The following information should be read in conjunction with the unaudited financial statements and notes thereto included in Part 1 - Item 1 of this Quarterly Report and the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended June 28, 2008 ("Form 10-K").

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any statements regarding the Company's total investment in the Jinan Hi-Tech Industries Development Zone, the continuation of a high level of turns orders, higher levels of inventory, future gross profit and gross margin; the plans and objectives of management for future operations; the Company's tax rate; the adequacy of allowances for returns, price protection and other concessions; the sufficiency of cash generated from operations and cash balances; the Company's exposure to interest rate risk; expectations regarding our R&D and SG&A expenses; and our possible future acquisitions and assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "estimates," "potential," or "continue," or the negative thereof or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including but not limited to the factors set forth (i) in Item 1A, Risk Factors, of Part II of this Form 10-Q, (ii) in Item 1A, Risk Factors, of Part I of the Company's Form 10-K for the year ended June 28, 2008, and (iii) in Note 1 to the Notes to Condensed Consolidated Financial Statements. All forward-looking statements and reasons why results may differ included in this Quarterly Report are made as of the date hereof, and the Company assumes no obligation to update any such forward-looking statement or reason why actual results may differ.

Results of Operations

The following table sets forth certain statement of operations data as a
percentage of net revenues for the periods indicated.

                                                                   Three Months Ended
                                                            September 27,      September 29,
(unaudited)                                                     2008               2007
Net revenues                                                         100.0 %            100.0 %
Cost of revenues                                                      63.6 %             63.6 %
Gross profit                                                          36.4 %             36.4 %
Operating expenses:
Research and development                                              15.7 %             10.6 %
Selling, general and administrative                                    9.6 %             15.2 %
Total                                                                 25.3 %             25.8 %

Income from operations                                                11.1 %             10.6 %
Interest and other income                                              2.5 %              3.6 %
Other than temporary decline in value of investment                  (0.1) %                - %
Income before income taxes                                            13.5 %             14.2 %

Income taxes                                                           4.7 %              4.4 %
Minority interest in (income) loss of consolidated
subsidiaries                                                         (0.2) %                - %
Equity in net income of investees                                      0.3 %              0.3 %

Net income                                                             8.9 %             10.1 %

Net Revenues

The following table sets forth our revenues and the customer concentrations with
respect to such revenues for the periods indicated.

                                                       Three Months Ended
                                                 September 27,     September 29,         %
(in thousands, unaudited)                            2008              2007           Change
Net revenues                                    $        43,896   $        38,468          14.1 %
% of net sales accounted for by top 5 direct
customers (1)                                              49.3 %            36.3 %
Number of direct customers that each account
for more than 10% of net sales                                2                 1
% of net sales accounted for by top 5 end
customers (2)                                              29.4 %            22.2 %
Number of end customers that each account for
more than 10% of net sales                                    1              None

(1) Direct customers purchase products directly from the Company. These include distributors and contract manufacturers that in turn sell to many end customers as well as OEMs that also purchase directly from the Company.

(2) End customers are OEMs whose products include the Company's products. End customers may purchase directly from the Company or from distributors or contract manufacturers. We rely on the end customer data provided by our direct distribution and contract manufacturing customers to provide this information.

The Company designs, develops and markets high-performance integrated circuits
("ICs" or IC products) and frequency control products ("FCPs" or FCP products)
used in many of today's advanced electronic systems. Our IC products include functions that support the connectivity, timing and signal conditioning of high-speed parallel and serial protocols that transfer data among a system's microprocessor, memory and various peripherals, such as displays and monitors, and between interconnected systems. Our FCPs are electronic components that provide frequency references such as crystals, oscillators, and hybrid timing generation products for computer, communication and consumer electronic products. Our analog, digital and mixed-signal ICs, together with our FCP products enable higher system bandwidth and signal quality, resulting in better operating reliability, signal integrity, and lower overall system cost in applications such as notebook computers, servers, network switches and routers, storage area networks, digital TVs, cell phone, GPS and digital media players.

Net revenues consist of product sales, which are recognized upon shipment, less an estimate for returns and allowances. Net revenue increased $5.4 million or 14.1% in the first quarter of fiscal 2009 versus the first quarter of fiscal 2008 primarily as the result of:
· a 157.3% increase in the sales of connect IC products to $6.2 million, an increase of $3.8 million;
· an increase of $3.0 million or 20.0% in sales of our FCP products to $18.3 million, and

· an offsetting decline of sales in analog, digital switch, clock, and interface IC products to $19.4 million, for a $1.4 million sales decrease.

