Sirenza Microdevices 10Q 2007 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2007.

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

For the transition period from to

Commission File Number: 000-30615

SIRENZA MICRODEVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0073042

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


303 S. Technology Court, Broomfield, CO		80021
(Address of principal executive offices)		(Zip Code)

(303) 327-3030

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

As of April 10, 2007 there were 51,475,050 shares of registrant’s Common Stock outstanding.

SIRENZA MICRODEVICES, INC.

INDEX


		Page
Part I. Financial Information		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
Part II. Other Information		21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Submission of Matters to a Vote of Security Holders	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
	Signatures	31

Part I. Financial Information

Item 1.

Financial Statements

SIRENZA MICRODEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	March 31, 2007			December 31, 2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	28,849		$	24,847
Short-term investments		—			19
Accounts receivable, net		25,423			22,227
Inventories		24,752			27,045
Other current assets		3,387			3,446

Total current assets		82,411			77,584
Property and equipment, net		18,160			15,345
Other non-current assets		1,787			1,720
Acquisition-related intangibles, net		54,160			57,081
Goodwill		60,785			59,862

Total assets	$	217,303		$	211,592

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,100		$	9,389
Income taxes payable		3,356			3,232
Accrued compensation and other expenses		7,006			6,716
Other accrued liabilities		2,894			2,894
Deferred margin on distributor inventory		1,534			1,529
Note payable		3,000			3,000
Capital lease obligations, current portion		433			517

Total current liabilities		29,323			27,277
Capital lease obligations, long-term portion		494			531
Deferred tax and other liabilities, non-current		10,566			10,101
Accrued pension		3,061			2,962
Commitments and contingencies
Stockholders’ equity:
Common stock		52			52
Additional paid-in capital		247,623			246,173
Treasury stock, at cost		(165	)		(165	)
Accumulated other comprehensive income		5,495			4,792
Accumulated deficit		(79,146	)		(80,131	)

Total stockholders’ equity		173,859			170,721

Total liabilities and stockholders’ equity	$	217,303		$	211,592

See accompanying notes.

SIRENZA MICRODEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share data)


	Three Months Ended March 31,
	2007		2006
Net revenues	$	39,054	$	20,892
Cost of revenues		22,156		10,813
Gross profit		16,898		10,079
Operating expenses:
Research and development		4,910		2,876
Sales and marketing		2,952		2,226
General and administrative		4,861		3,092
Amortization of acquisition-related intangible assets		3,187		449

Total operating expenses		15,910		8,643

Income from operations		988		1,436
Interest and other income, net		204		194

Income before income taxes		1,192		1,630
Provision for income taxes		151		47

Net income	$	1,041	$	1,583

Basic net income per share	$	0.02	$	0.04

Diluted net income per share	$	0.02	$	0.04

Shares used to compute basic net income per share		50,099		36,917

Shares used to compute diluted net income per share		52,080		38,880

See accompanying notes.

SIRENZA MICRODEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	Three Months Ended March 31,
	2007			2006
Operating Activities
Net income	$	1,041		$	1,583
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,460			1,235
Stock-based compensation		1,041			1,193
Deferred taxes		(216	)		—
Other		8			20
Changes in operating assets and liabilities		1,610			1,387

Net cash provided by operating activities		7,944			5,418
Investing Activities
Sales/maturities of available-for-sale securities, net		19			151
Purchases of property and equipment		(4,075	)		(775	)
Acquisition costs		(325	)		(536	)

Net cash used in investing activities		(4,381	)		(1,160	)
Financing Activities
Principal payments on capital lease obligations		(128	)		—
Proceeds from exercise of stock options and employee stock plans		443			2,535

Net cash provided by financing activities		315			2,535
Effect of exchange rate changes on cash		124			—
Increase in cash and cash equivalents		4,002			6,793
Cash and cash equivalents at beginning of period		24,847			11,266

Cash and cash equivalents at end of period		28,849			18,059
Supplemental disclosures of noncash investing and financing activities
Reclassification of property and equipment and accrued expenses	$	47		$	47
PDI acquisition costs	$	—		$	550
Cost and accumulated depreciation of property and equipment disposed of	$	1,077		$	—
Non-cash adjustments to goodwill and other	$	663		$	—

See accompanying notes.

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2007 are not necessarily indicative of the results that may be expected for any subsequent period or for the year as a whole.

The consolidated balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Sirenza Microdevices, Inc. (“the Company”) for the fiscal year ended December 31, 2006, which are included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2007.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated.

The Company uses the U.S. dollar as its functional currency for its foreign wholly owned subsidiaries in Canada and its representative offices in China and India. All monetary assets and liabilities are remeasured at the current exchange rate at the end of the period, nonmonetary assets and liabilities are remeasured at historical exchange rates and revenues and expenses are remeasured at average exchange rates in effect during the period. Transaction gains and losses resulting from the process of remeasurement are included in net earnings.

The Company has designated the local currency as the functional currency for its foreign subsidiaries in Germany and China. These subsidiaries primarily expend cash in their local respective currencies and generate cash in both the local currency and U.S. dollars. The assets and liabilities, excluding inter-company accounts, of these subsidiaries are translated at current month-end exchange rates. Revenue and expenses are translated at the average monthly exchange rate. Translation adjustments are recorded in accumulated other comprehensive income.

Recent Accounting Pronouncements

Effective at the beginning of the first quarter of 2007, the Company adopted the provision of FIN 48, “Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement No. 109.”

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, “Fair Value Measurements.” The purpose of SFAS No. 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements. The measurement and disclosure requirements are effective for the company beginning in the first quarter of fiscal 2008. The company is currently evaluating whether SFAS No. 157 will result in a change to its fair value measurements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Liabilities.” This statement provides companies with an option to report certain financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce complexity in accounting for financial instruments and the volatility in earnings caused by measuring related financial assets and liabilities. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of SFAS No. 159 are effective beginning in the first quarter of the first fiscal year after November 15, 2007. The Company is currently evaluating the impact this statement will have on its consolidated financial statements

Note 2: Stock-Based Compensation

At March 31, 2007, the Company’s 1998 Stock Plan (the “1998 Plan”), disclosed below, was the only stock-based employee compensation plan impacted by the adoption of SFAS 123R. Equity awards granted under the 1998 Plan have historically consisted of stock options and more recently restricted stock purchase rights and performance shares, which we collectively refer to as stock awards. The total compensation expense related to this plan was approximately $1.0 million the three months ended March 31, 2007. Prior to January 1, 2006, the Company accounted for this plan under the recognition and measurement provisions of APB Opinion No. 25. Accordingly, the Company did not typically recognize compensation expense for stock option grants, as it granted stock options at an exercise price equal to the fair market value of the Company’s common stock on the date of grant. However, in 2004, the Company began granting stock awards at an exercise price of par value ($0.001 per share) which are subject to a right of reacquisition by the Company at cost or for no consideration in the event that the recipient’s employment terminates without the vesting milestones having been achieved. The Company measures the fair value of the stock awards based upon the fair market value of the Company’s common stock on the dates of grant and recognizes any resulting compensation expense, net of a forfeiture rate, on a straight-line basis over the associated service period, which is generally the vesting term of the stock awards. The Company typically estimates forfeiture rates based on historical experience, while also considering the duration of the vesting term of the option or stock award.

Tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are classified as financing cash flows. Due to the availability of net operating loss carryforwards, the Company did not recognize tax benefit for the tax deduction from stock option exercises for the three months ended March 31, 2007 and 2006.

A summary of stock option activity under the 1998 Plan as of March 31, 2007 and changes during the three months ended March 31, 2007 is presented below:


Stock Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2006	2,665,971		$	2.55
Granted	—
Exercised	(154,378	)	$	2.86
Forfeited/cancelled/expired	(1,250	)	$	3.67

Outstanding at March 31, 2007	2,510,343		$	2.53	6.02	$	15,297

Exercisable at March 31, 2007	2,288,230		$	2.40	5.88	$	14,239

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the first quarter of fiscal 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2007. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the three months ended March 31, 2007 was approximately $821,000. The total fair value of stock options vested and expensed was approximately $249,000, before and after tax, for the three months ended March 31, 2007.

As of March 31, 2007, approximately $683,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 0.59 years.

Cash received from stock option exercises for the three months ended March 31, 2007 was approximately $441,000.

Nonvested stock awards as of March 31, 2007 and changes during the three months ended March 31, 2007 were as follows:


Stock Awards	Shares		Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2006	1,295,288		$	7.21
Granted	33,300		$	7.80
Vested	(95,799	)	$	7.09
Forfeited/cancelled/expired	(32,257	)	$	8.96

Nonvested at March 31, 2007	1,200,532		$	7.23

As of March 31, 2007, there was $6.0 million of unrecognized stock-based compensation expense related to nonvested stock awards. That cost is expected to be recognized over a weighted-average period of 1.79 years.

Total stock-based compensation expense related to stock options and stock awards under the 1998 Plan was allocated as follows:


	Three Months Ended March 31,
	2007						2006
	(in thousands)
	Stock Options		Stock Awards		Total		Stock Options		Stock Awards		Total
Cost of sales	$	27	$	71	$	98	$	59	$	27	$	86
Research and development		55		210		265		188		64		252
Sales and marketing		59		90		149		204		40		244
General and administrative		108		421		529		525		86		611

Total stock-based compensation expense (1)	$	249	$	792	$	1,041	$	976	$	217	$	1,193

(1)	Stock-based compensation costs capitalized into inventory of approximately $26,000 are not included in the table above.

3. Business Combinations

Acquisition of Premier Devices, Inc.

On April 3, 2006 (“the closing date”), Sirenza acquired Premier Devices, Inc. (“PDI”) in exchange for 7.0 million shares of Sirenza common stock, valued at approximately $53.0 million, $14.0 million in cash and $6.0 million in promissory notes bearing 5% simple interest per annum paid monthly and maturing one year from the date of issuance, and approximately $2.1 million in estimated direct transaction costs for a preliminary purchase price of $75.1 million. The fair value of the Company’s common stock issued in connection with the PDI acquisition was derived using an average market price per share of Sirenza common stock of $7.58, based on the average of the closing prices for a range of trading days commencing February 2, 2006 and ending February 8, 2006 around the announcement date (February 6, 2006) of the acquisition. PDI is a designer, manufacturer and marketer of RF components headquartered in San Jose, California with manufacturing operations in Shanghai, China and Nuremberg, Germany. This acquisition expanded both the depth and breadth of Sirenza’s products by adding PDI’s CATV amplifier, module and optical receiver offerings as well as its line of passive RF components such as mixers, splitters, transformers, couplers, isolators, circulators and amplifiers. The acquisition brought Sirenza design and manufacturing capabilities in Asia and Europe, including PDI’s passive component manufacturing and engineered technical solutions expertise in sourcing, integration, and board-level and subsystem assembly. Sirenza believes that these new product offerings and capabilities advance its strategic objective of diversifying and expanding its end markets and applications. The Company’s results of operations include the effect of the PDI acquisition from the closing date and are being reported as a separate business segment.

Sirenza, Phillip Chuanze Liao and Yeechin Shiong Liao (“the Liaos”) (the sole shareholders of PDI) and U.S. Bank National Association (the “Escrow Agent”) entered into an Escrow Agreement dated as of February 4, 2006 (the “Escrow Agreement”) which became effective at closing. Pursuant to the Escrow Agreement, upon the closing of the merger, 3.5 million of the 7.0 million shares of Sirenza common stock to be issued to the Liaos as consideration in the merger were placed in a 2-year escrow as security for their indemnification obligations pursuant to the merger agreement. In 2007, the Liaos sold the 7.0 million shares of Sirenza common stock issued in connection with the acquisition of PDI and deposited $7.2 million in the escrow. Any indemnification claims paid to Sirenza from the escrow will be paid in cash.

Due to a series of transactions that occurred prior to the date that Sirenza acquired the stock of PDI, PDI may have realized certain contingent income tax liabilities that were not recorded in its financial statements. Sirenza is in the process of evaluating the likelihood that these liabilities would be assessed as well as the amount of such liabilities. Sirenza’s preliminary estimate of any contingent tax liabilities is between zero and $17.0 million. Any adjustments to record a liability or cash payout related to the aforementioned tax contingencies has been or will be recorded as additional goodwill and are not expected to affect Sirenza’s reported operating results other than with respect to any interest and penalties as described in Note 10: Taxes. Sirenza cannot be assured that the portion of the PDI purchase price held in escrow to secure indemnification obligations of the former PDI shareholders will be sufficient to offset any amounts that Sirenza may be obligated to pay related to such tax contingencies, or that such indemnification obligations will not expire prior to the time that Sirenza becomes obligated to pay such amounts, if any.

Acquisition of Micro Linear Corporation

On October 31, 2006, Sirenza acquired Micro Linear Corporation (“Micro Linear”) in exchange for approximately 4.9 million shares of Sirenza common stock, valued at approximately $44.9 million and approximately $1.0 million in estimated direct transaction costs for a preliminary purchase price of $45.9 million. The allocation of the purchase price has been prepared based on preliminary estimates of fair values upon finalization of estimated direct transaction costs. Micro Linear is a fabless semiconductor company specializing in wireless IC solutions used in a variety of wireless applications serving global end markets. Subsequent to the acquisition, Micro Linear was included in the SMDI business segment, augmenting its existing product portfolio and expanding its expertise in integrated RF IC products for consumer applications. Micro Linear’s transceivers can be used in many streaming wireless applications such as cordless phones, PHS handsets, wireless speakers and headphones, security cameras, game controllers, cordless headsets and other personal electronic appliances. The acquisition is intended to enable Sirenza to penetrate the digital cordless phone market and PHS terminal market and strengthen Sirenza’s current participation in the digital TV (DTV) and set-top box markets. The Company’s results of operations include the effect of the Micro Linear acquisition from the date of acquisition.

Effective with the acquisition, each outstanding share of Micro Linear common stock was converted into the right to receive 0.365 of a share of Sirenza common stock. The value of the common stock issued to the stockholders of Micro Linear was derived using an average market price per share of $9.07, which represented the average of the closing prices per share for a range of trading days commencing August 11, 2006 and ending August 17, 2006 around the announcement date (August 15, 2006) of the acquisition.

Note 4: Amortizable acquisition-related intangible assets

Amortization of acquisition-related intangible assets totaled $3.2 million and $449,000 for the three-month periods ended March 31, 2007 and 2006, respectively. Acquisition-related intangible assets are being amortized over the periods in which the economic benefits of such assets are expected to be used. Acquisition-related intangible assets are being amortized on a straight-line basis, which management believes to reasonably reflect the pattern over which the economic benefits are being derived.

