UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number

000-50669

SiRF TECHNOLOGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	77-0576030
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)
217 Devcon Drive, San Jose, California	95112
(Address of principal executive office)	(Zip Code)

(408) 392-8300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

52,967,074 shares of the Registrant’s common stock were outstanding as of April 30, 2007.

TABLE OF CO NTENTS

			Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and December 31, 2006	3
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006 (Unaudited)	5
		Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36
Item 4.	Controls and Procedures		36
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		37
Item 1A.	Risk Factors		37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		51
Item 6.	Exhibits		52
SIGNATURES			53
EXHIBIT INDEX			54

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2007 (2)			December 31, 2006 (1)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	128,204		$	133,817
Marketable securities		59,284			36,391
Accounts receivable, net of allowance for doubtful accounts of $217 and $321 as of March 31, 2007 and December 31, 2006, respectively		26,537			18,375
Inventories		19,078			16,472
Current deferred tax assets		10,878			11,743
Prepaid expenses and other current assets		5,953			6,912
Total current assets		249,934			223,710
Long-term investments		6,963			26,412
Property and equipment, net		9,424			8,469
Goodwill		55,967			55,967
Identified intangible assets, net		18,575			19,680
Long-term deferred tax assets		36,735			31,620
Other assets		880			805
Total assets	$	378,478		$	366,663
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,892		$	15,883
Accrued payroll and related benefits		9,429			10,508
Other accrued liabilities		6,080			4,127
Deferred margin on shipments to distributors		1,881			1,256
Deferred revenue		497			574
Advance contract billings		284			478
Rebates payable to customers		2,749			5,334
Current portion of long-term obligations		132			189
Total current liabilities		30,944			38,349
Long-term deferred and other tax liabilities		1,709			462
Long-term obligations		1,424			509
Total liabilities		34,077			39,320
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock		5			5
Additional paid-in-capital		370,692			355,690
Accumulated other comprehensive loss		(113	)		(142	)
Accumulated deficit		(26,183	)		(28,210	)
Total stockholders’ equity		344,401			327,343
Total liabilities and stockholders’ equity	$	378,478		$	366,663

⁽¹⁾ The condensed consolidated balance sheet information was derived from SiRF Technology Holdings, Inc. audited Consolidated Financial Statements for the year ended December 31, 2006.

⁽²⁾ On January 1, 2007, the Company adopted EITF No. 06-02, Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43 and FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. The impact of changes in ‘accrued payroll and related benefits,’ ‘long term deferred and other tax liabilities,’ and ‘long-term obligations’ resulting from adoption of these new accounting pronouncements was recorded as cumulative effect adjustments to the opening balance of accumulated deficit in the March 31, 2007 Condensed Consolidated Balance Sheet. For additional information on the adoption of these new accounting pronouncements see Note 1.

See accompanying Notes to Condensed Consolidated Financial Statements.

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SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three months ended March 31,
	2007			2006
Revenue:
Product revenue	$	65,798		$	50,163
License royalty revenue		1,466			2,517
Net revenue		67,264			52,680
Cost of revenue:
Cost of product revenue (includes stock compensation expense of $ 226 and $65 for the three months ended March 31, 2007 and 2006, respectively)		30,520			23,625
Gross profit		36,744			29,055
Operating expenses:
Research and development (includes stock compensation expense of $4,363 and $3,310 for the three months ended March 31, 2007 and 2006, respectively)		21,167			17,025
Sales and marketing (includes stock compensation expense of $1,004 and $658 for the three months ended March 31, 2007 and 2006)		6,127			4,449
General and administrative (includes stock compensation expense of $1,735 and $684 for the three months ended March 31, 2007 and 2006, respectively)		6,485			3,767
Amortization of acquisition-related intangible assets		1,083			1,323
Acquired in-process research and development expense		—			13,251
Total operating expenses		34,862			39,815
Operating income (loss)		1,882			(10,760	)
Interest income, net		2,411			1,363
Other expense, net		(441	)		(61	)
Other income, net		1,970			1,302
Net income (loss) before provision for income taxes		3,852			(9,458	)
Provision for income taxes		1,048			1,507
Net income (loss)	$	2,804		$	(10,965	)
Net income (loss) per share:
Basic	$	0.05		$	(0.22	)
Diluted	$	0.05		$	(0.22	)
Weighted average number of shares used in per share calculations:
Basic		52,171			50,179
Diluted		56,346			50,179

See accompanying Notes to Condensed Consolidated Financial Statements.

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SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three months ended March 31,
	2007			2006
Operating activities:
Net (loss) income	$	2,804		$	(10,965	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock compensation expense		7,331			4,887
Depreciation and amortization		1,266			1,363
Amortization of identified intangible assets		1,213			1,444
In-process research and development		—			13,251
Deferred tax assets, net		(2,969	)		(11,244	)
Excess tax benefits from employee equity incentive plans		3,953			12,601
Gross excess tax benefits from stock-based compensation		(3,637	)		(11,075	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(8,162	)		(10,911	)
Inventories		(2,491	)		4,406
Prepaid expenses and other current assets		959			(88	)
Other long-term assets		(75	)		189
Accounts payable		(5,991	)		(2,310	)
Accrued payroll and related benefits		(1,520	)		450
Other accrued liabilities		2,063			(807	)
Deferred margin on shipments to distributors		625			667
Deferred revenue		(77	)		253
Rebates payable to customers		(2,585	)		(1,751	)
Advance contracts billings		(194	)		(263	)
Net cash used in operating activities		(7,487	)		(9,903	)
Investing activities:
Purchases of available-for-sale investments		(21,184	)		(7,972	)
Maturities and sales of available-for-sale investments		17,786			8,636
Net cash paid for business acquisitions, net of cash acquired and purchase accounting adjustments		—			(16,785	)
Purchases of property and equipment		(2,147	)		(669	)
Purchases of intellectual property assets		(108	)		(158	)
Net cash used in investing activities		(5,653	)		(16,948	)
Financing activities:
Principal payments under capital leases obligations		(74	)		(16	)
Gross excess tax benefits from stock-based compensation		3,637			11,075
Proceeds from issuance of common stock		3,964			5,592
Net cash provided by financing activities		7,527			16,651
Net decrease in cash and cash equivalents		(5,613	)		(10,200	)
Cash and cash equivalents at beginning of period		133,817			83,882
Cash and cash equivalents at end of period	$	128,204		$	73,682

See accompanying Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Summary of Significant Accounting Policies

Organization

SiRF Technology Holdings, Inc., or SiRF or the Company, is the holding company for SiRF Technology, Inc., or SiRF Technology, which develops and markets semiconductor products designed to enable location awareness in high-volume mobile consumer devices and commercial applications. SiRF Technology was incorporated in the state of California in February 1995 and reincorporated in the state of Delaware in September 2000. SiRF was incorporated in the state of Delaware in June 2001 when all of SiRF Technology’s capital was exchanged for SiRF capital.

Basis of Presentation

The consolidated financial statements include SiRF and its wholly owned subsidiaries. Unless otherwise specified, references to the Company are references to the Company and its consolidated subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such management estimates include, but are not limited to, recognition of revenue, provision for inventory write-downs, valuation of stock options, valuation of goodwill and long-lived assets and valuation of deferred tax assets. Actual results could differ from those estimates.

Certain Significant Risks and Uncertainties

SiRF operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company’s control and could have a material adverse effect on SiRF’s business, operating results, and financial condition. These risks include, but are not limited to, variability and uncertainty of revenues and operating results; the emerging nature of SiRF’s market; its reliance on third parties to manufacture, assemble and distribute its products; customer concentration; technological changes and new product development risks; competition; intellectual property and related risks; management of growth; dependence on key personnel; acquisitions and investments; international operations and regulatory requirements.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, short and long-term investments and accounts receivable. Risks associated with these instruments are mitigated by banking with, and purchasing commercial paper from, creditworthy institutions. SiRF’s receivables are concentrated in a relatively few number of customers and as a result, the Company maintains individually significant receivable balances with these parties. If the financial condition or operations of these parties deteriorate substantially, SiRF’s operating results could be adversely affected. The Company performs periodic evaluations of its customers’ financial condition, but generally does not require collateral for sales on credit. The Company maintains reserves for estimated potential credit losses. SiRF’s historical credit losses have been within management’s expectations.

Cash and Cash Equivalents, Marketable Securities and Long-Term Investments

The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents. Investments with original maturities over ninety days and remaining maturities less than one year are considered short-term investments and investments with remaining maturities greater than one year are considered long-term investments. As of March 31, 2007 cash equivalents and investments are principally comprised of high-quality commercial paper, obligations of the United States government and its agencies and money market accounts. The Company’s investments are considered to be available-for-sale and are reported at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. The cost of securities sold is based on the specific identification method.

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Restricted Cash

The Company has approximately $0.8 million deposited in an escrow account, which represents contingent cash payments to designated former Impulsesoft employees for continued employment upon the second anniversary of the acquisition close date. These payments are automatically forfeited if such contingencies are not met. The restricted cash amounts have been classified within “Prepaid expenses and other current assets” in the consolidated balance sheet as of March 31, 2007.

Inventory

Inventory costs are determined using standard costs which approximate actual costs under the first-in, first-out method. The Company’s standard cost policy is to continuously review and set standard costs at current manufacturing costs. Manufacturing overhead standards for product cost are calculated assuming full absorption of projected spending over projected volumes. The Company records a reserve for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. The Company performs a detailed review of inventory each period that considers multiple factors including demand forecasts, market conditions, product life cycle status, product development plans and current sales levels. If future demand or market conditions for the Company’s products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of component inventory, the Company may be required to record additional write-downs which would negatively impact gross margins in the period when the write-downs are recorded. If actual market conditions are more favorable, the Company may have higher gross margins when products incorporating inventory that was previously reserved are sold.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets of three to seven years. Leasehold improvements are depreciated over the lesser of the estimated useful life or the remaining useful life of the lease.

Assessment of Long-Lived and Other Intangible Assets and Goodwill

Purchased intangible assets consist of acquired developed and core technology, customer relationships, assembled-workforce, patents and intellectual property assets. These purchased intangible assets are amortized using the straight-line method over their estimated useful lives of one to thirteen years.

The Company is required to assess the potential impairment of identified intangible assets, long-lived assets and goodwill on an annual basis, and potentially more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include the following:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of the Company’s use of the acquired assets;

• significant negative industry or economic trends; and

• significant decline in the Company’s market capitalization.

When it is determined that the carrying value of intangible assets, long-lived assets or goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company tests for recoverability based on an estimate of future undiscounted cash flows as compared to the long-lived assets or goodwill’s carrying value. If the initial test for recovery fails, measurement of impairment is based on the Company’s projected discounted cash flow, which requires the Company to make significant estimates and assumptions regarding future revenue and expenses, projected capital expenditures, changes in the Company’s working capital and the relevant discount rate. Should actual results differ significantly from current estimates, impairment charges may result.

Goodwill

SiRF evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of the reporting

7

unit is estimated using a combination of quoted market prices, the income or discounted cash flow approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. The Company performs its impairment review at the entity level as it has only one operating segment, which is its sole reporting unit. The Company conducted its annual impairment test as of September 30, 2006 and determined there to be no impairment. There were no events or circumstances from that date through March 31, 2007 that would impact this assessment.

Revenue Recognition

The Company derives revenue primarily from sales of semiconductor chip sets and licenses of its intellectual property and premium software products. As business activities related to licenses of intellectual property and premium software products are not considered significant to the Company’s consolidated operating results, the Company operates as a single operating segment. Revenue from sales of semiconductor chip set sales is recognized when persuasive evidence of a sales arrangement exists, transfer of title and acceptance, where applicable, occurs, the sales price is fixed or determinable and collection is probable. Transfer of title occurs based on defined terms in customer purchase orders. The Company records reductions to chip set revenue for expected product returns based on the Company’s historical experience and other known factors.

The Company defers the recognition of revenue and the related cost of revenue on shipments to distributors that have rights of return and price protection privileges on unsold products until the products are sold by the distributor to its customers. Price protection rights grant distributors the right to a credit in the event of decreases in the price of the Company’s products. For certain distributors, the Company also defers the recognition of revenue and the related cost of revenue on shipments based on the gross price. Upon product sell-through, these distributors may receive a credit for the price discounts associated with the customers who purchased those products.

The Company enters into co-branding rebate agreements with certain customers and provides marketing incentives to certain distributors. Payments made under such agreements and marketing incentives are recorded as a reduction of revenue in accordance with Emerging Issues Task Force, or EITF, No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” The Company generally records rebate reserves for both direct and indirect customers. Rebates to direct customers are presented in the consolidated balance sheets as a reduction of accounts receivables as the rebates are offset against amounts owed from direct customers and rebates to indirect customers are separately presented in the consolidated balance sheets as rebates payable to customers.

The Company licenses rights to use its intellectual property to allow licensees to utilize our technology. The Company also licenses rights to use its premium software products to licensees to enable SiRF chip sets to provide enhanced functionality in specific applications. The Company recognizes premium software product revenue in accordance with American Institute of Certified Public Accountants, or AICPA, Statement of Position, or SOP, 97-2, “Software Revenue Recognition.” The Company earns royalties on licensees’ worldwide sales of their products incorporating the licensed intellectual property or premium software based upon the specific criteria included in the associated royalty agreements. The Company’s licensees; however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. During the periods preceding the fourth quarter of 2006, the Company estimated and recorded the royalty revenues earned for sales by certain licensees (Estimated Licensees) in the quarter in which such sales occurred, but only when reasonable estimates of such amounts could be made.

Starting in the fourth quarter of 2006, the Company determined that due to business circumstances it could no longer reliably estimate royalty revenue from the Estimated Licensees. As such, the Company began recognizing all royalty revenues based solely on royalties reported by licensees during such quarter.

Subsequent to the sale of the Company’s premium software products, it has no obligation to provide any modification, customization, upgrades, or enhancements. The cost of revenue associated with licenses is insignificant.

Shipping and Handling

Costs related to shipping and handling are included in cost of sales for all periods presented.

8

Advertising

Advertising costs are charged to sales and marketing expense as incurred and are not significant in all periods presented.

Income Taxes

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards, or SFAS, No. 109, “Accounting for Income Taxes.” Under this method, the Company determines deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the current year’s financial statements are included in determining income taxes payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenue, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because it is assumed that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, resulting in a deferred tax liability or deferred tax asset. In preparing consolidated financial statements, the Company assesses the likelihood that deferred tax assets will be realized from future taxable income. The Company establishes a valuation allowance if the Company determines that it is more likely than not that some portion of the deferred tax assets will not be realized. Changes in the valuation allowance, when recorded, would be included in the Company’s consolidated statements of operations as a provision for (benefit from) income taxes. SiRF exercises significant judgment in regards to estimates of future market growth, forecasted earnings and projected taxable income, in determining provision for income taxes, deferred tax assets and liabilities for purposes of assessing the Company’s ability to utilize any future tax benefit from deferred tax assets. Refer to the Adoption of Recent Accounting Pronouncements below, for further information on the adoption of Financial Accounting Standards Interpretation, or FIN, No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.”

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding, excluding the weighted average unvested common shares subject to repurchase. Diluted net income (loss) per share is computed giving effect to all potential dilutive common stock including stock options, stock warrants, common stock subject to repurchase, restricted stock units and potential shares associated with employee stock purchase plan withholding. Refer to Note 3, Stock-Based Compensation, for further information.

The reconciliation of the numerators and denominators used in computing basic and diluted net income (loss) per share for the three months ended March 31, 2007 and 2006 is as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands, except per share data)
Numerator:
Net income (loss)	$	2,804		$	(10,965	)
Denominator:
Weighted average common shares outstanding		52,543			50,612
Less: Weighted average common shares outstanding subject to repurchase		(372	)		(433	)
Weighted average shares used in net income (loss) per common share, basic Dilutive potential common shares:		52,171			50,179
Weighted average of repurchasable common stock outstanding		372			—
Weighted average of common stock options		3,363			—
Weighted average of preferred stock warrants		201			—
Weighted average of restricted stock units		173			—
Weighted average of employee stock purchase plan shares		66			—
Total weighted average shares used in net income (loss) per share, diluted		56,346			50,179

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	Three Months Ended March 31,
	2007		2006
	(In thousands, except per share data)
Net income (loss) per share:
Basic	$	0.05	$	(0.22	)
Diluted	$	0.05	$	(0.22	)

The weighted average shares used to compute net loss per share for the three months ended March 31, 2006, is equivalent for purposes of computing the denominator used in basic and diluted net loss per share, as the Company recorded a net loss for the first quarter of 2006.

The following common stock equivalents, which could potentially dilute basic net income (loss) per share in future periods, were excluded from the computation of diluted net income (loss) per share in the periods presented, as their effect would have been anti-dilutive:

	Three months Ended March 31,
	2007	2006
	(In thousands)
Outstanding common stock options	2,043	5,017
Restricted stock units	57	100
Shares of common stock subject to repurchase	—	433
Warrants	—	271
Employee purchase plan rights	—	94

Stock-Based Compensation

SiRF accounts for its employee stock options, restricted stock units and the stock purchase rights under the 2004 Employee Stock Purchase Plan, or the Purchase Plan, under the provisions of SFAS No. 123R, “Share-Based Payment,” Financial Accounting Standards Board, or FASB, Technical Bulletin 97-1, or FTB, “Accounting under Statement 123 for Certain Employee Stock Purchase Plans with a Look-Back Option,” and Securities and Exchange Commission, or SEC, Staff Accounting Bulletin, or SAB, No. 107.

