The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 28, 2008 filed with the SEC, and all of our other filings, including our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.

This Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "expect," "anticipate," "estimate," "plan," "intend," "continue," "may," "can," "believe" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical results or from those expressed or implied by the relevant forward- looking statement. We discuss these risks and uncertainties in detail in Part I. Item 1A. of our 2008 Form 10-K together with further risks discussed in Part II. Item 1A. Risk Factors of this Form 10-Q.

Introduction

Overview

We are a leading global designer and manufacturer of high-quality brand name power supplies and power management products. We sell our products to original equipment manufacturers ("OEM"), distributors and service providers. Our customers span several industries including communications, networking equipment, server/storage, computer, instrumentation, industrial, renewable energy, and other electronic equipment industries. We are engaged in the design and production of the following products:

º •
º AC/DC power supplies that convert AC from a primary power source, such as a wall outlet, into a precisely controlled DC voltage. Virtually every electronic device that plugs into an AC wall outlet requires some type of AC/DC power supply, and we provide a broad range of AC/DC power supplies that power a wide variety of OEM equipment;

º •
º DC power systems that are used by communications and Internet service providers to power their equipment, and are used as backup power for large communications infrastructure equipment;

º •
º DC/DC converters that modify an existing DC voltage level to a different DC voltage level to meet the power needs of various subsystems and components within electronic equipment. Our DC/DC converters include high-density and low-density "brick" converters that are generally used to control power on communications printed circuit boards and also include Point-of-Load ("POL") converters that power devices within an Intermediate Bus Architecture as well as in other applications. Our Z-One® digital power management products fall into the DC/DC converter category;

º •
º Inverters for Renewable Energy ("RE"), also called alternative energy products that convert solar (photovoltaic or "PV") or wind energy into useable AC/DC power. Our inverters are used in the PV residential and commercial applications which are designed using a "string configuration" or "centralized configuration," respectively, to support increasing levels of power from 2kW to multi MW solutions; and

º •
º Additional products that include digital control products for motors and a variety of other application-specific specialty power products.

Our Operating Environment

We have implemented detailed plans to improve our operational and financial performance, drive long-term growth and profitability, improve on-time delivery, reduce manufacturing inefficiencies, and increase gross margin. The operating framework in which we manage our business and guide our strategies is based on the disciplined management of three business levers: targeted growth, operational efficiency and capital strategy. Although we have made progress towards our goals in recent periods, there are still many areas in which we believe that we can improve. Based on these plans we have recently launched the following initiatives:

º •
º We are developing a global service solution and investing in additional engineering and design resources to broaden our renewable energy product lines and support customers in key geographical regions. During the quarter, we restructured the marketing teams in order to more aggressively and efficiently generate leads and pursue business opportunities. We are reviewing product roadmaps and determining how to better deploy our sales resources to drive the business.

º •
º In an effort to open the digital power control market for future growth, we have licensed our digital power technology patents to companies like Linear Technology, Infineon Technologies, Powervations, and Texas Instruments.

º •
º During the first fiscal quarter of 2009, we announced a plan to further reduce costs in response to improved operational efficiencies and demand uncertainty associated with the global economic slowdown. As a result, we reduced our global headcount during the first six months of 2009 by approximately 1,200 and expect annualized savings of $6 to $7 million.

º •
º During the second fiscal quarter of 2009, we announced our plan to exit our Dominican Republic facility. The plan is expected to be completed by the end of the first half of 2010. Through implementation of this action, we expect to (i) realign global manufacturing and sourcing; (ii) improve operational performance; (iii) increase efficiencies in the supply chain and manufacturing process and
(iv) improve our ability to respond to customer requirements in a cost effective manner. We anticipate that we will achieve annual savings of $13 to $14 million once the closure is complete.

º •
º We are significantly increasing our presence in Asia to take advantage of a lower cost structure and closer proximity to suppliers and certain major customers.

º •
º We are addressing supply chain issues, including programs to lower material and logistics costs, the acceleration of the transfer of manufacturing to China, and the implementation of new sales and operations planning processes.

