SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

No significant changes have been made to the Company's significant accounting policies disclosed in Note 2, Summary of Significant Accounting Policies, in its Annual Report on Form 10-K/A, filed on June 15, 2011, for the year ended December 31, 2010. The accounting policy information below is to aid in the understanding of the financial information disclosed.

Cash and Cash Equivalents

The Company considers cash invested in highly liquid financial instruments with maturities of three months or less at the date of purchase to be cash equivalents.

Short-Term and Long-Term Investments

Investments in highly liquid financial instruments with maturities greater than three months but not longer than twelve months from the balance sheet date are classified as short-term investments. Investments in financial instruments with maturities greater than twelve months from the balance sheet date are classified as long-term investments. As of June 30, 2011 and December 31, 2010, the Company's short-term and long-term investments consisted of U.S. government backed securities, municipal bonds, corporate commercial paper and other high-quality commercial securities, which were classified as held-to-maturity and were valued using the amortized-cost method, which approximates fair market value.

Amortized cost and estimated fair market value of investments classified as held-to-maturity at June 30, 2011, are as follows (in thousands):



			Gross Unrealized
	Amortized Cost		Gains		Losses		Estimated Fair Market Value
Investments due in less than 3 months:
U.S. municipal securities	$	1,000	$	—	$	—	$	1,000
U.S. government securities	5,026		8		—		5,034
Corporate securities	1,426		—		—		1,426
Total	$	7,452	$	8	$	—	$	7,460

Investments due in 4-12 months:
Corporate securities	$	25,639	$	250	—		$	25,889
Total	$	25,639	$	250	—		$	25,889
Investments due in more than 12 months:
Corporate securities	$	30,043	$	428	$	—	$	30,471
Total	$	30,043	$	428	$	—	$	30,471

Total investment securities	$	63,134	$	686	$	—	$	63,820

Amortized cost and estimated fair market value of investments classified as held-to-maturity at December 31, 2010 are as follows (in thousands):



			Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Market Value
Investments due in less than 3 months:
Commercial paper	$	7,135	—		—			$	7,135
Corporate securities	1,508		—		(1		)	1,507
Total	$	8,643	—		$	(1	)	$	8,642

Investments due in 4-12 months:
Corporate securities	$	21,255	$	84	—			$	21,339
U.S. government securities	5,095		20		—			5,115
U.S. municipal securities	1,005		3		—			1,008
Total	$	27,355	$	107	—			$	27,462

Investments due in more than 12 months:
Corporate securities	$	31,760	$	648	—			$	32,408
Total	$	31,760	$	648	—			$	32,408

Total investment securities	$	67,758	$	755	$	(1	)	$	68,512

Revenue Recognition

Product revenues consist of sales to original equipment manufacturers (“OEMs”), merchant power supply manufacturers and distributors. Shipping terms to international OEM customers and merchant power supply manufacturers from the Company's facility in California are “delivered at frontier” (“DAF”). As such, title to the product passes to the customer when the shipment reaches the destination country and revenue is recognized upon the arrival of the product in that country. Shipping terms to international OEMs and merchant power supply manufacturers on shipments from the Company's facility outside of the United States are “EX Works” (EXW), meaning that title to the product transfers to the customer upon shipment from the Company's foreign warehouse. Shipments to OEMs and merchant power supply manufacturers in the Americas are “free on board” (“FOB”) point of origin meaning that title is passed to the customer upon shipment. Revenue is recognized upon title transfer for sales to OEMs and merchant power supply manufacturers, assuming all other criteria for revenue recognition are met as described below.

The Company applies the provisions of Accounting Standard Codification (“ASC”) 605-10 (“ASC 605-10”) and all related appropriate guidance. Revenue is recognized when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the price is fixed or determinable, and (4) collectability is reasonably assured. Customer purchase orders are generally used to determine the existence of an arrangement. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The Company considers the price to be fixed based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. With respect to trade receivables, the Company performs ongoing evaluations of its customers' financial conditions and requires letters of credit whenever deemed necessary.