The Company’s acquisition-related intangible assets were as follows (in thousands):


	March 31, 2007						December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Customer Relationships	$	34,113	$	4,699	$	29,414	$	33,915	$	3,395	$	30,520
Developed Product Technology		27,183		7,588		19,595		27,115		5,982		21,133
Core Technology Leveraged		6,360		1,209		5,151		6,360		992		5,368
Committed Customer Backlog		180		180		—		180		120		60

	$	67,836	$	13,676	$	54,160	$	67,570	$	10,489	$	57,081

The gross carrying amount of acquisition-related intangible assets in the table above is subject to change due to foreign currency fluctuations, as a significant portion of the Company’s acquisition-related intangible assets are related to foreign subsidiaries.

The weighted average amortization period of the Company’s acquisition-related intangible assets is as follows (in months):


Developed Product Technology		66
Customer Relationships		98
Core Technology Leveraged		105
Committed Customer Backlog		3
Total acquisition-related intangible assets		82

As of March 31, 2007, the Company’s estimated amortization expense of acquisition-related intangible assets over the next five years and thereafter is as follows (in thousands):


2007	$	9,524
2008		10,264
2009		7,632
2010		5,514
2011		5,377
Thereafter		15,849

	$	54,160

Amortization expense included in the table above is subject to change due to foreign currency fluctuations as a significant portion of the Company’s acquisition-related intangible assets are related to foreign subsidiaries.

Note 5: Goodwill

The changes in the carrying amount of goodwill during the three month period ended March 31, 2007 are as follows (in thousands):


	SMDI Segment			PDI Segment		Total
Balance as of December 31, 2006	$	24,586		$	35,276	$	59,862
Goodwill adjustments		(8	)		602		594
Effect of foreign currency rate change		—			329		329

Balance as of March 31, 2007	$	24,578		$	36,207	$	60,785

The PDI Segment goodwill adjustments primarily relate to tax liability adjustments existing prior to the date of the acquisition as a result of the Company adopting FIN 48 in the first quarter of 2007. See Note 10: Taxes for more information.

Note 6: Inventories

Inventories are stated at the lower of standard cost, which approximates actual (first-in, first-out method) or market (estimated net realizable value).

The Company plans production based on orders received and forecasted demand and must order wafers and raw material components and build inventories well in advance of product shipments. The valuation of inventories at the lower of cost or market requires the use of estimates regarding the amounts of current inventories that will be sold. These estimates are dependent on the Company’s assessment of current and expected orders from its customers, including consideration that orders are subject to cancellation with limited advance notice prior to shipment. Because the Company’s markets are volatile, and are subject to technological risks and price changes as well as inventory reduction programs by the Company’s customers and distributors, there is a risk that the Company will forecast incorrectly and produce excess inventories of particular products. This inventory risk is compounded because many of the Company’s customers place orders with short lead times. As a result, actual demand will differ from forecasts, and such a difference has in the past and may in the future have a material adverse effect on actual results of operations.

The components of inventories, net of written-down inventories and reserves, are as follows (in thousands):


	March 31, 2007		December 31, 2006
Raw materials	$	11,818	$	14,483
Work-in-process		5,463		4,456
Finished goods		7,471		8,106

	$	24,752	$	27,045

Note 7: Net Income Per Share

The Company computes basic net income per share by dividing the net income for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of shares of common stock and potential common stock equivalents outstanding during the period, if dilutive. Potential common stock equivalents include incremental shares of common stock issuable upon the exercise of stock options and employee stock awards.

The shares used in the computation of the Company’s basic and diluted net income per common share were as follows (in thousands):


	Three Months Ended
	March 31, 2007	March 31, 2006
Weighted average common shares outstanding	50,099	36,917
Dilutive effect of employee stock options and awards	1,981	1,963

Weighted average common shares outstanding, assuming dilution	52,080	38,880

Weighted average common shares outstanding, assuming dilution, include the incremental shares that would be issued upon the assumed exercise of stock options and employee stock awards.

The effect of options to purchase 31,625 and 49,625 shares of common stock have not been included in the computation of diluted net income per share for the quarters ended March 31, 2007 and 2006, respectively, as the effect would have been antidilutive. Stock options are antidilutive when the exercise price of the options is greater than the average market price of the common shares for the period.

Note 8: Retirement Benefit Plan

The Company maintains a qualified defined benefit pension plan for its German subsidiary. The plan is unfunded with an unfunded obligation of approximately $3.1 million.

The components of the net periodic benefit cost for the defined benefit pension plan were as follows (in thousands):


	Three Months Ended March 31, 2007
Service cost	$	25
Interest cost		26
Expected return on plan assets		—
Recognized actuarial loss		—

Net periodic benefit cost	$	51

The actuarial assumptions used to calculate the net periodic benefits cost for the defined benefit pension plan were as follows:


	2007
Discount rate	4.5	%
Rate of compensation increase	2.5	%

Note 9: Comprehensive Income

The components of comprehensive income were as follows (in thousands):


	Three Months Ended March 31,
	2007			2006
Net income	$	1,041		$	1,583
Change in net unrealized gains (losses) on available-for-sale investments		(1	)		18
Change in cumulative translation adjustment		704			—

Total comprehensive income	$	1,744		$	1,601

The components of accumulated other comprehensive income were as follows (in thousands):


	March 31, 2007			December 31, 2006
Cumulative translation adjustment	$	5,548		$	4,844
Additional pension liability experience		(52	)		(52	)
Accumulated net unrealized loss on available-for-sale securities		(1	)		—

Total accumulated other comprehensive income	$	5,495		$	4,792

As we intend to indefinitely reinvest the earnings of our non-U.S. subsidiaries, we are not reporting the cumulative translation adjustment and minimum pension liability, net of German tax. The U.S. tax effect of the net unrealized gain (loss) on available-for-sale securities is not material for any period presented.

Note 10: Taxes

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and a few foreign jurisdictions. The tax years of 2003—2006 remain open to examination in the U.S. jurisdiction and the Company’s U.S. net operating loss carryforwards are subject to examination for the years in which they were generated. There is a range of open tax years in our foreign jurisdictions with the earliest open year being 1999 and the latest being 2006.

Effective at the beginning of the first quarter of 2007, the Company adopted the provision of FIN 48, “Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement No. 109.” FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

At the adoption date of January 1, 2007, the Company increased the liability for net unrecognized tax positions by $663,000, of which $56,000 would favorably affect our effective tax rate if recognized. We accounted for the $663,000 increase as a cumulative effect of a change in accounting principle that resulted in a decrease to retained earnings of $56,000 and an increase to goodwill of $607,000. See our related discussion in Note 3: Business Combinations. At March 31, 2007, we had $683,000 of unrecognized tax positions, of which $76,000 would favorably affect our effective tax rate if recognized. These unrecognized tax positions were classified as deferred tax and other liabilities, non-current. Although timing of any resolution is highly uncertain, the Company does not believe it is reasonably possible that the unrecognized tax positions would materially change in the next 12 months.

The Company’s policy is to include interest and penalties related to unrecognized tax positions within the provision for income taxes on the consolidated condensed statements of income. With the adoption of FIN 48, the company accrued $85,000 for the payment of interest and penalties relating to unrecognized tax positions, of which $56,000 was recorded to retained earnings, $9,000 was recorded to goodwill and $20,000 was recorded in our first quarter of 2007 provision for income taxes.

Note 11: Segments of an Enterprise and Related Information

SMDI Segment:

The SMDI segment consists of the Company’s RF component sales business predating the acquisition of PDI in April 2006 as well as the business of Micro Linear acquired in October 2006. The products of the SMDI segment currently serve six principal end markets noted below:

•

Mobile Wireless—this market includes global mobile wireless infrastructure applications, with particular focus on leading standards, including GSM, WCDMA, CDMA, and TD-SCDMA infrastructure opportunities.

•

Broadband Network Applications—this market includes primarily digital satellite radio applications and digital TV, or DTV applications.

•

Standard and Catalog Products—this market includes established and emerging mid-level to smaller customers in a variety of end markets, such as point-to-point and network repeaters, to which we largely market catalog products through our global sales distribution and sales representative networks.

•

Consumer Applications—this market includes digital cordless telephones, personal handyphone systems, wireless speakers, security cameras, cordless headsets and other personal electronic appliances.

•

Wireless Access Applications—this market includes the WiMAX, WiFi and emerging Ultra Wideband and Zigbee markets for infrastructure and CPE terminal applications.

•

Aerospace and Defense Applications—this market includes aerospace, military/defense and homeland security applications.

Within the SMDI segment’s marketing function the Company has established six market-facing strategic business units, or SBUs, which allow the segment to further concentrate and prioritize its efforts in strategic planning, product development, and marketing of the segment’s products to better support its worldwide customers.

Although the Company’s chief operating decision maker reviews disaggregated revenue information by SBU with the SMDI segment, the SBUs do not have separate profit and loss statements reviewed by the Company’s chief operating decision maker, and accordingly are aggregated and reported within the single SMDI segment.

PDI Segment:

The PDI segment consists of the business acquired on April 3, 2006 from Premier Devices, Inc. The PDI segment designs and manufactures RF components and consists of CATV amplifier, module and optical receiver products, a line of passive RF components such as mixers, splitters, transformers, couplers, isolators, circulators and amplifiers, as well as passive component manufacturing and engineered technical solutions expertise in sourcing, integration, and board-level and subsystem assembly. The majority of the PDI segment’s manufacturing operations are conducted in Shanghai, China and Nuremberg, Germany.

Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131), requires disclosures of certain information regarding operating segments, products and services, geographic areas of operation and major customers. The method for determining what information to report under SFAS 131 is based upon the “management approach,” or the way that management organizes the operating segments within a company, for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Chief Executive Officer. The CODM evaluates the performance of the Company based on consolidated and segment operating income (loss). In addition, the CODM does not consider interest and other income (expense) or income tax expense or benefit in making operating decisions.

The accounting policies of each segment are the same as those described in Note 1: Organization and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. All intercompany transactions between the reported segments for the periods presented have been eliminated. Executive management and other corporate overhead costs are allocated to each segment. With the exception of goodwill, assets and liabilities are not discretely reviewed by the CODM, and accordingly are not detailed by segment below.

Segment information is summarized as follows (in thousands):


	SMDI			PDI		Elimination of intersegment net revenue and other			Total Company
Three Months Ended:

March 31, 2007

Net revenues	$	23,539		$	15,746	$	(231	)	$	39,054

Operating income (loss)	$	(46	)	$	1,005	$	29		$	988

March 31, 2006

Net revenues	$	20,892		$	—	$	—		$	20,892

Operating income	$	1,436		$	—	$	—		$	1,436

The disaggregated revenue information by SBU that is reviewed by the CODM within the SMDI segment is as follows (in thousands):


	Three Months ended March 31,
	2007		2006
Aerospace, Defense and Homeland Security	$	1,426	$	1,498
Broadband Network Applications		1,032		5,192
Mobile Wireless		11,385		7,186
Standard Products		5,884		4,494
Wireless Access		1,619		2,522
Consumer Applications		2,193		—

Total net revenues	$	23,539	$	20,892

The disaggregated revenue information by major product type that is reviewed by the CODM within the PDI segment is as follows (in thousands):


	Three Months ended March 31, 2007
CATV	$	10,193
Engineered technical solutions		3,010
Passive RF components and other		2,312
Intersegment products		231

	$	15,746

Note 12: Contingencies

On August 30, 2006, a complaint regarding a putative class action lawsuit, Yevgeniy Pinis v. Timothy R. Richardson, et al., No. 2381-N, was filed in the Court of Chancery of the State of Delaware in New Castle County against us, Micro Linear Corporation (“Micro Linear”), Metric Acquisition Corporation and Micro Linear’s board of directors in connection with our proposed acquisition of Micro Linear. The complaint was amended on September 12, 2006. The amended complaint alleges, among other things, that the Micro Linear board of directors violated its fiduciary duties to the stockholders of Micro Linear by approving the proposed merger of Metric Acquisition Corporation with and into Micro Linear, that the consideration proposed to be paid to the stockholders of Micro Linear in the merger is unfair and inadequate and that the proxy statement/prospectus that forms a part of our registration statement on Form S-4 (as amended and filed on September 13, 2006) is deficient in a number of respects. The complaint seeks, among other things, an injunction prohibiting us and Micro Linear from consummating the merger, rights of rescission against the merger and the terms of the merger agreement, damages incurred by the class, and attorneys’ fees and expenses. On October 4, 2006, we and Micro Linear agreed in principle with the plaintiff to a settlement of this lawsuit. The agreement in principle as to the proposed settlement contemplates that counsel for the plaintiff will request a reasonable award of fees and expenses from the court in connection with the lawsuit. The amount of any fee award ultimately granted is within the court’s discretion and cannot be determined at this time. We and the other defendants have reserved our rights to negotiate in good faith regarding and to oppose plaintiff’s related fee application. Further to the proposed settlement, the parties agreed to provide the stockholders of Micro Linear with certain additional disclosures. The settlement is subject to the approval of the Delaware Court of Chancery and provides for a broad release of claims by the stockholder class. Prior to the time at which the settlement will be submitted to the Delaware Court of Chancery for final approval, the parties will provide additional information to class members in a notice of settlement, including further information about the release of claims. If the settlement does not occur, and litigation against us continues, we believe we have meritorious defenses and intend to defend the case vigorously.

In November 2001, we, various officers and certain underwriters of the Company’s initial public offering of securities were named in a purported class action lawsuit filed in the United States District Court for the Southern District of New York. The suit, In re Sirenza Microdevices, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-10596, alleges improper and undisclosed activities related to the allocation of shares in our initial public offering, including obtaining commitments from investors to purchase shares in the aftermarket at pre-arranged prices. Similar lawsuits concerning more than 300 other companies’ initial public offerings were filed during 2001, and this lawsuit is being coordinated with those actions (the “coordinated litigation”). Plaintiffs filed an amended complaint on or about April 19, 2002, bringing claims for violation of several provisions of the federal securities laws and seeking an unspecified amount of damages. On or about July 1, 2002, an omnibus motion to dismiss was filed in the coordinated litigation on behalf of the issuer defendants, of which we and our named officers and directors are a part, on common pleadings issues. On October 8, 2002, pursuant to stipulation by the parties, the court dismissed the officer and director defendants from the action without prejudice. On February 19, 2003, the court granted in part and denied in part a motion to dismiss filed on behalf of defendants, including us. The court’s order dismissed all claims against us except for a claim brought under Section 11 of the Securities Act of 1933. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including us, was submitted to the court for approval. The terms of the settlement, if approved, would dismiss and release all claims against the participating defendants (including us). In exchange for this dismissal, D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1 billion, and the issuer defendants would agree to an assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On August 31, 2005, the court granted preliminary approval of the settlement. On April 24, 2006, the court held a hearing regarding the possible final approval of the previously described preliminary settlement between the 300 issuers and the plaintiffs. After hearing arguments from a number of interested parties, the court adjourned the hearing to consider its ruling on the matter. On December 5, 2006, the Court of Appeals for the Second Circuit reversed the court’s October 2004 order certifying a class in six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. It is unclear what impact this will have on the case. The settlement remains subject to a number of conditions, including final court approval. If the settlement does not occur, and litigation against us continues, we believe we have meritorious defenses and intend to defend the case vigorously.

