, services and technologies.

The market for our products and services is highly competitive, has high barriers to entry and has several other large companies with significant market share. For example, companies such as Illumina, Inc., Agilent Technologies and Life Technologies Corporation have products for genetic analysis that are directly competitive with certain of our products. In addition, Illumina, Inc., Life Technologies Corporation and Complete Genomics, Inc. also offer DNA sequencing technology which we do not offer. As the costs of DNA sequencing fall, we will face increased competition in certain of our existing and potential markets. We also face competition from established diagnostic companies such as Beckman Coulter, Becton, Dickinson and Company, bioMérieux, Celera Diagnostics, Johnson & Johnson, Gen-Probe Incorporated and Roche Diagnostics, which have made strategic commitments to diagnostics, have financial and other resources to invest in new technologies, and have substantial intellectual property portfolios, substantial experience in new product development and regulatory expertise. In addition, our collaborative partners may compete with us.

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Many of our current and potential competitors have significantly greater financial, technical, marketing and other resources than we do. In addition, many current and potential competitors have greater name recognition, more extensive customer bases and access to proprietary genetic content.

eBioscience competes in the life science research market with companies such as Becton, Dickinson and Company, Abcam plc, Life Technologies Corporation and Beckman Coulter. Through eBioscience, we are currently involved in litigation with Life Technologies Corporation, a competitor,over alleged infringement by eBioscience of its intellectual property rights. See "—Risks Related to Our Intellectual Property—Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or services or impact our stock price." Further, with respect to our eBioscience business unit, a number of competitors employ bundled arrangements in which customers pay for consumable products (such as reagent test kits), services and the related instruments under a single arrangement, including arrangements where the customer commits to purchase a minimum volume of consumable products annually. Since we do not currently produce instruments for this market, and bundled arrangements can allow competitors to offer lower prices for competing products, customer demand for these bundled arrangements could lead to loss of market share or force us to supply products at a discount.

Reduction or delay in research and development budgets and government funding may adversely impact our sales.

We expect that our revenue in the foreseeable future, including anticipated revenue from our eBioscience business unit, will be derived from products and services provided to pharmaceutical and biotechnology companies, as well as a relatively small number of academic, governmental and other research institutions. Our operating results may fluctuate substantially due to reductions and delays in research and development expenditures by these customers.

Factors that could affect the spending levels of our customers include:

· changes in government programs, including available funding, which support research and development expenditures by companies and research institutions;

· weakness in the global economy and changing market conditions that affect our customers;

· changes in the extent to which the pharmaceutical industry may use genetic information and genetic testing as a methodology for drug discovery and development;

· changes in the regulatory environment affecting life science companies and life science research;

· impact of consolidation within the pharmaceutical industry; and

· cost reduction initiatives of customers.

Budgets in the research-use-only market have been particularly challenged in recent periods, which we believe has had an adverse effect on us, including our eBioscience business unit. A significant or prolonged change in research funding, particularly with respect to the U.S. National Institutes of Health, could have an adverse impact on future revenues and results of operations.

As we implement our strategy to expand into new markets, the size and structure of our current sales, marketing and technical support organizations may limit our ability to sell our products and services.

As we implement our strategy to expand into new markets, we may not be able to establish a sales, marketing and technical support organization sufficient to sell, market and support all of our new products, or to cover all of the regions that we target globally. To assist our sales and support activities, we have entered into distribution agreements through certain distributors, principally in markets outside of North America and Europe. In addition, we may enter into distribution arrangements with respect to some of our products that we believe will be better served in such arrangements than our current sales and marketing organizations. We have less control over other third parties on whom we rely for sales, marketing and technical support. In addition, these third parties may decide to develop and sell competitive products or otherwise become our competitors, which could harm our business.

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Consolidation trends in both our market and many of our customers' markets have increased competition.

There has been a trend toward industry consolidation in our markets for the past several years. We expect this trend toward industry consolidation to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in operating results and could harm our business.

Additionally, there has been a trend toward consolidation in many of the customer markets we sell to, in particular the pharmaceutical industry. Consolidation in our customer markets results in increased competition for important market segments and fewer available accounts, and larger consolidated customers may be able to exert increased pricing pressure on companies in our market.

If we are unable to maintain our relationships with collaborative partners and licensors, we may have difficulty developing and selling our products and services.

Our commercial success depends, in part, on our ability to develop and maintain collaborative relationships and licenses with key companies as well as with key academic researchers. In particular, we depend on third parties for in-licensed technology and components for a variety of our product lines. We collaborate with a number of instrumentation and reagent companies, including Beckman Coulter, CapitalBio Corporation, Genisphere LLC, Life Technologies Corporation, Luminex Corporation, Siemens Medical Solutions Diagnostics, Takara Bio Inc., New England Biolabs, Inc. and Qiagen GmbH. Some of these collaborators, like Life Technologies Corporation, Takara Bio Inc., New England Biolabs, Inc. and Luminex Corporation, are currently sole suppliers of components of some of our reagent kits but they are also our competitors. Relying on our collaborative relationships is risky to our future success because:

· our partners may develop technologies or components competitive with our products and services;

· our existing collaborations may preclude us from entering into additional future arrangements or impact the integration of acquired businesses and technologies;

· our partners may not obtain regulatory approvals necessary to continue the collaborations in a timely manner;

· some of our agreements may terminate prematurely due to disagreements between us and our partners or licensors;

· our partners may not devote sufficient resources to the development and sale of our products and services;

· our partners may be unable to provide the resources required for us to progress in the collaboration on a timely basis;

· our collaborations may be unsuccessful; or

· some of our agreements have expired and we may not be able to negotiate future collaborative arrangements or renew current licenses on acceptable terms.

In addition, our eBioscience business unit relies on licensing as a basis for many of its products and intellectual property, and the ability to maintain and renew current licenses as well as license new technologies from third parties is and will continue to be important such unit's ability to offer and introduce products. The ability to retain and gain access to technologies necessary to develop new products will depend, in part, on our ability to convince third parties that our combined company can successfully commercialize the technologies we seek to license. The inability to maintain or to acquire any third-party licenses, or integrate the related third-party technologies into these products, could result in delays in our product developments and enhancements. There can be no assurance that we will be able to continue to successfully identify new products developed by others in the life science research and clinical healthcare markets or otherwise and, if identified, to negotiate license agreements on commercially reasonable terms, if at all.

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Risks Related to the Manufacturing of Our Products

We depend on a limited number of suppliers. We will be unable to launch or commercialize our products in a timely manner if our suppliers are unable to meet our requirements or if shipments from these suppliers are delayed or interrupted.

We outsource the manufacturing of our instruments to a limited number of suppliers. Some of our instruments and other key parts of our product lines, including components of our manufacturing equipment and certain raw materials used in the manufacture of our products are currently only available from a single supplier. Therefore, we depend on our suppliers to supply our instruments, or components of our products, in required volumes, at appropriate quality and reliability levels, and in compliance with regulatory requirements on a timely basis. If supplies from these vendors do not meet our requirements, or were delayed or interrupted for any reason, we would not be able to commercialize our products successfully or in a timely fashion, and our business could be adversely impacted.

Our business is dependent on our ability to forecast our needs for components and products in our product lines and our suppliers' ability to deliver such components and products in time to meet critical manufacturing and product release schedules. Our business could be adversely affected, for example, if suppliers fail to meet product release schedules, if we experience supply constraints, if we fail to negotiate favorable pricing or if we experience any other interruption or delay in the supply chain which interferes with our ability to manufacture our products or manage our inventory levels.

We may lose customers or sales if we are unable to meet customer demand for our products on a timely and cost-effective basis, or if we are unable to ensure the proper performance and quality of our products.

We produce our products in an innovative and complicated manufacturing process which has the potential for significant variability in manufacturing yields. We have encountered, and may in the future encounter, difficulties in manufacturing our products and, due to the complexity of our products and our manufacturing process, we may experience delays in the manufacture of our products or fail to ensure their proper performance or quality. As we develop new and enhanced products, we must be able to resolve in a timely, cost-effective manner manufacturing issues that may arise from time to time.

We base our manufacturing capabilities on our forecasted product mix for the quarter. If the actual product mix varies significantly from our forecast, we may not be able to fill some orders during that quarter, which could adversely impact our financial results. Difficulties in meeting customer, collaborator and internal demand could also cause us to lose customers or require us to delay new product introductions, which could in turn result in reduced demand for our products.

We rely on internal quality control procedures to verify our manufacturing processes. Due to the complexity of our products and manufacturing process, however, it is possible that products that do not meet all of our performance specifications may not be identified before they are shipped. If our products do not consistently meet our customers' performance expectations, demand for our products will decline. In addition, we do not maintain any backup manufacturing capabilities for the production of our products. Any interruption in our ability to continue operations at our existing manufacturing facilities could delay our ability to develop or sell our products, which could result in lost revenue and seriously harm our business, financial condition and results of operations.

We may need to adjust our manufacturing capacity based on business requirements or improvements made to our technological capabilities and there are risks associated with such adjustment.

If demand for our products is reduced or if we implement technologies that increase the density or yields of our wafers, our manufacturing capacity could be under-utilized and some of our long-lived assets, including facilities and equipment, may be impaired, which would increase our expenses. In addition, factory planning decisions may shorten the useful lives of long-lived assets including facilities and equipment, and cause us to accelerate depreciation. These changes in demand for our products, and changes in our customers' product needs, could have a variety of negative effects on our competitive position and our financial results, and, in certain cases, may reduce our revenue, increase our costs, lower our gross margin percentage or require us to recognize impairments of our assets. In addition, if demand for our products is reduced or we fail to accurately forecast demand, we could be required to write down inventory since certain of our products have a limited shelf life, which would have a negative impact on our gross margin.

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We have in the past, and may in the future, adjust our manufacturing capacity based on business requirements, which may include the rationalization of our facilities, including the abandonment of long-lived manufacturing assets and additional charges related to a reduction in capacity. Manufacturing and product quality issues may arise as we launch new products in our Singapore, Ohio and San Diego facilities and rely increasingly upon manufacturing by third parties. We may lose customers if we are unable to manufacture products or if we experience delays in the manufacture of our products as a result of this transition.

We may not be able to deliver acceptable products to our customers due to the rapidly evolving nature of genetic sequence information upon which our products are based.

The genetic sequence information upon which we rely to develop and manufacture our products is contained in a variety of databases throughout the world. These databases are rapidly expanding and evolving. In addition, the accuracy of these databases and resulting genetic research is dependent on various scientific interpretations and it is not expected that global genetic research efforts will result in standardized genetic sequence databases for particular genomes in the near future.

Although we have implemented ongoing internal quality control efforts to help ensure the quality and accuracy of our products, the fundamental nature of our products requires us to rely on genetic sequence databases and scientific interpretations which are continuously evolving. As a result, these variables may cause us to develop and manufacture products that incorporate sequence errors or ambiguities. The magnitude and importance of these errors will depend upon multiple and complex factors that would be considered in determining the appropriate actions required to remedy any inaccuracies. Our inability to timely deliver acceptable products as a result of these factors would likely adversely affect our relationship with customers, and could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Operations

We may not achieve sustained profitability.

Prior to 2002, we incurred losses each year since our inception, and we reported losses in 2006 and from 2008 through 2011. As a result, we had an accumulated deficit of approximately $477.1 million as of September 30, 2012. Our ability to achieve sustained profitability will depend, in part, on the rate of growth, if any, of our revenue and on the level of our expenses. In 2011 and through the nine months ended September 30, 2012, our business was affected by a drop in the volume of sales and consumables to our academic and pharmaceutical customers, particularly in North America, which led to a decrease in revenue as compared to the same prior-year period. There can be no assurance that our revenue will not continue to decrease in future periods. We expect to continue incurring significant expenses related to research and development, sales and marketing efforts to commercialize our products, litigation and non-cash stock based compensation, and we expect to continue to experience fluctuations in our operating results. If our revenue grows more slowly than we anticipate, or if our operating expenses are above what we expect or cannot be reduced in the event of lower revenue, we may not become profitable on a sustained basis, or at all.

If we do not attract and retain key employees, our business could be impaired.

To be successful, we must attract and retain qualified scientific, engineering, manufacturing, sales, marketing and management personnel. To expand our research, product development and sales efforts we need additional people skilled in areas such as bioinformatics, organic chemistry, information services, regulatory affairs, manufacturing, sales, marketing and technical support. Competition for these people is intense, and our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating existing employees. For example, our stock price has been volatile in recent years, resulting in a significant number of stock options granted to our employees having a strike price that is higher than the current trading price of our common stock. In addition, following the Acquisition, in order to retain and incentivize key eBioscience employee as we integrate the business, we granted certain employees PRSUs as further described in Note 5. "Stockholders' Equity and Share-Based Compensation Expense"; we cannot be assured that these equity awards will be successful in retaining and incentivizing such employees. If we are unable to hire, train and retain a sufficient number of qualified employees, we will not be able to expand our business or our business could be adversely affected.

We also rely on our scientific advisors and consultants to assist us in formulating our research, development and commercialization strategy. All of these individuals are engaged by other employers and have commitments to other entities that may limit their availability to us.

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Due to the international nature of our business, political or economic changes or other factors could harm our business.

A significant amount of our revenue is currently generated from sales outside the United States. Although such transactions are denominated in both U.S. dollars and foreign currencies, our future revenue, gross margin, expenses and financial condition are still affected by such factors as changes in foreign currency exchange rates; unexpected changes in, or impositions of, legislative or regulatory requirements, including export and trade barriers and taxes; longer payment cycles and greater difficulty in accounts receivable collection.

We also are subject to general geopolitical risks in connection with international operations, such as political, social and economic instability, potential hostilities, epidemics and changes in diplomatic and trade relationships. We cannot assure investors that one or more of the foregoing factors will not have a material adverse effect on our business, financial condition and operating results or require us to modify our current business practices.

Our effective tax rate may vary significantly.

Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions. Estimates and judgments are required in determining our worldwide provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result.

Changes in overall levels and the geographic mix of pretax earnings may adversely impact our effective tax rate. Certain jurisdictions have lower tax rates, and the amount of earnings in these jurisdictions may fluctuate. If we do not have profitable operations in these jurisdictions, our effective tax rate could be adversely impacted. Changes in tax laws, regulatory requirements, our treasury plans, and applicability of tax holidays and incentive programs in the countries in which we operate could have a material impact on our tax provision. Tax authorities may challenge the allocation of profits between our subsidiaries and conformance with requirements of tax holidays and incentive programs and we may not prevail in any such challenge. If we were not to prevail, we could be subject to higher tax rates or double tax.

Estimates are required in determining any valuation allowance to be recorded against our net deferred tax assets. Changes in the amount of valuation allowance required may significantly impact our financial results of operations.

Changes in other categories of earnings such as discontinued operations and other comprehensive income may affect our tax provision allocated to continuing operations.

In the normal course of business, we are subject to examination by taxing authorities in the U.S. and multiple foreign jurisdictions.

Failure in our information technology systems could disrupt our operations and cause the loss of customers or business opportunities.

Information technology ("IT") systems are used extensively in virtually all aspects of our business, including sales forecast, order fulfillment and billing, customer service, logistics and management of data from running samples on our products. Our success depends, in part, on the continued and uninterrupted performance of our IT systems. IT systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, human acts and natural disasters. Moreover, despite the security measures we have implemented, our IT systems may be subject to physical or electronic break-ins, computer viruses and similar disruptive problems. We also have taken precautionary measures to prevent unanticipated problems that could affect our IT systems. Nevertheless, we may experience damages to our systems, and system failures and interruptions.

If we experience systems problems, they may interrupt our ability to operate and adversely affect our reputation and result in a loss of customers and revenues.

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Risks Related to Our Investments

Our strategic equity investments may result in losses.

We periodically make strategic equity investments in various public and private companies with businesses or technologies that may complement our business. The market values of these strategic equity investments may fluctuate due to market conditions and other conditions over which we have no control. Other-than-temporary declines in the market price and valuations of the securities that we hold in other companies have required us to record losses relative to our ownership interest. This could result in future charges to our earnings. It is uncertain whether or not we will realize any long-term benefits associated with these strategic investments.

Global credit and financial market conditions could negatively impact the value of our current portfolio of cash equivalents or investments and our ability to meet our financing objectives.

Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. Our investments consist primarily of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. While as of the date of this filing we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents or investments since September 30, 2012, any significant deterioration in conditions of the global credit and financial markets may negatively impact our current portfolio of cash equivalents or investments or our ability to meet our financing objectives. Other-than-temporary declines in the market price and valuation of any of our investments would require us to adjust the carrying value of the investment through an impairment charge.

