0000817720
2011-01-01
2011-03-31
0000817720
2010-01-01
2010-03-31
0000817720
2010-03-31
0000817720
2009-06-30
0000817720
2011-03-31
0000817720
2010-06-30
0000817720
2009-07-01
2010-03-31
0000817720
2009-12-24
0000817720
2011-04-21
0000817720
2010-07-01
2011-03-31
iso4217:USD
xbrli:shares
xbrli:shares
iso4217:USD
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<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b></div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b></div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"></div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and
U.S. generally accepted accounting principles, or U.S. GAAP. However, certain information or
footnote disclosures normally included in financial statements prepared in accordance with U.S.
GAAP have been condensed or omitted pursuant to such SEC rules and regulations. In our opinion,
the financial statements include all adjustments, which are of a normal and recurring nature,
necessary for the fair presentation of the results of the interim periods presented. The results
of operations for the interim periods are not necessarily indicative of the operating results for
the full fiscal year or any future period. These financial statements should be read in
conjunction with the audited consolidated financial statements and related notes included in our
annual report on Form 10-K for the fiscal year ended June 30, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The consolidated financial statements include our financial statements and those of our wholly
owned subsidiaries. All significant intercompany balances and transactions have been eliminated
upon consolidation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Our fiscal
2011 will be a 52-week period ending on June 25, 2011. Our fiscal 2010 was a 52-week period ending
on June 26, 2010. The fiscal periods presented in this report were 13-week periods for the three
months ended March 26, 2011 and March 27, 2010. For ease of presentation, the accompanying
consolidated financial statements have been shown as ending on March 31 and calendar quarter end
dates for all annual, interim, and quarterly financial statement captions, unless otherwise
indicated.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Use of Estimates</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of consolidated financial statements in conformity with U.S. GAAP requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue,
expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to revenue recognition, allowance for doubtful
accounts, cost of revenue, inventories, product warranty, share-based compensation costs, provision
for income taxes, income taxes payable, intangible assets, investments, and contingencies. We base
our estimates on historical experience, applicable laws and regulations, and 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 value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
</div>
</div>
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<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Revenue Recognition</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recognize revenue from product sales when there is persuasive evidence that an arrangement
exists, delivery has occurred and title has transferred, the price is fixed or determinable, and
collection is reasonably assured. We accrue for estimated sales returns and other allowances,
based on historical experience, at the time we recognize revenue.
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Net Income Per Share</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The computation of basic and diluted net income per share was as follows (in thousands, except
per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Numerator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">13,496</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,606</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">49,873</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">33,637</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Denominator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Shares, basic
</div></td>
<td> </td>
<td> </td>
<td align="right">33,992</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,526</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34,118</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,826</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Effect of
dilutive
share-based
awards
</div></td>
<td> </td>
<td> </td>
<td align="right">1,354</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,569</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,447</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,545</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Shares, diluted
</div></td>
<td> </td>
<td> </td>
<td align="right">35,346</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,565</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,371</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.40</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.35</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.46</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.99</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.38</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.33</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.40</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.95</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our basic net income per share amounts for each period presented have been computed using the
weighted average number of shares of common stock outstanding. Our diluted net income per share
amounts for each period presented include the weighted average effect of potentially dilutive
shares. We use the “treasury stock” method to determine the dilutive effect of our share-based
awards and convertible notes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Dilutive net income per share amounts do not include the weighted average effect of 3,471,863
and 3,778,523 share-based awards that were outstanding during the three months ended March 31, 2011
and 2010, respectively, and 3,507,168 and 3,614,277 share-based awards that were outstanding during
the nine months ended March 31, 2011 and 2010, respectively. These share-based awards were not
included in the computation of diluted net income per share because the proceeds received, if any,
from such share-based awards combined with the average unamortized compensation costs adjusted for
the hypothetical tax benefit or deficiency creditable or chargeable, respectively, to additional
paid-in capital were greater than the average market price of our common stock, and therefore,
their effect would have been antidilutive.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Auction Rate Securities Investments</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our non-current investments include auction rate securities, or ARS, which are reported at
fair value, with unrealized gains and losses excluded from earnings and are shown separately as a
component of accumulated other comprehensive income within stockholders’ equity. We charge any
other-than-temporary declines in the fair value of a debt security to earnings (within impairment
(loss)/recovery on investments, net) if the decline results from a credit loss or to other
comprehensive income if the decline results from a noncredit loss. We charge any
other-than-temporary declines in the fair value of equity securities to earnings (within impairment
(loss)/recovery on investments, net). Other-than-temporary declines result in the establishment of
a new cost basis for the security. We include interest earned on investments in interest income.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our ARS investments have failed to settle in auctions and are not liquid. In the event we
need to access these funds prior to their maturity, we will not be able to do so without a loss of
principal, unless redeemed by the issuers or a future auction on these investments is successful.