On April 16, 2003, Scientific Components Corporation d/b/a Mini-Circuits Laboratory (“Mini-Circuits”) filed a complaint against us in the United States District Court for the Eastern District of New York alleging, among other things, breach of warranty by us for alleged defects in certain goods sold to Mini-Circuits. Mini-Circuits seeks compensatory damages plus interest, costs and attorneys’ fees. On July 30, 2003, we filed an answer to the complaint and asserted counterclaims against Mini-Circuits. In December 2005, we moved for summary judgment dismissing Mini-Circuits’ claims, and Mini-Circuits cross-moved for summary judgment dismissing our counterclaims. On August 30, 2006, the court issued an order determining that factual issues requiring a trial precluded dismissal of Mini-Circuits’ claims on our summary judgment motion, and, accordingly, denied our motion for summary judgment on Mini-Circuits’ claims. The court, however, granted Mini-Circuits’ motion for summary judgment, dismissing our counterclaims. While we believe Mini-Circuits’ claims to be without merit and intend to defend against Mini-Circuits’ claims vigorously, if we ultimately lose or settle the case, we may be liable for monetary damages and other costs of litigation. An estimate as to the possible loss or range of loss in the event of an unfavorable outcome cannot be made as of March 31, 2007. Even if we are entirely successful in defending against the lawsuit, we will have incurred significant legal expenses and our management may have to expend significant time in the defense.

In addition, we currently are involved in litigation and regulatory proceedings incidental to the conduct of our business and expect that we will be involved in other litigation and regulatory proceedings from time to time. While we currently believe that an adverse outcome with respect to such pending matters would not materially affect our business or financial condition, there can be no assurance that this will ultimately be the case.

On December 16, 2004, the Company acquired ISG Broadband, Inc. (ISG), a designer of RF gateway module and IC products for the cable TV, satellite radio and HDTV markets, for approximately $6.9 million in cash and estimated direct transaction costs of approximately $789,000 for a total preliminary purchase price of $7.7 million. Cash acquired in the acquisition totaled $154,000. Additional cash consideration of up to $7.15 million may become due and payable by the Company upon the achievement of margin contribution objectives attributable to sales of selected products for periods through December 31, 2007. The Company paid $1.15 million of additional cash consideration in 2006 and has accrued an additional $2.9 million at March 31, 2007, which was paid in the second quarter of 2007. Additional cash consideration of up to $3.0 million may become due and payable in 2008 related to the achievement of margin contribution objectives in 2007.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Statements

This quarterly report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including any statements concerning our possible or expected future results of operations, future market trends or conditions, future business or strategic plans or other future events. Forward-looking statements often include words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will” and “would,” or similar expressions. These forward-looking statements are based on expectations, forecasts and assumptions as of the date of such statements and involve risks and uncertainties that could cause actual outcomes to differ materially from those expressed in these forward-looking statements, including the factors described in “Risk Factors” below and elsewhere in this quarterly report. We intend that these forward-looking statements be subject to the safe harbors created by the provisions mentioned above. All subsequent written or spoken forward-looking statements attributable to Sirenza or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this quarterly report are made only as of the date of this report, and we do not intend, and undertake no obligation, to update these forward-looking statements.

Company Overview

Sirenza Microdevices is a supplier of radio frequency, or RF, components for the commercial communications, consumer and aerospace, defense and homeland security equipment markets. Our products are designed to optimize the reception and transmission of voice, video and data signals in mobile wireless communications networks and in other wireless and wire-line applications.

Commercial applications for Sirenza’s RF components include mobile wireless infrastructure networks, wireless local area networks, fixed wireless networks, broadband wireline applications such as coaxial cable and fiber optic networks and cable television set-top boxes. Sirenza also supplies components to consumer-oriented end markets including antennae and receivers for satellite radio, tuner-related integrated circuits, or ICs, for high definition television, or HDTV, and transceiver ICs for use in digital cordless telephones, personal handyphone systems, or PHS, handsets, wireless speakers, cordless headsets and other personal electronic appliances. Sirenza’s aerospace and defense, or A&D, products include RF components for government, military, avionics, space and homeland security systems.

We believe that our customers value our focus on the needs of customer-specific applications, our array of highly engineered products in multiple technologies, and our commitment to provide our customers with worldwide sales and application engineering support. We offer a broad line of products that range in complexity from discrete components to ICs and MCMs. Our discrete, IC and MCM products employ numerous semiconductor process technologies, which we believe allows us to optimize our products for our customers’ applications.

Our annual net revenues have increased in each of 2004, 2005 and 2006, driven by the addition of complementary products through our strategic acquisitions of other companies and assets, new product introductions and direct sales to large mobile wireless OEM customers.

In the past three years we have completed three acquisitions:

On December 16, 2004, we acquired ISG Broadband, Inc., or ISG, for an aggregate purchase price of $7.7 million, consisting of $6.9 million in cash and $789,000 in direct transaction costs. Additional cash consideration of up to $7.15 million was also provided for, subject to the achievement of margin contribution objectives attributable to sales of selected products for periods through December 31, 2007. The first installment of such payments was earned in 2005 and paid in the second quarter of 2006. The amount paid totaled $1.15 million. Approximately $2.9 million of the second installment was earned in 2006 and was paid in the second quarter of 2007. An additional payment of up to $3.0 million may be paid in 2008. ISG designed RF gateway module and IC products for the cable TV, satellite radio and HDTV markets. This acquisition enabled us to address new end markets, including HDTV and satellite radio, and broadened our product offering in the set-top box market by adding ISG’s silicon-based receiver/tuner products to our existing product lines targeting this market. Sales of the products acquired in the ISG acquisition represented a significant amount of our net revenues in 2005 and 2006.

On April 3, 2006, we acquired Premier Devices, Inc., or PDI, for an aggregate purchase price of $75.1 million, consisting of 7,000,000 shares of our common stock valued at $53.0 million, $14.0 million in cash, $6.0 million in promissory notes bearing 5% simple interest per annum paid monthly and maturing in one year and $2.1 million in direct transaction costs. PDI designed, manufactured and marketed complementary RF components featuring technologies common to existing and planned Sirenza products. PDI was headquartered in San Jose, California with manufacturing operations in Shanghai, China and Nuremberg, Germany. This acquisition expanded both the depth and breadth of our products by adding PDI’s CATV amplifier, module and optical receiver offerings as well as its line of passive RF components such as mixers, splitters, transformers, couplers isolators, circulators and amplifiers. The acquisition also brought us design and manufacturing capabilities in Asia and Europe, including PDI’s passive component manufacturing and engineered technical solutions expertise in sourcing, integration, and board-level and subsystem assembly. We believe that these new product offerings and capabilities advanced our strategic objective of diversifying and expanding our end markets and applications. Our results of operations include the effect of the PDI acquisition from the date of acquisition. The results of the former PDI operations are being reported as a separate business segment.

On October 31, 2006, we acquired Micro Linear Corporation, or Micro Linear, for approximately 4.9 million shares of our common stock, valued at approximately $44.9 million and approximately $1.0 million in estimated direct transaction costs. Micro Linear, headquartered in San Jose, California, was a fabless semiconductor company specializing in wireless integrated circuit (IC) solutions used in a variety of wireless applications serving global end markets. Under the terms of the merger agreement, the holders of the outstanding common stock of Micro Linear became entitled to receive 0.365 of a share of our common stock for each share of Micro Linear common stock they held at the date of closing. Our results of operations include the effect of the Micro Linear acquisition from the date of acquisition. The results of the former Micro Linear operations are being reported within the SMDI business segment.

As a result of the acquisition of PDI in April 2006, we currently operate in two business segments: the PDI segment, consisting of the business and product lines we acquired from PDI, and the SMDI segment, consisting of Sirenza’s pre-existing RF component sales business and the business acquired from Micro Linear. We have centralized our engineering and research and development functions, and within our marketing function established five market-facing strategic business units, or SBUs, which allow us to further concentrate and prioritize our efforts in strategic planning, product development, and marketing to better support our worldwide customers. Following our Micro Linear acquisition we added the Consumer Applications SBU. The SBUs do not have separate profit and loss statements reviewed by our chief operating decision maker, and accordingly are aggregated and reported within the single SMDI segment.

Below is a brief description of the markets targeted by the marketing SBUs within our SMDI segment:

•

Broadband Network Applications—this market includes primarily digital satellite radio applications and digital TV, or DTV applications.

•

Wireless Access Applications—this market includes the WiMAX, WiFi and emerging Ultra Wideband and Zigbee markets for infrastructure and CPE terminal applications.

•

Aerospace and Defense Applications—this market includes aerospace, military/defense and homeland security applications.

Revenue Overview

Revenue Recognition.

We present our revenue results as “net revenues.” Net revenues are defined as our revenues less sales discounts, rebates and returns. Historically, these revenue-related adjustments have not represented a significant percentage of our annual revenues, although sales discounts, rebates and returns will vary on a quarterly basis. We sell our products worldwide through a direct sales channel and a distribution sales channel.

Distributor Sales.

Our distribution arrangements provide our distributors with limited rights of return and certain price adjustments on unsold inventory held by them. We recognize revenues on sales to our distributors at the time our products are sold by the distributors to third-party customers. Our distribution channel consists of those sales made by our distribution channel partners under arrangements featuring such rights of return and price adjustment terms. If one of our distribution channel partners makes a sale of our products under an arrangement that does not include rights of return or price adjustment terms, we consider them a reseller of our products and include the revenue from such sales in our direct sales.

The majority of our SMDI segment consumer applications products were sold through our distribution channel in the first quarter of 2007, however we currently expect that distribution sales of these products will decrease on a percentage basis as we transition the sale of these products to our direct channel.

Direct Sales.

We recognize revenue from direct sales at the time product has shipped, title has transferred and no obligations remain. Direct sales include our sales to resellers but do not include our sales pursuant to distribution arrangements.

When our products are sold subject to acceptance criteria, our policy is to delay revenue recognition until the customer accepts the products. Historically, we have not experienced a delay in customer acceptance of our products.

Customer Concentration.

Historically, a significant percentage of our net revenues have been derived from a limited number of customers, including our distributors. Over time, both as a result of our active sales and marketing efforts and industry-wide changes in customer buying patterns, our customer base has shifted significantly toward direct sales to large original equipment manufacturers, or OEMs, and their contract manufacturers, or CMs. Our OEM customers have increased their outsourcing of the manufacture of their equipment to CMs, including companies such as Celestica, Flextronics, Sanmina and Solectron. As a result, we sell directly to both OEMs and CMs. Our OEM customers currently make the sourcing decisions for our sales to their CMs or suppliers. Accordingly, when we report customer net revenues in our public announcements, we typically attribute all net revenues to the ultimate OEM customer and not the respective CM or supplier.

This sales trend toward large OEMs and CMs has strengthened as a result of our recent acquisitions. For example, in 2005 this customer concentration increased as a significant portion of our net revenues was derived from sales of our satellite radio antenna product to Kiryung Electronics Co., Inc., and other suppliers to Sirius Satellite Radio. Our acquisition of PDI has also contributed to this customer concentration as a large percentage of PDI’s total revenues have historically come from relatively few customers, among them Motorola, which was also the SMDI segment’s largest customer in 2006.

Market share at our large OEM customers in particular tends to fluctuate from year to year based not only on our success in competing with our competitors, but also based on changes in the willingness of customers to have only one source of supply. For example, we may have a 100% share of the supply of a particular product to a customer one year and only 50% the next based on the customer deciding to employ a second source for risk management or other reasons not related to our performance as a supplier.

Diversification and Expansion Strategy.

We have historically focused on RF components for the wireless infrastructure market. We are now focusing on diversification efforts in order to capitalize on new opportunities in end markets outside of the wireless infrastructure market such as CATV, WiMAX, satellite radio, HDTV and other broadband and consumer applications.

We are also focusing on expansion through a combination of in house development of new products and acquisitions, as evidenced by our acquisition of PDI, which expanded both the depth and breadth of our product lines, and extended our design and manufacturing capabilities into Asia and Europe. The addition to our product portfolio of PDI’s complementary RF components has increased our penetration of the CATV infrastructure market and allows us to offer a more complete set of RF solutions to our combined customers. Similarly, our acquisition of Micro Linear is intended to support our product and end market diversification strategy by adding RF transceiver and network media conversion products and engineering talent to our portfolio and giving us access to new consumer and other end markets such as digital cordless telephones, personal handyphones, and wireless headsets.

Geographic Concentration.

Sales into Asia increased in each of the last three years as a result of OEMs increasingly outsourcing their manufacturing to CMs, primarily in China. In addition, we have increased our focus and presence in China and are experiencing increased shipments to various Chinese OEM customers. As a result of the PDI acquisition, our sales into Asia have decreased as a percentage of total net revenues, as most of PDI’s sales are to customers located in the United States. However, we continue to expect that a large portion of our sales in 2007 will be in the Asia region.

Competitors.

We compete primarily with other suppliers of high-performance RF components used in the infrastructure of communications networks, such as Alps, Avago, Hittite, M/A-COM, Minicircuits, NEC, TRAK Microwave Corporation and WJ Communications. For our newer broadband products, we expect our most significant competitors will include Analog Devices, Microtune, NEC, Sanyo, M/A-COM, Anadigics and ST Microelectronics. With respect to our satellite antenna sales, we compete with other manufacturers of satellite antennae and related equipment, including RecepTec and Wistron NeWeb. PDI’s CATV products primarily compete with those of NEC, Freescale, Anadigics, Philips and RFHIC Company, and its wireless infrastructure products primarily compete with WJ Communications, M/A-COM and Minicircuits. We expect that the principal competitors for the products we have acquired from Micro Linear will include Texas Instruments (Chipcon), Nordic, Atmel, Sitel, Infineon, Philips, DSP Group, Atheros, GCT and Airoha. We also indirectly compete with our own large communications OEM customers, which often have a choice as to whether they design and manufacture RF components and subsystems internally for their own consumption or purchase them from third-party providers such as us.

