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 ("MD&A") should be read in conjunction with the audited Consolidated Financial Statements, Notes and MD&A included in our Annual Report filed on Form 10-K for the fiscal year ended June 28, 2008. Our discussion and analysis is an integral part of understanding our financial results. Also refer to "Basis of Presentation and Use of Estimates" in the Notes to the Consolidated Financial Statements.

Our Critical Accounting Policies and Estimates

The preparation of our Consolidated Financial Statements in conformity with U. S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the Consolidated Financial Statements and accompanying notes. These estimates and assumptions are based on management's judgment and available information and, consequently, actual results could differ from these estimates.

The accounting policies that we believe are the most critical to understanding and evaluating our reported financial results include: revenue recognition; reserves on accounts receivable; allowance for excess and obsolete inventory; uncertain tax positions; valuation of deferred tax assets; valuation of long-lived and intangible assets; valuation of goodwill; estimation of warranty liabilities and share-based compensation expense.

As a result of the decline in the Company's stock price since June 28, 2008, which affected our market capitalization, we updated our goodwill impairment test as of September 27, 2008 to identify whether a potential impairment of the Company's recorded goodwill existed. As of September 27, 2008, the estimated fair value of our single reporting unit exceeded its carrying value, including goodwill. No impairment was noted as of September 27, 2008. However, in light of the current economic conditions, we will continue to closely monitor the valuation of goodwill throughout fiscal 2009.

Our Business Risks

Our results of operations and financial position are affected by a variety of factors. We believe the most significant recurring factors are the economic strength of the technology markets into which we sell our products, our ability to identify market demands and develop competitive products to meet those demands, the announcements and actions of our competitors and our ability to enter into new markets and broaden our presence in existing markets. Our sales are largely dependent on the health and growth of technology companies whose operations tend to be cyclical. Consequently, demand for our products tends to coincide with the increase or decrease in capital spending in the technology industry.

Recent Accounting Pronouncements

The following recent accounting pronouncements are not yet adopted:

• Statement of Financial Accounting Standards No. 141 (revised 2007), "Business Combinations" ("SFAS 141R").

• Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161").

• Financial Accounting Standards Board Staff Position No. 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3").

• Financial Accounting Standards Board Staff Position Accounting Principles Board Opinion No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1").

• Statement of Financial Accounting Standards No. 157, "Fair Value Measurements", ("SFAS 157"), as it relates to non-financial assets.

See Note 19 "New Accounting Pronouncements" and Note 5 - "Derivatives and Fair Value" for additional information on recent pronouncements adopted and not yet adopted as well as pronouncements related to fair value measures.

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