MaxLinear
Annual Report 2014

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the Fiscal Year Ended December 31, 2014OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the Transition Period From toCommission file number: 001-34666MaxLinear, Inc.(Exact name of Registrant as specified in its charter) Delaware 14-1896129(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 5966 La Place Court, Suite 100Carlsbad, California 92008(Address of principal executive offices) (Zip Code)(760) 692-0711(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of the exchange on which registeredClass A Common Stock, $0.0001 par value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þIndicate 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 of1934 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 filingrequirements for the past 90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes þ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨ Accelerated filer þNon-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þThe aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the registrant on June 30, 2014, thelast business day of the registrant’s most recently completed second fiscal quarter, was $313.7 million (based on the closing sales price of the registrant’sClass A common stock on that date). Shares of the registrant’s Class A or Class B common stock held by each officer and director and each person known tothe registrant to own 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates.This determination of affiliate status is not a determination for other purposes.As of February 13, 2015, the registrant has 30,987,609 shares of Class A common stock, par value $0.0001, and 6,977,834 shares of Class B commonstock, par value $0.0001, outstanding. DOCUMENTS INCORPORATED BY REFERENCEInformation required by Part III of this Form 10-K is incorporated by reference to the registrant’s proxy statement (the “Proxy Statement”) for the 2015 annualmeeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal yearcovered by this Form 10-K.Table of ContentsTABLE OF CONTENTS Part IPageItem 1.Business1Item 1A.Risk Factors11Item 1B.Unresolved Staff Comments35Item 2.Properties35Item 3.Legal Proceedings35Item 4.Mine Safety Disclosures36 Part II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities37Item 6.Selected Financial Data38Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations40Item 7A.Quantitative and Qualitative Disclosures About Market Risk51Item 8.Financial Statements and Supplementary Data51Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure51Item 9A.Controls and Procedures51Item 9B.Other Information54 Part III Item 10.Directors, Executive Officers and Corporate Governance55Item 11.Executive Compensation55Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters55Item 13.Certain Relationships and Related Transactions, and Director Independence55Item 14.Principal Accounting Fees and Services55 Part IV Item 15.Exhibits, Financial Statement Schedules56Table of ContentsMAXLINEAR, INC.PART IForward-Looking StatementsThe information in this Annual Report on Form 10-K for the fiscal year ended December 31, 2014, or this Form 10-K, contains forward-lookingstatements and information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, whichare subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning ourstrategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words“anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identifyforward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentionsor expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results orevents could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-lookingstatements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including,without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Form 10-K. We do not assume any obligation to update any forward-lookingstatements.ITEM 1.BUSINESSCorporate InformationWe incorporated in the State of Delaware in September 2003. Our executive offices are located at 5966 La Place Court, Suite 100, Carlsbad, California92008, and our telephone number is (760) 692-0711. In this Form 10-K, unless the context otherwise requires, the “Company,” “we,” “us” and “our” refer toMaxLinear, Inc. and its wholly owned subsidiaries. Our website address is www.maxlinear.com. The contents of our website are not incorporated by referenceinto this Form 10-K. We provide free of charge through a link on our website access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Qand Current Reports on Form 8-K, as well as amendments to those reports, as soon as reasonably practical after the reports are electronically filed with, orfurnished to, the Securities and Exchange Commission, or SEC. The names “MxL” and “digIQ” are our registered trademarks. All other trademarks and tradenames appearing in this Form 10-K are the property of their respective owners.OverviewWe are a provider of integrated, radio-frequency and mixed-signal integrated circuits for broadband communications and data center, metro, and long-haul transport network applications. Our high performance radio-frequency, or RF, receiver products capture and process digital and analog signals to bedecoded for various applications. These products include both RF receivers and RF receiver systems-on-chip, or SoCs, which incorporate our highlyintegrated radio system architecture and the functionality necessary to receive and demodulate broadband signals and physical medium devices that providea constant current source, current-to-voltage regulation, and data alignment and retiming functionality in optical interconnect applications. Our currentproducts receive and process RF and digital signals and enable the display of broadband video and data content in a wide range of electronic devices,including cable and terrestrial and satellite set top boxes, DOCSIS data and voice gateways, hybrid analog and digital televisions, satellite low-noise blockertransponders or outdoor units and optical modules for data center, metro, and long-haul transport network applications.We combine our high performance RF and mixed-signal semiconductor design skills with our expertise in digital communications systems, softwareand embedded systems to provide highly integrated semiconductor devices that are manufactured using a range of semiconductor manufacturing processes,including low-cost complementary metal oxide semiconductor, or CMOS, process technology, and Silicon Germanium BiCMOS and Indium Phosphideprocess technologies due to our recent entry into the optical interconnect market through our acquisition of Physpeed. Our ability to design analog andmixed-signal circuits in CMOS allows us to efficiently combine analog and digital signal processing functionality in the same integrated circuit. As a result,our RF receivers and RF receiver SoCs have high levels of functional integration and performance, small silicon die size and low power consumption.Moreover, our proprietary CMOS-based radio system architecture provides to our customers the benefits of superior RF system performance, shorter designcycles, significant design flexibility and low system cost across a wide range of broadband communications applications. It is our intention to drive futureoptical interconnect products to CMOS versus existing Silicon Germanium BiCMOS and Indium Phosphide process technology designs.1Table of ContentsWe sell our products to original equipment manufacturers, or OEMs, module makers and original design manufacturers, or ODMs. During 2014, wesold our products to more than 157 end customers. For the year ended December 31, 2014, our net revenue was $133.1 million as compared to $119.6 millionin the year ended December 31, 2013.Recent DevelopmentsOn February 3, 2015, we entered into a definitive agreement and plan of merger and reorganization with Entropic Communications, Inc., or Entropic,under which we agreed to acquire all of the outstanding capital stock of Entropic in a cash and stock transaction. If the merger is consummated, eachoutstanding share of Entropic's common stock will be converted into the right to receive $1.20 in cash and 0.2200 of a share of our Class A common stock;existing holders of our Class A and Class B common stock are expected to hold approximately 65% of the outstanding capital stock of the combinedcompany, and current holders of Entropic's common stock are expected to hold approximately 35% of the outstanding capital stock of the combinedcompany (ignoring for this purpose the special voting rights that holders of our Class B common stock will continue to hold after the merger). Consummationof the merger is subject to separate approvals by our stockholders and the stockholders of Entropic, regulatory approvals, and other customary closingconditions. For a more complete description of the terms and conditions of the merger, please refer to our Current Report on Form 8-K filed with the Securitiesand Exchange Commission on February 4, 2015. A copy of the definitive merger agreement is filed as Exhibit 2.1 to the Form 8-K.Headquartered in San Diego, Entropic is recognized for having pioneered the MoCA® (Multimedia over Coax Alliance) home networking standardand inventing Direct Broadcast Satellite (“DBS”) outdoor unit single-wire technology. Entropic has a rich history of innovation and deep expertise in RF,analog/mixed signal and digital signal processing technologies. Entropic’s silicon solutions have been broadly deployed across major cable, satellite, andfiber service providers.We believe our acquisition of Entropic will add significant scale to our analog/mixed-signal business, expanding our addressable market andenhancing the strategic value of our offerings to our broadband and access partners, OEM customers, and service providers. For a discussion of specific risksand uncertainties that could affect our ability to achieve these and other strategic objectives of the acquisition, please refer to Part I, Item 1A, “Risk Factors”under the subsection captioned “Risks Relating to the Proposed Acquisition of Entropic.”Industry BackgroundTechnological advances in the broadband data, broadcast TV, and wireless voice and data markets are driving dramatic changes in the way consumersaccess the internet and experience multimedia content. These advances include the ongoing worldwide conversion from analog to digital televisionbroadcasting; the increasing availability of high-speed broadband and wireless connectivity; the transitions from standard to high to ultra high/4K videodefinition television; the proliferation of multi-channel digital video recording, or DVR; the proliferation of multimedia content being both accessible andstored in the cloud through terrestrial broadcast digital television, cable, satellite and telecommunications carrier services. As a result, system designers areadding enhanced multimedia functionality to set top boxes and digital televisions, and expanding voice, video and data access functions and capabilities tohome broadband gateways and mobile devices, which in turn is creating demand for higher speed optical interconnects in data center, metro, and long-haultransport network applications. We believe that several trends, across multiple target markets, are creating revenue opportunities for providers of RF andanalog/mixed-signal solutions. These trends include the following:•Terrestrial: Consumers are demanding advanced features in their televisions and are also using non-traditional consumer electronic devices,such as personal computers, netbooks, tablets, in-cabin automobile, portable media players, and mobile phones to access broadcast televisionand other multimedia content. In the traditional television market, system designers are introducing cable and satellite ready televisionsequipped with enhanced features such as picture-in-picture and DVR. Also, with the increased popularity of accessing multimedia content over-the-top, or OTT, via broadband-enabled streaming services, consumers are increasingly augmenting these OTT multimedia content services withlocal free-to-air broadcast programming. Consumers can access these terrestrial broadcasts through set-top boxes containing terrestrial RFreceiver solutions.•Cable / Satellite / Broadband Access: Competing cable, satellite, and other broadband service providers differentiate their services byproviding consumers with bundled video, voice, and broadband data access, referred to as triple-play services. These services include advancedfeatures such as; channel guide information, video-on-demand, multi-channel digital video recording, or DVR, and picture-in-picture viewing.Many set top boxes, including those used for triple-play services, now enable consumers to simultaneously access, and manage multimediacontent from multiple locations in the same house. These advanced features require either a home gateway or a set top box to simultaneouslyreceive, demodulate, and decode multiple signals spread across several channels of frequency bandwidth. Traditional architectures wouldrequire that each simultaneously accessed signal require a dedicated RF receiver. In these emerging home gateway or media servers, wherecontent may be2Table of Contentsdelivered using internet protocol or IP, there may be “thin or remote clients” that may not have traditional TV tuners, but necessarily include abroadband RF receiver such as MoCA or WiFi. This greatly increases the number of RF receivers required to be deployed in each set top box. Inaddition, in order to deliver increasing data bandwidth to the home, cable MSOs have deployed DOCSIS 3.0 equipment and services, whichenable channel bonding, or the concurrent reception of multiple channels, resulting in higher aggregate “sum of the channels” bandwidthavailable to DOCSIS 3.0 cable subscribers.•Optical Interconnect: Growth in data traffic generated from smartphones and tablets, over-the-top, or OTT, streaming video, cloud computingand data analytics in hyper-scale data centers is creating demand for higher speed interconnect products addressing enterprise andtelecommunications infrastructure market applications. These solutions provide the interconnect function between the top-of-rack to the core-router within a datacenter, and the metro and long haul connections within a service provider network. Datacenter links are commonlyincreasing performance/speed and are currently changing from 1Gbps to 10Gbps on the servers and from 10/40Gbps to 100Gbps on the routersand switches, and we believe that over the next several years they will likely migrate to 400Gbps.As a result of these trends, RF and analog/mixed signal receiver technology is being deployed in a variety of devices for the terrestrial, cable, satellite,datacenter, and metro and long-haul telecom transport network markets. The proliferation of applications with advanced features has led to an increase in thenumber of devices with multiple RF receivers and RF receiver SoCs. RF receivers incorporate RF, digital and analog signal processing functions.Challenges Faced by Providers of Systems and RF Receivers and Optical InterconnectsThe stringent performance requirements of broadband communications and optical interconnect applications and the distinct technological challengesassociated with the terrestrial, cable, satellite, datacenter, and metro and long-haul telecom transport markets present significant obstacles to service providersand system designers. In particular, designing and implementing RF receivers to capture broadcast digital television signals is extremely challenging due inpart to the wide frequency band across which broadcast digital television signals are transmitted. As compared to other digital radio technologies, such ascellular, WiFi and Bluetooth, television signals broadcast over air, on cable, and by satellite are acquired over a much wider frequency band and encountermany more sources of interference. As a result, traditionally, design and implementation of these RF receivers have been accomplished using conventionalradio system architectures that employ multiple discrete components and are fabricated using expensive special purpose semiconductor manufacturingprocesses, such as silicon germanium, gallium arsenide, and special purpose CMOS-based RF process technologies.The core challenges of capturing and processing high quality broadband communications signals are common to the terrestrial, cable, and satellitemarkets. These challenges include:•Design Challenges of Receiving Multiple RF Signals. System designers and service providers across various markets seek to enhance consumerappeal through the addition of new features in their products. Incorporating more than one channel of RF reception in an electronic deviceenables many of these features and advanced applications that are rapidly becoming a part of the standard offering from device makers andservice providers. For example, in the cable set top box market, it is necessary to support the simultaneous reception of multiple channels forvoice, video and data applications in many system designs. In order to meet such requirements, OEMs must employ either multiple narrow orwideband RF receivers or Full Spectrum Capture (FSCTM) receiver SoCs in their system design. Each additional RF receiver poses newchallenges to the system designer, such as increased design complexity, overall cost, circuit board space, power consumption and heatdissipation. In addition, a high level of integration in multiple-receiver designs is necessary to combat the reliability and signal interferenceissues arising from the close proximity of sensitive RF elements.•Signal Clarity Performance Requirements. Television reception requires a robust and clear signal to provide an adequate user experience. Oneof the core attributes of system performance is signal clarity, often measured by the signal-to-noise ratio parameter, which measures the strengthof the desired signal relative to the combined noise and undesired signal strength in the same channel. Television reception requires an RFreceiver that has a wide dynamic range and the ability to isolate the desired signal from the undesired signals, which include the noise generatedby extraneous radio waves and interferers produced by home networking systems such as wireless local area network, or WLAN, and Bluetooth.Traditional RF receiver implementations utilized expensive discrete components, such as band-pass filters, resonance elements and varactordiodes to meet the stringent requirements imposed by broadband television reception. In high speed mobile environments, a method known asdiversity combining of radio signals, in which the desired signal is captured using multiple RF receivers and reconstructed into a single signal,has been employed to improve the signal-to-noise ratio. Diversity combining of radio signals3Table of Contentsrequires substantial RF, digital signal processing and software expertise. Both the traditional broadband reception and diversity combining ofRF signals in mobile environments are difficult to implement and pose challenges to RF receiver providers.•Multiple Standards. Worldwide, there are several regional standards for the transmission and reception of broadband analog and digital TVsignals. Technical performance, feature requirements and the predominance of a particular means of TV transmission vary regionally. Further,each major geographic region has adopted its own TV standard for cable, terrestrial, and satellite transmissions, such as DVB-T/T2/C/C2/S/S2,ATSC, NTSC, ISDB-T, PAL, SECAM, DTMB, CMMB, etc. As a result of these multiple standards, there are region-specific RF receiverrequirements and implementations, which make global standards compliance extremely challenging. Many system designers prefer a multiplestandards and protocol compliant solution that was previously not possible. Providers of RF receivers face the design challenge of providingthis flexibility to the system designer without any increase in power consumption, or any loss of performance quality or competitiveness.•Power Consumption. Power consumption is an important consideration for consumers and a critical design specification for system designers.For example, in battery-operated devices such as mobile handsets, netbooks and notebooks, and voice-enabled cable modems, long battery lifeis a differentiating device attribute. In addition, government sponsored programs, such as Energy Star in the U.S., induce consumers to purchasemore energy efficient products. For example, in September 2009, the U.S. Environmental Protection Agency announced that Energy Starcompliant televisions would be required to be 40% more energy efficient than their noncompliant counterparts. The addition of one or more RFreceivers to a system in order to enable digital TV functionality significantly increases the overall power consumption imposing severe platformlevel design constraints on multiple channel receiver systems. In fact, in some multiple receiver system designs, a majority of the system’soverall power consumption is attributable to the RF receiver and related components. Providers of RF receivers and RF receiver SoCs areconfronted with the design challenge of lowering power consumption while maintaining or improving device performance.•Size. The size of electronic components, such as RF receivers, is a key consideration for system designers and service providers. In the mobilemarket, size is a determining factor for whether or not a particular component, such as an RF receiver is designed into the product. In thetelevision market, as system designers create thinner flat-screen displays, the size of RF receivers is becoming a significant consideration,especially when multiple RF receivers are incorporated in a single system.The challenges of processing high-speed optical interconnect signals for datacenter, metro and long-haul telecommunications transport marketsinclude:•Optical Fiber Channel Impairments. The optical properties of the fiber material results in impairments to the optical signal that is beingpropagated across the fiber. These impairments include loss of light intensity, modal, chromatic and polarization dispersion as the lightpropagates through the fiber. These impairments result in degradation of signal integrity which contributes to effective reduction in datathroughput.•Optical Device Technology. The state-of-art in optical device technology today lags the speeds contemplated for data traffic within cloud datacenters and transport links between telecom data centers. So, there are severe physical limits to the conversion of electrical signals to opticalsignals and vice versa at extremely high speeds. These limitations arise from bandwidth, nonlinearities, and noise properties in lasers,modulators, and photo detectors.•Form Factor. The form factor of the face plates in server, storage, switch, and networking racks in data centers limits the capacity to dissipateheat generated by electrical and optical devices inside the transceivers to which optical fibers are connected. As data rates increase dramatically,the physical form of the face plates and connectors does not scale to cope with accompanying increase in power density.Limitations of Traditional RF Receiver SolutionsFor the past several decades, the RF receiver technology of choice has been the electro-mechanical can tuner. Despite field-proven performanceattributes such as signal clarity, can tuners are often prohibitively large in size and have high power consumption, low reliability and high cost, especially insystems requiring multiple RF receivers in a single device. Further, can tuners utilize multiple external discrete components that limit the use of a systemdesign to a single region or TV reception standard. Regional or standard specific customization can be tedious, time consuming and costly for the systemdesigners.4Table of ContentsSilicon RF receiver solutions eliminate some of the mechanical and discrete electronic components found in can tuners. However, existing silicon RFreceivers typically have been designed using a conventional radio system architecture that employs multiple external discrete components, although fewerthan in traditional can-tuners. In addition, these silicon RF receivers have been fabricated using expensive, special purpose semiconductor manufacturingprocesses such as gallium arsenide and silicon germanium process technologies. The use of multiple components and exotic semiconductor manufacturingprocess technologies increases system design complexity and overall cost. It reduces the feasibility of further integrating digital baseband circuits on thesame chip as the RF receiver. We believe that a new RF receiver technology is required to address the drawbacks of traditional can-tuners and siliconreceivers for the terrestrial, cable, and satellite markets.Scalability of systems to support simultaneous multiple channel reception is a major requirement in today’s home gateways, set-top-boxes, andbroadband data modems. The use of existing can-tuners or integrated single channel receivers built in expensive, special purpose semiconductor processtechnologies imposes severe platform level design constraints for scaling power consumption, and manufacturing cost.Our RF Receiver SolutionWe are a provider of integrated, radio-frequency and mixed-signal integrated circuits for broadband communications and data center, metro, and long-haul transport network applications. Our products enable the display of broadband video and data content in a wide range of electronic devices, includingcable and terrestrial and satellite set top boxes, DOCSIS data and voice gateways, hybrid analog and digital televisions, satellite low-noise blockertransponders or outdoor units and optical modules for data center, metro, and long-haul transport network applications.We combine our high performance analog and mixed-signal semiconductor design skills with our expertise in digital communications systems,software and embedded systems to develop RF receivers and RF receiver SoCs. We integrate our RF receivers with digital demodulation and othercommunications functions in standard CMOS process technology. Our solutions have the following key features:•Proprietary Radio Architecture. Digital signal processing is at the core of our RF receivers and RF receiver SoCs. Using our proprietary CMOS-based radio architecture, we leverage both analog and digital signal processing to improve system performance across multiple products. Thepartitioning of the signal processing in the chip between analog and digital domains is designed to deliver high performance, small die size andlow power for a given application. Moreover, our architecture is implemented in standard CMOS process technology, which enables us torealize the integration benefits of analog and digital circuits on the same integrated circuit. This allows us to predictably scale the on-chipdigital circuits in successive advanced CMOS process technology nodes. Our solutions have been designed into products in markets withextremely stringent specifications for quality, performance and reliability, such as the television and automotive markets. We believe that oursuccess in these markets demonstrates that our solution can be implemented successfully across multiple markets and applications.•High Signal Clarity Performance. We design our RF receivers and RF receiver SoCs to provide high signal clarity performance regardless of theapplication in which they are employed. For example, in the set top box market, we deploy our core RF and mixed-signal CMOS processtechnology platform and radio system architecture to overcome the interference from in-home networks that can degrade cable broadbandsignals. We believe that signal clarity is more critical in television compared to other communications applications such as voice and data,because signal loss and interference have a more adverse impact on the end user experience.•Highly Integrated. Our products integrate on a single chip the functionality associated with traditional analog and digital integrated circuitsand other expensive discrete components. This high level of integration has the cost benefits associated with smaller silicon die area, fewerexternal components and lower power. Our CMOS-based RF receiver SoC eliminates analog interface circuit blocks and external componentssituated at the interface between discrete analog and digital demodulator chips and reduces the cost associated with multiple integrated circuitpackages and related test costs. We are also able to integrate multiple RF receivers along with a demodulator onto a single die to createapplication-specific configurations for our customers. Thus, our highly integrated solution reduces the technical difficulties associated withovercoming the undesired interactions between multiple discrete analog and digital integrated circuits comprising a single system. Oursolutions reduce the technical burden on system designers in deploying enhanced television functionality in their products.•Low Power. Our products enable our customers to reduce power consumption in consumer electronic devices without compromising thestringent performance requirements of applications such as broadcast television. In addition, our products enable our customers to decreaseoverall system costs by reducing the power consumption and heat dissipation requirements in their systems. For example, in cable boxessupporting voice applications, low5Table of Contentspower consumption may enable a reduction in the number of batteries or battery capacity required to support standby and lifeline telephony. Incertain set top boxes, reduced overall power consumption may allow system designers to eliminate one or more cooling fans required todissipate the heat generated by high power consumption. The benefits of low power consumption increase with the number of RF receiversincluded in a system.•Scalable Platform. Our product families share a highly modular, core radio system architecture, which enables us to offer RF receiver and RFreceiver SoC solutions that meet the requirements of a wide variety of geographies, broadcast standards and applications. This is in contrast tolegacy solutions that require significant customization to conform to regional standards, technical performance and feature requirements.Moreover, by leveraging our flexible core architecture platform, our integrated circuit solutions can be deployed across multiple devicecategories. As a result, our customers can minimize the design resources required to develop applications for multiple target markets. Inaddition, our engineering resources can be deployed more efficiently to design products for larger addressable markets. We believe that our coretechnology platform also can be applied to other communications markets with similar performance requirements.