During the three months ended March 31, 2011 and 2010, $100,000 and $125,000 of our ARS investments
were redeemed at par, respectively, and during the nine months ended March 31, 2011 and 2010,
$350,000 and $1.1 million of our ARS investments were redeemed at par, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As there are currently no active markets for our various failed ARS investments, we have
estimated the fair value as of March 31, 2011 using a trinomial discounted cash flow analysis. The
analysis considered, among other factors, the following:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">the collateral underlying the security investments;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">creditworthiness of the counterparty;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">timing of expected future cash flows;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">the probability of a successful auction in a future period;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">the underlying structure of each investment;
</div></td>
</tr>
</table>
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">the present value of future principal and interest payments discounted at rates
considered to reflect current market conditions;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">consideration of the probabilities of default, passing a future auction, or redemption
at par for each period; and
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">estimates of the recovery rates in the event of default for each investment.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">When possible, our failed ARS investments were compared to other observable market data or
securities with similar characteristics. Our estimate of the fair value of our ARS investments
could change materially from period to period based on future market conditions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Contractual maturities for our ARS investments are generally greater than five years, with
fair value of $10.5 million maturing from 2015 to 2017, $8.7 million maturing from 2034 to 2045,
and $9.9 million having no stated maturity. Of our ARS investments, $21.9 million par value are
investment grade, and the remaining $18.5 million par value are below investment grade. For the
nine-month period ended March 31, 2010, we recognized a $449,000 other-than-temporary impairment
charge on our ARS investments in preferred stock.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The various types of ARS investments we held as of March 31, 2011, including the original cost
basis, other-than-temporary impairment included in other comprehensive income, other-than-temporary
impairment included in retained earnings, new cost basis, unrealized gain, and fair value consisted
of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Cumulative Other-than-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">temporary Impairment</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Included</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Included</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Original</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in Other</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">New</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Comprehensive</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Retained</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Basis</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Earnings</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Basis</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Gain</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Student loans
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,200</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(596</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(242</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">8,362</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">347</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,709</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Closed end municipal
and corporate
funds
</div></td>
<td> </td>
<td> </td>
<td align="right">10,650</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,112</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(93</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">9,445</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">476</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,921</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit linked notes
</div></td>
<td> </td>
<td> </td>
<td align="right">13,500</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(156</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,765</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4,579</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,999</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,578</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">5,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Municipals
</div></td>
<td> </td>
<td> </td>
<td align="right">2,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(203</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(83</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,714</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">156</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,870</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total ARS
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,350</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,067</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(14,183</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">24,100</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,978</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,078</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The various types of ARS investments we held as of June 30, 2010, including the original
cost basis, other-than-temporary impairment included in other comprehensive income,
other-than-temporary impairment included in retained earnings, new cost basis, unrealized gain, and
fair value consisted of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Cumulative Other-than-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">temporary Impairment</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Included</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Included</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Original</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in Other</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">New</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Comprehensive</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Retained</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Cost</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Basis</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Earnings</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Basis</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Gain</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Student loans
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,550</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(617</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(262</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">8,671</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">251</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,922</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Closed end municipal
and corporate
funds
</div></td>
<td> </td>
<td> </td>
<td align="right">10,650</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,112</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(93</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">9,445</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,738</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit linked notes
</div></td>
<td> </td>
<td> </td>
<td align="right">13,500</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(156</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,765</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4,579</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,952</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,531</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">5,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Municipals
</div></td>
<td> </td>
<td> </td>
<td align="right">2,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(203</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(83</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,714</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">107</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,821</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total ARS
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,700</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(14,203</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">24,409</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,603</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,012</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have accounted for all of our ARS investments as non-current (included in non-current
investments in the accompanying condensed consolidated balance sheets) as we are not able to
reasonably determine when the ARS markets will recover or be restructured. Based on our ability to
access our cash, our expected operating cash flows, and our other sources of cash, we have the
intent and ability to hold these investments until the value recovers or the investments mature.
