The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and related notes included elsewhere in this report.

When used in this discussion or elsewhere in this report, the words "expects," "anticipates," "estimates," "believes," "plans," "will," "intend," "can" and similar expressions are intended to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, risks relating to general economic conditions in the markets we address and the telecommunications market in general, risks related to the development of our new products and services, the effects of competition and competitive pricing pressure, uncertainties associated with changing intellectual property laws, developments in and expenses related to litigation, increased competition in our markets, inability to obtain sufficient amounts of key components, the rescheduling or cancellations of key customer orders, the loss of a key customer, the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations in the rate of exchange of foreign currency, changes in our effective tax rate, potential short-term investment losses and other risks due to credit market dislocation, changes in accounting for convertible debt, market acceptance of our new products and services, technological advancements, undetected errors or defects in our products, the risks associated with our international sales, geopolitical risks and risk of terrorist activities, the risks associated with attempting to integrate other companies and businesses we acquire, and the risks set forth below in Part II, Item 1A, "Risk Factors."

These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances or on which any such statement is based.

All references to "Symmetricom," "we," "us," and "our" mean Symmetricom, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company.

Overview

Symmetricom is a leading supplier of precise timing standards to industry, government, utilities, research centers and aerospace markets. We also supply Quality of Experience ("QoE") solutions that enable communication service providers to monitor the performance, as perceived by end users, of IP-based video and other next generation network applications. Timing and synchronization products and services include network synchronization systems and timing elements used by network operators and users, governments and professional services. Such products play an important role in the operation, bandwidth utilization, and quality of service of wireline, wireless and cable networks enabling our customers to increase the reliability of their networks in today's evolving communications environment.

Symmetricom's customers include worldwide public network providers, incumbent local exchange carriers ("ILECs"), public telephone and telegraph companies ("PTTs"), competitive local exchange carriers ("CLECs"), other telephone companies, wireless service providers, cable television operators, distributors and systems integrators, communications original equipment manufacturers ("OEMs"), aerospace contractors, governments and research facilities.

Impairment of Goodwill

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test the carrying amount of goodwill annually during the fourth fiscal quarter as well as at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.

During the third quarter of fiscal 2009, due to a decline in our stock price and a lowered business outlook, we determined that indicators of a potential goodwill impairment existed. Accordingly, we completed a step one goodwill impairment test to determined whether the decline in market capitalization and business outlook revisions indicated that the carrying value of our reporting units were in excess of fair value.

A step one goodwill impairment test compares the fair value of a reporting unit to its carrying value to determine if a step two test is required. We estimate our reporting unit's fair values using a weighted average of values determined under an income approach and a market approach. We weighed these approaches at approximately 67% and 33% for the income approach and the market approach, respectively. We applied a lower weighting to the market approach as there are a limited number of highly comparable companies, which are a key component of the market approach. Under the income approach, fair value is determined by discounting estimated future cash flows. The income approach is dependent on several significant assumptions, including our earnings projections and our cost of capital. Under the market approach, we estimate the fair value of each reporting unit based on pricing multiples of certain financial parameters observed in comparable companies.

Based on the results of our step one test, we determined that the fair values of the Wireline and Timing, Test and Measurement reporting units were less than their respective carrying amounts, and therefore the second step of the goodwill impairment test was performed to measure the amount of impairment loss for the each reporting unit. Due to the extensive work involved in performing the second step of the goodwill impairment analysis, we had not yet completed our analysis at the time our interim report on Form 10-Q for the third quarter of fiscal 2009 was due. Based on this preliminary analysis, we recorded an estimated goodwill impairment charge of approximately $48.1 million in the third quarter of fiscal 2009, consisting of $28.0 million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting segment.

Other

On February 10, 2009, we announced that our President and Chief Executive Officer, Thomas W. Steipp, informed our Board of Directors that he will retire on June 28, 2009. We also announced that we will initiate a search for a new CEO immediately. Upon his retirement, Mr. Steipp will also resign from our Board of Directors.

On January 20, 2009, we announced a restructuring plan to further streamline manufacturing operations and improve operational efficiencies. As part of our ongoing outsourcing and operational efficiency program, we plan to eliminate approximately 100 positions, or about 11% of our total workforce. The reductions began in January 2009 and will be complete by the third quarter of fiscal 2010. We expect to incur restructuring charges of approximately $7.1 million in connection with the plan, including approximately $1.1 million which we expect to record in the fourth quarter of fiscal 2009. Total restructuring charges are expected to include approximately $2.0 million in accelerated depreciation charges and approximately $5.1 million in one-time termination benefits and other restructuring related charges. Total restructuring charges in the third quarter of fiscal 2009 were $3.5 million, including $0.5 million related to accelerated depreciation and $3.0 million in one-time termination benefits and other restructuring related charges. Over the next twelve months, we expect to incur remaining integration and restructuring charges amounting to $3.5 million, including approximately $1.4 million in accelerated depreciation charges and approximately $2.1 million in one-time termination benefits and other restructuring related charges. Upon completion, we expect the restructuring and other actions to reduce our annual manufacturing and operating costs by approximately $7.0 million.