•Space Efficient Solution. Our highly integrated CMOS-based RF receivers and RF receiver SoCs have an extremely small silicon die size,require minimal external components and consume very little power. Our unique radio architecture, more specifically our Full-SpectrumCapture™ technology, not only enables us to integrate multiple RF receivers in a chip, but also results in a reduction in the incremental powerand die area required per each additional channel of reception. This enables our customers to design multi-receiver applications, such as cablemodems and set top boxes, in an extremely small form factor. In addition, our products are easily adapted to space-constrained devices such asflat screen televisions, netbooks, and laptops.Our StrategyOur objective is to be the leading provider of mixed-signal RF receivers and RF receiver SoCs for broadband video and data communications,datacenter, and metro and long-haul telecom transport market applications and, in the future, to leverage this core competency to expand into othercommunications markets with similar performance requirements. The key elements of our strategy are:•Extend Technology Leadership in RF Receivers and RF Receiver + Demodulator SoCs. We believe that our success has been, and will continueto be, largely attributable to our RF and mixed-signal design capability, as well as advanced digital design, which we leverage to develop high-performance, low-cost semiconductor solutions for broadband communications applications. The broadband RF receiver market presentssignificant opportunities for innovation through the further integration of RF and mixed-signal functionality with digital signal processingcapability in CMOS process technology. By doing so, we will be able to deliver products with lower power consumption, superior performanceand increased cost benefits to system designers and service providers. We believe that our core competencies and design expertise in this marketwill enable us to acquire more customers and design wins over time. We will continue to invest in this capability and strive to be an innovationleader in this market.•Leverage and Expand our Existing Customer Base. We target customers who are leaders in their respective markets. We intend to continue tofocus on sales to customers who are leaders in our current target markets, and to build on our relationships with these leading customers todefine and enhance our product roadmap. By solving the specific problems faced by our customers, we can minimize the risks associated withour customers’ adoption of our new integrated circuit products, and reduce the length of time from the start of product design to customerrevenue. Further, our engagements with market leaders will enable us to participate in emerging technology trends and new industry standards.•Target Additional High-Growth Markets. Our core competency is in RF analog and mixed-signal integrated circuit design in CMOS processtechnology for broadband communications applications. Several of the technological challenges involved in developing RF solutions for videobroadcasting and broadband reception are common to a majority of broadband communication markets. We intend to leverage our corecompetency in developing highly integrated RF receiver and RF receiver SoCs in standard CMOS process technology to address additionalmarkets within broadband communications, communications infrastructure, and connectivity markets that we believe offer profitable highgrowth potential.•Expand Global Presence. Due to the global nature of our supply chain and customer locations, we intend to continue to expand our sales,design and technical support organization both in the United States and overseas. In particular, we expect to increase the number of employeesin Asia, Europe and the United States to provide6Table of Contentsregional support to our increasing base of customers. We believe that our customers will increasingly expect this kind of local capability andsupport.•Attract and Retain Top Talent. We are committed to recruiting and retaining highly talented personnel with proven expertise in the design,development, marketing and sales of communications integrated circuits. We believe that we have assembled a high-quality team in all theareas of expertise required at a semiconductor communications company. We provide an attractive work environment for all of our employees.We believe that our ability to attract the best engineers is a critical component of our future growth and success in our chosen markets.ProductsOur products are integrated into a wide range of electronic devices, including cable and terrestrial and satellite set top boxes, DOCSIS data and voicegateways, hybrid analog and digital televisions, satellite low-noise blocker transponders or outdoor units and physical medium devices that go into opticalmodules for data center, metro, and long-haul transport network applications.We provide our customers with guidelines, known as reference designs, so that they can efficiently use our products in their product designs. Wecurrently provide the following types of semiconductors:•RF Receivers. These semiconductor products combine RF receiver technology that traditionally required multiple external discrete components,such as very high frequency, or VHF, and ultra-high frequency, or UHF, tracking filters, surface acoustic wave, or SAW, filters, intermediate-frequency, or IF, amplifiers, low noise amplifiers and transformers. All of these external components have been either eliminated or integratedinto a single semiconductor produced entirely in standard CMOS process technology.•RF Receiver SoCs. These semiconductor products combine the functionality of RF receivers, and demodulators in a single chip. In someconfigurations, these products may incorporate multiple RF receivers and single or multiple demodulators in a single chip to provideapplication or market specific solutions to customers.•Laser Modulator Drivers. These semiconductor products reside in optical modules and provide a constant current source that delivers exactlythe current to the laser diode that it needs to operate for a particular application•Transimpedance Amplifiers. These semiconductor products reside in optical modules and provide current-to-voltage conversion, converting thelow-level current of a sensor to a voltage.•Clock and Data Recovery Circuits. These semiconductor products generate a clock from an approximate frequency reference, and then phase-aligns to the transitions in the data stream with a phase-locked loop, or PLL.CustomersWe sell our products, directly and indirectly, to original equipment manufacturers, or OEMs, module makers and original design manufacturers, orODMs, and refer to these as our end customers. By providing a highly integrated reference design solution that our customers can incorporate in theirproducts with minimal modifications, we enable our customers to design cost-effective high performance digital RF receiver and RF receiver SoC solutionsrapidly. During the year ended December 31, 2014, we sold our products to more than 157 end customers. A significant but declining portion of our sales tothese and other customers are through distributors based in Asia, and we do not consider distributors as our end customers, despite selling the products to andbeing paid by the distributors.A significant portion of our net revenue has historically been generated by a limited number of customers. During the year ended December 31, 2014and the year ended December 31, 2013, ten customers accounted for approximately 67% and 72% of our net revenue, respectively. For the year endedDecember 31, 2014, Arris Group, Inc., or Arris, represented 31% of revenue. For the year ended December 31, 2013, Arris represented 28% of revenue. Sales toArris as a percentage of revenue include sales to Motorola Home, which was acquired by Arris in April 2013, for the years ended December 31, 2014 and2013.Products shipped to Asia accounted for 94% of our net revenue in the year ended December 31, 2014 and 93% of our net revenue in the year endedDecember 31, 2013. Products shipped to Japan accounted for 7% of our net revenue in the year ended December 31, 2014 and 9% of our net revenue in theyear ended December 31, 2013. Products shipped to China and Taiwan accounted for 71% and 6%, respectively, of our net revenue in the year endedDecember 31, 2014. Products shipped to China and Taiwan accounted for 68% and 8%, respectively, of our net revenue in the year ended December 31,2013. Although a large percentage of our products are shipped to Asia, we believe that a significant number of the systems designed by these customers andincorporating our semiconductor products are then sold outside Asia. For example, we believe revenue generated from sales of our digital terrestrial set topbox products during the year ended December 31, 2014 and 2013 related principally7Table of Contentsto sales to Asian set top box manufacturers delivering products into Europe, Middle East, and Africa, or EMEA, markets. Similarly, revenue generated fromsales of our cable modem products during the year ended December 31, 2014 and 2013 related principally to sales to Asian ODM’s and contractmanufacturers delivering products into European and North American markets. To date, all of our sales have been denominated in United States dollars. SeeNote 1 to our consolidated financial statements for a discussion of total revenue by geographical region for 2014, 2013 and 2012.Sales and MarketingWe sell our products worldwide through multiple channels, using our direct sales force, third party sales representatives, and a network of domestic andinternational distributors. We have direct sales personnel covering the United States, Europe and Asia, and operate customer engineering support offices inCarlsbad, Irvine, and San Jose in California; Atlanta in Georgia; Tokyo in Japan; Shanghai and Shenzhen in China; Hsinchu in Taiwan; Seoul in SouthKorea; and Bangalore, India. We also employ a staff of field applications engineers to provide direct engineering support locally to some of our customers.Our distributors are independent entities that assist us in identifying and servicing customers in a particular territory, usually on a non-exclusive basis.Sales through distributors accounted for approximately 28% of our net revenue in the year ended December 31, 2014 and 29% of our net revenue in the yearended December 31, 2013.In October 2005, we entered into a non-exclusive distributor agreement with Tomen Electronics Corporation, or Tomen, for distribution of ourproducts in Japan. Our distributor agreement with Tomen is effective for one year, unless it is terminated earlier by either party for any or no reason withwritten notice provided three months prior to the expiration of the agreement or by failure of the breaching party to cure a material breach within fifteen daysfollowing written notice of such material breach by the non-breaching party. Our agreement with Tomen will automatically renew for additional successiveone-year terms unless at least three months before the end of the then-current term either party provides written notice to the other party that it elects not torenew the agreement.In June 2009, we entered into a revised non-exclusive distributor agreement with Moly Tech Limited, or Moly Tech, for distribution of our products inChina, Hong Kong and Taiwan. Our distributor agreement with Moly Tech is effective for one year, unless it is terminated earlier by either party for any or noreason within sixty days of prior written notice or by failure to cure a material breach within thirty days following written notice of such material breach bythe non-breaching party. Our agreement with Moly Tech will automatically renew for additional successive one-year terms unless at least sixty days beforethe end of the then-current term either party provides written notice to the other party that it elects not to renew the agreement.In February 2012, we entered into a non-exclusive distributor agreement with Techmosa International, Inc., for distribution of our products in Taiwan.Our distributor agreement with Techmosa is effective for one year, unless it is terminated in writing earlier by either party for any or no reason which willcommence 60 days following receipt of the other party’s request, or by failure to cure a material breach within thirty days following written notice of suchmaterial breach by the non-breaching party. Our agreement with Techmosa will automatically renew for additional successive one-year terms unless at leastsixty days before the end of the then-current term either party provides written notice to the other party that it that it elects not to renew the agreement.Our sales cycles typically require a significant amount of time and a substantial expenditure of resources before we can realize revenue from the sale ofproducts, if any. Our typical sales cycle consists of a multi-month sales and development process involving our customers’ system designers andmanagement. The typical time from early engagement by our sales force to actual product introduction runs from nine to twelve months for the consumermarket, to as much as 18 to 24 months for the cable and satellite markets. If successful, this process culminates in a customer’s decision to use our products inits system, which we refer to as a design-win. Volume production may begin within three to nine months after a design-win, depending on the complexity ofour customer’s product and other factors upon which we may have little or no influence. Once our products have been incorporated into a customer’s design,they are likely to be used for the life cycle of the customer’s product. Thus, a design-win may result in an extended period of revenue generation. Conversely,a design-loss to our competitors, may adversely impact our financial results for an extended period of time.We generally receive purchase orders from our customers approximately six to twelve weeks prior to the scheduled product delivery date. Thesepurchase orders may be cancelled without charge upon notification, so long as notification is received within an agreed period of time in advance of thedelivery date. Because of the scheduling requirements of our foundries and assembly and test contractors, we generally provide our contractors productionforecasts and place firm orders for products with our suppliers, up to thirteen weeks prior to the anticipated delivery date, often without a purchase order fromour own customers. Our standard warranty provides that products containing defects in materials, workmanship or product performance may be returned for arefund of the purchase price or for replacement, at our discretion.Manufacturing8Table of ContentsWe use third-party foundries and assembly and test contractors to manufacture, assemble and test our semiconductor products. This outsourcedmanufacturing approach allows us to focus our resources on the design, sale and marketing of our products. Our engineers work closely with our foundriesand other contractors to increase yield, lower manufacturing costs and improve product quality.Wafer Fabrication. We utilize standard CMOS process technology to manufacture our products. We use a variety of process technology nodes rangingfrom 0.13µ down to 28 nanometer. We depend on four independent silicon foundry manufacturers located in Asia to support the majority of our waferfabrication requirements. Our key subcontractors are Semiconductor Manufacturing International Corporation, or SMIC, in China, Silterra Malaysia Sdn.Bhd., in Malaysia, Global Foundries in Singapore and United Microelectronics Corporation, or UMC, in Taiwan and Singapore.Assembly/packaging and Test. Upon completion of the silicon processing at the foundry, we forward the finished silicon wafers to independentassembly/packaging and test service subcontractors. The majority of our assembly/packaging and test requirements are supported by the followingindependent subcontractors: Advanced Semiconductor Engineering, or ASE, in Taiwan (assembly/packaging and test), Giga Solution Technology Co., Ltd inTaiwan (test only), King Yuan Electronics Co., Ltd, or KYEC, in Taiwan (test only), SIGURD Microelectronics Corp. in Taiwan (test only), SiliconwarePrecision Industries Co. Ltd, or SPIL, in Taiwan (assembly/packaging only) and Unisem (M) Berhad in China (assembly/packaging only).Quality Assurance. We have implemented significant quality assurance procedures to assure high levels of product quality for our customers. Weclosely monitor the work-in-progress information and production records maintained by our suppliers, and communicate with our third-party contractors toassure high levels of product quality and an efficient manufacturing time cycle. Upon successful completion of the quality assurance procedures, all of ourproducts are stored and shipped to our customers or distributors directly from our third-party contractors in accordance with our shipping instructions.Research and DevelopmentWe believe that our future success depends on our ability to both improve our existing products and to develop new products for both existing andnew markets. We direct our research and development efforts largely to the development of new high performance, mixed-signal semiconductor solutions forbroadband communications, datacenter, and metro and long-haul telecommunications transport market applications. We target applications that requirestringent overall system performance and low power consumption. As new and challenging communication applications proliferate, we believe that many ofthese applications may benefit from our SoC solutions combining analog and mixed-signal processing with digital signal processing functions. We haveassembled a team of highly skilled semiconductor and embedded software design engineers with expertise in broadband RF and mixed-signal integratedcircuit design, digital signal processing, communications systems and SoC design. As of December 31, 2014, we had approximately 269 employees in ourresearch and development group. Our engineering design teams are located in Carlsbad, Irvine, and San Jose in California; Atlanta in Georgia; Shanghai inChina; and Bangalore in India. Our research and development expense was $56.6 million in 2014, $53.1 million in 2013 and $46.5 million in 2012.CompetitionWe compete with both established and development-stage semiconductor companies that design, manufacture and market analog and mixed-signalbroadband RF receiver and optical interconnect products. Our competitors include companies with much longer operating histories, greater namerecognition, access to larger customer bases and substantially greater financial, technical and operational resources. Our competitors may develop productsthat are similar or superior to ours. We consider our primary competitors to be companies with a proven track record of supporting market leaders and thetechnical capability to develop and bring to market competing broadband RF receiver and RF receiver SoC and optical interconnect products. Our primarycompetitors include NXP B.V. in cable and terrestrial TV markets, Silicon Laboratories in terrestrial TV markets, RDA Microelectronics and RafaelMicroelectronics, Inc. in TV and terrestrial set-top-box markets, Broadcom Corporation in terrestrial, cable, and satellite data and video markets, EntropicCommunications, Inc. and Broadcom Corporation, in our new development initiatives targeting satellite outdoor units, and Inphi, and M/A-COM, andSemtech, and Qorvo amongst other in development initiatives targeting datacenter, and metro and long-haul telecommunications transport applications. Inaddition, it is quite likely that a number of other public and private companies, including some of our customers and semiconductor integrated circuitpartners, are developing competing products for digital TV, other broadband communications, and datacenter, and metro and long-haul telecommunicationstransport applications.The market for analog and mixed-signal semiconductor products is highly competitive, and we believe that it will grow more competitive as a result ofcontinued technological advances. We believe that the principal competitive factors in our markets include the following:•product performance;9Table of Contents•features and functionality;•energy efficiency;•size;•ease of system design;•customer support;•product roadmap;•reputation;•reliability; and•price.We believe that we compete favorably as measured against each of these criteria. However, our ability to compete in the future will depend upon thesuccessful design, development and marketing of compelling RF and mixed-signal semiconductor integrated solutions for high growth communicationsmarkets. In addition, our competitive position will depend on our ability to continue to attract and retain talent while protecting our intellectual property.Intellectual Property RightsOur success and ability to compete depend, in part, upon our ability to establish and adequately protect our proprietary technology and confidentialinformation. To protect our technology and confidential information, we rely on a combination of intellectual property rights, including patents, tradesecrets, copyrights and trademarks. We also protect our proprietary technology and confidential information through the use of internal and external controls,including contractual protections with employees, contractors, business partners, consultants and advisors. Protecting mask works, or the “topography” orsemiconductor material designs, of our integrated circuit products is of particular importance to our business and we seek to prevent or limit the ability ofothers to copy, reproduce or distribute our mask works.We have 58 issued patents and 305 patent applications pending in the United States. We also have 10 issued foreign patents and 101 other pendingforeign patent applications, based on our issued patents and pending patent applications in the United States. The 58 issued patents in the United States willbegin to expire in 2024 through 2032. The 10 issued foreign patents will expire in 2025.We are the owner of two registered trademarks in the United States, “MxL” and “digIQ”, and we claim common law rights in certain other trademarksthat are not registered.We may not gain any competitive advantages from our patents and other intellectual property rights. Our existing and future patents may becircumvented, designed around, blocked or challenged as to inventorship, ownership, scope, validity or enforceability. It is possible that we may be providedwith information in the future that could negatively affect the scope or enforceability of either our present or future patents. Furthermore, our pending andfuture patent applications may or may not be granted under the scope of the claims originally submitted in our patent applications. The scope of the claimssubmitted or granted may or may not be sufficiently broad to protect our proprietary technologies. Moreover, we have adopted a strategy of seeking limitedpatent protection with respect to the technologies used in or relating to our products.We are a party to a number of license agreements for various technologies, such as a license agreement with Intel Corporation relating to demodulatortechnologies that are licensed specifically for use in our products for cable set top boxes. The agreement was originally entered into with Texas Instrumentsbut was subsequently assigned to Intel Corporation as part of Intel Corporation’s acquisition of Texas Instruments’ cable modem product line in 2010. Thelicense agreement with Intel Corporation has a perpetual term, but Intel Corporation may terminate the agreement for any uncured material breach or in theevent of bankruptcy. If the agreement is terminated, we would not be able to manufacture or sell products that contain the demodulator technology licensedfrom Intel Corporation, and there would be a delay in the shipment of our products containing the technology until we found a replacement for thedemodulator technology in the marketplace on commercially reasonable terms or we developed the demodulator technology itself. We believe we could finda substitute for the currently licensed demodulator technology in the marketplace on commercially reasonable terms or develop the demodulator technologyourselves. In either case, obtaining new licenses or replacing existing technology could have a material adverse effect on our business, as described in “RiskFactors—Risks Related to Our Business—We utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectualproperty, our business could be adversely affected.”10Table of ContentsThe semiconductor industry is characterized by frequent litigation and other vigorous offensive and protective enforcement actions over rights tointellectual property. Moreover, there are numerous patents in the semiconductor industry, and new patents are being granted rapidly worldwide. Ourcompetitors may obtain patents that block or limit our ability to develop new technology and/or improve our existing products. If our products were found toinfringe any patents or other intellectual property rights held by third parties, we could be prevented from selling our products or be subject to litigation fees,statutory fines and/or other significant expenses. We may be required to initiate litigation in order to enforce any patents issued to us, or to determine thescope or validity of a third-party’s patent or other proprietary rights. We may in the future be contacted by third parties suggesting that we seek a license tointellectual property rights that they may believe we are infringing. In addition, in the future, we may be subject to lawsuits by third parties seeking toenforce their own intellectual property rights, as described in “Risk Factors—Risks Related to Our Business—We recently settled and are currently a party tointellectual property litigation and may face additional claims of intellectual property infringement. Current litigation and any future litigation could betime-consuming, costly to defend or settle and result in the loss of significant rights” and in “Item 3—Legal Proceedings.”EmployeesAs of December 31, 2014, we had approximately 378 employees, including 269 in research and development, 53 in sales and marketing, 8 inoperations and semiconductor technology and 48 in administration. None of our employees is represented by a labor organization or under any collectivebargaining arrangement, and we have never had a work stoppage. We consider our employee relations to be good.BacklogOur sales are made primarily pursuant to standard purchase orders. Because industry practice allows customers to reschedule, or in some cases, cancelorders on relatively short notice, we do not believe that backlog is a good indicator of our future sales.Geographic InformationDuring our last three years, substantially all of our revenue was generated from products shipped to China, Japan and Taiwan, and substantially all ofour long-lived assets are located within the United States.SeasonalityThe semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and priceerosion, evolving technical standards, short product life cycles and wide fluctuations in product supply and demand. From time to time, these and otherfactors, together with changes in general economic conditions, cause significant upturns and downturns in the industry, and in our business in particular.In addition, our operating results are subject to substantial quarterly and annual fluctuations due to a number of factors, such as the demand forsemiconductor solutions for broadband communications applications, the timing of receipt, reduction or cancellation of significant orders, the gain or loss ofsignificant customers, market acceptance of our products and our customers’ products, our ability to timely develop, introduce and market new products andtechnologies, the availability and cost of products from our suppliers, new product and technology introductions by competitors, intellectual propertydisputes and the timing and extent of product development costs.ITEM 1A.RISK FACTORSThis Annual Report on Form 10-K, or Form 10-K, including any information incorporated by reference herein, contains forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and Section 21E of the Securities ExchangeAct of 1934, as amended, referred to as the Exchange Act. In some cases, you can identify forward-looking statements by terms such as “may,” “will,”“should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms orother comparable terminology. The forward-looking statements contained in this 10-K involve known and unknown risks, uncertainties and situations thatmay cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by these statements. These factors include those listed below in this Item 1A and those discussedelsewhere in this Form 10-K. We encourage investors to review these factors carefully. We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may bemade from time to time by or on behalf of us, whether as a result of new information, future events or otherwise, except as required by law.11Table of ContentsBefore you invest in our securities, you should be aware that our business faces numerous financial and market risks, including those describedbelow, as well as general economic and business risks. The following discussion provides information concerning the material risks and uncertainties thatwe have identified and believe may adversely affect our business, our financial condition and our results of operations. Before you decide whether to investin our securities, you should carefully consider these risks and uncertainties, together with all of the other information included in this Form 10-K and inour other public filings.Risks Relating to the Proposed Acquisition of EntropicIf the acquisition is completed, our actual financial and operating results could differ materially from any expectations or guidance provided by usconcerning future results, including (without limitation) expectations or guidance with respect to the financial impact of any cost savings and otherpotential synergies.We currently expect to realize material cost savings and other synergies as a result of our proposed acquisition of Entropic, and as a result, we currentlybelieve that the acquisition will be accretive to our earnings per share, excluding upfront non-recurring charges, transaction related expenses, and theamortization of purchased intangible assets. The expectations and guidance we have provided with respect to the potential financial impact of theacquisition are subject to numerous assumptions, however, including assumptions derived from our diligence efforts concerning the status of and prospectsfor Entropic’s business, which we do not currently control, and assumptions relating to the near-term prospects for the semiconductor industry generally andthe markets for Entropic’s products in particular. Additional assumptions we have made relate to numerous matters, including (without limitation) thefollowing:•projections of Entropic’s future revenues;•the anticipated financial performance of Entropic’s products and products currently in development;•anticipated cost savings and other synergies associated with the acquisition, including potential revenue synergies;•our expected capital structure after the acquisition;•the amount of goodwill and intangibles that will result from the acquisition;•certain other purchase accounting adjustments that we expect to record in our financial statements in connection with the acquisition;•acquisition costs, including restructuring charges and transactions costs payable to our financial, legal, and accounting advisors;•our ability to maintain, develop, and deepen relationships with customers of Entropic; and•other financial and strategic risks of the Entropic acquisition, including the possible impact of reduced liquidity of MaxLinear resulting fromdeal-related cash outlays.We cannot provide any assurances with respect