You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this Form 10-K. Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. Actual results could differ materially because of the factors discussed in Part I, Item 1A. "Risk Factors" of this Form 10-K.

Overview

We were incorporated in California in 1984, became a public company in 1989 and were reincorporated in the State of Delaware in February 1999. Through most of our corporate existence, we provided ICs for personal computer applications, including personal computer ("PC") graphics and storage. In 2001, we refocused our business efforts away from these areas, which we believed had become commodity-like in terms of pricing and offered diminished opportunities for sustained product differentiation and profitability. We reinforced our commitment to operate efficiently and profitably by taking strategic actions beginning in 2005 to improve our top and bottom line growth, including:
(1) improving efficiencies by focusing on our product lines including mixed-signal audio, audio DSP, and energy products, (2) divesting ourselves of our digital

video product line assets and non-core products to focus on our core strengths, and (3) enhancing our capital structure by completing a $150 million stock repurchase program in fiscal year 2008 to increase long-term stockholder value. We continued this process in fiscal year 2009 with focusing on winning new designs, growing our market share in portable audio products in particular, and by laying the foundation for growth in our DSP and energy products.

The credit market crisis and other macro-economic challenges currently affecting the global economy impacted both the semiconductor industry and our own results of operations in fiscal year 2009. The recession reduced both business and consumer spending, which impacted sales of end-user products that incorporate our components. Consequently, for fiscal year 2009 net sales were down approximately 4 percent from the preceding year. However, our strength in revenue from new products and prudent expense management were key drivers in the Company maintaining bottom-line profitability for the year as a whole while establishing a solid base for future growth. Additionally, in the fourth quarter of fiscal year 2009, we announced a $20 million stock repurchase program. No share repurchases under this program have occurred as of March 28, 2009.

During fiscal year 2008, we acquired 100 percent of the outstanding stock of Apex for a purchase price of approximately $42.8 million, consisting primarily of cash and direct acquisition costs. Apex designs and produces integrated circuits, hybrids and modules used in a wide range of industrial and aerospace applications that require high-power precision analog products, such as PWM's and power amplifiers. These precision amplifiers are used for driving motors and piezoelectric devices, programmable power supplies and other devices requiring high power and precision control. In fiscal year 2008 we took additional steps to improve our competitive cost structure. First, we committed to a plan to close Caretta Integrated Circuits ("Caretta"), a subsidiary based in Shanghai, China. We also made a strategic decision to further streamline our organization structure which resulted in an additional headcount reduction of 61 employees. Finally, on January 30, 2008, we announced that our Board authorized a share repurchase program of up to $150 million. The Company completed this share repurchase program on April 28, 2008 and purchased a total of 24.5 million shares, or approximately 28% of the total number of shares outstanding prior to the program. All shares of our common stock that were repurchased were cancelled as of June 28, 2008.

Results of Operations

The following table summarizes the results of our operations for each of the past three fiscal years as a percentage of net sales. All percentage amounts were calculated using the underlying data in thousands:

                                                                         Fiscal Years Ended
                                                            March 28,        March 29,         March 31,
                                                              2009             2008              2007

Net sales                                                          100 %            100 %             100 %
Gross margin                                                        56 %             57 %              60 %
Research and development                                            26 %             27 %              24 %
Selling, general and administrative                                 26 %             29 %              29 %
Restructuring costs and other, net                                   - %              6 %               1 %
Impairment of non-marketable securities                              - %              2 %               2 %
Acquired in process research and development                         - %              1 %               1 %
Provision for litigation expenses                                    1 %              - %               - %
Impairment of intangible assets                                      1 %              - %               - %

Income (loss) from operations                                        2 %             (8 %)              3 %
Realized gain on marketable securities                               - %              - %               - %
Interest income                                                      2 %              7 %               7 %
Other income (expense), net                                          - %              - %               - %

Income (loss) before income taxes                                    4 %             (1 %)             10 %
Provision (benefit) for income taxes                                 2 %              2 %              (5 %)

Net income (loss)                                                    2 %             (3 %)             15 %

