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:

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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;

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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;

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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;

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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" and "centralized configuration," respectively, to support increasing levels of power from 2kW to multi MW solutions; and

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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:

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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 first nine months of 2009, 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. We are also designing products based on customer requirements for more efficient power solutions by developing high efficiency products for the storage, server, and networking markets and telecommunications in emerging markets. During the third fiscal quarter of 2009, our renewable energy sales showed marked improvement as a result of our ability to leverage market opportunities and increase penetration into key accounts which resulted in increased revenue and order backlog.

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º In an effort to open the digital power control market for future growth, we are in discussions with both power semiconductor and modular power companies and have licensed our digital power technology patents to companies like Linear Technologies, Infineon Technologies, Powervation, Texas Instruments and CUI.

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º In response to demand uncertainty associated with the global economic slowdown and our initiative to improve operational efficiencies by reducing our manufacturing footprint, we implemented our restructuring plan to reduce our global headcount and to exit our Dominican Republic facility during the first nine months of 2009. We anticipate that the closure of the Dominican Republic facility will 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. As a result, we reduced our global headcount during the first nine months of 2009 by approximately 1,300 and we estimate that we will achieve annual savings of $19 to $21 million from both the headcount restructuring and facility closure once complete.

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º During the third fiscal quarter of 2009, we continued to improve our factory utilization and on-time delivery by improving demand planning, factory throughput, master scheduling, and creating a more robust supply chain.

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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.

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

We follow accounting standards set by the Financial Accounting Standards Board, ("FASB"). The FASB sets generally accepted accounting principles ("GAAP") that we follow to ensure we consistently report our financial condition, results of operations, and cash flows. We have updated references to GAAP issued by the FASB in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to reflect the guidance in the FASB Accounting Standards Codification ("ASC").

Results of Operations

The Company's results for the first nine months of 2009 were impacted by the global economic recession. Demand across most of our product lines during the first nine months of the year decreased as many of our customers pushed orders out to future quarters and delayed new projects in response to the economic slowdown. Despite these negative impacts, we have reduced our overall cost structure and have made improvement in our gross margin as a result of the implementation of our operational and financial initiatives. In addition, as a result of our efforts to drive profitability and increase gross margin, we have rationalized our product offering and have eliminated lower margin products and products that do not fit in to our product portfolio.

While overall revenue decreased during 2009 as compared with levels of 2008, revenue generated from renewable energy market sales during the third quarter ended September 27, 2009 significantly increased as compared with the same quarter in 2008 as well as compared to the preceding fiscal quarters of 2009. The revenue growth in the renewable energy market was driven primarily by higher demand in the overall solar market, as well as by our continued focus on geographic expansion further into Europe and into Asia. In addition to increased revenue and order backlog, we have also increased our market share and outpaced the overall market growth in the renewable energy sector.

Net Sales. Net sales decreased $118 million, or 29%, to $289.1 million for the nine months ended September 27, 2009 from $407.1 million for the nine months ended September 28, 2008. Net sales decreased $40 million, or 29%, to $100.1 million for the quarter ended September 27, 2009 from $140.1 million for the quarter ended September 28, 2008. The decrease in sales primarily related to the overall decline in demand across the power conversion market sectors resulting from the global economic conditions. The decline in sales across the power conversion markets, was partially offset by an increase in sales to the renewable energy market during both the quarter and nine months ended September 27, 2009 as compared with the same periods of 2008, as we increased our presence and market share in both Europe and Asia.

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

                                  Three Months Ended                                 Nine Months Ended
                      September 27, 2009       September 28, 2008       September 27, 2009       September 28, 2008
OEMs                 $      65.2        65 %  $     106.0        76 %  $     199.1        69 %  $     302.1        74 %
Distributors                33.5        34 %         29.1        21 %         84.1        29 %         85.0        21 %
Service providers            1.4         1 %          5.0         3 %          5.9         2 %         20.0         5 %

Total                $     100.1       100 %  $     140.1       100 %  $     289.1       100 %  $     407.1       100 %

No customer exceeded 10% of net sales during either of the three- or nine-month periods ended September 27, 2009 or September 28, 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 and nine months ended September 27, 2009 and September 28, 2008 by end-markets under this new classification were as follows:

                           Three Months Ended                   Nine Months Ended
                    September 27,      September 28,     September 27,      September 28,
                        2009               2008              2009               2008
Network and
Telecom
Equipment                       28 %               43 %              30 %               41 %
Computer and
Office Equipment                16 %               14 %              21 %               17 %
Renewable Energy                31 %               14 %              21 %               12 %
Industrial
Equipment                       18 %               18 %              20 %               20 %
Other                            7 %               11 %               8 %               10 %

Total                          100 %              100 %             100 %              100 %

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

                                         September 27,     December 28,
                                             2009              2008
             Combined 180-day backlog     $        88.6     $       81.9
             Combined 90-day backlog      $        84.3     $       68.6

The increase in 180-day and 90-day backlog at September 27, 2009 was due to strengthened demand during the quarter ended September 27, 2009 in the power conversion and renewable energy markets with significant growth in the renewable energy sector. Bookings increased to $134.2 million, or 11%, during the quarter ended September 27, 2009 from $121.4 million booked during the same period of 2008. During the nine months ended September 27, 2009, bookings were $300.0 million, a decrease of 30% from bookings of $425.8 million during the same period in 2008. While overall bookings for the nine months ended September 27, 2009 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, the market showed signs of improvement as orders increased progressively during the quarter ended September 27, 2009.