to the accuracy of our assumptions, including our assumptions with respect to future revenues orrevenue growth rates, if any, of Entropic, and we cannot provide assurances with respect to our ability to realize the cost savings that we currently anticipate.Risks and uncertainties that could cause our actual results to differ materially from currently anticipated results include, but are not limited to, risks relatingto our ability to integrate Entropic successfully; currently unanticipated incremental costs that we may incur in connection with integrating the twocompanies; risks relating to our ability to realize incremental revenues from the acquisition in the amounts that we currently anticipate; risks relating to thewillingness of Entropic’s customers and other partners to continue to conduct business with MaxLinear; and numerous risks and uncertainties that affect thesemiconductor industry generally and the markets for our products and those of Entropic specifically. Any failure to integrate Entropic successfully and torealize the financial benefits we currently anticipate from the acquisition would have a material adverse impact on our future operating results and financialcondition and could materially and adversely affect the trading price or trading volume of our Class A common stock.Failure to integrate our business and operations successfully with those of Entropic in the expected time-frame or otherwise may adversely affectMaxLinear’s operating results and financial condition if the acquisition is completed.We do not have a substantial history of acquiring other companies and have never pursued an acquisition of the size and complexity of Entropic. Thesuccess of the proposed acquisition of Entropic will depend, in substantial part, on our ability to integrate Entropic’s business and operations successfullywith those of MaxLinear and to realize fully the anticipated benefits and potential synergies from combining our companies, including, among others,currently expected cost savings from12Table of Contentsduplicative functions; potential operational efficiencies in our respective supply chains and in research and development investments; and potential revenuegrowth resulting from the addition of Entropic’s product portfolio. Historically, we and Entropic have been independent companies, and we will continue tooperate as such until the completion of the acquisition. We expect that the integration will be complex and time consuming and will require substantialmanagement time and attention, which may divert attention and resources from other important areas, including our existing businesses. We may facesignificant challenges in consolidating our operations with Entropic, integrating the two companies’ technologies, and addressing the different corporatecultures of the two companies. Additional unanticipated costs may be incurred in the course of integrating our respective businesses. If the companies are notsuccessfully integrated, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. In such acase, we would expect our operating results and financial condition to be materially and adversely affected, which could also have a material and adverseeffect on the trading price or trading volume of our Class A common stock.Our business relationships, including customer relationships, and those of Entropic may be subject to disruption due to uncertainty associated withthe acquisition.In response to the announcement of the acquisition, customers, vendors, licensors, and other third parties with whom we or Entropic do business orotherwise have relationships may experience uncertainty associated with the acquisition, and this uncertainty could materially affect their decisions withrespect to existing or future business relationships with MaxLinear or Entropic while the acquisition is pending or with MaxLinear after the acquisition iscompleted. Moreover, with respect to Entropic’s prior acquisition of certain television and set-top box assets from Trident Microsystems, Inc. (“Trident”), wewere unable to conduct substantial diligence with respect to certain licenses and intellectual property rights because Entropic acquired these assets throughTrident’s bankruptcy proceedings. As a result, we are in many instances unable to evaluate the impact of the acquisition on certain assumed contract rightsand obligations, including intellectual property rights.These business relationships may be subject to disruption as customers and others may elect to delay or defer purchase or design-win decisions orswitch to other suppliers due to the uncertainty about the direction of our offerings, any perceived unwillingness on our part to support existing Entropicproducts after the acquisition is completed, or any general perceptions by customers or other third parties that impute operational or business challenges to usarising from the acquisition. In addition, customers or other third parties may attempt to negotiate changes in existing business relationships, which mayresult in additional obligations imposed on us. These disruptions could have a material adverse effect on our business, operating results, and financialcondition while the acquisition is pending or after it is completed. The adverse effect of any such disruptions could be exacerbated by a delay in thecompletion of the acquisition for any reason, including delays associated with obtaining regulatory approvals, or termination of the merger agreement. Anyloss of customers, customer products, design win opportunities, or other important strategic relationships could have a material adverse effect on our business,operating results, and financial condition and could have a material and adverse effect on the trading price or trading volume of our Class A common stock.We and Entropic may have difficulty motivating and retaining executives and other key employees in light of the acquisition.Uncertainty about the effect of the acquisition on our employees and those of Entropic may have an adverse effect on MaxLinear or Entropic while theacquisition is pending or on MaxLinear after the acquisition is completed. This uncertainty may impair our or Entropic’s ability to retain and motivate keypersonnel in the months leading up to the completion of the acquisition and our ability to retain and motivate them following the acquisition. Employeeretention may be particularly challenging as our and Entropic’s employees may experience frustrations during the integration process and uncertainty abouttheir future roles with us following completion of the acquisition. For the acquisition to be successful, we and Entropic must continue to retain and motivateexecutives and other key employees during the period before the acquisition is completed. Furthermore, after the acquisition is completed, MaxLinear mustbe successful at retaining and motivating key employees in order for the benefits of the transaction to be fully realized. If key employees depart because ofissues relating to the uncertainty and difficulty of integration or a desire not to become employees of MaxLinear after the acquisition is completed, we mayincur significant costs in identifying, hiring, and retaining replacements for departing employees, which could substantially reduce or delay our ability torealize the anticipated benefits of the acquisition and could have a material adverse effect on our business, operating results, and financial condition.The merger agreement with Entropic contains provisions that may preclude us, while the transaction is pending, from pursuing acquisitions that wemight otherwise pursue or that could discourage or deter bids for MaxLinear and that could require us to pay Entropic an $11.65 million termination feeunder certain circumstances.Under the merger agreement, subject to certain exceptions, we are restricted from pursuing or entering into agreements with respect to transactionsinvolving acquisitions of assets or businesses by MaxLinear. In addition, unless and until the13Table of Contentsmerger agreement is terminated, subject to specified exceptions, we are restricted from soliciting, initiating, knowingly encouraging, or knowinglyfacilitating from or with any person proposals that could reasonably be expected to lead to an “acquisition transaction” (as defined in the merger agreement),including transactions that would result in a change-of-control in or acquisition of MaxLinear. Our board is permitted under certain circumstances to changeits recommendation to our stockholders prior to our anticipated special meeting of stockholders if we receive a “superior proposal” or if an “interveningevent” has occurred (in each case, as such terms are defined in the merger agreement). Nevertheless, in such events, we are required to negotiate with Entropicregarding potential amendments to the merger agreement and may only enter into an agreement with respect to a superior proposal if specified conditionshave been satisfied and we have paid Entropic a termination fee of $11.65 million. In addition, we could be required to pay Entropic a termination fee ifEntropic terminates the merger agreement due to a "triggering event," which is defined in the definitive merger agreement and includes a change ofrecommendation by our board to our stockholders or our breach of the non-solicitation provisions of the merger agreement. These restrictive covenantscontained in the merger agreement could have the effect while the acquisition is pending of preventing us from pursuing acquisitions of complementaryproducts or businesses that management believes would be in the best interests of MaxLinear and its stockholders. In addition, these restrictions coulddiscourage a third party that may have an interest in acquiring us from considering or proposing an acquisition of MaxLinear. If such a proposal wereforthcoming, we may not be able to enter into an agreement with respect to such an alternative transaction without incurring potentially significant liabilityto Entropic. If the proposed acquisition is not completed, we will have incurred substantial costs that may adversely affect our operating results and financialcondition as well as the market price of our Class A common stock.If the acquisition is not completed, the price of our Class A common stock may decline to the extent that such market price reflects a marketassumption that the acquisition will be completed. In addition, we have incurred and will incur substantial costs in connection with the proposed acquisition.These costs are primarily associated with the fees of our financial advisors, accountants, and legal counsel and, with limited exceptions relating to a portionof our financial advisor fees, will be payable regardless of whether the acquisition is completed. In addition, we have diverted significant managementresources in an effort to complete the acquisition and are subject to restrictions contained in the merger agreement on the conduct of our business during thependency of the acquisition. If the acquisition is not completed, we will have received little or no benefit in respect of such costs incurred. If the acquisitionis not completed under certain circumstances specified in the merger agreement, we may be required to pay a termination fee to Entropic of $11.65 million orto reimburse Entropic for its out-of-pocket expenses up to a cap of $2.5 million. Furthermore, if the acquisition is not completed, we may experience negativereactions from the financial markets and our suppliers, customers, customer prospects, and employees. Any of these factors could have an adverse effect onour business, operating results, and financial condition or on the trading price of our Class A common stock.Our ability to complete the acquisition is subject to various closing conditions, including approval of our stockholders and certain requiredregulatory approvals, which may contain burdensome conditions, including divestitures, that could have an adverse effect on our operation of the businessfollowing the acquisition.To complete the acquisition, our stockholders must approve the issuance of the shares of our Class A common stock pursuant to the terms of the mergeragreement. In addition, completion of the acquisition is conditioned upon the receipt of certain regulatory approvals, including the expiration or terminationof the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Even if these approvals are obtained, governmentalauthorities could impose conditions on the completion of the acquisition, including requiring divestitures that could delay consummation of the acquisitionor have an adverse effect on our business following the acquisition. Under the terms of the merger agreement, we have agreed to certain limited divestitures ofassets of Entropic, if required by governmental or regulatory authorities, so as to enable the closing of the acquisition as soon as reasonably possible.The special meeting at which our stockholders will vote on the transactions contemplated by the merger agreement may take place before all suchapprovals have been obtained and, in cases where they have not been obtained, before the terms of any conditions to obtain such approvals that may beimposed are known. As a result, if stockholder approval of the transactions contemplated by the merger agreement is obtained at our special meeting, we maymake decisions after the special meeting to waive a condition or approve certain actions required to obtain necessary approvals without seeking furtherstockholder approval. Such actions could have an adverse effect on our business following completion of the acquisition. In addition, the merger agreementcontains other customary closing conditions, which may not be satisfied or waived.If we are unable to complete the acquisition, we would be subject to a number of risks, including the following:•we would not realize the anticipated benefits of the acquisition, including, among other things, increased operating efficiencies;14Table of Contents•the attention of our management may have been diverted to the acquisition rather than to our own operations and the pursuit of otheropportunities that could have been beneficial to us;•the potential loss of key personnel during the pendency of the acquisition as employees and other service providers may experience uncertaintyabout their future roles with us following completion of the acquisition; and•the trading price of our Class A common stock may decline to the extent that the current market prices reflect a market assumption that theacquisition will be completed.We can provide no assurance that the various closing conditions will be satisfied, that the necessary regulatory approvals will be obtained, or that anyrequired conditions will not materially adversely affect our business following the acquisition. If we are required to undertake divestitures in order to obtainany approvals required to complete the acquisition, we may be less able to realize anticipated benefits of the acquisition, and our business, operating results,and financial condition after the acquisition may be adversely affected. In addition, we can provide no assurance that these conditions will not result in theabandonment or delay of the acquisition. The occurrence of any of these events individually or in combination could have a material adverse effect on ourbusiness, financial condition, and results of operations and on the trading price of our Class A common stock.In order to complete the acquisition and distribute the cash consideration payable to Entropic stockholders, we will be required to use substantiallyall of Entropic’s available cash resources and a sizeable portion of our cash resources. As a result, our available liquidity after the acquisition will bereduced at the same time that the scope of our operations and cash requirements have increased, and we may be required to seek additional financing.Under the terms of the merger agreement and in order to implement the distribution of the cash merger consideration to Entropic’s stockholders,Entropic is required to deliver to the exchange agent specified for the acquisition an amount of cash designated by us, which cannot exceed Entropic’saggregate cash and cash equivalents less $10.0 million. We will be required to fund the balance of the cash merger consideration from our own cash and cashequivalents. Consequently, substantially all of Entropic’s available cash will be used in connection with the acquisition, and our overall liquidity aftercompletion of the acquisition will be materially reduced relative to our current liquidity even though we will have incurred substantial expenses and expectto incur additional restructuring costs as we integrate Entropic’s business and operations. To the extent Entropic’s cash and cash equivalents at closing areless than we currently anticipate, we would be required to use a larger portion of our available cash. As a result of these factors, our board of directors andmanagement may determine to seek financing to enhance our liquidity, which could involve the issuance of debt or equity securities. We cannot provideany assurances that additional financing will be available to us when and as needed or on terms that we believe to be commercially reasonable. To the extentwe issue debt securities, such indebtedness would have rights that are senior to holders of equity securities and could contain covenants that restrict ouroperations. Any equity financing would be dilutive to our current stockholders. If we determine that we require funding as a result of the acquisition butcannot obtain such funding on terms we consider to be reasonable, we may seek other methods to reduce our use of cash, including reductions in our researchand development spending, which would be expected to have an adverse long-term effect on our business, operating results, and financial condition. A number of purported stockholder class action lawsuits have been filed against us, Entropic, Entropic’s directors, and our merger subsidiaries,Excalibur Acquisition Corporation and Excalibur Subsidiary, LLC, challenging the acquisition, and an unfavorable judgment or ruling in these lawsuitscould prevent or delay the consummation of the acquisition, result in substantial costs, or have an adverse effect on our business, financial condition andoperating results.Beginning on February 9, 2015, a number of purported stockholder class action complaints were filed on behalf of a putative class of Entropicstockholders in the Court of Chancery in the State of Delaware and in the Superior Court of the State of California County of San Diego. The class actioncomplaints name Entropic, the members of Entropic’s board, MaxLinear and our merger subsidiaries, Excalibur Acquisition Corporation and ExcaliburSubsidiary, LLC, as defendants. Additional lawsuits may be filed.The class action complaints generally allege, among other things, that, in connection with our proposed acquisition of Entropic, the individualdefendants breached their fiduciary duties to Entropic stockholders by, among other things, purportedly failing to take steps to maximize the value ofEntropic to its stockholders and agreeing to allegedly preclusive deal protection devices in the merger agreement. The complaints further allege thatEntropic, MaxLinear, and/or our merger subsidiaries aided and abetted the individual defendants in the alleged breaches of their fiduciary duties. Thecomplaints seek, among other things: an order enjoining the defendants from consummating the proposed transaction; an order declaring the mergeragreement unlawful and unenforceable; in the event that the proposed transaction is consummated, an order rescinding it and setting it aside or awardingrescissory damages to the class; imposition of a constructive trust; damages; and/or attorneys’ fees and costs. 15Table of ContentsOur management believes that the allegations in the Delaware class action complaints and the California class action complaints are without merit andintend to vigorously contest the actions. Litigation is inherently uncertain, however, and there can be no assurances that the defense of these stockholderlawsuits will be successful. In addition, we and Entropic have obligations, under certain circumstances, to hold harmless and indemnify each of the defendantdirectors against judgments, fines, settlements and expenses related to claims against such directors and otherwise to the fullest extent permitted underDelaware law and our and Entropic’s respective bylaws and certificate of incorporation. Such obligations may apply to these lawsuits. An unfavorableoutcome in these lawsuits could prevent or delay the consummation of the merger, result in substantial costs to us and Entropic, or have an adverse effect onour business, financial condition and operating results.If the acquisition of Entropic is completed, the issuance of shares of our Class A common stock to Entropic stockholders will substantially reduce thepercentage interests of our stockholders.At the completion of the proposed acquisition of Entropic, we expect to issue approximately 20.6 million shares of our Class A common stock toformer Entropic stockholders entitled to receive consideration pursuant to the merger agreement. If the acquisition is completed, we expect that ourstockholders will own approximately 65% and that Entropic stockholders will own approximately 35% of our outstanding capital stock followingcompletion of the acquisition. The issuance of shares of our Class A common stock to Entropic stockholders in the acquisition and the assumption by us ofEntropic options, restricted stock units, and certain performance stock units will cause a significant reduction in the relative percentage voting and economicinterests of our current stockholders.We expect to incur substantial expenses related to the integration of MaxLinear and Entropic.We expect to incur substantial expenses in connection with integrating the operations, technologies, and business systems of MaxLinear and Entropic.We expect business systems integration between the two companies to require substantial management attention, including integration of informationmanagement, purchasing, accounting and finance, sales, payroll and benefits systems and regulatory compliance functions. Numerous factors beyond ourcontrol could affect the total cost or the timing of expected integration expenses. Moreover, many of the expenses that will be incurred are by their naturedifficult to estimate accurately at the present time. These expenses could, particularly in the near term, reduce the savings that we expect to achieve from theelimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses. These integrationexpenses may result in MaxLinear’s taking significant charges against earnings following the completion of the acquisition.We will record goodwill that could become impaired and adversely affect our future operating results.The acquisition will be accounted for as an acquisition by MaxLinear in accordance with accounting principles generally accepted in the UnitedStates. Under the acquisition method of accounting, the assets and liabilities of Entropic will be recorded, as of completion, at their respective fair values andadded to our assets and liabilities. Our reported financial condition and results of operations after completion of the acquisition will reflect Entropic’sbalances and results but will not be restated retroactively to reflect the historical financial position or results of operations of Entropic for periods prior to theacquisition. As a result, comparisons of future results against prior period results will be more difficult for investors.Under the acquisition method of accounting, the total purchase price will be allocated to Entropic’s tangible assets and liabilities and identifiableintangible assets based on their fair values as of the date of completion of the acquisition. The excess of the purchase price over those fair values will berecorded as goodwill. We expect that the acquisition will result in the creation of goodwill based upon the application of the acquisition method ofaccounting. To the extent the value of goodwill or intangibles becomes impaired, we may be required to incur material charges relating to such impairment.Any such impairment charge could have a material impact on our operating results in future periods, and the announcement of a material impairment couldhave an adverse effect on the trading price and trading volume of our Class A common stock.The market value of our Class A common stock could decline if large amounts of our Class A common stock are sold following the acquisition.Following the acquisition, our stockholders and former stockholders of Entropic will own interests in a company operating an expanded business withmore assets and a different mix of liabilities. Our current stockholders (and those of Entropic who will receive our Class A common stock in connection withthe acquisition) may not wish to continue to invest in us, or may wish to reduce their investment in us, in order to comply with institutional investingguidelines, to increase diversification or to track any rebalancing of stock indices in which our Class A common stock and Entropic common stock is or wasincluded. If, following the acquisition, large amounts of our Class A common stock are sold, the price of our Class A common stock could decline.16Table of ContentsRisks Relating to Our BusinessWe face intense competition and expect competition to increase in the future, which could have an adverse effect on our revenue, revenue growthrate, if any, and market share.The global semiconductor market in general, and the RF receiver market in particular, are highly competitive. We compete in different target marketsto various degrees on the basis of a number of principal competitive factors, including our products’ performance, features and functionality, energyefficiency, size, ease of system design, customer support, product roadmap, reputation, reliability and price, as well as on the basis of our customer support,the quality of our product roadmap and our reputation. We expect competition to increase and intensify as more and larger semiconductor companies as wellas the internal resources of large, integrated original equipment manufacturers, or OEMs, enter our markets. Increased competition could result in pricepressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue, revenue growth rates andoperating results.As our products are integrated into a variety of electronic devices, we compete with suppliers of both can tuners and traditional silicon RF receivers,and with providers of physical medium devices for optical interconnect markets. Our competitors range from large, international companies offering a widerange of semiconductor products to smaller companies specializing in narrow markets and internal engineering groups within television, set top box, datamodems and gateway, satellite low-noise blocker, and optical module manufacturers, some of which may be our customers. Our primary competitors includeSilicon Labs, NXP B.V., RDA Microelectronics, Inc., Broadcom Corporation, Entropic Communications, Inc., Rafael Microelectronics, Inc., and Inphi, M/A-COM, Semtech, and Qorvo for our new initiatives into the optical interconnect markets. It is quite likely that competition in the markets in which weparticipate will increase in the future as existing competitors improve or expand their product offerings. In addition, it is quite likely that a number of otherpublic and private companies are in the process of developing competing products for digital television and other broadband communication applications.Because our products often are building block semiconductors which provide functions that in some cases can be integrated into more complex integratedcircuits, we also face competition from manufacturers of integrated circuits, some of which may be existing customers that develop their own integratedcircuit products. If we cannot offer an attractive solution for applications where our competitors offer more fully integrated tuner/demodulator/videoprocessing products, we may lose significant market share to our competitors. Certain of our competitors have fully integrated tuner/demodulator/videoprocessing solutions targeting high performance cable, satellite, or DTV applications, and thereby potentially provide customers with smaller and cheapersolutions. Some of our targeted customers for our optical interconnect solutions are module makers who are vertically integrated, where we compete withinternally supplied components.Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends.During past periods of downturns in our industry, competition in the markets in which we operate intensified as manufacturers of semiconductors reducedprices in order to combat production overcapacity and high inventory levels. Many of our competitors have substantially greater financial and otherresources with which to withstand similar adverse economic or market conditions in the future. Moreover, the competitive landscape is changing as a result ofconsolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun tocollaborate with each other. These developments may materially and adversely affect our current and future target markets and our ability to competesuccessfully in those markets.We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one ormore of our major customers could have a material adverse effect on our revenue and operating results.During the year ended December 31, 2014, Arris accounted for approximately 31% of our net revenue, and our ten largest customers collectivelyaccounted for approximately 67% of our net revenue. During the year ended December 31, 2013, Arris accounted for approximately 28% of our net revenue,and our ten largest customers collectively accounted for approximately 72% of our net revenue. Sales to Arris as a percentage of revenue include sales toMotorola Home, which was acquired by Arris in April 2013, for the years ended December 31, 2014 and 2013. Our operating results for the foreseeable futurewill continue to depend on sales to a relatively small number of customers and on the ability of these customers to sell products that incorporate our RFreceivers or RF receiver SoCs. In the future, these customers may decide not to purchase our products at all, may purchase fewer products than they did in thepast, or may defer or cancel purchases or otherwise alter their purchasing patterns. Factors that could affect our revenue from these large customers include thefollowing:•substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or delay productpurchase commitments with little or no notice to us and without penalty; and•some of our customers have sought or are seeking relationships with current or potential competitors which may affect their purchasingdecisions.17Table of ContentsIn addition, delays in development could impair our relationships with our strategic customers and negatively impact sales of the products underdevelopment. Moreover, it is possible that our customers may develop their own product or adopt a competitor’s solution for products that they currently buyfrom us. If that happens, our sales would decline and our business, financial condition and results of operations could be materially and adversely affected.Our relationships with some customers may deter other potential customers who compete with these customers from buying our products. To attractnew customers or retain existing customers, we may offer these customers favorable prices on our products. In that event, our average selling prices and grossmargins would decline. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers couldseriously impact our revenue and materially and adversely affect our results of operations.A significant portion of our revenue is attributable to demand for our products in markets for cable applications.Prior to fiscal 2010, sales of our products to customers in the mobile electronic device market and terrestrial market accounted for a significant portionof our revenue in prior periods; however, revenue derived from mobile electronic devices has declined since fiscal 2010 and is no longer an area of focus forus. For fiscal 2012, revenue directly attributable to cable applications accounted for approximately 63% of our net revenue. For fiscal 2013, revenue directlyattributable to cable applications accounted for approximately 68% of our net revenue. For fiscal 2014, revenue directly attributable to cable applicationsaccounted for approximately 65% of our net revenue. We expect that cable revenue will continue to represent a meaningful percentage of our total revenuesin fiscal 2015 even as we expect the relative percentage to decline, assuming anticipated increases in satellite revenue occur. Delays in the development of,or unexpected developments in, the terrestrial television receiver and cable and satellite applications markets could have an adverse effect on order activityby manufacturers in these markets and, as a result, on our business, revenue, operating results and financial condition.If we fail to penetrate new markets, specifically the market for satellite set-top and gateway boxes and outdoor units, our revenue, revenue growthrate, if any, and financial condition could be materially and adversely affected.Currently, we sell most of our products to manufacturers of applications for television, cable modems, cable gateways, and cable set-top boxes, and toChinese manufacturers of terrestrial set top boxes for sale in various markets worldwide. Our future revenue growth, if any, will depend in part on our abilityto expand beyond these markets with our RF receivers and RF receiver SoCs, and we have targeted the markets for satellite set-top and gateway boxes andoutdoor units, and physical medium devices for optical interconnects as our next market opportunities. Each of these markets presents distinct andsubstantial risks. If any of these markets do not develop as we currently anticipate, or if we are unable to penetrate them successfully, it could materially andadversely affect our revenue and revenue growth rate, if any.We expect cable data modems/gateways and cable and satellite set top boxes and video gateways to represent our largest North American andEuropean target market. The North American and European cable set top box market is dominated by only a few OEMs, including Cisco Systems, Inc., ArrisGroup, Inc., Pace plc, Humax Co., Ltd., Samsung Electronics Co., Ltd., and Technicolor S.A. These OEMs are large, multinational corporations withsubstantial negotiating power relative to us. Securing design wins with any of these companies requires a substantial investment of our time and resources.Even if we succeed, additional testing and operational certifications will be required by the OEMs’ customers, which include large cable televisioncompanies such as Comcast Corporation, Time Warner Cable Inc., DIRECTV, and EchoStar Corporation. In addition, our products will need to be compatiblewith other components in our customers’ designs, including components produced by our competitors or potential competitors. There can be no assurancethat these other companies will support or continue to support our products.If we fail to penetrate these or other new markets upon which we target our resources, our revenue and revenue growth rate, if any, likely will decreaseover time and our financial condition could suffer.We may be unable to make the substantial and productive research and development investments which are required to remain competitive in ourbusiness.The semiconductor industry requires substantial investment in research and development in order to develop and bring to market new and enhancedtechnologies and products. Many of our products originated with our research and development efforts and we believe have provided us with a significantcompetitive advantage. Our research and development expense was $56.6 million in 2014, $53.1 million in 2013 and $46.5 million in 2012. In 2014, wecontinued to increase our research and development expenditures as part of our strategy of devoting focused research and development efforts on thedevelopment of innovative and sustainable product platforms. We are committed to investing in new product development internally in order to staycompetitive in our markets and plan to maintain research and development and design capabilities for new solutions in advanced semiconductor processnodes such as 40nm and 28nm and beyond. We do not know whether we will have sufficient resources to maintain the level of investment in research anddevelopment required to remain competitive as semiconductor18Table of Contentsprocess nodes continue to shrink and become increasingly complex. In addition, we cannot assure you that the technologies which are the focus of ourresearch and development expenditures will become commercially successful.The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the marketacceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.Highly complex products like our RF receivers and RF receiver SoCs and physical medium devices for optical modules may contain defects and bugswhen they are first introduced or as new versions are released. Due to our limited operating history, defects and bugs that may be contained in our productsmay not yet have manifested. We have previously experienced, and may in the future experience, defects and bugs. If any of our products contains defects orbugs, or has reliability, quality or compatibility problems, we may not be able to successfully correct these problems. Consequently, our reputation may bedamaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attractnew customers, and our financial results. In addition, these defects or bugs could interrupt or delay sales to our customers. If any of these problems are notfound until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall,repair or replacement costs, and our operating costs could be adversely affected. These problems may also result in warranty or product liability claimsagainst us by our customers or others that may require us to make significant expenditures to defend these claims or pay damage awards. In the event of awarranty claim, we may also incur costs if we compensate the affected customer. We maintain product liability insurance, but this insurance is limited inamount and subject to significant deductibles. There is no guarantee that our insurance will be available or adequate to protect against all claims. We alsomay incur costs and expenses relating to a recall of one of our customers’ products containing one of our devices. The process of identifying a recalledproduct in devices that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs,contract damage claims from our customers and reputational harm. Costs or payments made in connection with warranty and product liability claims andproduct recalls could materially affect our financial condition and results of operations.Average selling prices of our products could decrease rapidly, which could have a material adverse effect on our revenue and gross margins.We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices. From time totime, we have reduced the average unit price of our products due to competitive pricing pressures, new product introductions by us or our competitors, andfor other reasons, and we expect that we will have to do so again in the future. If we are unable to offset any reductions in our average selling prices byincreasing our sales volumes or introducing new products with higher margins, our revenue and gross margins will suffer. To support our gross margins, wemust develop and introduce new products and product enhancements on a timely basis and continually reduce our and our customers’ costs. Failure to do sowould cause our revenue and gross margins to decline.If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and ourcompetitive position could be harmed.We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. Tocompete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performance andreliability and meet the cost expectations of our customers. The introduction of new products by our competitors, the market acceptance of products based onnew or alternative technologies, or the emergence of new industry standards could render our existing or future products obsolete. Our failure to anticipate ortimely develop new or enhanced products or technologies in response to technological shifts could result in decreased revenue and our competitors winningmore competitive bid processes, known as “design wins.” In particular, we may experience difficulties with product design, manufacturing, marketing orcertification that could delay or prevent our development, introduction or marketing of new or enhanced products. If we fail to introduce new or enhancedproducts that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our operating results will beadversely affected.In particular, we believe that we will need to develop new products in part to respond to changing dynamics and trends in our end user markets,including (among other trends) consolidation among cable and satellite operators, potential industry shifts away from the hardware devices and othertechnologies that incorporate our products, and changes in consumer television viewing habits and how consumers access and receive broadcast content anddigital broadband services. We cannot predict how these trends will continue to develop or how or to what extent they may affect our future revenues andoperating results. We believe that we will need to continue to make substantial investments in research and development in an attempt to ensure a productroadmap that anticipates these types of changes; however, we cannot provide any assurances that we will19Table of Contentsaccurately predict the direction in which our markets will evolve or that we will be able to develop, market, or sell new products that respond to such changessuccessfully or in a timely manner, if at all.We recently settled and are currently a party to intellectual property litigation and may face additional claims of intellectual property infringement.Current litigation and any future litigation could be time-consuming, costly to defend or settle and result in the loss of significant rights.The semiconductor industry is characterized by companies that hold large numbers of patents and other intellectual property rights and thatvigorously pursue, protect and enforce intellectual property rights. Third parties have in the past and may in the future assert against us and our customersand distributors their patent and other intellectual property rights to technologies that are important to our business.On January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against us in the United StatesDistrict Court of Delaware (the “District Court Litigation”). In its complaint, CrestaTech alleges that we infringe U.S. Patent Nos. 7,075,585 and 7,265,792. Inaddition to asking for compensatory damages, CrestaTech alleges willful infringement and seeks a permanent injunction. CrestaTech also names SharpCorporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged use of our television tuners. On January 28, 2014, CrestaTechfiled a complaint with the U.S. International Trade Commission, or ITC, alleging that we, Sharp, Sharp Electronics, and VIZIO, infringe the same patentsasserted in the Delaware action. On May 16, 2014 the ITC granted CrestaTech’s motion to file an amended complaint adding six OEM Respondents, namely,SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron Infocomm Technology (America) Corp., Top Victory Investments Ltd.and TPV International (USA), Inc. CrestaTech filed the amended complaint on June 12, 2014, alleging that the Company’s accused products are importedinto and sold within the United States by, or on behalf of, the Company, Sharp, Sharp Electronics, VIZIO and the six OEM Respondents. Through its ITCcomplaints, CrestaTech seeks an exclusion order preventing entry into the United States of certain of our television tuners and televisions containing suchtuners from Sharp, Sharp Electronics, and VIZIO. CrestaTech also seeks a cease and desist order prohibiting these defendants from engaging in theimportation into, sale for importation into, the sale after importation of, or otherwise transferring within the United States certain of our television tuners ortelevisions containing such tuners. The target date for completing the ITC investigation is June 29, 2015. The District Court litigation is currently stayed.Notwithstanding the completion of the ITC trial and post-trial briefing, our overall litigation with CrestaTech is still in the early stages, and we havenot recorded an accrual for loss contingencies associated with the litigation; determined that an unfavorable outcome is probable or reasonably possible; ordetermined that the amount or range of any possible loss is reasonably estimable.Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution and includingthe CrestaTech claims, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. In addition,many of our customer and distributor agreements require us to indemnify and defend our customers or distributors from third-party infringement claims andpay damages in the case of adverse rulings. Claims of this sort also could harm our relationships with our customers or distributors and might deter futurecustomers from doing business with us. In order to maintain our relationships with existing customers and secure business from new customers, we have beenrequired from time to time to provide additional assurances beyond our standard terms. If any future proceedings result in an adverse outcome, we could berequired to:•cease the manufacture, use or sale of the infringing products, processes or technology;•pay substantial damages for infringement;•expend significant resources to develop non-infringing products, processes or technology;•license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;•cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor;or•pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology.Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.20Table of ContentsWe utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectual property, our business could beadversely affected.Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual propertyrights, including patents, copyrights, trademarks and trade secrets in the United States and in selected foreign countries where we believe filing for suchprotection is appropriate. Effective patent, copyright, trademark and trade secret protection may be unavailable, limited or not applied for in some countries.Some of our products and technologies are not covered by any patent or patent application. We cannot guarantee that:•any of our present or future patents or patent claims will not lapse or be invalidated, circumvented, challenged or abandoned;•our intellectual property rights will provide competitive advantages to us;•our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by ouragreements with third parties;•any of our pending or future patent applications will be issued or have the coverage originally sought;•our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;•any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or beinvalidated, circumvented, challenged or abandoned; or•we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect royalties or otherpayments.In addition, our competitors or others may design around our protected patents or technologies. Effective intellectual property protection may beunavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United States, or may not be applied for in oneor more relevant jurisdictions. If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit ourability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and resultsof operations.Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property may have occurred ormay occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwiseadequately protect our intellectual property would adversely affect our business. Moreover, if we are required to commence litigation, whether as a plaintiffor defendant as has occurred with CrestaTech, not only will this be time-consuming, but we will also be forced to incur significant costs and divert ourattention and efforts of our employees, which could, in turn, result in lower revenue and higher expenses.We also rely on customary contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement securitymeasures to protect our trade secrets. We cannot assure you that these contractual protections and security measures will not be breached, that we will haveadequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of suchcontracts.In addition, we have a number of third-party patent and intellectual property license agreements. Some of these license agreements require us to makeone-time payments or ongoing royalty payments. Also, a few of our license agreements contain most-favored nation clauses or other price restriction clauseswhich may affect the amount we may charge for our products, processes or technology. We cannot guarantee that the third-party patents and technology welicense will not be licensed to our competitors or others in the semiconductor industry. In the future, we may need to obtain additional licenses, renewexisting license agreements or otherwise replace existing technology. We are unable to predict whether these license agreements can be obtained or renewedor the technology can be replaced on acceptable terms, or at all.When we settled a trademark dispute with Linear Technology Corporation, we agreed not to register the “MAXLINEAR” mark or any other markscontaining the term “LINEAR”. We may continue to use “MAXLINEAR” as a corporate identifier, including to advertise our products and services, but maynot use that mark on our products. The agreement does not affect our ability to use our registered trademark “MxL”, which we use on our products. Due to ouragreement not to register the “MAXLINEAR” mark, our ability to effectively prevent third parties from using the “MAXLINEAR” mark in connection withsimilar products or technology may be affected. If we are unable to protect our trademarks, we may experience difficulties in achieving and maintainingbrand recognition and customer loyalty.21Table of ContentsOur business, revenue and revenue growth, if any, will depend in part on the timing and development of the global transition from analog to digitaltelevision, which is subject to numerous regulatory and business risks outside our control.For the year ended December 31, 2014, sales of our RF receiver products used in digital terrestrial television applications, or DTT, including digitaltelevisions, PCTV, IPTV, terrestrial set top boxes, and terrestrial receivers in satellite video gateways represented a significant portion of our revenues. Weexpect a significant portion of our revenue in future periods to continue to depend on the demand for DTT applications. In contrast to the United States,where the transition from analog to digital television occurred on a national basis in June 2009, in Europe and other parts of the world, the digital transitionis being phased in on a local and regional basis and is expected to occur over many years. Many countries in Eastern Europe and Latin America are expectedto convert to digital television by the end of 2018, with other countries targeting dates as late as 2024. As a result, our future revenue will depend in part ongovernment mandates requiring conversion from analog to digital television and on the timing and implementation of those mandates. If the ongoing globaltransition to digital TV standards does not continue to progress or experiences significant delays, our business, revenue, operating results and financialcondition would be materially and adversely affected. If during the transition to digital TV standards, consumers disproportionately purchase TV’s withdigital or hybrid tuning capabilities, this could diminish the size of the market for our digital-to-analog converter set-top box solutions, and as result ourbusiness, revenue, operating results and financial condition would be materially and adversely affected.Global economic conditions, including factors that adversely affect consumer spending for the products that incorporate our integrated circuits,could adversely affect our revenues, margins, and operating results.Our products are incorporated in numerous consumer devices, and demand for our products will ultimately be driven by consumer demand for productssuch as televisions, automobiles, cable modems, and set top boxes. Many of these purchases are discretionary. Global economic volatility and economicvolatility in the specific markets in which the devices that incorporate our products are ultimately sold can cause extreme difficulties for our customers andthird-party vendors in accurately forecasting and planning future business activities. This unpredictability could cause our customers to reduce spending onour products, which would delay and lengthen sales cycles. Furthermore, during challenging economic times our customers may face challenges in gainingtimely access to sufficient credit, which could impact their ability to make timely payments to us. In addition, our recent revenue growth has beenattributable in large part to purchases of digital-to-analog set top converter boxes in various geographies including Europe. Partially in response to economicand political developments, Greece recently extended the date for its deadline for switching to exclusive digital television broadcasts. Similar extensions inother European countries could adversely affect our revenue and growth. These events, together with economic volatility that may face the broader economyand, in particular, the semiconductor and communications industries, may adversely affect, our business, particularly to the extent that consumers decreasetheir discretionary spending for devices deploying our products.We rely on a limited number of third parties to manufacture, assemble and test our products, and the failure to manage our relationships with ourthird-party contractors successfully could adversely affect our ability to market and sell our products.We do not have our own manufacturing facilities. We operate an outsourced manufacturing business model that utilizes third-party foundry andassembly and test capabilities. As a result, we rely on third-party foundry wafer fabrication and assembly and test capacity, including sole sourcing for manycomponents or products. Currently, all of our products are manufactured by United Microelectronics Corporation, or UMC, Silterra Malaysia Sdn Bhd,Global Foundries, and Semiconductor Manufacturing International Corporation, or SMIC, at foundries in Taiwan, Singapore, Malaysia, and China. We alsouse third-party contractors for all of our assembly and test operations.Relying on third party manufacturing, assembly and testing presents significant risks to us, including the following:•failure by us, our customers, or their end customers to qualify a selected supplier;•capacity shortages during periods of high demand;•reduced control over delivery schedules and quality;•shortages of materials;•misappropriation of our intellectual property;•limited warranties on wafers or products supplied to us; and•potential increases in prices.22Table of ContentsThe ability and willingness of our third-party contractors to perform is largely outside our control. If one or more of our contract manufacturers or otheroutsourcers fails to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputationcould suffer. For example, in the event that manufacturing capacity is reduced or eliminated at one or more facilities, including as a response to the recentworldwide decline in the semiconductor industry, manufacturing could be disrupted, we could have difficulties fulfilling our customer orders and our netrevenue could decline. In addition, if these third parties fail to deliver quality products and components on time and at reasonable prices, we could havedifficulties fulfilling our customer orders, our net revenue could decline and our business, financial condition and results of operations would be adverselyaffected.Additionally, our manufacturing capacity may be similarly reduced or eliminated at one or more facilities due to the fact that our fabrication andassembly and test contractors are all located in the Pacific Rim region, principally in China, Taiwan, Singapore and Malaysia. The risk of earthquakes inthese geographies is significant due to the proximity of major earthquake fault lines, and Taiwan in particular is also subject to typhoons and other Pacificstorms. Earthquakes, fire, flooding, or other natural disasters in Taiwan or the Pacific Rim region, or political unrest, war, labor strikes, work stoppages orpublic health crises, such as outbreaks of H1N1 flu, in countries where our contractors’ facilities are located could result in the disruption of our foundry,assembly or test capacity. Any disruption resulting from these events could cause significant delays in shipments of our products until we are able to shift ourmanufacturing, assembly or test from the affected contractor to another third-party vendor. There can be no assurance that alternative capacity could beobtained on favorable terms, if at all.We do not have any long-term supply contracts with our contract manufacturers or suppliers, and any disruption in our supply of products ormaterials could have a material adverse effect on our business, revenue and operating results.We currently do not have long-term supply contracts with any of our third-party vendors, including UMC, Silterra Malaysia Sdn Bhd, GlobalFoundries, and SMIC. We make substantially all of our purchases on a purchase order basis, and neither UMC nor our other contract manufacturers arerequired to supply us products for any specific period or in any specific quantity. Foundry capacity may not be available when we need it or at reasonableprices. Availability of foundry capacity has in the past been reduced from time to time due to strong demand. Foundries can allocate capacity to theproduction of other companies’ products and reduce deliveries to us on short notice. It is possible that foundry customers that are larger and better financedthan we are, or that have long-term agreements with our foundry, may induce our foundry to reallocate capacity to them. This reallocation could impair ourability to secure the supply of components that we need. We expect that it would take approximately nine to twelve months to transition performance of ourfoundry or assembly services to new providers. Such a transition would likely require a qualification process by our customers or their end customers. Wegenerally place orders for products with some of our suppliers approximately four to five months prior to the anticipated delivery date, with order volumesbased on our forecasts of demand from our customers. Accordingly, if we inaccurately forecast demand for our products, we may be unable to obtain adequateand cost-effective foundry or assembly capacity from our third-party contractors to meet our customers’ delivery requirements, or we may accumulate excessinventories. On occasion, we have been unable to adequately respond to unexpected increases in customer purchase orders and therefore were unable tobenefit from this incremental demand. None of our third-party contractors has provided any assurance to us that adequate capacity will be available to uswithin the time required to meet additional demand for our products.To address capacity considerations, we are in the process of qualifying additional semiconductor fabricators. Qualification will not occur if we identifya defect in a fabricator’s manufacturing process or if our customers choose not to invest the time and expense required to qualify the proposed fabricator. Iffull qualification of a fabricator does not occur, we may not be able to sell all of the materials produced by this fabricator or to fulfill demand for our products,which would adversely affect our business, revenue and operating results. In addition, the resulting write-off of unusable inventories would have an adverseeffect on our operating results.We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses particularly as we seek to enter newmarkets where we may not have prior experience.Our recent operating history has focused on developing integrated circuits for specific terrestrial and cable television applications, and as part of ourstrategy, we seek to expand our addressable market into new product categories. For example, we have recently expanded into the market for satellite set-topand gateway boxes and outdoor units and physical medium devices for the optical interconnect markets. Our limited operating experience in new markets orpotential markets we may enter, combined with the rapidly evolving nature of our markets in general, substantial uncertainty concerning how these marketsmay develop and other factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. We are currently expanding ourstaffing and increasing our expense levels in anticipation of future revenue growth. If our revenue does not increase as anticipated, we could incur significantlosses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.23Table of ContentsWe may not sustain our growth rate, and we may not be able to manage future growth effectively.We have experienced significant growth in a short period of time. Our net revenue increased from approximately $97.7 million in 2012 toapproximately $119.6 million in 2013 and approximately $133.1 million in 2014. We may not achieve similar growth rates in future periods. You should notrely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance. If we are unable to maintainadequate revenue growth, our financial results could suffer and our stock price could decline.To manage our growth successfully and handle the responsibilities of being a public company, we believe we must effectively, among other things:•recruit, hire, train and manage additional qualified engineers for our research and development activities, especially in the positions of designengineering, product and test engineering and applications engineering;•add sales personnel and expand customer engineering support offices;•implement and improve our administrative, financial and operational systems, procedures and controls; and•enhance our information technology support for enterprise resource planning and design engineering by adapting and expanding our systemsand tool capabilities, and properly training new hires as to their use.If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products and we mayfail