Results of Operations

The Company's results for the first six months of 2009 were impacted by the global economic recession. Demand for our products during the first six months decreased as many of our customers pushed orders out to future quarters and delayed new projects in response to the economic slowdown. We have reduced our overall cost structure and have made improvements in our gross margin as a result of the implementation of our operational and financial initiatives, in spite of revenue and booking levels being negatively impacted by external demand during the first six months of the year.

Net Sales. Net sales decreased $78 million, or 29.2%, to $189.0 million for the six months ended June 28, 2009 from $267.0 million for the six months ended June 29, 2008. Net sales decreased $58.1 million, or 38.9%, to $91.2 million for the quarter ended June 28, 2009 from $149.3 million for the quarter ended June 29, 2008. The decrease in sales primarily related to the overall decline in demand resulting from the global economic conditions.

Net sales by customer category were as follows, in millions:

                                Three Months Ended                       Six Months Ended
                         June 28, 2009       June 29, 2008       June 28, 2009       June 29, 2008
   OEMs                 $   63.2      69 %  $  110.3      74 %  $  133.9      71 %  $  196.0      73 %
   Distributors             25.4      28 %      29.2      20 %      50.7      27 %      55.9      21 %
   Service providers         2.6       3 %       9.8       6 %       4.4       2 %      15.1       6 %

   Total                $   91.2     100 %  $  149.3     100 %  $  189.0     100 %  $  267.0     100 %

No customer exceeded 10% of net sales during either of the three- or six-month periods ended June 28, 2009 or June 29, 2008.

We have redefined our end-markets based on the customers we serve, and have reclassified certain customers. Our "Other" end-market category includes the Smart Motor Control market. Net sales for the quarters ended June 28, 2009 and June 29, 2008 by end-markets under this new classification were as follows:

                                        Three Months Ended        Six Months Ended
                                      June 28,     June 29,    June 28,     June 29,
                                        2009         2008        2009         2008
      Network and Telecom Equipment          30 %         39 %        31 %         41 %
      Computer and Office Equipment          24 %         19 %        24 %         18 %
      Industrial Equipment                   19 %         17 %        22 %         20 %
      Renewable Energy                       19 %         13 %        15 %         11 %
      Other                                   8 %         12 %         8 %         10 %

      Total                                 100 %        100 %       100 %        100 %

The Company's combined quarter-end 180-day and 90-day backlog were as follows, in millions:

                                           June 28,     December 28,
                                             2009           2008
               Combined 180-day backlog    $    56.8     $       81.9
               Combined 90-day backlog     $    46.8     $       68.6

The decrease in 180-day and 90-day backlog during the six months ended June 28, 2009 was due to weakened demand during the period, as well as to a decrease in delinquent backlog of approximately $3.6 million resulting from implementation of operational initiatives which improved on-time delivery to customers. During the six months ended June 28, 2009, bookings were $165.9 million, a decrease of 46% from bookings of $304.4 million during the same period in 2008. Bookings weakened as customer demand decreased in response to the global economic recession, as customers consumed their current inventory levels and delayed orders and projects to future periods.

We generally sell our products pursuant to purchase orders rather than long-term contracts. 180-day backlog consists of purchase orders on-hand having delivery dates scheduled within the next six months. Our backlog may not necessarily be a reliable indicator of future revenue because our customers are able to cancel or modify their orders up to 30 days prior to delivery (up to 60 days prior to delivery without penalty). In addition, a significant portion of our revenues is derived from "turns" business (that is,

revenues from orders that are booked and shipped within the same reporting period). Since a growing portion of our business is engaged in the design, manufacture and sale of Renewable Energy products which have lead time expectations of fewer than six weeks, we expect the backlog to continue to be less than historic norms in the future. Our bookings were not significantly impacted by any new Vendor Managed Inventory ("VMI") programs during the quarter ended June 28, 2009. Under a VMI program, we manufacture products for our customers based on their forecast. As a result, the booking and billing occur simultaneously upon use of the product, and therefore there is always a book-to-bill ratio of 1.0 for these programs. We may bring additional VMI programs on-line in the future, which would result in higher "turns" business, lower backlog, and higher finished goods inventory.

