The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related Notes thereto which appear elsewhere herein. Except for the historical financial information, many of the matters discussed in this Item 2 may be considered "forward-looking" statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Cautionary Note regarding Forward-Looking Statements," elsewhere herein and in other filings made with the Securities and Exchange Commission.

Overview

On July 8, 2008, our shareholders approved a one-for-ten reverse stock split (the "Reverse Stock Split") and the Reverse Stock Split became effective on July 9, 2008. Pursuant to the Reverse Stock Split, every ten shares of our common stock have been combined into one share of common stock. The number of shares subject to our outstanding options and warrants have been reduced in the same ratio as the reduction in the outstanding shares, and the per share exercise price of those options and warrants have been increased in direct proportion to the Reverse Stock Split ratio. Earnings per share computations, balance sheets, and footnote presentation of shares and share equivalents for the three months ended September 30, 2008 and prior periods have been restated to reflect the reverse stock split. The Reverse Stock Split will have no impact on the authorized number of shares.

We are evaluating the targeted video advertising market over cable networks and the internet to determine if there are opportunities to sell our current products or develop new products. We are focused on utilizing our video and analytics expertise, existing and newly developed software, and our patent portfolio to address these markets. We are in the midst of this process and believe that it may have a positive impact on our business, however, we cannot assure the success or timing of this initiative.

We believe we are executing our business plan and expense reduction initiatives to achieve sustainable profitability. We will continue to review and realign our cost structure as needed, balanced with investing in the business to increase revenues.

Application of Critical Accounting Policies

The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. For a complete description of our critical accounting policies, please refer to the "Application of Critical Accounting Policies" in our most recent Annual Report on Form 10-K for the year ended June 30, 2008 filed with the SEC on August 27, 2008.

Selected Operating Data as a Percentage of Total Revenue

The following table sets forth selected operating data as a percentage of total
revenue, unless otherwise indicated, for certain items in our consolidated
statements of operations for the periods indicated.

                                                    Three Months Ended
                                                       September 30,
                                                     2008          2007
Revenues:                                               (Unaudited)
Product                                                 65.7 %       60.1 %
Service                                                 34.3         39.9
Total revenues                                         100.0        100.0

Cost of sales (% of respective sales category):
Product                                                 46.8         51.7
Service                                                 38.5         40.8
Total cost of sales                                     43.9         47.4

Gross margin                                            56.1         52.6

Operating expenses:
Sales and marketing                                     19.5         23.3
Research and development                                20.9         25.9
General and administrative                              12.7         14.5
Total operating expenses                                53.1         63.7

Operating income (loss)                                  3.0        (11.1 )

Gain on arbitration settlement, net                        -         11.7
Recovery of minority investment, net                       -          8.7
Interest income - net                                    0.5          1.2
Other income (expense) - net                            (1.6 )        0.6

Income before income taxes                               1.9         11.1

Provision for income taxes                               1.4          0.4

Net income                                               0.5 %       10.7 %

                             Results of Operations

The three months ended September 30, 2008 compared to the three months ended
September 30, 2007

                                              Three Months Ended
                                                September 30,
         (Dollars in Thousands)               2008          2007         $ Change       % Change

Product revenues                           $   12,049     $   9,768     $    2,281           23.4 %
Service revenues                                6,286         6,487           (201 )         (3.1 %)
Total revenues                                 18,335        16,255          2,080           12.8 %

Product cost of sales                           5,635         5,053            582           11.5 %
Service cost of sales                           2,418         2,647           (229 )         (8.7 %)
Total cost of sales                             8,053         7,700            353            4.6 %


Product gross margin                            6,414         4,715          1,699           36.0 %
Service gross margin                            3,868         3,840             28            0.7 %
Total gross margin                             10,282         8,555          1,727           20.2 %

Operating expenses:
Sales and marketing                             3,568         3,793           (225 )         (5.9 %)
Research and development                        3,839         4,212           (373 )         (8.9 %)
General and administrative                      2,323         2,347            (24 )         (1.0 %)
Total operating expenses                        9,730        10,352           (622 )         (6.0 %)

Operating income (loss)                           552        (1,797 )        2,349             NM (1)

Gain on arbitration settlement, net                 -         1,900         (1,900 )           NM (1)
Recovery of minority investment, net                -         1,415         (1,415 )           NM (1)
Interest income - net                              82           189           (107 )        (56.6 %)
Other (expense) income - net                     (291 )          91           (382 )           NM (1)

Income before income taxes                        343         1,798         (1,455 )        (80.9 %)

Provision for income taxes                        250            54            196          363.0 %

Net income                                 $       93     $   1,744     $   (1,651 )        (94.7 %)