to satisfy customer requirements, maintain product quality, execute our business plan or respond to competitive pressures.If we are unable to attract, train and retain qualified personnel, especially our design and technical personnel, we may not be able to execute ourbusiness strategy effectively.Our future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing andfinance, and especially our design and technical personnel. We do not know whether we will be able to retain all of these personnel as we continue to pursueour business strategy. Historically, we have encountered difficulties in hiring and retaining qualified engineers because there is a limited pool of engineerswith the expertise required in our field. Competition for these personnel is intense in the semiconductor industry. As the source of our technological andproduct innovations, our design and technical personnel represent a significant asset. The loss of the services of one or more of our key employees, especiallyour key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical personnel, could have a materialadverse effect on our business, financial condition and results of operations.Our business would be adversely affected by the departure of existing members of our senior management team.Our success depends, in large part, on the continued contributions of our senior management team, in particular, the services of Kishore Seendripu,Ph.D., our Chairman, President and Chief Executive Officer, Curtis Ling, Ph.D., our Chief Technical Officer and a Director, and Madhukar Reddy, Ph.D., ourVice President, Central Engineering. None of our senior management team is bound by written employment contracts to remain with us for a specified period.In addition, we have not entered into non-compete agreements with members of our senior management team. The loss of any member of our seniormanagement team could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which does not assureproduct sales.Prior to purchasing our products, our customers require that both our products and our third-party contractors undergo extensive qualificationprocesses, which involve testing of the products in the customer’s system and rigorous reliability testing. This qualification process may continue for sixmonths or more. However, qualification of a product by a customer does not assure any sales of the product to that customer. Even after successfulqualification and sales of a product to a customer, a subsequent revision to the RF receiver or RF receiver SoC and physical medium devices for opticalmodules, changes in our customer’s manufacturing process or our selection of a new supplier may require a new qualification process, which may result indelays and in us holding excess or obsolete inventory. After our products are qualified, it can take six months or more before the customer commencesvolume production of components or devices that incorporate our products. Despite these uncertainties, we devote substantial resources, including design,engineering, sales, marketing and management efforts, to qualifying our products with customers in anticipation of sales. If we are unsuccessful or delayed inqualifying any of our products with a customer, sales of this product to the customer may be precluded or delayed, which may impede our growth and causeour business to suffer.24Table of ContentsWe are subject to risks associated with our distributors’ product inventories and product sell-through. Should any of our distributors cease or beforced to stop distributing our products, our business would suffer.We currently sell a significant but declining portion of our products to customers through our distributors, who maintain their own inventories of ourproducts. For fiscal 2012, sales through distributors accounted for 40% of our net revenue. For fiscal 2013, sales through distributors accounted for 29% ofour net revenue. For fiscal 2014, sales through distributors accounted for 28% of our net revenue. For these distributor transactions, revenue is not recognizeduntil product is shipped to the end customer and the amount that will ultimately be collected is fixed or determinable. Upon shipment of product to thesedistributors, title to the inventory transfers to the distributor and the distributor is invoiced, generally with 30 day terms. On shipments to our distributorswhere revenue is not recognized, we record a trade receivable for the selling price as there is a legally enforceable right to payment, relieving the inventoryfor the carrying value of goods shipped since legal title has passed to the distributor, and record the corresponding gross profit in the consolidated balancesheet as a component of deferred revenue and deferred profit, representing the difference between the receivable recorded and the cost of inventory shipped.Future pricing credits and/or stock rotation rights from our distributors may result in the realization of a different amount of profit included our futureconsolidated statements of operations than the amount recorded as deferred profit in our consolidated balance sheets.If our distributors are unable to sell an adequate amount of their inventories of our products in a given quarter to manufacturers and end users or if theydecide to decrease their inventories of our products for any reason, our sales through these distributors and our revenue may decline. In addition, if somedistributors decide to purchase more of our products than are required to satisfy end customer demand in any particular quarter, inventories at thesedistributors would grow in that quarter. These distributors likely would reduce future orders until inventory levels realign with end customer demand, whichcould adversely affect our product revenue in a subsequent quarter.Our reserve estimates with respect to the products stocked by our distributors are based principally on reports provided to us by our distributors,typically on a weekly basis. To the extent that this resale and channel inventory data is inaccurate or not received in a timely manner, we may not be able tomake reserve estimates for future periods accurately or at all.We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actualresults could negatively affect our inventory levels, sales and operating results.Our revenue is generated on the basis of purchase orders with our customers rather than long-term purchase commitments. In addition, our customerscan cancel purchase orders or defer the shipments of our products under certain circumstances. Our products are manufactured using a silicon foundryaccording to our estimates of customer demand, which requires us to make separate demand forecast assumptions for every customer, each of which mayintroduce significant variability into our aggregate estimate. We have limited visibility into future customer demand and the product mix that our customerswill require, which could adversely affect our revenue forecasts and operating margins. Moreover, because our target markets are relatively new, many of ourcustomers have difficulty accurately forecasting their product requirements and estimating the timing of their new product introductions, which ultimatelyaffects their demand for our products. Historically, because of this limited visibility, actual results have been different from our forecasts of customer demand.Some of these differences have been material, leading to excess inventory or product shortages and revenue and margin forecasts above those we wereactually able to achieve. These differences may occur in the future, and the adverse impact of these differences between forecasts and actual results couldgrow if we are successful in selling more products to some customers. In addition, the rapid pace of innovation in our industry could render significantportions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected expenses or increases in our reserves that could adverselyaffect our business, operating results and financial condition. Conversely, if we were to underestimate customer demand or if sufficient manufacturingcapacity were unavailable, we could forego revenue opportunities, potentially lose market share and damage our customer relationships. In addition, anysignificant future cancellations or deferrals of product orders or the return of previously sold products due to manufacturing defects could materially andadversely impact our profit margins, increase our write-offs due to product obsolescence and restrict our ability to fund our operations.Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures. Even if we begin a productdesign, customers may decide to cancel or change their product plans, which could cause us to generate no revenue from a product and adversely affect ourresults of operations.We are focused on securing design wins to develop RF receivers and RF receiver SoCs and physical medium devices for optical modules for use in ourcustomers’ products. These selection processes typically are lengthy and can require us to incur significant design and development expenditures anddedicate scarce engineering resources in pursuit of a single customer opportunity. We may not win the competitive selection process and may never generateany revenue despite incurring significant design and development expenditures. These risks are exacerbated by the fact that some of our customers’ products25Table of Contentslikely will have short life cycles. Failure to obtain a design win could prevent us from offering an entire generation of a product, even though this has notoccurred to date. This could cause us to lose revenue and require us to write off obsolete inventory, and could weaken our position in future competitiveselection processes.After securing a design win, we may experience delays in generating revenue from our products as a result of the lengthy development cycle typicallyrequired. Our customers generally take a considerable amount of time to evaluate our products. The typical time from early engagement by our sales force toactual product introduction runs from nine to twelve months for the consumer market, to as much as 36 months for the cable operator market. The delaysinherent in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to loseanticipated sales. In addition, any delay or cancellation of a customer’s plans could materially and adversely affect our financial results, as we may haveincurred significant expense and generated no revenue. Finally, our customers’ failure to successfully market and sell their products could reduce demand forour products and materially and adversely affect our business, financial condition and results of operations. If we were unable to generate revenue afterincurring substantial expenses to develop any of our products, our business would suffer.Our operating results are subject to substantial quarterly and annual fluctuations and may fluctuate significantly due to a number of factors thatcould adversely affect our business and our stock price.Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations may occur on a quarterly andon an annual basis and are due to a number of factors, many of which are beyond our control. These factors include, among others:•changes in end-user demand for the products manufactured and sold by our customers;•the receipt, reduction or cancellation of significant orders by customers;•fluctuations in the levels of component inventories held by our customers;•the gain or loss of significant customers;•market acceptance of our products and our customers’ products;•our ability to develop, introduce and market new products and technologies on a timely basis;•the timing and extent of product development costs;•new product announcements and introductions by us or our competitors;•incurrence of research and development and related new product expenditures;•seasonality or cyclical fluctuations in our markets;•currency fluctuations;•fluctuations in IC manufacturing yields;•significant warranty claims, including those not covered by our suppliers;•changes in our product mix or customer mix;•intellectual property disputes;•loss of key personnel or the shortage of available skilled workers;•impairment of long-lived assets, including masks and production equipment; and•the effects of competitive pricing pressures, including decreases in average selling prices of our products.The foregoing factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly or annual operatingresults. We typically are required to incur substantial development costs in advance of a prospective sale with no certainty that we will ever recover thesecosts. A substantial amount of time may pass between a design win and the generation of revenue related to the expenses previously incurred, which canpotentially cause our operating results to fluctuate significantly from period to period. In addition, a significant amount of our operating expenses arerelatively26Table of Contentsfixed in nature due to our significant sales, research and development costs. Any failure to adjust spending quickly enough to compensate for a revenueshortfall could magnify its adverse impact on our results of operations.We are subject to the cyclical nature of the semiconductor industry.The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and priceerosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. Any future downturns may result in diminishedproduct demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Furthermore, any upturn in thesemiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are dependent on the availabilityof this capacity to manufacture and assemble our RF receivers and RF receiver SoCs and physical medium devices for optical modules. None of our third-party foundry or assembly contractors has provided assurances that adequate capacity will be available to us in the future. A significant downturn or upturncould have a material adverse effect on our business and operating results.The use of open source software in our products, processes and technology may expose us to additional risks and harm our intellectual property.Our products, processes and technology sometimes utilize and incorporate software that is subject to an open source license. Open source software istypically freely accessible, usable and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as acomponent of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licensesrequire the user of such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost. This can subjectpreviously proprietary software to open source license terms.While we monitor the use of all open source software in our products, processes and technology and try to ensure that no open source software is usedin such a way as to require us to disclose the source code to the related product, processes or technology when we do not wish to do so, such use couldinadvertently occur. Additionally, if a third party software provider has incorporated certain types of open source software into software we license from suchthird party for our products, processes or technology, we could, under certain circumstances, be required to disclose the source code to our products, processesor technology. This could harm our intellectual property position and have a material adverse effect on our business, results of operations and financialcondition.We rely on third parties to provide services and technology necessary for the operation of our business. Any failure of one or more of our partners,vendors, suppliers or licensors to provide these services or technology could have a material adverse effect on our business.We rely on third-party vendors to provide critical services, including, among other things, services related to accounting, billing, human resources,information technology, network development, network monitoring, in-licensing and intellectual property that we cannot or do not create or provideourselves. We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements. The ability of these third-party vendors to successfully provide reliable and high quality services is subject to technical and operational uncertainties that are beyond our control.While we may be entitled to damages if our vendors fail to perform under their agreements with us, our agreements with these vendors limit the amount ofdamages we may receive. In addition, we do not know whether we will be able to collect on any award of damages or that these damages would be sufficientto cover the actual costs we would incur as a result of any vendor’s failure to perform under its agreement with us. Any failure of our corporate infrastructurecould have a material adverse effect on our business, financial condition and results of operations. Upon expiration or termination of any of our agreementswith third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levelsand cost, that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until thetransition is complete.Additionally, we incorporate third-party technology into and with some of our products, and we may do so in future products. The operation of ourproducts could be impaired if errors occur in the third-party technology we use. It may be more difficult for us to correct any errors in a timely manner if at allbecause the development and maintenance of the technology is not within our control. There can be no assurance that these third parties will continue tomake their technology, or improvements to the technology, available to us, or that they will continue to support and maintain their technology. Further, dueto the limited number of vendors of some types of technology, it may be difficult to obtain new licenses or replace existing technology. Any impairment ofthe technology or our relationship with these third parties could have a material adverse effect on our business.27Table of ContentsUnanticipated changes in our tax rates or unanticipated tax obligations could affect our future results.Since we operate in different countries and are subject to taxation in different jurisdictions, our future effective tax rates could be impacted by changesin such countries’ tax laws or their interpretations. Both domestic and international tax laws are subject to change as a result of changes in fiscal policy,changes in legislation, evolution of regulation and court rulings. The application of these tax laws and related regulations is subject to legal and factualinterpretation, judgment and uncertainty. We cannot determine whether any legislative proposals may be enacted into law or what, if any, changes may bemade to such proposals prior to their being enacted into law. If U.S. or international tax laws change in a manner that increases our tax obligation, it couldresult in a material adverse impact on our net income and our financial position.The Federal examination by the Internal Revenue Service for the years 2010 and 2011 was completed during the three months ended March 31, 2014.The Company is still subject to examination for 2012 and 2013. In the event we are determined to have any unaccrued tax obligation arising from futureaudits, our operating results would be adversely affected.Our future effective tax rate could be unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities. Changesin our effective tax rate could have a material adverse impact on our results of operations. We record a valuation allowance to reduce our net deferred taxassets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider historical levels ofincome, expectations and risks associated with estimates of future taxable income and ongoing prudent and practical tax planning strategies. On a periodicbasis we evaluate our deferred tax asset balance for realizability. To the extent we believe it is more likely than not that some portion of our deferred taxassets will not be realized, we will recognize a valuation allowance against the deferred tax asset. Realization of our deferred tax assets is dependent primarilyupon future U.S. taxable income. During the year ended December 31, 2011, we established a full valuation allowance on our net federal deferred tax assets.Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries inwhich we conduct business and other factors related to our international operations.We sell our products throughout the world. Products shipped to Asia accounted for 94% of our net revenue in the year ended December 31, 2014. Inaddition, approximately 34% of our employees are located outside of the United States. All of our products are manufactured, assembled and tested in Asia,and all of our major distributors are located in Asia. Multiple factors relating to our international operations and to particular countries in which we operatecould have a material adverse effect on our business, financial condition and results of operations. These factors include:•changes in political, regulatory, legal or economic conditions;•restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protectionmeasures, including export duties and quotas and customs duties and tariffs;•disruptions of capital and trading markets;•changes in import or export licensing requirements;•transportation delays;•civil disturbances or political instability;•geopolitical turmoil, including terrorism, war or political or military coups;•public health emergencies;•differing employment practices and labor standards;•limitations on our ability under local laws to protect our intellectual property;•local business and cultural factors that differ from our customary standards and practices;•nationalization and expropriation;•changes in tax laws;•currency fluctuations relating to our international operating activities; and•difficulty in obtaining distribution and support.28Table of ContentsIn addition to a significant portion of our wafer supply coming from Singapore, China and Malaysia, substantially all of our products undergopackaging and final test in Taiwan. Any conflict or uncertainty in this country, including due to natural disaster or public health or safety concerns, couldhave a material adverse effect on our business, financial condition and results of operations. In addition, if the government of any country in which ourproducts are manufactured or sold sets technical standards for products manufactured in or imported into their country that are not widely shared, it may leadsome of our customers to suspend imports of their products into that country, require manufacturers in that country to manufacture products with differenttechnical standards and disrupt cross-border manufacturing relationships which, in each case, could have a material adverse effect on our business, financialcondition and results of operations.We also are subject to risks associated with international political conflicts involving the U.S. government. For example, in 2008 we were instructedby the U.S. Department of Homeland Security to cease using Polar Star International Company Limited, a distributor based in Hong Kong, that deliveredthird-party products, to a political group that the U.S. government did not believe should have been provided with the products in question. As a result, weimmediately ceased all business operations with that distributor. The loss of Polar Star as a distributor did not materially delay shipment of our productsbecause Polar Star was a non-exclusive distributor and we had in place alternative distribution arrangements. However, we cannot provide assurances thatsimilar disruptions of distribution arrangements in the future will not result in delayed shipments until we are able to identify alternative distributionchannels, which could include a requirement to increase our direct sales efforts. Loss of a key distributor under similar circumstances could have an adverseeffect on our business, revenues and operating results.If we suffer losses to our facilities or distribution system due to catastrophe, our operations could be seriously harmed.Our facilities and distribution system, and those of our third-party contractors, are subject to risk of catastrophic loss due to fire, flood or other naturalor man-made disasters. A number of our facilities and those of our contract manufacturers are located in areas with above average seismic activity. Thefoundries that manufacture all of our wafers are located in Taiwan, Singapore, Malaysia and China, and all of the third-party contractors who assemble andtest our products also are located in Asia. In addition, our headquarters are located in Southern California. The risk of an earthquake in the Pacific Rim regionor Southern California is significant due to the proximity of major earthquake fault lines. For example, in 2002 and 2003, major earthquakes occurred inTaiwan. Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenue and result in significantexpenses to repair or replace the facility.Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If wefail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, and we couldbe subject to civil or criminal penalties.Our business is subject to various international and U.S. laws and other legal requirements, including packaging, product content, labor, import/exportcontrol regulations, and the Foreign Corrupt Practices Act. These regulations are complex, change frequently and have generally become more stringent overtime. We may be required to incur significant costs to comply with these regulations or to remedy violations. Any failure by us to comply with applicablegovernment regulations could result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on ourability to conduct our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additionalregulations in marketing our products.Our products and operations are also subject to the rules of industrial standards bodies, like the International Standards Organization, as well asregulation by other agencies, such as the U.S. Federal Communications Commission. If we fail to adequately address any of these rules or regulations, ourbusiness could be harmed.For example, the SEC recently adopted a final rule to implement Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,which requires new disclosures concerning the use of conflict minerals, generally tantalum, tin, gold, or tungsten, that originated in the Democratic Republicof the Congo or an adjoining country. These disclosures are required whether or not these products containing conflict minerals are manufactured by us orthird parties. Verifying the source of any conflict minerals in our products will create additional costs in order to comply with the new disclosurerequirements and we may not be able to certify that the metals in our products are conflict free, which may create issues with our customers. In addition, thenew rule may affect the pricing, sourcing and availability of minerals used in the manufacture of our products.We must conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as theserequirements change. If we fail to comply with these requirements in the manufacture or distribution of our products, we could be required to pay civilpenalties, face criminal prosecution and, in some cases, be prohibited from distributing our products in commerce until the products or component substancesare brought into compliance.29Table of ContentsIn addition to our acquisition of Physpeed, we may, from time to time, make additional business acquisitions or investments, which involve significantrisks.In addition to the acquisition of Physpeed, which we completed in the fourth quarter of fiscal 2014, we may, from time to time, make acquisitions,enter into alliances or make investments in other businesses to complement our existing product offerings, augment our market coverage or enhance ourtechnological capabilities. However, any such transactions could result in:•issuances of equity securities dilutive to our existing stockholders;•substantial cash payments;•the incurrence of substantial debt and assumption of unknown liabilities;•large one-time write-offs;•amortization expenses related to intangible assets;•a limitation on our ability to use our net operating loss carryforwards;•the diversion of management’s time and attention from operating our business to acquisition integration challenges;•adverse tax consequences; and•the potential loss of key employees, customers and suppliers of the acquired business.Additionally, in periods subsequent to an acquisition, we must evaluate goodwill and acquisition-related intangible assets for impairment. If suchassets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings.Integrating acquired organizations and their products and services, including the integration of Physpeed following completion of the acquisition,may be expensive, time-consuming and a strain on our resources and our relationships with employees, customers and suppliers, and ultimately may not besuccessful. The benefits or synergies we may expect from the acquisition of complementary or supplementary businesses may not be realized to the extent orin the time frame we initially anticipate. Some of the risks that may affect our ability to successfully integrate acquired companies, including Physpeed,include those associated with:•failure to successfully further develop the acquired products or technology;•conforming the acquired company’s standards, policies, processes, procedures and controls with our operations;•coordinating new product and process development, especially with respect to highly complex technologies;•loss of key employees or customers of the acquired company;•hiring additional management and other critical personnel;•in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particulareconomic, currency, political and regulatory risks associated with specific countries;•increasing the scope, geographic diversity and complexity of our operations;•consolidation of facilities, integration of the acquired company’s accounting, human resource and other administrative functions andcoordination of product, engineering and sales and marketing functions;•the geographic distance between the companies;•liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities; and•litigation or other claims in connection with the acquired company, including claims for terminated employees, customers, former stockholdersor other third parties.30Table of ContentsWe may be subject to information technology failures, including data protection breaches and cyber-attacks, that could disrupt our operations,damage our reputation and adversely affect our business, operations, and financial results.We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidentialdata relating to our business and third party businesses. Although we have implemented security controls to protect our information technology systems,experienced programmers or hackers may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious softwareprograms that compromise our confidential information or that of third parties and cause a disruption or failure of our information technology systems. Anysuch compromise of our information technology systems could result in the unauthorized publication of our confidential business or proprietary information,result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation, ordamage our reputation. The cost and operational consequences of implementing further data protection measures either as a response to specific breaches oras a result of evolving risks, could be significant. In addition, our inability to use or access our information systems at critical points in time could adverselyaffect the timely and efficient operation of our business. Any delayed sales, significant costs or lost customers resulting from these technology failures couldadversely affect our business, operations and financial results.Third parties with which we conduct business, such as foundries, assembly and test contractors, and distributors, have access to certain portions of oursensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact ourbusiness, operations and financial results.Investor confidence may be adversely impacted if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and as a result, ourstock price could decline.We are subject to rules adopted by the Securities Exchange Commission, or SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, orSarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our management’s report on, and assessment of the effectiveness of, ourinternal controls over financial reporting.If we fail to maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404.Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and areimportant to helping prevent financial fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss ofinvestor confidence in the reliability of our consolidated financial statements and could result in investigations or sanctions by the SEC, the New York StockExchange, or NYSE, or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negativelyimpact the market price of our securities. Ineffective control over financial reporting could also cause investors to lose confidence in our reported financialinformation, which could adversely affect the trading price of our common stock.Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, our management,including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error andall fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that allcontrol issues and instances of fraud, if any, have been detected.Our products must conform to industry standards in order to be accepted by end users in our markets.Generally, our products comprise only a part of a communications device. All components of these devices must uniformly comply with industrystandards in order to operate efficiently together. We depend on companies that provide other components of the devices to support prevailing industrystandards. Many of these companies are significantly larger and more influential in driving industry standards than we are. Some industry standards may notbe widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companiesdo not support the same industry standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected,which would harm our business.Products for communications applications are based on industry standards that are continually evolving. Our ability to compete in the future willdepend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render ourproducts incompatible with products developed by other suppliers. As a result, we could be required to invest significant time and effort and to incursignificant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industrystandards for a significant period of time, we could miss opportunities to achieve crucial design wins. We may not be successful in developing31Table of Contentsor using new technologies or in developing new products or product enhancements that achieve market acceptance. Our pursuit of necessary technologicaladvances may require substantial time and expense.Risks Relating to Our Class A Common StockThe dual class structure of our common stock as contained in our charter documents will have the effect of allowing our founders, executive officers,employees and directors and their affiliates to limit your ability to influence corporate matters that you may consider unfavorable.We sold Class A common stock in our initial public offering. Our founders, executive officers, directors and their affiliates and employees hold sharesof our Class B common stock, which is not publicly traded. Until March 29, 2017, the dual class structure of our common stock will have the followingeffects with respect to the holders of our Class A common stock:•allows the holders of our Class B common stock to have the sole right to elect two management directors to the Board of Directors;•with respect to change of control matters, allows the holders of our Class B common stock to have ten votes per share compared to the holders ofour Class A common stock who will have one vote per share on these matters; and•with respect to the adoption of or amendments to our equity incentive plans, allows the holders of our Class B common stock to have ten votesper share compared to the holders of our Class A common stock who will have one vote per share on these matters, subject to certain limitations.Thus, our dual class structure will limit your ability to influence corporate matters, including with respect to transactions involving a change ofcontrol, and, as a result, we may take actions that our stockholders do not view as beneficial, which may adversely affect the market price of our Class Acommon stock. In addition to the additional voting rights granted to holders of our Class B common stock, which is held principally by certain of ourexecutive officers and founders, we have entered change of control agreements with our executive officers, which could have an adverse effect on a thirdparty’s willingness to consider acquiring us, either because it may be more difficult to retain key employees with change of control benefits or because of theincremental cost associated with these benefits.The concentration of our capital stock ownership with our founders will limit your ability to influence corporate matters and their interests maydiffer from other stockholders.As of December 31, 2014, our founders, including our Chairman, President and Chief Executive Officer, Dr. Seendripu, together control approximately17% of our outstanding capital stock, representing approximately 61% of the voting power of our outstanding capital stock with respect to change of controlmatters and the adoption of or amendment to our equity incentive plans. Dr. Seendripu and the other founders therefore have significant influence over ourmanagement and affairs and over all matters requiring stockholder approval, including the election of two Class B directors and significant corporatetransactions, such as a merger or other sale of MaxLinear or its assets, for the foreseeable future.Our management team may use our available cash, cash equivalents, and liquid investment assets in ways with which you may not agree or in wayswhich may not yield a return.We use our cash, cash equivalents, and liquid investment assets for general corporate purposes, including working capital. We may also use a portionof these assets to acquire complementary businesses, products, services or technologies, including the acquisition of Physpeed. Our management hasconsiderable discretion in the application of our cash, cash equivalents, and investment resources, and you will not have the opportunity to assess whetherthese liquid assets are being used in a manner that you deem best to maximize your return. We may use our available resources for corporate purposes that donot increase our operating results or market value. In addition, our cash, cash equivalents, and liquid investment resources may be placed in investments thatdo not produce significant income or that may lose valueAnti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by ourstockholders to replace or remove our current management and limit the market price of our Class A common stock.Provisions in our certificate of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control orchanges in our management. These provisions provide for the following:•authorize our Board of Directors to issue, without further action by the stockholders, up to 25,000,000 shares of undesignated preferred stock;32Table of Contents•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;•specify that special meetings of our stockholders can be called only by our Board of Directors, our Chairman of the Board of Directors, ourPresident or by unanimous written consent of our directors appointed by the holders of Class B common stock;•establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, includingproposed nominations of persons for election to our Board of Directors;•establish that our Board of Directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms and withone Class B director being elected to each of Classes II and III;•provide for a dual class common stock structure, which provides our founders, current investors, executives and employees with significantinfluence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as amerger or other sale of our Company or its assets;•provide that our directors may be removed only for cause;•provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum,other than any vacancy in the two directorships reserved for the designees of the holders of Class B common stock, which may be filled only bythe affirmative vote of the holders of a majority of the outstanding Class B common stock or by the remaining director elected by the Class Bcommon stock (with the consent of founders holding a majority in interest of the Class B common stock over which the founders then exercisevoting control);•specify that no stockholder is permitted to cumulate votes at any election of directors; and•require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficultfor stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, because weare incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits aDelaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years followingthe date on which the stockholder became an “interested” stockholder.Our share price may be volatile as a result of limited trading volume and other factors.Our shares of Class A common stock began trading on the New York Stock Exchange in March 2010. An active public market for our shares on theNew York Stock Exchange may not be sustained. In particular, limited trading volumes and liquidity may limit the ability of stockholders to purchase or sellour common stock in the amounts and at the times they wish. Trading volume in our Class A common stock tends to be modest relative to our totaloutstanding shares, and the price of our Class A common stock may fluctuate substantially (particularly in percentage terms) without regard to news about usor general trends in the stock market. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and mayimpair our ability to acquire other companies or technologies by using our shares as consideration.In addition, the trading price of our Class A common stock could become highly volatile and could be subject to wide fluctuations in response tovarious factors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this Annual Report on Form 10-K and others such as:•actual or anticipated fluctuations in our financial condition and operating results;•overall conditions in the semiconductor market;•addition or loss of significant customers;•changes in laws or regulations applicable to our products;•actual or anticipated changes in our growth rate relative to our competitors;•announcements of technological innovations by us or our competitors;33Table of Contents•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;•additions or departures of key personnel;•competition from existing products or new products that may emerge;•issuance of new or updated research or reports by securities analysts;•fluctuations in the valuation of companies perceived by investors to be comparable to us;•disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual propertyprotection for our technologies;•announcement or expectation of additional financing efforts;•sales of our Class A or Class B common stock by us or our stockholders;•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and•general economic and market conditions.Furthermore, the stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the marketprices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of thosecompanies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest ratechanges or international currency fluctuations, may negatively impact the market price of our Class A common stock. In the past, companies that haveexperienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigationin the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, whichcould seriously harm our business.If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, especially dueto our dual-class voting structure, our share price and trading volume could decline.The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us orour business, especially with respect to our unique dual-class voting structure as to the election of directors, change of control matters and matters related toour equity incentive plans. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change theiropinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reportson us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.Future sales of our Class A common stock in the public market could cause our share price to decline.Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depressthe market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. As ofDecember 31, 2014, we had 30.9 million shares of Class A common stock and 7.0 million shares of Class B common stock outstanding.All shares of Class A common stock are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or theSecurities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.We have filed registration statements on Form S-8 under the Securities Act to register 16.9 million shares of our Class A common stock for issuanceunder our 2010 Equity Incentive Plan and 2010 Employee Stock Purchase Plan. These shares may be freely sold in the public market upon issuance and oncevested, subject to other restrictions provided under the terms of the applicable plan and/or the option agreements entered into with option holder.Our Executive Incentive Bonus Plan permits the settlement of awards under the plan in the form of shares of its Class A common stock. For the 2013and 2012 performance period, actual awards under the Executive Incentive Bonus Plan were settled in Class A common stock issued under our 2010 EquityIncentive Plan, as amended, with the number of shares issuable to plan participants determined based on the closing sales price of our Class A common stockas determined in trading on the New York Stock Exchange on May 9, 2014 and May 3, 2013, respectively. Additionally, we settled all bonus awards for allother employees for the 2013 and 2012 performance period in shares of its Class A common stock. We issued 0.6 million shares34Table of Contentsof our Class A common stock for the 2013 performance period upon settlement of the bonus awards on May 9, 2014. We issued 0.8 million shares of ourClass A common stock for the 2012 performance period upon settlement of the bonus awards on May 3, 2013. We intend to settle all bonus awards foremployees for the 2014 performance period in shares of our Class A common stock. We cannot currently predict when the bonus awards will be settled, butwe currently anticipate that approximately 0.4 million shares of our Class A common stock will be issued for the 2014 performance period. These shares maybe freely sold in the public market immediately following the issuance of such shares and the issuance of such shares may have an adverse effect on our shareprice once they are issued.We do not intend to pay dividends for the foreseeable future.We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. Weanticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination topay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their Class A common stock afterprice appreciation, which may never occur, as the only way to realize any future gains on their investments.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESOur corporate headquarters occupy approximately 45,000 square feet in Carlsbad, California under a lease that expires in December 2019. All of ourbusiness and engineering functions are represented at our corporate headquarters, including a laboratory for research and development and manufacturingoperations. In addition to our principal office space in Carlsbad, we have leased facilities for use as design centers in Irvine, Camarillo and San Jose inCalifornia; Atlanta in Georgia; Shanghai, and Shenzhen in China; Hsinchu in Taiwan; Seoul in South Korea; Tokyo in Japan; and Bangalore in India. Wealso have engineering support offices in Shenzhen in China; Caen in France; Tokyo in Japan; Hsinchu in Taiwan; and Seoul in South Korea. We believe thatour current facilities are adequate to meet our ongoing needs and that additional facilities are available for lease to meet our future needs.ITEM 3.LEGAL PROCEEDINGSCrestaTech LitigationOn January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against us in the United StatesDistrict Court of Delaware (the “District Court Litigation”). In its complaint, CrestaTech alleges that we infringe U.S. Patent Nos. 7,075,585 and 7,265,792. Inaddition to asking for compensatory damages, CrestaTech alleges willful infringement and seeks a permanent injunction. CrestaTech also names SharpCorporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged use of our television tuners. On January 28, 2014, CrestaTechfiled a complaint with the U.S. International Trade Commission, or ITC, alleging that we, Sharp, Sharp Electronics, and VIZIO, infringe the same patentsasserted in the Delaware action. On May 16, 2014 the ITC granted CrestaTech’s motion to file an amended complaint adding six OEM Respondents, namely,SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron Infocomm Technology (America) Corp., Top Victory Investments Ltd.and TPV International (USA), Inc. CrestaTech filed the amended complaint on June 12, 2014, alleging that our accused products are imported into and soldwithin the United States by, or on behalf of, us, Sharp, Sharp Electronics, VIZIO and the six OEM Respondents. Through its ITC complaints, CrestaTech seeksan exclusion order preventing entry into the United States of certain of our television tuners and televisions containing such tuners from Sharp, SharpElectronics, and VIZIO. CrestaTech also seeks a cease and desist order prohibiting these defendants from engaging in the importation into, sale forimportation into, the sale after importation of, or otherwise transferring within the United States certain of our television tuners or televisions containing suchtuners. The target date for completing the ITC investigation is June 29, 2015. The District Court litigation is currently stayed.Notwithstanding the completion of the ITC trial and post-trial briefing, our overall litigation with CrestaTech is still in the early stages, and we havenot recorded an accrual for loss contingencies associated with the litigation; determined that an unfavorable outcome is probable or reasonably possible; ordetermined that the amount or range of any possible loss is reasonably estimable.Other MattersIn addition, from time to time, we are subject to threats of litigation or actual litigation in the ordinary course of business, some of which may bematerial. Other than the CrestaTech litigation described above, we believe that there are no35Table of Contentsother currently pending matters that, if determined adversely to us, would have a material effect on our business or that would not be covered by our existingliability insurance maintained by us.Entropic Communications Merger LitigationThe Delaware ActionsBeginning on February 9, 2015, a number of stockholder class action complaints were filed in the Court of Chancery of the State of Delaware on behalfof a putative class of Entropic Communications, Inc. (“Entropic”) stockholders and naming as defendants Entropic, the board of directors of Entropic,MaxLinear, Excalibur Acquisition Corporation, and Excalibur Subsidiary, LLC. Langholz v. Entropic Communications, Inc., et al., C.A. No. 10631-VCP(Del. Ch. filed Feb. 9, 2015); Tomblin v. Entropic Communications, Inc., et al., C.A. No. 10632-VCP (Del. Ch. filed Feb. 9, 2015); Crill v. EntropicCommunications, Inc., et al., C.A. No. 10640-VCP (Del. Ch. filed Feb. 11, 2015); Wohl v. Entropic Communications, Inc., et al., C.A. No. 10644-VCP (Del.Ch. filed Feb. 11, 2015); Parshall v. Entropic Communications, Inc., et al., C.A. No. 10652-VCP (Del. Ch. filed Feb. 12, 2015); Saggar v. Padval, et al., C.A.No. 10661-VCP (Del. Ch. filed Feb. 13, 2015); Respler v. Entropic Communications, Inc., et al., C.A. No. 10669-VCP (Del. Ch. filed Feb. 17, 2015); Gal v.Entropic Communications, Inc., et al., C.A. No. 10671-VCP (Del. Ch. filed Feb. 17, 2015); Werbowsky v. Padval, et al., C.A. No. 10673-VCP (Del. Ch. filedFeb. 18, 2015); and Agosti v. Entropic Communications, Inc., C.A. No. 10676-VCP (Del. Ch. filed Feb. 18, 2015). The complaints generally allege that, inconnection with the proposed acquisition of Entropic by MaxLinear, the individual defendants breached their fiduciary duties to Entropic stockholders by,among other things, purportedly failing to take steps to maximize the value of Entropic to its stockholders and agreeing to allegedly preclusive dealprotection devices in the merger agreement. The complaints further allege that Entropic, MaxLinear, and/or the merger subsidiaries aided and abetted theindividual defendants in the alleged breaches of their fiduciary duties. The complaints seek, among other things, an order enjoining the defendants fromconsummating the proposed transaction, an order declaring the merger agreement unlawful and unenforceable; in the event that the proposed transaction isconsummated, an order rescinding it and setting it aside or awarding rescissory damages to the class, imposition of a constructive trust; damages; and/orattorneys’ fees and costs. The California ActionsBeginning on February 10, 2015, two stockholder class action complaints were filed in the Superior Court of the State of California County of SanDiego on behalf of a putative class of Entropic stockholders and naming as defendants Entropic, the board of directors of Entropic, MaxLinear, ExcaliburAcquisition Corporation, and Excalibur Subsidiary, LLC. Krasinski v. Entropic Communications, Inc., et al., Case No. 37-2015-00004613-CU-SL-CTL (Cal.Super. Ct. San Diego Cnty. filed Feb. 9, 2015); and Khoury v. Entropic Communications, Inc., et al., Case No. 37-2015-00004737-CU-SL-CTL (Cal. Super.Ct. San Diego Cnty. filed Feb. 11, 2015). The complaints generally allege that, in connection with the proposed acquisition of Entropic by MaxLinear, theindividual defendants breached their fiduciary duties to Entropic stockholders by, among other things, purportedly failing to take steps to maximize thevalue of Entropic to its stockholders and agreeing to allegedly preclusive deal protection devices in the merger agreement. The complaints further allege thatMaxLinear and the merger subsidiaries aided and abetted the individual defendants in the alleged breaches of their fiduciary duties. The complaints seek,among other things, an order enjoining the defendants from consummating the proposed transaction, an order rescinding, to the extent already implemented,the proposed transaction or any of its terms, or granting the class rescissory damages, damages, and attorneys’ fees and costs.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.36Table of ContentsPART II — FINANCIAL INFORMATIONITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket Information and HoldersIn March 2010, we completed the initial public offering of our Class A common stock. Our Class A common stock is traded on the New York StockExchange, or NYSE, under the symbol MXL. The following table sets forth, for the periods indicated, the high and low sale prices for our Class A commonstock as reported by the NYSE: Year Ended December 31, 2014 High LowFirst Quarter (January 1, 2014 to March 31, 2014)$11.32 $8.94Second Quarter (April 1, 2014 to June 30, 2014)$10.33 $7.74Third Quarter (July 1, 2014 to September 30, 2014)$10.80 $6.63Fourth Quarter (October 1, 2014 to December 31, 2014)$8.09 $6.25 Year Ended December 31, 2013 High LowFirst Quarter (January 1, 2013 to March 31, 2013)$6.40 $5.07Second Quarter (April 1, 2013 to June 30, 2013)$7.25 $5.05Third Quarter (July 1, 2013 to September 30, 2013)$9.05 $6.70Fourth Quarter (October 1, 2013 to December 31, 2013)$10.46 $7.62On December 31, 2014, the last reported sales price of our common stock was $7.41 and, according to our transfer agent, as of February 13, 2015, therewere 16 record holders of our Class A common stock and 56 record holders of our Class B common stock.Our Class B common stock is not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into oneshare of Class A common stock and in most instances automatically converts upon sale or other transfer.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for usein the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination todeclare dividends will be made at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements,general business conditions and other factors that our Board of Directors may deem relevant.Stock Performance GraphNotwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the priceperformance of our common stock shall not be deemed “filed” with the SEC or “Soliciting Material” under the Exchange Act, or subject to Regulation 14Aor 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting materialor to the extent we specifically incorporate this information by reference.The graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on The NYSEComposite Index and The Philadelphia Semiconductor Index. The period shown commences on March 23, 2010 and ends on December 31, 2014, the end ofour last fiscal year. The graph assumes an investment of $100 on March 23, 2010, and the reinvestment of any dividends. In addition, the graph assumes thevalue of our common stock on March 23, 2010 was the initial public offering price of $14.00 per share.The comparisons in the graph below are required by the Securities and Exchange Commission and are not intended to forecast or be indicative ofpossible future performance of our common stock.37Table of ContentsRecent Sales of Unregistered SecuritiesIn the year ended December 31, 2014, we issued an aggregate of 0.05 million shares of our Class B common stock to certain employees upon theexercise of options awarded under our 2004 Stock Plan. We received aggregate proceeds of approximately $0.04 million in the year ended December 31,2014 as a result of the exercise of these options. We believe these transactions were exempt from the registration requirements of the Securities Act in relianceon Rule 701 thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. As ofDecember 31, 2014, options to purchase an aggregate of 1.3 million shares of our Class B common stock remain outstanding. All issuances of shares of ourClass B common stock pursuant to the exercise of these options will be made in reliance on Rule 701. All option grants made under the 2004 Stock Plan weremade prior to the effectiveness of our initial public offering. No further option grants will be made under our 2004 Stock Plan.None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock. In addition,each share of our Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value,except for certain transfers described in our certificate of incorporation.ITEM 6.SELECTED FINANCIAL DATAWe have derived the selected consolidated statement of operations data for the years ended December 31, 2014, 2013 and 2012 and selectedconsolidated balance sheet data as of December 31, 2014 and 2013 from our audited consolidated financial statements and related notes included elsewherein this report. We have derived the statement of operations data for the years ended December 31, 2011 and 2010 and the balance sheet data as of December31, 2012, 2011 and 2010 from our audited consolidated financial statements not included in this report. Our historical results are not necessarily indicative ofthe results to be expected for any future period. The following selected consolidated financial data should be read in38Table of Contentsconjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements andrelated notes included elsewhere in this report. Years Ended December 31, 2014 2013 2012 2011 2010 (in thousands, except per share amounts)Consolidated Statement of Operations Data: Net revenue$133,112 $119,646 $97,728 $71,937 $68,701Cost of net revenue51,154 46,683 37,082 26,690 21,560Gross profit81,958 72,963 60,646 45,247 47,141Operating expenses: Research and development56,625 53,132 46,458 40,157 27,725Selling, general and administrative34,191 32,181 27,254 20,216 15,915Total operating expenses90,816 85,313 73,712 60,373 43,640Income (loss) from operations(8,858) (12,350) (13,066) (15,126) 3,501Interest income236 222 282 292 326Interest expense(15) (4) (53) (69) (29)Other expense, net(108) (199) (74) (128) (55)Income (loss) before income taxes(8,745) (12,331) (12,911) (15,031) 3,743Provision (benefit) for income taxes(1,704) 402 341 6,993 (6,371)Net income (loss)(7,041) (12,733) (13,252) (22,024) 10,114Net income allocable to preferred stockholders— — — — (1,215)Net income (loss) attributable to common stockholders:$(7,041) $(12,733) $(13,252) $(22,024) $8,899Net income (loss) per share attributable to common stockholders: Basic$(0.19) $(0.37) $(0.40) $(0.68) $0.33Diluted$(0.19) $(0.37) $(0.40) $(0.68) $0.30Shares used to compute net income (loss) per share: Basic36,472 34,012 33,198 32,573 26,743Diluted36,472 34,012 33,198 32,573 29,478 Years Ended December 31, 2014 2013 2012 2011 2010 (in thousands)Consolidated Balance Sheet Data: Cash, cash equivalents and short- and long-term investments, available-for-sale$79,351 $86,354 $77,256 $85,736 $94,486Working capital67,668 56,558 68,450 76,585 95,444Total assets135,711 124,929 110,597 112,376 118,918Capital lease obligations, net of current portion— — — 2 18Total stockholders’ equity99,102 86,674 80,233 93,025 104,89739Table of ContentsITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-Looking StatementsThe following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidatedfinancial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks anduncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, butare not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report.OverviewWe are a provider of integrated, radio-frequency and mixed-signal integrated circuits for broadband communications and data center, metro, and long-haul transport network applications. Our high performance radio-frequency, or RF, receiver products capture and process digital and analog broadbandsignals to be decoded for various applications. These products include both RF receivers and RF receiver systems-on-chip, or SoCs, which incorporate ourhighly integrated radio system architecture and the functionality necessary to receive and demodulate broadband signals, and physical medium devices thatprovide a constant current source, current-to-voltage regulation, and data alignment and retiming functionality in optical interconnect applications. Ourcurrent products receive and process RF and digital signals and enable the display of broadband video and data content in a wide range of electronic