Net Sales

Commencing with fiscal year 2009, we report sales in two product categories:
audio products and energy products. The energy product category had previously been referred to as "industrial," but has been revised to reflect our focus on integrated circuits designed for a variety of energy exploration, measurement and control applications. Revenue in the new energy product line category includes certain product revenue such as ARM and Communication that is not an ongoing focus or typically considered an energy related product. Our sales by product line is as follows (in thousands):

                                  March 28,      March 29,      March 31,
                                     2009           2008           2007

                Audio products    $   97,293     $  100,097     $  105,913
                Energy products       77,349         81,788         76,391

                Total             $  174,642     $  181,885     $  182,304

Net sales for fiscal year 2009 decreased 4 percent, to $174.6 million from $181.9 million in fiscal year 2008. The drop in net sales reflects a $4.4 million decrease in energy product sales and a $2.8 million decrease in audio product sales. Within the energy product group, sales decreases were primarily attributable to seismic, industrial A/D converters and amplifiers, communications, and ARM processor-based products. These decreases were partially offset by an increase in Apex Precision Power product sales, primarily attributable to a full years contributions in fiscal year 2009, as Apex was acquired by the Company on July 24, 2007. The audio products group experienced substantial growth from its' portable products, which were partially offset by decreases in DAC and ADC product sales.

Net sales for fiscal year 2008 were $181.9 million, virtually unchanged versus sales of $182.3 million in fiscal year 2007. Fiscal year 2008 net sales were impacted by a contribution of $12.6 million from Apex Precision Power products, which were acquired by the Company on July 24, 2007, and by a $9.1 million increase in sales of portable products from our audio product line. These sales increases were offset by unfavorable sales variances from various products within the audio and energy product lines. In particular, DAC, interface, and ADC products within the audio products group experienced sales reductions in fiscal year 2008 versus fiscal year 2007, while seismic and communications products incurred unfavorable sales variances within the energy product group.

Export sales, principally to Asia, including sales to U.S.-based customers with manufacturing plants overseas, were approximately $119.5 million in fiscal year 2009, $112.5 million in fiscal year 2008, and $112.8 million in fiscal year 2007. Export sales to customers located in Asia were 48 percent of net sales in fiscal year 2009, 40 percent of net sales in fiscal year 2008, and 44 percent of net sales in fiscal year 2007. All other export sales represented 20 percent, 22 percent, and 18 percent of net sales in fiscal years 2009, 2008, and 2007, respectively.

Our sales are denominated primarily in U.S. dollars. During fiscal years 2009, 2008, and 2007, we did not enter into any foreign currency hedging contracts.

Sales to Avnet, Inc., our largest distributor, represented 33 percent, 27 percent, and 29 percent of net sales in fiscal years 2009, 2008, and 2007, respectively. The increase in sales to Avnet from fiscal year 2008 to fiscal year 2009 is partially related to Avnet's acquisition of Azzurri Technology Ltd., a former distributor for Cirrus Logic, early in fiscal year 2009. We had one end customer whose sales revenues represented more than 15% of the Company's net sales for the fiscal year ending March 28, 2009, while sales to our ten largest customers represented approximately 36% of our revenues. No other customer or distributor represented more than 10 percent of net sales in fiscal years 2009, 2008, or 2007. The loss of a significant customer or a significant reduction in their orders could have an adverse affect on our sales.

Gross Margin

Gross margin was 56 percent in fiscal year 2009, down from 57 percent in fiscal year 2008. The decrease in margin from fiscal year 2008 was mainly due to changes in both customer and product mix. The audio product group experienced a reduction in margin from fiscal year 2008 to fiscal year 2009, which was partially

offset by an increase in energy product margin for this same period. The sale of product that had been written down in prior fiscal years contributed approximately $1.6 million, or 0.9 percent, to gross margin compared to contribution of approximately $1.1 million, or 0.6 percent, in fiscal year 2008. In total, excess and obsolete inventory charges decreased by $1.4 million from fiscal year 2008, which increased gross margin by 0.8 percentage points.