SFAS No. 123R requires stock-based compensation cost to be measured at grant date, based on the fair value of the award and is recognized as expense over the requisite service period. SiRF adopted the modified prospective application method as provided by SFAS No. 123R. Under the modified-prospective method compensation cost is recognized beginning with the effective date (January 1, 2006) (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosures,” for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date. Previously reported financial statements have not been restated.

The fair value of our restricted stock units was calculated based upon the fair market value of our stock at the date of grant or as determined under EITF No. 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination,” for our acquisition related restricted stock units. We have elected to use the straight-line attribution method for awards granted after the adoption of SFAS No. 123R and continue to use a multiple option valuation approach for awards granted prior to the adoption of SFAS No. 123R that were unvested as of the effective date. Refer to Note 3, Stock-Based Compensation, for further information.

Research and Development and Software Development Costs

Research and development expense is charged to operations as incurred. To the extent research and development costs include the development of embedded software, the Company believes that software development is an integral part of the semiconductor design and such costs are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized in accordance with SFAS No. 86, “Computer Software To Be Sold, Leased or Otherwise Marketed.” The costs to develop such software have not been capitalized as they are not material since the current software development process is essentially completed concurrent with the establishment of technological feasibility and the time period between the establishment of technological feasibility and product release is relatively short.

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SiRF generates engineering services income from various commercial customers through activities which enable those customers to accelerate their product development efforts. SiRF retains ownership of the technology developed under these arrangements. Development costs related to the underlying contracts are classified as research and development expense and are not discretely tracked. Any income generated with these development costs is classified as a reduction of research and development expense. Engineering services are billed in accordance with the terms and conditions of the related contracts, which may allow progress billings upon costs incurred, completion, or other billing arrangements. Engineering services income is recognized as a reduction of research and development expense only if the customer accepts the delivery of a given milestone, and collectibility is probable. Advance contract billings include amounts that have been invoiced, for which SiRF has not yet received acceptance of the deliverable from the customer, and result in the deferral of income until such time that specified milestones are accepted. The following table summarizes these services:

	Three months Ended March 31,
	2007			2006
	(In thousands)
Gross research and development expense	$	21,544		$	17,250
Less: recognized engineering services income		(377	)		(225	)
Net research and development expense	$	21,167		$	17,025

Accounts Receivable Allowance

SiRF makes estimates of the collectibility of accounts receivable and regularly reviews the adequacy of its allowance for doubtful accounts after considering the amount of aged accounts receivable, each customer’s ability to pay, and the collection history with each customer. The Company reports charges to the allowance for doubtful accounts as a portion of general and administrative costs. The Company regularly reviews past due invoices to determine if an allowance is appropriate based on the risk category using the factors discussed above. In addition, the Company maintains a reserve by applying a percentage to aging categories based on historical experience. Assumptions and judgments regarding collectibility of accounts could differ from actual events. While SiRF’s credit losses have historically been within its expectations and the allowance established, the Company may not continue to experience the same credit loss rates that it has in the past. The Company’s receivables are concentrated in a relatively few number of customers. As of March 31, 2007, SiRF’s accounts receivable allowance was $0.2 million. As of March 31, 2007, 49% of SiRF’s receivables were concentrated in two customers. Therefore, a significant change in the liquidity or financial position of any of these customers could make it more difficult for the Company to collect its accounts receivable and may require the Company to record additional charges that could adversely affect its operating results.

Product Warranty

SiRF provides for the estimated cost of product warranties at the time revenue is recognized. SiRF continuously monitors chip set returns for product failures and maintains a warranty reserve for the related expenses based on historical experience of similar products, as well as other assumptions that SiRF believes to be reasonable under the circumstances. SiRF’s product warranty reserve includes specific accruals for known product issues and an accrual for an estimate of incurred but unidentified product issues based on historical activity. SiRF’s warranty accrual is based on historical activity and the related expense was not significant for the first quarter 2007 and 2006, respectively.

Foreign Currency

SiRF’s functional currency for all its foreign subsidiaries is the U.S. dollar. Assets and liabilities are remeasured using the exchange rate on the balance sheet date. Revenues, expenses, gains and losses are remeasured at the average exchange rate in effect during the period. Remeasurement adjustments are recorded within ‘Other income, net’ as remeasurement gains/losses within the Condensed Consolidated Statement of Operations.

Segment Reporting

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the reporting of information about operating segments, including related disclosures about products and services, geographic areas and major customers. The standard for determining what information to report is based on available financial information that is regularly reviewed and used by SiRF’s chief operating decision maker in evaluating the Company’s financial performance and resource allocation. SiRF’s chief operating decision-maker is considered to be the chief executive

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officer, or CEO. Based on the criteria stated in SFAS No. 131 for determining separately reportable operating segments and the financial information available to and reviewed by the CEO, the Company has determined that it operates as a single operating and reportable segment.

Indemnifications

From time to time the Company enters into types of contracts that contingently require SiRF to indemnify parties against third party claims. These contracts primarily relate to: (i) real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from use of the applicable premises; (ii) agreements with the Company’s officers, directors and employees, under which SiRF may be required to indemnify such persons from liabilities arising out of their employment relationship; and (iii) agreements with customers to purchase chip sets and to license the Company’s IP core technology or embedded software, under which the Company may indemnify customers for intellectual property infringement claims, product liability claims or recall campaign claims related specifically to the Company’s products. As for indemnifications related to intellectual property, these guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims alleged against the Company’s products. Indemnifications related to product liability claims generally require the Company to compensate the other party for damages stemming from use of the Company’s products. Indemnifications related to recall campaigns generally require the Company to compensate the other party for costs related to the repair or replacement of defective products. The nature of the intellectual property indemnification, the product liability indemnification, and the recall campaign indemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers and suppliers in the event the Company is required to meet its contractual obligations. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations.

Adoption of Recent Accounting Pronouncements

Accounting for Sabbatical Leave and Other Similar Benefits

Effective January 1, 2007, SiRF adopted Emerging Issues Task Force, or EITF, Issue No. 06-02, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences.” A sabbatical leave is a benefit provided to employees whereby the employee is entitled to time off with pay, over and above routine vacation time, after working for a specified period of time. EITF No. 06-02 prescribes that an employee’s right to a compensated absence under a sabbatical or similar benefit arrangement does accumulate pursuant to SFAS No. 43, “Accounting for Compensated Absences” and therefore, a liability should be accrued over the service period in which employees earn the right to sabbatical leave. The cumulative effect of adopting EITF No. 06-02 on January 1, 2007 has been recognized as a change in accounting principle, recorded as an adjustment to the opening balance of accumulated deficit, net of tax, on the adoption date. As a result of the implementation of EITF No. 06-02, SiRF recognized an increase of approximately $1.0 million in ‘accrued payroll and related benefits’ and $0.3 million in ‘current deferred tax assets’ and ‘long-term deferred tax assets,’ which resulted in a net increase of $0.7 million in the opening balance of accumulated deficit in the March 31, 2007 Condensed Consolidated Balance Sheet. In prior years, SiRF accrued for the expense related to sabbatical leave when the employee fully vested in the benefit.

Accounting for Uncertainty in Income Taxes

Effective January 1, 2007, SiRF adopted FIN No. 48. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 utilizes a two-step approach for evaluating uncertain tax positions accounted for in accordance with SFAS No. 109. Step one, Recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, Measurement, is based on the largest amount of benefit, which is more likely than not to be realized on ultimate settlement. The cumulative effect of adopting FIN No. 48 on January 1, 2007 is recognized as a change in accounting principle, recorded as an adjustment to the opening balance of accumulated deficit on the adoption date. As a result of the implementation of FIN No. 48, SiRF recognized an increase of approximately $0.1 million in ‘long-term deferred and other tax liabilities’ for unrecognized tax benefits related to tax positions taken in prior periods, which resulted in an increase of $0.1 million in accumulated deficit.

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Upon adoption of FIN No. 48, the Company’s historical policy of including interest and penalties related to unrecognized tax benefits within the Company’s ‘provision for (benefit from) income taxes,’ remained unchanged. As of March 31, 2007, the Company had $0.2 million accrued for payment of interest and penalties related to unrecognized tax benefits ($0.2 million as of the adoption date of FIN No. 48). The Company recognized an immaterial amount of interest and penalties related to unrecognized tax benefits in its provision for income taxes for the three months ended March 31, 2007.

The Company’s total amounts of unrecognized tax benefits as of January 1, 2007 (adoption date) was $5.6 million, of which $3.9 million, if recognized, would affect our effective tax rate. As of March 31, 2007, the Company’s total amounts of unrecognized tax benefits was $6.2 million, of which $4.5 million, if recognized, would affect our effective tax rate. The Company has recognized a net amount of $1.2 million in ‘long-term deferred and other tax liabilities’ for unrecognized tax benefits in its Condensed Consolidated Balance Sheets.

As of March 31, 2007, the Company believes it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase over the next twelve months. The Company expects a shift in the geographical mix of its revenue and costs associated with its global operations. The total liabilities for unrecognized tax benefits and the increase for the current period of these liabilities relate primarily to research and development tax credits and the allocations of revenue and costs amongst the Company’s global operations. The Company estimates the total amounts of unrecognized tax benefits associated with its research and development tax credits and the allocations of revenue and costs amongst the Company’s global operations to increase by approximately $0.4 million over the next three months. At this time the Company is unable to estimate the range of the reasonably possible change in unrecognized tax benefits over the next twelve months associated with the shift in the geographical mix of its revenue and costs related to changes in its global operations. The Company is not aware of any other unrecognized tax benefits that would significantly change in the next twelve months.

Although the Company files U.S. federal, U.S. state, and foreign tax returns, the Company’s only major tax jurisdiction is the United States and its 1995 – 2006 tax years remain subject to examination by the various taxing authorities or jurisdictions.

Recently Issued Accounting Standards

Fair Value Measurement

In September 2006, the FASB, issued SFAS No. 157, “Fair Value Measurement.” SFAS No. 157 defines how the fair value of assets and liabilities should be measured in more than 40 other accounting standards where fair value measurement is allowed or required. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 requires fair value measurements to be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, including interim periods within that fiscal year. The Company is currently assessing SFAS No. 157 and has not yet determined the impact, if any, that the adoption of SFAS No. 157 will have on its financial position, results of operations and fair value disclosures.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB, issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 provides an option to report selected financial assets and liabilities at fair value. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS No. 159 attempts to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing SFAS No. 159 and has not yet determined the impact, if any, that the adoption of SFAS No. 159 will have on its financial position, results of operations and fair value disclosures.

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Note 2. Business and a Development-Stage Company Acquisitions

Development-Stage Company

TrueSpan Incorporated

On March 14, 2006, SiRF acquired TrueSpan Incorporated, or TrueSpan, a development-stage company specializing in systems communication. The acquisition of TrueSpan is intended to add to SiRF’s systems expertise as the Company expands its offerings to include complex multifunction and location technology platform solutions. The aggregate purchase consideration for this acquisition was approximately $18.0 million, which includes direct transaction costs and cash acquired and excludes the fair value of assumed unvested TrueSpan stock options, issuance of unvested SiRF restricted stock units and future contingent payments. Such contingent payments will be made to certain former TrueSpan employees contingent upon their continued employment with SiRF and will not exceed $3.0 million. These contingent payments will result in compensation expense amortized on a straight-line basis over the related two-year service period. TrueSpan did not have a developed product, had no customers and was not generating revenue. Accordingly, the Company concluded the TrueSpan acquisition did not met the criteria to be accounted for as an acquisition of a “business” under the requirements of SFAS No. 141, “Business Combinations,” as TrueSpan did not possess the ability to generate outputs (as defined by SFAS No. 141) in order to continue normal operations and generate a revenue stream by providing its products to customers. The negative excess of the fair value of the net assets acquired over purchase consideration was allocated on a proportionate basis to reduce the fair value of non-monetary assets acquired. The total fair value of net assets acquired, as adjusted for the allocation of excess fair value over purchase consideration, consisted of current assets of $1.2 million, property and equipment of $0.2 million, identified amortizable intangible assets of $1.0 million, net deferred tax assets of $3.4 million, less current liabilities assumed of $0.9 million and recognition of $13.3 million of charges for acquired in-process research and development, or IPR&D.

As of the acquisition date, TrueSpan was in the process of performing technology verification for its Digital Video Broadcasting, or DVB, chip and its Radio Frequency, or RF, chip, which provide the capability for bringing broadcast services to handheld receivers and other platforms. At the time of acquisition, both chips were expected to be released in late 2007. At the time of acquisition for valuation purposes, the DVB technology was expected to have a useful life of 7 - 10 years. Additionally, TrueSpan was working on proprietary software for the functionality of the DVB chip in consumer products, with completion expected in 2006. At the time of acquisition for valuation purposes, the DVB software technology was assumed to have a useful life of 5 years and TrueSpan was expected to begin benefiting from both projects in 2007. This software development project was still in process as of December 31, 2006 and as of year end the DVB chip had taped out. As of March 31, 2007, the DVB chip is undergoing laboratory tests for functionality and compliance to technological standards and our firmware and software integration efforts are also underway. Over the next year the system integration and system validation of a reference design are the key activities prior to completion. There has been no material variations associated with the TrueSpan chip development projects.

The Company’s methodology for allocating the relative portion of the aggregate purchase price of TrueSpan to IPR&D was determined through established valuation techniques in the high-technology communications equipment industry. IPR&D was expensed upon acquisition in accordance with FIN No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method,” because technological feasibility had not been established and no future alternative uses existed. The fair value of the IPR&D was determined using the income approach, which discounts expected future cash flows to present value. At that time, the net cash flows for the acquired IPR&D were expected to commence in 2007. The weighted average cost of capital was adjusted to reflect the difficulties and uncertainties in completing each project and thereby achieving technological feasibility, the percentage of completion of each project, anticipated market acceptance and penetration, market growth rates, and risks related to the impact of potential changes in future target markets. Based on these factors, a discount rate of 40.0% was deemed appropriate for valuing the IPR&D. Based on an independent valuation report prepared in relation to the Company’s acquisition of TrueSpan, the value assigned to IPR&D, as well as the projected costs to complete the IPR&D were as follows:

Acquired IPR&D	Fair Value of IPR&D		Projected Costs to Complete IPR&D
	(In Thousands)
DVB Chip	$	10,600	$	3,528
DVB Software		3,300		57
Totals	$	13,900	$	3,585

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The Company recorded a charge of approximately $13.3 million representing IPR&D acquired in connection with the TrueSpan acquisition during the first quarter of 2006, which reflects the fair value of the IPR&D adjusted for the proportionate allocation of negative excess of the fair value of the net assets acquired over purchase consideration.

In connection with the TrueSpan acquisition, SiRF issued 214,931 restricted stock units, which are contingent upon the continued employment of the recipients, with the contingency being released over four years. SiRF also issued 53,791 restricted stock units, which are contingent upon the achievement of specified milestones and the continued employment of the recipients over a period of two years. The fair value of the restricted stock units is approximately $10.0 million based upon the average SiRF stock price a few days before and after the acquisition announcement date on March 16, 2006 in accordance with EITF No. 99-12. The fair value of the restricted stock units is being amortized as compensation expense on a straight-line basis over the service period. SiRF is also required to pay up to $3 million in additional cash, which is contingent upon the achievement of specified milestones and the continued employment of the recipients over a period of two years. The expense associated with this cash award is being amortized as compensation expense on a straight-line basis over the service period. SiRF included the results of operations of this transaction prospectively from the date of transaction closing.

Businesses

In 2005, the Company acquired Kisel Microelectronics, AB, a privately held limited liability company, based in Stockholm, Sweden, the GPS chip set product family of Motorola, Inc., a Delaware corporation, and Impulsesoft Private Limited, a privately held software company based in Bangalore, India.

Note 3. Stock-Based Compensation

On January 1, 2006, SiRF adopted the provisions of SFAS No. 123R. SFAS No. 123R establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the requisite service period.

The fair value of SiRF’s stock options and the Purchase Plan rights was estimated using a Black-Scholes option pricing model. This model requires the input of highly subjective assumptions, along with certain policy elections in adopting and implementing SFAS No. 123R, including the options’ expected life and the price volatility of the Company’s underlying stock. Actual volatility, expected lives, and interest rates may be different than the Company’s assumptions, which would result in an actual value of the options being different than estimated. The fair value of stock-based awards is amortized over the requisite service period of the award using the straight-line attribution method for awards granted after the adoption of SFAS No. 123R and SiRF continues to use the multiple option valuation approach for awards granted prior to the adoption of SFAS No. 123R.

Expected Term: SiRF’s expected term represents the period that SiRF’s stock options are expected to be outstanding and was determined based on the accounting guidance provided within SEC SAB No. 107. SAB No. 107 provides a simplified method for determining the expected term of “plain vanilla” options, as defined by SAB No. 107, under certain circumstances. As SiRF’s options are considered “plain vanilla” and no awards have been issued with a market condition, SiRF has elected to use this simplified method as it has limited historical exercise data or alternative information to reasonably estimate an expected term assumption. The simplified method assumes that all options will be exercised midway between the vesting date and the contractual term of the option. The simplified method as provided within SAB No. 107 is only allowed for the transition period through December 31, 2007. During the transition period, SiRF will evaluate its expected term assumption to consider among other things, historical exercise patterns, the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. During the first quarter of 2007, SiRF’s estimated expected term based upon the simplified method provided by SAB No. 107 was approximately 4.58 years, as compared to approximately 6.08 years during the corresponding prior year period.

Expected Volatility: SiRF utilized its own historical volatility in valuing its stock option grants and purchase rights under the Purchase Plan. SiRF also evaluated the historical and implied volatility of “guideline” companies selected based on similar industry and product focus whose share or option prices have been publicly traded for a longer period of time as a baseline volatility benchmark to evaluate the reasonableness of its volatility assumption. SiRF’s historical volatility was deemed to be reasonable based upon its benchmark reasonableness comparison.