     Gross Profit.

                                     Three Months Ended         Six Months Ended
                                   June 28,      June 29,    June 28,      June 29,
                                     2009          2008        2009          2008
      Gross profit, in millions    $    18.1     $    30.6    $   32.0      $   51.9
      Gross profit margin               19.9 %        20.5 %      16.9 %        19.4 %

Gross profit for the six months ended June 28, 2009 was $32.0 million compared with a gross profit of $51.9 million in the comparable period in 2008. As a percentage of net sales, gross margin decreased to 16.9% for the first six months of 2009 from a gross margin of 19.4% for the same period in 2008. Gross margin for the six months ended June 28, 2009 was impacted by multiple factors.

º •
º The decrease in customer demand resulting in reduction in sales volume of approximately 29%, as well as unfavorable foreign currency translation impacts primarily due to the weakening of the Euro against the US dollar between periods, which negatively impacted the gross margin by approximately 4 margin points.

º •
º Increased inventory write-downs during the six months ended June 28, 2009 as compared with the same period of the prior year negatively impacted the gross margin by approximately 3 margin points.

º •
º Partially offsetting the negative impacts related to volume decreases, foreign currency fluctuations and inventory write-downs were positive impacts resulting from the successful implementation of many of our operational initiatives which resulted in improved on-time delivery to our customers, reduced materials and logistics costs, and the reduction of the overall expense levels. As a result of operational improvements including material cost reductions, gross margin for the six months ended June 28, 2009 was favorably impacted by approximately 3 margin points and by approximately 1.5 margin points resulting from favorable product mix as compared with the same period in the prior year.

Gross profit for the quarter ended June 28, 2009 was $18.1 million compared with a gross profit of $30.6 million in the comparable period in 2008. As a percentage of net sales, gross margin decreased slightly to 19.9% for the second quarter of 2009 from a gross margin of 20.5% for the same period in 2008. Gross margin for the quarter ended June 28, 2009 was impacted by the following factors:

º •
º As a result of decreased demand, sales decreased by 39% which negatively impacted gross margin by approximately 2 margin points during the second quarter of 2009 as compared with the same period in 2008.

º •
º Gross margin was negatively impacted by foreign currency fluctuations, primarily due to the weakening of the Euro against the US dollar between periods, resulting in an unfavorable impact of approximately 3 margin points.

º •
º Partially offsetting the negative impacts related to volume decreases and foreign currency fluctuations were positive impacts resulting from the successful implementation of many of our

operational initiatives including material cost reductions, improving gross margin by approximately 2 margin points. In addition, favorable product mix positively impacted gross margin by approximately 2 margin points as the composition of products sold improved during 2009. Products generating a higher gross margin like those sold into the renewable energy market increased to 19% of net sales during the quarter ended June 28, 2009 as compared with 13% of net sales during the same quarter of the previous year.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased $12.2 million, or 31%, to $26.8 million for the six months ended June 28 2009 from $39.0 million for the same period in 2008. As a percentage of net sales, selling, general and administrative expense improved to 14% for the six months ended June 28, 2009 from 15% for the six months ended June 29, 2008. Selling, general and administrative expense decreased $5.1 million, or 28%, to $13.7 million for the quarter ended June 28 2009 from $18.8 million for the same period in 2008. As a percentage of net sales, selling, general and administrative expense increased to 15% for the quarter ended June 28, 2009 from 13% for the quarter ended June 29, 2008.

