This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements involve a number of risks and uncertainties. These include, but are not limited to: global business and economic conditions; operating results; new product introductions and sales; competitive conditions; capital expenditures and resources; manufacturing capacity utilization; customer demand and inventory levels; intellectual property matters; mergers and acquisitions and integration activities; and the risk factors set forth in Part II, Item 1A "Risk Factors" to this Report on Form 10-Q. As a result of these risks and uncertainties, actual results could differ from those anticipated in the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly revise these statements for future events or new information after the date of this Report on Form 10-Q.

This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes included in this report and the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 29, 2009 filed with the SEC. Operating results for the three months and six months ended September 27, 2009 are not necessarily indicative of operating results for an entire fiscal year.

Forward-looking statements, which are generally identified by words such as "anticipates," "expects," "plans," and similar terms, include statements related to revenues and gross profit, research and development activities, selling, general and administrative expenses, intangible expenses, interest income and other, taxes, capital spending and financing transactions, as well as statements regarding successful development and market acceptance of new products, industry and overall economic conditions and demand, and capacity utilization.

Results of Operations

We design, develop, manufacture and market a broad range of high-performance, mixed-signal semiconductor solutions for the advanced communications, computing and consumer industries. This is achieved by developing detailed systems-level knowledge, and applying our fundamental semiconductor heritage in high speed serial interfaces, timing, switching and memory to create solutions to compelling technology problems faced by customers.

In the first quarter of fiscal 2010, as part of a refinement of our business strategy, we incorporated multi-port products from the Communications segment into the Computing and Consumer segment. This change in segment reporting had no impact on our consolidated balance sheets, statements of operations, statements of cash flows or statements of stockholders' equity for any periods. The segment information for three month and six months ended September 28, 2008 has been adjusted retrospectively to conform to the current period presentation. The Chief Executive Officer has been identified as the Chief Operating Decision Maker.

Our reportable segments include the following:

††† Communications segment: includes Rapid I/O switching solutions, flow-control management devices, FIFOs, integrated communications processors, high-speed SRAM, military application, digital logic, telecommunications and network search engines (divested in the second quarter of fiscal 2010),.

††† Computing and Consumer segment: includes clock generation and distribution products, PCI Express switching and bridging solutions, high-performance server memory interfaces, PC audio, video products and multi-port products.

Revenues

(in thousands)                                   Three months ended                  Six months ended
                                           Sept. 27,                          Sept. 27,
                                              2009       Sept. 28, 2008          2009       Sept. 28, 2008
Communications                             $   60,314      $       86,239     $  117,974      $      172,900
Computing and Consumer                         79,190             114,302        137,484             215,849
  Total                                    $  139,504      $      200,541     $  255,458      $      388,749

Communications Segment
Revenues in our Communications segment decreased $25.9 million, or 30% in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009. The decrease was primarily driven by revenue declines in our networking division, as a result of divestiture of the NWD assets on July 17, 2009, as well as overall weakness in our communications end market due to the economic downturn. Revenues from our SRAM, multi-port, FIFO, and digital logic products decreased 22% year over year due to the softness in the communications integrated circuit market. Revenues from our communications timing and telecom products decreased 12% year over year due to reduced demand for our timing products in the communications markets. Our military products also decreased 33% year over year. Partially offsetting these decreases was an increase in our flow control management products as a result of the Tundra acquisition.

Computing and Consumer Segment
Revenues in our Computing and Consumer segment decreased $35.1 million, or 31% in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009 as a result of the global economic downturn and increased competition in the consumer market. Revenues within our Computing and Multimedia division decreased 26%, driven by lower end customer demand for systems using our personal computing and consumer products and erosion of average selling prices. Revenues within our Enterprise Computing division decreased 42%, driven by the continued ramp down of our Advanced Memory Buffer (AMB) products. Partially offsetting these decreases was an increase in our Video and Display division as a result of the Silicon Optix acquisition in the third quarter of fiscal 2009 and new products ramp up in the the second quarter of fiscal 2010.