Risks Related to Government Regulation and Litigation

We and our customers are subject to various government regulations, and we may incur significant expenses to comply with, and experience delays in our product commercialization as a result of, these regulations.

The Food and Drug Administration ("FDA") has jurisdiction over the commercialization of medical devices, including in vitro diagnostic test kits and the reagents and instrumentation used in these tests. In vitro diagnostic tests, reagents, and instruments may be subject to pre-market review and post-market controls by the FDA. Certain in-vitro diagnostic products must also be approved by the regulatory agencies of foreign governments or jurisdictions before the product can be sold outside the United States. Commercialization of our and our collaborative partners' in-vitro diagnostic products outside of the research environment may depend upon successful completion of clinical trials. Clinical development is a long, expensive and uncertain process and we do not know whether we, or any of our collaborative partners, will be permitted to undertake clinical trials of any potential in-vitro diagnostic products. It may take us or our collaborative partners many years to complete any such testing, and failure can occur at any stage. Delays or rejections of potential products may be encountered based on changes in regulatory policy during the period of product development and regulatory agency review. Moreover, if and when our projects reach clinical trials, we, or our collaborative partners, may decide to discontinue development of any or all of these projects at any time for commercial, scientific or other reasons. Any of the foregoing matters could have a material adverse effect on our business, financial condition and results of operations.

Many of our products are labeled for "research use only." Products intended for research use only are not subject to clearance or approval by the FDA. However, research use only products may fall under the FDA's jurisdiction if these are used for clinical rather than research purposes. Even when a product is exempted from FDA clearance or approval, the FDA may impose restrictions as to the types of customers to which we can market and sell our products. Such restrictions may materially and adversely affect our business, financial condition and results of operations.

The FDA, the U.S. Department of Health and Human Services and foreign government regulators are increasingly focused on genetic analysis tools, including the use of arrays, which are labeled for research use only, by clinical laboratories in laboratory-developed tests ("LDTs") offered by these laboratories, including labs certified under the Clinical Laboratory Improvement Amendments ("CLIA"). We cannot predict the extent of the FDA's future efforts in regulation and enforcement policies with respect to the sale and use of arrays for the development of LDTs by CLIA-certified laboratories. If regulations or enforcement policies restrict our customers' development of LDTs using our products labeled for research use only, or if we otherwise are required to obtain FDA premarket clearance or approval prior to commercializing these products, our ability to generate revenue from the sale of our products may be delayed or otherwise adversely affected. Moreover, our failure to comply with governmental rules and regulations related to our products could cause us to incur significant adverse publicity, subject us to investigations and notices of non-compliance or lead to fines or restrictions upon our ability to sell our products. We also may be at risk for liability related to government reimbursement of tests involving the use of our products if it is determined that these tests require FDA-clearance or approval and no such clearance or approval has been obtained.

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Medical device laws and regulations are also in effect in many countries, ranging from comprehensive device approval requirements to requests for product data or certifications. The number and scope of these requirements are increasing. We may not be able to obtain regulatory approvals in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory approvals. In addition, the export by us of certain of our products which have not yet been cleared for domestic commercial distribution may be subject to FDA or other export restrictions.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. A failure to comply with these regulations might result in suspension of these contracts or administrative or other penalties, and could have a material adverse effect on our ability to compete for future government grants, contracts and programs.

Healthcare reform and restrictions on reimbursements may limit our returns on molecular diagnostic products that we may develop independently or with our collaborators.

We are currently collaborating with our partners to develop diagnostic and therapeutic products. The ability of our collaborators to commercialize such products may depend, in part, on the extent to which reimbursement for these products will be available under U.S. and foreign regulations that govern reimbursement for clinical testing services by government authorities, private health insurers and other organizations. In the United States, third-party payer price resistance, the trend towards managed health care and the implementation of the Patient Protection and Affordable Care Act of 2010 could reduce payment rates for health care products and services, adversely affecting the profits of our customers and collaborative partners and reducing our future royalties. Under Medicare rules, diagnostic tests must be ordered by a physician who is treating the beneficiary and who uses the test results in patient management. Under this rule, some Medicare contractors may deny coverage for a test, even if the test has been cleared or approved by the FDA, without proof, as determined sufficient by the contractor, that the test is useful in patient management.

We face risks related to handling of hazardous materials and other regulations governing environmental safety.

Our operations are subject to complex and stringent environmental, health, safety and other governmental laws and regulations that both public officials and private individuals may seek to enforce. Our activities that are subject to these regulations include, among other things, our use of hazardous and radioactive materials and the generation, transportation and storage of waste. We could discover that we or an acquired business is not in material compliance. Existing laws and regulations may also be revised or reinterpreted, or new laws and regulations may become applicable to us, whether retroactively or prospectively, that may have a negative effect on our business and results of operations. It is also impossible to eliminate completely the risk of accidental environmental contamination or injury to individuals. In such an event, we could be liable for any damages that result, which could adversely affect our business.

We may be exposed to liability due to product defects.

The risk of product liability claims is inherent in the testing, manufacturing, marketing and sale of human diagnostic and therapeutic products and we may be subjected to such claims. We have voluntarily recalled products in the past. We may seek to acquire additional insurance for clinical or product liability risks. We may not be able to obtain such insurance or general product liability insurance on acceptable terms or in sufficient amounts. A product liability claim or recall could have a serious adverse effect on our business, financial condition and results of operations.

Ethical, legal and social concerns surrounding the use of genetic information could reduce demand for our products.

Genetic testing has raised ethical issues regarding privacy and the appropriate uses of the resulting information. For these reasons, governmental authorities may call for limits on or regulation of the use of genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, such concerns may lead individuals to refuse to use genetics tests even if permissible. Any of these scenarios could reduce the potential markets for our molecular diagnostic products, which could have a material adverse effect on our business, financial condition and results of operations.

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Risks Related to Our Intellectual Property

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

Maintaining a strong patent position is critical to our business. Patent law relating to the scope of claims in the technology fields in which we operate is uncertain, so we cannot be assured the patent rights we have or may obtain will be valuable. Others have filed, and in the future are likely to file, patent applications that are similar or identical to ours or those of our licensors. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office that could result in substantial costs in legal fees and could substantially affect the scope of our patent protection. We cannot be assured our patent applications will have priority over those filed by others. Also, our intellectual property may be subject to significant administrative and litigation proceedings. In addition, we may acquire businesses, which may not have developed or maintained a similarly robust patent position. For example, our eBioscience business unit does not have a patent portfolio at the current time, so we must rely on non-patent rights, including third-party licenses, that relate to such business operations.

Legal actions to enforce our patent rights can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or interferences against those that have infringed on our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

In addition to patent protection, we also rely upon copyright and trade secret protection, as well as non-disclosure agreements with our employees, consultants and third-parties, to protect our confidential and proprietary information. Such measures may not provide adequate protection for our proprietary information.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or services or impact our stock price.

Third parties have asserted and may in the future assert that we are employing their proprietary technology without authorization. As we launch new products and enter new markets, we expect that competitors will claim that our products infringe their intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new markets. We are currently engaged in litigation with third parties who allege that we have infringed their intellectual property rights. See Note 11. "Legal Proceedings" found in this Quarterly Report on 10-Q for further information. In addition, we are aware of third-party patents that may relate to our technology. We routinely receive notices claiming infringement from third parties as well as invitations to take licenses under third-party patents. Third parties may have obtained, and may in the future obtain, patents allowing them to claim that the use of our technologies infringes these patents.

We could incur substantial costs and divert the attention of our management and technical personnel in defending ourselves against any of these claims. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our stock price, which may be disproportionate to the actual import of the ruling itself. Furthermore, parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products, and could result in the award of substantial damages against us. In the event of a successful claim of infringement against us, we may be required to pay damages and obtain one or more licenses from third parties, or be prohibited from selling certain products.

In addition, we may be unable to obtain these licenses at a reasonable cost, if at all. We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins. Moreover, we could encounter delays in product introductions while we attempt to develop alternative methods or products. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, and the prohibition of sale of any of our products could materially affect our ability to grow and maintain profitability.

Through our acquisition of eBioscience, we are also engaged in litigation with Life Technologies Corporation, a competitor. The suit alleges that eBioscience has infringed certain of its patents and seeking a permanent injunction enjoining eBioscience from further infringement, unspecified money damages, attorneys' fee and other relief. Although the Acquisition Agreement provides that we shall be indemnified for certain damages associated with such litigation, we cannot assure you that such indemnification will be available or adequate to cover any losses we incur associated with the litigation following the closing of the Acquisition.

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Risks Related to Our Common Stock

The price of our common stock historically has been volatile. This volatility may affect the price at which you could sell the common stock you receive upon conversion, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock.

The market price for our common stock has varied between a high of $5.95 on October 28, 2011, and a low of $3.60 on August 23, 2012 in the twelve-month period ending on September 30, 2012. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including those listed in this "Risk Factors" section and other, unknown factors. Our stock price also may be affected by comments by securities analysts regarding our business or prospects, our issuance of common stock or other equity securities, our inability to meet analysts' expectations, general fluctuations in the stock market or in the stock prices of our industry peers or our customers and general conditions and publicity regarding the genomics, biotechnology, pharmaceutical or life science industries. This volatility may affect the price at which you could sell the common stock you receive upon conversion of your notes.

In addition, the sale of substantial amounts of our common stock could adversely impact its price. As of September 30, 2012, we had outstanding approximately 70.7 million shares of our common stock and options to purchase approximately 6.3 million shares of our common stock (of which approximately 3.1 million were exercisable as of that date). We also had outstanding approximately 4.0 million shares underlying restricted stock awards and restricted stock units as of September 30, 2012. As of September 30, 2012, we also had outstanding $82.9 million aggregate principal amount of our 4.00% Notes and $3.9 million aggregate principal amount of our 3.50% Notes, which are convertible into shares of our common stock. We have reserved a total of approximately 18 million shares of our common stock to satisfy the settlement obligations of such notes. The sale or the availability for sale of a large number of shares of our common stock in the public market could cause the price of our common stock to decline.

Volatility in the stock price of other companies often has led to securities class action litigation against those companies. Any future securities litigation against us could result in substantial costs and divert management's attention and resources, which could seriously harm our business, financial condition and results of operations.

Our quarterly results have historically fluctuated significantly and may continue to do so. Failure to meet financial expectations may disappoint securities analysts or investors and result in a decline in our stock price.

Our revenue and operating results may fluctuate significantly due, in part, to factors that are beyond our control and which we cannot predict. The timing of our customers' orders may fluctuate from quarter to quarter. Historically, we have experienced customer ordering patterns for instrumentation and consumables in which the majority of the shipments occur in the last month of the quarter. These ordering patterns limit management's ability to accurately forecast our future revenue or product mix. Additionally, license revenue may also be unpredictable and fluctuates due to the timing of payments of non-recurring licensing fees. Because our expenses are largely fixed in the short to medium term, any material shortfall in revenue may cause us to experience material losses.

Because of this difficulty in predicting future performance, our operating results may fall below our own expectations and the expectations of securities analysts or investors in some future quarter or quarters. Our failure in the past to meet these expectations has adversely affected the market price of our common stock and may continue to do so.

In addition to factors that affect the spending levels of our customers described above, additional factors could cause our operating results to fluctuate, including:

· competition;

· our inability to produce products in sufficient quantities and with appropriate quality;

· the frequency of experiments conducted by our customers;

· our customers' inventory of products;

· the receipt of relatively large orders with short lead times; and

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· our customers' expectations as to how long it takes us to fill future orders.

In addition, integrating operations, financial and other systems of acquired businesses, including those in connection with our acquisition of eBioscience, may compound the difficulty of predicting our future performance, for example by decreasing our ability to forecast customer demand and manage our inventory levels, and may therefore increase the fluctuation of our operating results.

Delaware law and our charter documents may impede or discourage a takeover, which could cause the market price of our common stock to decline.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. Our charter and bylaws contain provisions relating to issuance of preferred stock, limitations on written consents, special meetings of stockholders and advance notification procedures for stockholder proposals. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, unless certain conditions are met.

These and other provisions of our charter documents and Delaware law could prevent or deter mergers, takeovers or other business combinations involving us, discourage potential acquirers from making tender offers for our common stock, or discourage proxy contests for changes in our management, any of which, under certain circumstances, could depress the market price of our common stock and the value of the notes.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

48

ITEM 6. EXHIBITS

Exhibit Number	Description of Document
10.42(1)‡	2012 Inducement Plan
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
EX-101.INS	XBRL Instance Document(2)
EX-101.SCH	XBRL Taxonomy Extension Schema Document(2)
EX-101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document(2)
EX-101.DEF	XBRL Taxonomy Extension Definition Linkbase Document(2)
EX-101.LAB	XBRL Taxonomy Extension Label Linkbase Document(2)
EX-101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document(2)

(1)Incorporated by reference to Registrant's Registration Statement on Form S-8 as filed on June 29, 2012 (File No. 333-182456)

(2)Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or 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.

‡ Management contract, compensatory plan, contract or arrangement

49

SIGNATURES

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

	By:	/s/ TIMOTHY C. BARABE
	Name:	Timothy C. Barabe
	Title:	Executive Vice President and Chief Financial Officer
November 6, 2012
		Duly Authorized Officer and Principal Financial
		And Accounting Officer

50

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Frank Witney, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Affymetrix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 6, 2012	/S/ FRANK WITNEY
	Name:	Frank Witney
	Title:	Director, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

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

I, Timothy C. Barabe, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Affymetrix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 6, 2012	/s/ TIMOTHY C. BARABE
	Name:	Timothy C. Barabe
	Title:	Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2012 (the "Report") for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Each of the undersigned certifies that, to his knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Affymetrix, Inc.

November 6, 2012	/S/ FRANK WITNEY
	Name:	Frank Witney
	Title:	Director, President and Chief Executive Officer
	/S/ TIMOTHY C. BARABE
	Name:	Timothy C. Barabe
	Title:	Executive Vice President and Chief Financial Officer

This certification accompanying the Report is not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities such Section, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before, on or after the date of the Report), irrespective of any general incorporation language contained in such filing.