(1) NM denotes percentage is not meaningful

Product Sales. Total product sales for the three months ended September 30, 2008 were approximately $12.0 million, an increase of approximately $2.3 million, or 23.4%, from $9.8 million for the three months ended September 30, 2007. The increase in product sales resulted from the $2.1 million, or 32.9%, increase in on-demand product sales to $8.4 million in the three months ended September 30, 2008, from $6.3 million in the three months ended September 30, 2007. The increase in on-demand product revenue was primarily generated by $1.4 million and $0.7 million increases in sales in North America and Japan, respectively. North American on-demand product sales increased due to existing customers replacing older systems with our latest generation on-demand system, expanding existing systems, and two customers deploying video-on-demand to new markets. On-demand product sales increased in Japan due to completion of a customized software product to a Japanese cable distributor in the three months ended September 30, 2008, that was incremental to prior year revenue. Fluctuation in on-demand revenue is often due to the fact that we have a small base of large customers making periodic large purchases that account for a significant percentage of revenue.

Real-time product sales increased approximately $0.2 million, or 6.0%, to $3.7 million in the three months ended September 30, 2008 from $3.5 million in the three months ended September 30, 2007. This increase was due to slightly increased volume of North American system sales during the three months ended September 30, 2008, compared to the same period in the prior year.

Service Revenue. Total service revenue for the three months ended September 30, 2008 was $6.3 million, a decrease of $0.2 million, or 3.1%, from $6.5 million for the three months ended September 30, 2007. The decrease in service revenue was due to the $0.4 million, or 14.2%, decrease in service revenue related to real-time products. For years we have experienced a steady decline in real-time service revenues, as our old legacy products have been removed from service and, to a lesser extent, from customers purchasing our new products that produce significantly less service revenue. We expect real-time service revenues to ultimately decline further, partially offset by newer system service, as additional legacy systems are eventually removed from service.

Service revenue associated with on-demand products increased $0.2 million, or 5.5%, partially offsetting the decrease in real-time service revenue. On-demand service revenue increased due to additional installations during the quarter, and also because we continue to expand our base of on-demand market deployments that generate maintenance and support service revenue.

Product Gross Margin. Product gross margin was $6.4 million for the three months ended September 30, 2008, an increase of approximately $1.7 million, or 36%, from $4.7 million for the three months ended September 30, 2007. Product gross margin as a percentage of product revenue increased to 53.2% in the three months ended September 30, 2008 from 48.3% in the three months ended September 30, 2007. Product gross margins, as a percentage of product revenue, increased primarily due to technological advances in our systems allowing us to utilize less hardware per system, coupled with a lower fixed component of labor and overhead and our ability to purchase product components at lower prices during the three months ended September 30, 2008, compared to the same period in the prior year.

Service Gross Margin. The gross margin on service revenue increased to 61.5% of service revenue in the three months ended September 30, 2008 from 59.2% of service revenue in the three months ended September 30, 2007. The increase in service margins as a percentage of service revenue was primarily due to the $0.2 million reduction in service costs during the three months ended September 30, 2008, compared to the same period in the prior year. Decreasing service costs resulted from decreasing headcount and facilities costs, as we have focused on managing costs of the infrastructure that is necessary to fulfill service and support provided for our products. We expect to maintain similar or slightly lower service margins as we continue to manage costs related to our maintenance and support infrastructure.

Sales and Marketing. Sales and marketing expenses decreased approximately $0.2 million, or 5.9% to $3.6 million in the three months ended September 30, 2008 from $3.8 million in the three months ended September 30, 2007. Sales and marketing expense decreased primarily because we incurred $0.2 million less in depreciation expense related to our MediaHawk 4500 on-demand systems that were being used as demonstration systems for customers.

Research and Development. Research and development expenses decreased approximately $0.4 million, or 8.9%, to approximately $3.8 million in the three months ended September 30, 2008 from $4.2 million in the three months ended September 30, 2007. Decreasing research and development expenses were primarily attributable to a $0.2 million reduction in lease and facilities costs resulting from consolidating development facilities and moving to smaller office space during the prior fiscal year. We also incurred $0.1 million less in depreciation expense related to development and test equipment in the three months ended September 30, 2008, compared to the same period in the prior year, as a result of a downward trend in capital expenditures for development and test equipment over the past few years.

General and Administrative. General and administrative expenses remained flat at approximately $2.3 million during each of the three months ended September 30, 2008 and 2007.

Gain on Arbitration Settlement, Net. In August 2007, we reached an agreement with a supplier of ours, to settle the claims in the pending arbitration between the two parties, in exchange for a full release. In the arbitration, we alleged that in 2002 and 2003 we experienced high failure rates in our MediaHawk 2000 and 3000 series on-demand servers as a result of defective power converters manufactured by the supplier. We settled for approximately $2.4 million, from which approximately $0.5 million of attorney fees were deducted and we received the net proceeds in the three months ended September 30, 2007. We do not anticipate any further proceeds from this settlement.