We currently have a cautious outlook on our fiscal second quarter ending December 27, 2008, due to the challenging business environment and limited visibility on end-market demands. We have also announced our expectation that fiscal second quarter revenues will decline from the amount reported for the fiscal first quarter.

The following table sets forth net revenues by country as a percentage of total net revenues for the three month periods ended September 27, 2008 and September 29, 2007:

(in thousands, unaudited)                                      Three Months Ended
                                                            As a                                 As a
                                     September 27,      Percentage of     September 29,      Percentage of
Net sales to countries:                   2008           Net Revenue           2007           Net Revenue
China (including Hong Kong)          $        15,433                 35 % $        15,387                 40 %
United States                                  2,504                  6             3,847                 10
Taiwan                                        18,323                 42            11,156                 29
Singapore                                      2,069                  5             1,923                  5
Others (less than 10% each)                    5,567                 12             6,155                 16
Total net sales                      $        43,896                100 % $        38,468                100 %

For the three months ended September 27, 2008, as compared with the same period of the prior year, the percentage of our net revenues derived from sales to Asian countries increased as a result of an increasing demand for technological devices and a continuing concentration of contract manufacturing in those regions. We expect our future sales to continue to grow, as a percentage of net revenues, in Asian countries. As the migration of assembly operations to Asia continues, we expect our fiscal 2009 net revenues from sales in North America to decline, as they have during fiscal 2008.

Gross Profit

The following table sets forth our gross profit for the periods indicated.



                                                       Three Months Ended
(In thousands, unaudited)                        September 27,      September 29,        %
                                                     2008               2007           Change

Net revenues                                    $        43,896    $        38,468          14.1 %
Gross profit                                             15,982             14,001          14.1 %
Gross profit as a percentage of net revenues
(gross margin)                                             36.4 %             36.4 %

The absolute increase in gross profit for the three month period ended September 27, 2008 compared with the same period of the prior year was primarily due to rising sales of silicon connect IC products and to the consistency in sales of analog switches. Silicon connect IC products carried larger profit margins in the three month period ended September 27, 2008 as compared with the same period of the prior year. In addition, analog switches continue to carry above average margins over lower margin FCP products; however those margins have decreased in the three month period ended September 27, 2008 as compared with the same period of the prior year. Gross margin for the first fiscal quarter in fiscal 2009 and fiscal 2008 remained flat at 36.4%.

With respect to the increase in gross profit in the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008 of $2.0 million, the increase is the result of:
· Sales growth in silicon connect IC products, which generated $1.8 million increased gross profit;
· increased sales of the FCP product family, which contributed $0.8 million of increased gross profit,
· increased sales of digital, clock and silicon interface products, which contributed $0.8 million of increased gross profit, which was offset by
· a decrease of $0.8 million in gross profit from sales of analog switches.

During the three months ended September 27, 2008 and September 29, 2007, gross profits and gross margins benefited from the sale of inventory, previously valued at $63,000 and $262,000, respectively, that we had previously identified as excess and written off.

Future gross profit and gross margin are highly dependent on the level and product mix of net revenues. This includes the mix of sales between lower margin FCP products and our higher margin integrated circuit products. Although we have been successful at favorably improving our integrated circuit product mix and penetrating new end markets, there can be no assurance that this will continue. Accordingly, we are not able to predict future gross profit levels or gross margins with certainty.

Research and Development


                                             Three Months Ended
(In thousands, unaudited)              September 27,     September 29,       %
                                           2008              2007         Change

Net revenues                          $        43,896   $        38,468      14.1 %
Research and development                        4,221             4,082       3.4 %

R&D as a percentage of net revenues               9.6 %            10.6 %

Research and development expenses consist primarily of costs related to personnel and overhead, non-recurring engineering charges, and other costs associated with the design, prototyping, testing, manufacturing process design support, and technical customer applications support of our products. The $139,000 expense increase for the three month period ended September 27, 2008 as compared to the same period of the prior year is primarily attributable to a $154,000 increase in salaries and wages due to the merit awards and headcount increases and a $157,000 increase in share-based compensation expense offset by a $176,000 decrease in bonus expense.