XML

FINANCIAL INSTRUMENTS, Non-Marketable Securities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
FINANCIAL INSTRUMENTS [Abstract]
Carrying Value of Non-Marketable Securities After Recording OTTI	$ 4,969		$ 5,007
Estimated Fair Value of Non-Marketable Securities	4,969		5,007
Recorded Impairment Charges on Non-Marketable Securities	$ 0	$ 1,347

XML

LEGAL PROCEEDINGS (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
LEGAL PROCEEDINGS [Abstract]
Significant Costs Incurred in Connection With Administrative Proceedings	$ 0

XML

GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 25, 2012	Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			$ 113,695
Finite-lived Intangible Assets Acquired	140,855
Ending carrying value of finite-lived intangible assets	254,550
Finite-Lived Intangible Assets, Accumulated Amortization	(84,170)
Amortization of Intangible Assets	(12,450)
Finite-Lived Intangible Assets, Accumulated Amortization	(96,620)
Finite-Lived Intangible Assets, Net, Beginning Balance	29,525
Finite-Lived Intangible Assets, Net, Ending Balance	157,930
Expected Future Annual Amortization Expense [Abstract]
2012, remainder thereof	6,419
2013	23,473
2014	20,750
2015	14,609
2016	13,757
Thereafter	78,922
Total	157,930
Goodwill	159,420	157,900
Schedule of Goodwill [Table]
Balance at December 31, 2011	0	157,900
Goodwill, Acquired During Period	157,929
Goodwill, Translation Adjustments	1,491
Balance at September 30, 2012	159,420	157,900
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			14,600
Finite-lived Intangible Assets Acquired	61,752
Ending carrying value of finite-lived intangible assets	76,352
Finite-Lived Intangible Assets, Accumulated Amortization	(9,510)
Amortization of Intangible Assets	(2,979)
Finite-Lived Intangible Assets, Accumulated Amortization	(12,489)
Finite-Lived Intangible Assets, Net, Beginning Balance	5,090
Finite-Lived Intangible Assets, Net, Ending Balance	63,863
Finite-Lived Intangible Asset, Weighted Average Period before Next Renewal or Extension	12 years
Expected Future Annual Amortization Expense [Abstract]
Total	63,863
Developed technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			17,653
Finite-lived Intangible Assets Acquired	58,635
Ending carrying value of finite-lived intangible assets	76,288
Finite-Lived Intangible Assets, Accumulated Amortization	(13,179)
Amortization of Intangible Assets	(4,521)
Finite-Lived Intangible Assets, Accumulated Amortization	(17,700)
Finite-Lived Intangible Assets, Net, Beginning Balance	4,474
Finite-Lived Intangible Assets, Net, Ending Balance	58,588
Finite-Lived Intangible Asset, Weighted Average Period before Next Renewal or Extension	12 years
Expected Future Annual Amortization Expense [Abstract]
Total	58,588
License fees [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			79,142
Finite-lived Intangible Assets Acquired	1,928
Ending carrying value of finite-lived intangible assets	81,070
Finite-Lived Intangible Assets, Accumulated Amortization	(60,355)
Amortization of Intangible Assets	(400)
Finite-Lived Intangible Assets, Accumulated Amortization	(60,755)
Finite-Lived Intangible Assets, Net, Beginning Balance	18,787
Finite-Lived Intangible Assets, Net, Ending Balance	20,315
Expected Future Annual Amortization Expense [Abstract]
Total	20,315
Other Contractual Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			0
Finite-lived Intangible Assets Acquired	3,030
Ending carrying value of finite-lived intangible assets	3,030
Finite-Lived Intangible Assets, Accumulated Amortization	0
Amortization of Intangible Assets	(1,047)
Finite-Lived Intangible Assets, Accumulated Amortization	(1,047)
Finite-Lived Intangible Assets, Net, Beginning Balance	0
Finite-Lived Intangible Assets, Net, Ending Balance	1,983
Finite-Lived Intangible Asset, Weighted Average Period before Next Renewal or Extension	2 years
Expected Future Annual Amortization Expense [Abstract]
Total	1,983
Trademarks and tradenames [Member]
Finite-Lived Intangible Assets [Line Items]
Beginning carrying value of finite-lived intangible assets			2,300
Finite-lived Intangible Assets Acquired	15,510
Ending carrying value of finite-lived intangible assets	17,810
Finite-Lived Intangible Assets, Accumulated Amortization	(1,126)
Amortization of Intangible Assets	(3,503)
Finite-Lived Intangible Assets, Accumulated Amortization	(4,629)
Finite-Lived Intangible Assets, Net, Beginning Balance	1,174
Finite-Lived Intangible Assets, Net, Ending Balance	13,181
Finite-Lived Intangible Asset, Weighted Average Period before Next Renewal or Extension	5 years
Expected Future Annual Amortization Expense [Abstract]
Total	$ 13,181

XML

INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended	9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
INCOME TAXES [Abstract]
Income Tax Benefit (Provision)	$ 181		$ (740)	$ 44,315	$ 37,254	$ (1,141)
Income Tax (Benefit) Provision Related to Acquisition		37,462			37,462
Income tax (benefit) provision acquisition adjustment					7,242
Income Tax (Benefit) Provision Acquisition					208
Change in Unrecognized Tax Benefits Related to Acquisition					2,100
Change in Unrecognized Tax Benefits					$ 0

XML

INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Inventories [Abstract]
Raw Materials	$ 10,442	$ 8,635
Work-In-Process	40,740	10,554
Finished Goods	38,377	23,662
Inventory, Net, Total	89,559	42,851
Inventory, Net-Short-Term Portion	74,891	42,851
Inventory, Net-Long-Term Portion	$ 14,668	$ 0

XML

ACQUISITION, Part IV (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended			9 Months Ended		12 Months Ended	21 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012	Jun. 25, 2012
Unaudited pro forma financial information [Abstract]
Revenues	$ 79,624		$ 82,122	$ 247,021	$ 256,035
Net (loss) income	(17,643)		(17,128)	(36,399)	(8,528)
Business Acquisition, Pro Forma Earnings Per Share, Basic and Diluted	$ (0.25)		$ (0.25)	$ (0.52)	$ (0.12)
Business Acquisition, Cost of Acquired Entity, Acceleration of Stock Options								8,265
Income tax (benefit) provision related to acquisition		37,462		37,462
Business Acquisition, Cost of Acquired Entity, Transaction Costs Duration	266			6,032	0	2,936	8,968
Business Acquisition, Cost of Acquired Entity, Transaction Costs incurred by eBioscience	$ 60			$ 5,530	$ 126

XML

GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2012

GOODWILL AND INTANGIBLE ASSETS [Abstract]

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

The gross carrying amounts and net book values of the Company's definite-lived intangible assets are as follows (in thousands):

	Carrying Value, Gross						Accumulated Amortization									Intangible Assets, Net				Weighted
	December 31,				September 30,		December 31,						September 30,			December 31,		September 30,		Average
	2011		Additions		2012		2011			Additions			2012			2011		2012		Useful Life
Customer relationships	$	14,600	$	61,752	$	76,352	$	(9,510	)	$	(2,979	)	$	(12,489	)	$	5,090	$	63,863	12 years
Developed technologies		17,653		58,635		76,288		(13,179	)		(4,521	)		(17,700	)		4,474		58,588	12 years
Trademarks and tradenames		2,300		15,510		17,810		(1,126	)		(3,503	)		(4,629	)		1,174		13,181	5 years
Other contractual agreements		-		3,030		3,030		-			(1,047	)		(1,047	)		-		1,983	2 years
Licenses		79,142		1,928		81,070		(60,355	)		(400	)		(60,755	)		18,787		20,315	Variable
Total definite-lived intangible assets	$	113,695	$	140,855	$	254,550	$	(84,170	)	$	(12,450	)	$	(96,620	)	$	29,525	$	157,930

Expected future annual amortization expense

The expected future annual amortization expense of the Company's intangible assets is as follows (in thousands):

	Amortization
For the Year Ending December 31,	Expense
2012, remainder thereof	$	6,419
2013		23,473
2014		20,750
2015		14,609
2016		13,757
Thereafter		78,922
Total	$	157,930

Schedule of Goodwill [Table Text Block]

The Company recognized goodwill of $157.9 million at the Acquisition Date in connection with the Acquisition. Refer to "Note 2. "Acquisition" for further details. Information in regards to changes in the Company's goodwill at September 30, 2012 is as follows (in thousands):

Balance at December 31, 2011	$	-
Additions:
Acquisition of eBioscience		157,929
Effects of foreign currency change		1,491
Balance at September 30, 2012	$	159,420

XML

LONG-TERM DEBT OBLIGATIONS, Term Loan (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Jun. 25, 2012
LONG-TERM DEBT OBLIGATIONS [Abstract]
Original Aggregate Principal Amount of Term Loan				$ 85,000
Original Revolving Credit Facility				15,000
Debt Instrument, Maturity Date, Description (in years)		P5Y
Total Amount of Term Loan Borrowed as of Balance Sheet Date	85,000	85,000		85,000
Debt Instrument, Interest Rate at Period End	6.50%	6.50%
Payments of Term Loan	2,125	2,125	0
Debt Issuance Cost - Term Loan				4,500
Amortization Period For Debt Issuance Cost Term Loan		5 years
Outstanding Principal Balance of Term Loan as of Balance Sheet Date	82,875	82,875
Interest Expense, Debt, Excluding Amortization	$ 1,690	$ 1,766

XML

STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Stockholders Equity And Share Based Compensation Expense [Abstract]
Common Stock Capital Share Reserved for Future Issuance under Stock Compensation Plans (in shares)	4,995		4,995
Common Stock, Capital Shares Reserved for Future Issuance 2012 Inducement (in shares)	2,000		2,000
Entity recognized share-based compensation expense [Abstract]
Total stock-based compensation expense	$ 2,259	$ 2,228	$ 14,857	$ 6,602
Costs of sales [Member]
Entity recognized share-based compensation expense [Abstract]
Total stock-based compensation expense	403	267	1,114	840
Research and development [Member]
Entity recognized share-based compensation expense [Abstract]
Total stock-based compensation expense	307	503	980	1,541
Selling, general and administrative [Member]
Entity recognized share-based compensation expense [Abstract]
Total stock-based compensation expense	$ 1,549	$ 1,458	$ 12,763	$ 4,221

XML

FINANCIAL INSTRUMENTS, Available-For-Sale Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Jun. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Dec. 31, 2011
FINANCIAL INSTRUMENTS [Abstract]
Available-For-Sale Securities, Gross Realized Gains (Losses), Sale Proceeds	$ 51,968
Maximum Realized Gains on Available-For-Sale Securities	489	0
Summary of Available-For-Sale Securities [Abstract]
Amortized Cost			9,794	62,325
Gross Unrealized Gains			118	483
Gross Unrealized Losses			0	(370)
Fair Value			9,912	62,438
U.S. Government Obligations and Agency Securities [Member]
Summary of Available-For-Sale Securities [Abstract]
Amortized Cost			7,297	19,421
Gross Unrealized Gains			65	177
Gross Unrealized Losses			0	0
Fair Value			7,362	19,598
U.S. Corporate Debt [Member]
Summary of Available-For-Sale Securities [Abstract]
Amortized Cost			648	24,942
Gross Unrealized Gains			15	259
Gross Unrealized Losses			0	(101)
Fair Value			663	25,100
Foreign Government Obligations and Agency Securities [Member]
Summary of Available-For-Sale Securities [Abstract]
Amortized Cost				2,805
Gross Unrealized Gains				6
Gross Unrealized Losses				(1)
Fair Value				2,810
Foreign Corporate Debt and Equity Securities [Member]
Summary of Available-For-Sale Securities [Abstract]
Amortized Cost			1,849	15,157
Gross Unrealized Gains			38	41
Gross Unrealized Losses			0	(268)
Fair Value			$ 1,887	$ 14,930

XML

LONG-TERM DEBT OBLIGATIONS, Convertible Senior Notes (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Jun. 25, 2012
LONG-TERM DEBT OBLIGATIONS [Abstract]
4.00% Convertible Senior Notes Aggregate Principal Amount				$ 105,000,000
Debt Issuance Cost for 4.00% Convertible Senior Notes		3,900
Net Proceeds From Issuance of 4.00% Convertible Senior Notes		101,062,000	0
4.00%, Interest Rate, Stated Percentage				4.00%
Amortization Period For Debt Issuance Cost Convertible Notes		7 years
Debt Instrument, Convertible, Shares per $1,000 principal amount of 4.00% Convertible Senior Notes				170.0319
Maximum Number of Shares Upon Conversion of the 4.00% Convertible Senior Notes				17,857,143
Debt Instrument, Convertible, Conversion Price				$ 5.88
Date Which Convertible Notes Will Become Redeemable				Jul. 01, 2017
Percentage Company's common stock has been above conversion price				130.00%
Number of Consecutive Trading Days Within Measurement Period				20
Number Of Consecutive Trading Days On Which Trading Price Is Examined For Triggering Of Conversion				30
Number of Trading Days to Trigger Measurement Period Within Date Company Provides Notice of Redemption				5
Percentage of Principal Amount That The Redemption Price Will Be Equal To				100.00%
Debt Instrument, 4.00% Convertible, Interest Expense	1,190,000	1,270,000
Aggregate Principal Amount of 3.50% Senior Convertible Notes Repurchased		91,614,000
Repayments of Convertible Debt excluding accrued interest		92,059,000
Debt Instrument, 3.50% Convertible, Interest Expense Paid with repurchase		445,000
Debt Related Commitment Fees and Debt Issuance Costs		262,000
3.50% Senior Convertible Notes Aggregate Principal Amount	3,855,000	3,855,000
Percentage of Principal Amount Holders Can Require Company To Repurchase Notes	100.00%	100.00%
Date Holders Of Notes Can Require Company Require Company To Repurchase	Jan. 15, 2013	Jan. 15, 2013
Debt Instrument, 3.50% Convertible, Interest Expense	$ 33,000	$ 1,071,000

XML

INVENTORIES, Amortization (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Jun. 25, 2012
INVENTORIES [Abstract]
Business Combination, Recognized Identifiable Assets Acquired And Liabilities Assumed Inventory				$ 50,700
Inventory, Step Up Adjustment				28,987,000
Amortization of Inventory Step-Up In Fair Value	$ 4,536,000	$ 4,855,000	$ 0

XML

FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2012

FINANCIAL INSTRUMENTS [Abstract]

FINANCIAL INSTRUMENTS

NOTE 4—FINANCIAL INSTRUMENTS

Investments in Debt and Equity Securities

The fair values of the Company's available-for-sale securities are based on quoted market prices and are included in cash and cash equivalents, available-for-sale securities—short-term and available-for-sale securities—long-term on the Company's Condensed Consolidated Balance Sheets based on each respective security's maturity.

As described in further detail in Note 2. "Acquisition", during the second quarter of 2012, the Company liquidated the majority of its available-for-sale securities to finance the Acquisition. The available-for-sale securities were sold for total cash consideration of $52.0 million and the resulting net gain on sale of $0.5 million was recognized in Interest income and other, net in the accompanying Condensed Consolidated Statements of Operations.

The following is a summary of available-for-sale securities as of September 30, 2012 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. government obligations and agency securities	$	7,297	$	65	$	-	$	7,362
U.S. corporate debt		648		15		-		663
Foreign corporate debt and equity securities		1,849		38		-		1,887
Total available-for-sale securities	$	9,794	$	118	$	-	$	9,912

The following is a summary of available-for-sale securities as of December 31, 2011 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
U.S. government obligations and agency securities	$	19,421	$	177	$	-		$	19,598
U.S. corporate debt		24,942		259		(101	)		25,100
Foreign government obligations and agency securities		2,805		6		(1	)		2,810
Foreign corporate debt and equity securities		15,157		41		(268	)		14,930
Total available-for-sale securities	$	62,325	$	483	$	(370	)	$	62,438

Contractual maturities of available-for-sale securities as of September 30, 2012 and December 31, 2011 are as follows (in thousands):

	September 30,		December 31,
	2012		2011
Less than one year	$	2,575	$	7,937
One to two years		5,717		25,785
More than two years		1,620		28,716
Total available-for-sale securities	$	9,912	$	62,438

The Company recognized no significant net realized gains and losses during the three months and nine months ended September 30, 2011. Realized gains and losses are included in Interest income and other, net in the accompanying Condensed Consolidated Statements of Operations.

Non-Marketable Securities

As of September 30, 2012 and December 31, 2011, the carrying amounts of the Company's non-marketable securities, totaling $5.0 million, equaled their estimated fair values. The estimated fair value was primarily determined to be the initial cost basis plus the Company's allocated share of results and any other-than-temporary impairment ("OTTI") charges that were recognized in prior periods. There was no OTTI recognized during the nine months ended September 30, 2012. During the nine months ended September 30, 2011, the Company recognized an impairment of $1.3 million in Interest income and other, net related to its investment in a limited partnership investment fund. Net investment results are included in interest income and other, net in the accompanying Condensed Consolidated Statements of Operations. Depending on market conditions, the Company may incur additional charges on this investment portfolio in the future.

Derivative Financial Instruments

The Company derives a portion of its revenues in foreign currencies, predominantly in Europe and Japan, as part of its ongoing business operations. In addition, a portion of its assets is held in the nonfunctional currencies of its subsidiaries. The Company enters into foreign currency forward contracts to manage a portion of the volatility related to transactions that are denominated in foreign currencies. The Company's foreign currency forward contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures. The Company's accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company recognizes derivatives on its accompanying Condensed Consolidated Balance Sheets at fair value. The effective portions of designated cash flow hedges are recorded in other comprehensive income ("OCI") until the hedged item is recognized in earnings. As of September 30, 2012, the Company's existing foreign currency forward exchange contracts mature within 12 months. The deferred amount related to the Company's derivatives currently recorded in OCI and expected to be recognized into earnings over the next 12 months is a net loss of $0.6 million. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings.

Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in OCI associated with such derivative instruments are reclassified immediately into operations through other income and expense. Any subsequent changes in fair value of such derivative instruments are reflected in other income and expense unless they are re-designated as hedges of other transactions. The Company did not recognize any net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three and nine months ended September 30, 2012 and 2011.

Under the Credit Agreement as defined in Note 9. "Long-Term Obligations", the Company is required to maintain derivative contracts to protect against fluctuations in interest rates with respect to at least 35% of the aggregate principal amount of the Term Loan, as defined in Note 9. "Long-Term Obligations," then outstanding, with such derivative contracts being required to have at least a three-year term. Accordingly, the Company has entered into an interest rate swap (the "Interest Rate Swap") for which the notional amount was originally set at $27 million, with quarterly reduction to the notional amount consistent with the mandatory amortization schedule of the Term Loan. The Interest Rate Swap calls for quarterly fixed rate quarterly payments of 1.70% of the notional amount in exchange for a variable rate quarterly receipts equal to a 3 month LIBOR rate with a floor of 1.50%. The Interest Rate Swap terminates on June 25, 2015.