Cost of Revenues Overview

Cost of revenues consists primarily of costs associated with:

Wafers from third-party wafer fabs for our IC products;

Raw material components from third-party vendors for our IC, MCM and satellite antenna products;

Packaging for our IC products performed by third-party vendors;

Assembling and testing of our MCM products in our facility;

Testing of our IC products in our facility and by third-party vendors;

Assembling and testing of our satellite antenna and other broadband products performed by a third-party vendor; and

Costs associated with procurement, production control, quality assurance, reliability and manufacturing engineering.

For our IC products, we outsource our wafer manufacturing and packaging and then perform the majority of our final testing and tape and reel assembly at our Colorado manufacturing facility. The testing and tape and reel assembly for our IC products acquired in the Micro Linear acquisition are outsourced to third party suppliers. For our SMDI segment MCMs, we manufacture, assemble and test most of our products at our manufacturing facility in Colorado. For our satellite antenna and other broadband products, we outsource our assembly and testing to a third-party vendor. We build and test a significant majority of our PDI segment products in our manufacturing and test facilities in Shanghai, China and Nuremberg, Germany.

Historically, we have relied upon a limited number of foundries to manufacture most of our semiconductor wafers for our IC products. We have contractual agreements with some of these suppliers in which pricing is fixed or tiered based on volume. With others, price, volume and other terms are set on a periodic basis through negotiations between the parties. We source our IC packaging assembly and test to a limited number of established, international commercial vendors. We anticipate that we will continue to depend on a limited number of vendors for our wafer and packaging requirements.

While the raw materials we use in our MCM and satellite antenna products are generally available from numerous sources, we tend to use a single source of supply for each item, either because the performance characteristics of a given supplier’s product are particularly favorable or to enhance our ability to drive volume pricing by limiting our supplier base. While we believe we can find alternate sources of supply on reasonable terms, delay, redesigns and increased costs could result if we seek to qualify a new supplier.

Gross Profit and Margin Overview

Our gross profit and gross margin are influenced by a number of factors including the following:

1. Product features

Historically, customers have been willing to pay a premium for new or different features or functionality. Therefore, an increased percentage of sales of such products in a given period is likely to have an accretive effect on our gross margin.

2. Product type

In the markets in which we operate, IC products have historically yielded a higher gross margin than MCMs, satellite antenna products and most of the products manufactured and sold by PDI. Therefore, an increased percentage of sales of IC products in a given period is likely to have an accretive effect on our gross margin. Conversely, an increased percentage of sales of PDI products or MCMs, and in particular satellite antenna products, in a given period is likely to have a dilutive effect on our gross margin.

3. Market

Our products are sold into a wide variety of markets and each of these markets has a pricing structure that is dictated by the economics of that particular market. Therefore, the gross margin on our products can vary by the markets into which they are sold. An increased percentage of sales into higher margin markets in a given period will have an accretive effect on our gross margin, and an increased percentage of sales into lower margin markets in a given period will generally have the opposite effect. This is particularly evident for our satellite antenna product, which is sold into the consumer products, or retail, market where gross margins are generally lower than those in industrial markets.

4. Sales channel

Historically, the gross margin on sales to our large OEM customers has been lower than the gross margin on sales through our distribution channel or sales to some of our smaller direct customers. This is primarily due to the bargaining power of large OEM customers based on their higher product volumes. Therefore, an increased percentage of sales to our large OEM customers in a given period may have a dilutive effect on our gross margin while an increased percentage of sales through our distribution channel would have the opposite effect.

5. Level of integration of the product

We have seen a general trend among our customers toward seeking more integrated products with enhanced functionality, which enables them to procure fewer products from fewer suppliers. These integrated products typically command a higher average selling price than our stand-alone components. However, the manufacturing costs of these integrated products are higher, which generally results in a lower gross margin on sales of our integrated products in comparison to our stand-alone components. Therefore, an increased percentage of sales of our more integrated products in a given period will generally have an accretive impact on our average selling prices and a dilutive effect on our gross margin.

6. The efficiency and effectiveness of our manufacturing operations

Our gross margin is generally lower in periods with less volume and higher in periods with increased volume. In periods in which volumes produced internally are low, our fixed manufacturing overhead costs are allocated to fewer units, thereby diluting our gross margin when those products are sold. Conversely, in periods in which volumes produced internally are high, our fixed manufacturing overhead costs are allocated to more units, thereby positively impacting gross margin when those products are sold. This accretive impact is primarily felt in areas where our manufacturing process is highly integrated, such as the manufacture of MCM products.

7. Provision for excess inventories

As discussed in more detail in “Critical Accounting Policies and Estimates,” our cost of revenues, gross profit and gross margin may be materially impacted by provisions for excess inventories.

We believe that each of the above factors will continue to affect our cost of revenues, gross profit and gross margin for the foreseeable future and that the interaction of the factors listed above could have a significant period-to-period effect on our cost of revenues, gross profit and gross margin.

Operating Expense Overview

Research and development expenses consist primarily of salaries and salary-related expenses for personnel engaged in R&D activities, material costs for prototype and test units and other expenses related to the design, development and testing of our products and, to a lesser extent, fees paid to consultants and outside service providers. We expense all of our R&D costs as they are incurred. Our R&D costs can vary significantly from quarter to quarter depending on the timing and

quantities of materials bought for prototype and test units. We compete in part based on our ability to offer a broad range of highly engineered products designed to meet the needs of our customers, and accordingly we intend to continue to invest in R&D. From time to time we will receive funding from our customers for non-recurring engineering, or NRE, expenses to help defray the cost of work performed at their request. We record NRE funding as a reduction to research and development expenses in the period that the customer agrees that the objectives established for payment of the NRE have been achieved. Historically, NRE funding has not materially impacted our R&D expense as a whole.

We historically have performed our R&D activities in multiple, geographically dispersed locations in North America. We believe maintaining multiple standalone R&D design centers allows us to attract key personnel we might not otherwise be able to hire and allows the personnel there to better concentrate on their development tasks. We plan to continue our strategy of conducting our R&D activities in multiple locations, including locations outside of North America.

Sales and marketing expenses consist primarily of salaries, commissions and salary-related expenses for personnel engaged in marketing, sales and application engineering functions, as well as costs associated with trade shows, promotional activities, advertising and public relations. We expense commissions to our external, independent sales representatives when revenues from the associated sale are recognized. We expense quarterly cash incentives to internal sales employees based on the achievement of targeted net revenue and sales-related goals.

We intend to increase the number of direct sales personnel and application engineers supporting our customers from time to time at levels appropriate for our overall operating plan. In particular, we have placed both sales personnel and application engineers in various time zones around the world to support our customers. We believe that the combination of our direct sales force and application engineers provides us with an important advantage over any competitors which do not maintain support personnel locally in our markets.

General and administrative expenses consist primarily of salaries and salary-related expenses for executive, finance, accounting, information technology, and human resources personnel, as well as insurance and professional fees. We intend to invest in general and administrative expenses at levels appropriate for our overall operating plan.

Critical Accounting Policies and Estimates

Our discussion and analysis of our 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, expenses and related disclosures. 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 that are not readily apparent from other sources. We evaluate these estimates on an ongoing basis. Actual results may differ from these estimates.

Due to our adoption of FIN 48 in the first quarter of 2007, we have added a new critical accounting policy regarding income taxes as described in more detail immediately below. For a listing of our other critical accounting policies, please refer to our Annual Report on Form 10-K filed with the SEC in March 2007.

Income Taxes: We adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement No. 109” (FIN 48), in the first quarter of 2007. See “Note 10: Taxes” in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q for further discussion. We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of revenue, deductions, tax credits, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to these uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

We perform quarterly and annual assessments of the realizability of our net deferred tax assets considering all available evidence, both positive and negative. Assessments of the realizability of deferred tax assets require that management make significant judgments about many factors, including the amount and likelihood of future taxable income. As a result of these assessments, we previously concluded that it was more likely than not that our U.S. net deferred tax assets would not be realized and have established a full valuation allowance against our net U.S. deferred tax assets. The valuation allowance established in 2001 was recorded as a result of our analysis of the facts and circumstances at that time, which led us to conclude that we could no longer forecast future U.S. taxable income under the more likely than not standard required by SFAS 109 “Accounting for Income Taxes.”

Although we had U.S. taxable income in 2006, the acquisitions of Micro Linear and PDI increased our net U.S. deferred tax assets for the year, which places additional uncertainty on the realizability of the total U.S. net deferred tax asset. We continue to evaluate the need for a valuation allowance. To the extent we are able to generate U.S. taxable income in future periods and if our projections indicate that we are likely to generate sufficient future U.S. taxable income, we may determine that some or all of our U.S. deferred tax assets will more likely than not be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made and we may recognize a benefit from income taxes on our income statement, which would have a positive impact on our consolidated results of operations. In periods following a reduction of our valuation allowance, our effective tax rate used to calculate our provision for income taxes on our statement of income is expected to increase significantly.

Results of Income

The following table shows selected consolidated statement of income data expressed as a percentage of net revenues for the periods indicated:


	Three Months Ended March 31,
	2007		2006
Net revenues	100	%	100	%
Total cost of revenues	57	%	52	%

Gross profit	43	%	48	%
Operating expenses:
Research and development	12	%	14	%
Sales and marketing	8	%	10	%
General and administrative	12	%	15	%
Amortization of acquisition-related intangible assets	8	%	2	%

Total operating expenses	40	%	41	%

Income from operations	3	%	7	%
Interest and other income, net	0	%	1	%
Provision for income taxes	0	%	0	%

Net income	3	%	8	%

Comparisons of the Three Months Ended March 31, 2007 and March��31, 2006

Net Revenues

The following table sets forth information pertaining to our channel and geographic net revenue composition expressed as a percentage of net revenues for the periods indicated:


	Three Months Ended March 31,
	2007		2006
Direct (1)	91	%	91	%
Distribution (2)	9	%	9	%

Total	100	%	100	%

United States	45	%	22	%
Asia	47	%	59	%
Europe	7	%	12	%
Other	1	%	7	%

Total	100	%	100	%

(1)	Net revenues from sales to distributors in which rights of return and price adjustment programs are not applicable are included in net revenues attributable to our direct channel.

(2)	Net revenues from sales to distributors under distribution arrangements in which rights of return and price adjustment programs are applicable are included in net revenues attributable to our distribution channel.

Net revenues increased to $39.1 million in the first quarter of 2007 from $20.9 million in the first quarter of 2006. The increase was primarily attributable to $17.7 million of net revenue generated from sales of PDI and Micro Linear products in 2007. The increase in net revenues within our SMDI segment was also partly due to an increase in sales of our mobile wireless infrastructure products in the first quarter of 2007 compared to the first quarter of 2006. The increase in sales of our mobile wireless infrastructure products was driven primarily by the installation and enhancement of new and existing wireless networks, particularly in China. Partially offsetting this increase in net revenues within our SMDI segment were lower net revenues from sales or our broadband network application products, in particular, sales of our satellite radio antenna.

Sales into Asia increased significantly in absolute dollars primarily as a result of our OEMs increasingly outsourcing their manufacturing to CMs, primarily in China. Also contributing to the increase in sales to Asia was an increase in sales to Chinese OEM customers from both the SMDI and PDI segments. Sales into Asia as a percentage of net revenues decreased primarily as a result of the impact of PDI sales, as the majority of its sales were to customers located in the United States.

Cost of Revenues

Cost of revenues increased to $22.2 million in the first quarter of 2007 from $10.8 million in the first quarter of 2006. The increase was primarily the result of $11.6 million of additional costs associated with sales of our PDI and Micro Linear products, including $151,000 related to an increase in inventory valuation from acquisition. Other than with regard to this Micro Linear related increase, cost of revenues within our SMDI segment did not change significantly.

Gross Profit and Gross Margin

Gross profit increased to $16.9 million in the first quarter of 2007 from $10.1 million in the first quarter of 2006. The first quarter of 2007 gross profit totaled $11.6 million for the SMDI segment and $5.3 million for the PDI segment. Gross margin decreased to 43% in the first quarter of 2007 from 48% in the first quarter of 2006. This decrease was primarily due to the net revenue contribution from PDI, as PDI products typically yield lower gross margins than the average for SMDI segment products. Within the SMDI segment, gross margin increased slightly, primarily due to lower sales of our satellite radio antenna products, which typically result in a lower gross margin than sales of the products in our other SBU’s.

Operating Expenses

Research and Development. Research and development expenses increased to $4.9 million in the first quarter of 2007 from $2.9 million in the first quarter of 2006. This increase was primarily attributable to $2.0 million of additional costs associated with PDI segment and Micro Linear research and development activities and personnel.

Aggregate research and development expenses within the SMDI segment did not change significantly, excluding the additional costs associated with Micro Linear as described above. Salaries and salary related expenses increased approximately $210,000 in the first quarter of 2007 compared to the first quarter of 2006 due to base pay increases in the second half of 2006. This increase was offset by a reduction in incentive bonus expenses of $225,000, as a result of performance objectives not being met in the first quarter of 2007 related to our Cash Incentive Plan for the first six months of 2007.

Sales and Marketing Sales and marketing expenses increased to $3.0 million in the first quarter of 2007 from $2.2 million in the first quarter of 2006. This increase was primarily attributable to $738,000 of additional costs associated with our PDI segment and Micro Linear sales and marketing activities and personnel.

Aggregate sales and marketing expenses within the SMDI segment did not change significantly, excluding the additional costs associated with Micro Linear as described above. Salaries and salary related expenses increased approximately $141,000 in the first quarter of 2007 compared to the first quarter of 2006 due to base pay increases in the second half of 2006. In addition, advertising and collateral sales material expenses were higher in the first quarter of 2007 as a result of internal and external sales conferences. These increases were offset by a reduction in incentive bonus expenses of $132,000, as a result of performance objectives not being met in the first quarter of 2007 related to our Cash Incentive Plan for the first six months of 2007. In addition, stock-based compensation expenses were lower in the first quarter of 2007 due to a number of stock option grants becoming fully amortized in the second half of 2006.