Revenues in Asia Pacific (APAC), North America, Japan and Europe accounted for 68%, 17%, 9% and 6%, respectively, of our consolidated revenues in the second quarter of fiscal 2010 compared to 66%, 18%, 8% and 8%, respectively, in the second quarter of fiscal 2009. We expect that a significant portion of our revenue will continue to be represented by sales to our customers in Asia, as many of our largest customers utilize manufacturers in the APAC region.

Revenues (recent trends and outlook). We currently anticipate overall revenues will be flat in the third quarter of fiscal 2010.

Revenues (first six months of fiscal 2010 compared to first six months of fiscal 2009). Our year-to-date revenues through the second quarter of fiscal 2010 were $255.5 million, a decrease of $133.3 million, or 34% when compared to the same period one year ago. Revenues in our Communications segment decreased $54.9 million, or 32%, driven by our divestiture of the NWD assets on July 17, 2009 and lower revenues from SRAM, multi-port, FIFO, and digital logic products. These decreases were partially offset by the increased sales of our flow control management products as a result of the Tundra acquisition. Revenues in our Computing and Consumer segment decreased $78.5 million, or 36%, due to broad demand weakness from our personal computing and consumer products end markets. The decreases were partially offset by the growth in Video products revenues as a result of the Silicon Optix's acquisition and new products ramp up.

Included in the caption "Deferred income on shipments to distributors" on the Condensed Consolidated Balance Sheets are amounts related to shipments to certain distributors for which revenue is not recognized until our product has been sold by the distributor to an end customer. The components of deferred income on shipments to distributors as of September 27, 2009 and March 29, 2009 were as follows:

                                                Sept. 29,       March 29,
(in thousands)                                     2009           2009
Gross deferred revenue                         $    21,030     $    21,302
Gross deferred costs                                 4,020           4,764
Deferred income on shipments to distributors   $    17,010     $    16,538

The gross deferred revenue represents the gross value of shipments to distributors at the list price billed to the distributor less any price protection credits provided to them in connection with reductions in list price while the products remain in their inventory. Based on our history, the amount ultimately recognized as revenue will be lower than this amount as a result of ship from stock pricing credits which are issued in connection with the sell through of the product to an end customer. As the amount of price adjustments subsequent to shipment is dependent on the overall market conditions, the levels of these adjustments can fluctuate significantly from period to period. Historically, this amount has represented an average of approximately 25% of the list price billed to the customer. As these credits are issued, there is no impact to working capital as this reduces both accounts receivable and deferred revenue. The gross deferred costs represent the standard costs (which approximate actual costs) of products we sell to the distributors. The deferred income on shipments to distributors increased $0.5 million or 3% in the first six months of fiscal 2010 compared to the fourth quarter of fiscal 2009. The increase was primarily attributable to the inclusion of Tundra shipments to distributors in the second quarter of fiscal 2010, which had higher margins than IDT products.

Gross Profit

(in thousands)           Three months ended                       Six months ended
                 Sept. 27, 2009      Sept. 28, 2008      Sept. 27, 2009      Sept. 28, 2008
Gross profit        $      51,131      $       87,153      $       98,296      $      171,612
Gross margin                   37 %                43 %                38 %                44 %

Gross profit (the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009). Gross profit for the second quarter of fiscal 2010 was $51.1million, a decrease of $36.0 million compared to the second quarter of fiscal 2009. Gross margin for the second quarter of fiscal 2010 was 37% compared to 43% in the second quarter of fiscal 2009. The decrease in gross profit was primarily driven by lower revenue, lower utilization of our fabrication facility and an unfavorable shift in the mix of products sold. The utilization of our manufacturing capacity in Oregon decreased from approximately 79% of equipped capacity in the second quarter of fiscal 2009 to 77% of equipped capacity in the second quarter of fiscal 2010. In addition, our gross profit was negatively impacted by $7.6 million related to the sale of acquired inventory valued at fair market value, less an estimated selling cost, associated with our acquisition of Tundra. We also recorded $5.7 million of severance and benefit costs related to a reduction in force associated with our acquisition of Tundra and the restructuring action within our Oregon fabrication facility. Partially offsetting these decreases, our gross margin benefited from a $10.3 million decrease in intangible asset amortization as we wrote down the carrying value of intangible assets in fiscal 2009. In addition, a portion of the intangible assets are being amortized on an accelerated method, resulting in decreased amortization over time. Furthermore, our gross margin benefited from $0.7 million and $1.1 million decreases in performance related bonuses and equipment expenses, respectively, as a result of our cost control efforts in response to the challenging economic times. Finally, in the second quarter of fiscal 2010 and 2009, gross profit benefited by approximately $0.9 million and $1.1 million, respectively, from the sale of inventory previously written down.