The Company did not designate the Interest Rate Swap as a hedging instrument and will recognize adjustments to fair value through Interest and other income on the accompanying Condensed Consolidated Statements of Operations at each reporting date. As of September 30, 2012, the fair value of the Interest Rate Swap was $0.1 million.

As of September 30, 2012 and December 31, 2011, the total notional values of the Company's derivative assets and liabilities were as follows (in thousands):

	September 30,		December 31,
	2012		2011
Euro	$	17,510	$	11,851
Japanese yen		10,619		7,008
British pound		5,043		4,459
Interest rate swap		27,519		-
Total	$	60,691	$	23,318

Other than the Interest Rate Swap, the Company did not have any derivative assets or liabilities that were not designated or qualifying as hedges as of September 30, 2012. As of December 31, 2011, the Company did not have any derivative assets or liabilities that were not designated or qualifying as hedges.

As a result of the use of derivative instruments, the Company is exposed to the risk that the counterparties may be unable to meet the terms of the underlying agreements. To mitigate this risk, only contracts with carefully selected highly-rated major financial institutions are entered into. In the event of non-performance by these counterparties, the asset position carrying values of the financial instruments represent the maximum amount of loss that can be incurred; however, no losses as a result of counterparty defaults are expected. The Company does not require and is not required to pledge collateral for these financial instruments. The Company does not enter into derivative contracts for trading or speculative purposes and is not party to any leveraged derivative instruments.

The following table shows the Company's derivative assets and liabilities measured at fair value as reflected on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30,		December 31,		Balance Sheet
	2012		2011		Location
Derivative assets:
Foreign exchange contracts	$	199	$	940	Other current assets
Derivative liabilities:
Foreign exchange contracts		812		217	Accrued expenses
Interest rate swap		74		-	Accrued expenses

The following table shows the effect, net of tax, of the Company's derivative instruments on the accompanying Condensed Consolidated Statements of Operations and OCI for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Derivatives in cash flow hedging relationships:
Net (loss) gain recognized in OCI, net of tax (1)	$	(1,204	)	$	353			(1,472	)		303
Net gain reclassified from accumulated OCI into income, net of tax (2)		140			-			837			-
Net gain (loss) recognized in other income and expense (3)		40			(66	)		68			(79	)
Derivatives not designated as hedging relationships:
Net (loss) gain recognized in other income and expense (4)		(353	)		625			(479	)		(1,892	)

______________________

(1) Net change in the fair value of the effective portion classified in OCI

(2) Effective portion classified as revenue

(3) Ineffective portion and amount excluded from effectiveness testing classified as Interest and other, net

(4) Classified in Interest and other, net

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STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE, Stock Options (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jun. 25, 2012
Stockholders Equity And Share Based Compensation Expense [Abstract]
Business Acquisition, Cost of Acquired Entity, Acceleration of Stock Options					$ 8,265
Total Unrecognized Share-Based Compensation Expense Related to Non-Vested Awards Expected to Recognized	$ 18,364		$ 18,364
Weighted-Average Term of Unrecognized Share-Based Compensation Expense (in years)			2 years 9 months 18 days
Fair Value of Options Estimated at the Date of Grant With Weighted-Average Assumptions [Abstract]
Risk free interest rate (in hundredths)	0.60%	1.20%	0.60%	1.80%
Expected dividend yield (in hundredths)	0.00%	0.00%	0.00%	0.00%
Expected volatility (in hundredths)	67.00%	67.00%	67.00%	67.00%
Expected option term (in years)	4 years 7 months 6 days	4 years 6 months	4 years 7 months 6 days	4 years 6 months
Weighted-Average Grant Date Fair Value of Options Granted (in dollars per share)	$ 2.11	$ 3.31	$ 2.19	$ 3.05

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Foreign Currency Translation Adjustment	$ 3,024	$ 2,758

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NET (LOSS) INCOME PER COMMON SHARE (Tables)

9 Months Ended

Sep. 30, 2012

NET (LOSS) INCOME PER COMMON SHARE (Tables) [Abstract]

Reconciliation of basic and diluted net (loss) income per common share

The following table sets forth a reconciliation of basic and diluted net (loss) income per common share (in thousands except per common share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012		2011
Net (loss) income	$	(17,859	)	$	(9,789	)	$	1,573	$	(13,422	)
Shares used in computing basic net (loss) income per common share		70,403			69,719			70,181		70,790
Add effect of dilutive securities:
Employee stock compensation plans		-			-			103		-
Common stock subject to repurchase		-			-			326		-
Shares used in computing diluted net (loss) income per common share		70,403			69,719			70,610		70,790
Basic net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)
Diluted net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)

Securities excluded from diluted earnings per common share on an actual outstanding basis

The potential dilutive securities excluded from diluted earnings per common share were as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Employee stock compensation plans		6,435		6,214		6,331		6,214
Restricted stock subject to repurchase		4,041		1,794		3,724		1,794
Convertible notes		17,985		3,169		7,214		3,169
Total		28,461		11,177		17,269		11,177

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RELATED PARTY TRANSACTIONS (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
RELATED PARTY TRANSACTIONS [Abstract]
Minimum Royalty Payment from Related Party	$ 100,000
Revenue from Related Parties	$ 0

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STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE, Performance-Based Awards (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Stockholders Equity And Share Based Compensation Expense [Abstract]
PRSU: Award Requisite Service Period (in months)	12 months
PRSU: Grants in Period, Net of Forfeitures (in shares)	240,000
Actual PRSUs achieved (in shares)	60,000
PRSU: Grant Date Intrinsic Value achieved (in dollars per share)	$ 4.63	$ 6.71
Expected PRSUs to be Achieved (in shares)	15,000
PRSU: Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 115
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures PRSU, eBioscience	911,500
Share-based compensation arrangement by share-based payment award, options, Grants in Period, Grant Date Intrinsic Value PRSU, eBioscience	$ 4.16
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized PRSU, eBioscience	$ 2,580

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ACQUISITION, Part I (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Jun. 25, 2012
ACQUISITION [Abstract]
Convertible Price Per Share for Outstanding eBio Shares (in dollars per share)			$ 38.18
Revenue, Net, eBioscience specific	$ 17,578	$ 18,953
Net Loss, eBioscience specific	4,714	4,555
Business Acquisition, Cost of Acquired Entity, Purchase Price			314,891
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred	215
Business Acquisition, Cost of Acquired Entity, Accelerated Vesting of eBioscience stock options			8,265
Acquisition Consideration			306,626
Debt Instrument, 4.00% Interest Rate, Stated Percentage	4.00%	4.00%	4.00%
Components of Cash Paid for the Acquisition [Abstract]
Acquisition Consideration			306,626
Business Acquisition, Cost of Acquired Entity, Acceleration of Stock Options			8,265
Total purchase price			314,891
Determination of Consideration Transferred to Acquisition Date Fair Values of Assets Acquired and Liabilities Assumed [Abstract]
Business Acquisition, Cost of Acquired Entity, Purchase Price			306,626
Business, Combination Recognized Identifiable Assets Acquired And Liabilities Assumed, Net [Abstract]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangibles Adjustment			22,155
Income tax (benefit) provision acquisition adjustment		7,242
Inventory, Step Up Adjustment			28,987
Allocation of Purchase Price - Initial [Member]
ACQUISITION [Abstract]
Acquisition Consideration			306,841
Components of Cash Paid for the Acquisition [Abstract]
Acquisition Consideration			306,841
Determination of Consideration Transferred to Acquisition Date Fair Values of Assets Acquired and Liabilities Assumed [Abstract]
Cash and Cash Equivalents Acquired			7,095
Accounts Receivable, Net Acquired			9,488
Inventories, Net Acquired			52,060
Prepaid Expenses and Other Assets Acquired			7,844
Plant, Property and Equipment Net Acquired			5,969
Intangible Assets Net Acquired			159,755
Other Noncurrent Assets Acquired			1,769
Identifiable Assets Acquired			243,980
Accounts Payable and Accrued Liabilities Acquired			(18,681)
Deferred Tax Liabilities, Net Acquired			(55,542)
Other Noncurrent Liabilities Acquired			(3,241)
Identifiable Liabilities Acquired			(77,464)
Goodwill			140,325
Business Acquisition, Cost of Acquired Entity, Purchase Price			306,841
Measurement Period Adjustments for Purchase Accounting [Member]
ACQUISITION [Abstract]
Acquisition Consideration			(215)
Components of Cash Paid for the Acquisition [Abstract]
Acquisition Consideration			(215)
Determination of Consideration Transferred to Acquisition Date Fair Values of Assets Acquired and Liabilities Assumed [Abstract]
Cash and Cash Equivalents Acquired			0
Accounts Receivable, Net Acquired			(8)
Inventories, Net Acquired			(1,380)
Prepaid Expenses and Other Assets Acquired			56
Plant, Property and Equipment Net Acquired			551
Intangible Assets Net Acquired			(22,155)
Other Noncurrent Assets Acquired			(328)
Identifiable Assets Acquired			(23,264)
Accounts Payable and Accrued Liabilities Acquired			(2,819)
Deferred Tax Liabilities, Net Acquired			8,264
Other Noncurrent Liabilities Acquired			0
Identifiable Liabilities Acquired			5,445
Goodwill			17,604
Business Acquisition, Cost of Acquired Entity, Purchase Price			(215)
Allocation Of Purchase Price- Final [Member]
ACQUISITION [Abstract]
Acquisition Consideration			306,626
Components of Cash Paid for the Acquisition [Abstract]
Acquisition Consideration			306,626
Determination of Consideration Transferred to Acquisition Date Fair Values of Assets Acquired and Liabilities Assumed [Abstract]
Cash and Cash Equivalents Acquired			7,095
Accounts Receivable, Net Acquired			9,480
Inventories, Net Acquired			50,680
Prepaid Expenses and Other Assets Acquired			7,900
Plant, Property and Equipment Net Acquired			6,520
Intangible Assets Net Acquired			137,600
Other Noncurrent Assets Acquired			1,441
Identifiable Assets Acquired			220,716
Accounts Payable and Accrued Liabilities Acquired			(21,500)
Deferred Tax Liabilities, Net Acquired			(47,278)
Other Noncurrent Liabilities Acquired			(3,241)
Identifiable Liabilities Acquired			(72,019)
Goodwill			157,929
Business Acquisition, Cost of Acquired Entity, Purchase Price			$ 306,626

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ACQUISITION, Part II (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 25, 2012
Purchased intangible assets [Line Items]
Preliminary Fair Value		$ 137,600
Customer relationships [Member]
Purchased intangible assets [Line Items]
Preliminary Fair Value		61,100
Estimated Useful Life	12 years
Developed technologies [Member]
Purchased intangible assets [Line Items]
Preliminary Fair Value		58,000
Estimated Useful Life	12 years
Trademarks and tradenames [Member]
Purchased intangible assets [Line Items]
Preliminary Fair Value		15,500
Estimated Useful Life	5 years
Other contractual agreements [Member]
Purchased intangible assets [Line Items]
Preliminary Fair Value		$ 3,000
Estimated Useful Life	2 years

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2012

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 3—FAIR VALUE

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

A fair value hierarchy was established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

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

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

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 (in thousands)

			Significant
	Quoted Prices		Other
	In Active		Observable
	Markets		Inputs
	(Level 1)		(Level 2)		Total
September 30, 2012:
Assets:
U.S. government obligations and agency securities	$	-	$	7,362	$	7,362
U.S. corporate debt		-		663		663
Foreign corporate debt and equity securities		-		1,887		1,887
Total	$	-	$	9,912	$	9,912
Derivative assets	$	-	$	199	$	199
Liabilities:
Derivative liabilities	$	-	$	886	$	886
December 31, 2011:
Assets:
U.S. government obligations and agency securities	$	-	$	19,598	$	19,598
U.S. corporate debt		-		25,100		25,100
Foreign government obligations and agency securities		-		2,810		2,810
Foreign corporate debt and equity securities		105		14,825		14,930
Total	$	105	$	62,333	$	62,438
Derivative assets	$	-	$	940	$	940
Liabilities:
Derivative liabilities	$	-	$	217	$	217

The Company's Level 2 input assumptions are determined based on review of third-party sources.

The fair value of the Company's derivative assets and liabilities is determined based on the estimated consideration the Company would pay or receive to terminate these agreements on the reporting date. The derivative assets and liabilities are located in other current assets and accrued liabilities, respectively, in the accompanying Condensed Consolidated Balance Sheets.

As of September 30, 2012 and December 31, 2011, the Company had no financial assets or liabilities measured on a recurring basis requiring Level 3 classification, including those that have unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets and liabilities.

Debt Obligations

Debt obligations are not recorded at fair value on a recurring basis and are carried at amortized cost. The fair value of debt obligations was based on recent transactions and categorized within Level 3 of the fair value hierarchy.

The fair values of the Company's 3.50% Senior Convertible Notes due 2039 (the "3.50% Notes") and 4.00% Notes are based on quoted market prices at the balance sheet date. At September 30, 2012, the fair value of the Company's remaining 3.50% Notes was $3.7 million and the fair value of the Company's 4.00% Notes was $102.3 million.

On June 25, 2012, the Company entered into a Credit Agreement and borrowed $85.0 million under the Term Loan. As of September 30, 2012, the fair value of the Term Loan approximated its carrying value of $82.9 million.

Property and Equipment, Net – Held for Sale

In the fourth quarter of 2011, the Company had entered into a non-binding letter of intent to sell its facility located in West Sacramento, California to a third-party. As a result of the letter of intent, the Company reclassified the facility from long-lived assets held and used to held-for-sale and recognized an impairment charge of $1.7 million to bring the carrying value of the facility to its estimated fair market value, which was the anticipated selling price under the non-binding letter of intent. During the three months ended September 30, 2012, the non-binding letter of intent was terminated.

The Company received several additional third-party offers to purchase the facility in West Sacramento, California during the third quarter of 2012, and based on the offers, the estimated fair value of the facility was deemed to be lower than the carrying cost and the Company recognized $4.0 million of impairment during the three months ended September 30, 2012. As of the filing date, the Company continues to negotiate with potential buyers.