Expected Dividend: SiRF has not issued any dividends, nor does it expect to issue dividends in the near future; therefore, a dividend yield of zero was used.

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Risk-Free Interest Rate: SiRF bases the risk-free interest rate used in the Black-Scholes option pricing model on the implied yield currently available on United States Treasury zero-coupon issues with an equivalent expected term.

Estimated Pre-vesting Forfeitures: SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates. SiRF has considered historical termination behavior, as well as retention related incentives in its forfeiture estimation process.

The fair value of stock options and new purchase rights under the Purchase Plan were estimated with the following weighted-average assumptions:

	Stock Options
	Three Months Ended March 31,
	2007		2006
Risk-free interest rate	4.7	%	4.6	%
Average expected life of options (in years)	4.58		6.08
Volatility	56	%	50	%
Dividend yield	—		—

The weighted average fair value of options granted with an exercise price equal to the fair value of common stock utilizing the Black-Scholes option pricing model during the first quarter of 2007 and 2006, was $13.47 and $17.98, respectively. No options were granted in the first quarter of 2007 or 2006 with exercise prices below the deemed fair value of common stock.

The estimated fair value of purchase rights under the Purchase Plan is amortized over the individual accumulation periods comprising the offering period. There were no new purchase rights valued during the first quarter of 2007 or 2006.

Stock Option and Employee Stock Purchase Plans

1995 Stock Plan

In March 1995, SiRF adopted the 1995 Stock Plan, or the 1995 Plan, to provide incentive and non-statutory stock options to purchase shares of common stock to employees and independent contractors. Under the 1995 Plan, the exercise price for incentive stock options is at least 100% of the stock’s fair market value on the date of grant for employees owning 10% or less of the voting power of all classes of stock, and at least 110% of the fair market value on the date of grant for employees owning more than 10% of the voting power of all classes of stock. For non-statutory stock options, the exercise price is at least 110% of the fair market value on the date of grant for employees owning more than 10% of the voting power of all classes of stock and no less than 85% for employees owning 10% or less of the voting power of all classes of stock. The 1995 Plan was terminated upon the completion of SiRF’s initial public offering in April 2004 and the remaining 19,558 stock options not granted under the 1995 Plan were cancelled. No shares of the Company’s common stock remain available for issuance under the 1995 Plan other than for satisfying exercises of stock options granted under this plan prior to its termination. As of March 31, 2007, no shares of common stock have been reserved for issuance under the 1995 Plan and options to purchase a total of 3,311,500 shares of common stock were outstanding.

Options generally vest over a period of four years, generally become exercisable beginning six months from the date of employment or grant and expire ten years from the date of grant. Unvested common stock issued to employees, directors and consultants under stock purchase agreements is subject to repurchase at the Company’s option upon termination of employment or services at the original purchase price. This right to repurchase expires ratably over the vesting period.

2004 Stock Incentive Plan

In March 2004, SiRF adopted the 2004 Stock Incentive Plan, or the 2004 Plan. Under the 2004 Plan, 5,000,000 shares of common stock were reserved for issuance upon the completion of the Company’s initial public offering on April 22, 2004. On January 1 of each year, starting in 2005, the aggregate number of shares reserved for issuance under the 2004 Plan increase automatically by the lesser of (i) 5,000,000 shares, (ii) 5% of the total number of shares of common stock outstanding at that time, or (iii) a number of shares determined by the Board of Directors. In accordance with this provision, for fiscal 2007, the Board of Directors elected to increase the number of shares reserved for issuance under the 2004 Plan by 2,614,194 shares. Forfeited options or awards generally become available for future awards. Under the 2004 Plan, the exercise price for incentive stock options is at least 100% of the stock’s fair market value on the date of grant for employees

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owning 10% or less of the voting power of all classes of stock, and generally not available to employees owning more than 10% of the voting power of all classes of common stock. For non-statutory stock options, the exercise price is no less than 85% of the stock’s fair market value on the date of grant.

Under the 2004 Plan, options generally expire between seven and ten years from the date of grant. However, the term of the options may be limited to five years if the optionee owns stock representing more than 10% of the voting power of all classes of stock. Vesting periods for options and restricted stock units are determined by the Company’s Board of Directors and generally provide for shares to vest over a two to four year period. As of March 31, 2007, 4,924,258 options to purchase common stock and 756,542 unvested restricted stock units granted were outstanding and 6,069,905 options were available for issuance under the 2004 Plan.

2004 Employee Stock Purchase Plan

In March 2004, SiRF adopted the Purchase Plan. Under the Purchase Plan, 1,000,000 shares were reserved for issuance upon the Company’s completion of the initial public offering. On January 1 of each year, starting in 2005, the number of shares reserved for issuance automatically increase by the lesser of (i) 750,000 shares, (ii) 1.5% of issued and outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (iii) a number of shares determined by the Board of Directors. In accordance with this provision, for fiscal 2007, the Board of Directors elected to not increase the number of shares reserved for issuance under the Purchase Plan. Eligible employees are allowed to have salary withholdings of up to 15% of cash compensation to purchase shares of common stock at a price equal to 85% of the lower of the fair market value of the stock on the first trading day of the offering period or the fair market value on the purchase date. The initial offering period commenced on April 22, 2004, the effective date for the initial public offering of SiRF’s common stock. There were no shares of common stock issued under the Purchase Plan during the quarter ended March 31, 2007 and 1,850,659 shares were available for issuance under the Purchase Plan.

TrueSpan 2004 Stock Incentive Plan

In March 2006, in conjunction with the acquisition of TrueSpan, SiRF assumed the existing TrueSpan 2004 Stock Incentive Plan, or the TrueSpan Plan. All unvested options granted under the TrueSpan Plan were assumed by SiRF as part of the acquisition. All contractual terms of the assumed options remain the same, except for the converted number of shares and exercise price based on an exchange ratio determined as part of the acquisition agreement. As of March 31, 2007, no additional options can be granted under the TrueSpan Plan and options to purchase a total of 22,967 shares of common stock were outstanding.

Outstanding Stock Options

The following table summarizes information about options granted and outstanding under the 2004 Plan, 1995 Plan and the TrueSpan Plan at March 31, 2007:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
		(in years)			(in thousands)					(in thousands)
$ 0.40 — $ 2.00	524,592	2.74	$	1.83	$	13,603	524,592	$	1.83	$	13,603
$ 2.25 — $ 4.00	2,376,292	6.03	$	3.99	$	56,484	2,180,614	$	3.99	$	51,833
$ 5.50 — $ 12.51	1,687,790	7.25	$	11.31	$	27,764	979,868	$	10.85	$	16,570
$13.07 — $ 28.24	1,661,524	7.34	$	20.55	$	11,980	304,069	$	15.88	$	3,612
$28.35 — $ 39.73	2,008,527	7.13	$	32.83		—	177,247	$	32.01		—
$ 0.40 — $ 39.73	8,258,725	6.60	$	15.69	$	109,831	4,166,390	$	7.39	$	85,618

The aggregate intrinsic value in the table above is based on SiRF’s closing stock price of $27.76 as of March 30, 2007, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted average remaining contractual term of options exercisable at March 31, 2007 was approximately 6.1 years.

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A summary of stock option activity as of March 31, 2007 and changes during the quarter then ended is presented below:

Options	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2006	8,404,868		$	14.74
Granted	454,100		$	26.49
Exercised	(510,141	)	$	7.77
Forfeited/Expired	(90,102	)	$	26.28
Outstanding at March 31, 2007	8,258,725		$	15.69

As of March 31, 2007, there was approximately $31.1 million of total unrecognized compensation cost related to unvested stock options granted and outstanding with a weighted average remaining vesting period of 2.2 years. Net cash proceeds from the exercise of stock options were approximately $4.0 million and $5.6 million for the first quarter of 2007 and 2006 respectively. The aggregate intrinsic value of options exercised during the first quarter of 2007 based on the aggregate weighted average exercise price and SiRF’s closing stock price of $27.76 as of March 30, 2007, was approximately $10.2 million.

A summary of restricted stock unit activity as of March 31, 2007 is presented below:

Unvested Restricted Stock Units	Shares		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2006	791,897		$	31.00
Granted	24,000		$	23.79
Vested	(51,120	)	$	36.84
Forfeited	(8,235	)	$	33.83
Unvested at March 31, 2007	756,542		$	30.35

The fair value of the Company’s restricted stock units is calculated based upon the fair market value of the Company’s stock at the date of grant or as determined under EITF No. 99-12 for our acquisition related restricted stock units. As of March 31, 2007, there was $15.4 million of total unrecognized compensation cost related to unvested restricted stock units granted, which is expected to be recognized over a weighted average period of 2.5 years. During the first quarter of 2007, the total fair value of restricted stock units that vested was $1.9 million. There were no restricted stock units that vested during the first quarter of 2006.

As of March 31, 2007, there was $2.3 million of total unrecognized compensation cost related to the Purchase Plan rights that is expected to be recognized over the remaining accumulation periods comprising the offering periods.

Options Granted to Non-employees

The Company grants options to non-employees for consulting services performed. SiRF accounts for equity instruments issued to non-employees in accordance with SFAS No. 123R and EITF No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” Under EITF No. 96-18 and SFAS No. 123R, compensation expense for non-employee stock options is calculated using the Black-Scholes option pricing model and is recorded as the shares underlying the options are earned. The unvested shares underlying the options are subject to periodic revaluation over the remaining vesting period, as these options have similar characteristics to the Company’s employee options. SiRF recognizes the compensation expense for non-employee options and awards on an accelerated basis in accordance with FIN No. 28. The initial vesting period for these options ranged from immediate vesting to vesting over four years and the option exercise period ranges from seven to ten years.

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Common Stock Subject to Repurchase

During 2005, shares of common stock subject to a repurchase right were issued in connection with the Kisel acquisition and are contingent upon the continued employment of the recipients. As of March 31, 2007, the Company had 585,959 contingent shares of common stock outstanding and $2.0 million of unrecognized compensation cost related to these contingent shares, which is expected to be recognized over a weighted average period of 2.1 years.

Additionally, SiRF permits certain employees to exercise their unvested common stock options covered by their option agreements and has the right to repurchase the unvested shares from the employee at the original sale price. No other shares of common stock were subject to a repurchase right at March 31, 2007.

Performance Share Award

During the fourth quarter of 2006, the Company entered into a Performance Share Award Agreement with the Company’s CEO. This award provides the CEO with the opportunity to earn shares of SiRF common stock, the number of which shall be determined pursuant to, and subject to the attainment of performance goals. The performance goals are determined based on the Company’s cumulative revenue growth and cumulative operating income margin over a two year period. The number of shares to be earned by the CEO ranges from zero to a maximum of 150,000 shares, with the target being 50,000 shares, depending on the extent to which the performance goals are met. The Company shall withhold shares of common stock that otherwise would be issued to the CEO when the award is settled to satisfy the tax withholding obligation, but not in excess of the amount of shares necessary to satisfy the minimum withholding amount.

Following completion of the audited financial statements for the period of January 1, 2007 through December 31, 2007 and for the period of January 1, 2008 through December 31, 2008, or Performance Period, at a meeting of the Compensation Committee of the Board of Directors, which shall in no event be later than two and one-half months after the end of the Performance Period, the Committee will certify whether and to the extent the performance goals have been met and shall direct the Company to issue the corresponding number of shares of Common Stock to the CEO. The CEO’s eligibility to receive issued shares of Common Stock is conditioned on his continuous employment with the Company through the end of the Performance Period.

As of March 31, 2007, the Company had $1.0 million of unrecognized compensation cost related to the anticipated target share quantity, which is expected to be recognized on a straight-line basis over a weighted average period of 1.75 years. To the extent the anticipated number of shares to be earned changes, the corresponding compensation cost will be prospectively adjusted accordingly.

Note 4. Inventories

Inventories consist of the following:

	March 31, 2007		December 31, 2006
	(In thousands)
Raw material/Work in process	$	4,338	$	4,024
Finished goods		14,740		12,448
Total inventories	$	19,078	$	16,472

The comparative inventory information as of December 31, 2006, presented above, reflects a reclassification of approximately $1.9 million previously reported as finished goods in the Company’s December 31, 2006 Form 10-K to raw materials.

Note 5. Segment and Geographical Information

As discussed in Note 1, Organization and Summary of Significant Accounting Policies, SFAS No. 131 establishes standards for the reporting by business enterprises of information about operating segments, products and services, geographic areas, and major customers. The standard for determining what information to report is based on available financial information that is regularly reviewed and used by SiRF’s chief operating decision maker in evaluating the Company’s financial performance and resource allocation. SiRF’s chief operating decision-maker is considered to be the CEO. Based on the criteria stated in SFAS No. 131 for determining separately reportable operating segments and the financial information available to and reviewed by the CEO, the Company has determined that it operates as a single operating and reportable segment.

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Geographic Information

The following table summarizes net revenue by geographic region:

	Three months Ended March 31,
	2007		2006
	(In thousands)
Net revenue:
United States	$	12,534	$	11,998
Export sales from the United States:
Taiwan		34,271		29,941
Singapore		6,088		3,971
Other		14,371		6,770
Net revenue	$	67,264	$	52,680

The Company determines geographic location of its revenue based upon the destination of shipment for all original equipment manufacturers and value-added customers, and based upon distributor location for all its distributor customers.

The Company derives a substantial majority of its net revenue from sales to the automotive, mobile phone and consumer device markets. The Company believes that over 90% of its net revenue during the first quarter of 2007 and 2006 was attributable to products which were eventually incorporated into the automotive, mobile phone and consumer device markets.

Note 6. Customer Concentration

The following table summarizes net revenue as a percentage of total net revenue and accounts receivable as a percentage of total accounts receivable for customers that accounted for 10% or more of net revenue or net accounts receivable:

	Net Accounts Receivable				Net Revenue
	March 31,		December 31,		Three Months Ended March 31,
Customer	2007		2006		2007		2006
A	35	%	40	%	33	%	40	%
B	3	%	12	%	14	%	14	%
C	14	%	—		11	%	8	%
D	8	%	11	%	7	%	4	%

Note 7. Identified Intangible Assets

Identified intangible assets at March 31, 2007, consist of the following:

	Gross Assets		Accumulated Depreciation			Net
	(In thousands)
Acquisition-related developed and core technology	$	23,699	$	(18,302	)	$	5,397
Acquisition-related customer relationships		18,510		(8,633	)		9,877
Acquisition-related assembled workforce		1,479		(763	)		716
Acquisition-related patents		2,000		(282	)		1,718
Total acquisition-related intangible assets		45,688		(27,980	)		17,708
Intellectual property assets		1,496		(629	)		867
Total identified intangible assets	$	47,184	$	(28,609	)	$	18,575

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Identified intangible assets at December 31, 2006, consist of the following:

	Gross Assets		Accumulated Depreciation			Net
	(In thousands)
Acquisition-related developed and core technology	$	23,699	$	(17,697	)	$	6,002
Acquisition-related customer relationships		18,510		(8,254	)		10,256
Acquisition-related assembled workforce		1,479		(703	)		776
Acquisition-related patents		2,000		(243	)		1,757
Total acquisition-related intangible assets		45,688		(26,897	)		18,791
Intellectual property assets		1,388		(499	)		889
Total identified intangible assets	$	47,076	$	(27,396	)	$	19,680

Amortization expense of acquisition-related intangible assets was $1.1 million and $1.3 million for the three months ended March 31, 2007 and 2006, respectively. Amortization of intellectual property assets was $0.1 million for both the three months ended March 31, 2007 and 2006, and was included in research and development expense.

Estimated future amortization expense related to identified intangible assets at March 31, 2007 is as follows:

Fiscal Year:
	(In thousands)
2007 (remaining 9 months)	$	3,439
2008		4,434
2009		2,959
2010		1,333
2011		1,127
Thereafter		5,283
Total	$	18,575

Note 8. Deferred Margin on Shipments to Distributors

Revenue on shipments made to distributors under agreements allowing right of return and price protection is deferred until the distributors sell the merchandise. Deferred revenue under these agreements and deferred cost of sales related to inventories held by distributors, as well as the deferred margin related to certain inventories sold to certain customers who are not distributors are as follows:

	March 31, 2007			December 31, 2006
	(In thousands)
Deferred distributor revenue	$	3,050		$	2,019
Less: inventory held at distributors		(1,169	)		(763	)
Deferred margin on shipments to distributors	$	1,881		$	1,256

Note 9. Comprehensive Income (Loss)

The components of comprehensive income (loss), net of tax, are as follows:

	Three months Ended March 31,
	2006		2006
	(In thousands)
Net income (loss)	$	2,804	$	(10,965	)
Other comprehensive income:
Change in unrealized losses on available-for-sale securities		29		13
Change in cumulative translation adjustments		—		—
Total comprehensive income (loss)	$	2,833	$	(10,952	)

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Note 10. Long-Term Obligations

The Company maintains a short-term revolving line of credit under which it may borrow up to $5.0 million, including $5.0 million in the form of letters of credit, with an interest rate equal to the prime rate (8.25% of March 31, 2007). The line of credit is available through February 2009. There were no borrowings under the line of credit as of March 31, 2007 or December 31, 2006. There were no letters of credit collateralized by the line of credit as of March 31, 2007 or December 31, 2006.