The Company believes that continued spending on research and development to develop new products and improve manufacturing processes is critical to the Company's success, and as a result expects to increase research and development expenses in future periods over the long term. In the short term, the Company intends to continue to focus on cost control while business conditions improve. If business conditions deteriorate or the rate of improvement does not meet our expectations, the Company may implement cost-cutting actions.

Selling, General and Administrative ("SG&A")

                                              Three Months Ended
(In thousands, unaudited)               September 27,     September 29,       %
                                            2008              2007         Change

Net revenues                           $        43,896   $        38,468      14.1 %
Selling, general and administration              6,901             5,839      18.2 %

SG&A as a percentage of net revenues              15.7 %            15.2 %

Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The $1.1 million expense increase for the three month period ended September 27, 2008 as compared to the same period of the prior year is attributable to a $299,000 increase in salaries and wages due to merit awards and headcount increases, a $230,000 increase in temporary labor primarily related to the implementation of information technology infrastructure, increases of $75,000 in legal fees, $106,000 in accounting services, a $108,000 increase in share-based compensation expense, and an increase of $111,000 increase in commission expenses in support of increased sales. These were partially offset by a decrease of $77,000 in the Company's bad debt expense.

The Company anticipates that selling, general and administrative expenses in absolute dollars will increase in future periods over the long term due to increased staffing levels, particularly in sales and marketing, as well as increased commission expense as a function of supporting higher sales levels. The Company intends to continue its focus on controlling costs. If business conditions deteriorate or the rate of improvement does not meet our expectations, the Company may implement cost-cutting actions.

Interest and Other Income, net

                                         Three Months Ended
(In thousands, unaudited)         September 27,      September 29,       %
                                      2008               2007          Change

Interest and other income, net   $         1,106    $         1,370     (19.3) %

Net interest and other income declined 19.3% for the three months ended September 27, 2008 as compared with the same period of the prior year primarily due to a $528,000 reduction in the interest earned on investments in marketable securities and cash and cash equivalents balances offset by a $319,000 exchange gain primarily due to the U.S. Dollar strengthening against the New Taiwan Dollar.

Income Tax Expense


                                           Three Months Ended
(In thousands, unaudited)           September 27,      September 29,       %
                                        2008               2007         Change

Income before income tax expense   $         5,922    $         5,450       8.7 %
Income tax                                   2,069              1,691      22.4 %

Effective tax rate                            34.9 %             31.0 %

The increase in income tax expense for the three months ended September 27, 2008 over the same period of the prior year is due to the increase in income before income taxes as well as an increase in the effective tax rate. The increased effective tax rate is due primarily to the mix of earnings between tax jurisdictions as well as a decrease in the anticipated benefit the Company receives from the Federal research and development credit due to the expiration of the credit as of December 31, 2007.

During the quarter ended September 27, 2008, our effective tax rate did not significantly differ from the federal statutory tax rate.

Equity in Net Income of Unconsolidated Affiliates

                                                               Three Months Ended
                                                  September 27,      September 29,        %
(In thousands, unaudited)                             2008               2007           Change
Equity in net income of PTI                     $              60   $            54         11.1 %
Equity in net income of JCP                                    57                72       (20.8) %
Equity in net losses of other investees                         -                (5 )          -
Total                                           $             117   $           121        (3.3) %

Equity in net income of unconsolidated affiliates includes our allocated portion of the net income of Pericom Technology, Inc. ("PTI"), a British Virgin Islands corporation based in Shanghai, People's Republic of China and Hong Kong. Our allocated portion of PTI's results was $60,000 and $54,000 for the three months ended September 27, 2008 and September 29, 2007, respectively.

Equity in net income of unconsolidated affiliates also includes the Company's allocated portion of the net income of Jiyuan Crystal Photoelectric Frequency Technology Ltd. ("JCP"), an FCP manufacturing company located in Science Park of Jiyuan City, Henan Province, China. JCP is a key manufacturing partner of SRe, and SRe has acquired a 49% equity interest in JCP. For the three month period ended September 27, 2008, the Company's allocated portion of JCP's results were income of $57,000 as compared with income of $72,000 for the same period of the prior year.

Liquidity and Capital Resources

As of September 27, 2008, the Company's principal sources of liquidity included cash, cash equivalents and short-term and long-term investments of approximately $121.0 million as compared with $123.9 million on June 28, 2008.