On January 14, 2009, Nortel Networks, one of our customers, filed for bankruptcy protection from its creditors. We reviewed our shipments that related to Nortel as of the end of the second quarter of fiscal 2009. As a result of this review, we determined that $0.5 million in shipments made in the quarter and not yet paid should not be recognized as revenue due to the uncertain nature of the collectability of the related receivables prior to the bankruptcy filing. Additionally, we reviewed accounts receivable balances as of the end of the second quarter of fiscal 2009 related to Nortel and recognized a $0.1 million charge to the allowance for doubtful accounts. Please see "Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions" below.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Other than the change of estimate for doubtful accounts (See Item 1 of Part I, Financial Statements - Note 1 - Basis of Presentation and Recently Issued Financial Statements), we believe that there have been no significant changes during the nine months ended March 29, 2009 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 29, 2008.

Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions

Financial markets in the U.S. and abroad have experienced a severe downturn arising from a multitude of factors, including concerns about the systemic impact of inflation and deflation, geopolitical issues, adverse credit conditions, higher energy costs, lower corporate profits and capital spending, and declining real estate and mortgage markets, combined with volatile oil prices, decreased business and consumer confidence and increased unemployment. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases cease, to provide funding to borrowers.

Adverse economic conditions in the U.S. and other markets in which we operate and into which we sell our products have adversely affected and may continue to adversely affect our liquidity and financial condition. If current economic conditions or the constrained credit environment continue, our customers may be unable to timely replace maturing liabilities and access the capital markets to meet liquidity needs on satisfactory terms or at all, resulting in adverse effects on our results of operations. In addition, our customers may delay or reduce capital expenditures. This could result in reductions in sales of our products, longer sales cycles, difficulties in collecting accounts receivable, additional excess and obsolete inventory, potential impairment charges related to our goodwill and intangible assets, gross margin deterioration, slower adoption of new technologies, increased price competition and supplier difficulties.

Results of Operations

The following table presents selected items in our condensed consolidated
statements of operations as a percentage of total revenues for the three and
nine months ended March 29, 2009 and March 30, 2008:



                                                Three Months Ended                Nine Months Ended
                                            March 29,        March 30,        March 29,        March 30,
                                              2009             2008             2009             2008
Net revenue
Telecom Solutions Division:
Wireline Products                                49.5 %           44.3 %           46.7 %           41.4 %
Wireless/OEM Products                             6.1 %           10.2 %            8.5 %           10.8 %
Global Services                                   3.7 %            5.9 %            6.5 %            8.5 %
Quality of Experience Assurance                   0.4 %            2.2 %            0.6 %            1.0 %
Timing, Test and Measurement Division            40.3 %           37.4 %           37.8 %           38.3 %

Total net revenue                               100.0 %          100.0 %          100.0 %          100.0 %
Cost of products and services                    51.6 %           55.1 %           50.3 %           54.6 %
Amortization of purchased technology              0.7 %            1.6 %            0.7 %            1.7 %
Integration and restructuring charges             4.0 %            0.6 %            1.4 %            0.3 %
Gross profit                                     43.7 %           42.7 %           47.6 %           43.5 %
Operating expenses:
Research and development                          9.3 %           13.2 %           11.8 %           13.7 %
Selling, general and administrative              24.2 %           31.0 %           26.3 %           31.1 %
Amortization of intangible assets                 0.2 %            0.5 %            0.2 %            0.5 %
Integration and restructuring charges             6.4 %            0.3 %            2.8 %            0.3 %
Impairment of goodwill                           85.4 %             -  %           30.0 %             -  %
Operating loss                                  (81.8 )%          (2.2 )%         (23.5 )%          (2.1 )%
Loss on repayment of convertible notes,
net                                                -  %             -  %           (0.3 )%            -  %
Gain on sale of asset                              -  %             -  %             -  %            0.5 %
Loss on short-term investments, net                -  %           (2.1 )%          (0.9 )%          (1.1 )%
Interest income                                   0.6 %            3.4 %            1.0 %            4.1 %
Interest expense                                 (1.0 )%          (2.4 )%          (1.1 )%          (2.4 )%
Loss before income taxes                        (82.2 )%          (3.3 )%         (24.8 )%          (1.1 )%
Income tax provision                              0.6 %           (1.5 )%           1.8 %           (0.4 )%
Loss from continuing operations                 (82.8 )%          (1.8 )%         (26.5 )%          (0.7 )%
Gain from discontinued operations, net
of tax                                             -  %             -  %             -  %            0.1 %
Net loss                                        (82.8 )%          (1.8 )%         (26.5 )%          (0.6 )%