Note 11. Related Party Transactions

Certain customers and/or suppliers of the Company, who are also common stockholders and/or have a common board member, may be considered related parties. The Company entered into an agreement with Skyworks Solutions, Inc. to manufacture some of its chip set products. One of SiRF’s board members, Moiz Beguwala, is also a board member of Skyworks. SiRF purchases from Skyworks were insignificant in the three months ended March 31, 2007 and zero in the three months ended March 31, 2006. SiRF did not have any trade payables or non-cancellable purchase orders to Skyworks as of March 31, 2007 or March 31, 2006.

As discussed above in Note 2, Acquisitions, during the first quarter of 2006, SiRF acquired TrueSpan, a development-stage company specializing in systems communication. One of SiRF’s board members, Diosdado P. Banatao, is a founder of Tallwood Venture Capital, or Tallwood, a venture capital firm focusing on semiconductors and semiconductor related technologies. Tallwood was an investor in TrueSpan and owned 4.0 million shares of preferred stock at the time of acquisition. Diosdado P. Banatao recused himself from the Company’s decision to acquire TrueSpan. There was no preferential treatment given to Tallwood as part of this acquisition, the preferred stock owned by Tallwood was purchased at the same payout rate as other holders of preferred stock.

Note 12. Commitments and Contingencies

The Company may be subject to claims, legal actions and complaints, including patent infringement, arising in the normal course of business. The likelihood and ultimate outcome of such an occurrence is not presently determinable; however, there can be no assurance that the Company will not become involved in protracted litigation regarding alleged infringement of third party intellectual property rights or litigation to assert and protect the Company’s patents or other intellectual property rights. Any litigation relating to patent infringement or other intellectual property matters could result in substantial cost and diversion of the Company’s resources that could materially and adversely affect the Company’s business and operating results.

The Company leases facilities and certain equipment under operating lease agreements, which require payment of property taxes, insurance and normal maintenance costs. The Company also accounts for certain term-based software licenses as capital lease agreements, which require future payment commitments on behalf of the Company. Many of the Company’s facility leases contain renewal options, which provide the option to extend its lease based upon the terms of the agreement. These renewal options do not represent a future commitment on behalf of the Company.

On December 15, 2006, SiRF Technology, Inc., filed a patent infringement complaint against Global Locate, Inc. and its United States distributor, SBCG, Inc. d/b/a Innovation Sales Southern California, in the United States District Court for the Central District of California. The complaint alleges infringement by Global Locate and SBCG of four patents assigned to SiRF Technology, Inc. and seeks both monetary damages and an injunction to prevent further infringement. On January 8, 2007, Global Locate answered the aforementioned complaint and filed counterclaims alleging infringement by SiRF Technology, Inc. of four patents and seeking monetary damages and an injunction to prevent further alleged infringement. On January 30, 2007, Global Locate filed an amended answer with additional counterclaims alleging violations by SiRF Technology, Inc. of the Sherman Antitrust Act and of the California Business and Professions Code.

Furthermore, on February 8, 2007, SiRF Technology, Inc. filed a complaint under Section 337 of the Tariff Act of 1930, as amended, in the United States International Trade Commission, or ITC, requesting that the ITC commence an investigation into the unlawful sale for importation into the United States, importation into the United States, and/or sale within the United States after importation of certain GPS chips or chipsets, associated software, and systems made for or by and/or sold by or for Global Locate, and products containing the same. As a result, on March 8, 2007, the ITC instituted an action entitled “In the Matter of Certain GPS Chips, Associated Software and Systems, and Products Containing Same,” ITC Investigation No. 337-TA-596.

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Finally, on April 2, 2007, Global Locate filed a complaint under Section 337, requesting that the ITC commence an investigation of certain GPS devices and products made for or by and/or sold by or for SiRF Technology, Inc. and four of its customers. As a result, on April 30, 2007, the ITC instituted ITC Investigation No. 337-TA-602.

The outcome of any litigation, including the lawsuits between the Company and Global Locate, is uncertain and either favorable or unfavorable outcomes could have a material impact. The Company intends to defend the lawsuits vigorously and enforce the use of its intellectual property only to those authorized to do so.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report on Form 10-Q contains forward-looking statements, including, but not limited to, statements about our expectations regarding the amount of our net revenue from sales to the Asia/Pacific region, our expectations on competition and competitive pricing, timing of our product development, our expectations regarding our dependency on and the amount of net revenue anticipated from future sales of SiRFstarIII-LT, GSCi-5000 and other new products, qualification of new foundries, our belief that a significant amount of the systems designed and manufactured by customers in the Asia/Pacific region are subsequently sold to original equipment manufacturers outside of that region, the expected growth of the location-based services, portable navigation devices and wireless markets and their impact on our business, our dependency on establishing and maintaining relationships with established providers and industry leaders, increases in research and development costs, sales and marketing expenses and general and administrative expenses and stock-based compensation charges, adjustments for our tax liability, enhancing our efficiencies in logistic management, our belief that we have leading edge technology, our ability to meet market demand for low power and small size Global Positioning Systems functionality products, impact from changes in interest rates and foreign currency rates, our profitability, our critical accounting policies and impact of recent accounting pronouncements, our anticipated growth, our gross margins, our expenses, our revenues and sources of revenues, our anticipated cash needs, our need for additional debt financing, our estimates regarding our capital requirements, our needs for additional financing, price reductions, our dependency on relationships with and concentration of our customers, costs of being a public company, the impact of changes to financial accounting standards, our disclosure controls and procedures, future acquisitions or investments, our competitive position, our legal proceedings and our intellectual property, including our ability to obtain patents in the future and protection of intellectual property in foreign countries and potential legal proceedings. These statements may be identified by such terms as “anticipate,” “believe,” “may,” “might,” “expect,” “will,” “intend,” “could,” “can,” or the negative of those terms or similar expressions intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the development of the market for GPS-based location awareness technology, factors affecting our quarterly results, our sales cycle, price reductions, our dependence on and qualification of foundries to manufacture our products, production capacity, our ability to adequately forecast demand for our products, our customer relationships, our ability to compete successfully, our product warranties, the impact of our intellectual property indemnification practices and other risks discussed in “Risk Factors” in this report. These forward-looking statements represent our estimates and assumptions only as of the date of this report. Unless required by law, we undertake no responsibility to update these forward-looking statements.

All references to “SiRF,” “we,” “our,” or the “Company” mean SiRF Technology Holdings, Inc. and its subsidiaries, except where it is clear from the context that such terms mean only this parent company and excludes subsidiaries.

SiRF^®, SiRFstar^®, SiRFXTrac^®, SiRFDRive^®, SiRFLoc^®, SiRFNav^®, SiRFSoft^®, SoftGPS^® and the SiRF name and orbit design logo are our registered trademarks. The following are trademarks of SiRF Technology, Inc., some of which are pending registration as intent-to-use applications: SiRFstarIII-LT™, SiRFstarIII™, SiRFstarII™, SnapLock™, SnapStart™, FoliageLock™, SingleSat™, TricklePower™, Push-to-Fix™, SiRF Powered™, SiRFLink™, Multimode Location Engine™, SiRFSoftGPS™, SiRFDiRect™ LocativeMedia™, SiRFDashDR™, SiRFDemo™, SiRFDemoPPC™, SiRFecosystem™, SiRFFlash™, SiRFFlashEngine™, SiRFFlashEngineEP™, SiRFFlashMulti™, SiRFGetEE™, SiRFInstantFix™, SiRFLocDemo™, SiRFsandbox™, SiRFstudio™, SiRFView™, Locations; Because Life Moves™ and The Power of Location Now™. This quarterly report on Form 10-Q also includes trade names, trademarks and service marks of other companies and organizations.

The following discussion of our financial condition and results of operations should be read together with the Condensed Consolidated Financial Statements and related notes in this report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

Overview

We are a leading semiconductor supplier of Global Positioning System, or GPS, based location technology solutions designed to provide location awareness capabilities in high-volume mobile consumer and commercial systems. Our products have been integrated into mobile consumer devices such as mobile phones, automobile navigation systems, personal digital assistants, portable navigation devices and GPS-based peripheral devices, and into commercial systems such as fleet management and road-tolling systems. As of March 31, 2007, we had 201 patents granted worldwide with 156 patents granted in the United States and 45 patents granted in foreign countries, with expiration dates ranging from 2010 to 2025.

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We market and sell our products to original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, of three target platforms: wireless handheld devices, such as mobile phones; automotive electronics systems, including in-car navigation systems, portable navigation systems and telematics systems; and consumer and compute devices, including ultra mobile computers, personal digital assistants, notebook computers, recreational GPS handhelds, mobile gaming machines, digital cameras and watches. As we supply products that support multiple applications within these three target platforms, we do not have the ability to discretely track separate financial information for each of these three target platforms. Additionally, we market and sell our products to value-added manufacturers, or VAMs, which typically provide GPS modules or sub-systems to the OEMs, and through intellectual property partners, which integrate our core technology into their products. Intellectual property partners are typically large semiconductor companies.

As usage of GPS technology for high volume applications is still in the early stages of deployment, it is difficult to predict market growth or growth drivers reliably. While some of the applications, such as OEM automotive navigation systems, are well developed, most high-growth applications are just starting to emerge. We continue to see the growth of the portable navigation systems as a major driver in our growth and is expected to continue to be in 2007. Location-based services, or LBS, are offered by some wireless network operators as a way to send information to cell-phone subscribers based on their current location. While the LBS market for wireless operators is in its early stages, we expect it to become a growth driver for our business starting the first half of 2007 and continue to be into the future. Our long term growth depends on maintaining a leadership position in such markets and enabling multiple growth drivers across our target platforms. We are currently focusing significant effort on enabling the end-to-end platform for successful LBS deployment by wireless operators and for other consumer applications. Successful alliances with wireless operators and service providers, mobile phone vendors, location based content providers and wireless platform providers are critical to our success in this emerging market.

On March 14, 2006, we acquired TrueSpan Incorporated, or TrueSpan, a privately held Delaware corporation, formed in August 2004 and located in Long Beach, California and in Bangalore, India. The acquisition of TrueSpan, a development-stage technology company with significant communications systems expertise, has added to our systems expertise as we expand our offerings to include complex multifunction and location technology platform solutions. As of the acquisition date, TrueSpan was in the process of performing technology verification for its Digital Video Broadcasting, or DVB, chip and its Radio Frequency, or RF, chip, which provide the capability for bringing broadcast services to handheld receivers and other platforms. In addition, TrueSpan was working on proprietary software for the functionality of the DVB chip in consumer products. We concluded the TrueSpan acquisition did not meet the criteria to be accounted for as an acquisition of a “business” under the requirements of Statement of Financial Accounting Standards, or SFAS, No. 141, “Business Combinations,” as TrueSpan did not possess the ability to generate outputs (as defined by SFAS No. 141) in order to continue normal operations and generate a revenue stream by providing its products to customers. In the first quarter of 2006, we recognized $13.3 million of charges for acquired in-process research and development, or IPR&D, which related to projects that had not yet reached technological feasibility at the time of acquisition. With respect to the in-process development projects associated with the TrueSpan acquisition, we are not currently aware of any material variations between projected results and actual results, nor any new risks or uncertainties associated with completing development within a reasonable period of time of its original estimates.

In 2006, we announced the following new products: SiRFInstantFix, our unique premium software offering that minimizes the start-up wait time for GPS systems; SiRFstarIII-LT family, our most power-efficient and the smallest version of our flagship SiRFstarIII architecture ideal for a wide range of GPS enabled consumer mobile devices; and GSCi-5000, our extremely small multimode A-GPS chip, based on a new architecture related to the Motorola product family acquisition, which is optimized to address the space and cost constraints of cellular handsets. The GSCi-5000 product line reached pre-production qualification and was substantially complete as of the end of 2006. We expect significant revenue contribution from this product line in the second half of 2007. As of the end of 2006, the SiRFstarIII-LT family products were production qualified and we expect these products to contribute meaningful revenue in 2007. We have also introduced our GSC3/LP, a lower power version of our GSC3 product line, which moved into high volume production in the fourth quarter of 2006. Strong interest and design win activity for these products are important for our revenue growth in 2007 and beyond.

During the first quarter of 2007, as compared to the corresponding prior year period we observed steady growth in the overall market for GPS-enabled devices across all our target platforms with the portable navigation devices again being the biggest contributor to our revenue mix. The portable navigation device market continues to show momentum with existing suppliers broadening their product lines and many new suppliers entering the market. We continue to build on our market leadership position and have expanded our customer base by winning many of these new designs at existing customers, as

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well as with new customers. We believe that our position in the wireless market was significantly strengthened through the launch of new products and alliances formed during the first quarter of 2007. The mobile phone market also showed steady progress with many of our handset customers designing products based on our SiRFstarIII-LP and SiRFstarIII-LT architecture and GSCi-5000 chips, with some of these handset customers entering inter-operability tests with major operators. During the first quarter of 2007, we announced the SiRFstarIII GSD3t, which is our first 90 nm RFCMOS single die SiRFstarIII product. The SiRFstarIII GSD3t brings the SiRFstarIII class GPS performance to price-conscious and space-constrained mobile devices, such as cell phones. Our design pipeline in the wireless space includes multiple platforms at tier one handset customers, as well as designs at leaders in the smartphone market and at many original design manufacturers.

Our ability to develop and deliver new products successfully depends on a number of factors, including our ability to predict market requirements, anticipate changes in technology standards, and develop and introduce new products that meet market needs in a timely manner. We are seeing significant demand in the market for low power and small size GPS functionality. Our ability to meet these market requirements is a key element for our revenue growth.

Futhermore, our markets are becoming more competitive resulting in increased pricing pressure on our products. While we believe that we have leading edge technology, our ability to compete and maintain current product margin levels depends on faster design cycle time and lower product cost structure. In the first quarter of 2006, we acquired one development stage company, which has complemented our existing engineering group and expanded our product offerings. However, many of these new product offerings are quite complex and we may not be successful in implementing these in a timely manner. We also continue to enhance our efficiencies in logistics management and work with our semiconductor fabrication, packaging and testing vendors to reduce product costs, in an effort to maintain our overall cost structure.

Our operations are directly impacted by cyclicality in the semiconductor industry, which is characterized by wide fluctuations in product supply and demand. This cyclicality could cause our operating results to decline dramatically from one period to the next. In addition to the sale of chip sets, our business depends on the volume of production by our technology licensees, which in turn depends on the current and anticipated market demand for semiconductors and products that use semiconductors.

We currently rely, and expect to continue to rely, on a limited number of customers for a significant portion of our net revenue. In the first quarter of 2007, we had three customers that each accounted for 10% or more of our net revenue, which collectively accounted for approximately 58% of our net revenue. If we fail to successfully sell our products to one or more of our significant customers in any particular period, or if a large customer purchases fewer of our products, defers orders or fails to place additional orders with us, our net revenue could decline, and our operating results may not meet market expectations.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on historical experience and on various other assumptions that we believe 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, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Our most critical accounting policies include: (1) revenue recognition, which impacts the recording of revenue; (2) valuation of inventories, which impacts cost of revenue and gross margin; (3) stock-based compensation, which impacts cost of product revenue, gross margin and operating expenses, as well as footnote disclosure; (4) the assessment of recoverability of long-lived assets including goodwill and other intangible assets, the potential impairment of which impacts cost of product revenue and operating expenses; and (5) income taxes which impacts provision for income taxes and the valuation of our deferred tax assets and liabilities. We also have other key accounting policies that are less subjective, and therefore, their application would not have a material impact on our reported results of operations. The following is a discussion of our most critical accounting policies, as well as the estimates and judgments involved.

Revenue Recognition. We recognize revenue from sales to our direct customers, both OEMs and VAMs, when the earnings process is complete, as evidenced by an agreement with the customer, transfer of title, as well as fixed or

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determinable pricing and probable collectibility. Transfer of title occurs based on defined terms in customer purchase orders for all shipments. We assess the need for allowances at the time of sale to our direct customers for estimated sales returns. We determine these allowances based upon the historical rate of returns.

We enter into co-branding rebate agreements with certain customers and provide marketing incentives to certain distributors. Payments to be made under such agreements and marketing incentives are recorded as a reduction of revenue. In certain circumstances, we estimate the proportion of product shipments that are rebate-applicable from a larger population of shipments, as well as we estimate the likelihood of whether or not such rebates will be claimed over time. If our estimates of product rebates differ from actual results, adjustments to estimated net revenues could result.

We license rights to use our intellectual property to allow licensees to integrate our GPS technology into their products. We also license rights to use our premium software products to licensees to enable our chip sets to provide enhanced functionality in specific applications. We recognize premium software product revenue in accordance with American Institute of Certified Public Accountants, or AICPA, Statement of Position, or SOP, 97-2, “Software Revenue Recognition.” We earn royalties on licensees’ worldwide sales of their products incorporating the licensed intellectual property or premium software based upon the specific criteria included in the associated royalty agreements. Our licensees; however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. During the periods preceding the fourth quarter of 2006, we estimated and recorded the royalty revenues earned for sales by certain licensees (the Estimated Licensees) in the quarter in which such sales occurred, but only when reasonable estimates of such amounts could be made.

Starting in the fourth quarter of 2006, we determined that due to business circumstances we could no longer reliably estimate royalty revenue from the Estimated Licensees. As such, we began recognizing all royalty revenues based solely on royalties reported by licensees during such quarter.

Subsequent to the sale of our premium software products, we have no obligation to provide any modification, customization, upgrades, or enhancements. The cost of revenue associated with licenses is insignificant.