Gross Profit (first six months of fiscal 2010 compared to the first six months of fiscal 2009). Our year to date gross profit through the second quarter of fiscal 2010 was $87.2 million, a decrease of $84.5 million, or 49% compared to the same period one year ago. Our gross margin for the six months of fiscal 2010 was 43% compared to 44% for the same period a year ago. The decrease in gross profit was primarily attributable to the factors discussed above, including lower utilization of our fabrication facility, a shift in the mix of products sold, sale of inventory valued at fair market value and restructuring expenses. In addition, our gross profit was negatively impacted by an impairment charge related to a note receivable net of deferred gain for the assets we sold to our subcontractor in fiscal 2007 and restructuring actions in fiscal 2010. Partially offsetting these decreases, our gross margin benefited from a $21.2 million decrease in intangible asset amortization. Furthermore, our gross margin benefited from $3.2 million and $1.4 million decreases in equipment expenses and performance related bonuses. Finally, in the first six months of fiscal 2010 and 2009, gross profit benefited by approximately $3.3 million and $2.0 million, respectively, from the sale of inventory previously written down.

Operating Expenses

The following table shows our operating expenses:

                                           Three months ended                                                   Six months ended
                      Sept. 27,        % of Net         Sept. 28,        % of Net         Sept. 27,        % of Net         Sept. 28,        % of Net
                        2009           Revenues           2008           Revenues           2009           Revenues           2008           Revenues
Research and
Development          $    41,455                30 %   $    41,532                21 %   $    77,770                30 %   $    85,151                22 %
Selling, General
and Administrative   $    30,662                22 %   $    32,211                16 %   $    56,097                22 %   $    65,176                17 %

Research and development. R&D expenses were flat in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. We completed our acquisition of Leadis and Tundra in the first and second quarter of fiscal 2010, respectively. As a result, our labor-related costs increased $3.5 million as the benefits of a Company-wide shut down and divestiture of our NWD assets were offset by additional personnel related costs from Tundra and Leadis and the restructuring expenses associated with the Tundra acquisition. In addition, our indirect material expense and equipment expense increased $0.2 million and $0.7 million, respectively, primarily attributable to the higher product development activities and inclusion of Tundra and Leadis related costs in our results of operations. Offsetting these increases was a $4.6 million decrease in other labor-related costs, including a $2.0 million reduction in performance related bonuses as a result of our cost control efforts, a $2.2 million decrease in stock based compensation expense as a result of lower valuation of new grants compared to the second quarter of fiscal 2009 due to lower stock prices in the second quarter of fiscal 2010 and a $0.4 million decrease in the expense related to our 401(K) match expense as a result of the temporary suspension of our U.S. 401(K) employer match program.

Research and development (the first six months of fiscal 2010 compared to the first six months of fiscal 2009). Our year to date R&D expenses through the second quarter of fiscal 2010 were $77.8 million, a decrease of $7.4 million, or 9% compared to the same period one year ago. The decrease was primarily attributable to a $4.3 million reduction in performance related bonuses; a $4.6 million decrease in stock based compensation expense and a $1.1 million decrease in the 401(K) match, a Company-wide shutdown and reduction of R&D expenses associated with our divestiture of the NWD assets. In addition, indirect material expense and outside service decreased $0.4 million and $0.3 million, respectively. Partially offsetting these decreases was a $4.2 million increase in labor-related costs resulting from the Tundra and Leadis acquisitions and a $0.3 million and a $0.5 million increase in facilities and equipment expenses.

We currently anticipate that R&D spending in the third quarter of fiscal 2010 will be flat as compared to the second quarter of fiscal 2010.