We will continue to monitor our ARS investments and evaluate our accounting for these investments
quarterly. Subsequent to recording other-than-temporary impairment charges, certain of our ARS
investments have increased in value above their new cost bases, and this increase is included as
unrealized gain above and in accumulated other comprehensive income in the accompanying condensed
consolidated balance sheets.
</div>
</div>
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<!-- Begin Block Tagged Note 5 - us-gaap:FairValueAssetsAndLiabilitiesMeasuredOnRecurringBasisValuationTechniquesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Fair Value of Cash Equivalents and Investments</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Certain financial assets and liabilities have been recognized or disclosed at fair value on a
recurring basis. For other financial assets and liabilities, we elected not to apply the fair
value option.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Current accounting standards establish a consistent framework for measuring fair value on
either a recurring or nonrecurring basis in which inputs, used in valuation techniques, are
assigned a hierarchical level.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following are the hierarchical levels of inputs to measure fair value:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Level 1 inputs are observable inputs that reflect quoted prices (unadjusted) for
identical assets or liabilities in active markets.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Level 2 inputs reflect quoted prices for identical assets or liabilities in markets that
are not active; quoted prices for similar assets or liabilities in active markets; inputs
other than quoted prices that are observable for the assets or liabilities; or inputs that
are derived principally from or corroborated by observable market data by correlation or
other means.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Level 3 inputs are unobservable inputs reflecting our assumptions, which are
incorporated into valuation techniques and models used to determine fair value. The
assumptions are consistent with market participant assumptions that are reasonably
available. Our Level 3 assets consist of non-current ARS investments. We estimated the
fair value of our ARS investments based on, among other factors, the following: (i) the
collateral underlying the security investments, (ii) creditworthiness of the counterparty,
(iii) timing of expected future cash flows, (iv) the probability of a successful auction
in a future period, (v) the underlying structure of each investment; (vi) the present
value of future principal and interest payments discounted at rates considered to reflect
current market conditions; (vii) consideration of the probabilities of default, passing a
future auction, or repurchase at par for each period; and (viii) estimates of the recovery
rates in the event of default for each investment.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial assets and liabilities measured at fair value on a recurring basis, by level within
the fair value hierarchy consisted of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Level 3</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">241,326</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">208,040</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Auction rate securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,078</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,012</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total available-for-sale securities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">241,326</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,078</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">208,040</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,012</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Money market balances are included in cash and cash equivalents as of March 31, 2011 and June
30, 2010. ARS are included in non-current investments as of March 31, 2011 and June 30, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Changes in fair value of our Level 3 financial assets were as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of June 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">28,012</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gain
</div></td>
<td> </td>
<td> </td>
<td align="right">1,396</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Realized gain on redeemed securities
</div></td>
<td> </td>
<td> </td>
<td align="right">20</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Redemptions
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(350</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of March 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,078</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">There were no transfers in or out of our Level 1 or 3 assets during the nine months ended
March 31, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair values of our cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximate their carrying values because of the short-term nature of those
instruments.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Inventories</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories are stated at the lower of cost (first-in, first-out method) or market (estimated
net realizable value) and consisted of the following (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">20,529</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,251</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right">12,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,416</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,624</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18,667</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Periodically, we purchase inventory from our contract manufacturers when a customer delays its
delivery schedule or cancels its order. In those circumstances in which our customer has cancelled
its order and we purchase inventory from our contract manufacturers, we consider a write-down to
reduce the carrying value of the inventory purchased to its net realizable value. We charge
write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net
realizable value to cost of revenue. The effect of these write-downs is to establish a new cost
basis in the related inventory, which we do not subsequently write up.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Product Warranties, Indemnifications, and Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Product Warranties</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We generally warrant our products for a period of 12 months or more from the date of sale and
estimate probable product warranty costs at the time we recognize revenue. Factors that affect our
warranty liability include historical and anticipated rates of warranty claims, materials usage,
and service delivery costs. We assess the adequacy of our warranty obligations periodically and