Selling expense decreased $5.1 million, or 31%, to $11.3 million for the six months ended June 28, 2009 from $16.4 million for the same period in 2008. Selling expense decreased $2.4 million, or 30%, to $5.5 million for the quarter ended June 28, 2009 from $7.9 million for the same quarter in 2008. As a result of the reduced revenue levels during 2009 and the related reductions in sales bonuses and commissions, selling expense decreased $1.4 million and $2.4 million during the three and six months ended June 28, 2009, respectively, as compared with the same periods in 2008. Decreases of approximately $0.6 million and $1.1 million for the three and six months ended June 28, 2009, respectively, related to foreign currency fluctuations as the functional currencies at certain of our foreign locations weakened against the US Dollar during the first six months of 2009 as compared with the same period of 2008. Selling expense also decreased during the three and six months ended June 28, 2009 as compared to the same period of 2008 as a result of our continued efforts to reduce the company's cost structure.

General and administrative expense decreased $7.1 million, or 31%, to $15.5 million for the six months ended June 28, 2009 from $22.6 million for the same period in 2008. General and administrative expense decreased $2.7 million, or 25%, to $8.2 million for the quarter ended June 28, 2009 from $10.9 million for the same quarter in 2008. The decrease in general and administrative expenses is primarily a result of continued efforts to reduce the company's cost structure as well as a result of the US Dollar strengthening against the functional currencies at our foreign locations during 2009.

Engineering and Quality Assurance Expense. Engineering and quality assurance expense decreased by $9.1 million, or 38%, to $14.7 million for the six months ended June 28, 2009 from $23.8 million in the same period of 2008. As a percentage of net sales, engineering and quality assurance expense decreased to 8% during the six months ended June 28, 2009 from 9% during the same period of 2008. Engineering and quality assurance expense decreased by $4.6 million, or 39%, to $7.2 million for the quarter ended June 28, 2009 from $11.8 million in the comparable period in 2008. As a percentage of net sales, engineering and quality assurance expense was 8% during both quarters ended June 28, 2009 and June 29, 2008. The decrease in engineering and quality assurance expense was primarily due to continued efforts to reduce the company's cost structure through spending reductions, relocation of engineering resources to lower cost locations, and efficiency improvements. Engineering and quality assurance expense also decreased as a result of foreign currency fluctuations by approximately $0.7 million and $1.0 million for the three and six months ended June 28, 2009, respectively, compared with the same periods of 2008.

Amortization of Intangible Assets. Amortization of intangible assets decreased to $0.8 million for the six months ended June 28, 2009 compared with $1.4 million for the same period in 2008. Amortization of intangible assets decreased to $0.4 million for the quarter ended June 28, 2009

compared with $0.5 million for the same quarter in 2008. The decrease was primarily due to certain intangibles reaching the end of their amortizable life.

Restructuring Charge. During the three and six months ended June 28, 2009, we recorded pre-tax restructuring charges of $3.9 million and $5.0 million, respectively, in accordance with SFAS No. 146, "Accounting for Costs Associated with Disposal Activities" and SFAS No. 112, "Employers' Accounting for Postemployment Benefits, an Amendment of FASB Statements No. 5 and 43," as applicable. Under SFAS 146, we record employee one-time termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required, we record contract termination costs when a contract is terminated or ceases to provide economic benefit to the Company, and we record other associated restructuring costs in connection with the consolidation or closure of our facilities when the liability is incurred. In accordance with the guidance provided under SFAS 112, we accrue for severance expenses prior to notification for termination benefits that are contractual or required by regional labor laws or are pursuant to a substantive plan where the costs are deemed probable and reasonably estimable.

During the first six months of 2009, we announced a plan to restructure our global organization in response to ongoing demand uncertainty and to exit our factory in the Dominican Republic. The plan is expected to be completed by the end of the first half 2010. Through implementation of this action, we expect to
(i) realign global manufacturing and sourcing; (ii) improve operational performance; (iii) increase efficiencies in the supply chain and manufacturing process and (iv) improve our ability to respond to customer requirements in a cost effective manner. With respect to the aforementioned plan, we expect to record severance and other charges of $13 to $15 million during 2009 and through the first half of 2010. We anticipate that the portion of the charge that will result in future cash expenditures will be approximately $6 million for severance for terminated employees and approximately $4 million for other costs associated with the facility closure. We also expect to record non-cash charges of approximately $3 to $5 million related to asset and inventory charges. We expect to achieve annual savings of $19 to $21 million once our global restructure efforts are complete.