Gross margin was 57 percent in fiscal year 2008, down from 60 percent in fiscal year 2007. The decrease in margins from fiscal year 2007 was mainly due to changes in both customer and product mix. Both the audio product group margin and energy product group margin experienced slight decreases in fiscal year 2008 versus fiscal year 2007. The sale of product that had been written down in prior fiscal years contributed approximately $1.1 million, or 0.6 percent, to gross margin compared to contribution of approximately $1.9 million, or 1.0 percent, in fiscal year 2007. In total, excess and obsolete inventory charges increased by $0.4 million from fiscal year 2007, which decreased gross margin by 0.2 percentage points.

Research and Development Expenses

Fiscal year 2009 research and development expenses decreased $4.2 million from fiscal year 2008. The decrease was primarily due to a decrease in product development expenses of $1.9 million, as a result of lower mask expenses and engineering wafer costs. In addition, salary and benefit costs associated with research and development personnel decreased by $1.5 million. Finally, non-recurring engineering worked performed and billed to third parties resulted in an additional $0.7 million reduction in research and development expenses.

Fiscal year 2008 research and development expenses increased $4.5 million from fiscal year 2007. Depreciation and amortization charges increased $2.2 million, substantially due to the acquisition of Apex on July 24, 2007, and also due to the acquisition of certain assets from Tripath Technologies, Inc. for $3.5 million in the first quarter of fiscal year 2008. Salary and benefits costs increased by $1.3 million, largely attributable to the acquisition of Apex. Finally, product development expenses increased by $0.9 million due to higher spending for outsourced firmware, engineering test time, and tape outs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $8.3 million in fiscal year 2009, or 15 percent, compared to fiscal year 2008. The decrease was primarily attributable to a $3.7 million reduction in professional expenses caused by the absence of fees associated with the internal stock option investigation performed in fiscal year 2008 and the reduction in Silvaco lawsuit expenses. See also Part 1 - Item 3 "Legal Proceedings" for additional discussion regarding the Silvaco Data Systems lawsuit. Commission expense decreased $1.2 million due primarily to lower sales and fluctuations in commissionable product mix in fiscal year 2009 versus fiscal year 2008. Salaries and benefits costs were $1.5 million lower in fiscal year 2009 versus fiscal year 2008, primarily due to reduced headcount and other associated employee costs. Finally, occupancy costs in fiscal year 2009 were $0.9 million lower than in fiscal year 2008, primarily due to the termination of a lease in Fremont, California.

Selling, general and administrative expenses increased $1.8 million in fiscal year 2008 compared to fiscal year 2007, largely due to a $2.9 million increase in professional expenses, primarily legal fees attributable to the SEC stock option investigation and the Silvaco lawsuit. These increases were partially offset by reductions in fees attributable to our internal stock option investigation expenses incurred in fiscal year 2007.

Restructuring Costs and Other, net

During fiscal year 2008, we recorded net restructuring charges of $10.5 million as a separate line item on the statement of operations in operating expenses under the caption "Restructuring costs and other, net." This net charge was comprised primarily of two separate steps taken to improve our competitive cost structure. First, we committed to a plan to close Caretta, a subsidiary based in Shanghai, China. This action eliminated approximately 30 positions in China during the Company's fourth fiscal quarter, and resulted in the Company recording primarily a non-cash charge for the assets and goodwill related to Caretta of $10.2 million, as well as $0.9 million in cash payments for the affected employees. Also in the fourth quarter of fiscal year 2008, we

reduced headcount by 61 employees. The restructuring charge associated with this activity amounted to $0.9 million, and were primarily related to employee severance costs. Also in fiscal year 2008, in connection with the expiration of a lease agreement in Fremont, California in December 2007, we recorded a $1.5 million reduction to the fiscal year 2004 and 2006 restructuring liabilities to reduce the accrual to the estimated final settlement amounts. See also Note 10 - Restructuring Costs and Other of the Notes to Consolidated Financial Statements contained in Item 8 for additional discussion on these restructuring activities.

During fiscal year 2007, we recorded restructuring charges of $1.0 million to operating expenses primarily related to the transition of design activities from our Boulder, Colorado office to our headquarters in Austin, Texas. The restructuring costs for the closure of the Boulder design center were composed of $0.7 million in severance and relocation costs and $0.3 million in facility related charges. Approximately 20 employees were affected by this action, five of whom relocated to our Austin headquarters.

