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

Concurrent is a provider of computing technologies and software applications and related services for the video solutions market and the high-performance, real-time market. Concurrent's business is comprised of two segments for financial reporting purposes: products and services. We provide products and services for each of these markets.

Concurrent's video solutions products consist of hardware and/or software as well as integration services, sold primarily to broadband companies that provide interactive, digital services for the delivery of video. Concurrent's real-time products consist of real-time operating systems and software development tools combined, in most cases, with off-the-shelf hardware and services sold to a wide variety of companies seeking high-performance, real-time computer solutions for use in various applications requiring low-latency response and determinism such as simulation, image generation, hardware-in-the-loop testing and data acquisition.

Concurrent provides sales and support from offices and subsidiaries throughout North America, Europe, and Asia.

We have announced a new strategy to sell our video solutions, including our media data and advertising solutions to the internet and mobile device markets, 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.

We perform our goodwill impairment review annually on July 1, or more frequently if events or circumstances indicate that the asset might be impaired. For purposes of goodwill impairment testing, we compare the fair value of each reporting unit with its carrying amount, including allocated goodwill. If the carrying amount of the reporting unit exceeds its fair value, determined based on expected discounted future cash flows, the goodwill allocated to that reporting unit may not be recoverable. An impairment charge is recorded if the carrying amount of allocated goodwill exceeds its implied fair value. As of March 31, 2009, the price per share of our common stock declined by 47% from the closing price per share on June 30, 2008. The recent economic downturn has persisted to the point that our market capitalization has remained well below our book value and our business and future cash flows may be impacted. We performed an interim impairment analysis of goodwill and other intangible assets during our third quarter of fiscal 2009. As a result of this analysis, we recorded a $16.0 million impairment of our goodwill during the three months ended March 31, 2009, and such loss is reflected in operating expenses in the Consolidated Statements of Operations.

As a result of the strategic planning process for the three months ended March 31, 2009, Concurrent rebranded certain products to better reflect its strategic direction and no longer intends to use the Everstream trademark. Consequently, Concurrent recorded a $1.1 million impairment of its Everstream trademark and a $0.4 million deferred tax benefit for the three months ended March 31, 2009.

Application of Critical Accounting Estimates

The SEC defines "critical accounting estimates" 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             Nine Months Ended
                                                   March 31,                      March 31,
                                              2009            2008           2009           2008
Revenues:                                         (Unaudited)                    (Unaudited)
Product                                          66.2 %          68.5 %         64.4 %         62.0 %
Service                                          33.8            31.5           35.6           38.0
Total revenues                                  100.0           100.0          100.0          100.0

Cost of sales (% of respective sales
category):
Product                                          45.7            45.3           46.2           49.6
Service                                          37.7            45.2           36.6           40.7
Total cost of sales                              43.0            45.3           42.8           46.2

Gross margin                                     57.0            54.7           57.2           53.8

Operating expenses:
Sales and marketing                              21.8            20.2           21.5           21.5
Research and development                         18.3            21.8           19.1           23.4
General and administrative                       11.5            12.4           12.1           13.8
Impairment of goodwill and trademark             88.8               -           30.7              -
Total operating expenses                        140.4            54.4           83.4           58.7

Operating (loss) income                         (83.4 )           0.3          (26.2 )         (4.9 )

Gain on arbitration settlement, net                 -               -              -            3.6
Recovery of minority investment, net                -               -              -            2.7
Interest (expense) income - net                  (0.1 )           0.9            0.1            1.1
Other (expense) income - net                     (0.6 )           0.5           (0.5 )          0.3

(Loss) income before income taxes               (84.1 )           1.7          (26.6 )          2.8

(Benefit) provision for income taxes             (4.3 )           0.1           (0.2 )          0.4

Net (loss) income                               (79.8 )%          1.6 %        (26.4 )%         2.4 %

                             Results of Operations

The three months ended March 31, 2009 compared to the three months ended March
31, 2008

                                          Three Months Ended
                                               March 31,
        (Dollars in Thousands)             2009          2008       $ Change       % Change
 Product revenues                       $   12,730     $ 13,279     $    (549 )         (4.1 %)
 Service revenues                            6,513        6,095           418            6.9 %
 Total revenues                             19,243       19,374          (131 )         (0.7 %)

 Product cost of sales                       5,813        6,022          (209 )         (3.5 %)
 Service cost of sales                       2,453        2,753          (300 )        (10.9 %)
 Total cost of sales                         8,266        8,775          (509 )         (5.8 %)

 Product gross margin                        6,917        7,257          (340 )         (4.7 %)
 Service gross margin                        4,060        3,342           718           21.5 %
 Total gross margin                         10,977       10,599           378            3.6 %