Selling, general and administrative. SG&A expenses decreased $1.5 million, or 5% to $30.7 million in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. The decrease was primarily attributable to a $4.2 million reduction in intangible asset amortization as we wrote down the fair value of intangible assets in fiscal 2009 and a portion of intangible assets, which is being amortized on an accelerated method, resulting in decreased amortization expense over time. Compared to the second quarter of fiscal 2009, sales representative commissions decreased $2.4 million attributable to lower revenues in the second quarter of fiscal 2010. In addition, stock based compensation expense decreased $2.3 million as a result of lower valuation of new grants in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009 and performance related bonuses decreased $1.1million as a result of our cost control efforts. Partially offsetting these decreases was a $7.7 million increase in labor-related expenses, primarily attributable to the addition of Tundra personnel and the restructuring expenses associated with the Tundra acquisition. We also experienced a $0.4 million increase in legal and consulting services spending primarily attributable to the on-going litigation and a $0.2 million increase in equipment expense as a result of Tundra acquisition.

Selling, General and Administrative (the first six months of fiscal 2010 compared to the first six months of fiscal 2009). Our year to date SG&A expenses through the second quarter of fiscal 2010 were $56.1 million, a decrease of $9.1 million, or 14% compared to the same period one year ago. The decreases was primarily attributable to an $8.9 million reduction of intangible asset amortization, a decrease of $5.0 million in sales representative commissions due to decreased sales, a $3.6 million decrease in stock based compensation expense and a $2.0 million reduction in performance related bonuses. Partially offsetting these decreases was a $7.2 million increase in labor-related expenses as a result of the Tundra acquisition and restructuring actions. We also experienced a $3.8 million increase in legal and consulting services spending and a $0.4 million increase in equipment expense as a result of the Tundra acquisition.

We currently anticipate that SG&A spending in the third quarter of fiscal 2010 will decrease slightly compared to the second quarter of fiscal 2010.

Restructuring. During the second quarter of fiscal 2010, we initiated restructuring actions following our acquisition of Tundra and an assessment of ongoing personnel needs in light of the acquisition. In connection with these actions, we reduced approximately 133 positions worldwide. As a result, we recorded restructuring expenses of $8.6 million for severance payments, payments under federal, state and province notice statutes and retention and other benefits associated with these restructuring actions in the second quarter of fiscal 2010, of which $8.4 million was related to severance, retention and other benefits to the terminated employees and $0.2 million was for facilities impairment charges which was recorded as SG&A expense. As of September 27, 2009, we made the severance and retention payments totaling $5.6 million related to this restructuring action. We expect to complete these restructuring actions in the fourth quarter of fiscal 2010. In addition, in connection with our plan to transition the manufacture of products to Taiwan Semiconductor Manufacturing Company Limited ("TSMC"), our management approved a plan to exit wafer production operations at our Oregon fabrication facility. As a result, we accrued restructuring expenses of $4.8 million for severance payments and other benefits associated with this restructuring action in the second quarter of fiscal 2010. We expect to complete these restructuring actions in the second quarter of fiscal 2012.

During the fourth quarter of fiscal 2009, we initiated a restructuring action intended to align our spending with demand that has weakened in the slowing economy. The restructuring action included a reduction of approximately 124 positions across multiple divisions worldwide. In March 2009, after carefully considering the market, revenues and prices for search engines, we decided to restructure our NWD division. As part of this restructuring action, we reduced approximately 56 positions in this division and ceased investment in new search engine product development. In addition, we initiated restructuring actions, which affected our sales personnel in Germany and Japan. During the first six months of fiscal 2010, we reduced additional 12 positions related to these actions. As a result, we recorded restructuring

expenses of $2.2 million and $5.3 million for severance payments, payments under federal, state and province notice statutes and retention and other benefits associated with these restructuring actions in the first six months of fiscal 2010 and the fourth quarter of fiscal 2009. As of September 27, 2009, we settled severance retention and other benefits of $7.1 million related to these restructuring actions. We expect to complete these restructuring actions in the third quarter of fiscal 2010.