adjust the accrued warranty liability on the basis of our estimates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Indemnifications</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with certain third-party agreements, we are obligated to indemnify the third
party in connection with any technology infringement by us. We have also entered into
indemnification agreements with our officers and directors. Maximum potential future payments
cannot be estimated because these agreements do not have a maximum stated liability. However,
historical costs related to these indemnification provisions have not been significant. We have
not recorded any liability in our consolidated financial statements for such indemnification
obligations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Contingencies</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We may receive notices from third parties that claim our products infringe their rights. From
time to time, we receive notice from third parties alleging infringement of their intellectual
property rights. We cannot be certain that our technologies and products do not or will not
infringe issued patents or other proprietary rights of third parties.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Any infringement claims, with or without merit, could result in significant litigation costs
and diversion of management and financial resources, including the payment of damages, which could
have a material adverse effect on our business, financial condition, and results of operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Convertible Senior Subordinated Notes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December 2004, we issued an aggregate of $125.0 million of convertible notes and incurred
debt issuance costs of $4.3 million, consisting primarily of the initial purchasers’ discount and
costs related to legal, accounting, and printing, which were amortized over five years. The notes
were issued in a private offering pursuant to Rule 144A under the Securities Act of 1933, as
amended, or the Securities Act, and mature December 1, 2024. We used the net proceeds for working
capital and general corporate purposes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In fiscal 2009, we repurchased and retired $59.7 million of our outstanding notes at a
discount from par of approximately 7%, which resulted in a $1.1 million net loss on retirement of
debt after deducting the associated unamortized discount and issuance costs. In December 2009, we
repurchased and retired $63.0 million par value of our notes when investors exercised their rights
to require us to repurchase their notes. The remaining $2.3 million par value of our notes
outstanding are classified as long-term as the next date noteholders can require us to repurchase
all or a portion of their notes is in December 2014.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recorded interest expense on the notes of $4,000 during each of the three-month periods
ended March 31, 2011 and 2010, and $13,000 and $2.4 million during the nine-month periods ended
March 31, 2011 and 2010, respectively. Through December 31, 2009, interest expense included the
amortization of discount and issuance costs. As of March 31, 2011, the if-converted value of the
notes did not exceed the principal amount of the notes.
</div>
</div>
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<!-- Begin Block Tagged Note 9 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Share-Based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The purpose of our various share-based compensation plans is to attract, motivate, retain, and
reward high-quality employees, directors, and consultants by enabling such persons to acquire or
increase their proprietary interest in our common stock in order to strengthen the mutuality of
interests between such persons and our stockholders and to provide such persons with long-term
performance incentives to focus their best efforts in the creation of stockholder value.
Consequently, share-based compensatory awards issued subsequent to the initial award to our
employees and consultants are determined primarily on individual performance. Our share-based
compensation plans with outstanding awards consist of our 1996 Stock Option Plan, or our 1996 Plan,
our 2001 Incentive Compensation Plan, as amended, or our 2001 Plan, our 2010 Incentive Compensation
Plan, or our 2010 Plan, and our 2010 Employee Stock Purchase Plan, or our 2010 ESPP.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share-based compensation and the related tax benefit recognized in our consolidated statements
of income were as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cost of revenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">355</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">553</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,032</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,816</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Research and development
</div></td>
<td> </td>
<td> </td>
<td align="right">3,377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,328</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,129</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,772</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Selling, general, and administrative
</div></td>
<td> </td>
<td> </td>
<td align="right">4,619</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,314</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,751</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,351</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,195</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">25,708</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">27,339</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax benefit recorded on share-based compensation
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,347</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,735</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,426</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,042</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We utilize the Black-Scholes option pricing model to estimate the grant date fair value of
certain employee share-based compensatory awards, which requires the input of highly subjective
assumptions, including expected volatility and expected life. Historical and implied volatilities
were used in estimating the fair value of our share-based awards, while the expected life of our
options and estimated forfeitures for share-based awards that are not expected to vest were
estimated based on historical trends since our initial public offering. Changes in these inputs
and assumptions can materially affect the measure of estimated fair value of our share-based
compensation. We charge the estimated fair value less estimated forfeitures to earnings on a
straight-line basis over the vesting period of the underlying awards, which is generally four years
for our stock options and deferred stock units, or DSUs, and up to two years for our 2010 ESPP.