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ACQUISITION, Part III (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended		12 Months Ended	21 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012	Jun. 25, 2012
ACQUISITION [Abstract]
Business Combination, Indemnification Assets, Amount as of Acquisition Date						$ 25,200
Business Acquisition, Cost of Acquired Entity, Transaction Costs Duration	266	6,032	0	2,936	8,968
Debt Issuance Cost					8,538
Business Acquisition, Cost of Acquired Entity, Acceleration of Stock Options						$ 8,265

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FINANCIAL INSTRUMENTS, Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
FINANCIAL INSTRUMENTS [Abstract]
Maximum Existing Foreign Currency Forward Exchange Contracts Maturity Period (in months)			12 months
Maximum Expected Period to Recognized Deferred Amount Into Earnings (in months)			12 months
Expected Deferred Amount To Be Recognized in OCI	$ 645		$ 645
Gain (Loss) on Discontinuation of Cash Flow Hedge Due to Forecasted Transaction Probable of Not Occurring, Net	0	0	0	0
Description of Interest Rate Derivative Instruments Not Designated as Hedging Instruments Activities			Accordingly, the Company has entered into an interest rate swap (the "Interest Rate Swap") for which the notional amount was originally set at $27 million, with quarterly reduction to the notional amount consistent with the mandatory amortization schedule of the Term Loan. The Interest Rate Swap calls for quarterly fixed rate quarterly payments of 1.70% of the notional amount in exchange for a variable rate quarterly receipts equal to a 3 month LIBOR rate with a floor of 1.50%. The Interest Rate Swap terminates on June 25, 2015.
Notional Amount of Other Derivatives Not Designated as Hedging Instruments	27,519		27,519
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value	74		74
Gain (Loss) on Interest Rate Derivative Instruments Not Designated as Hedging Instruments	74
Contracts [Line Items]
Contracts Qualifying as Hedges	60,691		60,691		23,318
Contracts Not Designated or Qualifying as Hedges	0		0		0
Other current assets [Member] | Foreign exchange contracts [Member]
Derivative Assets:
Fair Value, Asset	199		199		940
Accrued expenses [Member] | Foreign exchange contracts [Member]
Derivative Liabilities:
Fair Value, Liability	812		812		217
Accrued expenses [Member] | Interest Rate Swap [Member]
Derivative Liabilities:
Fair Value, Liability	74		74		0
Euro [Member}
Contracts [Line Items]
Contracts Qualifying as Hedges	17,510		17,510		11,851
Japanese Yen [Member]
Contracts [Line Items]
Contracts Qualifying as Hedges	10,619		10,619		7,008
British Pound [Member]
Contracts [Line Items]
Contracts Qualifying as Hedges	5,043		5,043		4,459
Swap [Member]
Contracts [Line Items]
Contracts Qualifying as Hedges	$ 27,519		$ 27,519		$ 0

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NET (LOSS) INCOME PER COMMON SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Numerator:
Net Income (Loss) Available to Common Stockholders, Diluted	$ (17,859)	$ (9,789)	$ 1,573	$ (13,422)
Denominator:
Shares used in computing basic net income (loss) per common share	70,403	69,719	70,181	70,790
Add effect of dilutive securities:
Employee stock compensation plans (in shares)	0	0	103	0
Common stock subject to repurchase (in shares)	0	0	326	0
Shares Used In Computing Diluted Net (Loss) Income Per Common Share	70,403	69,719	70,610	70,790
Basic Net (Loss) Income Per Common Share	$ (0.25)	$ (0.14)	$ 0.02	$ (0.19)
Diluted Net (Loss) Income Per Common Share	$ (0.25)	$ (0.14)	$ 0.02	$ (0.19)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	28,461	11,177	17,269	11,177
Employee Stock Compensation Plans [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	6,435	6,214	6,331	6,214
Restricted Stock Subject to Repurchase [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,041	1,794	3,724	1,794
Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	17,985	3,169	7,214	3,169

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current Assets:
Cash and Cash Equivalents	$ 29,026	$ 201,937
Restricted Cash	691	692
Available-For-Sale Securities-Short-Term Portion	2,575	7,937
Accounts Receivable, Net	52,534	44,021
Inventory, Net-Short-Term Portion	74,891	42,851
Deferred Tax Assets-Short-Term Portion	379	364
Property and Equipment, Net-Held For Sale	5,000	9,000
Prepaid Expenses and Other Current Assets	15,078	7,785
Total Current Assets	180,174	314,587
Available-For-Sale Securities-Long-Term Portion	7,337	54,501
Property and Equipment, Net	30,988	30,583
Inventory, Net-Long-Term Portion	14,668	0
Goodwill	159,420	0
Intangible Assets, Net	157,930	29,525
Deferred Tax Assets-Long-Term Portion	3,445	450
Other Long-Term Assets	16,224	8,369
Total Assets	570,186	438,015
Current Liabilities:
Accounts Payable and Accrued Liabilities	56,852	44,774
Convertible Debt-Short-Term Portion	3,855	0
Term Loan-Short-Term Portion	6,375	0
Deferred Revenue-Short-Term Portion	10,749	9,852
Total Current Liabilities	77,831	54,626
Deferred Revenue-Long-Term Portion	3,453	3,959
Other Long-Term Liabilities	22,345	9,127
Convertible Notes	105,000	95,469
Term Loan-Long-Term Portion	76,500	0
Stockholders' Equity:
Common Stock	707	704
Additional Paid-In Capital	757,051	750,332
Accumulated Other Comprehensive Income	4,420	2,492
Accumulated Deficit	(477,121)	(478,694)
Total Stockholders' Equity	285,057	274,834
Total Liabilities and Stockholders' Equity	$ 570,186	$ 438,015

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STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE, Employee Stock Purchase Plan (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Stockholders Equity And Share Based Compensation Expense [Abstract]
Common Stock Capital Share Reserved for Future Issuance under Employee Stock Purchase Plan (in shares)	7,000,000	7,000,000
ESPP Purchase Consideration as Percentage of Market Value		85.00%
ESPP Offering Period (in months)		P12M
ESPP Number of Purchase Periods Per Offering Period		2
Number of Months in Each Purchase Period (in months)		P6M
Look-Back Period for ESPP (in months)		P12M
Percentage of Gross Compensation Through Payroll Deductions Employees Can Invest (in hundredths)	15.00%	15.00%
Number of Shares of Common Stock Employee Permitted to Purchase (in shares)		750
Number of Participants in ESPP	279	279
Number of Shares Issued ESPP (in shares)		133,051
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 4.23	$ 4.23
Allocated Share-based Compensation Expense	$ 115	$ 502
Fair Value of Stock Purchased in ESPP Estimated With Weighted Average Assumptions [Abstract]
Risk Free Interest Rate (in hundredths)		10.00%
Expected Dividend Yield (in hundredths)		0.00%
Expected Volatility (in hundredths)		67.00%
Expected Term (in years)		9 months 18 days

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 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. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The condensed consolidated financial statements include the accounts of Affymetrix, Inc. and its wholly owned subsidiaries ("Affymetrix" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included.

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying Condensed Consolidated Balance Sheet as of September 30, 2012, the Condensed Consolidated Statements of Operations, Comprehensive (Loss) Income for the three and nine months ended September 30, 2012 and 2011 and Cash Flows for the nine months ended September 30, 2012 are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 28, 2012. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the accompanying notes to those financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

As further discussed in Note 2. "Acquisition", the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2012 includes adjustments that were made during the three months ended September 30, 2012 upon finalization of the valuation of certain assets acquired and liabilities assumed from the acquisition of eBioscience Holdings, inc. ("eBioscience"). Such adjustments are considered to have occurred as of June 25, 2012 (the "Acquisition Date"). Thus, in future periods, the Company's financial statements as of June 30, 2012 and for the three and six months then ended will be recast to reflect these adjustments.

There have been no material changes to the Company's significant accounting policies as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 except as otherwise described below:

Business Combinations

The Company's condensed consolidated financial statements include the operations of an acquired business after the completion of the acquisition. The Company accounts for acquired businesses using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date, while transaction costs are expensed as incurred, except for any debt and equity issuance costs. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

Inventories

Inventory cost is computed on an adjusted standard basis (which approximates actual cost on a first-in, first-out basis). Provisions for slow moving, potentially excess and obsolete inventories are provided based on estimated demand requirements, product life cycle and development plans, component cost trends, product pricing, product expiration and quality issues.

Inventory that is not expected to be utilized until more than 12 months from the balance sheet date is classified as long-term. Estimating the level of inventory utilization for the upcoming 12 months requires management to exercise significant judgment. The Company maintains inventory levels in excess of 12 months for certain components of work-in-progress that have useful lives of up to 10 years. Carrying such levels of inventory impacts the Company's liquidity and cash flows since the inventory will not be converted to cash for more than one year.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to thirteen years with the amortization recognized in either cost of revenue or operating expense, as appropriate. Finite-lived intangible assets are reviewed for impairment when facts or circumstances suggest that the carrying value of such assets may not be recoverable. Additionally, during each period, the Company evaluates the estimated remaining useful lives of purchased finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.

Goodwill and intangible assets with indefinite lives are not subject to amortization, but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. The Company first conducts an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it then conducts a two-step test for impairment of goodwill. In the first step, the Company compares the fair value of its reporting units to their carrying values. If the fair values of the reporting units exceed the carrying value of the net assets, goodwill is not considered impaired and no further analysis is required. If the carrying values of the net assets exceed the fair values of the reporting units, then the second step of the impairment test must be performed in order to determine the implied fair value of the goodwill. If the carrying value of the goodwill exceeds the implied fair value, then an impairment loss equal to the difference would be recorded. For 2012, the Company will perform its annual goodwill impairment test during the fourth quarter of 2012, unless other indicators arise that would require analysis prior to the fourth quarter. No indicators have arisen as of September 30, 2012.

Foreign Currency

Certain operations from foreign subsidiaries of the Company have a functional currency other than the U.S. dollar. All other subsidiaries have the U.S. dollar as their functional currency.

Assets and liabilities of non-U.S. subsidiaries that use the local currency as their functional currency are translated to U.S. dollars at exchange rates in effect at the balance sheet date with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income (loss) within stockholders' equity. Income and expense accounts are translated at average exchange rates during the year. For the three and nine months ended September 30, 2012, the amount of loss that was recognized in foreign currency translation adjustment included in accumulated other comprehensive income in stockholders' equity was $3.0 million and $2.8 million, respectively.

The Company's subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were insignificant and have been included in the Company's results of operations.

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FAIR VALUE MEASUREMENTS, Debt Obligations (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 25, 2012
FAIR VALUE MEASUREMENTS [Abstract]
Debt Instrument, 3.50% Interest Rate, Stated Percentage	3.50%
Debt Instrument, 4.00% Interest Rate, Stated Percentage	4.00%	4.00%
3.50% Convertible Debt, Fair Value Disclosures	$ 3,656
4.00% Convertible Debt, Fair Value Disclosures	102,327
Total amount borrowed as of balance sheet date	85,000	85,000
Notes Payable, Fair Value Disclosure	$ 82,875

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FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2012

FINANCIAL INSTRUMENTS [Abstract]

Summary of available-for-sale securities

The following is a summary of available-for-sale securities as of September 30, 2012 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. government obligations and agency securities	$	7,297	$	65	$	-	$	7,362
U.S. corporate debt		648		15		-		663
Foreign corporate debt and equity securities		1,849		38		-		1,887
Total available-for-sale securities	$	9,794	$	118	$	-	$	9,912

The following is a summary of available-for-sale securities as of December 31, 2011 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
U.S. government obligations and agency securities	$	19,421	$	177	$	-		$	19,598
U.S. corporate debt		24,942		259		(101	)		25,100
Foreign government obligations and agency securities		2,805		6		(1	)		2,810
Foreign corporate debt and equity securities		15,157		41		(268	)		14,930
Total available-for-sale securities	$	62,325	$	483	$	(370	)	$	62,438

Contractual maturities of available-for-sale securities as of September 30, 2012 and December 31, 2011 are as follows (in thousands):

	September 30,		December 31,
	2012		2011
Less than one year	$	2,575	$	7,937
One to two years		5,717		25,785
More than two years		1,620		28,716
Total available-for-sale securities	$	9,912	$	62,438

Notional values of entity's foreign currency forward contracts mature within 12 months

As of September 30, 2012 and December 31, 2011, the total notional values of the Company's derivative assets and liabilities were as follows (in thousands):

	September 30,		December 31,
	2012		2011
Euro	$	17,510	$	11,851
Japanese yen		10,619		7,008
British pound		5,043		4,459
Interest rate swap		27,519		-
Total	$	60,691	$	23,318

Entity's foreign currency derivatives measured at fair value

The following table shows the Company's derivative assets and liabilities measured at fair value as reflected on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30,		December 31,		Balance Sheet
	2012		2011		Location
Derivative assets:
Foreign exchange contracts	$	199	$	940	Other current assets
Derivative liabilities:
Foreign exchange contracts		812		217	Accrued expenses
Interest rate swap		74		-	Accrued expenses

Effect of entity's derivative instruments, net of tax, on Condensed Statements of Operations

The following table shows the effect, net of tax, of the Company's derivative instruments on the accompanying Condensed Consolidated Statements of Operations and OCI for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Derivatives in cash flow hedging relationships:
Net (loss) gain recognized in OCI, net of tax (1)	$	(1,204	)	$	353			(1,472	)		303
Net gain reclassified from accumulated OCI into income, net of tax (2)		140			-			837			-
Net gain (loss) recognized in other income and expense (3)		40			(66	)		68			(79	)
Derivatives not designated as hedging relationships:
Net (loss) gain recognized in other income and expense (4)		(353	)		625			(479	)		(1,892	)

______________________

(1) Net change in the fair value of the effective portion classified in OCI

(2) Effective portion classified as revenue

(3) Ineffective portion and amount excluded from effectiveness testing classified as Interest and other, net

(4) Classified in Interest and other, net

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FAIR VALUE MEASUREMENTS, Property and Equipment, Net - Held for Sale (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
FAIR VALUE MEASUREMENTS [Abstract]
Impairment Charge on Property Plant & Equipment held for use	$ 4,000	$ 1,710

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2012

INVENTORIES [Abstract]

Inventories

At September 30, 2012 and December 31, 2011, inventories consisted of the following (in thousands):

	September 30,		December 31,
	2012		2011
Raw materials	$	10,442	$	8,635
Work-in-process		40,740		10,554
Finished goods		38,377		23,662
Total	$	89,559	$	42,851
Short-term portion	$	74,891	$	42,851
Long-term portion	$	14,668	$	-

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ACQUISITION

9 Months Ended

Sep. 30, 2012

ACQUISITION [Abstract]

ACQUISITION

NOTE 2—ACQUISITION

On the Acquisition Date, pursuant to the terms of an Amended and Restated Agreement and Plan of Merger (the "Acquisition Agreement"), a wholly-owned subsidiary of the Company merged with and into eBioscience, with eBioscience surviving as a wholly-owned subsidiary of the Company (the "Acquisition"). eBioscience specializes in the development, manufacturing, marketing and distribution of research tools in the areas of flow cytometry, immunoassays, microscopic imaging and other protein-based analyses.

At the Acquisition Date, each share of eBioscience issued and outstanding common stock immediately prior to the Acquisition Date was cancelled and converted into the right to receive cash of $38.18 per each such previously issued and outstanding common share. Further, all options to purchase shares of eBioscience common stock that were outstanding immediately prior to the Acquisition Date became exercisable to the extent not fully vested and were cancelled and retired immediately prior to the Acquisition Date in exchange for cash of $38.18 per each such previously outstanding option, less the exercise price of such option.

The Acquisition was accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the tangible and identifiable intangible assets and liabilities of eBioscience were recorded at their respective fair values as of the Acquisition Date, including an amount for goodwill representing the difference between the Acquisition consideration and the fair value of the identifiable net assets.

At June 30, 2012, the Company had provisionally estimated fair values for the assets acquired and liabilities assumed at the Acquisition Date. The amounts reported were considered provisional as the Company was completing the valuation work required to allocate the purchase price and finalize the working capital adjustments. During the third quarter of 2012, with the help of third-party specialists, the valuation was finished and the determination of the fair value of acquired inventory, property and equipment, and intangible assets was completed. This resulted in purchase accounting adjustments (also referred to as "measurement period adjustments") to the Company's Condensed Consolidated Financial Statements as of and for the period ended June 30, 2012. Under GAAP, changes to the purchase price allocation during the measurement period are recognized as of the date of acquisition. The Company considers purchase accounting to be final except for provisional tax amounts that may change during the measurement period.

The results of operations of the acquired eBioscience business and the fair values of the assets acquired and liabilities assumed have been included in the Company's Condensed Consolidated Financial Statements since the date of the Acquisition. For the three and nine months ended September 30, 2012, the Company recorded $17.6 million and $19.0 million, respectively, in revenue and recognized a net loss of $4.7 million and $4.6 million, respectively, from eBioscience.

Purchase price

The Acquisition Date purchase price totaled $314.9 million and is net of $0.2 million proceeds received during the third quarter of 2012 for final working capital adjustments. Of the total purchase price, $8.3 million was accounted for as share-based compensation expense as a result of the accelerated vesting of certain eBioscience employee options immediately prior to the Acquisition and has been recognized in the accompanying Condensed Consolidated Statement of Operations under Selling, general and administrative expenses for the nine months ended September 30, 2012. The remaining $306.6 million was allocated to the net assets acquired from eBioscience. The Acquisition was financed through a combination of cash on hand, the liquidation of available-for-sale securities, proceeds from third-party financing (the "Term Loan") and the issuance of 4.00% Convertible Senior Notes (the "4.00% Notes"). Refer to Note 9. "Long-Term Debt Obligations" for further information.

The following table summarizes the accounting treatment of the purchase price paid (in thousands):

Purchase consideration	$	306,626
Share-based compensation expense		8,265
Total purchase price	$	314,891

Fair values of assets acquired and liabilities assumed

The following table summarizes the fair values of assets acquired, liabilities assumed and goodwill (in thousands) at the Acquisition Date, as well as retrospective purchase accounting adjustments (also referred to as "measurement period adjustments") made with respect to the six months ended June 30, 2012:

	Before
	Adjustment						After
	of Final						Adjustment
	Allocation			Measurement			of Final
	of Purchase			Period			Allocation of
	Price(1)			Adjustments(2)			Purchase Price
Cash and cash equivalents	$	7,095		$	-		$	7,095
Accounts receivable, net		9,488			(8	)		9,480
Inventories		52,060			(1,380	)		50,680
Prepaid expenses and other assets		7,844			56			7,900
Property and equipment		5,969			551			6,520
Intangible assets		159,755			(22,155	)		137,600
Other non-current assets		1,769			(328	)		1,441
Identifiable assets acquired		243,980			(23,264	)		220,716
Accounts payable and accrued liabilities		(18,681	)		(2,819	)		(21,500	)
Deferred tax liability		(55,542	)		8,264			(47,278	)
Other non-current liabilities		(3,241	)		-			(3,241	)
Identifiable liabilities acquired		(77,464	)		5,445			(72,019	)
Goodwill		140,325			17,604			157,929
Acquisition consideration	$	306,841		$	(215	)	$	306,626

(1) As previously reported in the notes to the Condensed Consolidated Financial Statements included in the Company's Quarterly Report on Form 10-Q as of June 30, 2012 and for the three and six months then ended.