General and Administrative. General and administrative expenses increased to $4.9 million in the first quarter of 2007 from $3.1 million in the first quarter of 2006. This increase was primarily attributable to $2.4 million of additional costs associated with our PDI segment and Micro Linear general and administrative activities and personnel.

Excluding the additional costs associated with Micro Linear as described above, aggregate general and administrative expenses within the SMDI segment decreased by in the first quarter of 2007 compared to the first quarter of 2006. Corporate overhead costs of $350,000 were allocated to PDI and incentive bonus expenses decreased approximately $260,000 as a result of performance objectives not being met in the first quarter of 2007 related to our Cash Incentive Plan for the first six months of 2007. In addition, the SMDI segment incurred lower costs associated with stock-based compensation and severance in the first quarter of 2007 compared to the first quarter of 2006. Partially offsetting these decreases was an increase in salaries and salary related expenses due to base pay increases in the second half of 2006 and an increase in professional fees and public company expenses.

Amortization of Acquisition-Related Intangible Assets. We recorded amortization of $3.2 million in the first quarter of 2007 and $449,000 in the first quarter of 2006 related to our acquired intangible assets. See our disclosure under Note 4: “Amortizable Acquisition-Related Intangible Assets” in Notes to Condensed Consolidated Financial Statements set forth above for more information pertaining to the amortization of acquisition-related intangible assets.

Interest and Other Income, Net. Interest and other income, net, includes income from our cash and available-for-sale securities, interest expense from capital lease financing obligations, foreign currency transaction remeasurement gains and losses and other miscellaneous items. We had net interest and other income of $269,000 in the first quarter of 2007 compared to $194,000 in the first quarter of 2006. The increase in net interest and other income was primarily attributable to an increase in interest income in 2007 due to higher cash balances. Partially offsetting this increase was interest expense of $65,000 in the first quarter of 2007 compared to $0 in the first quarter of 2006. The increase is attributable to interest expense associated with capital lease obligations assumed in connection with the PDI acquisition and interest expense on the notes payable to the former shareholders of PDI.

Provision for (Benefit from) Income Taxes. We recorded a tax expense for the first quarter of 2007 of $151,000, compared to $47,000 for the first quarter of 2006. The income tax expense represents the net U.S. and non-U.S. current and deferred income tax expense. The difference between the provision for income taxes that would be derived by applying the statutory rate to our income before income taxes and the provision actually recorded is due primarily to the impact of the change in valuation allowance, miscellaneous non-deductible items, tax credits and non-U.S. taxes, specifically a low Chinese tax rate.

Liquidity and Capital Resources

As of March 31, 2007, we had cash and cash equivalents of $28.8 million. At March 31, 2007, our working capital approximated $53.1 million. We had $3.4 million in short-term debt at March 31, 2007 consisting of a $3.0 million note payable issued in connection with the acquisition of PDI which we subsequently retired in April 2007, as well as $433,000 of capital lease obligations. We have $494,000 of long-term debt at March 31, 2007 consisting of capital lease obligations.

Net cash provided by operating activities

Operating activities provided cash of $7.9 million in the first quarter of 2007 and $5.4 million in the first quarter of 2006. In first quarter of 2007, the primary sources of cash were $1.0 million of net income, as adjusted for non-cash charges of $4.5 million for depreciation and amortization, $1.0 million for stock-based compensation, and other changes in operating assets and liabilities.

Our accounts receivable were approximately $3.2 million higher at the end of the first quarter of 2007 compared to the end of 2006. The increase in accounts receivable was primarily attributable to an increase in overall sales from the fourth quarter of 2006 as well as an increase in sales in the latter part of the quarter. Our days sales outstanding, or DSOs, were 59 days in the first quarter of 2007, compared to 55 days in the fourth quarter of 2006.

Inventories decreased to $24.8 million at March 31, 2007 from $27.0 million at December 31, 2006. The decrease was primarily attributable to lower finished goods inventories as a result of increased inventory turns and more efficient raw materials inventory management. Our inventory turns increased to 3.6 at March 31, 2007 from 3.1 at the end of 2006.

Accounts payable increased to $11.1 million at March 31, 2007 from $9.4 million at December 31, 2006. The increase in accounts payable in the first quarter of 2007 was primarily attributable to an increase in purchasing activity.

Net cash used in investing activities

Cash used in investing activities in the first quarter of 2007 totaled $4.4 million and was primarily related to additional manufacturing equipment for our Shanghai, China facility in anticipation of the transition of our manufacturing operations from Broomfield, Colorado.

As a result of an earn-out related to our acquisition of ISG at the end of 2004, additional cash consideration may become due and payable based on achievement of margin contribution objectives attributable to sales of selected products for periods through December 31, 2007. The Company had additional cash consideration of $2.9 million accrued at March 31, 2007 related to the 2006 earn-out period, which was paid in the second quarter of 2007. An additional payment of up to $3.0 million may be paid in 2008 based on achievement of objectives.

Cash provided by financing activities

Cash provided by financing activities totaled $315,000 in the first quarter of 2007. The major financing inflow of cash related to proceeds from employee stock plans.

Sirenza currently estimates that it will incur total costs of approximately $8.0 million to $10.0 million in 2007 in connection with its planned Broomfield to Shanghai manufacturing transition. This estimate includes approximately $4.5 to $6.0 million in estimated capital expenditures for new equipment to support the manufacturing transition, with the remainder of the estimate being attributable to anticipated additional personnel, recruiting, travel and facility improvement costs, additional lease expense and potential lease termination expense, and one-time severance payments and retention incentives. These estimated costs are expected to result in future cash expenditures. The actual costs associated with the manufacturing transition may vary materially from these estimates.

Based on current macro-economic conditions and conditions in the commercial communications, consumer and A&D equipment markets, our current company structure and our current outlook for 2007, we expect that we will be able to fund our working capital and capital expenditure needs from cash on hand and cash generated from operations for at least the next 12 months. Other sources of liquidity that may be available to us are the leasing of capital equipment, commercial lines of credit at a commercial bank, or sales of our securities.

Contractual Obligations

As of March 31, 2007, our contractual obligations, including payments due by period, were as follows (in thousands):


	Payments due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating lease commitments	$	5,851	$	1,690	$	2,185	$	1,930	$	46
Capital lease commitments	$	1,012	$	492	$	520	$	—	$	—
Additional consideration related to the acquisition of ISG Broadband, Inc.	$	2,894	$	2,894	$	—	$	—	$	—
Unconditional purchase obligations	$	2,712	$	2,712	$	—	$	—	$	—
Promissory note due to shareholder of PDI	$	3,000	$	3,000	$	—	$	—	$	—

Total	$	15,469	$	10,788	$	2,705	$	1,930	$	46

Purchase commitments are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including open purchase orders. We include in purchase commitments contractual obligations we have with our vendors who supply us with our wafer requirements for IC-based products. Because the wafers we purchase are unique to these suppliers and involve significant expense, our agreements with these suppliers often prohibit cancellation subsequent to the production release of the products in our suppliers’ manufacturing facilities, regardless of whether our end customers cancel orders with us or our requirements are reduced. Purchase orders or contracts for the purchase of raw materials, other than wafer requirements for IC-based products, and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current manufacturing needs and are generally fulfilled by our vendors within short time horizons. Except for wafers for our IC-based products, we do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements for three months.

The total indicated in the table above includes $2.9 million of additional cash consideration accrued at March 31, 2007 and paid in the second quarter of 2007 in connection with our acquisition of ISG. However, an additional $3.0 million may be payable in 2008 based on the achievement of margin contribution objectives attributable to sales of selected products for periods through December 31, 2007. Also noted in the table above is the remaining $3.0 million promissory note issued in the PDI acquisition, which we retired in April 2007.

We expect to fund these contractual obligations with cash and cash equivalents on hand, cash flows from operations and proceeds received from employee stock plans. The expected timing of payments of the obligations discussed above is based upon current information. Timing and actual amounts paid may be different.

Off-Balance-Sheet Arrangements

As of March 31, 2007 we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to foreign currency exchange rate and interest rate risk that could impact our financial position and results of operations. To mitigate some of these risks, we utilize currency forward contracts. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

We place our cash equivalents, short-term investments and restricted cash with high-credit-quality financial institutions, investing primarily in money market accounts and federal agency related securities. We have established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Our interest income and expense are sensitive to changes in the general level of interest rates. In this regard, changes in interest rates can affect the interest earned on our cash equivalents and available-for-sale investments. For example, a one percent increase or decrease in interest rates would increase or decrease our annual interest income by approximately $288,000, based on our cash and available-for-sale investments balance at March 31, 2007.

Foreign Currency Exchange Rate Risk

As a result of the acquisition of PDI, we now conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which our consolidated financial statements are reported. Correspondingly, our operating results could be adversely affected by foreign currency exchange rate volatility relative to the U.S. dollar. Our subsidiaries in Germany and China use the local currency as their functional currency, as the majority of their purchases are transacted in the local currency. However, revenue for these foreign subsidiaries is invoiced and collected in both the local currency and in U.S. dollars, typically depending on the preference of the customer. Although we did not have any derivative financial instruments outstanding as of March 31, 2007, to hedge against the risk of Euro to U.S. dollar exchange rate fluctuations, our German subsidiary has in the past contracted with a financial institution to sell U.S. dollars and buy Euros at fixed exchange rates at specific dates in the future. We continue to evaluate strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, although we cannot ensure that we will not recognize gains or losses from international transactions. Not every exposure is or can be hedged, and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts which may vary or which may later prove to be inaccurate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our operating results.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1.Legal Proceedings

On April 16, 2003, Scientific Components Corporation d/b/a Mini-Circuits Laboratory (“Mini-Circuits”) filed a complaint against us in the United States District Court for the Eastern District of New York alleging, among other things, breach of warranty by us for alleged defects in certain goods sold to Mini-Circuits. Mini-Circuits seeks compensatory damages plus interest, costs and attorneys’ fees. On July 30, 2003, we filed an answer to the complaint and asserted counterclaims against Mini-Circuits. In December 2005, we moved for summary judgment dismissing Mini-Circuits’ claims, and Mini-Circuits cross-moved for summary judgment dismissing our counterclaims. On August 30, 2006, the court issued an order determining that factual issues requiring a trial precluded dismissal of Mini-Circuits’ claims on our summary judgment motion, and, accordingly, denied our motion for summary judgment on Mini-Circuits’ claims. The court, however, granted Mini-Circuits’ motion for summary judgment, dismissing our counterclaims. While we believe Mini-Circuits’ claims to be without merit and intend to defend against Mini-Circuits’ claims vigorously, if we ultimately lose or settle the case, we may be liable for monetary damages and other costs of litigation. Even if we are entirely successful in defending against the lawsuit, we will have incurred significant legal expenses and our management may have to expend significant time in the defense.

Item 1A. Risk Factors

Set forth below and elsewhere in this quarterly report and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this quarterly report.

Risks Relating to Our Business

Our operating results will fluctuate and we may not meet quarterly or annual financial expectations, which could cause our stock price to decline.

Our quarterly operating results have varied significantly in the past and are likely to vary significantly in the future based upon a number of factors, many of which we have little or no control over. Factors that could cause operating results to fluctuate include:

• the reduction, rescheduling or cancellation of orders by customers, whether as a result of a loss of market share by us or our customers, slowing demand for our products or our customers’ products, over-ordering of products or otherwise;

• the gain or loss of a key customer or significant changes in the financial condition of one or more key customers;

• fluctuations in manufacturing output, yields, quality control or other potential problems or delays we or our subcontractors may experience in the fabrication, assembly, testing or delivery of our products;

• general economic growth or decline, or changing conditions in the commercial communications, consumer or aerospace and defense industries generally or the market for products containing RF components specifically;

• the market acceptance of our products and particularly the timing and success of new product and technology introductions by us (such as our power amplifiers targeted at makers of light sources for rear-projection TVs, and our newer PHS products) or our customers or competitors;

•

period-to-period changes in the mix of products we sell to our customers or the mix of sales between our segments, which can reduce our gross margin;

•

availability, quality and cost of wafers and other raw materials, equipment, components, semiconductor wafers and internal or outsourced manufacturing, packaging and test capacity;

•

seasonal and other changes in customer purchasing cycles and component inventory levels, which we may be unable to predict;

•

changes in selling prices for RF components due to competitive or currency exchange rate pressures;

•

the amount, timing and relative success of our investments in R&D;

•

impairment charges associated with intangible assets, including goodwill and acquisition-related intangible assets;

•

factors that could cause our reported domestic and foreign income taxes and income tax rate to increase in future periods, such as our ability to utilize net operating losses or tax credits in certain jurisdictions and the geographic distribution of our income, which may change from period to period; and

•

the effects of war, acts of terrorism or geopolitical unrest, such as disruption in general economic activity, and the effects on the economy and our business of increasing oil prices.

The occurrence of these and other factors could cause us to fail to meet quarterly or annual financial expectations, which could cause our stock price to decline. For example, in the first quarter of 2005 our financial results were below investment community expectations, in part due to rescheduling of customer orders, and our stock price subsequently declined.

Our operating results may suffer if we are unable to accurately forecast demand for our products.

Our business is characterized by short-term orders and shipment schedules. Customer orders can typically be cancelled or rescheduled without significant penalty to the customer. Some large customers also may require us to build and maintain minimum inventories and keep them available for purchase at specified locations based on non-binding demand estimates that are subject to change, which exposes us to inventory risk and makes it more difficult to manage our working capital. Because we do not have substantial non-cancelable backlog, we typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate substantially, leading to excess inventory write-downs and resulting negative impacts on gross margin and net income. In response to anticipated long lead times to obtain inventory and materials from outside suppliers and foundries, we periodically order materials in advance of customer demand. This advance ordering has in the past and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less saleable.

During periods of industry downturn such as we have experienced in the past, customer order lead times and the resulting order backlog typically shrink further, making it more difficult to forecast production levels, capacity and net revenues. We frequently find it difficult to accurately predict future demand in the markets we serve, which limits our ability to accurately estimate requirements for production capacity. Even in periods of high demand, customers often attempt to “pull-in” the proposed delivery dates of products they have previously ordered from us, which can also make it difficult to forecast production levels, capacity and net revenues. While we strive to meet our customers’ changing requirements, if we are unsuccessful in this regard these customers may shift future orders or market share to our competitors in response.

We depend on a relatively small number of customers for a significant portion of our net revenues. The loss of any of these customers could reduce our net revenues and earnings.