As of March 28, 2009, we have a remaining restructuring accrual for all of our past restructurings of $2.0 million, primarily related to future lease payments net of anticipated subleases that will be paid over the respective lease terms through fiscal year 2013. We have classified $0.9 million of this restructuring accrual as long-term.

Impairment of Non-Marketable Securities

During the second quarter of fiscal year 2008, we determined an impairment indicator existed related to our remaining cost method investment in Magnum Semiconductor, Inc. ("Magnum"), as Magnum had received additional capital funding from other sources, and our portion of the investment was diluted. We performed a fair value analysis of our cost method investment in Magnum in accordance with Emerging Issues Task Force No. 03-1 ("EITF 03-1"), "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." Based on the results of the analysis on September 29, 2007, we recognized an impairment of $3.7 million to reduce the carrying value of the Magnum cost method investment to zero. The impairment was recorded as a separate line item on the statement of operations in operating expenses under the caption "Impairment of non-marketable securities."

We previously determined, during the fourth quarter of fiscal year 2007, an impairment indicator existed related to our cost method investment in Magnum. We obtained an independent valuation of the fair value of our cost method investment in Magnum in accordance with EITF 03-1. Based on the results of the independent valuation, at March 31, 2007, we recognized an impairment of $4.3 million to reduce the carrying value of the Magnum cost method investment to $3.7 million. The impairment was recorded as a separate line item on the statement of operations in operating expenses under the caption "Impairment of non-marketable securities." For more details regarding our investment in Magnum, please see Note 4 - Non-Marketable Securities of the Notes to Consolidated Financial Statements contained in Item 8.

Acquired In-Process Research and Development

On July 24, 2007, we acquired 100 percent of the outstanding stock of Apex. The results of Apex's operations have been included in our consolidated financial statements since the acquisition date. We acquired Apex for a purchase price of approximately $42.8 million, consisting primarily of cash and direct acquisition costs. Approximately $1.8 million of the purchase price was allocated to in-process research and development and was included in total operating expenses on the consolidated statement of operations under the caption "Acquired in process research and development." Of the remaining purchase price, $21.2 million was allocated to acquired intangible assets, $16.9 million was allocated to identified assets including fixed assets, accounts receivable, and inventory, $6.2 million was allocated to goodwill, and $3.3 million was allocated to net liabilities assumed. In fiscal year 2009, a refund of $0.2 million related to income taxes was received, which reduced goodwill to $6.0 million.

During fiscal year 2007, we acquired 100 percent of the voting equity interests in Caretta, a company based in Shanghai, China that specialized in designing power management integrated circuits for the single-cell lithium ion battery market. In allocating the $11.3 million purchase price, we immediately recognized an expense of $1.9 million for research and development that was defined as "in-process" at the time of

acquisition. This charge is included in total operating expenses on the consolidated statement of operations under the caption "Acquired in process research and development." Of the remaining purchase price, $4.1 million was allocated to acquired technology, $6.5 million was allocated to goodwill and $1.2 million was allocated to net liabilities assumed. Due to the closure of this office, all technology and goodwill was written off in the fourth quarter of fiscal year 2008. See Note 10 - Restructuring Costs and Other of the Notes to Consolidated Financial Statements contained in Item 8 for further discussion.

Provision For Litigation Expenses

During the second quarter of fiscal year 2009, we recognized a $1.8 million charge related to previously incurred and current legal fees and expenses associated with our ongoing derivative lawsuits. Approximately $0.8 million of those costs were capitalized in "Other current assets" on the consolidated balance sheets as of March 29, 2008. Based on a proposed settlement of the derivative lawsuits in December 2008, the Company believed that it was more likely than not that previously incurred and current legal fees and expenses of $1.8 million related to this matter would not ultimately be recovered under the Company's Directors and Officers insurance policy and should be expensed. The charge was recorded as a separate line item on the consolidated statement of operations in operating expenses under the heading "Provision for litigation expenses," with a corresponding reduction in "Other current assets." Additional costs were incurred throughout fiscal year 2009 related to this matter resulting in a cumulative amount of $2.2 million in provisions for litigation expenses as of March 28, 2009. On December 19, 2008, the initial Stipulation of Settlement (the "Original Stipulation") between the parties with respect to the derivative lawsuit was filed with the federal court. On December 30, 2008, the federal court denied the parties' proposed stipulation. On March 13, 2009, a Revised Stipulation of Settlement (the "Revised Stipulation") was filed with the federal court. The Revised Stipulation modified the terms of the Original Stipulation to address the concerns of the Court raised in the Court's denial of the Original Stipulation. On March 25, 2009, the Court preliminarily approved the settlement and scheduled a hearing for May 28, 2009, to consider whether to provide final approval of the settlement and enter judgment thereon. The ultimate disposition of the case may result in additional financial consequences, which we are unable to predict at this time, and any such adjustments will be recorded in accordance with FASB No. 5, "Accounting for Contingencies." See Note 8, Legal Matters, to the Consolidated Financial Statements for additional information.