During the three and six months ended June 28, 2009, we recorded severance benefits of approximately $3.7 million for approximately 1,100 employees and $4.8 million for approximately 2,100 employees, respectively. We also recorded approximately $0.2 million of facility closure costs related to continuing lease obligations during the three and six months ended June 28, 2009.

Goodwill Impairment. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," we do not amortize goodwill and other intangible assets that are deemed to have indefinite lives. We review goodwill and intangible assets for impairment annually at the end of each fiscal August, or more often if events or circumstances indicate that impairment may have occurred. In addition to the testing above, which is done on an annual basis, management considers whether certain impairment indicators are present in assessing whether the carrying value of goodwill and other intangible assets may be impaired. As a result of the continued decrease in our market capitalization during the first fiscal quarter of 2009, we tested our goodwill for impairment in accordance with SFAS No. 142 and determined that goodwill was impaired. Our testing approach utilized a discounted cash flow analysis and comparative market multiples to determine our (single reporting unit) fair value for comparison to our carrying value. As our carrying value exceeded our estimated fair value as of March 29, 2009, we applied the approach prescribed in SFAS 142 for determining the impairment amount. As a result of the interim test, a goodwill impairment charge of $57.0 million was recorded in our consolidated condensed statements of operations for the six months ended June 28, 2009.

Loss from Operations. As a result of the items above, loss from operations was $72.4 million for the six months ended June 28, 2009 compared with a loss from operations of $12.4 million for the comparable period in 2008. Loss from operations was $7.0 million for the quarter ended June 28, 2009 compared with a loss from operations of $0.6 million for the comparable period in 2008.

Interest Income (Expense), Net. Net interest expense was approximately $4.1 million for the six months ended June 28, 2009, compared with net interest expense of approximately $4.7 million for the comparable period in 2008. Net interest expense was approximately $2.2 million for the quarter ended June 28, 2009, compared with net interest expense of approximately $3.0 million for the comparable period in 2008.

The net interest expense recorded during the three and six months ended June 28, 2009 related to an average of approximately $51 million and $60 million, respectively, of 8% senior secured convertible notes, carrying an effective interest rate of approximately 9.3%, interest on the senior convertible notes issued May 8, 2009 at an effective interest rate of 11.3%, along with interest related to credit facilities and long-term debt obligations at certain foreign locations. The net interest expense recorded during the three and six months ended June 29, 2008 primarily related to $50.0 million in term debt, carrying an effective interest rate of approximately 14.0%, borrowed to finance the acquisition in October 2006, and $0.9 million related to the write-off of the debt issue costs and debt discount related to the $50 million PWER Bridge term debt which was repaid near the end of the quarter ended June 29, 2008. Also included in the interest expense for the three and six months ended June 29, 2008 was interest related to credit facilities and long-term debt obligations at the acquired entity.

Gain on Extinguishment of Debt. Gain on extinguishment of debt was $5.3 million and $8.4 million for the three and six months ended June 28, 2009, respectively. We repurchased $7 million of outstanding 8% senior secured convertible notes for approximately $3.5 million at the end of the first fiscal quarter of 2009 and approximately $21.8 million of outstanding 8% senior secured convertible notes for approximately $15.2 million during the second fiscal quarter of 2009.

Other Income (Expense), Net. Net other expense was $0.2 million for the six months ended June 28, 2009, compared with net other expense of $2.7 million for the same period in 2008. Net other expense was $2.2 million for the quarter ended June 28, 2009, compared with net other expense of $1.0 million for the same period in 2008. Net other expense for the three and six months ended June 28, 2009 primarily related to losses on foreign currency transactions. Included in net other expense for the three and six months ended June 29, 2008 was approximately $1.2 million expense related to the write-off of certain assets including $0.2 million related to an investment in a privately-held company. Also included in net other expense were losses on foreign currency . . .