(2) During the third quarter of 2012, the Company finalized the valuations and allocations of the fair value of certain assets and liabilities included in the Acquisition resulting in the purchase accounting adjustments detailed above.

The Company reduced the fair values of certain intangible assets by $22.2 million to better reflect market participant assumptions about the facts and circumstances existing as of the Acquisition Date.

The adjustments in the table above had a de minimis impact on the amortization of the affected intangible assets for the three and six-months ended June 30, 2012. However, the above change in domestic deferred tax liabilities resulted in a $7.2 million increase in the Company's domestic deferred tax asset valuation allowance. Adjustments to valuation allowances are further discussed in Note 12. "Income Taxes."

The above measurement period adjustments did not result from events that occurred after the Acquisition Date.

Inventories

The inventories acquired include an adjusted step-up in basis of approximately $29.0 million, which represents the fair value of the inventory less a reasonable profit margin on costs to complete and sell. The $29.0 million step-up in basis will be recognized as the inventory is sold, which is expected to be over a period of 12 to 23 months from the Acquisition Date.

Intangible Assets

The following table summarizes the fair value of definite-lived intangible assets acquired at the Acquisition Date and their estimated useful lives (in thousands, except for estimated useful lives):

			Estimated
	Fair Value		Useful Life
Purchased intangible assets:
Customer base	$	61,100	12 years
Developed technologies		58,000	12 years
Trademarks and tradenames		15,500	5 years
Other contractual agreements		3,000	2 years
Total	$	137,600

Purchased intangible assets were recorded at fair value determined using an income approach, which recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs. Indications of value are developed by discounting these benefits to their present worth at a discount rate that reflects the current return requirements of market participants.

Purchased intangible assets are finite-lived intangible assets and are being amortized over their estimated useful lives ranging from two to twelve years.

Deferred tax liabilities

Deferred tax liabilities assumed are primarily comprised of the tax impact of the temporary difference between the fair values of assets acquired and the historical tax basis of those assets. These temporary differences will reverse as the assets are amortized.

Goodwill

The excess of Acquisition consideration over the fair value of assets acquired and liabilities assumed represents goodwill. The Company believes the factors that contributed to goodwill include synergies that are specific to the Company's consolidated business, and not available to market participants, and the acquisition of a talented workforce that expands the Company's expertise in business development and the commercialization of cell and protein analysis products. The Company does not expect any portion of this goodwill to be deductible for tax purposes.

Liabilities

The above determination of fair value excludes potential amounts related to certain litigation in which eBioscience is currently involved. The Acquisition Agreement provides that eBioscience security holders shall, subject to certain limitations, indemnify Affymetrix against damages arising out of or resulting from intellectual property litigation brought against eBioscience by Life Technologies Corporation. The net assets acquired and results of operations do not reflect the potential outcome of this litigation, which is unable to be estimated at September 30, 2012. Under the terms of the Acquisition Agreement, $25.2 million of the purchase price was placed into escrow to secure eBioscience security holders' indemnification obligations to the Company.

Transaction costs

The Company cumulatively incurred approximately $9.0 million of Acquisition-related costs that are recognized as Selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Operations, of which $6.1 million was recognized during the nine months ended September 30, 2012 and $2.9 million was recognized in the year ended December 31, 2011.

Total underwriting and financing fees of approximately $8.5 million associated with the Term Loan and 4.00% Notes were also incurred and are discussed in Note 9. "Long-Term Debt Obligations."

Share-based compensation costs

The share-based compensation expense of $8.3 million recognized for the accelerated vesting of certain eBioscience options immediately vested prior to the Acquisition was recognized in the accompanying Condensed Consolidated Statements of Operations as Selling, general and administrative expense in during the nine months ended September 30, 2012.

Pro Forma Financial Information

The following pro forma financial information presents the combined results of operations for the three and nine months ended September 30, 2012 and 2011 as if the Acquisition had been completed on January 1, 2011, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition. The pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and eBioscience. Accordingly, these pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	79,624		$	82,122		$	247,021		$	256,035
Net loss		(17,643	)		(17,128	)		(36,399	)		(8,528	)
Basic and diluted earnings per share		(0.25	)		(0.25	)		(0.52	)		(0.12	)

The pro forma financial information includes non-recurring pro forma adjustments for share-based compensation expense of $8.3 million recognized for the accelerated vesting of certain eBioscience stock options immediately prior to the Acquisition, and an adjusted income tax benefit of $37.5 million that were excluded from the pro forma results for the nine months ended September 30, 2012 and included in the pro forma results for the nine months ended September 30, 2011.

The pro forma financial information also excludes non-recurring Acquisition-related transaction costs incurred by the Company of $0.2 million and $6.1 million, respectively, and by eBioscience of $0.1 million and $5.6 million, respectively. For the three and nine months ended September 30, 2011,  the Company did not incur any non-recurring Acquisition costs and eBioscience incurred 0.1 million.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUE:
Product Sales	$ 72,685	$ 57,001	$ 189,681	$ 182,608
Services and Other	6,939	6,986	21,593	19,762
Total Revenue	79,624	63,987	211,274	202,370
COSTS AND EXPENSES:
Cost of Product Sales	33,979	24,647	81,907	70,913
Cost of Services and Other	3,959	3,001	11,057	9,627
Research and Development	16,498	15,328	43,417	46,894
Selling, General and Administrative	36,302	26,915	104,752	80,802
Total Costs and Expenses	90,738	69,891	241,133	208,236
Loss From Operations	(11,114)	(5,904)	(29,859)	(5,866)
Interest Income and Other, Net	(3,933)	(2,154)	(1,631)	(3,549)
Interest Expense	2,993	991	4,191	2,866
Loss Before Income Taxes	(18,040)	(9,049)	(35,681)	(12,281)
Income Tax (Benefit) Provision	(181)	740	(37,254)	1,141
Net (Loss) Income	$ (17,859)	$ (9,789)	$ 1,573	$ (13,422)
Basic Net (Loss) Income Per Common Share	$ (0.25)	$ (0.14)	$ 0.02	$ (0.19)
Diluted Net (Loss) Income Per Common Share	$ (0.25)	$ (0.14)	$ 0.02	$ (0.19)
Shares Used In Computing Basic Net (Loss) Income Per Common Share	70,403	69,719	70,181	70,790
Shares Used In Computing Diluted Net (Loss) Income Per Common Share	70,403	69,719	70,610	70,790

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INCOME TAXES

9 Months Ended

Sep. 30, 2012

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 12—INCOME TAXES

During the three and nine months ended September 30, 2012, the Company recognized an income tax benefit of $0.2 million and $37.3 million, respectively. The income tax benefit results primarily from a reduction in the valuation allowance recorded against the Company's net deferred tax assets of $37.5 million recorded during the second quarter of 2012, due to deferred tax liabilities recognized for the difference between the fair value and carrying basis of certain tangible and intangible assets obtained as part of the Acquisition, which can be used as a source of income to support realization of certain domestic deferred tax assets.

Deferred tax liabilities recognized for the difference between the fair value and carrying basis of certain tangible and intangible assets obtained as part of the Acquisition can be used as a source of income when utilizing certain domestic deferred tax assets. The aforementioned purchase accounting adjustments that reduced certain tangible and intangible assets and reduced the related deferred tax liabilities discussed in Note 2. "Acquisition" resulted in an increase in the valuation allowance recorded against the Company's consolidated net deferred tax assets. Under Accounting Standards Codification ("ASC") 805-740, changes in an acquirer's valuation allowances that stem from a business combination should be recognized as an element of the acquirer's deferred income tax expense (benefit) in the reporting period that includes the business combination. As a result of the retrospective purchase accounting and related income tax valuation adjustments from the Acquisition, the Company recast its income tax benefit for the second quarter of 2012, lowering it by $7.2 million from net $44.3 million with a corresponding increase in valuation allowance.

For the nine months ended September 30, 2012, this income tax benefit was partially offset by an income tax provision of $0.2 million, respectively, which primarily consists of a provision for foreign taxes.

Due to the Company's history of cumulative operating losses, management concluded that, after considering all the available objective evidence, it is not more likely than not that all the Company's net deferred tax assets will be realized. Accordingly, all of the U.S. net deferred tax assets continue to be subject to a valuation allowance as of September 30, 2012.

As of September 30, 2012, excluding acquired unrecognized tax benefits of $2.1 million as a result of the Acquisition, there have been no material changes to the total amount of unrecognized tax benefits as compared to December 31, 2011.

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Document and Entity Information (USD $)	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012	Dec. 31, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	AFFYMETRIX INC
Entity Central Index Key	0000913077
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 552,544,248
Entity Common Stock, Shares Outstanding		70,691,322
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2012

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS [Text Block]

NOTE 13—RELATED PARTY TRANSACTIONS

In December 2011, the Company entered into an agreement under which it assigned one patent application and related know-how to Cellular Research, Inc. ("Cellular Research"), a company founded by the Company's Chairman, Dr. Stephen P.A. Fodor. Dr. Fodor also owns a majority of the shares of Cellular Research. Pursuant to the agreement, Cellular Research shall pay single digit royalties to Affymetrix on sales of products covered by the assigned technology, and starting in December 2015, an annual minimum fee of $100,000. Affymetrix shall also have a right of first refusal to collaborate with Cellular Research for the development of certain new products and to supply arrays to Cellular Research under certain terms and conditions. As of September 30, 2012, no royalties had been earned pertaining to this agreement.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net (Loss) Income [Abstract]
Net (Loss) Income	$ (17,859)	$ (9,789)	$ 1,573	$ (13,422)
Other Comprehensive (Loss) Income, Net of Tax, Portion [Abstract]
Foreign Currency Translation Adjustment	3,024	(33)	2,758	382
Unrealized Gains (Losses) on Available-for-Sale Securities and Non-Marketable Securities	251	398	(784)	2,436
Reclassification Adjustment for Realized (Losses) Gains Recognized in Net (Loss) Income	0	(513)	1,426	(1,586)
Unrealized (Losses) Gains on Cash Flow Hedges	(1,204)	353	(1,472)	303
Net Change in Other Comprehensive (Loss) Income, Net of Tax	2,071	205	1,928	1,535
Comprehensive (Loss) Income	$ (15,788)	$ (9,584)	$ 3,501	$ (11,887)

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2012

GOODWILL AND INTANGIBLE ASSETS [Abstract]

GOODWILL AND INTANGIBLE ASSETS

NOTE 7—GOODWILL AND INTANGIBLE ASSETS

The gross carrying amounts and net book values of the Company's definite-lived intangible assets are as follows (in thousands):

	Carrying Value, Gross						Accumulated Amortization									Intangible Assets, Net				Weighted
	December 31,				September 30,		December 31,						September 30,			December 31,		September 30,		Average
	2011		Additions		2012		2011			Additions			2012			2011		2012		Useful Life
Customer relationships	$	14,600	$	61,752	$	76,352	$	(9,510	)	$	(2,979	)	$	(12,489	)	$	5,090	$	63,863	12 years
Developed technologies		17,653		58,635		76,288		(13,179	)		(4,521	)		(17,700	)		4,474		58,588	12 years
Trademarks and tradenames		2,300		15,510		17,810		(1,126	)		(3,503	)		(4,629	)		1,174		13,181	5 years
Other contractual agreements		-		3,030		3,030		-			(1,047	)		(1,047	)		-		1,983	2 years
Licenses		79,142		1,928		81,070		(60,355	)		(400	)		(60,755	)		18,787		20,315	Variable
Total definite-lived intangible assets	$	113,695	$	140,855	$	254,550	$	(84,170	)	$	(12,450	)	$	(96,620	)	$	29,525	$	157,930

The expected future annual amortization expense of the Company's intangible assets is as follows (in thousands):

	Amortization
For the Year Ending December 31,	Expense
2012, remainder thereof	$	6,419
2013		23,473
2014		20,750
2015		14,609
2016		13,757
Thereafter		78,922
Total	$	157,930

The Company recognized goodwill of $157.9 million at the Acquisition Date in connection with the Acquisition. Refer to "Note 2. "Acquisition" for further details. Information in regards to changes in the Company's goodwill at September 30, 2012 is as follows (in thousands):

Balance at December 31, 2011	$	-
Additions:
Acquisition of eBioscience		157,929
Effects of foreign currency change		1,491
Balance at September 30, 2012	$	159,420

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INVENTORIES

9 Months Ended

Sep. 30, 2012

INVENTORIES [Abstract]

INVENTORIES

NOTE 6—INVENTORIES

At September 30, 2012 and December 31, 2011, inventories consisted of the following (in thousands):

	September 30,		December 31,
	2012		2011
Raw materials	$	10,442	$	8,635
Work-in-process		40,740		10,554
Finished goods		38,377		23,662
Total	$	89,559	$	42,851
Short-term portion	$	74,891	$	42,851
Long-term portion	$	14,668	$	-

Inventory at September 30, 2012 includes $50.7 million of inventory acquired from eBioscience that includes an adjusted step-up in basis of $29.0 million as discussed in Note 2. "Acquisition." Amortization expense on the fair value step-up during the three and nine months ended September 30, 2012 was $4.5 million and $4.9 million, respectively.

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STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE (Tables)

9 Months Ended

Sep. 30, 2012

Stockholders Equity And Share Based Compensation Expense [Abstract]

Share-based compensation expense

The Company recognized share-based compensation expense as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Costs of sales	$	403	$	267	$	1,114	$	840
Research and development		307		503		980		1,541
Selling, general and administrative		1,549		1,458		12,763		4,221
Total share-based compensation expense	$	2,259	$	2,228	$	14,857	$	6,602

Included in selling, general and administrative share-based compensation expense for the nine months ended September 30, 2012 was $8.3 million related to the acceleration of unvested stock options in connection with the Acquisition.

Fair value of options estimated at the date of grant with weighted-average assumptions

The fair value of options was estimated at the date of grant using the Black Scholes Merton option pricing model with the following weighted‑average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Risk free interest rate		0.6	%		1.2	%		0.6	%		1.8	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		67	%		67	%		67	%		67	%
Expected option term (in years)		4.6			4.5			4.6			4.5

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

During the three and nine months ended September 30, 2012, the fair value of shares under the ESPP was estimated using the following assumptions:

Risk free interest rate	0.1	%
Expected dividend yield	0.0	%
Expected volatility	67	%
Expected term (in years)	0.8

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 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. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The condensed consolidated financial statements include the accounts of Affymetrix, Inc. and its wholly owned subsidiaries ("Affymetrix" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included.

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying Condensed Consolidated Balance Sheet as of September 30, 2012, the Condensed Consolidated Statements of Operations, Comprehensive (Loss) Income for the three and nine months ended September 30, 2012 and 2011 and Cash Flows for the nine months ended September 30, 2012 are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 28, 2012. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the accompanying notes to those financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

As further discussed in Note 2. "Acquisition", the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2012 includes adjustments that were made during the three months ended September 30, 2012 upon finalization of the valuation of certain assets acquired and liabilities assumed from the acquisition of eBioscience Holdings, inc. ("eBioscience"). Such adjustments are considered to have occurred as of June 25, 2012 (the "Acquisition Date"). Thus, in future periods, the Company's financial statements as of June 30, 2012 and for the three and six months then ended will be recast to reflect these adjustments.

There have been no material changes to the Company's significant accounting policies as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 except as otherwise described below:

Inventory, Policy [Policy Text Block]

Inventories

Inventory cost is computed on an adjusted standard basis (which approximates actual cost on a first-in, first-out basis). Provisions for slow moving, potentially excess and obsolete inventories are provided based on estimated demand requirements, product life cycle and development plans, component cost trends, product pricing, product expiration and quality issues.