During the third quarter of fiscal 2009, we initiated restructuring actions, which primarily affected our military business and Corporate Technology Group. These restructuring actions were taken to better allocate our engineering resources to maximize revenue potential. These actions resulted in the reduction of approximately 26 positions. We recorded restructuring expenses of approximately $0.7 million for severance benefits associated with these restructuring actions in fiscal 2009. During the first quarter of fiscal 2010, we incurred additional restructuring expenses of less than $0.1 million related to these restructuring actions. We completed this restructuring plan in the second quarter of fiscal 2010.

During the second quarter of fiscal 2006, we completed the consolidation of our Northern California workforce into our San Jose headquarters and exited a leased facility in Salinas, California. Upon exiting the facility we recorded lease impairment charges of approximately $2.3 million, which represented the future rental payments under the agreements, reduced by an estimate of sublease income, and discounted to present value using an interest rate applicable to us. These charges were recorded as cost of revenues of $0.7million, research and development of $0.9 million and selling, general and administrative of $0.7 million. In fiscal 2008, we entered into a sublease agreement for our Salinas facility, resulting in a reduction to our accrued lease liabilities by $0.2 million. Since the initial restructuring, we have made lease payments of $1.1 million related to vacated facility in Salinas. As of September 27, 2009, the remaining accrued lease liabilities were $1.0 million.

Divestiture. On July 17, 2009, we completed the sale of certain assets related to our network search engine business (the "NWD assets") to NetLogic Microsystems, Inc ("Netlogic"), pursuant to an Asset Purchase Agreement by and between the Company and NetLogic dated April 30, 2009 (the "Agreement"). Upon closing of the transaction, NetLogic paid us $100 million in cash consideration, which included inventory valued at approximately $10 million (subject to adjustment). As of September 27, 2009, the inventory we sold to Netlogic was valued at $8.2 million and the excess cash for the inventory in the amount of $1.8 million was recorded as a payable to Netlogic. The NWD assets are part of the Communications reportable segment. In connection with the divestiture, we entered into a supply agreement with NetLogic whereby they agreed to buy and we agreed to sell Netlogic certain network search engine products for a limited time following the closing of the sale. According to the terms set forth in the agreement, we committed to sell certain products either at our standard costs or below our normal gross margins, which are lower than the estimated fair values. As a result, we recorded $3.0 million related to the estimated fair value of this agreement. In the second quarter of fiscal 2010, $0.2 million was recognized as revenue. We expect to complete the sale under this agreement within 2 years. In the second quarter of fiscal 2010, we recorded a gain of $82.7 million related to the divestiture.

Interest income and other, net. Changes in interest income and other, net are summarized as follows:

 (in thousands)                      Three months ended               Six months ended
                                 Sept. 27,        Sept. 28,       Sept. 27,       Sept. 28,
                                    2009             2008           2009             2008
Interest income                  $      480      $     1,616     $     1,024     $     3,210
Other income (expense), net             719           (1,232 )         1,600          (1,361 )
Interest income and other, net        1,199              384           2,624           1,849

Interest income decreased $1.1 million in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. The decrease was primarily attributable to a decrease in interest rates in the quarter. Other income (expense), net increased $2.0 million in the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009. The increase was primarily attributable to a gain of $1.0 million on our investment portfolio of marketable equity securities related to deferred compensation arrangements in the second quarter of fiscal 2010 while we recorded a loss of $0.8 million in the second quarter of fiscal 2009.

Interest income decreased $2.2 million in the first six months of fiscal 2010 compared to the first six months of fiscal 2009. The decrease is primarily attributable to less favorable interest rates. Other income, (expense), net increased $3.0 million in the first six months of fiscal 2010 as compared to the first six months of fiscal 2009. The increase is primarily attributable to a gain of $1.8 million on our investment portfolio of marketable equity securities related to deferred compensation arrangements while we recorded a loss of $0.9 million in the same period one year ago.

Provision for income taxes. We recorded an income tax provision of $2.4 million in the second quarter of fiscal 2010, an increase of $0.3 million compared to the second quarter of fiscal 2009. The income tax provision in the second . . .