A relatively small number of customers account for a significant portion of our net revenues in any particular period. For example, in 2006, Motorola accounted for more than 10% of net revenues and our top ten customers accounted for approximately 64% of net revenues. We expect that our history of high customer concentration and attendant risk will continue in future periods. While we enter into long-term supply agreements with customers from time to time, these contracts typically do not require the customer to buy any minimum amount of our products, and orders are typically handled on a purchase order by purchase order basis. We cannot assure you that sales to Motorola, Huawei or other large original equipment manufacturer, or OEM, customers will not decline in the future. The loss of Motorola or Huawei in particular, any of our other large OEM customers or any other significant customer could limit our ability to sustain and grow our net revenues, decrease our profitability and lower our stock price.

Our growth depends on the growth of the wireless and wireline communications infrastructure market. If this market does not grow, or if it grows at a slow rate, demand for our products may fail to grow or diminish.

Our growth will depend on the growth of the communications industry in general, and the market for wireless and wireline infrastructure components in particular. We cannot assure you that the market for these products will grow at all. If the market does not grow or experiences a downturn, our revenues and earnings may be materially reduced. In the past, there have been reductions throughout the worldwide communications industry in component inventory levels and equipment production volumes, and delays in the build-out of new wireless and wireline infrastructure. These events caused us to lower previously announced expectations for financial results, which caused the market price of our common stock to decrease. The occurrence of the events described above could result in lower or erratic sales for our products and decreased earnings. A substantial portion of our net revenues is currently derived from sales of components for wireless infrastructure applications. Our PDI segment derives a substantial portion of its revenue from the cable television infrastructure market. As a result, downturns in either the wireline or the wireless communications market could harm our operating results and stock price.

Our gross margin will fluctuate from period to period, and such fluctuation could affect our financial performance, particularly earnings per share, in turn potentially decreasing our stock price.

Numerous factors will cause our gross margin to fluctuate from period to period. For example, the gross margin on sales to large OEM customers has historically been lower than on sales through our distribution channel or sales to some of our smaller direct customers, primarily due to the bargaining power of large OEM customers and their higher product volumes. If, as we expect, these large OEMs continue to account for a majority of our net revenues for the foreseeable future, the continuance of this trend will likely have a dilutive impact on gross margins in future periods. In addition, sales of our IC products have historically yielded a higher gross margin than our MCM products. Therefore, increased sales of MCM products in a given period will likely have a dilutive effect on gross margin. In addition, sales of certain of our broadband products, in particular satellite radio antennae, have historically had lower gross margins than sales of our wireless infrastructure products. Therefore, increased sales of such products in a given period will likely have a dilutive effect on gross margin. In 2005, sales of antenna products increased significantly as a percentage of our total sales, which had a dilutive effect on gross margin. PDI’s gross margin in prior periods has generally been lower than Sirenza’s, and therefore increased sales of PDI segment products in a given period may have a dilutive effect on gross margin.

Other factors that could cause our gross margin to fluctuate include the features of the products we sell, the markets into which we sell our products, the level of integration of our products, the efficiency and effectiveness of our internal and outsourced raw material sourcing, manufacturing, packaging and test operations, product quality issues, provisions for excess inventories and sales of previously written-down inventories. As a result of these or other factors, we may be unable to maintain or increase our gross margin in future periods.

We may incur higher than expected costs and business disruption in transferring our manufacturing processes to new facilities.

In 2007 we intend to transition most of our Broomfield, Colorado manufacturing operations to a new manufacturing facility in Shanghai, China, where we recently relocated our existing Shanghai manufacturing facility. As a result of these transitions, we will need to re-qualify the transitioned operations for ISO or other certifications and also re-qualify our manufacturing processes or products with major customers. After the transition, we expect that a majority of our worldwide manufacturing will be conducted in Shanghai. We expect to incur substantial capital expense and wind-down costs in connection with the transition. We may not be able to accomplish the transition in the time scheduled and may spend more than we expect in completing it. Affected employees in Broomfield may be distracted by the transition or may seek other employment before their positions are eliminated, which could cause our overall operational efficiency to suffer. We may have difficulty finding qualified employees in Shanghai on schedule to staff our expanded operations. Once the transition is complete, we may not achieve the cost savings we expect to generate in future years from the transition, and we may experience difficulty in managing the transitional operations effectively from our Colorado headquarters. Any of these occurrences could result in additional costs, business interruption or disruption, loss of customers, weaker than expected financial results, and a reduced stock price.

Sales of our products have been affected by a pattern of product price decline, which can harm our business.

The market for our products is characterized by rapid technological change, evolving industry standards, product obsolescence, and significant price competition, and, as a result, is subject to regular decreases in product average selling prices over time. We are unable to predict future prices for our products, but expect that prices for products that we sell to our large wireless and wireline infrastructure OEM customers in particular, whom we expect to continue to account for a majority of our net revenues for the foreseeable future, will continue to be subject to downward pressure. These OEMs continue to require components from their suppliers, including us, to deliver improved performance at lower prices. We have also seen a similar pattern of price decline in our sales of satellite radio antennae and related products, and the products we have more recently acquired from PDI and Micro Linear are also subject to steady price pressure. Accordingly, our ability to maintain or increase net revenues will be dependent on our ability to increase unit sales volumes of existing products and to successfully develop, introduce and sell new products with higher prices into both the wireless infrastructure market and other markets. We cannot assure you that we will be able to develop significant new customers with less price sensitivity, increase unit sales volumes of existing products, or develop, introduce or sell new products not affected by a pattern of steady average selling price declines.

Our reliance on foreign suppliers and manufacturers and our offshore manufacturing transition expose us to the economic and political risks of the countries in which these operations are located.

Independent third parties in other countries, primarily in Thailand, Malaysia, South Korea, Taiwan and the Philippines, package substantially all of our semiconductor products. In addition, all of our satellite antenna manufacturing is outsourced to a subcontractor in the Philippines, and we obtain many of our semiconductor wafers from suppliers located abroad. Our reliance on foreign suppliers and packagers, our sizeable manufacturing operations in China and Germany and our planned transition of our Broomfield manufacturing operations to Shanghai subject us to risks of conducting business outside the United States, such as:

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unexpected changes in, or impositions of, legislative or regulatory requirements;

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shipment delays, including delays resulting from difficulty in obtaining import or export licenses;

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tariffs and other trade barriers and restrictions;

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political, social and economic instability;

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inefficiencies due to exchange rate fluctuations, differing time zones, language barriers, data privacy requirements and the like; and

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potential hostilities and changes in diplomatic and trade relationships.

The Chinese legal system lacks transparency in certain respects relative to that of the United States, which gives the Chinese central and local government authorities a higher degree of control over business in China than is customary in the United States and makes the process of obtaining necessary regulatory approval in China inherently somewhat more unpredictable. Although the Chinese government has been pursuing economic reform and a policy of welcoming foreign investments, it is possible that the Chinese government will change its current policies in the future, making continued business operations in China more difficult or unprofitable. In addition, the protection accorded our proprietary technology and know-how under both the Chinese and German legal systems is not as strong as in the United States and, as a result, we may lose valuable trade secrets and competitive advantage. Designing and manufacturing our products and using CMs and other suppliers throughout the Asia region exposes our business to the risk that our proprietary technology may be misappropriated and our ownership rights may not be protected or enforced to the extent that they may be in the United States. The cost of doing business in Germany can also be higher than in the U.S. due to German legal requirements regarding employee benefits and employer-employee relations, in particular.

In addition, we currently transact business with many of our foreign suppliers and packagers in U.S. dollars. Consequently, if the currencies of our suppliers’ countries were to increase in value against the U.S. dollar, our suppliers may attempt to raise the cost of our semiconductor wafers, packaging materials and services, and other materials, which could harm our profitability and make our products less price competitive. The substantial operations in China and Germany we acquired from PDI and our transition of manufacturing operations to Shanghai involve increases in the proportion of our sales and expenses denominated in foreign currency, which also increases our exposure to the risk of exchange rate fluctuations.

The common stock we issued in our 2006 acquisitions and charges associated with these acquisitions may negatively impact our earnings per share.

Based on the increase in our number of common shares outstanding in connection with our Micro Linear and PDI acquisitions, the amortization charges related to them and the potential for additional costs associated with integrating these companies, the acquisitions may result in lower earnings per share than would have been earned by Sirenza in the absence of the transactions. We expect that over time these acquisitions will yield cost synergies and other benefits to the combined company such that they will ultimately be accretive to earnings per share. However, there can be no assurance that an increase in earnings per share will be achieved. In order to achieve increases in earnings per share as a result of these acquisitions, management will, among other things, need to successfully manage the combined company’s operations, reduce operating expenses, increase revenues and compete effectively in its end-markets. Failure to achieve any of these objectives could cause our stock price to decline.

Our recent acquisitions of Micro Linear and PDI may not be successfully integrated or produce the results we anticipate.

In October 2006, we acquired Micro Linear, a fabless semiconductor company specializing in wireless integrated circuit solutions used in a variety of wireless products and headquartered in San Jose, California. In April 2006, we acquired PDI, the largest acquisition we have ever undertaken by many metrics, including the dollar value paid, the complexity, number of locations and geographic footprint of the operations to be integrated, and the number of employees joining us, which roughly tripled our employee base. PDI was also our first acquisition involving international operations, as most of PDI’s employees and manufacturing are based in Shanghai, China and Nuremberg, Germany. We expect that the integration of Micro Linear’s and PDI’s operations with our own will be a complex, time-consuming and costly process involving each of the typical acquisition risks discussed below in the risk factor entitled “We expect to make future acquisitions, which involve numerous risks.” We will also face, among others, the following related challenges and risks:

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operating a much larger combined company with operations in China and Germany, where we have limited operational experience;

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managing geographically dispersed personnel with diverse cultural backgrounds and organizational structures;

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the greater cash management, exchange rate, legal and income taxation risks associated with the combined company’s new multinational character and the movement of cash between Sirenza and its domestic and foreign subsidiaries;

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assessing and maintaining the combined company’s internal control over financial reporting and disclosure controls and procedures as required by U.S. securities laws;

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potential incompatibility of business cultures and/or loss of key personnel;

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increased professional advisor fees related to the new profile of the combined company;

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the need to efficiently reduce the combined company’s public company, sales and marketing and general and administrative expenses without associated disruption of the combined business;

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the possibility that we may incur unanticipated expenses in connection with these transactions or be required to expend material sums on potential contingent intellectual property, tax, environmental or other liabilities associated with these companies’ prior operations or facilities;

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possible integration-related expenses, severance pay, and charges to earnings from the elimination of redundancies; and

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increased difficulty in financial forecasting due to our limited familiarity with PDI’s and Micro Linear’s operations, customers and markets or their impact on the overall results of operations of the combined company.

Although the time required will vary with the particular circumstances of each business combination, and the allocation period in a business combination typically will not exceed one year from its consummation date, the costs and effects of the purchase accounting associated with these acquisitions also present challenges and risks. On January 31, 2007 we issued a press release announcing our unaudited results for our fourth quarter and fiscal year ended December 31, 2006, and on February 15, 2007, we filed such results on Form 8-K, noting that they remained unaudited and subject to adjustment. As we continued our year-end procedures to finalize these results, on March 6, 2007 we concluded that purchase accounting adjustments at our foreign subsidiaries were required under generally accepted accounting principles in the United States in the fourth quarter and fiscal year ended December 31, 2006, which reduced our provision for income taxes in both periods as previously disclosed. These reductions to our provision for income taxes resulted in our previously disclosed earnings per share for both periods increasing by $0.02 per diluted share, as well as other related income statement and balance sheet line item reclassifications.

Failure to successfully address one or more of the above risks may result in unanticipated liabilities and cash outlays, lower than expected net revenue, losses from operations, failure to realize any of the expected benefits of the acquisitions, and related declines in our stock price.

Our efforts to diversify our product portfolio and expand into new markets involve execution risk.

While historically we have derived most of our net revenues from the sale of products to the mobile wireless infrastructure market, one of our corporate strategies involves leveraging our core strengths in high-performance RF component design, modular design process technology and wireless systems application knowledge to expand into new markets which have similar product performance requirements, such as the rear-projection TV, broadband wireless access, Voice over Internet Protocol, or VoIP, cable, satellite radio, personal handyphone and digital cordless telephone markets. We do not have a long history in many of these markets or in consumer-oriented markets generally, and our lack of market knowledge relative to other participants in such markets may prevent us from competing effectively in them. It is possible that our competitive strengths will not translate effectively into these markets, and we will not be able to generate the revenues we expect from them or compete in them profitably. These markets also may not develop at the rates we anticipate. For example, sales of our products derived from the Micro Linear acquisition may not meet our expectations based on slowdowns in the personal handyphone, digital cordless phone or computer networking equipment markets or other factors. We may expend significant sums and engineering resources in attempting to develop appropriate products with which to penetrate these markets and fail to achieve our hoped for return on the investment.

Product quality, performance and reliability problems could disrupt our business and harm our financial condition and results of operations.

Our customers demand that our products meet stringent quality, reliability and performance standards. Despite standard testing performed by us, our suppliers and our customers, RF components such as those we produce may contain undetected defects or flaws that may only be discovered after commencement of commercial shipments. As a result, defects or failures have in the past, and may in the future, impact our product quality, performance and reliability, leading to:

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lost net revenues and gross profit, and lower margins;

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delays in, or cancellations or rescheduling of, orders or shipments;

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loss of, or delays in, market acceptance of our products;

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significant expenditures of capital and resources to resolve such problems;

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other costs including inventory write-offs and costs associated with customer support;

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product returns, discounts, credits issued, or cash payments to resolve such problems;

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diversion of technical and other resources from our other development efforts;

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warranty and product liability claims, lawsuits and liability for damages caused by such defects; and

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loss of customers, or loss of credibility with our current and prospective customers.

If we fail to successfully introduce new products in a timely and cost-effective manner, our ability to sustain and increase our net revenues could suffer.

The markets for our products are characterized by new product introductions, evolving industry standards and changes in manufacturing technologies. Because of this, our future success will in large part depend on our ability to:

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continue to introduce new products in a timely fashion;

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gain market acceptance of our products;

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improve our existing products to meet customer requirements;

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adapt our products to support established and emerging industry standards;

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adapt our products to support evolving wireless and wireline equipment architectures; and

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access new process and product technologies.