Inventory that is not expected to be utilized until more than 12 months from the balance sheet date is classified as long-term. Estimating the level of inventory utilization for the upcoming 12 months requires management to exercise significant judgment. The Company maintains inventory levels in excess of 12 months for certain components of work-in-progress that have useful lives of up to 10 years. Carrying such levels of inventory impacts the Company's liquidity and cash flows since the inventory will not be converted to cash for more than one year.

Business Combinations Policy [Policy Text Block]

Business Combinations

The Company's condensed consolidated financial statements include the operations of an acquired business after the completion of the acquisition. The Company accounts for acquired businesses using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date, while transaction costs are expensed as incurred, except for any debt and equity issuance costs. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to thirteen years with the amortization recognized in either cost of revenue or operating expense, as appropriate. Finite-lived intangible assets are reviewed for impairment when facts or circumstances suggest that the carrying value of such assets may not be recoverable. Additionally, during each period, the Company evaluates the estimated remaining useful lives of purchased finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.

Goodwill and intangible assets with indefinite lives are not subject to amortization, but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. The Company first conducts an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it then conducts a two-step test for impairment of goodwill. In the first step, the Company compares the fair value of its reporting units to their carrying values. If the fair values of the reporting units exceed the carrying value of the net assets, goodwill is not considered impaired and no further analysis is required. If the carrying values of the net assets exceed the fair values of the reporting units, then the second step of the impairment test must be performed in order to determine the implied fair value of the goodwill. If the carrying value of the goodwill exceeds the implied fair value, then an impairment loss equal to the difference would be recorded. For 2012, the Company will perform its annual goodwill impairment test during the fourth quarter of 2012, unless other indicators arise that would require analysis prior to the fourth quarter. No indicators have arisen as of September 30, 2012.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

Certain operations from foreign subsidiaries of the Company have a functional currency other than the U.S. dollar. All other subsidiaries have the U.S. dollar as their functional currency.

Assets and liabilities of non-U.S. subsidiaries that use the local currency as their functional currency are translated to U.S. dollars at exchange rates in effect at the balance sheet date with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income (loss) within stockholders' equity. Income and expense accounts are translated at average exchange rates during the year. For the three and nine months ended September 30, 2012, the amount of loss that was recognized in foreign currency translation adjustment included in accumulated other comprehensive income in stockholders' equity was $3.0 million and $2.8 million, respectively.

The Company's subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were insignificant and have been included in the Company's results of operations.

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NET (LOSS) INCOME PER COMMON SHARE

9 Months Ended

Sep. 30, 2012

NET (LOSS) INCOME PER COMMON SHARE (Tables) [Abstract]

NET (LOSS) INCOME PER COMMON SHARE [Text Block]

NOTE 10—NET (LOSS) INCOME PER COMMON SHARE

Basic net (loss) income per common share is calculated using the weighted‑average number of common shares outstanding during the period less the weighted‑average shares subject to repurchase. Diluted net (loss) income per common share gives effect to dilutive common stock subject to repurchase, stock options (calculated based on the treasury stock method), shares under the Company's ESPP and convertible debt (calculated using an as-if-converted method). Potentially dilutive securities are excluded from shares used in computing diluted net (loss) income per common share if their effect would be anti-dilutive.

The following table sets forth a reconciliation of basic and diluted net (loss) income per common share (in thousands except per common share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012		2011
Net (loss) income	$	(17,859	)	$	(9,789	)	$	1,573	$	(13,422	)
Shares used in computing basic net (loss) income per common share		70,403			69,719			70,181		70,790
Add effect of dilutive securities:
Employee stock compensation plans		-			-			103		-
Common stock subject to repurchase		-			-			326		-
Shares used in computing diluted net (loss) income per common share		70,403			69,719			70,610		70,790
Basic net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)
Diluted net (loss) income per common share	$	(0.25	)	$	(0.14	)	$	0.02	$	(0.19	)

The potential dilutive securities excluded from diluted earnings per common share were as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Employee stock compensation plans		6,435		6,214		6,331		6,214
Restricted stock subject to repurchase		4,041		1,794		3,724		1,794
Convertible notes		17,985		3,169		7,214		3,169
Total		28,461		11,177		17,269		11,177

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WARRANTIES

9 Months Ended

Sep. 30, 2012

WARRANTIES [Abstract]

WARRANTIES

NOTE 8—WARRANTIES

The Company provides for anticipated warranty costs at the time the associated product revenue is recognized. Product warranty costs are estimated based upon the Company's historical experience and the applicable warranty period. The Company periodically reviews the adequacy of its warranty reserve and adjusts, if necessary, the warranty percentage and accrual based on actual experience and estimated costs to be incurred. Information in regards to the changes in the Company's product warranty liability for the nine months ended September 30, 2012 is as follows (in thousands):

Balance at December 31, 2011	$	1,500
Additions charged to cost of product sales		335
Repairs and replacements		(469	)
Balance at September 30, 2012	$	1,366

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LONG-TERM DEBT OBLIGATIONS

9 Months Ended

Sep. 30, 2012

LONG-TERM DEBT OBLIGATIONS [Abstract]

LONG-TERM DEBT OBLIGATIONS [Text Block]

NOTE 9—LONG-TERM DEBT OBLIGATIONS

Term Loan

On June 25, 2012, the Company entered into a credit agreement (the "Credit Agreement") by, and among, Affymetrix and its domestic subsidiaries, and General Electric Capital Corporation ("GE Capital"), Silicon Valley Bank and other financial institutions party thereto from time to time (collectively, the "Lenders"), as well as certain securities affiliates of the Lenders. The Credit Agreement provides for the Term Loan in an aggregate principal amount of $85.0 million and a revolving credit facility in an aggregate principal amount of $15.0 million (the "Revolving Credit Facility" and, together with the Term Loan, the "Senior Secured Credit Facility"), each with a term of five years. As of September 30, 2012, the Company borrowed a total of $85.0 million under the Term Loan which was used to finance a portion of the Acquisition.

At the option of the Company (subject to certain limitations), borrowings under the Credit Agreement bear interest at either a base rate or at the London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin. Under the Base Rate Option, interest will be at the base rate plus 4.00% per annum, calculated on the basis of the actual number of days elapsed in a year of 365 or 366 days (as applicable) and payable quarterly in arrears. The base rate will be equal to the greatest of (a) the rate last quoted by The Wall Street Journal (or another national publication selected by GE Capital) as the U.S. "Prime Rate," (b) the federal funds rate, plus 0.50% per annum and (c) LIBOR for an interest period of one month, plus 1.00% per annum. However, the base rate will not be less than a floor of 2.50% per annum. Under the LIBOR Option, interest will be determined based on interest periods to be selected by Affymetrix of one, two, three or six months (and, to the extent available to all relevant lenders, nine or 12 months) and will be equal to LIBOR, plus 5.00%, calculated based on the actual number of days elapsed in a 360-day year. However, LIBOR will be deemed not to be less than a floor of 1.50% per annum. Interest will be paid at the end of each interest period or, in the case of interest periods longer than three months, quarterly. During the three months ended September 30, 2012, the Company entered into its Interest Rate Swap as required by the terms of the Credit Agreement with a third-party lending institution. Refer to Note 4. "Financial Instruments–Interest Rate Swap" for further information. At September 30, 2012, the applicable interest rate was approximately 6.50%.

The loans and other obligations under the Senior Secured Credit Facility are (i) guaranteed by substantially all of the Company's domestic subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of Affymetrix and each guarantor (subject to certain exceptions and limitations).

The Credit Agreement requires the Company to maintain a fixed charge coverage ratio of at least 1.5 to 1.0, a senior leverage multiple not exceeding initially 2.00 to 1.00 and stepping down to 1.50 to 1.00 and a total leverage multiple not exceeding initially 4.75 to 1.00 and stepping down to 3.50 to 1.00. The Credit Agreement also includes other covenants, including negative covenants that, subject to certain exceptions, limit Affymetrix', and that of certain of its subsidiaries', ability to, among other things: (i) incur additional debt, including guarantees by the Company or its subsidiaries, (ii) make investments, pay dividends on capital stock, redeem or repurchase capital stock, redeem or repurchase the Company's senior convertible notes or any subordinated obligations, (iii) create liens and negative pledges, (iv) make capital expenditures, (v) dispose of assets, (vi) make acquisitions, (vii) create or permit restrictions on the ability of Affymetrix' subsidiaries to pay dividends or make distributions to Affymetrix, (viii) engage in transactions with affiliates, (ix) engage in sale and leaseback transactions, (x) consolidate or merge with or into other companies or sell all or substantially all the Company's assets and (xi) change their nature of business, their organizational documents or their accounting policies. As of September 30, 2012, the Company was in compliance with these covenants.

The Company is required to make the following mandatory prepayments: (a) annual prepayments in an amount equal to 50% of excess cash flow (as defined in the Credit Agreement), subject to a leverage-based stepdown, (b) prepayments in an amount equal to 100% of the net cash proceeds of issuances or incurrences of debt obligations of Affymetrix and its subsidiaries (other than debt incurrences expressly permitted by the Credit Agreement), (c) prepayments in an amount equal to 100% of the net proceeds of asset sales in excess of $2.5 million annually (subject to certain reinvestment rights) and (d) prepayments in an amount equal to any indemnification payments or similar payments received under the Acquisition Agreement, subject to certain exclusions. During the three months ended September 30, 2012, the Company made a payment of $2.1 million.

The Credit Agreement also contains events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-default and cross-acceleration to other indebtedness in excess of specified amounts, monetary judgment defaults in excess of specified amounts, bankruptcy or insolvency, actual or asserted invalidity or impairment of any part of the credit documentation (including the failure of any lien on a material portion of the collateral to remain perfected) and change of ownership or control defaults. In addition, the occurrence of a "fundamental change" under the indenture governing the 4.00% Notes or the indenture governing the Company's 3.50% Notes would be an event of default under the Credit Agreement. As of September 30, 2012, there have been no events of default under the Credit Agreement.

Additionally, the proceeds from the Term Loan are net of debt issuance costs of approximately $4.5 million that are being amortized over the 5-year term of the Senior Secured Credit Facility beginning on June 25, 2012.

As of September 30, 2012, the Company had an outstanding principal balance of $82.9 million and incurred $1.7 million and $1.8 million, respectively, in interest under the Senior Secured Credit Facility for the three and nine months ended September 30, 2012.

The Term Loan will amortize in quarterly installments in amounts resulting in an annual amortization of 10% during the first year, 15% during the second year, 15% during the third year, 20% during the fourth year and 40% during the fifth year after June 25, 2012. The principal amount of unpaid maturities per the Credit Agreement is as follows (in thousands):

2012, remainder thereof	$	-
2013		9,563
2014		12,750
2015		13,812
2016		17,000
Thereafter		29,750
Total	$	82,875

4.00% Convertible Senior Notes

On June 25, 2012, the Company issued $105.0 million principal amount of 4.00% Convertible Senior Notes due July 1, 2019. The net proceeds, after debt issuance costs totaling $3.9 million from the 4.00% Notes offering, were $101.1 million. The 4.00% Notes bear interest of 4.00% per year payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2013 until the maturity date of July 1, 2019, unless converted, redeemed or repurchased earlier. The debt issuance costs are being amortized over the effective life of the 4.00% Notes, which is 7 years.

Holders of the 4.00% Notes may convert their 4.00% Notes into shares of the Company's stock at their option any time prior to the close of business on the business day immediately preceding the maturity date. The 4.00% Notes are initially convertible into approximately 170.0319 shares of the Company's common stock per $1,000 principal amount of notes, which equates to 17,857,143 shares of common stock, or an initial conversion price of $5.88 per share of common stock. The conversion rate is subject to certain customary anti-dilution adjustments. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances. Holders may also require the Company to repurchase for cash their notes upon certain fundamental changes.

On or after July 1, 2017, the Company can redeem for cash all or part of the 4.00% Notes if the last reported sale price per share of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending within 5 trading days prior to the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 4.00% Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

As of September 30, 2012, outstanding balance on the 4.00% Notes was $105.0 million and interest incurred for the three and nine months ended September 30, 2012 was $1.2 million and $1.3 million, respectively.

3.50% Senior Convertible Notes

During the first quarter of 2012, the Company repurchased approximately $91.6 million of aggregate principal amount of its 3.50% Notes in private transactions for total cash consideration of $92.1 million, including accrued interest of $0.5 million. Such notes were purchased at par and accelerated amortization of deferred financing costs of $0.3 million was recognized. Both the Company and the Holders of the remaining $3.9 million aggregate principal amount of 3.50% Notes have the option to settle the notes at a price equal to 100% of the outstanding principal amount plus accrued interest on January 15, 2013. For the three and nine months ended September 30, 2012, interest incurred on the 3.50% Notes was less than $0.1 million and $1.1 million, respectively.

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LEGAL PROCEEDINGS

9 Months Ended

Sep. 30, 2012

LEGAL PROCEEDINGS [Abstract]

LEGAL PROCEEDINGS

NOTE 11—LEGAL PROCEEDINGS

The Company has been in the past, and continues to be, a party to litigation which has consumed, and may continue to consume, substantial financial and managerial resources. The Company could incur substantial costs and divert attention of management and technical personnel in defending against litigation, and any adverse ruling or perception of an adverse ruling could have a material adverse impact on the Company's stock price. The results of any litigation or any other legal proceedings are uncertain and as of the date of this report, the Company has not accrued any liability with respect to any of the litigation matters listed below:

E8 Pharmaceuticals LLC

On July 1, 2008, the Company was named as a defendant in a complaint filed by plaintiffs E8 Pharmaceuticals LLC and Massachusetts Institute of Technology ("MIT") in the United States District Court of Massachusetts. In the complaint, the plaintiffs allege that the Company is infringing one patent owned by MIT and licensed to E8 Pharmaceuticals by making and selling the Company's GeneChip® products to customers and teaching its customers how to use the products. The plaintiffs seek a permanent injunction enjoining the Company from further infringement, unspecified monetary damages, enhanced damages pursuant to 35 U.S.C. §284, costs, attorneys' fees and other relief as the court deems just and proper. On September 4, 2012, the District Court issued its ruling construing key claims of the patent at issue. The parties thereafter stipulated to the dismissal of plaintiffs' claims and the Company's counterclaims, and on September 21, 2012, the District Court dismissed the lawsuit in its entirety. On September 26, 2012, the plaintiffs filed an appeal with the United States Court of Appeals for the Federal Circuit. The Company will continue to vigorously defend against the plaintiffs' claims.

Enzo Litigation

On October 28, 2003, Enzo Life Sciences, Inc., a wholly-owned subsidiary of Enzo Biochem, Inc. (collectively "Enzo"), filed a complaint against the Company that is pending in the United States District Court for the Southern District of New York for breach of contract, injunctive relief and declaratory judgment. The Enzo complaint relates to a 1998 distributorship agreement with Enzo under which the Company served as a non-exclusive distributor of certain reagent labeling kits supplied by Enzo. In its complaint, Enzo seeks monetary damages and an injunction against the Company from using, manufacturing or selling Enzo products and from inducing collaborators and customers to use Enzo products in violation of the 1998 agreement. Enzo also seeks the transfer of certain Affymetrix patents to Enzo.

On November 10, 2003, the Company filed a complaint against Enzo in the United States District Court for the Southern District of New York for declaratory judgment, breach of contract and injunctive relief relating to the 1998 agreement. In its complaint, the Company alleges that Enzo has engaged in a pattern of wrongful conduct against it and other Enzo labeling reagent customers by, among other things, asserting improperly broad rights in its patent portfolio, improperly using the 1998 agreement and distributorship agreements with others in order to corner the market for non-radioactive labeling reagents, and improperly using the 1998 agreement to claim ownership rights to the Company's proprietary technology. There is no trial date in the actions between Enzo and the Company.

On April 6, 2012, Enzo filed a complaint against the Company in the United States District Court for the District of Delaware. In the complaint, plaintiff alleges that Affymetrix is infringing U.S. Patent No. 7,064,197 by making and selling certain GeneChip® products. The plaintiff seeks a preliminary and permanent injunction enjoining the Company from further infringement and unspecified monetary damages. The Company will vigorously defend against the plaintiff's case.