As of September 27, 2008, $39.1 million was classified as cash and cash equivalents compared with $41.6 million as of June 28, 2008. The maturities of the Company's short term investments are staggered throughout the year so that cash requirements are met. Because the Company is a fabless semiconductor manufacturer, it has lower capital equipment requirements than other semiconductor manufacturers that own wafer fabrication facilities. For the three month period ended September 27, 2008, the Company spent approximately $2.5 million on property and equipment compared to $1.4 million for the three month period ended September 29, 2007. The Company generated approximately $1.1 million of interest and other income, net for the three month period ended September 27, 2008, an approximate $264,000 decrease over the $1.4 million interest and other income, net for the three month period ended September 29, 2007. The decrease in interest and other income, net was in primarily due to reduction in interest rates earned on investments in marketable securities and cash balances offset by exchange gains from the U.S. Dollar strengthening against the New Taiwan Dollar.

The Company's net cash provided by operating activities of $3.7 million for the three months ended September 27, 2008 was primarily the result of net income of $3.9 million and non-cash expenses of $2.0 million depreciation and amortization, $795,000 share-based compensation expense, which was partially offset by a $643,000 increase in net deferred taxes and $117,000 equity in the net income of unconsolidated affiliates. Additional contributions to cash included a $1.9 million increase in accounts payable, a $307,000 increase in other accrued liabilities and a $1.0 million decrease in prepaid and other current assets. Partially offsetting these were a $4.2 million increase in accounts receivable, and a $1.0 million increase in inventory and a $248,000 increase in other assets. The Company's net cash provided by operating activities was $4.6 million in the three months ended September 29, 2007.

The Company's cash used in investing activities of $3.5 million for the three months ended September 27, 2008 was primarily due to additions to property and equipment of approximately $2.5 million partially offset by maturities of investments exceeding purchases of investments by approximately $1.0 million. The Company used $22.9 million in investing activities for the three months ended September 29, 2007.

The Company's cash used in financing activities for the three months ended September 27, 2008 of $2.2 million was the result of repurchases of the Company's common stock at a cost of $2.7 million, partially offset by $426,000 in proceeds generated from the issuance of common stock in the Company's employee stock plans and $58,000 in excess tax benefits on share-based compensation. The Company used $4.3 million in financing activities in the three months ended September 29, 2007.

A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we may evaluate potential acquisitions of such businesses, products or technologies.

Our long-term future capital requirements will depend on many factors, including our level of revenues, the timing and extent of spending to support our product development efforts, the expansion of sales and marketing efforts, the timing of our introductions of new products, the costs to ensure access to adequate manufacturing capacity, and the continuing market acceptance of our products. We could be required, or could elect, to seek additional funding through public or private equity or debt financing and additional funds may not be available on terms acceptable to us or at all. We believe our current cash balances and cash flows generated by operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures.

Contractual Obligations and Commitments

The Company leases certain facilities under operating leases with termination
dates on or before December 2013. Generally, these leases have multiple options
to extend for a period of years upon termination of the original lease term or
previously exercised option to extend.

The Company's contractual obligations and commitments at September 27, 2008 are
as follows:

(in thousands)                                                  Payments Due by Period
                                      Total       1 Year or Less     2 - 3 Years     4 - 5 Years      Thereafter
Operating leases and operating
expense commitments                  $   6,068   $           1,355   $       2,214   $       2,216   $         283
Capital equipment purchase
commitments                          $   3,421   $           3,421           1,003               -               -
Total                                $   9,489   $           4,776   $       3,217   $       2,216   $         283

Jinan Cooperation Agreement

On January 26, 2008, the Company entered into a Cooperation Agreement with the Jinan Hi-Tech Industries Development Zone Commission (the "Commission") in the People's Republic of China (the "PRC") for the Company's investment in the Jinan Hi-Tech Industries Development Zone (the "Zone") that is located in Shandong Province, PRC. Under the Cooperation Agreement, the Company will, through a wholly-owned Hong Kong subsidiary, Pericom Asia Ltd., build a factory in the Zone for the development and manufacturing of frequency control products. It is expected that the Company's total gross investment, over a period of years, will be approximately $35 million.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements, defined by Regulation S-K item 303(a)(4), other than operating leases.

Critical Accounting Policies

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be reasonable given the circumstances. Actual results may vary from our estimates.

The methods, estimates and judgments we use in applying our most critical . . .