Impairment of Intangible Assets

In the fourth quarter of fiscal year 2009, we noted several impairment indicators surrounding our patents acquired from Tripath in June, 2007. We performed an impairment analysis under Statement of Financial Accounting Standard No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets," and noted that the undiscounted cash flows estimated to be generated from these patents were less than the carrying amount of the assets. We then compared the estimated fair value of these assets to their carrying amount and recognized an impairment loss of $2.1 million. These assets have a remaining carrying value of $0.2 million at March 28, 2009. The impairment was recorded as a separate line item on the statement of operations in operating expenses under the caption "Impairment of intangible assets."

Realized Gain on Marketable Securities

During the first quarter of fiscal year 2007, we sold all of our shares in Prudential Financial Inc. ("Prudential") and realized a gain of $0.2 million. We received these shares as we were a policy holder at the time of Prudential's demutualization.

Interest Income

Interest income in fiscal years 2009, 2008, and 2007 was $2.8 million, $12.1 million, and $13.1 million respectively. The decrease in interest income in fiscal year 2009 compared to fiscal years 2008 and 2007 was attributable to two factors: to lower average cash and cash equivalent balances on which interest was earned, principally attributable to the cash requirements associated with the Company's common stock repurchases occurring in the fourth quarter of fiscal year 2008 and the first quarter of fiscal year 2009; and also to lower

yields on invested capital. On January 28, 2008 our Board of Directors authorized a share repurchase program of up to $150 million. The Company completed the stock repurchase program on April 28, 2008, for a total of $150 million with 24.5 million shares repurchased.

Income Taxes

We recorded an income tax provision of $2.7 million in fiscal year 2009 on a pre-tax income of $6.2 million, yielding an effective tax rate of 44 percent. Our effective tax rate was higher than the U.S. statutory rate of 35 percent primarily due to a $2.7 million charge to tax expense in the fourth quarter of fiscal year 2009 to increase the valuation allowance on our U.S. deferred tax assets. This increase in the valuation allowance was based on an evaluation of the net U.S. deferred tax assets we expect to utilize in the upcoming year as a result of projected tax basis net income.

We recorded an income tax provision of $3.0 million in fiscal year 2008 on a pre-tax loss of $2.8 million, yielding an effective tax rate of 109 percent. Our effective tax rate was higher than the U.S. statutory rate of 35 percent primarily due to a $4.6 million charge to tax expense to increase the valuation allowance on our U.S. deferred tax assets.

In fiscal year 2007, we released $7.8 million of the valuation allowance that had been placed on our U.S. deferred tax assets. This release was based on our history of utilizing deferred tax assets and our expectation to do so again in fiscal year 2008. We recorded an income tax benefit of $8.4 million in fiscal year 2007 on pre-tax income of $19.5 million, yielding an effective tax benefit rate of 43.1 percent. Our effective tax rate was lower than the U.S. statutory rate of 35 percent primarily as a result of the realization of deferred tax assets that had been fully reserved and the release of a portion of the valuation allowance on certain deferred tax assets that have not yet been utilized. Our effective tax rate also reflected a nonrecurring tax benefit of $0.7 million that was generated by the reversal of prior year non-U.S. tax liabilities due to the expiration of statutes of limitations for the years in which certain potential non-U.S. tax liabilities had existed.

We evaluate the realizability of the deferred tax assets on a quarterly basis. We have deferred tax assets generated in non-U.S. jurisdictions that we have . . .