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). Our bookings were not significantly impacted by any new Vendor Managed Inventory ("VMI") programs during the quarter ended September 27, 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                    Nine Months Ended
                  September 27,      September 28,     September 27,       September 28,
                      2009               2008              2009                2008
 Gross profit,
 in millions       $        23.2      $        29.9     $        55.2        $        81.8
 Gross profit
 margin                     23.2 %             21.4 %            19.1 %               20.1 %

Gross profit for the nine months ended September 27, 2009 was $55.2 million compared with a gross profit of $81.8 million in the comparable period in 2008. As a percentage of net sales, gross margin decreased to 19.1% for the first nine months of 2009 from a gross margin of 20.1% for the same period in 2008. Gross margin for the nine months ended September 27, 2009 was impacted by multiple factors.

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º The decrease in customer demand resulting in a 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, negatively impacted the gross margin by approximately 4 margin points.

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º Increased inventory write-downs during the nine months ended September 27, 2009 as compared with the same period of the prior year negatively impacted the gross margin by approximately 2 margin points.

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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 several 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 these improvements, gross margin for the nine months ended September 27, 2009 was favorably impacted by approximately 4 margin points and was favorably impacted by approximately 1 margin point resulting from favorable product mix as compared with the same period in the prior year.

Gross profit for the quarter ended September 27, 2009 was $23.2 million compared with a gross profit of $29.9 million in the comparable period in 2008. As a percentage of net sales, gross margin increased to 23.2% for the third quarter of 2009 from a gross margin of 21.4% for the same period in 2008. Gross margin for the quarter ended September 27, 2009 was impacted by the following factors:

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º The increase in the gross margin was primarily due to positive impacts resulting from the successful implementation of many of our operational initiatives including material cost reductions and overhead spending reductions, which improved gross margin by approximately 7 margin points during the quarter ended September 27, 2009 compared to the same quarter in 2008.

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º Partially offsetting the positive impacts related to the success of operational initiatives were negative impacts to the gross margin resulting from decreased demand between periods as sales volumes decreased by approximately 29% during the quarter ended September 27, 2009 as compared to the same quarter in 2008, as well as from unfavorable foreign currency translation impacts due to the weakening of the Euro against the US dollar between periods. As a result, gross margin was negatively impacted by approximately 5 margin points during the third quarter of 2009 as compared with the same period in 2008.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased $16.3 million, or 28%, to $41.0 million for the nine months ended September 27 2009 from $57.3 million for the same period in 2008. As a percentage of net sales, selling, general and administrative expense was 14% for both nine months ended September 27, 2009 and September 28, 2008. Selling, general and administrative expense decreased $4.1 million, or 22%, to $14.1 million for the quarter ended September 27, 2009 from $18.2 million for the same period in 2008. As a percentage of net sales, selling, general and administrative expense increased to 14% for the quarter ended September 27, 2009 from 13% for the quarter ended September 28, 2008.

Selling expense decreased $6.9 million, or 29%, to $17.0 million for the nine months ended September 27, 2009 from $23.9 million for the same period in 2008. Selling expense decreased $1.9 million, or 25%, to $5.6 million for the quarter ended September 27, 2009 from $7.5 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 $0.9 million and $3.3 million during the three and nine months ended September 27, 2009, respectively, as compared with the same periods in 2008. Decreases of approximately $0.4 million and $1.4 million for the three and nine months ended September 27, 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 nine months of 2009 as compared with the same period of 2008. In addition, selling expense decreased during the three and nine months ended September 27, 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 $9.4 million, or 28%, to $24.0 million for the nine months ended September 27, 2009 from $33.4 million for the same period in 2008. General and administrative expense decreased $2.2 million, or 21%, to $8.5 million for the quarter ended September 27, 2009 from $10.7 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 $13.1 million, or 37%, to $21.9 million for the nine months ended September 27, 2009 from $35.0 million in the same period of 2008. As a percentage of net sales, engineering and quality assurance expense decreased to 8% during the nine months ended September 27, 2009 from 9% during the same period of 2008. Engineering and quality assurance expense decreased by $4.0 million, or 36%, to $7.2 million for the quarter ended September 27, 2009 from $11.2 million in the comparable period in 2008. As a percentage of net sales, engineering and quality assurance expense decreased to 7% during the quarter ended September 27, 2009 from 8% during the same period of 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 $0.2 million and $1.2 million for the three and nine months ended September 27, 2009, respectively, compared with the same periods of 2008.

Amortization of Intangible Assets. Amortization of intangible assets decreased to $1.2 million for the nine months ended September 27, 2009 compared with $1.9 million for the same period in 2008. Amortization of intangible assets decreased to $0.4 million for the quarter ended September 27, 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 nine months ended September 27, 2009, we recorded pre-tax restructuring charges of $0.7 million and $5.7 million, respectively, in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 420 "Exit or

Disposal Cost Obligations" and ASC 712 "Compensation-Nonretirement Postemployment Benefits," as applicable. Under ASC 420, 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 ASC 712, 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 2009, we announced and implemented 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 intend 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 estimate that we will achieve annual savings of $19 to $21 million once our global restructure efforts are complete.

During the three and nine months ended September 27, 2009, we recorded severance benefits of approximately $0.4 million and $5.3 million, respectively. We also recorded approximately $0.3 million and $0.4 million of facility closure costs related to continuing lease obligations during the three and nine months ended September 27, 2009, respectively.

Goodwill Impairment. In accordance with ASC 350 "Intangibles-Goodwill and Other," 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 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 ASC 350-20 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 nine months ended September 27, 2009.

Income (Loss) from Operations. As a result of the items above, loss from operations was $71.5 million for the nine months ended September 27, 2009 compared with a loss from operations of $12.3 million for the comparable period in 2008. Income from operations was $0.9 million for the quarter ended September 27, 2009 compared with income from operations of $0.1 million for the comparable period in 2008.

Interest Income (Expense), Net. Net interest expense was approximately . . .