We estimate that the development cycles of some of our products from concept to production could last more than 12 months. We have in the past experienced delays in the release of new products and an inability to successfully translate new product concepts to production in time to meet market demands or at all. The second-generation PHS products we recently acquired from Micro Linear have also experienced a longer than expected sales cycle, after the first generation of such products achieved only limited customer acceptance. In addition, the networking products acquired from Micro Linear are reaching maturity, and revenue from this product line is expected to decline in future periods, which increases the importance of new product introductions. We may not be able to introduce new products in a timely and cost-effective manner, which would impair our ability to sustain and increase our net revenues.

Our reliance on third-party wafer fabs to manufacture our semiconductor wafers may reduce our ability to fill orders and limit our ability to assure product quality and to control costs.

We do not own or operate a semiconductor fabrication facility, or fab. We currently rely on a number of third-party wafer fabs to manufacture our semiconductor wafers. These fabs include RF Micro Devices, or RFMD, for GaAs devices, Atmel for SiGe devices, TriQuint Semiconductors for our discrete devices, GCS for our indium gallium phosphide, or InGaP, devices, TSMC and Chartered Semiconductor for CMOS devices, IBM and Jazz Semiconductor for SiGe BiCMOS devices and an Asian foundry that supplies us with lateral diffused metal oxide semiconductor, or LDMOS, devices. The loss of one of our third-party wafer fabs, or any reduction of capacity, manufacturing disruption, or delay or reduction in wafer supply, would negatively impact our ability to fulfill customer orders, perhaps materially, and has in the past and could in the future damage our relationships with our customers, either of which could significantly harm our business and operating results.

Some of these relationships are handled on a purchase order by purchase order basis while others are conducted pursuant to longer-term purchase agreements. Some of our longer-term contracts feature “last-time buy,” or LTB, arrangements. An LTB arrangement typically provides that, if the vendor decides to obsolete or materially change the process by which our products are made, we will be given prior notice and opportunity to make a last purchase of wafers in volume. While the goal of the LTB arrangement is to allow us a sufficient supply of wafers in such instances to either meet our future needs or give us time to transition our products to, and qualify, another supply source, we cannot assure you that the volume of wafers provided for under any LTB arrangement will adequately meet our future requirements. Northrop Grumman, or NG (formerly TRW, Inc.), has discontinued the operation of the fabrication line on which our GaAs products have historically been made, and we made a last-time buy of wafers in connection with the line shutdown. We believe that through a combination of our current inventory and our efforts to transition customers to products using semiconductors produced by our other foundry partners, we will have a sufficient wafer supply to meet our currently anticipated customer needs. However, there can be no assurance that sufficient supplies of such wafers will become available to us, or that our transitioning efforts will be successful and will not result in lost market share.

Each of our foundries are our sole supplier for parts in the particular fabrication technology manufactured at their facility. GCS is a private company with limited capital resources and operating history. Because there are limited numbers of third-party wafer fabs that use the process technologies we select for our products and that have sufficient capacity to meet our needs, it would be difficult to find an alternative source of supply. Even if we were able to find an alternative source, using alternative or additional third-party wafer fabs would require an extensive qualification process that could prevent or delay product shipments, which could harm our business, financial condition and results of operations.

Our reliance on these third-party wafer fabs involves several additional risks, including reduced control over the manufacturing costs, delivery times, reliability and quality of our components produced from these wafers. The fabrication of semiconductor wafers is a highly complex and precise process. We expect that our customers will continue to establish demanding specifications for quality, performance and reliability that must be met by our products. Our third-party wafer fabs may not be able to achieve and maintain acceptable production yields in the future. To the extent our third-party wafer fabs suffer failures or defects, we have in the past and could in the future experience warranty and product liability claims, lost net revenues, increased costs, or delays in, cancellations or rescheduling of orders or shipments, any of which could harm our business, financial condition and results of operations.

A substantial portion of our products are sold to international customers, which exposes us to numerous risks.

A substantial portion of our direct sales and sales through our distributors are to foreign purchasers, particularly in China, Singapore, Korea, Mexico, Finland, the Philippines, Germany and Sweden. International sales approximated 59% of net revenues in 2006, the majority of which was attributable to customers, CMs and OEMs located in Asia. Demand for our products in foreign markets could decrease, which could harm our business, financial condition and results of operations. Moreover, sales to international customers may be subject to numerous risks, including:

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changes in trade policy and regulatory requirements;

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duties, tariffs and other trade barriers and restrictions;

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timing and availability of export licenses;

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exchange rate fluctuations;

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difficulties in managing distributors’ sales to foreign countries;

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the complexity and necessity of using foreign representatives;

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compliance with a variety of foreign and U.S. laws affecting activities abroad;

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potentially adverse tax consequences;

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trade disputes; and

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potential political, social and economic instability.

We are also subject to risks associated with the imposition of legislation and regulations relating to the import or export of high technology products. We cannot predict whether quotas, duties, taxes or other charges or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries. Because most sales of Sirenza products have historically been denominated in United States dollars, increases in the value of the United States dollar could increase the price of

our products so that they become relatively more expensive to customers in the local currency of a particular country, leading customers to order fewer products, thereby reducing our sales and profitability in that country. Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from United States laws; therefore, we may be limited in our ability to enforce our rights under such agreements and to collect damages, if awarded.

Failure to maintain effective internal control over financial reporting could adversely affect our business and the market price of our stock.

Pursuant to rules adopted by the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports on Form 10-K. While we currently believe our internal controls over financial reporting are effective, we are required to comply with Section 404 on an annual basis. If, in the future, we identify one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process, our management will be unable to assert that such internal controls are effective. We cannot be certain as to the timing of completion for our future evaluation, testing and any required remediation. If we are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors are unable to attest that our management’s report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our business and the market price of our common stock.

Intense competition in our industry could prevent us from increasing net revenues and sustaining profitability.

The RF component industry is intensely competitive in each of the markets we serve. With respect to our amplifier products, we compete primarily with other suppliers of high-performance RF components used in the infrastructure of communications networks such as Avago Technologies Limited, Hittite Microwave Corporation, M/A-COM, a division of Tyco Electronics Corp., NEC Corporation and WJ Communications, Inc. With respect to our satellite antenna sales, we compete with other manufacturers of satellite antennae and related equipment, including RecepTec, LLC and Wistron NeWeb Corp. For our newer broadband products, we expect our most significant competitors will include Analog Devices, Microtune, NEC, Sanyo, M/A-COM, Anadigics and ST Microelectronics. With respect to our signal source products, our primary competitors are Alps Electric Co., Ltd., M/A-COM and Mini-circuits. With respect to our A&D products, our primary competitors are Hittite, M/A-COM, Spectrum Control, Inc. and Teledyne Technologies Incorporated. The PDI segment’s cable television, or CATV products primarily compete with those of NEC, Freescale, Anadigics, Inc., Philips Electronics and RFHIC Company, and our wireless infrastructure products primarily compete with WJ Communications, M/A-COM, Mini-circuits and TRAK Microwave Corporation. We expect that the principal competitors for the products we have acquired from Micro Linear will include Texas Instruments (Chipcon), Nordic, Atmel, Sitel, Infineon, Philips, DSP Group, Atheros, GCT and Airoha. We also compete in a sense with our own large communications OEM customers, who often have a choice as to whether they design and manufacture RF components and subsystems internally for their own consumption or purchase them from third-party providers such as us. Competition in each of these markets is typically based on a combination of price, performance, product quality and reliability, customer support and the ability of each supplier to meet production deadlines and provide a steady source of supply. Market share at our large OEM customers in particular tends to fluctuate from year to year based not only on our relative success compared to our competitors in finding the right balance of these factors, but also based on changes in the willingness of customers to have only one source of supply. For example, we may have a 100% share of the supply of a particular product to a customer one year and only 50% the next based on the customer deciding to employ a second source for risk management or other reasons not related to our performance as a supplier.

We expect continuing competition both from existing competitors and from a number of companies that may enter the RF component market, and we may see future competition from companies that may offer new or emerging technologies. In addition, we expect that future competition will come from component suppliers based in countries with lower production costs, or IC manufacturers as they add additional integrated functionality at the chip level that could supplant our products. Many of our current and potential competitors have significantly greater financial, technical, manufacturing and marketing resources than we do. As a result, prospective customers may decide not to buy from us due to their concerns about our size, financial stability or ability to interact with their logistics systems. Our failure to successfully compete in our markets could result in lower revenues, decreased profitability and a lower stock price.

Our products could infringe the intellectual property rights of others, and resulting claims against us could be costly and require us to enter into disadvantageous license or royalty arrangements.

Our industry is characterized by the existence of a large number of patents and litigation based on allegations of patent infringement and the violation of intellectual property rights. Although we attempt to avoid infringing known proprietary rights of third parties in our product development efforts, we have in the past and may in the future be subject to legal proceedings and claims for alleged infringement by us or our licensees of third-party proprietary rights, such as patents, trade secrets, trademarks or copyrights, from time to time in the ordinary course of business. In addition, our sales agreements often contain intellectual property indemnities, such as patent and copyright indemnities, and our customers may assert claims against us for indemnification if they receive claims alleging that their products infringe others’ intellectual property rights.

Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and resources, or require us to enter into royalty or license agreements which are not advantageous to us or pay material amounts of damages. In addition, parties making these claims may be able to obtain an injunction, which could prevent us from selling our products. We are increasingly subject to infringement claims as the number of our products grows and as we move into new markets, and in particular in consumer markets, where there are many entrenched competitors and we are less familiar with the competitive landscape and prior art.

We expect to make future acquisitions, which involve numerous risks.

We have in the past made, and will continue to evaluate potential acquisitions of, and investments in, complementary businesses, technologies, services or products, and expect to pursue such acquisitions and investments if appropriate opportunities arise. However, we may not be able to identify suitable acquisition or investment candidates in the future, or if we do identify suitable candidates, we may not be able to make such acquisitions or investments on commercially acceptable terms, or at all. In the event we pursue acquisitions, we will face numerous risks including:

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difficulties in integrating the personnel, operations, technology or products and service offerings of the acquired company;

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diversion of management’s attention from normal daily operations of our business;

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difficulties in entering markets where competitors have stronger market positions;

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difficulties in managing and integrating operations in geographically dispersed locations;

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difficulties in improving the internal controls, disclosure controls and procedures and financial reporting capabilities of any acquired operations, particularly foreign and formerly private operations, as needed to meet the required standards of U.S. public companies;

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the loss of any key personnel of the acquired company as well as their know-how, relationships and expertise;

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maintaining customer, supplier or other favorable business relationships of acquired operations;

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insufficient net revenues to offset increased expenses associated with any abandoned or completed acquisitions; and

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additional expense associated with amortization or depreciation of acquired tangible and intangible assets.

Even if a proposed acquisition or alliance is successfully realized and integrated, we may not receive the expected benefits or synergies of the transaction. Past transactions have resulted, and future transactions may result, in significant costs and expenses and charges to earnings. The accounting treatment for any acquisition may result in significant amortizable intangible assets, which when amortized will negatively affect our consolidated results of operations. The accounting treatment for any acquisition may result in significant goodwill, which, if impaired, will negatively affect our consolidated results of operations. The accounting treatment for any acquisition may also result in significant in-process research and development charges, which will negatively affect our consolidated results of operations in the period in which an acquisition is consummated. In addition, any completed, pending or future transactions may result in unanticipated expenses or tax or other liabilities associated with the acquired assets or businesses. Furthermore, we may incur indebtedness or issue equity securities to pay for any future acquisitions. The incurrence of indebtedness could limit our operating flexibility and be detrimental to our results of operations, and the issuance of equity securities could be dilutive to our existing stockholders. Any or all of the above factors may differ from the investment community’s expectations in a given quarter, which could negatively affect our stock price.

We may experience difficulties in managing any future growth.

Our ability to successfully do business in a rapidly evolving market requires us to effectively plan and manage any current and future growth. Our ability to manage future growth will be dependent in large part on a number of factors, including:

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maintaining access to sufficient manufacturing capacity to meet customer demands;

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arranging for sufficient supply of key components to avoid shortages of components that are critical to our products;

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building out our administrative infrastructure at the proper pace to support any current and future sales growth while maintaining operating efficiency;

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adhering to our high quality and process execution standards, particularly as we hire and train new employees and during periods of high volume;

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managing the various components of our working capital effectively in periods where cash on hand is limited;

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upgrading our operational and financial systems, procedures and controls, including improvement of our accounting and internal management systems; and

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maintaining high levels of customer satisfaction.

If we are unable to effectively manage any future growth, our operations may be impacted and we may experience delays in delivering products to our customers. Any such delays could affect such customers’ ability to deliver products in accordance with their planned manufacturing schedules, which could adversely affect customer relationships. We may also be required to build additional component inventory in order to offset expected future component shortages. If we do not manage any future growth properly, our business and stock price could suffer.

If we lose our key personnel or are unable to attract and retain key personnel, we may be unable to pursue business opportunities or develop our products.

We believe that our future success will depend in large part upon our continued ability to recruit, hire, retain and motivate highly skilled technical, marketing, administrative and managerial personnel. Competition for these employees is significant. Our failure to retain our present employees and hire additional qualified personnel in a timely manner and on reasonable terms could harm our business, financial condition and results of operations. In addition, from time to time we may recruit and hire employees from our customers, suppliers and distributors, which could damage our business relationship with these parties. Our success also depends on the continuing contributions of our senior management and technical personnel, all of whom would be difficult to replace. The loss of key personnel could adversely affect our ability to execute our business strategy, which could harm our business, financial condition and results of operations. We may not be successful in retaining these key personnel.

Our reliance on subcontractors to package our products could cause a delay in our ability to fulfill orders or could increase our cost of revenues.

We do not package the RF semiconductor components that we sell but rather rely on subcontractors to package our products. Packaging is the procedure of electrically bonding and encapsulating the IC into its final protective plastic or ceramic casing. We provide the wafers containing the ICs to third-party packagers. We typically rely on a small number of packagers, and do not have long-term contracts with our third-party packagers stipulating fixed prices or packaging volumes. The fragile nature of the semiconductor wafers that we use in our components requires sophisticated packaging techniques and has in the past resulted in low packaging yields. If our packaging subcontractors fail to achieve and maintain acceptable production yields in the future, we could experience increased costs, including warranty and product liability expense and costs associated with customer support, delays in or cancellations or rescheduling of orders or shipments, product returns or discounts, reduced margins and lower net revenues.

Sources for certain components and materials are limited, which could result in interruptions, delays or reductions in product shipments.