Net Revenue:



                                            Three Months Ended                                         Nine Months Ended
                                         March 29,       March 30,                                 March 29,      March 30,
                                           2009            2008         $ Change      % Change        2009           2008        $ Change      % Change
Net Revenue (dollars in thousands) :
Wireline Products                       $    27,922     $    22,799     $   5,123         22.5 %   $   74,882     $   62,411     $  12,471         20.0 %
Wireless/OEM Products                         3,418           5,256        (1,838 )      (35.0 )       13,565         16,379        (2,814 )      (17.2 )
Global Services                               2,084           3,046          (962 )      (31.6 )       10,443         12,846        (2,403 )      (18.7 )
Quality of Experience Assurance                 202           1,114          (912 )      (81.9 )          989          1,574          (585 )      (37.2 )
Timing, Test and Measurement Division        22,744          19,254         3,490         18.1         60,596         57,837         2,759          4.8

Total Net Revenue                       $    56,370     $    51,469     $   4,901          9.5 %   $  160,475     $  151,047     $   9,428          6.2 %
Percentage of Revenue                         100.0 %         100.0 %                                   100.0 %        100.0 %

Third Quarter of Fiscal 2009: Net revenue consists of sales of products, software licenses and services. In the third quarter of fiscal 2009, net revenue increased $4.9 million, or 9.5%, compared to the corresponding quarter of fiscal 2008. Wireline revenue increased $5.1 million, or 22.5%, compared to the same quarter for the prior year, due to higher sales of cable products and shipments to a new international customer. Wireless/OEM Products revenue decreased $1.8 million, or 35.0%, compared to the same quarter for the prior year, due primarily to a decline in legacy technology investments by wireless carriers. Global Service revenue decreased by $1.0 million, or 31.6%, compared to the same quarter for the prior year, due primarily to lower installation revenue from a major customer. Revenue for Quality of Experience Assurance Products decreased by $0.9 million, or 81.9%, compared to the same quarter for the prior year, due primarily to extended trial periods by potential customers. Timing, Test and Measurement Division revenue increased by $3.5 million, or 18.1%, compared to the same quarter for the prior year, due to higher sales to the government communication and electronic system programs.

First Nine Months of Fiscal 2009: Net revenue increased by $9.4 million, or 6.2%, in the first nine months of fiscal 2009 as compared to the corresponding nine months in fiscal 2008. Wireline revenue increased $12.5 million, or 20.0%, compared to the same period for the prior year, due to higher sales of cable products and shipments to a new international customer. Wireless/OEM Products revenue decreased by $2.8 million, or 17.2%, compared to the corresponding nine months in fiscal 2008, due primarily to a decline in legacy technology investments by wireless carriers. Global Services revenue decreased by $2.4 million, or 18.7%, compared to the same period for the prior year, primarily due to lower installation revenue from a major customer. Revenue for Quality of Experience Assurance Products decreased $0.6 million, or 37.2%, compared to the same period for the prior year, due primarily to extended trial periods by potential customers. Revenue from the Timing, Test and Measurement Division for the first nine months of fiscal 2009 increased $2.8 million, or 4.8%, compared to the same period for the prior year, primarily due to higher sales to the government communication and electronic system programs.

Gross Profit:



                                            Three Months Ended                                          Nine Months Ended
                                         March 29,       March 30,                                  March 29,        March 30,
                                           2009            2008         $ Change      % Change         2009            2008         $ Change      % Change
Gross Profit (dollars in thousands) :
Wireline Products                       $    15,818     $    11,328     $   4,490         39.6 %   $     45,039     $    32,327     $  12,712         39.3 %
Wireless/OEM Products                           554           1,111          (557 )      (50.1 )          3,107           4,450        (1,343 )      (30.2 )
Global Services                                 636             821          (185 )      (22.5 )          2,948           3,598          (650 )      (18.1 )
Quality of Experience Assurance                  77             805          (728 )      (90.4 )            605           1,137          (532 )      (46.8 )
Timing, Test and Measurement Division        10,215           9,056         1,159         12.8           28,126          27,138           988          3.6
Other cost of sales                          (2,643 )        (1,151 )      (1,492 )      129.6           (3,380 )        (2,984 )        (396 )       13.3

Total Gross Profit                      $    24,657     $    21,970     $   2,687         12.2 %   $     76,445     $    65,666     $  10,779         16.4 %
Percentage of Revenue                          43.7 %          42.7 %                                      47.6 %          43.5 %