Inventory. We record a reserve for inventories that have become obsolete or are in excess of anticipated demand or net realizable value. We perform a detailed review of inventory each period that considers multiple factors including demand forecasts, market conditions, product life cycle status, product development plans and current sales levels. Demand forecasts involve numerous estimates, such as customer product demand projections based on the our historical experience, timing of new product introductions, timing of customer transitions to new products and sell-through of products predicated at different average selling prices. If future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of component inventory, we may be required to record additional write-downs which would negatively impact gross margins in the period when the write-downs are recorded. If actual market conditions are more favorable, we may have higher gross margins when products incorporating inventory that was previously reserved are sold.

Stock-Based Compensation. We measure stock-based compensation expense at the grant date, based on the fair value of the underlying equity award and the associated expense is recognized over the requisite service period. The fair value of our employee stock options and our Purchase Plan rights is estimated using a Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, as disclosed in Note 3 of the “Notes to Condensed Consolidated Financial Statements” in Item 1, including the price volatility of the underlying stock and the option’s expected term. Our options are considered “plain vanilla” as defined by SAB No. 107. We have elected to use the simplified method as prescribed by the SEC’s SAB No. 107, to estimate the option’s expected term as we have limited historical exercise data or alternative information to estimate a reasonable expected term assumption. The simplified method assumes that all options will be exercised midway between the vesting date and the contractual term of the option. The simplified method as provided by SAB No. 107 is only allowed for the transition period through December 31, 2007. During the transition period, we will evaluate our expected term assumption to consider among other things, historical exercise patterns, the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. We utilize our own historical volatility in valuing our stock option grants and purchase rights under the Purchase Plan. We also evaluate the historical and implied volatility of “guideline” companies selected based on similar industry and product focus whose share or option prices have been publicly traded for a longer period of time as a baseline volatility benchmark to evaluate the reasonableness of our volatility assumption based upon our historical stock price volatility. During the first quarter of 2007, the average volatility used to value our employee stock options was 56%. There were no new purchase rights valued during the first quarter of 2007 under our Purchase Plan. Actual volatility, our options’ expected lives, and interest rates may be different from our assumptions, which would result in an actual value of the options being different than estimated. We have elected to use the straight-line attribution method for awards granted after the adoption of SFAS No. 123R and continue to use a multiple option valuation approach for awards granted prior to the adoption of SFAS No. 123R that were unvested as of the effective date.

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Assessment of Long-Lived and Other Intangible Assets and Goodwill. We are required to assess the potential impairment of identified intangible assets, long-lived assets and goodwill on an annual basis, and potentially more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets; and

• significant negative industry or economic trends.

When we determine that the carrying value of intangible assets, long-lived assets or goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we test for recoverability based on an estimate of future undiscounted cash flows as compared to the long-lived assets or goodwill’s carrying value. If the initial test for recovery fails, measurement of impairment is based on projected discounted cash flow, which requires us to make significant estimates and assumptions regarding future revenue and expenses, projected capital expenditures, changes in our working capital and the relevant discount rate. Should actual results differ significantly from our current estimates, impairment charges may result.

Income Taxes. We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes.” Under this method, we determine deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the current year’s financial statements are included in determining income taxes payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenue, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because it is assumed that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, resulting in a deferred tax liability or deferred tax asset.

In preparing our consolidated financial statements, we assess the likelihood that our deferred tax assets will be realized from future taxable income. We establish a valuation allowance if we determine that it is more likely than not that some portion of the deferred tax assets will not be realized. Changes in the valuation allowance, when recorded, would be included in our consolidated statements of operations as a provision for (benefit from) income taxes. We exercise significant judgment in determining our provisions for income taxes, our deferred tax assets and liabilities and our future taxable income for purposes of assessing our ability to utilize any future tax benefit from our deferred tax assets. During the first quarter of 2007, we assessed the need for a valuation allowance against our deferred tax assets and based on earnings history and projected future taxable income, management determined that it is more likely than not that the deferred tax assets would be realized.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are recorded when identified, which is generally in the third quarter of the subsequent year for United States federal and state provisions. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We evaluate our uncertain tax positions under the provisions of Financial Accounting Standards Interpretation, or FIN, No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return. We only recognize tax benefits for positions that are more likely than not to be sustained upon final resolution with a taxing authority. We measure these tax benefits by estimating the amount of benefit that corresponds to the cumulative probability greater than 50% of being sustained upon final resolution with a taxing authority. We exercise significant judgment in estimating the final resolution of our tax positions with a taxing authority. We believe we have adequately provided for any reasonably foreseeable adjustments to our tax liability. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary in accordance with FIN No. 48. Refer to Note 1 of the “Notes to Condensed Consolidated Financial Statements” in Item 1 for additional information on the impact of adopting FIN No. 48 during the first quarter of 2007.

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Adoption of Recent Accounting Pronouncements

During the first quarter of 2007, we adopted EITF No. 06-02, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences” and FIN No. 48. Refer to Note 1 of the “Notes to Condensed Consolidated Financial Statements” in Item 1 for additional information on the impact of adopting these new accounting pronouncements.

Recently Issued Accounting Standards

Fair Value Measurement

In September 2006, the FASB, issued SFAS No. 157, “Fair Value Measurement.” SFAS No. 157 defines how the fair value of assets and liabilities should be measured in more than 40 other accounting standards where fair value measurement is allowed or required. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 requires fair value measurements to be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, including interim periods within that fiscal year. We are currently assessing SFAS No. 157 and have not yet determined the impact, if any, that the adoption of SFAS No. 157 will have on our financial position, results of operations and fair value disclosures.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB, issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 provides an option to report selected financial assets and liabilities at fair value. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS No. 159 attempts to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing SFAS No. 159 and have not yet determined the impact, if any, that the adoption of SFAS No. 159 will have on our financial position, results of operations and fair value disclosures.

Results of Operations

Revenue

The following table sets forth our revenue for the first quarter of 2007 and 2006:

	Three Months Ended March 31,
	2007					2006
	(In thousands)
	Dollars			% of Net Revenue		Dollars		% of Net Revenue
Product revenue	$	65,798		98	%	$	50,163	95	%
License royalty revenue		1,466		2	%		2,517	5	%
Net revenue	$	67,264				$	52,680
Increase, period over period		14,584
Percentage increase, period over period		28	%

Net revenue increased 28% in the first quarter of 2007 as compared to the corresponding prior year period due primarily to an increase in product revenue. This increase in product revenue resulted primarily from a 64% increase in unit

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shipments of chip sets, which was due primarily to increased sales of our product lines based on our SiRFstarIII architecture. This increase in unit shipments of chip sets was partially offset by a 20% decline in average selling prices in the first quarter of 2007, as compared to the corresponding prior year period. The decline in average selling prices was primarily due to increased sales of wireless products, which have lower average selling prices and overall competitive pricing pressures on other products. Declining average selling prices over time are expected and will likely continue to occur on sales of our SiRFstarIII product line. Increased sales volumes in the first quarter of 2007 were driven by continued growth in the wireless market, automotive markets, especially portable navigation systems and consumer and compute devices.

License royalty revenue as a percentage of total net revenue declined as compared to the prior year period and this trend is expected to continue. License royalty revenue decreased in the first quarter of 2007, as compared to the corresponding prior year period, due to a decline in our premium software royalty revenue and license royalty revenue from various customers associated with a decline in unit volumes.

Net revenue on international sales was approximately 81% and 77% of net revenue in the first quarter of 2007 and 2006, respectively. Net revenue on international sales to the Asia/Pacific region accounted for approximately 74% and 69% of net revenue in the first quarter of 2007 and 2006, respectively. International sales increased as a percentage of total net revenue in the first quarter of 2007, as compared to the corresponding prior year period, due to larger international sales to the Asia/Pacific region associated with increased customers and volume mix. We anticipate that a significant amount of our net revenue will continue to reflect sales to customers in that region as many of our VAM and contract manufacturer customers are located in Asia. Although a large percentage of our sales are made to customers in the Asia/Pacific region, we believe that a significant amount of the systems designed and manufactured by these customers are subsequently sold through to OEMs outside of the Asia/Pacific region. All of our sales are denominated in United States dollars.

Cost of Revenue and Gross Margin

Cost of revenue consists primarily of finished units or silicon wafers and costs associated with the assembly, testing and inbound and outbound shipping of our chip sets, costs of personnel and occupancy associated with manufacturing-related overhead functions, such as manufacturing support and quality assurance, all of which are associated with product revenue. As we do not have long-term, fixed supply agreements, our unit or wafer costs are subject to change based on the cyclical demand for semiconductor products. There was no cost of license royalty revenue for the periods reported. Total cost of revenue for the periods reported was as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Cost of revenue	$	30,520		$	23,625
Percentage of net revenue		45	%		45	%
Increase, period over period	$	6,895
Percentage increase, period over period		29	%

Cost of revenue increased in the first quarter of 2007, as compared to the corresponding prior year periods, due primarily to an increase in the volume of chip sets shipped and recognized as product revenue, partially offset by declines in per-unit materials cost and higher sales of wireless products, which have a lower per-unit materials cost. Cost of product revenue includes stock compensation expense of $0.2 million and $0.1 million for the three months ended March 31, 2007 and 2006, respectively.

Gross margin and gross margin as a percentage of net revenue for the periods reported were as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Gross margin	$	36,744		$	29,055
Percentage of net revenue		55	%		55	%
Increase, period over period	$	7,689
Percentage increase, period over period		26	%

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Product-only gross margin as a percentage of product revenue for the periods reported was as follows:

	Three Months Ended March 31,
	2007		2006
Product gross margin percentage	54	%	53	%

Gross margin as a percentage of net revenue remained flat in the first quarter of 2007, as compared to the corresponding prior year period. The impact on gross margin as a percentage of net revenue associated with license royalty revenue becoming a smaller percentage of total net revenue was offset by an increase in product gross margin as a percentage of net revenue in 2007, as compared to the corresponding prior year period. The increase in product gross margin as a percentage of net revenue in the first quarter of 2007, as compared to the corresponding prior year period, was due primarily to a decline in product costs and a change in product mix with lower per-unit materials cost, partially offset by lower average selling prices.

In the future, our gross margin percentages may be affected by increased competition and related decreases in unit average selling prices, changes in the mix of products sold (including the extent of license royalty revenue), the availability and cost of products from our suppliers, manufacturing yields (particularly on new products), increased volume and related volume price breaks, timing of volume shipments of new products and potential delays in introductions of new products. As a result, we may experience declines in demand or average selling prices of our existing products, and our inventories on hand may become impaired, resulting in write-offs either for excess quantities or lower of cost or market considerations. Such write-offs, when determined, could have a material adverse effect on gross margins and results of operations.

Operating Expenses

Our results of operations for the first quarter of 2007 and 2006 include non-cash expenses related to the estimated fair value of all our employee stock-based compensation awards. The following table provides the amounts we recorded within operating expenses for employee stock compensation expense during the first quarter of 2007 and 2006:

	Three Months Ended March 31,
	2007		2006
	(In thousands)
Operating expenses include the following stock compensation expense:
Research and development	$	4,363	$	3,310
Sales and marketing	$	1,004	$	658
General and administrative	$	1,735	$	684

As of March 31, 2007, we had approximately $31.1 million of total unrecognized compensation cost related to unvested stock options granted and outstanding with a weighted average remaining vesting period of 2.2 years. As of March 31, 2007, there was also $15.4 million of total unrecognized compensation cost related to unvested restricted stock units granted, which is expected to be recognized over a weighted average period of 2.5 years. In addition, we also had $2.3 million of total unrecognized compensation cost related to the Purchase Plan rights that is expected to be recognized over the remaining accumulation periods comprising the offering periods and $1.0 million of unrecognized compensation cost related to the performance share award agreement with our Chief Executive Officer, which is expected to be recognized over a weighted average period of 1.75 years.

Research and Development

Research and development expense consists primarily of salaries, bonuses, benefits and stock compensation expense for engineering personnel, depreciation of engineering equipment, amortization of intellectual property assets, costs of outside engineering services from contractors and consultants and costs associated with prototype wafers and mask sets. Some of our development costs are offset by income from engineering services arrangements with certain customers. Engineering services income was $0.4 million and $0.2 million in the first quarter of 2007 and 2006. Research and development expenses for the periods reported were as follows:

	Three Months Ended March 31,
	2007		2006
	(In thousands)
Research and development	$	21,167	$	17,025

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	Three Months Ended March 31,
	2007			2006
Percentage of net revenue		31	%	32	%
Increase, period over period	$	4,142
Percentage increase, period over period		24	%

Research and development expense increased in the first quarter of 2007, as compared to 2006, primarily due to a 12% increase in headcount, which resulted in increases in headcount related expenses of approximately $1.4 million. The increase in research and development expense during the first quarter of 2007 is further attributable to a net increase in stock compensation expense of approximately $1.1 million, which is primarily associated with the expenses recognized for TrueSpan related stock compensation awards, as compared to the amounts recorded in 2006. The increase in headcount is primarily attributable to the overall growth of our business. In conjunction with the acquisitions during 2005 and 2006, approximately $0.4 million of acquisition-related contingent payments were also recorded as compensation expense in the first quarter of 2007, with no similar expense in 2006. Additionally, increased costs associated with physical implementation of chip designs, as well as increased depreciation and amortization of engineering equipment and licensed technology attributed to the overall increase in research and development expense. We expect our research and development costs to increase in absolute dollars as we continue to develop new products in the future.

Sales and Marketing

Sales and marketing expense consists primarily of salaries, bonuses, benefits, stock compensation expenses and related costs for sales and marketing personnel, sales commissions, customer support, public relations, tradeshows, advertising and other marketing activities. Sales and marketing expenses for the periods reported were as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Sales and marketing	$	6,127		$	4,449
Percentage of net revenue		9	%		8	%
Increase, period over period	$	1,678
Percentage increase, period over period		38	%

The increase in sales and marketing expense in the first quarter of 2007, as compared to the corresponding prior year period, was due primarily to an increase in compensation related expenses of approximately $0.7 million. The increase in sales and marketing expense during the first quarter of 2007 is further attributable to the net increase in stock-based compensation expense of approximately $0.3 million. Additionally, increased costs associated with sales and marketing activities, such as trade shows, travel and entertainment and outside services attributed to the overall increase in sales and marketing expense. We expect sales and marketing expense to increase in absolute dollars as we hire additional personnel, expand our sales and marketing efforts and incur higher sales commissions with the anticipated growth of our business.

General and Administrative

General and administrative expense consists primarily of salaries, bonuses, benefits, stock compensation expenses and related costs for finance and administrative personnel, as well as outside service expenses, including legal, accounting and recruiting. General and administrative expenses for the periods reported were as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
General and administrative	$	6,485		$	3,767
Percentage of net revenue		10	%		7	%
Increase, period over period	$	2,718
Percentage increase, period over period		72	%

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The increase in general and administrative expense in the first quarter of 2007, as compared to the corresponding prior year period, was due primarily to increases in headcount related expenses and increased costs for legal, accounting and professional consulting services of approximately $1.6 million. The increase in general and administrative expense during the first quarter of 2007 is further attributable to the net increase in stock compensation expense of approximately $1.1 million. The increase in general and administrative expense is primarily associated with the growth of our business, as well as our recent acquisitions. We expect general and administrative expense, including legal expenses associated with ongoing and future litigation matters, to increase in absolute dollars as we hire additional personnel and incur costs related to the anticipated growth of our business, our operation as a public company and investments in our information technology infrastructure.

Amortization of Acquisition-Related Intangible Assets

Acquired identified intangible assets other than goodwill consist of acquired developed technology, core technology, customer list, assembled workforce, patents and customer relationships. These acquired identified intangible assets are being amortized using the straight-line method over their expected useful lives, which range from two to 13 years. Amortization of acquisition-related intangibles for the periods reported was as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Amortization of acquisition-related intangible assets	$	1,083		$	1,323
Percentage of net revenue		2	%		3	%
Decrease, period over period	$	(240	)
Percentage decrease, period over period		(18	)%

Amortization of acquisition-related intangible assets decreased slightly in the first quarter of 2007, as compared to the corresponding prior year period due primarily to lower amortization of $0.3 million associated with the full amortization of a prior acquisition related intangible during the third quarter of 2006, partially offset by increased intangible asset amortization of $0.1 million associated with the TrueSpan acquisition late in the first quarter of 2006.

Acquired in-Process Research and Development

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Acquired in-process research and development		—		$	13,251
Percentage of net revenue		—			25	%
Decrease, period over period	$	(13,251	)
Percentage decrease, period over period		(100	)%

In connection with the acquisition of TrueSpan during the first quarter of 2006 we allocated approximately $13.3 million of the purchase price to acquired IPR&D. The amount allocated to the acquired IPR&D was immediately expensed in the periods the acquisitions were completed, as the associated project had not yet reached technological feasibility and no future alternative uses existed for the technology. In calculating the value of the acquired IPR&D, we, with the assistance of an independent appraiser, used established valuation techniques accepted in the technology industry. This calculation gave consideration to relevant market size and growth factors, expected industry trends, the anticipated nature and timing of new product introductions by us and our competitors, product sales cycles, and the estimated life of the product derived from the underlying technology. The value of the acquired IPR&D reflects the relative value and contribution of the acquired research and development. We considered the stage of completion, the complexity of the work completed to date, the difficulty of completing the remaining development, costs already incurred, and the expected cost to complete the project in determining the value assigned to the acquired IPR&D.

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As of the acquisition date, TrueSpan was in the process of performing technology verification for its DVB and RF chips. The design for the chips was believed to be near completion, but significant risks and uncertainties in the design still existed and diagnosis of verification errors required debugging. Both of these chips were expected to be released in late 2007 at the time of the acquisition. TrueSpan was also working on proprietary software for the functionality of the DVB chip in consumer products, with completion expected in late 2006 at the time of the acquisition. As of March 31, 2007, the DVB chip has taped out and our development plans for the DVB software is now expected in late 2007, as it will be integrated with the DVB chip. Over the next year the system and software integration and the system validation are the key activities prior to completion. There has been no material variations associated with the TrueSpan chip development projects.