The Black-Scholes option pricing model was developed for use in estimating the fair value of traded
options having no vesting restrictions and being fully transferable. As our stock option and 2010
ESPP awards have characteristics that differ significantly from traded options, and as changes in
the subjective assumptions can materially affect the estimated value, our estimate of fair value
may not accurately represent the value assigned by a third party in an arms’-length transaction.
While our estimate of fair value and the associated charge to earnings materially affects our
results of operations, it has no impact on our cash position.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recognize tax benefit upon expensing certain share-based awards associated with our
share-based compensation plans, including nonqualified stock options and DSUs, but we cannot
recognize tax benefit concurrent with the recognition of share-based compensation expenses
associated with qualified stock options (incentive stock options and employee stock purchase plan
shares). For qualified stock options that vested after we began to expense share-based
compensation, we recognize tax benefit only in the period when disqualifying dispositions of the
underlying stock occur, which historically has been up to several years after vesting and in a
period when our stock price substantially increases. For qualified stock options that vested prior
to when we began to expense share-based compensation, we record the tax benefit directly to
additional paid-in capital.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We determine excess tax benefit using the long-haul method in which we compare the actual tax
benefit associated with the tax deduction from share-based award activity to the hypothetical tax
benefit on the grant date fair values of the corresponding share-based awards. Tax benefit
associated with excess tax deduction creditable to additional paid-in capital is not recognized
until the deduction reduces taxes payable.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Historically, we have issued new shares in connection with our share-based compensation plans;
however, treasury shares were also available for issuance as of March 31, 2011. Any additional
shares repurchased under our stock repurchase program would be available for issuance under our
share-based compensation plans.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Stock Options</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our share-based compensation plans with outstanding stock option awards include our 1996 Plan,
our 2001 Plan, and our 2010 Plan. We currently grant stock-based awards only under our 2010 Plan.
Under the 2010 Plan, we may grant employees, consultants, and directors incentive stock options or
nonqualified stock options to purchase shares of our common stock at not less than 100% of the fair
market value, or FMV, on the date of grant. Stock options granted to our employees generally are
incentive stock options, or qualified options, under the Internal Revenue Code, subject to calendar
year vesting limitations with any balance being nonqualified stock options.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Stock option activity and weighted average exercise prices for options outstanding and
exercisable, the weighted average exercise prices and the aggregate intrinsic value were as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Stock</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Option</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Awards</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Exercise</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Value</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">7,748,570</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22.43</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">1,141,323</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28.98</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,078,524</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14.35</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(410,058</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">28.97</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">7,401,311</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24.25</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,421</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">4,416,551</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">26,843</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The aggregate intrinsic value is based on the closing price of our common stock on March 25,
2011 and excludes stock options with exercise prices above the closing price of $26.98. Options
granted under our 2010 Plan generally vest over four years from the vesting commencement date and
expire seven years after the grant date if not exercised.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Deferred Stock Units</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our 2010 Plan enables us to grant DSUs to our employees, consultants, and directors. A DSU is
a promise to deliver shares of our common stock at a future date in accordance with the terms of
the DSU grant agreement.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">DSU activity, including DSUs granted, delivered, and forfeited, and the balance and aggregate
intrinsic value of DSUs were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">DSU Awards</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Value</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(thousands)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">821,146</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">330,231</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Delivered
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(287,978</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(72,539</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">790,860</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">21,337</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The aggregate intrinsic value is based on the closing price of our common stock on March 25,
2011 of $26.98.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">DSUs granted under our 2010 Plan generally vest over four years from the vesting
commencement date. Delivery of shares under our 2010 Plan takes place on quarterly vesting dates.