Third Quarter of Fiscal 2009: Gross profit in the third quarter of fiscal 2009 increased by $2.7 million or 12.2% compared to the corresponding quarter of fiscal 2008. Gross profit for Wireline Products increased by $4.5 million, or 39.6%, which is greater than the revenue increase of 22.5%, primarily due to a favorable sales mix of cable products with higher gross margin. Furthermore, Wireline Products benefited from lower costs as a result of the initial phase of outsourcing certain manufacturing capacity to a subcontractor in China. Gross profit for Wireless/OEM Products decreased by $0.6 million, or 50.1%, which was greater than the revenue decrease of 35.0% for the same period, due to the impact of a price reduction for a major OEM customer. Gross profit for Global Services decreased $0.2 million, or 22.5%, which is less than the revenue decrease of 31.6% for the same period due primarily to a decrease in revenue for repairs, which has a higher gross margin than other services. Gross profit for Quality of Experience Products, decreased by $0.7 million, or 90.4%, which is slightly higher than the revenue decrease of 81.9%. Gross profit for the Timing, Test and Measurement Division increased by $1.5 million, or 12.8%, which is less than the revenue increase of 18.1%, primarily due to more government business which has lower margins.

Other cost of sales increased $1.5 million or 129.6% primarily due to the company-wide restructuring announced in January 2009.

First Nine Months of Fiscal 2009: Gross profit increased $10.8 million or 16.4% during the first nine months of fiscal 2009 compared to the same period in the prior year. Gross profit for Wireline Products increased by $12.7 million, or 39.3%, which is higher than the revenue increase of 20.0%, primarily due to a favorable sales mix of cable products with higher gross margin. Furthermore, Wireline Products benefited from lower costs as a result of the initial phase of outsourcing certain manufacturing capacity to a subcontractor in China. Gross profit for the Wireless/OEM Products decreased by $1.3 million or 30.2%, which was higher than the revenue decrease of 17.2% for the same period due primarily to a reduction in price to a major customer. Gross profit for Global Services decreased $0.7 million or 18.1%, consistent with the revenue decrease of 18.7% for the same period. Gross profit for Quality of Experience Assurance decreased by $0.5 million or 46.8%, which is higher than the revenue increase of 37.2%, primarily due to higher manufacturing period costs. Gross profit for the Timing, Test and Measurement Division was flat compared to the first nine months of fiscal 2008.

Other cost of sales increased $0.4 million, or 13.3%, primarily due to the company-wide restructuring announced in January 2009. This was partially offset by lower costs for amortization of intangibles due to the write-off of intangible assets that were determined to be impaired in the fourth quarter of fiscal 2008 and other intangible assets that were fully amortized prior to the second fiscal quarter of 2009.

Operating Expenses:

Research and Development Expense:



                                      Three Months Ended                                                Nine Months Ended
                                  March 29,         March 30,                                      March 29,         March 30,
                                    2009              2008          $ Change       % Change           2009             2008          $ Change       % Change
Research and development
expense (dollars in thousands
)                                $     5,256       $     6,801      $  (1,545 )       (22.7 )%    $     19,008      $    20,674      $  (1,666 )        (8.1 )%
Percentage of Revenue                    9.3 %            13.2 %                                          11.8 %           13.7 %

Third Quarter of Fiscal 2009: Research and development expense consists primarily of salaries and benefits, prototype expenses and fees paid to outside consultants. Research and development expense in the third quarter of fiscal 2009 decreased $1.5 million, or 22.7%, compared to the third quarter of fiscal 2008 due primarily to lower headcount as a result of the January 2009 restructuring, lower incentive compensation related expenses, and lower stock-based compensation costs.

First Nine Months of Fiscal 2009: Research and development expense for the first nine months of fiscal 2009 decreased $1.7 million, or 8.1%, compared to the corresponding period of fiscal 2008, due primarily to lower headcount as a result of the January 2009 restructuring, lower incentive compensation related expenses, and lower stock-based compensation costs.

Selling, General and Administrative:



                                          Three Months Ended                                           Nine Months Ended
                                       March 29,       March 30,                                   March 29,        March 30,
                                         2009            2008         $ Change      % Change          2009            2008         $ Change      % Change
Selling, general and administrative
(dollars in thousands)                $    13,638     $    15,937     $  (2,299 )      (14.4 )%   $     42,148     $    46,984     $  (4,836 )      (10.3 )%
Percentage of Revenue                        24.2 %          31.0 %                                       26.3 %          31.1 %

Third Quarter of Fiscal 2009: Selling, general and administrative expenses consist primarily of salaries, benefits, sales commissions and travel-related expenses for our sales and services, marketing, finance, human resources, information technology and facilities departments. These expenses decreased by 14.4% to $13.6 million for the third quarter of fiscal 2009, or $2.3 million lower compared to $15.9 million for the corresponding quarter of fiscal 2008. . . .