We are not currently aware of any material variations between projected results and actual results, nor any new risks or uncertainties associated with completing development within a reasonable period of time of our original estimates. If we do not complete development on these projects or if we do not achieve market acceptance in a timely manner, our results of operations and financial condition could be adversely affected.

Other Income, Net

Other income, net, consists primarily of interest earned on our cash and investments. Other income, net, was $2.0 million and $1.3 million in the first quarter of 2007 and 2006, respectively. The increase in other income, net, in the first quarter of 2007, as compared to the corresponding prior year period, is primarily attributable to the increased interest rates earned on our cash equivalents, short- and long-term investments, which was partially offset by a final employee arbitration award against us that was also recorded during the first quarter of 2007.

Provision for Income Taxes

Provision for income taxes was $1.0 million and $1.5 million in the first quarter of 2007 and 2006, respectively. Our estimated effective tax rate was 27% and (16%) in the first quarter of 2007 and 2006, respectively. The provision for income taxes in the first quarter of 2007 differs from the amount computed by applying the statutory federal rate principally due to excess tax benefits associated with disqualified dispositions of incentive stock options and our employee stock purchase plan and their effect on the research and development tax credit. The provision for income taxes in the first quarter of 2006 differs from the amount computed by applying the statutory federal rate principally due to nondeductible acquired in-process research and development expense incurred as part of the TrueSpan acquisition. As the federal research and development tax credit expired on December 31, 2005, we did not factor this credit into our effective rate calculations for the first quarter of 2006. Due to reinstatement of the credit during the fourth quarter of 2006, we have included the benefit for the first quarter of 2007.

Liquidity and Capital Resources

Financial Condition

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Net cash used in operating activities	$	(7,487	)	$	(9,903	)
Net cash used in investing activities		(5,653	)		(16,948	)
Net cash provided by financing activities		7,527			16,651
Net decrease in cash and cash equivalents	$	(5,613	)	$	(10,200	)

Cash Flows

We have been profitable since 2003, with the exception of the first quarter of 2006, which was due to the one-time charge of $13.3 million for the acquired in-process research and development associated with the TrueSpan acquisition. As of March 31, 2007, we had $187 million in cash, cash equivalents, and marketable securities and $219 million in working capital, as compared to cash, cash equivalents and marketable securities balance of $170 million and $185 million in working capital as of December 31, 2006. We use independent semiconductor manufacturers to fabricate our semiconductors. By outsourcing our manufacturing, we are able to focus more of our resources on product design and eliminate the high cost of owning and operating our own manufacturing facility.

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Operating Activities. Net cash used in operating activities was $7.5 million in the first quarter of 2007, which resulted primarily from net changes in assets and liabilities of $17.4 million mainly due to an increase in accounts receivable of $8.2 million, a decrease in accounts payable of $6.0 million and a decrease in rebates payable of $2.6 million. Net cash used in operating activities was partially offset by non-cash reconciling items of approximately $7.2 million and net income of $2.8 million. Non-cash reconciling items were comprised of stock-based compensation expense, depreciation, amortization, changes in deferred tax assets and gross excess tax benefits from stock-based compensation.

Net cash used in operating activities was $9.9 million in the first quarter of 2006, which resulted primarily from changes in assets and liabilities of $10.1 million mainly due to an increase in accounts receivable of $10.9 million.

Investing Activities. Net cash used in investing activities was $5.7 million in the first quarter of 2007 and primarily resulted from the net expenditures from purchases of available-for-sale investments of $3.4 million and to a lesser extent capital expenditures of $2.1 million and purchases of intellectual property assets of $0.1 million.

Net cash used in investing activities was $16.9 million in the first quarter of 2006, which was primarily due to the acquisition of TrueSpan during the first quarter of 2006 that represented approximately $16.8 million, net of cash acquired. The cash paid in connection with the TrueSpan acquisition during the first quarter of 2006 excludes approximately $3.0 million in future contingent payments, which will be made to certain former TrueSpan employees contingent upon their continued employment with us and will result in compensation expense recorded over the related two-year service period. See Note 2 of “Notes to Condensed Consolidated Financial Statements” in Item 1 for further information. To a lesser extent, capital expenditures of $0.7 million and the net proceeds from maturities and sales of available-for-sale investments of $0.7 million impacted net cash used in investing activities.

Financing Activities. Net cash provided by financing activities was approximately $7.5 million in the first quarter of 2007, which was primarily due to the proceeds from stock option exercises of approximately $4.0 million and an increase in net financing cash flows of approximately $3.6 million related to the gross excess tax deductions in excess of compensation cost as required under SFAS No. 123R.

Net cash provided by financing activities was approximately $16.7 million in the first quarter of 2006, which was primarily due to an increase in net financing cash flows of approximately $11.1 million related to the gross excess tax deductions in excess of compensation cost as required under SFAS No. 123R and the proceeds from stock option exercises of approximately $5.6 million.

In February 2007, we modified our short-term revolving line of credit under which we may borrow up to $5.0 million, including $5.0 million in the form of letters of credit, with an interest rate equal to the prime rate (8.25% as of March 31, 2007). The line of credit was amended to extend the maturity date through February 2009. We had no borrowings under the line of credit as of March 31, 2007 or December 31, 2006. As of March 31, 2007, we were in compliance with all financial and non-financial covenants, including borrowing base requirements. We currently have no plans to obtain additional debt financing and do not foresee our bank line of credit having a significant impact on our ability to obtain equity financing.

We expect to experience continued growth in our operating expenses for the foreseeable future in order to execute our business strategy. We believe that our existing cash, investments, amounts available under our bank line of credit, and cash generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months. If we require additional capital resources to grow our business internally or to acquire complementary technologies and businesses at any time in the future, we may seek to sell additional equity or debt securities or obtain other debt financing, which could result in more dilution to our stockholders.

Contractual Obligations

As of March 31, 2007, our contractual obligations are materially consistent with our commitments disclosed as of December 31, 2006, with the exception of the increased obligations associated with our gross unrecognized tax benefits recorded in conjunction with the adoption of FIN No. 48. With the exception of our FIN No. 48 obligations, our contractual obligations primarily consist of amounts payable under equipment loans, capital and operating leases. As of March 31, 2007, our total amount of unrecognized tax benefits was $6.2 million and is considered a long-term obligation. We have recognized a net amount of $1.2 million in ‘long-term deferred and other tax liabilities’ for unrecognized tax benefits in our Condensed Consolidated Balance Sheets. We are unable to make reasonably reliable estimates of the period of cash settlement associated with these obligations with the respective taxing authority.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risks for changes in interest rates relates primarily to our investment portfolio. As of March 31, 2007, our cash equivalents and investment portfolio consisted of commercial paper, government bonds and money market funds. Our marketable securities consist of high-quality debt securities with maturities beyond 90 days at the date of acquisition, which mature within one year or less. Our long-term investments consist of high-quality debt securities with maturities beyond one year. Our investments are considered to be available-for-sale. We do not believe that an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio primarily due to the short term nature of our investment portfolio. Since we believe we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially impacted by the effect of a sudden change in market interest rates on our investment portfolio.

Foreign Currency Exchange Risk

Our exposure to adverse movements in foreign currency exchange rates is primarily related to our subsidiaries’ operating expenses, primarily in the United Kingdom, Japan, Taiwan, India and Sweden, denominated in the respective local currency. A hypothetical change of 10% in foreign currency exchange rates would not have a material impact on our consolidated financial statements or results of operations. All of our sales are transacted in U.S. dollars.

Item 4: Controls and Procedures

(a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with management’s evaluation during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may be subject to legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. During the quarter ended March 31, 2007, we were party to the following material legal proceeding:

On December 15, 2006, our subsidiary, SiRF Technology, Inc., filed a patent infringement complaint against Global Locate, Inc. and its United States distributor, SBCG, Inc. d/b/a Innovation Sales Southern California, in the United States District Court for the Central District of California. The complaint alleges infringement by Global Locate and SBCG of four patents assigned to SiRF Technology, Inc. and seeks both monetary damages and an injunction to prevent further infringement. On January 8, 2007, Global Locate answered the aforementioned complaint and filed counterclaims alleging infringement by SiRF Technology, Inc. of four patents and seeking monetary damages and an injunction to prevent further alleged infringement. On January 30, 2007, Global Locate filed an amended answer with additional counterclaims alleging violations by SiRF Technology, Inc. of the Sherman Antitrust Act and of the California Business and Professions Code.

Furthermore, on February 8, 2007, SiRF Technology, Inc. filed a complaint under Section 337 of the Tariff Act of 1930, as amended, in the United States International Trade Commission, or ITC, requesting that the ITC commence an investigation into the unlawful sale for importation into the United States, importation into the United States, or sale within the United States after importation of certain GPS chips or chipsets, associated software, and systems made for or by or sold by or for Global Locate, and products containing the same. As a result, on March 8, 2007, the ITC instituted an action entitled “In the Matter of Certain GPS Chips, Associated Software and Systems, and Products Containing Same,” ITC Investigation No. 337-TA-596.

Finally, on April 2, 2007, Global Locate filed a complaint under Section 337, requesting that the ITC commence an investigation of certain GPS devices and products made for or by and/or sold by or for SiRF Technology, Inc. and four of its customers. As a result, on April 30, 2007, the ITC instituted ITC Investigation No. 337-TA-602. The Company intends to defend the lawsuits vigorously and enforce the use of its intellectual property only to those authorized to do so.

The outcome of any litigation is uncertain and either favorable or unfavorable outcomes could have a material impact. Regardless of the outcome, litigation may be time-consuming and expensive and could divert management’s attention from our business.

Item 1A. Risk Factors

In evaluating SiRF Technology Holdings, Inc. and our business, you should carefully consider the following factors in addition to the other information in this Quarterly Report on Form 10-Q. Any one of the following risks could seriously harm our business, financial condition, and results of operations, causing the price of our stock to decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Because many companies sell in the market for location technology products, we must compete successfully to sustain or gain market share.

The market for our products is highly competitive and rapidly evolving. We are seeing increased competition throughout the market for location technology products. This increased competition will likely result in price reductions, reduced margins or loss of market share. We may be unable to compete successfully against current or future competitors. Some of our customers are also competitors of ours. Within each of our markets, we face competition from public and private companies, as well as our customers’ in-house design efforts. For chip sets, our main competitors include QUALCOMM, Infineon, Sony, STMicroelectronics, Texas Instruments, MediaTek, Global Locate, Atmel, Centrality, u-blox, u-Nav and Trimble. Some large semiconductor companies may acquire private GPS companies to gain access to their technology and become serious competitors to us in a short time. For modules based on our products, the main competitors are Furuno, JRC, Sony, u-blox and Trimble. For licensed IP cores, our competitors include QUALCOMM, Ceva and several private companies. Licensees of intellectual property from our competitors may also compete against us. We also compete against suppliers of software-based GPS solutions including NXP, RFMD and Cambridge Silicon Radio. We expect new competitors to enter the commercial market for GPS semiconductors as demand for GPS systems continues to grow. With this increase in demand of GPS-based products, some products may be manufactured with lower quality GPS semiconductors, which may cause further price reductions in the market.

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In the wireless market, we also compete against products based on alternative location technologies that do not rely on GPS, such as wireless infrastructure-based systems. These systems are based on technologies that compute a caller’s location by measuring the differences of signals between individual base stations. If these technologies become more widely adopted, market acceptance of our products may decline. Competitors in these areas include Andrew, Cambridge Silicon Radio, Polaris and TruePosition. Further, alternative satellite-based navigation systems such as Galileo, which is being developed by European governments, may reduce the demand for GPS-based applications or cause customers to postpone decisions on whether to integrate GPS capabilities into their products.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and other resources than we do and many of our private competitors raised additional financing in 2006. We also believe that our success depends on our ability to establish and maintain relationships with established system providers and industry leaders. For example, we recently announced that our SiRFstarIII architecture will provide GPS-based location awareness for products based on the Intel Ultra Mobile Platform; however, this relationship is not exclusive. Our failure to establish and maintain these relationships, or any interference with these relationships by our competitors, will harm our ability to penetrate emerging markets.

We are entering into new markets that are highly competitive with well established competitors.

As a result of some of our recent acquisitions, we are entering into more complex market areas and we may need to invest a significant amount of resources to compete successfully. These new market areas are highly competitive and have put increased pricing pressures on our products. For example, in both the Bluetooth and mobile TV space there is a range of well established semiconductor companies, including CSR, Broadcom, Texas Instruments, STMicroelectronics, Mediatek and Marvell in the Bluetooth space, Texas Instruments in the mobile TV space and Qualcomm in the mobile TV space and wireless space, as well as start-ups that have established a market presence. As a new entrant into these markets, we believe that our success depends on our ability to establish relationships with leading customers and, with regard to the mobile TV space and wireless space, with operators and infrastructure providers as well. Our failure to do so could harm our ability to successfully compete in these new markets and could adversely affect our operating results.

If we do not timely deliver new products or if these products do not achieve market acceptance, our reputation may suffer and our net revenue may decline.

Our ability to develop and deliver new products successfully will depend on various factors, including our ability to:

• accurately predict market requirements and evolving industry standards for the high-volume GPS-based applications industry;

• anticipate changes in technology standards, such as mobile TV and other wireless technologies;

• develop and introduce new products that meet market needs in a timely manner; and

• attract and retain engineering and marketing personnel.

If we do not timely deliver new products or if these products do not achieve market acceptance, our reputation may suffer, the variability of our revenue may increase and our net revenue, earnings and stock price may decline. For example, in 2005 we launched a range of new products based on both SiRFstarII and SiRFstarIII architectures and in 2006 we launched the following new products: SiRFstarIII-LT, GSCi5000, and SiRFInstantFix. During the first quarter of 2007, we also introduced the SiRFstarIII GSD3t. While some of the product lines based on our SiRFstarIII architecture are now in high-volume production, others are still in prototype or sampling stages. If these or other products we introduce do not achieve market acceptance in a timely manner, our business could suffer.

Our operating results depend significantly on sales of our SiRFstarIII product line and our ability to develop and achieve market acceptance of new GPS products.

We currently derive most of our revenue from sales of our SiRFstarIII product line. If we fail to develop or achieve market acceptance of new GPS products or other multifunction products, we will continue to depend on sales of our SiRFstarIII product line, which have declining average selling prices over time. Any decline in sales of our SiRFstarIII product line or decreases in average selling prices will adversely affect our net revenue and operating results.

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Our operating results will depend significantly on sales of our products in the wireless market.

We expect to derive a significant portion of future revenue from sales of our products within the wireless market. Our success will depend on the growth of this emerging market. If the wireless market does not achieve the growth we expect, the growth and success of our business could be limited. In addition, if we do not timely deliver new wireless-based products or if these products do not achieve market acceptance our net revenue and operating results may not increase as anticipated or may decline.

Our products are becoming more complex and defects in our products could result in a decrease in customers and revenue, unexpected expenses and loss of market share.

Our products are complex and must meet stringent quality requirements. With some of our recent acquisitions we are expanding into even more complex technologies that may require a significant investment of resources to be successful. Products as complex as ours may contain undetected errors or defects, especially when first introduced or when new versions are released. For example, our products may contain errors, which are not detected until after they are shipped because we cannot test for all possible scenarios. Errors or defects may not be detected until after commercial shipments. In addition, errors or defects in our server software could cause our customers to experience a loss of network service effecting end-users. As our products become more complex, we face significantly higher research and development risks and risk of undetected defects. In addition, as our components become more complex we may be limited in the number of products that can utilize these components. Any errors or defects in our products, or the perception that there may be errors or defects in our products, could result in customers’ rejection of our products, damage to our reputation, a decline in our stock price, lost revenue, diverted development resources and increased customer service and support costs and warranty claims.

We intend to evaluate acquisitions or investments in complementary technologies and businesses, and we may not realize the anticipated benefits of these acquisitions or investments.

As part of our business strategy, we plan to evaluate acquisitions of, or investments in, complementary technologies and businesses. For example, in 2006, we acquired TrueSpan, a development-stage technology company with significant communications systems expertise. We may be unable to identify suitable acquisition candidates or investment opportunities in the future or be able to make these acquisitions or investments on a commercially reasonable basis, or at all. If we are unable to identify and successfully complete suitable acquisitions or investments, we may be required to expand our internal research and development efforts, which could harm our competitive position or result in negative market perception. Any future acquisitions and investments would have several risks, including:

• our inability to successfully integrate acquired technologies, product lines or operations;

• diversion of management’s attention;

• potentially dilutive issuances of equity securities or the incurrence of debt or contingent liabilities;

• expenses related to amortization of intangible assets;

• potential write-offs of acquired assets;

• risk of project delays;

• failure to achieve projected results of the acquisition;

• loss of key employees of acquired businesses; and

• our inability to recover the costs of acquisitions or investments.

We may not realize the anticipated benefits of any acquisition or investment.

The market for GPS-based location awareness capabilities in high-volume consumer and commercial applications is emerging, and if this market does not develop as quickly as we expect, the growth and success of our business will be limited.

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The market for GPS-based location awareness technology in high-volume consumer and commercial applications is new and its potential is uncertain. Many of these GPS-based applications have not been commercially introduced or have not achieved widespread acceptance. Our success depends on the rapid development of this market. We cannot predict the growth rate, if any, of this market. The development of this market depends on several factors, including government mandates such as E911 mandate in the United States and E110 mandate in Japan, the development of location awareness infrastructure by wireless network operators and the availability of location-aware content and services. The failure of the market for high-volume consumer and commercial GPS-based applications to develop in a timely manner would limit the growth and success of our business.