At the delivery date, we withhold shares to cover statutory minimum tax withholding by delivering a
net number of shares. Until delivery of shares, the grantee has no rights as a stockholder.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Of the shares delivered, 79,307 shares valued at $2.3 million were withheld to meet statutory
minimum tax withholding requirements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Employee Stock Purchase Plan</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our 2010 ESPP became effective in October 2010. Our 2010 ESPP allows employees to designate
up to 15% of their base compensation, subject to legal restrictions and limitations, to purchase
shares of common stock at 85% of the lesser of the FMV at the beginning of the offering period or
the exercise date. The offering period extends for up to two years and includes four exercise
dates occurring at six-month intervals. Under the terms of our 2010 ESPP, if the FMV at an
exercise date is less than the FMV at the beginning of the offering period, the current offering
period will terminate and a new two-year offering period will commence.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic
value for employee stock purchase plan purchases during the nine-month period ended March 31, 2011
were as follows (in thousands, except for shares purchased and weighted average purchase price):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares purchased
</div></td>
<td> </td>
<td> </td>
<td align="right">320,745</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average purchase price
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15.90</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash received
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,099</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Aggregate intrinsic value
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,995</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The early termination of an offering period followed by the commencement of a new offering
period represents a modification to the terms of the underlying awards. Under the terms of our
2001 ESPP, the offering period that commenced on July 1, 2007 was terminated on December 31, 2008
and a new offering period commenced on January 1, 2009. The December 31, 2008 modification
affected approximately 257 employees. The modification resulted in incremental compensation
costs, which were not material and which were recognized on a straight-line basis over the two-year
period ending December 31, 2010.
</div>
</div>
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<!-- Begin Block Tagged Note 10 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We account for income taxes under the asset and liability method. We consider the operating
earnings of our foreign subsidiaries to be indefinitely invested outside the United States.
Accordingly, no provision has been made for the federal, state, or foreign taxes that may result
from future remittances of undistributed earnings of our foreign subsidiaries.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes of $1.2 million and $45,000 for the three months ended March
31, 2011 and 2010, respectively, represented estimated federal, foreign, and state taxes. The
effective tax rate for the three months ended March 31, 2011 was 8.0% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates, the federal and state research credit, and the release of unrecognized tax
benefits, partially offset by foreign withholding taxes and net unrecognized tax benefit associated
with qualified stock options. The effective tax rate for the three months ended March 31, 2010 was
0.4% and diverged from the combined federal and state statutory rate primarily because of increased
foreign income taxed at lower tax rates, the recognition of tax benefit on the carryback of a prior
year net operating loss, the release of unrecognized tax benefits, and the benefit of research tax
credits, partially offset by foreign withholding taxes and net unrecognized tax benefit associated
with qualified stock options. We recorded a tax benefit of $1.8 million from the carryback of a
prior year net operating loss, which represents a revision of tax benefits generated in fiscal 2008
and 2009.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes of $7.0 million and $5.1 million for the nine months ended
March 31, 2011 and 2010, respectively, represented estimated federal, foreign, and state taxes.