The Company makes sales to distributors and retail partners and recognizes revenue based on a sell-through method. Sales to distributors are made under terms allowing certain price protection and rights of return on the Company's products held by the distributors. As a result of these rights, the Company defers the recognition of revenue and the costs of revenues derived from sales to distributors until such distributors resell the Company's products to their customers. The Company determines the amounts to defer based on the level of actual inventory on hand at the distributors as well as inventory in transit to the distributors. The gross profit that is deferred as a result of this policy is reflected as “deferred income on sales to distributors” in the accompanying condensed consolidated balance sheets. The total deferred revenue as of June 30, 2011 and December 31, 2010 was approximately $23.9 million and $24.7 million, respectively. The total deferred cost as of June 30, 2011 and December 31, 2010 was approximately $12.7 million and $12.5 million, respectively.

Common Stock Repurchases and Common Stock Dividend

In May 2009, the Company's board of directors authorized the use of $25.0 million to repurchase the Company's common stock. From May 2009 to December 31, 2009 the Company purchased 0.5 million shares for approximately $11.0 million, and in the first two quarters of 2010 the Company purchased 0.4 million shares for approximately $14.0 million, concluding this repurchase program.

In February 2011, the board of directors authorized the use of an additional $50.0 million for the repurchase of the Company's common stock. Repurchases will be executed according to certain pre-defined price/volume guidelines set by the board of directors. In the three months ended June 30, 2011, the Company repurchased 0.1 million shares for a total cost of $4.4 million, leaving $45.6 million remaining for future repurchases. There is currently no expiration date for this stock repurchase program.

In January 2010, the Company's board of directors declared four quarterly cash dividends in the amount of $0.05 per share to be paid to stockholders of record at the end of each quarter in 2010. The quarterly dividend payments were made on March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010, to stockholders of record as of February 26, 2010, May 28, 2010, August 31, 2010 and November 30, 2010, respectively, each in the aggregate amount of approximately $1.4 million.

In October 2010, the Company's board of directors declared four quarterly cash dividends in the amount of $0.05 per share to be paid to stockholders of record at the end of each quarter in 2011. The first quarterly dividend payment of approximately $1.4 million was made on March 31, 2011, to stockholders of record as of February 28, 2011. The second quarterly dividend payment of $1.4 million was made on June 30, 2011 to stockholders of record as of May 31, 2011. The Company expects that the remaining quarterly dividends will result in a similar use of cash. The declaration of any future cash dividend is at the discretion of the board of directors and will depend on the Company's financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of the Company's stockholders.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition and inventories. These estimates are based on historical facts and various other assumptions that the Company believes to be reasonable at the time the estimates are made.

Comprehensive Income

Comprehensive income consists of net income, plus the effect of foreign currency translation adjustments. The components of comprehensive income, net of taxes, are as follows (in thousands):



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Net income	$	10,599	$	15,587		$	20,453	$	27,901
Other comprehensive income:
Translation adjustments	23		(5		)	72		(55		)
Total comprehensive income	$	10,622	$	15,582		$	20,525	$	27,846

Components of the Company's Condensed Consolidated Balance Sheet

Accounts Receivable (in thousands):



	June 30, 2011			December 31, 2010
Accounts receivable trade	$	33,255		$	30,656
Accrued ship and debit and rebate claims	(24,874		)	(24,839		)
Allowance for doubtful accounts	(312		)	(275		)
Other	1			171
Total	$	8,070		$	5,713

Prepaid Expenses and Other Current Assets (in thousands):



	June 30, 2011		December 31, 2010
Prepaid legal fees	$	2,000	$	4,000
Prepaid inventory (Note 16)	—		917
Note receivable (Note 4)	3,000		—
Prepaid income tax	1,289		1,117
Prepaid maintenance agreements	501		554
Interest receivable	690		737
Other	2,092		1,938
Total	$	9,572	$	9,263

Other Assets (in thousands):



	June 30, 2011		December 31, 2010
Prepaid royalty (Note 15)	$	10,000	$	10,000
Investment in third party (Note 15)	7,000		7,000
Financing lease receivables and deposits (Note 17)	7,191		—
Other	1,164		288
Total	$	25,355	$	17,288

Other Accrued Liabilities (in thousands):



	June 30, 2011		December 31, 2010
Accrued payment for acquisition (Note 14)	$	40	$	6,955
Accrued professional fees	1,085		1,013
Accrued expense for engineering wafers	488		502
Advances from customers	410		713
Other	344		365
Total	$	2,367	$	9,548