Recovery of Minority Investment, Net. In fiscal year 2003, we recorded a $13.0 million net impairment charge due to an "other-than-temporary" decline in the market value of an equity investment in Thirdspace Living Limited ("Thirdspace"). At the end of fiscal year 2003, Thirdspace was sold to Alcatel Telecom Ltd. and placed into liquidation. The liquidation of Thirdspace assets resulted in a recovery for us of $3.1 million of our previously impaired investment, in aggregate, during fiscal year 2004. Thirdspace's only significant remaining asset subsequent to the aforementioned transactions was a right to 40% of amounts recovered by nCube, now part of Arris Group, Inc., if any, from the lawsuit brought by nCube against SeaChange International, Inc., alleging patent infringement. On January 9, 2006, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court's decision in favor of nCube. On September 28, 2007, nCube, Alcatel and Concurrent agreed upon the terms of distributing this Thirdspace asset and we received $1.4 million of net proceeds from the settlement of Thirdspace's remaining asset. Consistent with previous recoveries of the impaired Thirdspace investment, we recorded the $1.4 million as a "Recovery of minority investment" within the Statement of Operations during the three months ended September 30, 2007. We do not anticipate further cash proceeds related to the liquidation of Thirdspace. As part of the arrangement with nCube and Alcatel, we also eliminated transferability concerns regarding our license to U.S. patent numbers 5,805,804 and 5,623,595. The agreement provides that licenses to these patents may be transferred to an acquirer of Concurrent or Concurrent's on-demand business, so long as the acquirer has not been formally identified as an Alcatel target.

Other (Expense) Income - net. During the three months ended September 30, 2008, we incurred approximately $0.3 million of realized currency translation losses. These losses resulted from foreign currency transactions by our subsidiaries for which the Euro is the functional currency, primarily due to the decline in the Euro value during the three months ended September 30, 2008.

Provision for Income Taxes. We recorded income tax expense for our domestic and foreign subsidiaries of $0.3 million in the three months ended September 30, 2008, compared to tax expense of $0.1 million for our domestic and foreign subsidiaries in the three months ended September 30, 2007. The increase in the consolidated effective tax rate during the three months ended September 30, 2008, compared to the same period in the prior year was due to income recorded in the US in the prior year for which net operating loss carryforwards were available to reduce otherwise taxable income. However, during the three months ended September 30, 2008, consolidated income before taxes was primarily attributable to income earned in foreign locations that had no remaining net operating loss carryforwards. Income tax expense for each of the three months ended September 30, 2008 and 2007 was primarily attributable to income earned in foreign locations that cannot be offset by net operating loss carryforwards.

Net Income. The net income for the three months ended September 30, 2008 was $0.1 million or $0.01 per basic and diluted share compared to a net income for the three months ended September 30, 2007 of $1.7 million, or $0.21 per basic and diluted share.

Liquidity and Capital Resources

Our liquidity is dependent on many factors, including sales volume, operating profit and the efficiency of asset use and turnover. Our future liquidity will be affected by, among other things:

· the rate of growth or decline, if any, of on-demand market expansions and the pace at which domestic and international cable companies and telephone companies implement on-demand technology;

· the rate of growth or decline, if any, of deployment of our real-time operating systems and tools;

· the actual versus anticipated decline in revenue from maintenance and product sales of real-time proprietary systems;

· ongoing cost control actions and expenses, including capital expenditures;

· the margins on our product sales;

· our ability to leverage the potential of Everstream, including advanced advertising and other to be identified initiatives;

· our ability to raise additional capital, if necessary;

· our ability to obtain additional or replacement bank financing, if necessary;

· our ability to meet the covenants contained in our Credit Agreement;

· timing of product shipments, which typically occur during the last month of the quarter;

· the percentage of sales derived from outside the United States where there are generally longer accounts receivable collection cycles; and

· the number of countries in which we operate, which may require maintenance of minimum cash levels in each country and, in certain cases, may restrict the repatriation of cash, such as cash held on deposit to secure office leases.

Uses and Sources of Cash

We used $2.2 million of cash from operating activities during the three months ended September 30, 2008 compared to generating $4.7 million of cash during the three months ended September 30, 2007. Operating cash outflow was primarily attributable to payment of prior year end payables and accruals during the period and the timing of accounts receivable collection. Prior period operating cash inflow was primarily attributable to collection of receivables and $1.9 million of net cash proceeds received from an arbitration settlement. We do not anticipate further cash proceeds related to this settlement.