 Operating expenses:
 Sales and marketing                         4,200        3,923           277            7.1 %
 Research and development                    3,522        4,214          (692 )        (16.4 %)
 General and administrative                  2,222        2,406          (184 )         (7.6 %)
 Impairment of goodwill and trademark       17,090            -        17,090          NM(1)
 Total operating expenses                   27,034       10,543        16,491          156.4 %

 Operating (loss) income                   (16,057 )         56       (16,113 )        NM(1)

 Interest (expense) income - net               (13 )        174          (187 )        NM(1)
 Other (expense) income - net                 (107 )         91          (198 )        NM(1)

 (Loss) income before income taxes         (16,177 )        321       (16,498 )        NM(1)

 (Benefit) provision for income taxes         (832 )         20          (852 )        NM(1)
 Net (loss) income                      $  (15,345 )   $    301     $ (15,646 )        NM(1)

(1) NM denotes percentage is not meaningful

Product Revenue. Total product revenue for the three months ended March 31, 2009 was approximately $12.7 million, a decrease of approximately $0.6 million, or 4.1%, from $13.3 million for the three months ended March 31, 2008. The decrease in product revenue resulted from the $0.3 million, or 3.6%, decrease in video product sales and the $0.2 million, or 5.1%, decrease in real-time product sales. Fluctuation in video revenue is often due to the fact that we have customers making periodic large purchases that account for a significant percentage of revenue. Decreasing volume of real-time product sales is primarily due to the impact of the economic downturn on our customers. We believe that the trend of declining real-time product revenue may continue as a result of the sustained economic downturn.

Service Revenue. Total service revenue for the three months ended March 31, 2009 was $6.5 million, an increase of $0.4 million, or 6.9%, from $6.1 million for the three months ended March 31, 2008. The increase in service revenue was due to the $0.6 million, or 16.1%, increase in service revenue related to video products. Video service revenue increased due to additional installations during the three months ended March 31, 2009, compared to the same period in the prior year, and also because we continue to expand our base of video market deployments that generate maintenance and support service revenue.

Partially offsetting the increase in video related service revenue, service revenue related to real-time products during the three months ended March 31, 2009 decreased approximately $0.2 million, or 5.8% from the three months ended March 31, 2008. For years we have experienced a steady decline in real-time service revenues, as our legacy products have been removed from service and, to a lesser extent, from customers purchasing our new products that produce less service revenue. We expect real-time service revenues to decline further, partially offset by newer system service, as additional legacy systems are eventually removed from service.

Product Gross Margin. Product gross margin was $6.9 million for the three months ended March 31, 2009, a decrease of approximately $0.3 million, or 4.7%, from approximately $7.3 million for the three months ended March 31, 2008. Product gross margin as a percentage of product revenue remained approximately the same, decreasing slightly to 54.3% in the three months ended March 31, 2009 from 54.7% in the three months ended March 31, 2008.

Service Gross Margin. The gross margin on service revenue increased to $4.1 million, or 62.3% of service revenue in the three months ended March 31, 2009 from $3.3 million, or 54.8% of service revenue in the three months ended March 31, 2008. The increase in service margins as a percentage of service revenue was primarily due to the $0.3 million reduction in service costs during the three months ended March 31, 2009, compared to the same period in the prior year. Decreasing service costs resulted from decreasing headcount, 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 increased approximately $0.3 million, or 7.1% to $4.2 million in the three months ended March 31, 2009 from $3.9 million in the three months ended March 31, 2008. Sales and marketing expense increased primarily because we incurred $0.2 million of expenses from our strategic marketing launch during the three months ended March 31, 2009. Also, we incurred $0.1 million of additional salaries wages and benefits and $0.2 million of additional severance as a result of changes to our sales group and directing additional resources to focus on strategic marketing. Partially offsetting these increases in costs, we incurred $0.2 million less in commission expense in the three months ended March 31, 2009, compared to the same period in the prior year.

Research and Development. Research and development expenses decreased approximately $0.7 million, or 16.4%, to approximately $3.5 million in the three months ended March 31, 2009 from $4.2 million in the three months ended March 31, 2008. Decreasing research and development expenses were primarily attributable to a $0.4 reduction of research and development related salaries, benefits and other employee related costs as part of our effort to reduce operating expenses. Also, an additional $0.2 million of development costs incurred for customized solutions sold to customers were charged to cost of sales in the current period, compared to the same period of the prior year. Additionally, costs incurred by our UK development group decreased by approximately $0.2 million during the three months ended March 31, 2009, compared to the same period in the prior year, due to the declining value of the British pound relative to the U.S. dollar.