Life Technologies Litigation

On October 12, 2010, Life Technologies Corporation filed a complaint against eBioscience in the United States District Court for the Southern District of California, alleging that eBioscience is infringing U.S. Patent Nos. 6,423,551, 6,699,723, and 6,927,069 related to certain eBioscience products. The plaintiff seeks a preliminary and permanent injunction enjoining eBioscience from further infringement and unspecified monetary damages. On August 30, 2012, Life Technologies Corporation filed a second complaint against eBioscience in the United States District Court for the Southern District of California, alleging that eBioscience is infringing U.S. Patent Nos. 8,071,359, 8,071,360, and 8,071,361, related to certain eBioscience products. The plaintiff seeks a preliminary and permanent injunction enjoining eBioscience from further infringement and further unspecified monetary damages. The Company is vigorously defending against these claims. Pursuant to the Acquisition Agreement, eBioscience security holders shall, subject to certain limitations, indemnify the Company against damages arising out of or resulting from the claims.

Administrative Proceedings

The Company's intellectual property is subject to a number of significant administrative actions. These proceedings could result in the Company's patent protection being significantly modified or reduced, and the incurrence of significant costs and the consumption of substantial managerial resources. For the nine months ended September 30, 2012, the Company did not incur significant costs in connection with administrative proceedings.

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FAIR VALUE MEASUREMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets:
Total	$ 9,912	$ 62,438
Foreign currency derivative assets	199	940
Liabilities:
Foreign Currency Derivative Liabilities	886	217
Fair Value, Assets and Liabilities, Level 3	0	0
Quoted Prices In Active Markets (Level 1) [Member]
Assets:
Total	0	105
Foreign currency derivative assets	0	0
Liabilities:
Foreign Currency Derivative Liabilities	0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total	9,912	62,333
Foreign currency derivative assets	199	940
Liabilities:
Foreign Currency Derivative Liabilities	886	217
U.S. Government Obligations and Agency Securities [Member]
Assets:
Total	7,362	19,598
U.S. Government Obligations and Agency Securities [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Assets:
Total	0	0
U.S. Government Obligations and Agency Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total	7,362	19,598
U.S. corporate debt [Member]
Assets:
Total	663	25,100
U.S. corporate debt [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Assets:
Total	0	0
U.S. corporate debt [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total	663	25,100
Foreign Government Obligations and Agency Securities [Member]
Assets:
Total		2,810
Foreign Government Obligations and Agency Securities [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Assets:
Total		0
Foreign Government Obligations and Agency Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total		2,810
Foreign Corporate Debt and Equity Securities [Member]
Assets:
Total	1,887	14,930
Foreign Corporate Debt and Equity Securities [Member] | Quoted Prices In Active Markets (Level 1) [Member]
Assets:
Total		105
Foreign Corporate Debt and Equity Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total	$ 1,887	$ 14,825

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LONG-TERM DEBT OBLIGATIONS, Term Loan Maturities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Long-term Debt, Fiscal Year Maturity Term Loan [Abstract]
2012, remainder thereof	$ 0
2013	9,563
2014	12,750
2015	13,812
2016	17,000
Thereafter	29,750
Total	$ 82,875

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2012

FAIR VALUE MEASUREMENTS [Abstract]

Financial assets and liabilities measured at fair value on a recurring basis

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 (in thousands)

			Significant
	Quoted Prices		Other
	In Active		Observable
	Markets		Inputs
	(Level 1)		(Level 2)		Total
September 30, 2012:
Assets:
U.S. government obligations and agency securities	$	-	$	7,362	$	7,362
U.S. corporate debt		-		663		663
Foreign corporate debt and equity securities		-		1,887		1,887
Total	$	-	$	9,912	$	9,912
Derivative assets	$	-	$	199	$	199
Liabilities:
Derivative liabilities	$	-	$	886	$	886
December 31, 2011:
Assets:
U.S. government obligations and agency securities	$	-	$	19,598	$	19,598
U.S. corporate debt		-		25,100		25,100
Foreign government obligations and agency securities		-		2,810		2,810
Foreign corporate debt and equity securities		105		14,825		14,930
Total	$	105	$	62,333	$	62,438
Derivative assets	$	-	$	940	$	940
Liabilities:
Derivative liabilities	$	-	$	217	$	217

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WARRANTIES (Tables)

9 Months Ended

Sep. 30, 2012

WARRANTIES [Abstract]

Changes in entity's product warranty liability

Balance at December 31, 2011	$	1,500
Additions charged to cost of product sales		335
Repairs and replacements		(469	)
Balance at September 30, 2012	$	1,366

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WARRANTIES (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Changes in Entity's Product Warranty Liability [Abstract]
Balance at December 31, 2011	$ 1,500
Additions Charged to Cost of Product Sales	335
Repairs and Replacements	(469)
Balance at September 30, 2012	$ 1,366

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FINANCIAL INSTRUMENTS, Gain (Loss) by Hedging Relationship (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Derivative designated as hedging instrument [Member]
Effect of Entity's Derivative Instruments, Net of Tax, on Condensed Statements of Operations [Abstract]
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net	$ (1,204)	$ 353	$ (1,472)	$ 303
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	140	0	837	0
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net	40	(66)	68	(79)
Derivative not designated as hedging instrument [Member]
Effect of Entity's Derivative Instruments, Net of Tax, on Condensed Statements of Operations [Abstract]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ (353)	$ 625	$ (479)	$ (1,892)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income	$ 1,573	$ (13,422)
Adjustments To Reconcile Net Income (Loss) to Net cash Provided By Operating Activities:
Depreciation and Amortization	25,335	24,974
Amortization of Inventory Step-Up In Fair Value	4,855	0
Share-Based Compensation Including Acquisition	14,857	6,602
Deferred Tax Assets	(34,042)	20
Long Lived Assets Held-for-sale, Impairment Charges	4,000	0
Other Non-Cash Transactions	1,336	4,402
Changes in Operating Assets and Liabilities:
Accounts Receivable, Net	1,171	11,180
Inventories	(309)	1,501
Prepaid Expenses and Other Assets	1,014	3,253
Accounts Payable and Accrued Liabilities	(16,603)	(4,948)
Deferred Revenue	212	(1,755)
Other Long-Term Liabilities	(1,420)	1,807
Net Cash Provided By Operating Activities	1,979	33,614
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired	(307,796)	0
Capital Expenditures	(6,457)	(4,920)
Purchases of Available-For-Sale Securities	0	(78,951)
Proceeds From Sales of Available-For-Sale Securities	52,063	27,974
Proceeds From Maturities of Available-For-Sale Securities	638	19,350
Capital Distribution From Non-Marketable Investments	681	0
Proceeds From Sale of Property and Equipment	0	400
Purchase of Technology Rights	(2,303)	(150)
Net Cash Used In Investing Activities	(263,174)	(36,297)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, Net	131	(650)
Net Proceeds From Term Loan	80,500	0
Payments of Term Loan	(2,125)	0
Net Proceeds From Issuance of 4.00% Convertible Senior Notes	101,062	0
Repurchase of 3.50% Senior Convertible Notes	(91,614)	(3)
Net Cash Provided By (Used In) Financing Activities	87,954	(653)
Effect of Exchange Rate Changes On Cash and Cash Equivalents	330	243
Net Decrease In Cash and Cash Equivalents	(172,911)	(3,093)
Cash and Cash Equivalents At Beginning Of Period	201,937	35,484
Cash and Cash Equivalents At End Of Period	$ 29,026	$ 32,391

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STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE

9 Months Ended

Sep. 30, 2012

Stockholders Equity And Share Based Compensation Expense [Abstract]

STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE

NOTE 5—STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE

Share-based Compensation Plans

The Company has a share-based compensation program, most recently, the 2000 Amended and Restated Equity Incentive Plan (the "Plan"), that provides the Board of Directors broad discretion in creating equity incentives for employees, officers, directors and consultants. This program includes incentive and non-qualified stock options and non-vested stock awards (also known as restricted stock) granted under various stock plans. As of September 30, 2012, the Company had approximately 5.0 million shares of common stock reserved for future issuance under its share-based compensation plans including 2.0 million shares of common stock authorized for issuance under the Company's 2012 Inducement Plan that was adopted by the Board of Directors in June 2012. New shares are issued as a result of stock option exercises, restricted stock units vesting and restricted stock award grants.

The Company recognized share-based compensation expense as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Costs of sales	$	403	$	267	$	1,114	$	840
Research and development		307		503		980		1,541
Selling, general and administrative		1,549		1,458		12,763		4,221
Total share-based compensation expense	$	2,259	$	2,228	$	14,857	$	6,602

Included in selling, general and administrative share-based compensation expense for the nine months ended September 30, 2012 was $8.3 million related to the acceleration of unvested stock options in connection with the Acquisition.

As of September 30, 2012, $18.4 million of total unrecognized share-based compensation expense related to non-vested awards is expected to be recognized over the respective vesting terms of each award through 2016. The weighted‑average term of the unrecognized share-based compensation expense is 2.8 years.

Stock Options

The fair value of options was estimated at the date of grant using the Black Scholes Merton option pricing model with the following weighted‑average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Risk free interest rate		0.6	%		1.2	%		0.6	%		1.8	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		67	%		67	%		67	%		67	%
Expected option term (in years)		4.6			4.5			4.6			4.5

The risk free interest rate for periods within the contractual life of the Company's stock options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term is derived from an analysis of the Company's historical exercise trends over ten years. The expected volatility for the three and nine months ended September 30, 2012 and 2011 is based on a blend of historical and market‑based implied volatility. Using the assumptions above, the weighted‑average grant date fair value of options granted during the three months ended September 30, 2012 and 2011, was $2.11 and $3.31, respectively, and during the nine months ended September 30, 2012 and 2011, was $2.19 and $3.05, respectively.

Performance-Based Awards

In 2011, the Compensation Committee of the Company's Board of Directors approved a grant of performance-based restricted stock units ("PRSUs") under the Plan to an executive officer that is earned annually in four equal tranches (the "Performance Period"). The PRSUs entitle the executive to receive a certain number of shares of the Company's common stock based on the Company's satisfaction of certain financial and strategic performance goals as set and approved by the Board of Directors annually during the first quarter of the specific performance period. Based on the achievement of the performance conditions during each Performance Period, the final settlement of the PRSU award will vest twelve months following the end of each Performance Period. The PRSU award will be forfeited if the performance goals are not met or if the executive officer is no longer employed at the vest date.

The number of shares underlying the PRSUs that were granted to the executive officer during 2011 totaled 240,000 shares. As of September 30, 2012, performance conditions pertaining to 60,000 shares of the PRSUs, with a grant date fair value of $6.71 per PRSU, were achieved and the fair value of the vested PRSU's is being amortized on a straight-line basis over the remaining service period. The Company expects that an additional 15,000 shares of the PRSUs, with a grant date fair value of $4.63 per PRSU, will vest and the fair value of such PRSU's is being amortized on a straight-line basis over the related service period. The total compensation cost related to PRSUs granted but not yet recognized was approximately $0.1 million as of September 30, 2012.

During July 2012, the Compensation Committee granted certain PRSUs following the acquisition of eBioscience referred to as an Acquisition Performance Share Program (the "Program"). The purpose of the Program is to align key management and senior leadership with stockholders' interests and to retain key employees. The measurement periods for the Program are the twelve month periods ended June 30, 2012 and June 30, 2013, respectively. Members of eBioscience management and other key employees are participating in the Program. Awards granted under the Program are granted in the form of performance shares pursuant to the terms of our Plan. If pre-determined eBioscience specific performance goals are met, shares of stock will be granted to the recipient, vesting one month following the performance period representing the date of certification of achievement, contingent upon the recipient's continued service to the Company.

For the nine months ended September 30, 2012, the Company awarded 911,500 PRSUs under the Program at a grant date fair value of $4.16 per PRSU and expects 100% of the PRSUs will vest. The fair value of the PRSUs is being amortized on a straight-line basis over the related service period. The total compensation cost related to PRSUs granted but not yet recognized was approximately $2.6 million as of September 30, 2012.

Employee Stock Purchase Plan

In August 2011, the Company's Board of Directors adopted the 2011 Employee Stock Purchase Plan ("ESPP") that was approved by the Company's stockholders on May 11, 2012. The ESPP reserved a total of 7.0 million shares of the Company's common stock for issuance under the plan and permits eligible employees to purchase common stock at a discount through payroll deductions.

The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or the last day of the purchase period, whichever is lower. The offering periods are twelve months and include two six month purchase periods that result in a look-back for determining the purchase price of up to 12 months. Employees can invest up to 15% of their gross compensation through payroll deductions. In no event would an employee be permitted to purchase more than 750 shares of common stock during any six-month purchase period. The initial offering period commenced in November 2011. As of September 30, 2012, there were 279 participants in the plan and approximately 133,051 shares were issued under the ESPP during the period at a subscription date fair value of $4.23 per share. Included in total share-based compensation cost for the three and nine months ended September 30, 2012 was $0.1 million and $0.5 million, respectively, related to the ESPP.

During the three and nine months ended September 30, 2012, the fair value of shares under the ESPP was estimated using the following assumptions:

Risk free interest rate	0.1	%
Expected dividend yield	0.0	%
Expected volatility	67	%
Expected term (in years)	0.8

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LONG-TERM DEBT OBLIGATIONS (Tables)

9 Months Ended

Sep. 30, 2012

LONG-TERM DEBT OBLIGATIONS [Abstract]

Schedule of Maturities of Long-term Debt [Table Text Block]

The Term Loan will amortize in quarterly installments in amounts resulting in an annual amortization of 10% during the first year, 15% during the second year, 15% during the third year, 20% during the fourth year and 40% during the fifth year after June 25, 2012. The principal amount of unpaid maturities per the Credit Agreement is as follows (in thousands):

2012, remainder thereof	$	-
2013		9,563
2014		12,750
2015		13,812
2016		17,000
Thereafter		29,750
Total	$	82,875

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FINANCIAL INSTRUMENTS, Contractual Maturities of Available-For-Sale Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Available-For-Sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Available-For-Sale Securities, Debt Maturities, Next Twelve Months, Fair Value	$ 2,575	$ 7,937
Available-For-Sale Securities, Debt Maturities, Year Two Through Three, Fair Value	5,717	25,785
Available-For-Sale Securities, Debt Maturities, after Year Three, Fair Value	1,620	28,716
Total Available-For-Sale Securities	$ 9,912	$ 62,438

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ACQUISITION (Tables)

9 Months Ended

Sep. 30, 2012

ACQUISITION [Abstract]

Total purchase price

The following table summarizes the accounting treatment of the purchase price paid (in thousands):

Purchase consideration	$	306,626
Share-based compensation expense		8,265
Total purchase price	$	314,891

Fair values of assets acquired, liabilities assumed and goodwill

The following table summarizes the fair values of assets acquired, liabilities assumed and goodwill (in thousands) at the Acquisition Date, as well as retrospective purchase accounting adjustments (also referred to as "measurement period adjustments") made with respect to the six months ended June 30, 2012:

	Before
	Adjustment						After
	of Final						Adjustment
	Allocation			Measurement			of Final
	of Purchase			Period			Allocation of
	Price(1)			Adjustments(2)			Purchase Price
Cash and cash equivalents	$	7,095		$	-		$	7,095
Accounts receivable, net		9,488			(8	)		9,480
Inventories		52,060			(1,380	)		50,680
Prepaid expenses and other assets		7,844			56			7,900
Property and equipment		5,969			551			6,520
Intangible assets		159,755			(22,155	)		137,600
Other non-current assets		1,769			(328	)		1,441
Identifiable assets acquired		243,980			(23,264	)		220,716
Accounts payable and accrued liabilities		(18,681	)		(2,819	)		(21,500	)
Deferred tax liability		(55,542	)		8,264			(47,278	)
Other non-current liabilities		(3,241	)		-			(3,241	)
Identifiable liabilities acquired		(77,464	)		5,445			(72,019	)
Goodwill		140,325			17,604			157,929
Acquisition consideration	$	306,841		$	(215	)	$	306,626

Definite-lived intangible assets acquired and their estimated useful lives

The following table summarizes the fair value of definite-lived intangible assets acquired at the Acquisition Date and their estimated useful lives (in thousands, except for estimated useful lives):

			Estimated
	Fair Value		Useful Life
Purchased intangible assets:
Customer base	$	61,100	12 years
Developed technologies		58,000	12 years
Trademarks and tradenames		15,500	5 years
Other contractual agreements		3,000	2 years
Total	$	137,600

Pro forma financial information

The following pro forma financial information presents the combined results of operations for the three and nine months ended September 30, 2012 and 2011 as if the Acquisition had been completed on January 1, 2011, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition. The pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and eBioscience. Accordingly, these pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	79,624		$	82,122		$	247,021		$	256,035
Net loss		(17,643	)		(17,128	)		(36,399	)		(8,528	)
Basic and diluted earnings per share		(0.25	)		(0.25	)		(0.52	)		(0.12	)