The effective tax rate for the nine months ended March 31, 2011 was 12.4% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates, the release of unrecognized tax benefits, the retroactive reinstatement of the
federal research credit, and the state research credit, partially offset by foreign withholding
taxes and net unrecognized tax benefit associated with qualified stock options. The effective tax
rate for the nine months ended March 31, 2010 was 13.3% and diverged from the combined federal and
state statutory rate primarily because of increased foreign income taxed at lower tax rates, the
recognition of tax benefit on the carryback of a prior year net operating loss, the release of
unrecognized tax benefits, and the benefit of research tax credits, partially offset by foreign
withholding taxes, net unrecognized tax benefit associated with qualified stock options, the
impairment of an investment for which a full valuation allowance was established, and the
establishment of a valuation allowance on certain deferred tax assets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Unrecognized Tax Benefits</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The total liability for gross unrecognized tax benefits decreased $1.0 million during the
quarter ended March 31, 2011 to $19.6 million from $20.6 million at December 31, 2010. The
liability for gross unrecognized tax benefit, if recognized, would reduce the effective tax rate on
income from continuing operations. The net decrease consisted of a release of unrecognized tax
benefit of $1.6 million because of statute expiration and an increase of $586,000 from current year
tax positions. The balance of interest and penalties accrued related to unrecognized tax benefits
as of March 31, 2011 was $1.5 million and was unchanged from December 31, 2010. We classify
interest and penalties, if any, as components of income tax expense.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">No material unrecognized tax benefit is expected to be paid within one year, and we cannot
make a reliable estimate when cash settlement with a taxing authority may occur. Any prospective
adjustments to our unrecognized tax benefits will be recorded as an increase or decrease to income
tax expense and cause a corresponding change to our effective tax rate. Accordingly, our effective
tax rate could fluctuate materially from period to period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our major tax jurisdictions are the United States, California, and Hong Kong SAR, and fiscal
2003 onward remain subject to examination by one or more of these jurisdictions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010, or the Act. The Act in part retroactively
reinstated the research credit to January 1, 2010. Accordingly, our year-to-date effective tax
rate for fiscal 2011 includes the benefit of the retroactive reinstatement.
</div>
</div>
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<!-- Begin Block Tagged Note 11 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>11. Segment, Customers, and Geographic Information</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We operate in one segment: the development, marketing, and sale of custom-designed capacitive
interface solutions that enable people to interact more easily and intuitively with a wide variety
of electronic devices and products. We generate our revenue from two broad product categories:
the personal computing, or PC, market and digital lifestyle product market. The PC market
accounted for 43% and 63% of net revenue for the three months ended March 31, 2011 and 2010,
respectively, and 47% and 60% of net revenue for the nine months ended March 31, 2011 and 2010,
respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net revenue within geographic areas based on our customers’ locations for the periods
presented was as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">China
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">91,212</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">81,760</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">302,849</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">285,744</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Japan
</div></td>
<td> </td>
<td> </td>
<td align="right">17,623</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,741</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,970</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,325</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Taiwan
</div></td>
<td> </td>
<td> </td>
<td align="right">13,489</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,895</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,903</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,712</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Korea
</div></td>
<td> </td>
<td> </td>
<td align="right">6,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,459</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,352</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,814</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">13,470</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">357</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">532</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">142,406</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">116,212</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">455,172</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">369,127</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In March 2011, Japan experienced a significant earthquake, triggering a tsunami that resulted
in widespread damage and business interruption. While we have not identified any material impact on
our business and operations at this time and believe we have taken actions necessary to ensure our
ability to deliver products to meet our customers’ demands, we cannot predict what impact, if any,
the current interruptions in Japan may have on our business and operations in the future.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Major customers as a percentage of net revenue for the periods presented were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer A
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">12</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer B
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">11</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">Less than 10%
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We sell our products primarily to contract manufacturers that provide manufacturing
services to original equipment manufacturers, or OEMs. We extend credit based on an evaluation of
a customer’s financial condition, and we generally do not require collateral. Major customer
accounts receivable as a percentage of accounts receivable for the periods presented were as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">As of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">As of</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer A
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">12</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer B
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer C
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">Less than 10%
</div></td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>12. Comprehensive Income</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our comprehensive income generally consists of net income plus the effect of unrealized gains
and losses on our investments primarily due to changes in market value of certain of our ARS
investments and interest rate fluctuations on our fixed interest rate investments. In addition, we
recognize the noncredit portion of other-than-temporary impairment in comprehensive income. We
recognize remeasurement adjustments in our consolidated statement of income as the U.S. dollar is
the functional currency of our foreign entities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our comprehensive income was as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">13,496</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,606</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">49,873</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">33,637</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gain/(loss) on available-for-sale
investments, net of tax
</div></td>
<td> </td>
<td> </td>
<td align="right">716</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,396</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,575</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total comprehensive income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">14,212</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,595</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">51,269</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">35,212</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
false
--06-25
Q3
2011
2011-03-26
10-Q
0000817720
34253171
Yes
Large Accelerated Filer
834288531
SYNAPTICS INC
No
Yes
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