General and Administrative. General and administrative expenses decreased approximately $0.2 million, or 7.6%, to approximately $2.2 million in the three months ended March 31, 2009 from $2.4 million in the three months ended March 31, 2008. Decreasing general and administrative expenses were primarily attributable to $0.2 million of severance expense that we incurred in the prior year period that did not recur during the three months ended March 31, 2009.

Goodwill and Trademark Impairment. During the three months ended March 31, 2009, we recorded total goodwill and trademark impairment charges of $17.1 million. We recorded a $16.0 million goodwill impairment charge due to the sustained decline in our stock price and the estimated effect of the economic downturn on our weighted average cost of capital, which reflects the market's presumed risk on our ability to generate estimated future cash flows. This impairment charge resulted in a net goodwill balance of $0 as of March 31, 2009. Additionally, as a result of our strategic planning process for the period ended March 31, 2009, we have rebranded our product lines to better reflect our strategic direction and no longer intend to use the Everstream trademark. Consequently, we recorded a $1.1 million impairment of our Everstream trademark for the three months ended March 31, 2009, which resulted in a net trademark balance of $0 as of March 31, 2009.

Interest income (expense) - net. Interest income decreased approximately $0.2 million during the three months ended March 31, 2009, compared to the same period of the prior year, primarily due the decrease in yield from our cash caused by the decline in interest rates during the past twelve months.

Other (Expense) Income - net. During the three months ended March 31, 2009, we incurred approximately $0.1 million of realized currency translation losses. These losses resulted from foreign currency transactions by our subsidiaries for which the Japanese yen and Euro are the functional currency.

(Benefit) Provision for Income Taxes. We recorded an income tax benefit for our domestic and foreign subsidiaries of ($0.8) million in the three months ended March 31, 2009, compared to tax expense of less than $0.1 million for our domestic and foreign subsidiaries in the three months ended March 31, 2008. The change in the consolidated effective tax rate during the three months ended March 31, 2009, compared to the same period in the prior year was primarily attributable to a $0.4 million deferred tax benefit resulting from the reversal of a deferred tax liability associated with the Everstream trademark. When the trademark was removed from the books as a result of the impairment, the associated deferred tax liability was also written off. Net operating loss carryforwards were available to reduce otherwise taxable income recorded in the US in the three months ended March 31, 2009. The remaining $0.4 million of benefit recorded during the three months ended March 31, 2009 was attributable to a benefit recorded by our Japan subsidiary as a result of the pretax loss reported during the period. Our Japan subsidiary is subject to an approximately 49% effective tax rate.

As of June 30, 2008, we had U.S. federal tax net operating loss carryforwards of approximately $159.1 million for income tax purposes, of which $13.6 million will expire immediately after fiscal year 2009, and the remainder will expire at various dates through 2028. The benefits associated with these losses and tax credits may be limited if an "ownership change" has occurred within the meaning of Section 382(g) of the Internal Revenue Code. We are not certain that an ownership change has occurred as of March 31, 2009 and are currently conducting a study to make a final determination on this matter. We expect to complete this study prior to our fiscal year ended June 30, 2009. If we determine that an ownership change has occurred, this event could subject our net operating loss carryforwards to an annual limitation, which could restrict our ability to use them to offset taxable income in periods following the ownership change.

Net (Loss) Income. The net loss for the three months ended March 31, 2009 was ($15.3) million or ($1.85) per basic and diluted share compared to net income for the three months ended March 31, 2008 of $0.3 million, or $0.04 per basic and diluted share.

The nine months ended March 31, 2009 compared to the nine months ended March 31,

2008

                                          Nine Months Ended
                                              March 31,
        (Dollars in Thousands)            2009          2008       $ Change       % Change
 Product revenues                       $  35,845     $ 33,011     $   2,834            8.6 %
 Service revenues                          19,853       20,196          (343 )         (1.7 %)
 Total revenues                            55,698       53,207         2,491            4.7 %

 Product cost of sales                     16,554       16,384           170            1.0 %
 Service cost of sales                      7,265        8,210          (945 )        (11.5 %)
 Total cost of sales                       23,819       24,594          (775 )         (3.2 %)

 Product gross margin                      19,291       16,627         2,664           16.0 %
 Service gross margin                      12,588       11,986           602            5.0 %
 Total gross margin                        31,879       28,613         3,266           11.4 %

 Operating expenses:
 Sales and marketing                       12,006       11,437           569            5.0 %
 Research and development                  10,668       12,445        (1,777 )        (14.3 %)
 General and administrative                 6,725        7,319          (594 )         (8.1 %)
 Impairment of goodwill and trademark      17,090            -        17,090          NM(1)
 Total operating expenses                  46,489     $ 31,201        15,288           49.0 %

 Operating (loss) income                  (14,610 )     (2,588 )     (12,022 )        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                         79          575          (496 )        (86.3 %)
 Other (expense) income - net                (305 )        169          (474 )        NM(1)