Our success depends upon our customers’ ability to successfully sell their products incorporating our technology.

Even if a customer selects our technology to incorporate into its product, the customer may not ultimately market and sell its product successfully. A cancellation or change in plans by a customer, whether from lack of market acceptance, such as in the wireless space, of its products or otherwise, could cause us to lose sales that we had anticipated. Also, our business and operating results could suffer if a significant customer reduces or delays orders during our sales cycle or chooses not to release products that contain our technology.

Our future success depends on building relationships with customers that are market leaders. If we cannot establish these relationships or if these customers develop their own systems or adopt competitors’ products instead of buying our products, our business may not succeed.

We intend to continue to pursue customers who are leaders in our target markets. We may not succeed in establishing these relationships because these companies may develop their own systems or adopt one of our competitors’ products. These relationships often require us to develop new premium software that involves significant technological challenges. These types of customers also frequently place considerable pressure on us to meet their tight development schedules. We may have to devote a substantial amount of our limited resources to these relationships, which could detract from or delay our completion of other important development projects. Delays in development of these projects could impair our relationships with other customers and negatively impact sales of products under development.

Some of our customers could become our competitors.

Many of our customers are also large integrated circuit suppliers and some of our large customers already have GPS expertise in-house. These large customers have longer operating histories, significantly greater resources and name recognition, and a larger base of customers than we do. The process of licensing our technology to and support of such customers entails the transfer of technology that may enable them to become a source of competition to us, despite our efforts to protect our intellectual property rights. We cannot sell to some customers who compete with us. In addition, we compete with divisions within some of our customers. For example, STMicroelectronics, a customer of ours, has internally developed a GPS solution for the automotive market in which we compete. Further, each new design by a customer presents a competitive situation. We, in the past, have lost design wins to divisions within our customers and this may occur again in the future. We cannot provide assurance that these customers will not continue to compete with us, that they will continue to be our customers or that they will continue to license products from us at the same volumes. Competition could increase pressure on us to lower our prices and profit margins.

We have relied, and expect to continue to rely, on a limited number of customers for a significant portion of our net revenue, and our net revenue could decline due to the delay or loss of significant customer orders.

We expect that a small number of customers may constitute a significant portion of our net revenue for the foreseeable future. In the first quarter 2007, we had three customers that each accounted for 10% or more of our net revenue, which collectively accounted for approximately 58% of our net revenue. If we fail to successfully sell our products to one or more of our significant customers in any particular period, or if a large customer purchases fewer of our products, defers orders or fails to place additional orders with us, our net revenue could decline, and our operating results may not meet market expectations. In addition, we design some of our products to incorporate customer specifications. If our customers purchase fewer products than anticipated or if we lose a customer, we may not be able to sell these products to other customers, which would result in excess inventory and could negatively impact our operating results.

The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross profits.

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As is typical in the semiconductor industry, the average selling price of a product historically declines significantly over the life of the product. In addition, the products we develop and sell are used for high-volume applications. In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors. We expect that we will have to similarly reduce prices in the future for mature products. Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins. Our financial results will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing our costs, adding new features to our existing products or developing new or enhanced products on a timely basis with higher selling prices or gross margins.

Our reliance on third-party distributors subjects us to certain risks that could negatively impact our business.

We market and sell our products directly and through third-party distributors pursuant to agreements that can generally be terminated for convenience by either party upon prior notice to the other party. These agreements are non-exclusive and permit our distributors to offer our competitors’ products. In addition, our third party distributors have been a significant factor in our ability to increase sales of our products. In the first quarter 2007, two of our distributors accounted for approximately 33% and 14% of our net revenues, respectively. Accordingly, we are dependent on our distributors to supplement our direct marketing and sales efforts. If a significant distributor terminated its relationship with us or decided to market our competitors’ products over our products, this could have an adverse impact on our ability to bring our products to market.

Additionally, distributors typically maintain an inventory of our products. In most instances, our agreements with distributors protect their inventory of our products against price reductions. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to distributors, resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by the distributors. However, in the event of an unexpected significant decline in the price of our products, the price protection rights we offer to our distributors could materially adversely affect us because our revenue and product margin would decline.

In some cases, our distributors’ ability to order products may be limited by their credit line or other financial limitations, which can adversely affect our revenues.

We have derived a substantial majority of our net revenue from sales to the automotive, mobile phone and consumer device markets. If we fail to generate continued revenue from these markets or from additional markets, our revenue could decline.

We believe that over 90% of our net revenue during the first quarter of 2007 and 2006 was attributable to products that were eventually incorporated into the automotive, including portable navigation devices, mobile phone and consumer device markets. Consumer spending and the demand for our products in these markets is uncertain and may decline. If we cannot sustain or increase sales of our products into these markets or if we fail to generate revenue from additional markets, our net revenue could decline.

We derive a substantial portion of our revenue from international sales and conduct a significant portion of our business internationally, and economic, political and other risks may harm our international operations and cause our revenue to decline.

We derived approximately 81% and 77% of our net revenue on international sales in the first quarter of 2007 and 2006, respectively. International sales to the Asia/Pacific region accounted for approximately 74% and 69% of our net revenue in the first quarter of 2007 and 2006, respectively. We maintain sales offices in Europe and the Asia/Pacific region and may expand our international operations.

A significant amount of our business is international and our products are sold into markets that are very price sensitive. Tariffs and trade restrictions that favor local competition in some countries on our products could significantly impact our business. Any increase in tariffs changes on GPS products, in countries where we do business, could negatively impact our business. Additional risks we face in conducting business internationally include:

• multiple, conflicting and changing laws and regulations, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

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• development of regional standards and infrastructure that could reduce the demand for our products, such as the emergence of a new satellite navigation system and a new mobile TV standard in China;

• difficulties and costs in staffing and managing foreign operations as well as cultural differences;

• international terrorism, particularly in emerging markets;

• laws and business practices favoring local companies;

• potentially adverse tax consequences, such as withholding tax obligations on license revenue that we may not be able to offset fully against our United States tax obligations, including the further risk that foreign tax authorities may recharacterize license fees or increase tax rates, which could result in increased tax withholdings and penalties;

• potentially reduced protection for intellectual property rights, particularly in emerging markets;

• inadequate local infrastructure and transportation delays;

• financial risks, such as longer sales and payment cycles, greater difficulty collecting accounts receivable and exposure to foreign currency exchange and rate fluctuations;

• failure by us or our customers to gain regulatory approval for use of our products; and

• political and economic instability, including wars, acts of terrorism, political unrest, a recurrence of the SARS outbreak, boycotts, curtailments of trade and other business restrictions.

Also, there may be reluctance in some foreign markets to purchase products based on GPS technology, due to the control of GPS by the United States government. Any of these factors could significantly harm our future international sales and operations and, consequently, our business.

Cyclicality in the semiconductor industry may affect our revenue and, as a result, our operating results could be adversely affected.

The semiconductor industry has historically been cyclical and is characterized by wide fluctuations in product supply and demand. From time to time, this industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product and technology cycles, excess inventories and declines in general economic conditions. This cyclicality could cause our operating results to decline dramatically from one period to the next. In addition to the sale of chip sets, our business depends on the volume of production by our technology licensees, which, in turn, depends on the current and anticipated market demand for semiconductors and products that use semiconductors. As a result, if we are unable to control our expenses adequately in response to lower revenue from our chip set customers and technology licensees, our operating results will suffer and we might experience operating losses.

Our quarterly revenue and operating results are difficult to predict, and if we do not meet quarterly financial expectations, our stock price will likely decline.

Our quarterly revenue and operating results are difficult to predict and, have in the past, and may in the future, fluctuate from quarter to quarter. It is possible that our operating results in some quarters will be below market expectations. This would likely cause the market price of our common stock to decline. Our quarterly operating results may fluctuate because of many factors, including:

• our ability to successfully develop, introduce and sell new or enhanced GPS-based products in a timely manner;

• changes in the relative volume of sales of our chip sets, our premium software offerings and our IP cores or other products, which have significantly different average selling prices and gross margins;

• unpredictable volume and timing of customer orders;

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• unpredictable or launch delays of location-based services by operators impacting demand from our customers;

• the availability, pricing and timeliness of delivery of other components, such as flash memory and crystal oscillators, used in our customers’ products;

• the timing of new product announcements or introductions by us or by our competitors;

• the introduction or delay in launch of our customers’ products using our technology or customers’ no longer using our technology;

• seasonality in our various target markets;

• product obsolescence and our ability to manage product transitions;

• decreases in the average selling prices of our products; and

• fluctuations and estimations inherent in predicting our effective income tax rates.

We base our planned operating expenses in part on our expectations of future revenue, and our expenses are relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we may be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter.

Our lengthy sales cycle makes it difficult for us to forecast revenue and increases the variability of quarterly fluctuations, which could cause our stock price to decline.

We have a lengthy sales process in some of our target markets and our sales cycles typically range from nine months to two years, depending on the market. We typically need to obtain a design win, where our product is incorporated into a customer’s initial product design. In some cases, due to the rapid growth of new GPS applications and products and our prospective customers’ inexperience with GPS technology, this process can be time-consuming and requires substantial investment of our time and resources. After we have developed and delivered a product to a customer, our customer often tests and evaluates our product before designing its own product to incorporate our technology. Our customers may need three to nine months or longer to test and evaluate our technology and an additional 12 months or more to begin volume production of products that incorporate our technology. In addition, for the wireless market there is significant interoperability testing that needs to be done with the operators’ infrastructure before incorporating our technology into any product. Because of this lengthy sales cycle, we may experience delays from the time we increase our operating expenses and our investments in committing capacity until the time that we generate revenue from these products. Also, a design win may never result in volume shipments. It is possible that we may not generate sufficient, if any, revenue from these products to offset the cost of selling and completing the design work.

Part of our business uses a royalty-based business model, which has inherent risks.

Although a substantial majority of our net revenue is derived from sales of our chip sets, in recent periods, we have had a portion of our net revenue from large customers in the wireless markets come from royalties paid by licensees of our technology. Royalty payments are based on the number of semiconductor chips shipped which contain our GPS technology or our premium software. For our server software, royalties may be based on the number of subscribers or on transaction volumes. We depend on our ability to structure, negotiate and enforce agreements for the determination and payment of royalties. In the first quarter of 2007, three of our licensees accounted for approximately 42%, 23% and 17% of our license royalty revenue, respectively. If a significant licensee terminated its relationship with us, demands price reductions, decided to adopt our competitors technology over our technology or if we are unable to negotiate and renew existing agreements with significant licensees, our royalty revenues, gross margins and net income could be adversely impacted. We face risks inherent in a royalty-based business model, many of which are outside of our control, including, but not limited to, the following:

• the rate of adoption and incorporation of our technology by wireless handset makers and wireless infrastructure vendors;

• fluctuations in volumes and prices at which licensees sell products that incorporate our technology;

• the demand for products incorporating our licensed technology; and

• the cyclicality of supply and demand for products using our licensed technology.

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It is difficult for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us to lose revenue.

The standard terms of our license agreements require our licensees to document the manufacture and sale of products that incorporate our technology and report this data to us on a quarterly basis. Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time-consuming and potentially detrimental to our ongoing business relationship with our licensees. As a result, to date, we have relied exclusively on the accuracy of reports supplied by our licensees without independently verifying the information in them. Any significant inaccuracy in the reporting by our licensees or our failure to audit our licensees’ books and records may result in our receiving less royalty revenue than we are entitled to under the terms of our license agreements.

Changes to financial accounting standards may affect our results of operations and cause us to change our business practices.

We prepare our financial statements to conform with United States generally accepted accounting principles, or GAAP. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, American Institute of Certified Public Accountants, or AICPA, the SEC, and various bodies formed to interpret and create appropriate accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. For example, the adoption of Statement of Financial Accounting Standards, or SFAS, No. 123R, “Share-Based Payment,” in 2006 had a material impact to our financial statements. Under SFAS No. 123R, we are required to record a charge to earnings for the fair value of employee stock option grants and other equity incentives. We will have significant and ongoing accounting charges resulting from option grants and other equity incentives that will reduce our overall net income. In addition, since we historically have used equity-related compensation as a component of our total employee compensation program, this accounting change could make the use of equity-related compensation less attractive to us and therefore make it more difficult to attract and retain employees. See Note 3 of the “Notes to Consolidated Financial Statements” in Item 1 for a discussion of the impact on our financial results. In connection with our equity compensation program, we have reviewed certain stock option grants and our related procedures. Also in 2006, the FASB issued Financial Accounting Standards Interpretation, or FIN, No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” Under FIN No. 48 we are required to follow a two-step approach for evaluating uncertain tax positions, which may have an impact on our financial position and results of operations in the future. Although we do not believe there are any matters that could have a material effect on our financial statements, the SEC or other government agency may inquire as to our granting of equity compensation or disagree with our findings.

We have been profitable since the third quarter of 2003, but may not sustain or increase profitability in the future.

We have been profitable since the third quarter of 2003, with the exception of the first quarter of 2006, which was due to the one-time charge of $13.3 million for the acquired in-process research and development associated with the TrueSpan acquisition, but may not sustain or increase profitability in the future. As of March 31, 2007, we had an accumulated deficit of approximately $26.2 million. We intend to increase our research and development, sales and marketing and general and administrative expenses. We also expect to incur substantial stock-based compensation charges and charges related to amortization of acquired intangible assets associated with our recent acquisitions and any future acquisitions. If we do not sustain or increase profitability or otherwise meet the expectations of securities analysts or investors, the market price of our common stock will likely decline. The revenue and income potential of our business and market are unproven and our revenue may not continue to increase at historical rates.

If we are unable to fund the development of new products to keep pace with rapid technological change, we will be unable to expand our business and maintain our market position.

The market for high-volume consumer and commercial GPS-based applications and other technologies that we are developing is characterized by rapidly changing technology, such as low power or smaller form factors. This requires us to continuously develop new products and enhancements for existing products to keep pace with evolving industry standards and rapidly changing customer requirements. For example, many of our customers are looking for very highly integrated products with multiple functions and multiple radio technologies. We may not have the financial resources necessary to fund future innovations. If we are unable to successfully define, develop and introduce competitive new products and enhance existing products, we may not be able to compete successfully in our markets.

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We may not obtain sufficient patent protection, which could harm our competitive position and increase our expenses.

Our success and ability to compete depends to a significant degree upon the protection of our proprietary technology. As of March 31, 2007, we had 201 patents granted worldwide. Of this total we have 156 granted patents in the United States and 45 patents granted in foreign countries, with expiration dates ranging from 2010 to 2025. We also have 133 pending patent applications in the United States and 176 pending foreign patent applications. Our patent applications may not provide protection of all competitive aspects of our technology or may not result in issued patents. Any patents issued may provide only limited protection for our technology and the rights that may be granted under any future patents that may be issued may not provide competitive advantages to us. Also, patent protection in foreign countries may be limited or unavailable where we need this protection. It is possible that competitors may independently develop similar technologies or design around our patents and competitors could also successfully challenge any issued patent. We may also choose not to pursue all instances of patent infringement.

We also rely upon trademark, copyright and trade secret laws and contractual restrictions to protect our proprietary rights, and, if these rights are not sufficiently protected, it could harm our ability to compete and generate revenue.

We also rely on a combination of trademark, copyright and trade secret laws, and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our proprietary rights. Our ability to compete and grow our business could suffer if these rights are not adequately protected. We seek to protect our source code for our software, and design code for our chip sets, documentation and other written materials under trade secret and copyright laws. We license our software and IP cores under signed license agreements, which impose restrictions on the licensee’s ability to utilize the software and IP cores. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. The steps we have taken to protect our proprietary information may not be adequate to prevent misappropriation of our technology. Our proprietary rights may not be adequately protected because:

• laws and contractual restrictions may not prevent misappropriation of our technologies or deter others from developing similar technologies; and

• policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use.

The laws of other countries in which we market our products, such as some countries in the Asia/Pacific region, may offer little or no protection of our proprietary technologies. As we increase our international sales, it may be more difficult to protect our intellectual property rights. Reverse engineering, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for doing so, which would harm our competitive position and market share.

Any potential dispute involving our patents or intellectual property or third party patents or third party intellectual property could be costly, time-consuming and may result in our loss of significant rights.

Other parties may assert intellectual property infringement claims against us, and our products may infringe the intellectual property rights of third parties. From time to time we and our customers receive letters, including letters from various industry participants alleging infringement of patents or offerings to discuss licensing of third party patents alleged to be used in our products. For example, in September 2000, we entered into a settlement and cross-licensing agreement with a third party regarding patent infringement under which we agreed to pay approximately $5.0 million and issued a warrant to purchase shares of our preferred stock. As we increase our international sales, we may become more susceptible to these types of infringement claims.

Litigation may be necessary to enforce our patents or any patents we may receive and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, and we may not prevail in any future litigation. For example, in December 2006, or subsidiary, SiRF Technology, Inc. filed a patent infringement complaint against Global Locate, Inc. and its United States distributor, SBCG, Inc. d/b/a Innovation Sales Southern California, in the United States District Court for the Central District of California and on February 8, 2007, we filed a complaint with the ITC requesting an investigation under the Tariff Act of 1930.