The commercial communications industry from time to time is affected by limited supplies of certain key components and materials. For example, we rely on Analog Devices for the integrated circuits, or ICs, utilized in the manufacture of our phase-locked loop, or PLL, products, and also rely on limited sources for certain packaging materials. If we, or our packaging subcontractors, are unable to obtain these or other materials in the required quantity and quality, we could experience delays or reductions in product shipments, which would reduce our profitability. Temporary shortages have arisen in the past and may arise in the future. If key components or materials are unavailable, while we would hope to be able to remedy the situation through cooperation with the suppliers, locating alternate sources of supply or otherwise, our costs could increase and net revenues could decline.

Recent changes in environmental laws and regulations applicable to manufacturers of electrical and electronic equipment have required us to redesign some of our products, and may increase our costs and expose us to liability.

The implementation of new technological or legal requirements, such as recycling requirements and lead-free initiatives, has impacted our products and manufacturing processes, and could affect the timing of product introductions, the cost and commercial success of our products and our overall profitability. For example, a directive in the European Union banned the use of lead, other heavy metals and certain flame retardants in electrical and electronic equipment beginning in 2006. As a result, in advance of this deadline, many of our customers changed their equipment specifications to use only components that do not contain these banned substances and indicated that they would no longer design in non-compliant components. Because many of our IC products utilize a tin-lead alloy as a soldering material in the manufacturing process, our MCM products contain circuit boards plated with a tin-lead surface and certain molded active components in our MCM products are molded with a banned substance, we either have already or may need to in the future redesign our products and obtain compliant raw materials from our suppliers to respond to the new legislation and to meet customer demand. Although we began this process in the first quarter of 2004 and have released many compliant products to date, we have products that remain non-compliant. Due to the limited geographic coverage of the regulations and our worldwide customer base, the different rates at which various customers are requiring compliant components, and the fact that some components containing banned substances remain exempt from the regulations for particular customer applications, we are

not stopping all production of parts containing banned substances on a particular scheduled date, but are making the move gradually as customer demand dictates. We anticipate selling such products for some time. We may be left with excess inventory of certain leaded parts if customers for those parts move to lead-free only consumption without giving us sufficient notice. In addition, our industry has no long-term data to assess the effectiveness, shelf-life, moisture sensitivity, and thermal tolerance of alternative materials, so we may experience product quality and performance issues as we transition our products to such materials.

Further, for our MCM products, we rely on third party suppliers, over which we have little or no control, to provide certain of the components needed for our products to meet applicable standards. In addition, this redesign is resulting in increased research and development and manufacturing and quality control costs. If we are unable to redesign existing products and introduce new products to meet the standards set by environmental regulation and our customers, sales of our products could decline, which could harm our business, financial condition and results of operations. Failure to comply with any applicable environmental regulations could result in a range of consequences, including loss of sales, fines, suspension of production, excess inventory, and criminal and civil liabilities.

China recently adopted directives similar to the European Union directive described above. While portions of the legislation have been implemented, the scope of product types affected and other aspects of the legislation and its application remain somewhat unclear. We are still evaluating the impact this regulation will have on our business. Another recent directive in the European Union imposes a “take-back” obligation on manufacturers of electrical and electronic equipment. This obligation requires manufacturers of electrical or electronic equipment to finance the collection, recovery and disposal of the electrical or electronic equipment that they produce. At this time, we are not aware of adopted legislation implementing this directive and the methods by which our industry will attempt to comply with these take-back obligations have not been fully developed. We may have take-back obligations, and even if the specific implementing legislation eventually adopted does not directly apply to us or our products and solutions, our customers could potentially shift some of their costs to us through contractual provisions. We are unable to assess the impact of this proposed legislation at this time but it could result in increased costs to us, which could harm our business, financial condition and results of operations.

Environmental regulations could subject us to substantial costs or fines, or require us to suspend production, alter manufacturing processes or cease operations at one or more sites.

The manufacture, assembly and testing of our products requires the use of hazardous materials that are subject to a broad array of environmental, health and safety laws and regulations governing the use, transportation, emission, discharge, storage, recycling or disposal of such materials. Failure to comply with any such laws or regulations could result in fines, suspension of production, alteration of fabrication and assembly processes, curtailment of operations or sales, requirements to remediate land, air or groundwater and other legal liability. Some domestic and foreign environmental regulations allow regulating authorities to impose cleanup liability on a company that leases or otherwise becomes associated with a contaminated site even though that company had nothing to do with the acts that gave rise to the contamination. Accordingly, even if our operations are conducted in accordance with these laws, we may incur environmental liability based on the actions of prior owners, lessees or neighbors of sites we lease now or in the future, or sites we become associated with due to acquisitions. For example, PDI’s manufacturing site in Nuremberg, Germany occupies a small portion of a large parcel formerly occupied by Alcatel and other manufacturers dating back to the early 1900s. Chlorinated solvent and heavy metal contamination in air, soil and groundwater were identified on the former Alcatel site in the late 1980s, and pump-and-treat remediation systems have been implemented on portions of the site. While we do not believe that this contamination resulted from the operation of PDI’s business, that any additional remediation is required on the PDI site or that we or PDI have any material related liability, we cannot assure you that such liability will not arise in the future.

We have a material amount of goodwill and long-lived assets, including finite-lived acquired intangible assets, which, if impaired, could harm our results of operations.

We have a material amount of goodwill, which is the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired. Goodwill is subject to a periodic impairment evaluation based on the fair value of the reporting unit. We also have a material amount of long-lived assets, including finite-lived acquired intangible assets recorded on our balance sheet. These assets are evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying value of the related assets may not be recoverable. Any impairment of our goodwill or long-lived assets, including finite-lived acquired intangible assets, could harm our business, financial condition and results of operations.

The outcome of litigation in which we have been named as a defendant is unpredictable and an adverse decision in any such matter could subject us to damage awards and lower the market price of our stock.

We are a defendant in litigation matters that are described under the heading “Legal Proceedings” elsewhere in this quarterly reports on Form 10-Q. These claims may divert financial and management resources that would otherwise be used to benefit our operations. Although we believe that we have meritorious defenses to the claims made in the litigation matters to which we have been named a party and intend to contest each lawsuit vigorously, we cannot assure you that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits, including the results of any amicable settlement, could subject us to material damage awards or otherwise harm our business.

The timing of the adoption of industry standards may negatively impact sales of our products.

The markets in which we and our customers compete are characterized by rapidly changing technology, evolving industry standards and continuous improvements in products and services. If technologies or standards supported by us or our customers’ products, such as 2.5G and 3G, WiMAX and PHS, fail to gain widespread commercial acceptance, our business may be significantly impacted. For example, the worldwide installation of 2.5G and 3G equipment has occurred at a much slower rate than we initially expected. In addition, while historically the demand for wireless and wireline communications has exerted pressure on standards bodies worldwide to adopt new standards for these products, such adoption generally only occurs following extensive investigation of, and deliberation over, competing technologies. The delays inherent in the standards approval process have in the past and may in the future cause the cancellation, postponement or rescheduling of the installation of communications systems by our customers. If further delays in adoption of industry standards were to occur in China, the United States or other countries where our products are frequently used, it could result in lower sales of our products and worse than expected results of operations in one or more periods.

Our limited ability to protect our proprietary information and technology may adversely affect our ability to compete.

Our future success and ability to compete is dependent in part upon our proprietary information and technology. Although we have patented technology and patent applications pending, we primarily rely on a combination of contractual rights and copyright, trademark and trade secret laws and practices to establish and protect our proprietary technology. We generally enter into confidentiality agreements with our employees, consultants, resellers, wafer suppliers, vendors, customers and potential customers, and limit the disclosure and use of our proprietary information. The steps taken by us in this regard may not be adequate to prevent misappropriation of our technology. Additionally, our competitors may independently develop technologies that are substantially equivalent or superior to our technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain or use our products or technology. Our ability to enforce our patents, copyrights, software licenses and other intellectual property is limited by our financial resources and is subject to general litigation risks, as well as uncertainty as to the enforceability of our intellectual property rights in various countries. If we seek to enforce our rights, we may be subject to claims that the intellectual property right is invalid, is otherwise not enforceable or is licensed to the party against whom it is asserting a claim. In addition, our assertion of intellectual property rights could result in the other party seeking to assert alleged intellectual property rights of its own against us.

Risks Relating to Our Common Stock

Our common stock price may be extremely volatile, and the value of your investment may decline.

Our common stock price has been highly volatile since our initial public offering. We expect that this volatility will continue in the future due to factors such as:

•

actual or anticipated variations in operating results;

•

changes in financial estimates or recommendations by stock market analysts regarding us or our competitors;

•

announcements by our customers regarding end market conditions and the status of existing and future infrastructure network deployments;

•

announcements of technological innovations, new products or new services by us or by our competitors or customers;

•

general market and economic conditions;

•

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

•

additions or departures of key personnel;

•

the effects of trading or other activity by short sellers, hedge funds and other speculators; and

•

future equity or debt offerings or our announcements of these offerings.

In addition, in recent years, the stock market in general, and the Nasdaq Global Market and the securities of technology companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of individual companies. These broad market fluctuations have in the past and may in the future materially and adversely affect our stock price, regardless of our operating results. In the event our stock price declines, you may be unable to sell your shares at or above the price at which you purchased them.

Our stock price may decline if a substantial number of shares are sold in the market by our stockholders.

Future sales of substantial amounts of shares of our common stock by our existing stockholders in the public market, or the perception that these sales could occur, may cause the market price of our common stock to decline. Increased sales of our common stock in the market for any reason could exert significant downward pressure on our stock price. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price we deem appropriate.

Some of our stockholders can exert control over us, and they may not make decisions that reflect our interests or those of other stockholders.

Our founding stockholders control a significant amount of our outstanding common stock. As a result, these stockholders will be able to exert a significant degree of influence over our management and affairs and control over matters requiring stockholder approval, including the election of our directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of us and might affect the market price of our securities. In addition, the interests of these stockholders may not always coincide with your interests or the interests of other stockholders.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Submission of Matters to a Vote of Security Holders

None

Item 5.

Other Information

None

Item 6.

Exhibits

EXHIBIT INDEX


Exhibit Number		Description
3.1		Restated Certificate of Incorporation of Registrant. (1)

3.2		Certificate of Ownership and Merger of SMDI Sub, Inc. into Stanford Microdevices, Inc. (effecting corporate name change of Registrant to “Sirenza Microdevices, Inc.”). (2)

3.3		Bylaws of Registrant, as amended, as currently in effect. (3)

4.1		Form of Registrant’s Common Stock certificate. (4)

4.2		Registration Rights Agreement by and Among the Registrant, Phillip Liao and Yeechin Liao, effective as of April 3, 2006. (5)

10.1**		Description of First Half 2007 Incentive Plan.

10.2**		General Incentive Plan Terms and Conditions, as amended through February 9, 2007. (6)

10.3		Purchase Agreement, dated February 15, 2007, among the Registrant, Phillip Chuanze Liao, Yeechin Shiong Liao and Piper Jaffray & Co. (7)



11.1		Statement regarding computation of per share earnings. (8)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a).

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

32.1		Certification of Chief Executive Officer pursuant to Section 1350.

32.2		Certification of Chief Financial Officer pursuant to Section 1350.

**	Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.

(1)	This exhibit is incorporated by reference to the Registrant’s Registration Statement on Form S-1 and all amendments thereto, Registration No. 333-31382, initially filed with the Securities and Exchange Commission on March 1, 2000.

(2)	This exhibit is incorporated by reference to the Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002.

(3)	This exhibit is incorporated by reference to the Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 29, 2001.

(4)	This exhibit is incorporated by reference to the Registrant’s Registration Statement on Form S-3 and all amendments thereto, Registration No. 333-112382, initially filed with the Securities and Exchange Commission on January 30, 2004.

(5)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated April 3, 2006, filed with the Securities and Exchange Commission on April 6, 2006.

(6)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 9, 2007, filed with the Securities and Exchange Commission on February 15, 2007.

(7)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 15, 2007, filed with the Securities and Exchange Commission on February 20, 2007.

(8)	This exhibit has been omitted because the information is shown in the Consolidated Financial Statements or Notes thereto.

SIGNATURES

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


DATE: May9, 2007		SIRENZA MICRODEVICES, INC.

		/s/ Robert Van Buskirk
		ROBERT VAN BUSKIRK
		President, Chief Executive Officer and Director

DATE: May9, 2007		/s/ Charles R. Bland
		CHARLES R. BLAND
		Chief Financial Officer

EXHIBIT INDEX


Exhibit Number		Description
3.1		Restated Certificate of Incorporation of Registrant. (1)

3.2		Certificate of Ownership and Merger of SMDI Sub, Inc. into Stanford Microdevices, Inc. (effecting corporate name change of Registrant to “Sirenza Microdevices, Inc.”). (2)

3.3		Bylaws of Registrant, as amended, as currently in effect. (3)

4.1		Form of Registrant’s Common Stock certificate. (4)

4.2		Registration Rights Agreement by and Among the Registrant, Phillip Liao and Yeechin Liao, effective as of April 3, 2006. (5)

10.1**		Description of First Half 2007 Incentive Plan.

10.2**		General Incentive Plan Terms and Conditions, as amended through February 9, 2007. (6)

10.3		Purchase Agreement, dated February 15, 2007, among the Registrant, Phillip Chuanze Liao, Yeechin Shiong Liao and Piper Jaffray & Co. (7)

11.1		Statement regarding computation of per share earnings. (8)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a).

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

32.1		Certification of Chief Executive Officer pursuant to Section 1350.

32.2		Certification of Chief Financial Officer pursuant to Section 1350.

**	Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.

(1)	This exhibit is incorporated by reference to the Registrant’s Registration Statement on Form S-1 and all amendments thereto, Registration No. 333-31382, initially filed with the Securities and Exchange Commission on March 1, 2000.

(2)	This exhibit is incorporated by reference to the Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002.

(3)	This exhibit is incorporated by reference to the Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 29, 2001.

(4)	This exhibit is incorporated by reference to the Registrant’s Registration Statement on Form S-3 and all amendments thereto, Registration No. 333-112382, initially filed with the Securities and Exchange Commission on January 30, 2004.

(5)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated April 3, 2006, filed with the Securities and Exchange Commission on April 6, 2006.

(6)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 9, 2007, filed with the Securities and Exchange Commission on February 15, 2007.

(7)	This exhibit is incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 15, 2007, filed with the Securities and Exchange Commission on February 20, 2007.

(8)	This exhibit has been omitted because the information is shown in the Consolidated Financial Statements or Notes thereto.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Good

Sirenza Microdevices (SMDI) Inactive 10-Q2007 Q1 Quarterly report

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