 (Loss) income before income taxes        (14,836 )      1,471       (16,307 )        NM(1)

 (Benefit) provision for income taxes        (114 )        195          (309 )        NM(1)
 Net (loss) income                      $ (14,722 )   $  1,276       (15,998 )        NM(1)

(1) NM denotes percentage is not meaningful

Product Revenue. Total product revenue for the nine months ended March 31, 2009 was approximately $35.8 million, an increase of approximately $2.8 million, or 8.6%, from $33.0 million for the nine months ended March 31, 2008. The increase in product sales resulted from the approximately $4.5 million, or 23.4%, increase in video product sales to $24.0 million in the nine months ended March 31, 2009, from $19.4 million in the nine months ended March 31, 2008. The increase in video product revenue was primarily generated by $2.8 million and $1.7 million increases in revenue from sales in North America and Asia, respectively. North American video solutions product sales increased due to existing customers replacing older systems with our latest generation video solutions system, expanding existing systems, and deploying video solutions to new markets. Video solutions product sales increased in Japan due to completion of customized software products to a Japanese cable operator in the nine months ended March 31, 2009, that was incremental over prior year revenue. Fluctuation in video solutions revenue is often due to the fact that we have customers making periodic large purchases that account for a significant percentage of revenue.

Real-time product sales decreased $1.7 million, or 12.6%, to $11.9 million in the nine months ended March 31, 2009 from $13.6 million in the nine months ended March 31, 2008. This decrease was due to a $1.5 million and $0.5 million decrease in revenue from sales in Europe and North America, respectively, resulting from decreasing volume of system sales in these markets during the nine months ended March 31, 2009, compared to the same period in the prior year. We believe that decreasing volume of real-time product sales is primarily due to the impact of the economic downturn on our customers in these markets. This trend of declining real-time product revenue may continue as a result of the sustained economic downturn.

Service Revenue. Total service revenue for the nine months ended March 31, 2009 was $19.9 million, a decrease of $0.3 million, or 1.7%, from $20.2 million for the nine months ended March 31, 2008. The decrease in service revenue was due to the approximate $0.9 million, or 10.5%, decrease in service revenue related to real-time products. For years we have experienced a steady decline in real-time service revenues, as our legacy products have been removed from service and, to a lesser extent, from customers purchasing our new products that produce less service revenue. We expect real-time service revenues to decline further, partially offset by newer system service, as additional legacy systems are eventually removed from service.

Service revenue associated with video solutions products increased $0.5 million, or 4.3%, to $12.5 million during the nine months ended March 31, 2009 from approximately $12.0 million for the nine months ended March 31, 2008. During the nine months ended March 31, 2009, we recognized additional installation service revenue, compared to the same period in the prior year, due to the timing of system installations during the period, and also because we continue to expand our base of video market deployments that generate maintenance and support service revenue.

Product Gross Margin. Product gross margin was $19.3 million for the nine months ended March 31, 2009, an increase of approximately $2.7 million, or 16%, from $16.6 million for the nine months ended March 31, 2008. Product gross margin as a percentage of product revenue increased to 53.8% in the nine months ended March 31, 2009 from 50.4% in the nine months ended March 31, 2008. Product gross margins, as a percentage of product revenue, increased primarily due to the mix of software and hardware sales, as well as technological improvements 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 nine months ended March 31, 2009, compared to the same period in the prior year.

Service Gross Margin. The gross margin on service revenue increased to 63.4% of service revenue in the nine months ended March 31, 2009 from 59.3% of service revenue in the nine months ended March 31, 2008. The increase in service margins as a percentage of service revenue was primarily due to the $0.9 million reduction in service costs during the nine months ended March 31, 2009, compared to the same period in the prior year. Decreasing service costs resulted from a $0.7 million decrease in salaries, wages, and benefits, as we have focused on managing costs of the personnel 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 increased approximately $0.6 million, or 5.0% to $12.0 million in the nine months ended March 31, 2009 from $11.4 million in the nine months ended March 31, 2008. Sales and marketing expense increased primarily because we incurred $0.7 million of additional salaries and benefits and $0.6 million of additional severance as a result of changes to our sales and marketing group. Partially offsetting these increasing costs, during the nine months ended March 31, 2009, we incurred $0.4 million less in depreciation expense related to our MediaHawk 4500 video solutions systems that were being used as demonstration systems for customers and have been fully depreciated or sold. Additionally, we incurred $0.3 million less in incentive compensation expense in the nine months ended March 31, 2009, compared to the same period in the prior year.

Research and Development. Research and development expenses decreased approximately $1.8 million, or 14.3%, to approximately $10.7 million in the nine months ended March 31, 2009 from $12.4 million in the nine months ended March . . .