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Litigation, whether or not determined in our favor or settled, could be costly and time-consuming and could divert management’s attention from our business. If there is a successful claim of infringement, we may be required to pay substantial damages to the party claiming infringement, develop non-infringing technology or enter into royalty or license agreements that may not be available on commercially acceptable terms, if at all. Our failure to develop non-infringing technologies or license the proprietary rights on a timely basis would harm our business. Also, we may be unaware of filed patent applications that relate to our products. Parties making infringement claims may be able to obtain an injunction, which could prevent us from selling our products or using technology that contains the allegedly infringing intellectual property. Parties making infringement claims may also be able to bring an action before the United States International Trade Commission that could result in an order stopping the importation into the United States of our products. Any intellectual property litigation could have a material adverse effect on our business, operating results or financial condition.

We may have difficulty in protecting our intellectual property rights in foreign countries, which could increase the cost of doing business or cause our revenue to decline.

Our intellectual property is used in a large number of foreign countries. There are many countries, particularly in emerging markets, in which we have no issued patents, or that may have reduced intellectual property protection. In addition, effective intellectual property enforcement may be unavailable or limited in some foreign countries. It may be difficult for us to protect our intellectual property from misuse or infringement by other companies in these countries. For example, if our foundries lose control of our intellectual property, it would be more difficult for us to take remedial measures because our foundries are located in countries that do not have the same protection for intellectual property that is provided in the United States. Furthermore, we expect this to become a greater problem for us as our technology licensees increase their manufacturing in countries, which provide less protection for intellectual property. Our inability to enforce our intellectual property rights in some countries may harm our business.

Our intellectual property indemnification practices may adversely impact our business.

We have agreed to indemnify some customers for certain costs and damages of intellectual property infringement in some circumstances. This practice may subject us to significant indemnification claims by our customers or others. In addition to indemnification claims by our customers, we may also have to defend related third-party infringement claims made directly against us. In some instances, our GPS products are designed for use in devices used by potentially millions of consumers, such as cellular telephones, and our server software is placed on servers providing wireless network services to end-users, both of which could subject us to considerable exposure should an infringement claim occur. In the past we have received notice from a major customer informing us that this customer received notice from one of our competitors that the inclusion of our chip sets into our customer’s products requires the payment of patent license fees to the competitor. We may receive similar notices from our customers or directly from our competitors in the future. We cannot assure you that such claims will not be pursued or that these claims, if pursued, would not harm our business.

We depend primarily on four independent foundries to manufacture substantially all of our current products, and any failure to obtain sufficient foundry capacity could significantly delay our ability to ship our products and damage our customer relationships.

We do not own or operate a fabrication facility. We rely on third parties to manufacture our semiconductor products. Four outside foundries, Samsung in South Korea, IBM in the United States, STMicroelectronics in Italy and France, and TSMC in Taiwan currently manufacture substantially all of our products.

Because we rely on outside foundries, we face several significant risks, including:

• lack of manufacturing capacity and higher prices;

• limited control over delivery schedules, quality assurance and control, manufacturing yields and production costs; and

• the unavailability of, or potential delays in obtaining access to, key process technologies.

The ability of each foundry to provide us with semiconductors is limited by its available capacity. We do not have a guaranteed level of production capacity with any of these foundries and it is difficult to accurately forecast our capacity

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needs. We do not have long-term agreements with any of these foundries and we place our orders on a purchase order basis. We place our orders on the basis of our customers’ purchase orders and sales forecasts; however, the foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice. It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with the foundries, may induce our foundries to reallocate capacity to them. Any reallocation could impair our ability to secure the supply of semiconductors that we need.

Each of our semiconductor products is manufactured at only one foundry and if any one foundry is unable to provide the capacity we need, we may be delayed in shipping our products, which could damage our customer relationships and result in reduced revenue.

Although we substantially use four separate foundries, each of our semiconductor products is manufactured at one of these foundries. If one of our foundries is unable to provide us with capacity as needed, we could experience significant delays delivering the semiconductor product being manufactured for us solely by that foundry. Also, if any of our foundries experiences financial difficulties, if they suffer damage to their facilities or in the event of any other disruption of foundry capacity, we may not be able to qualify an alternative foundry in a timely manner. In addition, any consolidation among the various foundries could impact the affected foundries’ product capacity or its collective ability to continue to manufacture one or more of our products. If we choose to use a new foundry or process for a particular semiconductor product, we believe that it would take us several months to qualify the new foundry or process before we can begin shipping products. If we cannot accomplish this qualification in a timely manner, we may experience a significant interruption in supply of the affected products.

The facilities of the independent foundries upon which we rely to manufacture all of our semiconductors are located in regions that are subject to earthquakes and other natural disasters, as well as geopolitical risk and social upheaval.

The outside foundries and their subcontractors upon which we rely to manufacture most of our semiconductors are located in countries that are subject to earthquakes and other natural disasters, as well as geopolitical risks and social upheavals. Any earthquake or other natural disaster in these countries could materially disrupt these foundries’ production capabilities and could result in our experiencing a significant delay in delivery, or substantial shortage, of our products. In addition, these facilities are subject to risks associated with uncertain political, economic and other conditions in Asia, such as political turmoil in the region and the outbreak of SARS or bird flu, which could disrupt the operation of these foundries and in turn harm our business. For example, South Korea is a neighboring state to North Korea, which is currently in discussions with the United States and other countries regarding its nuclear weapons program. Any geographical or social upheaval in these countries could materially disrupt the production capabilities of our foundries and could result in our experiencing a significant delay in delivery, or a substantial shortage of our products.

We depend on a sole supplier for some critical components.

We purchase certain critical components, such as NOR flash memory technology, from a single supplier. The loss of this supplier, disruption of the supply chain, or delays or changes in the design cycle time could result in delays in the manufacture and shipment of products, additional expense associated with obtaining a new supplier, impaired margins, reduced production volumes, strained customer relations and loss of business or could otherwise harm our results of operations.

We place binding manufacturing orders based on our forecasts and if we fail to adequately forecast demand for our products, we may incur product shortages or excess product inventory.

Our third-party manufacturers require us to provide forecasts of our anticipated manufacturing orders and place binding manufacturing orders in advance of receiving purchase orders from our customers. This may result in product shortages or excess product inventory because we cannot easily increase or decrease our manufacturing orders. Obtaining additional supply in the face of product shortages may be costly or impossible, particularly in the short term, which could prevent us from fulfilling orders. In addition, our chip sets have rapidly declining average selling prices. As a result, an incorrect forecast may result in substantial product in inventory that is aged and obsolete, which could result in write-downs of excess or obsolete inventory. Our failure to adequately forecast demand for our products could cause our quarterly operating results to fluctuate and cause our stock price to decline.

We may experience lower than expected manufacturing yields, which would delay the production of our semiconductor products.

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The manufacture of semiconductors is a highly complex process. Minute impurities can cause a substantial number of wafers to be rejected or cause numerous die on a wafer to be nonfunctional. Semiconductor companies often encounter difficulties in achieving acceptable product yields from their manufacturers. Our foundries have from time to time experienced lower than anticipated manufacturing yields, including for our products. This often occurs during the production of new products or the installation and start-up of new process technologies. We may also experience yield problems as we migrate our manufacturing processes to smaller geometries. If we do not achieve planned yields, our product costs could increase, and product availability would decrease.

The loss of any of our primary third-party subcontractors that assemble and test all of our current products could disrupt our shipments, harm our customer relationships and reduce our sales.

We rely on a limited number of primary third-party subcontractors to assemble and test all of our current chip sets either for our foundries or directly for us. As a result, we do not directly control our product delivery schedules, assembly and testing costs or quality assurance and control. If any of these subcontractors experiences capacity constraints or financial difficulties, if any subcontractor suffers any damage to its facilities or if there is any other disruption of assembly and testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner. We typically do not have long-term agreements with any of these subcontractors. We typically procure services from these suppliers on a per-order basis. Because of the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our semiconductor products. Any problems that we may encounter with the delivery, quality or cost of our products could damage our reputation and result in a loss of customers.

We use a third party to warehouse and ship a significant portion of our products and any failure to adequately store and protect our products or to deliver our products in a timely manner could harm our business.

We use a third party, JSI Shipping, with locations worldwide. We use JSI Singapore for a significant portion of our product warehousing and shipping. As a result, we rely on this third party to adequately protect and ensure the timely delivery of our products. Our warehoused products are insured under a general insurance policy, including the portion of products warehoused by JSI, which may not always sufficiently cover the entire value of inventory held by JSI at any given time. If our products are not delivered in a timely manner or are not sufficiently protected prior to delivery, our business could suffer.

If our value-added manufacturer customers do not provide sufficient support, our business could be harmed.

Our products are highly technical and, as a result, may require a high level of customer support. We rely on our value-added manufacturers to support our products. If these value-added manufacturers cannot successfully support our products, which are embedded in their products, our reputation could be harmed and future sales of our products could be adversely affected.

The GPS market could be subject to governmental and other regulations that may increase our cost of doing business or decrease demand for our products.

GPS technology is restricted and its export is controlled. The United States government may restrict specific uses of GPS technology in some applications for privacy or other reasons. The United States government may also block the civilian GPS signal at any time or in hostile areas. In addition, the policies of the United States government for the use of GPS without charge may change. The growth of the GPS market could be limited by government regulation or other action. For example, the President of the United States authorized a new national policy on December 8, 2004 that establishes guidance and implementation actions for space-based positioning, navigation, timing programs, augmentations and activities for United States national and homeland security, civil, scientific, and commercial purposes. These regulations or actions could interrupt or increase our cost of doing business.

Reallocation of the radio frequency bands used by GPS technology may harm the utility and reliability of our products.

GPS technology uses radio frequency bands that are globally allocated for radio navigation satellite services. International allocations of radio frequency bands are made by the International Telecommunications Union, a specialized technical agency of the United Nations. These allocations are further governed by radio regulations which have treaty status and which are subject to modification every two to three years by the World Radio Communication Conference. Any

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reallocation of radio frequency bands, including frequency band segmentation or spectrum sharing, may negatively affect the utility and reliability of GPS-based products. Also, unwanted emissions from mobile satellite services and other equipment operating in adjacent frequency bands or inband from licensed and unlicensed devices may negatively affect the utility and reliability of GPS-based products. The Federal Communications Commission continually receives proposals for new technologies and services which may seek to operate in, or across, the radio frequency bands currently used by the GPS and other public services. For example, in May 2000, the Federal Communications Commission issued a proposed rule for the operation of ultra-wideband radio devices on an unlicensed basis in the same frequency bands. These ultra-wideband devices might cause interference with the reception of GPS signals. This could reduce demand for GPS-based products, which could reduce our sales and revenue. Adverse decisions by the Federal Communications Commission that result in harmful interference to the delivery of the GPS signals may harm the utility and reliability of GPS-based products.

Our technology relies on the GPS satellite network, and any disruption in this network would impair the viability of our business.

The satellites and ground support systems that provide GPS signals are complex electronic systems subject to electronic and mechanical failures and possible sabotage. The satellites were originally designed to have lives of six to seven years and are subject to damage by the hostile space environment in which they operate. However, some of the satellites currently deployed have already been in place for 15 years. Repairing damaged or malfunctioning satellites is currently not economically feasible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites, or they may not be replaced at all. A reduction in the number of operating satellites would impair the operations or utility of GPS, which would have a material negative effect on our business. The United States government may not remain committed to the maintenance of GPS satellites over a long period.

Personal privacy concerns may limit the growth of the high-volume consumer and commercial GPS-based applications and demand for our products.

GPS-based consumer and commercial applications rely on the ability to receive, analyze and store location information. Consumers may not accept some GPS applications because of the fact that their location can be tracked by others and that this information could be collected and stored. Also, federal and state governments may disallow specific uses of GPS technology for privacy or other reasons or could subject this industry to regulation. If consumers view GPS-based applications as a threat to their privacy, demand for some GPS-based products could decline.

We may experience a decrease in market demand due to uncertain economic conditions in the United States and in international markets, which has been further exacerbated by the concerns of terrorism, war and social and political instability.

Economic growth in the United States and international markets has slowed and may continue to slow or may decline. In addition, the terrorist attacks in the United States and turmoil in the Middle East have increased the uncertainty in the United States economy and may contribute to a decline in economic conditions, both domestically and internationally. Terrorist acts and similar events, or war in general, could contribute further to a slowdown of the market demand for goods and services, including demand for our products. If the economy declines as a result of the recent economic, political and social turmoil, or if there are further terrorist attacks in the United States or elsewhere, we may experience decreases in the demand for our products, which may harm our operating results.

Because competition for qualified personnel is intense in our industry and in our geographic regions, we may not be able to recruit and retain necessary personnel, which could impact the development or sales of our products.

Our success will depend on our ability to attract and retain senior management, engineering, sales, marketing and other key personnel, such as communications systems experts, GPS systems and algorithm experts, software developers, radio frequency and application-specific integrated circuit engineers. Because of the intense competition for these personnel, particularly in the San Francisco Bay area, Los Angeles area and Phoenix area in the United States, Stockholm in Sweden and Bangalore and Noida in India, we may be unable to attract and retain key technical and managerial personnel. If we are unable to retain our existing personnel, or attract and train additional qualified personnel, our growth may be limited due to our lack of capacity to develop and market our products. All of our key employees are employed on an “at will” basis. The loss of any of these key employees could slow our product development processes and sales efforts or harm investors’ perception of our business. We may also incur increased operating expenses and be required to divert the attention of other senior executives to recruit replacements for key personnel. Also, we may have more difficulty attracting personnel as a public company because of the perception that the stock option component of our compensation package may not be as valuable.

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Changes to our senior management could negatively affect our operations and relationships with manufacturers, customers and employees.

We have hired new senior management and these changes could negatively affect our operations and our relationships with our manufacturers, third-party subcontractors, customers, employees and market leaders. If the integration of our senior management team does not go as smoothly as anticipated, it could negatively affect our business.

We are exposed to risks from legislation requiring companies to evaluate internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent auditors to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. As a result, we have and expect to continue to incur increased expense and to devote additional management resources to Section 404 compliance. In the future, if our chief executive officer, chief financial officer or independent registered public accounting firm determine that our internal control over financial reporting are not effective as defined under Section 404, investor perceptions of our company may be adversely affected and could cause a decline in the market price of our stock.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from executing our growth strategy.

We believe that our existing cash, investments, amounts available under our bank line of credit and cash generated from operating activities, will be sufficient to meet our anticipated cash needs for at least the next 12 months. The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including:

• market acceptance of our products;

• the need to adapt to changing technologies and technical requirements;

• the existence of opportunities for expansion; and

• access to and availability of sufficient management, technical, marketing and financial personnel.

If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain other debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased expenses and could result in covenants that would restrict our operations. We have not made arrangements to obtain additional financing, and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all.

If we fail to manage our growth, our business may not succeed.

We have significantly expanded our operations in the United States and internationally, and we plan to continue to expand the geographic scope of our operations. As we continue to grow, we may be unable to expand our business at the same growth rate as we have in the past. To manage our growth, we must implement and improve additional and existing administrative, financial and operations systems, procedures and controls. Our failure to manage growth could disrupt our operations and could limit our ability to pursue potential market opportunities.

The warranty provisions in our agreements with some customers expose us to risks from product liability claims.

Our agreements with some customers contain limited warranty provisions, which provide the customer with a right to damages if a defect is traced to our products or if we cannot correct errors reported during the warranty period. While our historical warranty costs have not been material, if in the future our contractual limitations are unenforceable in a particular jurisdiction or if we are exposed to product liability claims that are not covered by insurance, a successful claim could require us to pay substantial damages.

Our operations are primarily located in California and, as a result, are subject to earthquakes and other catastrophes.

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Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel, which are primarily located in San Jose, California and in Santa Ana, California. San Jose and Santa Ana exist on or near known earthquake fault zones. Should an earthquake or other catastrophe, such as a fire, flood, power loss, communication failure or similar event, disable our facilities, we do not have readily available alternative facilities from which to conduct our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On the following dates we withheld the following shares of common stock pursuant to the exercise of outstanding options by net issuance in which the holders relinquished shares to cover the exercise price and withholding taxes for such shares of common stock:

Period	Total Number of Shares (or Units) Withheld	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 31, 2007	297	$	29.36	None	N/A
February 28, 2007	148	$	28.59	None	N/A
March 30, 2007	147	$	27.76	None	N/A

On the following dates we withheld the following shares of common stock pursuant to the vesting of outstanding restricted stock units to cover the withholding taxes for such shares of common stock:

Date of Vesting	Shares of Common Stock Issued	Shares of Common Stock Withheld	Fair Market Value on Date of Vesting
January 18, 2007	1,724	1,276	$	24.89
February 8, 2007	1,665	1,148	$	30.86
March 14, 2007	18,443	10,074	$	27.47

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Item 6. Exhibits

Exhibit No.	Exhibit
31.1	Certification of Michael L. Canning pursuant to Rule 13(a)-14(a)/15(d)-14(a)
31.2	Certification of Geoffrey Ribar pursuant to Rule 13(a)-14(a)/15(d)-14(a)
32.1	Section 1350 Certification(1)

⁽¹⁾ The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

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SiRF TECHNOLOGY HOLDINGS, INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SiRF Technology Holdings, Inc
Date: May 8, 2007	By:	/S/ MICHAEL L. CANNING
		Michael L. Canning
		President and Chief Executive Officer
		(Duly authorized officer)
Date: May 8, 2007		/S/ GEOFFREY RIBAR
		Geoffrey Ribar
		Senior Vice President Finance and Chief Financial Officer
		(Duly authorized officer and principal financial officer)

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Exhibit Index

Exhibit No.	Exhibit
31.1	Certification of Michael L. Canning pursuant to Rule 13(a)-14(a)/15(d)-14(a)
31.2	Certification of Geoffrey Ribar pursuant to Rule 13(a)-14(a)/15(d)-14(a)
32.1	Section 1350 Certification(1)

⁽¹⁾ The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

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