application processor is an area where we can add a significant amount of value and we also believe it represents a revenue growth opportunity.

Gross Margin Improvement

 

We continued to focus on improving our gross margin in fiscal year 2008. Our gross margin was 45.6% for fiscal year 2008, an increase of 320 basis points from our gross margin of 42.4% for fiscal year 2007.

 

Our gross margin is significantly impacted by the mix of products that we earn revenue from during each of our fiscal periods. Product mix is often difficult to estimate with accuracy.  Therefore, if we achieve significant revenue growth in our lower margin product lines, or if we are unable to earn as much revenue as we expect from higher margin product lines, our gross margin may be negatively impacted. We expect gross margin will be relatively flat to slightly up during the first quarter of fiscal year 2009 as compared to the fourth quarter of fiscal year 2008.

 

Subsequent Event



Property Purchase



  On February 14, 2008, we closed escrow on a purchase of property that includes approximately 25 acres of land and ten commercial buildings in Santa Clara, California for approximately $150.0 million.



Critical Accounting Policies and Estimates

 

    Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, cost of revenue, expenses and related disclosure of contingencies. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, accounts receivable, inventories, income taxes, and goodwill. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

 

    We believe the following critical accounting policies affect our significant judgments and estimates used in the preparation of our consolidated financial statements. Our management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors, or Board.  The Audit Committee has reviewed our disclosures relating to our critical accounting policies and estimates in this Annual Report on Form 10-K.  

 

Revenue Recognition

 

     Product Revenue

 

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed and determinable, and collection is reasonably assured. For most sales, we use a binding purchase order and in certain cases we use a contractual agreement as evidence of an arrangement. We consider delivery to occur upon shipment provided title and risk of loss have passed to the customer based on the shipping terms. At the point of sale, we assess whether the