During the three months ended September 30, 2007, we received $1.4 million of net cash proceeds from the monetization of remaining assets of Thirdspace, an entity that we purchased a minority interest in during fiscal 2002, and that was subsequently liquidated. We do not anticipate further cash proceeds related to the liquidation of Thirdspace.

We invested $0.6 million in property, plant and equipment during the three months ended September 30, 2008 compared to $0.3 million during the three months ended September 30, 2007. Capital additions during each of these periods related primarily to product development and testing equipment. We expect capital additions to continue at a similar level during the remainder of this fiscal year.

We have a Credit Agreement with Silicon Valley Bank that provides for a $10.0 million revolving credit line (the "Revolver") with a borrowing base dependent upon our outstanding North American accounts receivable. The interest amount is based upon the amount advanced and the rate varies based upon our accounts receivable and the amount of cash in excess of debt. The interest rate on the Revolver was 5.50% as of September 30, 2008. The outstanding principal amount plus all accrued but unpaid interest is payable in full at the expiration of the credit facility on July 1, 2009. Based on the borrowing formula and our financial position as of September 30, 2008, approximately $9.9 million was available to us under the Revolver. As of September 30, 2008, $0.9 million was drawn under the Revolver, resulting in $9.0 million of remaining available funds under the Revolver.

In addition, the Credit Agreement contains certain financial covenants, including a required adjusted quick ratio (the ratio of cash and accounts receivable to current liabilities (less the current portion of deferred revenue)) of at least 1.25 to 1.00 and a minimum tangible net worth of at least $10.2 million, as of September 30, 2008. The Credit Agreement also contains customary restrictive covenants concerning our operations. As of September 30, 2008, we were in compliance with these covenants as our adjusted quick ratio was 3.67 to 1.00 and our tangible net worth was $24.7 million.

At September 30, 2008, we had working capital (current assets, less current liabilities) of $24.8 million and had no material commitments for capital expenditures compared to working capital of $25.7 million at June 30, 2008. Based upon our existing cash balances, historical cash usage, available credit facility, and generation of operating cash flow in fiscal year 2008, we believe that existing cash balances will be sufficient to meet our anticipated working capital and capital expenditure requirements for the next twelve months.

Off-Balance Sheet Arrangements

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers that often require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. We evaluate estimated losses for such indemnifications under SFAS No. 5, "Accounting for Contingencies", as interpreted by FASB Interpretation No. ("FIN") 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." We consider factors such as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, we have not encountered material costs as a result of such obligations and have not accrued any material liabilities related to such indemnifications in our financial statements.

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments are disclosed in our Annual Report on Form 10-K for the year ended June 30, 2008. There have been no material changes to our contractual obligations and commercial commitments during the three months ended September 30, 2008.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made or incorporated by reference in this release may constitute "forward-looking statements" within the meaning of the federal securities laws. When used or incorporated by reference in this release, the words "believes," "expects," "estimates," "anticipates," and similar expressions, are intended to identify forward-looking statements. Statements regarding future events and developments, our future performance, market share, and new market growth, as well as our expectations, beliefs, plans, estimates, or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of our forward-looking statements in this report include, but are not limited to, our pricing trends, our expected cash position, our expectations of on-demand service revenue flattening or decreasing, our expectations of market share and growth, the impact of interest rate changes and fluctuation in currency exchange rates, our sufficiency of cash, the impact of litigation, and our previous historical trend of declining real-time service revenue. These statements are based on beliefs and assumptions of Concurrent's management, which are based on currently available information. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. The risks and uncertainties which could affect our financial condition or results of operations include, without limitation: delays or cancellations of customer orders; changes in product demand; economic conditions; our ability to satisfy the financial covenants in the credit agreement; various inventory risks due to changes in market conditions; uncertainties relating to the development and ownership of intellectual property; uncertainties relating to our ability and the ability of other companies to enforce their intellectual property rights; the pricing and availability of equipment, materials and inventories; the concentration of our customers; failure to effectively manage change; delays in testing and introductions of new products; rapid technology changes; system errors or failures; reliance on a limited number of suppliers and failure of components provided by those suppliers; uncertainties associated with international business activities, including foreign regulations, trade controls, taxes, and currency fluctuations; the impact of competition on the pricing of VOD products; failure to effectively service the installed base; the entry of new well-capitalized competitors into our markets; the success of new on-demand and real-time products; the availability of Linux software in light of issues raised by SCO Group; the success of our relationships with Alcatel-Lucent; capital spending patterns by a limited customer base and in light of the current negative macro-economic environment; privacy concerns over data collection; and the availability of debt or equity financing to support our liquidity needs if cash flow does not improve.

Other important risk factors are discussed in Part II, Item 1A. of this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008.

Our forward-looking statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.