devices,including cable and terrestrial and satellite set top boxes, DOCSIS data and voice gateways, and hybrid analog and digital televisions, satellite low-noiseblocker transponders or outdoor units and optical modules for data center, metro, and long-haul transport network applications.Our net revenue has grown from approximately $0.6 million in fiscal 2006 to $133.1 million in fiscal 2014. In 2014, our net revenue was derivedprimarily from sales of cable modems and gateways and global digital RF receiver products for analog and digital television applications. Our ability toachieve revenue growth in the future will depend, among other factors, on our ability to further penetrate existing markets; our ability to expand our targetaddressable markets by developing new and innovative products; and our ability to obtain design wins with device manufacturers, in particularmanufacturers of set top boxes and cable modems and gateways for the cable and satellite industries.Products shipped to Asia accounted for 94%, 93% and 91% of net revenue in the years ended December 31, 2014, 2013 and 2012. A significant butdeclining portion of these sales in Asia is through distributors. Although a large percentage of our products are shipped to Asia, we believe that a significantnumber of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia. For example, we believerevenue generated from sales of our digital terrestrial set top box products during the years ended December 31, 2014, 2013 and 2012 related principally tosales to Asian set top box manufacturers delivering products into Europe, Middle East, and Africa, or EMEA, markets. Similarly, revenue generated from salesof our cable modem products during the years ending December 31, 2014, 2013 and 2012 related principally to sales to Asian ODM’s and contractmanufacturers delivering products into European and North American markets. To date, all of our sales have been denominated in United States dollars.A significant portion of our net revenue has historically been generated by a limited number of customers. During the year ended December 31, 2014,Arris accounted for 31% of our net revenue, and our ten largest customers collectively accounted for 67% of our net revenue. During the year endedDecember 31, 2013, Arris accounted for 28% of our net revenue, and our ten largest customers collectively accounted for 72% of our net revenue. Sales toArris as a percentage of revenue include sales to Motorola Home, which was acquired by Arris in April 2013, for the years ended December 31, 2014 and2013. For certain customers, we sell multiple products into disparate end user applications such as cable modems and cable set-top boxes.Our business depends on winning competitive bid selection processes, known as design wins, to develop semiconductors for use in our customers’products. These selection processes are typically lengthy, and as a result, our sales cycles will vary based on the specific market served, whether the designwin is with an existing or a new customer and whether our product being designed in our customer’s device is a first generation or subsequent generationproduct. Our customers’ products can be complex and, if our engagement results in a design win, can require significant time to define, design and result involume production. Because the sales cycle for our products is long, we can incur significant design and development expenditures in circumstances wherewe do not ultimately recognize any revenue. We do not have any long-term purchase commitments with any of our customers, all of whom purchase ourproducts on a purchase order basis. Once one of our products is incorporated into a customer’s design, however, we believe that our product is likely toremain a component of the customer’s product for its life cycle because of the time and expense associated with redesigning the product or substituting analternative chip. Product life cycles in our target markets will vary by application. For example, in the hybrid television market, a design-in can have aproduct life cycle of 9 to 18 months. In the terrestrial retail digital set top box market, a design-in can have a product life cycle40Table of Contentsof 18 to 24 months. In the cable operator modem and gateway sectors, a design-in can have a product life cycle of 24 to 48 months. In the satellite operatorgateway and outdoor unit sectors, a design-in can have a product life cycle of 24 to 60 months and beyond.Recent DevelopmentsOn February 3, 2015, we entered into a definitive agreement and plan of merger and reorganization with Entropic Communications, Inc., or Entropic,under which we agreed to acquire all of the outstanding capital stock of Entropic in a cash and stock transaction. If the merger is consummated, eachoutstanding share of Entropic's common stock will be converted into the right to receive $1.20 in cash and 0.2200 of a share of our Class A common stock;existing holders of our Class A and Class B common stock are expected to hold approximately 65% of the outstanding capital stock of the combinedcompany, and current holders of Entropic's common stock are expected to hold approximately 35% of the outstanding capital stock of the combinedcompany (ignoring for this purpose the special voting rights that holders of our Class B common stock will continue to hold after the merger). Consummationof the merger is subject to separate approvals by our stockholders and the stockholders of Entropic, regulatory approvals, and other customary closingconditions. For a more complete description of the terms and conditions of the merger, please refer to our Current Report on Form 8-K filed with the Securitiesand Exchange Commission on February 4, 2015. A copy of the definitive merger agreement is filed as Exhibit 2.1 to the Form 8-K.Headquartered in San Diego, Entropic is recognized for having pioneered the MoCA® (Multimedia over Coax Alliance) home networking standardand inventing Direct Broadcast Satellite (“DBS”) outdoor unit single-wire technology. Entropic has a rich history of innovation and deep expertise in RF,analog/mixed signal and digital signal processing technologies. Entropic’s silicon solutions have been broadly deployed across major cable, satellite, andfiber service providers.We believe our acquisition of Entropic will add significant scale to our analog/mixed-signal business, expanding our addressable market andenhancing the strategic value of our offerings to our broadband and access partners, OEM customers, and service providers. For a discussion of specific risksand uncertainties that could affect our ability to achieve these and other strategic objectives of the acquisition, please refer to Part I, Item 1A, “Risk Factors”under the subsection captioned “Risks Relating to the Proposed Acquisition of Entropic.”Critical Accounting Policies and EstimatesManagement’s discussion and analysis of our financial condition and results of operations is based upon our financial statements which are preparedin accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments,the most critical of which are those related to revenue recognition, allowance for doubtful accounts, inventory valuation, income taxes and stock-basedcompensation. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.Materially different results can occur as circumstances change and additional information becomes known.We believe that the following accounting policies involve a greater degree of judgment and complexity than our other accounting policies.Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results ofoperations.Revenue RecognitionRevenue is generated from sales of our integrated circuits. We recognize revenue when all of the following criteria are met: 1) there is persuasiveevidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable and 4) collectibility is reasonably assured.Title to product transfers to customers either when it is shipped to or received by the customer, based on the terms of the specific agreement with thecustomer.Revenue is recorded based on the facts at the time of sale. Transactions for which we cannot reliably estimate the amount that will ultimately becollected at the time the product has shipped and title has transferred to the customer are deferred until the amount that is probable of collection can bedetermined. Items that are considered when determining the amounts that will be ultimately collected are: a customer’s overall creditworthiness and paymenthistory, customer rights to return unsold product, customer rights to price protection, customer payment terms conditioned on sale or use of product by thecustomer, or extended payment terms granted to a customer.A portion of our revenues are generated from sales made through distributors under agreements allowing for pricing credits and/or stock rotation rightsof return. Revenues from sales through our distributors accounted for 28% and 29% of net41Table of Contentsrevenue in the years ended December 31, 2014, and December 31, 2013, respectively. Pricing credits to our distributors may result from our price protectionand unit rebate provisions, among other factors. These pricing credits and/or stock rotation rights prevent us from being able to reliably estimate the finalsales price of the inventory sold and the amount of inventory that could be returned pursuant to these agreements. As a result, for sales through distributors,we have determined that it does not meet all of the required revenue recognition criteria at the time we deliver our products to distributors as the final salesprice is not fixed or determinable.For these distributor transactions, revenue is not recognized until product is shipped to the end customer and the amount that will ultimately becollected is fixed or determinable. Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor isinvoiced, generally with 30 day terms. On shipments to our distributors where revenue is not recognized, we record a trade receivable for the selling price asthere is a legally enforceable right to payment, relieving the inventory for the carrying value of goods shipped since legal title has passed to the distributor,and record the corresponding gross profit in our consolidated balance sheet as a component of deferred revenue and deferred profit, representing thedifference between the receivable recorded and the cost of inventory shipped. Future pricing credits and/or stock rotation rights from our distributors mayresult in the realization of a different amount of profit included in our future consolidated statements of operations than the amount recorded as deferredprofit in our consolidated balance sheets.We record reductions in revenue for estimated pricing adjustments related to price protection agreements with our end customers in the same periodthat the related revenue is recorded. Price protection pricing adjustments are recorded at the time of sale as a reduction to revenue and an increase in ouraccrued liabilities. The amount of these reductions is based on specific criteria included in the agreements and other factors known at the time. We accrue100% of potential price protection adjustments at the time of sale and do not apply a breakage factor. We reverse the accrual for unclaimed price protectionamounts as specific programs contractually end or when we believe unclaimed amounts are no longer subject to payment and will not be paid. See Note 4 fora summary of our price protection activity.Allowance for Doubtful AccountsWe perform ongoing credit evaluations of our customers and adjust credit limits based on each customers’ credit worthiness, as determined by ourreview of current credit information. We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based uponour historical experience, our anticipation of uncollectible accounts receivable and any specific customer collection issues that we have identified. While ourcredit losses have historically been insignificant, we may experience higher credit loss rates in the future than we have in the past. Our receivables areconcentrated in relatively few customers. Therefore, a significant change in the liquidity or financial position of any one significant customer could makecollection of our accounts receivable more difficult, require us to increase our allowance for doubtful accounts and negatively affect our working capital.Inventory ValuationWe assess the recoverability of our inventory based on assumptions about demand and market conditions. Forecasted demand is determined based onhistorical sales and expected future sales. Inventory is stated at the lower of cost or market. Cost approximates actual cost on a first-in, first-out basis andmarket reflects current replacement cost (e.g. net replacement value) which cannot exceed net realizable value or fall below net realizable value less anallowance for an approximately normal profit margin. We reduce our inventory to its lower of cost or market on a part-by-part basis to account for itsobsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and its market value based upon assumptionsabout future demand and market conditions. Once established, these adjustments are considered permanent and are not revised until the related inventory issold or disposed of. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be requiredthat may adversely affect our operating results. If actual market conditions are more favorable, we may have higher gross profits when products are sold.Production MasksProduction masks with alternative future uses or discernible future benefits are capitalized and amortized over their estimated useful life of two years.To determine if the production mask has alternative future uses or benefits, we evaluate risks associated with developing new technologies and capabilities,and the related risks associated with entering new markets. Production masks that do not meet the criteria for capitalization are expensed as research anddevelopment costs.Goodwill and Intangible AssetsGoodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired nettangible and intangible assets. Intangible assets represent purchased intangible assets including developed technology and in-process research anddevelopment, or IPR&D, and technologies acquired or licensed from other42Table of Contentscompanies. Purchased intangible assets with definitive lives are capitalized and amortized over their estimated useful life. Technologies acquired or licensedfrom other companies are capitalized and amortized over the greater of the terms of the agreement, or estimated useful life, not to exceed three years. Wecapitalize IPR&D projects acquired as part of a business combination. On completion of each project, IPR&D assets are reclassified to developed technologyand amortized over their estimated useful lives.Impairment of Goodwill and Long-Lived AssetsGoodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under thepurchase method. Goodwill is not amortized but is tested for impairment using a two-step method. Step one is the identification of potential impairment. Thisinvolves comparing the fair value of each reporting unit, which we have determined to be the entity itself, with its carrying amount, including goodwill. If thefair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of theimpairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measurethe amount of impairment loss, if any. We test by reporting unit, goodwill and other indefinite-lived intangible assets for impairment at October 31 or morefrequently if we believe indicators of impairment exist.During development, IPR&D is not subject to amortization and is tested for impairment annually or more frequently if events or changes incircumstances indicate that the asset might be impaired. We review indefinite-lived intangible assets for impairment as of October 31, the date of our annualgoodwill impairment review or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability ofindefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash flows that asset is expected togenerate. Once an IPR&D project is complete, it becomes a definite lived intangible asset and is evaluated for impairment in accordance with our policy forlong-lived assets.We regularly review the carrying amount of our long-lived assets, as well as the useful lives, to determine whether indicators of impairment may existwhich warrant adjustments to carrying values or estimated useful lives. An impairment loss would be recognized when the sum of the expected futureundiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss would be measured based on theexcess of the carrying amount of the asset over the asset’s fair value.Income TaxesWe provide for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes representthe future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxesgenerally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from thedifferences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that is considered more likely than not that a tax benefit will not berealized. A decision to record a valuation allowance results in an increase in income tax expense or a decrease in income tax benefit. If the valuationallowance is released in a future period, income tax expense will be reduced accordingly.The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertainincome tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. Anuncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be lessthan the ultimate assessment, a further charge to expense would result.In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible. We will continue to assess the need for a valuation allowance on the deferred tax asset by evaluating bothpositive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the income statementfor the period that the adjustment is determined to be required.Stock-Based CompensationWe measure the cost of employee services received in exchange for equity incentive awards, including stock options, employee stock purchase rights,restricted stock units and restricted stock awards based on the grant date fair value of the award. We use the Black-Scholes valuation model to calculate thefair value of stock options and employee stock purchase43Table of Contentsrights granted to employees. We calculate the fair value of restricted stock units and restricted stock awards based on the fair market value of our Class Acommon stock on the grant date. Stock-based compensation expense is recognized over the period during which the employee is required to provide servicesin exchange for the award, which is usually the vesting period. We recognize compensation expense over the vesting period using the straight-line methodand classify these amounts in the statements of operations based on the department to which the related employee reports. We calculate the weighted-averageexpected life of options using the simplified method as prescribed by guidance provided by the Securities and Exchange Commission. This decision wasbased on the lack of historical data due to our limited number of stock option exercises under the 2010 Equity Incentive Plan. We will continue to assess theappropriateness of the use of the simplified method as we develop a history of option exercises.We account for stock options issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Stockoptions issued to non-employees are accounted for at their estimated fair value determined using the Black-Scholes option-pricing model. The fair value ofoptions granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period therelated services are rendered. We calculate the fair value of restricted stock units issued to non-employees based on the fair market value of our Class Acommon stock on the grant date and the resulting stock-based compensation expense is recognized over the period during which the non-employee isrequired to provide services in exchange for the award, which is usually the vesting period.Results of OperationsThe following describes the line items set forth in our consolidated statements of operations.Net Revenue. Net revenue is generated from sales of integrated radio frequency analog and mixed signal semiconductor solutions for broadbandcommunication applications. A significant but declining portion of our end customers purchase products indirectly from us through distributors. Althoughwe sell the products to, and are paid by, the distributors, we refer to these end customers as our customers.Cost of Net Revenue. Cost of net revenue includes the cost of finished silicon wafers processed by third-party foundries; costs associated with ouroutsourced packaging and assembly, test and shipping; costs of personnel, including stock-based compensation, and equipment associated withmanufacturing support, logistics and quality assurance; amortization of certain production mask costs; cost of production load boards and sockets; and anallocated portion of our occupancy costs.Research and Development. Research and development expense includes personnel-related expenses, including stock-based compensation, newproduct engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual propertylicense costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs. Researchand development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance withrequired specifications. All research and development costs are expensed as incurred.Selling, General and Administrative. Selling, general and administrative expense includes personnel-related expenses, including stock-basedcompensation, distributor and other third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legalfees, depreciation expense and allocated occupancy costs.Interest Income. Interest income consists of interest earned on our cash, cash equivalents and investment balances.Interest Expense. Interest expense consists primarily of imputed interest on i) the purchase of licensed technology and ii) property and equipmentcapital leases.Other Income (Expense). Other income (expense) generally consists of income (expense) generated from non-operating transactions.Provision (Benefit) for Income Taxes. We make certain estimates and judgments in determining income tax expense for financial statement purposes.These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition ofrevenue and expenses for tax and financial statement purposes and the realizability of assets in future years. Benefit for income taxes for the year endedDecember 31, 2014 primarily relates to a valuation allowance release resulting in a tax benefit of $2.3 million due to the purchase accounting adjustment forthe net deferred tax liability acquired from Physpeed and income tax in foreign jurisdictions. Income tax expense for the year ended December 31, 2013 and2012, primarily relates to income tax in foreign jurisdictions. Income tax expense for the year ended December 31, 2011 is primarily due to the establishmentof a valuation allowance on the net federal deferred tax asset in the third quarter of 2011.The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the44Table of Contentsperiods indicated. Years Ended December 31, 2014 2013 2012Net revenue100 % 100 % 100 %Cost of net revenue38 39 38Gross profit62 61 62Operating expenses: Research and development42 44 47Selling, general and administrative26 27 28Total operating expenses68 71 75Loss from operations(6) (10) (13)Interest income— — —Interest expense— — —Other expense, net— — —Loss before income taxes(6) (10) (13)Provision (benefit) for income taxes(1) — —Net loss(5)% (10)% (13)%Comparison of the Years Ended December 31, 2014, 2013 and 2012Net Revenue Years Ended December 31, % Change 2014 2013 2012 2014 2013 (dollars in thousands) Cable$86,172 $81,284 $61,725 6% 32%% of net revenue65% 68% 63% Terrestrial$46,940 $38,362 $36,003 22% 7%% of net revenue35% 32% 37% Total net revenue$133,112 $119,646 $97,728 11% 22%The increase in net revenue for the year ended December 31, 2014, as compared to the year ended December 31, 2013, was primarily due to an increasein revenue from cable and terrestrial products of $4.9 million and $8.6 million, respectively. Growth in terrestrial applications for the year ended December31, 2014 was primarily driven by growth in terrestrial set-top box applications and, to a lesser extent, growth in hybrid TV and satellite applications. Cableproduct growth of $4.9 million for the year ended December 31, 2014 was driven by DOCSIS 3.0 data applications and, to a lesser extent, DTA applications,which offset declines in media server and other video applications.The increase in net revenue for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was primarily due to an increasein revenue from cable and terrestrial products of $19.6 million and $2.4 million, respectively. The majority of the growth in cable revenue for the year endedDecember 31, 2013 was attributable to sales into DOCSIS 3.0 cable modems and video server-gateway applications. The growth in terrestrial revenue for theyear ended December 31, 2013 was driven primarily by hybrid TV tuner applications offset by decreases in our automotive and terrestrial STB applications.The demand for our cable and terrestrial products will depend on several factors, including the rate of worldwide transition from analog-to-digitalterrestrial and cable television broadcast, and, with respect to our cable products, the growth in demand, if any, for high speed DOCSIS 3.0 cable broadbandconnectivity and related multimedia content and services.45Table of ContentsCost of Net Revenue and Gross Profit Years Ended December 31, % Change 2014 2013 2012 2014 2013 (dollars in thousands) Cost of net revenue$51,154 $46,683 $37,082 10% 26%% of net revenue38% 39% 38% Gross profit$81,958 $72,963 $60,646 12% 20%% of net revenue62% 61% 62% The increase in the gross profit percentage for the year ended December 31, 2014 as compared to the year ended December 31, 2013 was primarily dueto the absence of production mask impairments of $1.1 million in the year ended December 31, 2014, which was offset by an increase in sales of lower marginproducts, as well as declines in average selling prices of certain key products across both cable and terrestrial applications declining at a quicker rate thandeclines in their average manufacturing costs.The decrease in the gross profit percentage for the year ended December 31, 2013 as compared to the year ended December 31, 2012 was due to theaverage selling prices of certain key products declining at a quicker rate than declines in their average manufacturing costs, partially offset by an increase insales of higher margin products. A $1.1 million impairment of production masks that were previously capitalized, but for which future use is no longerexpected, and a $0.4 million increase in excess and obsolete inventory reserves also contributed to the decrease in the gross profit percentage for the yearended December 31, 2013.We currently expect that gross profit percentage will fluctuate in the future, from quarter-to-quarter, based on changes in product mix, average sellingprices, and average manufacturing costs.Research and Development Years Ended December 31, % Change 2014 2013 2012 2014 2013 (dollars in thousands) Research and development$56,625 $53,132 $46,458 7% 14%% of net revenue42% 44% 47% The increase in research and development expense for the year ended December 31, 2014, as compared to the year ended December 31, 2013, wasprimarily due to a $4.4 million increase in headcount-related items (including stock-based compensation) and combined increases in design tools andoccupancy expenses of $1.5 million, offset by a decrease in performance based compensation of $1.4 million and prototype expenses of $1.0 million. In2014, headcount-related items increased primarily due to increases in our average full-time-equivalent headcount compared to prior year. The non-headcountrelated increases are primarily due to increased project related design tools usage and several facilities relocation and facilities expansions in Bangalore,India and Carlsbad, California.The increase in research and development expense for the year ended December 31, 2013, as compared to the year ended December 31, 2012, wasprimarily due to a $6.5 million increase in headcount-related items (including stock-based compensation). In 2013 and 2012, headcount-related items(including stock-based compensation) increased due to increases in our average full-time-equivalent headcount compared to prior year, expenses related toour employee bonus plan and an increase in employee healthcare costs.We expect our research and development expenses to increase as we continue to focus on expanding our product portfolio and enhancing existingproducts.46Table of ContentsSelling, General and Administrative Years Ended December 31, % Change 2014 2013 2012 2014 2013 (dollars in thousands) Selling, general and administrative$34,191 $32,181 $27,254 6% 18%% of net revenue26% 27% 28% The increase in selling, general and administrative expense for the year ended December 31, 2014, as compared to the year ended December 31, 2013,was primarily attributable to a $1.9 million increase in headcount-related items (including stock-based compensation) and combined increases inprofessional, consulting and outside services, travel-related, and occupancy expenses of $2.0 million, offset by a decrease in performance basedcompensation of $0.3 million and non-recurring legal expenses of $1.6 million. In 2014, headcount-related items increased primarily due to increases in ouraverage full-time-equivalent headcount compared to prior year. The non-headcount related increases are primarily due to our acquisition of Physpeed andseveral facilities relocation and facilities expansions in Bangalore, India and Carlsbad, California. Non-recurring legal fees decreased due to the completionof our litigation with Silicon Laboratories in the prior year.The increase in selling, general and administrative expense for the year ended December 31, 2013, as compared to the year ended December 31, 2012,was primarily attributable to increases in headcount-related items (including stock-based compensation) and incremental legal expense related to ourcompleted litigation with Silicon Laboratories. Headcount-related items (including stock-based compensation) increased $3.0 million. These increases areprimarily due to increases in our average full-time-equivalent headcount compared to the prior year and increases in employee healthcare costs. Non-recurring legal expenses (including the $1.25 million one-time payment related to the settlement agreement) increased $2.2 million for the year endedDecember 31, 2013.We expect selling, general and administrative expenses to increase in the future as we expand our sales and marketing organization to enableexpansion into existing and new markets, as we continue to build our international administrative infrastructure.Interest and Other Income (Expense) Years Ended December 31, 2014 2013 2012Interest income$236 $222 $282Interest expense(15) (4) (53)Other expense, net(108) (199) (74)Interest income increased in 2014 compared to 2013 due to higher cash equivalent and investment balances. Interest income decreased in 2013compared to 2012 due to lower yields on cash equivalent and investment balances. Interest expense decreased in 2013 compared to 2012 due to a reductionin our capital leases which were completed in 2013. Other expense, net in 2014, 2013 and 2012 consisted primarily of losses on foreign currency transactionsand investment management fees.Provision (Benefit) for Income Taxes Years Ended December 31, 2014 2013 2012Provision (benefit) for income taxes$(1,704) $402 $341The benefit for income taxes for the year ended December 31, 2014 was $(1.7) million or approximately 19.5% of pre-tax loss compared to theprovision for income taxes of $0.4 million or approximately (3.3)% of pre-tax loss for the year ended December 31, 2013. The benefit for income taxes for theyear ended December 31, 2014 primarily relates to a valuation allowance release resulting in a tax benefit of $2.3 million due to the purchase accountingadjustment for the net deferred tax liability acquired from Physpeed and income tax in foreign jurisdictions. We continue to maintain a valuation allowanceto offset the federal and California deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold required underaccounting guidelines. We will continue to assess the need for a valuation allowance on the deferred47Table of Contentstax assets by evaluating positive and negative evidence that may exist. Until such time that we remove the valuation allowance against our federal andCalifornia deferred tax assets, our provision for income taxes will primarily consist of taxes associated with our foreign subsidiaries.The provision for income taxes for the year ended December 31, 2013 was $0.4 million or approximately (3.3)% of pre-tax loss compared to $0.3million or approximately (2.6)% of pre-tax loss for the year ended December 31, 2012. The provision for income taxes for the year ended December 31, 2013and 2012 primarily relates to income tax in foreign jurisdictions.Liquidity and Capital ResourcesAs of December 31, 2014, we had cash and cash equivalents of $20.7 million, short- and long-term investments of $58.7 million, and net accountsreceivable of $18.5 million.Our primary uses of cash are to fund operating expenses, purchases of inventory and the acquisition of property and equipment. Cash used to fundoperating expenses excludes the impact of non-cash items such as depreciation and stock-based compensation and is impacted by the timing of when we paythese expenses as reflected in the change in our outstanding accounts payable and accrued expenses.Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers. Aside from thegrowth in amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, whichcan vary from period to period depending on the payment cycles of our major distributor customers.Following is a summary of our working capital and cash and cash equivalents for the periods indicated: Years Ended December 31, 2014 2013 (in thousands)Working capital$67,668 $56,558Cash and cash equivalents20,696 26,450Short-term investments48,399 35,494Long-term investments10,256 24,410Total cash and cash equivalents and investments$79,351 $86,354Stock RepurchaseIn the year ended December 31, 2012, the Company’s board of directors and the audit committee of the Company’s board of directors approved therepurchase and retirement of 1.2 million shares of the Company’s Class A common stock and the repurchase and retirement of 1.0 million shares of theCompany’s Class B common stock. The Company effected the repurchases pursuant to a stock repurchase agreement. The per share repurchase price for bothClass A and Class B shares repurchased was the closing price of the Company’s Class A common stock in trading on the New York Stock Exchange on thedate of the agreement. The aggregate repurchase price was $12.1 million. There were no stock repurchases in the year ended December 31, 2014 and 2013.Other than the transactions disclosed above, the Company’s board of directors has not authorized any stock repurchase program, and the Company hasno current plans to effect any open-market purchases of its Class A common stock or other repurchases of its Class B common stock from two of itsshareholders.Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periodsindicated:48Table of Contents Years Ended December 31, 2014 2013 2012 (dollars in thousands)Net cash provided by operating activities$12,234 $12,890 $7,544Net cash used in investing activities(17,466) (9,537) (4,191)Net cash provided by (used in) by financing activities(506) 1,270 (9,577)Effect of exchange rates on cash and cash equivalents(16) 17 8Net increase (decrease) in cash and cash equivalents$(5,754) $4,640 $(6,216)Cash Flows from Operating ActivitiesNet cash provided by operating activities in 2014 was $12.2 million. Net cash provided by operating activities primarily consisted of $0.7 million inchanges in operating assets and liabilities and $18.6 million in non-cash operating expenses, partially offset by a net loss of $7.0 million. Non-cash itemsincluded in net loss for the year ended December 31, 2014 included depreciation and amortization expense of $5.1 million, amortization of net investmentpremiums of $0.7 million, stock-based compensation of $15.0 million, and impairment of long-lived assets of $0.03 million.Net cash provided by operating activities in 2013 was $12.9 million. Net cash provided by operating activities primarily consisted of $6.9 million inchanges in operating assets and liabilities and $18.7 million in non-cash operating expenses, partially offset by a net loss of $12.7 million. Non-cash itemsincluded in net loss for the year ended December 31, 2013 included depreciation and amortization expense of $3.7 million, amortization of net investmentpremiums of $1.0 million, stock-based compensation of $13.0 million, and impairment of long-lived assets of $1.2 million.Net cash provided by operating activities in 2012 was $7.5 million. Net cash provided by operating activities primarily consisted of $6.0 million inchanges in operating assets and liabilities and $14.8 million in non-cash operating expenses, partially offset by a net loss of $13.3 million. Included inchanges in operating assets and liabilities were incremental accruals related to legal expenses for our Silicon Laboratories, or Silicon Labs, litigation as wellas a reduction in the accrual related to estimated fines and penalties related to a previously disclosed export compliance matter. Non-cash items included innet loss for the year ended December 31, 2012 included depreciation and amortization expense of $3.5 million amortization of net investment premiums of$1.1 million, stock-based compensation of $10.0 million and an impairment of long-lived assets of $0.2 million.Cash Flows from Investing ActivitiesNet cash used in investing activities in 2014 was $17.5 million. Net cash used in investing activities primarily consisted of $56.7 million in purchasesof securities, $8.8 million in purchases of property and equipment and $9.1 million cash used in acquisition, offset by $57.2 million in maturities ofsecurities.Net cash used in investing activities in 2013 was $9.5 million. Net cash used in investing activities primarily consisted of $70.6 million in purchasesof securities, $3.2 million in purchases of property and equipment and $1.0 million in purchases of intangibles, offset by $65.2 million in maturities ofsecurities.Net cash used in investing activities in 2012 was $4.2 million. Net cash used in investing activities primarily consisted of $89.2 million in maturitiesof securities, offset by $87.9 million in purchases of securities, $5.1 million in purchases of property and equipment and $0.4 million in purchases ofintangibles.Cash Flows from Financing ActivitiesNet cash used in financing activities in 2014 was $0.5 million. Net cash used in financing activities consisted primarily of proceeds from issuance ofcommon stock of $3.3 million partially offset by $3.8 million in minimum tax withholding paid on behalf of employees for restricted stock units andpayments on capital leases.Net cash provided by financing activities in 2013 was $1.3 million. Net cash provided by financing activities consisted primarily of proceeds fromissuance of common stock of $2.6 million partially offset by $1.4 million in minimum tax withholding paid on behalf of employees for restricted stock unitsand payments on capital leases.Net cash used in financing activities in 2012 was $9.6 million. Net cash used in financing activities consisted primarily of repurchases of commonstock of $12.1 million and $0.2 million in minimum tax withholding paid on behalf of employees for restricted stock units, offset by proceeds from issuanceof common stock of $2.7 million.49Table of ContentsWe believe that our $20.7 million of cash and cash equivalents and $58.7 million in short- and long-term investments at December 31, 2014 will besufficient to fund our projected operating requirements for at least the next twelve months. Our cash and cash equivalents as of December 31, 2014 have beenfavorably affected by our implementation of an equity-based bonus program. In connection with that bonus program, in May 2014, we issued approximately0.6 million freely-tradable shares of our Class A common stock in settlement of bonus awards for the fiscal 2013 performance period under our bonus plan. AtDecember 31, 2014, an accrual of $3.1 million was recorded for bonus awards for employees for the 2014 performance period, which we intend to settle inshares of our Class A common stock issued under its 2010 Equity Incentive Plan, as amended, with the number of shares issuable to plan participantsdetermined based on the closing sales price of our Class A common stock as determined in trading on the New York Stock Exchange at a date to bedetermined, but our compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.Notwithstanding the foregoing, we may need to raise additional capital or incur additional indebtedness to continue to fund our operations in thefuture. In particular, as disclosed under the caption “Risks Relating to the Proposed Acquisition of Entropic” on page 12, we may determine that we need toseek additional funding as our liquidity may be adversely affected as a result of the payment of the cash portion of the merger consideration. Our futurecapital requirements will depend on many factors, including our rate of revenue growth, the expansion of our engineering, sales and marketing activities, thetiming and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuingmarket acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additionalfunds may not be available on terms favorable to us or at all. If we are unable to raise additional funds when needed, we may not be able to sustain ouroperations.The proposed acquisition of Entropic may result in us entering into some form of debt facility to ensure appropriate levels of liquidity for operatingthe business.Contractual Obligations, Commitments and ContingenciesThe following table summarizes our outstanding contractual obligations as of December 31, 2014: Payments Due by Period 2019 and Total 2015 2016 2017 2018 Thereafter (in thousands)Operating lease obligations$6,127 $1,679 $1,381 $1,348 $1,017 $702Other obligations4,158 3,250 908 — — —Inventory purchase obligations10,139 10,139 — — — —Total contractual obligations$20,424 $15,068 $2,289 $1,348 $1,017 $702Other obligations represent purchase commitments for software licensing agreements, information systems infrastructure and other commitments madein the ordinary course of business.We are unable to make a reasonably reliable estimate as to when or if cash settlement with taxing authorities will occur for our unrecognized taxbenefits. Therefore, our unrecognized tax benefits of $10.8 million are not included in the table above.Warranties and IndemnificationsIn connection with the sale of products in the ordinary course of business, we often make representations affirming, among other things, that ourproducts do not infringe on the intellectual property rights of others, and agree to indemnify customers against third-party claims for such infringement.Further, our certificate of incorporation and bylaws require us to indemnify our officers and directors against any action that may arise out of their services inthat capacity, and we have also entered into indemnification agreements with respect to all of our directors and certain controlling persons. As ofDecember 31, 2014 and 2013, no expenses were incurred under such provisions. As of December 31, 2012, we incurred expenses of $0.3 million under suchprovisions related to a previously disclosed export compliance matter.Off-Balance Sheet ArrangementsAs part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships,such as entities often referred to as structured finance or special purpose entities, or SPEs, which would have been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2014, we were not involved in any unconsolidated SPEtransactions.50Table of ContentsRecent Accounting PronouncementsFor additional information regarding recently adopted and issued accounting pronouncements, see Note 1 of the notes to consolidated financialstatements contained within this Form 10-K.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKForeign Currency RiskTo date, our international customer and vendor agreements have been denominated almost exclusively in United States dollars. Accordingly, we havelimited exposure to foreign currency exchange rates and do not enter into foreign currency hedging transactions. The functional currency of certain foreignsubsidiaries is the local currency. Accordingly, the effects of exchange rate fluctuations on the net assets of these foreign subsidiaries’ operations areaccounted for as translation gains or losses in accumulated other comprehensive income within stockholders’ equity. We do not believe that a change of 10%in such foreign currency exchange rates would have a material impact on our financial position or results of operations.Interest Rate RiskWe had cash and cash equivalents of $20.7 million at December 31, 2014 which was held for working capital purposes. We do not enter intoinvestments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as aresult of changes in interest rates due to their short-term nature. Declines in interest rates, however, will reduce future investment income.Investments RiskOur investments, consisting of U.S. Treasury and agency obligations and corporate notes and bonds, are stated at cost, adjusted for amortization ofpremiums and discounts to maturity. In the event that there are differences between fair value and cost in any of our available-for-sale securities, unrealizedgains and losses on these investments are reported as a separate component of accumulated other comprehensive income (loss).Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adverselyimpacted due to rising interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Report.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed withthe SEC is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information isaccumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow fortimely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and noevaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have beendetected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, prior to filing this Form 10-K, we carried outan evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer,of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)as of the end of the period covered by this Form 10-K. Based on their evaluation, our principal executive officer and principal financial officer concluded thatour disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.51Table of ContentsManagement’s Annual Report on Internal Controls over Financial ReportingOur management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequateinternal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management, including our principalexecutive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting based on criteria established in theInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based uponthat evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014. The effectiveness of ourinternal control over financial reporting as of December 31, 2014 has been audited by Ernst & Young LLP, an independent registered public accounting firm,and Ernst & Young LLP has issued a report on our internal control over financial reporting, as stated within their report which is included herein.Changes in Internal Control over Financial ReportingAn evaluation was performed under the supervision and with the participation of our management, including our principal executive officer andprincipal financial officer, to determine whether any change in our internal control over financial reporting occurred during the fiscal quarter endedDecember 31, 2014 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We did not identify anychange in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2014 that materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.52Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholders of MaxLinear, Inc.We have audited MaxLinear, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).MaxLinear, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, MaxLinear, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of MaxLinear, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive loss, stockholders’equity, and cash flows for each of the three years in the period ended December 31, 2014 and the financial statement schedule listed in the Index at Item 15(a)(2) of MaxLinear, Inc. and our report dated February 23, 2015 expressed an unqualified opinion thereon./s/ Ernst & Young LLPIrvine, CaliforniaFebruary 23, 201553Table of ContentsITEM 9B.OTHER INFORMATIONNone.54Table of ContentsPART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by Item 10 with respect to our directors and executive officers is incorporated by reference from the information set forthunder the captions “Proposal Number 1 — Election of Class III Director By Class A Common Stock and Class B Common Stock”, “Proposal Number 2 —Election of Class III Director By Class B Common Stock” and “Executive Officers” in our Definitive Proxy Statement to be filed in connection with our 2015Annual Meeting of Stockholders, or the 2015 Proxy Statement, which will be filed with the Securities and Exchange Commission no later than 120 days afterDecember 31, 2014.Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16(a) of theExchange Act. This information is contained under the caption “Related Person Transactions and Section 16(a) Beneficial Ownership ReportingCompliance” in the 2015 Proxy Statement and is incorporated herein by reference.Code of ConductWe have adopted a code of ethics and employee conduct that applies to our board of directors and all of our employees, including our chief executiveofficer and principal financial officer.Our code of conduct is available at our website by visiting www.maxlinear.com and clicking through “Investors,” “Corporate Governance,” and “Codeof Conduct.” When required by the rules of the New York Stock Exchange, or NYSE, or the Securities and Exchange Commission, or SEC, we will discloseany future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any member ormembers of our board of directors on our website within four business days following the date of such amendment or waiver.The information required by Item 10 with respect to our audit committee is incorporated by reference from the information set forth under the caption“Corporate Governance and Board of Directors — Board Committees” in the 2015 Proxy Statement.ITEM 11. EXECUTIVE COMPENSATIONThe information required by Item 11 is incorporated by reference from the information set forth under the captions “Compensation of Non-EmployeeDirectors” and “Executive Compensation,” in our 2015 Proxy Statement.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by Item 12 is incorporated by reference from the information set forth under the captions “Executive Compensation —Equity Compensation Plan Information” and “Security Ownership,” in our 2015 Proxy Statement.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 13 is incorporated by reference from the information set forth under the captions “Corporate Governance and Boardof Directors — Director Independence” and “Related Person Transactions and Section 16(a) Beneficial Ownership Reporting Compliance,” in our 2015Proxy Statement.ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by Item 14 is incorporated by reference from the information set forth under the caption “Proposal Number 4 — Ratificationof Appointment of Independent Registered Public Accounting Firm,” in our 2015 Proxy Statement.55Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESa) Documents filed as part of the report1. Financial StatementsOur consolidated financial statements are attached hereto and listed on the Index to Consolidated Financial Statements set forth on page F-1 of thisAnnual Report on Form 10-K.2. Financial Statement SchedulesSchedule II. Valuation and Qualifying Accounts—Years ended December 31, 2014, 2013 and 2012All other schedules are omitted as the required information is inapplicable, or the information is presented in the financial statements or related notes.SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (in thousands):Classification Balance atbeginning of year Additions chargedto expenses (Deductions) Balance at end ofyearAllowance for doubtful accounts 2014 $57 $— $— $572013 132 — (75) 572012 — 132 — 132Inventory reserves 2014 $533 $39 $(222) $3502013 152 533 (152) 5332012 117 127 (92) 152Valuation allowance for deferred tax assets 2014 $28,628 $3,106 $(2,335) $29,3992013 22,243 6,385 — 28,6282012 16,029 6,214 — 22,2433. ExhibitsExhibit Number Exhibit Title3.1 Registrant’s Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on March29, 2010 (incorporated by reference to Exhibit 3.5 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto(File No. 333-162947)).3.2 Registrant’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.8 of the Registrant’s Registration Statement onForm S-1 and all amendments thereto (File No. 333-162947)).4.1 Specimen common stock certificate of Registrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement onForm S-1 and all amendments thereto (File No. 333-162947)).+10.1 Form of Director and Executive Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’sRegistration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.2 Form of Director and Controlling Person Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’sRegistration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.3 2004 Stock Plan, as amended (incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K filed onFebruary 6, 2013 (File No. 001-34666)).+10.4 Form of Stock Option Agreement under the 2004 Stock Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s RegistrationStatement on Form S-1 and all amendments thereto (File No. 333-162947)).56Table of Contents+10.5 Amendment No. 1 to the form of Stock Option Agreement under the 2004 Stock Plan (incorporated by reference to Exhibit 10.5 of theRegistrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.6 2010 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K filedon May 23, 2014 (File No. 001-34666)).+10.7 Form of Agreement under the 2010 Equity Incentive (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report onForm 10-Q filed on July 28, 2011 (File No. 001-34666)).+10.8 2010 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.8 of the Registrant’s Annual Report on Form10-K filed on February 6, 2013 (File No. 001-34666)).+10.9 Employment Offer Letter, dated December 20, 2010, between the Registrant and Adam C. Spice (incorporated by reference to Exhibit99.2 to the Registrant’s Current Report on Form 8-K filed on December 28, 2010).+10.10 Employment Offer Letter, dated June 24, 2011, between the Registrant and Brian Sprague (incorporated by reference to Exhibit 10.10 ofthe Registrant’s Quarterly Report on Form 10-Q filed on July 28, 2011 (File No. 001-34666)).+10.11 Employment Offer Letter, dated September 12, 2011, by and between the Registrant and Justin Scarpulla (incorporated by reference toExhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on March 15, 2012 (File No. 001-34666)).+10.12 Form of Change in Control Agreement for Chief Executive Officer and Chief Financial Officer (incorporated by reference to Exhibit10.12 of the Registrant’s Quarterly Report on Form 10-Q filed on May 1, 2013 (File No. 333-34666)).+10.13 Form of Change in Control Agreement for Executive Officers (incorporated by reference to Exhibit 10.13 of the Registrant’s QuarterlyReport on Form 10-Q filed on May 1, 2013 (File No. 333-34666)).10.14 Lease Agreement, dated May 18, 2009, between the Registrant and JCCE – Palomar, LLC (incorporated by reference to Exhibit 10.14 ofthe Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).10.15 Sublease Agreement, dated May 9, 2009, between the Registrant and CVI Laser, LLC (incorporated by reference to Exhibit 10.15 of theRegistrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.16 Intellectual Property License Agreement, dated June 18, 2009, between the Registrant and Intel Corporation, (incorporated by referenceto Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.17 Employment Offer Letter, dated November 9, 2012, between the Registrant and Will Torgerson (incorporated by reference to Exhibit10.17 of the Registrant’s Annual Report on Form 10-K filed on February 6, 2013 (File No. 001-34666)).†10.18 Distributor Agreement, dated June 5, 2009, between the Registrant and Moly Tech Limited (incorporated by reference to Exhibit 10.18of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.19 Distributor Agreement, dated October 3, 2005, between the Registrant and Tomen Electronics Corporation (incorporated by reference toExhibit 10.19 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.20 Distributor Agreement, dated August 19, 2009, between the Registrant and Lestina International Ltd. (incorporated by reference toExhibit 10.20 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.21 MaxLinear, Inc. Executive Bonus Plan, as amended (incorporated by reference to Exhibit 10.21 of the Registrant's Current Report onForm 8-K filed on May 20, 2013 (File No. 001-34666)).+10.22 Employment Offer Letter, dated April 22, 2011, between the Registrant and Michael LaChance (incorporated by reference to Exhibit10.22 of the Registrant’s Annual Report on Form 10-K filed on March 14, 2012 (File No. 001-34666)).10.23 Stock Repurchase Agreement, dated August 21, 2012, by and among the Registrant, Mission Ventures III, L.P., Mission VenturesAffiliates III, L.P., and U.S. Venture Partners VIII, L.P. (incorporated by reference to Exhibit 10.23 of the Registrant’s Current Report onForm 8-K filed on August 22, 2012 (File No. 001-34666)).10.24 Stock Repurchase Agreement, dated October 31, 2012, by and among the Registrant, U.S. Venture Partners VIII, L.P, USVP VIIIAffiliates Fund, L.P., USVP Entrepreneur Partners VIII-A, L.P. and USVP Entrepreneur Partners VIII-B, L.P. (incorporated by reference toExhibit 10.24 of the Registrant’s Current Report on Form 8-K filed on October 31, 2012 (File No. 001-34666)).57Table of Contents+10.25 Separation Agreement, dated March 15, 2012, by and between the Registrant and Patrick E. McCready (incorporated by reference toExhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on March 15, 2012 (File No. 001-34666))10.26 Lease Agreement, dated December 17, 2013, between Registrant and The Campus Carlsbad, LLC (incorporated by reference to Exhibit10.26 of the Registrant’s Annual Report on Form 10-K filed on February 7, 2014 (File No. 001-34666)).+10.27 Separation Agreement and Release, dated December 15, 2014, by and between the Registrant and Brian J. Sprague (incorporated byreference to Exhibit 10.27 of the Registrant’s Current Report on Form 8-K filed on December 16, 2014 (File No. 001-34666))*11.1 Statement re computation of income (loss) per share (included on page F-14 of this Form 10-K).*21.1 Subsidiaries of the Registrant.*23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.*24.1 Power of Attorney (included on the signature page of this Form 10-K).*31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.#*32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*Filed herewith.#In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on InternalControl Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished pursuant to this itemwill not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Suchcertification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent thatthe registrant specifically incorporates it by reference.+Indicates a management contract or compensatory plan.†Confidential treatment has been requested and received for certain portions of these exhibits.(b) ExhibitsThe exhibits filed as part of this report are listed in Item 15(a)(3) of this Form 10-K.(c) SchedulesThe financial statement schedules required by Regulation S-X and Item 8 of this form are listed in Item 15(a)(2) of this Form 10-K.58Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized. MAXLINEAR, INC. (Registrant) By: /s/ KISHORE SEENDRIPU, PH.D Kishore Seendripu, Ph.D President and Chief Executive OfficerDate: February 23, 2015 (Principal Executive Officer)POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kishore Seendripu, Ph.D.and Adam C. Spice, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to sign any and allamendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documentsin connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents, full power and authority todo and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or shemight or could do in person, hereby ratifying and confirming all that each of said attorneys-in-facts and agents, or his substitute or substitutes, or any of them,shall do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated:Signature Title Date/s/ KISHORE SEENDRIPU, PH.D President and Chief Executive Officer February 23, 2015Kishore Seendripu, Ph.D (Principal Executive Officer) /s/ ADAM C. SPICE Chief Financial Officer February 23, 2015Adam C. Spice (Principal Financial Officer) /s/ THOMAS E. PARDUN Lead Director February 23, 2015Thomas E. Pardun /s/ STEVEN C. CRADDOCK Director February 23, 2015Steven C. Craddock /s/ CURTIS LING, PH.D Director February 23, 2015Curtis Ling, Ph.D /s/ ALBERT J. MOYER Director February 23, 2015Albert J. Moyer /s/ DONALD E. SCHROCK Director February 23, 2015Donald E. Schrock 59Table of ContentsMaxLinear, Inc.Index to Consolidated Financial StatementsReport of Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Comprehensive LossF-5Consolidated Statements of Stockholders’ EquityF-6Consolidated Statements of Cash FlowsF-7Notes to Consolidated Financial StatementsF-8F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholders of MaxLinear, Inc.We have audited the accompanying consolidated balance sheets of MaxLinear, Inc. as of December 31, 2014 and 2013, and the related consolidatedstatements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2014. Ouraudits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MaxLinear, Inc. atDecember 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered inrelation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), MaxLinear, Inc.’s internalcontrol over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2015 expressed an unqualified opinion thereon./s/ Ernst & Young LLPIrvine, CaliforniaFebruary 23, 2015F-2Table of ContentsMAXLINEAR, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except par amounts) December 31, 2014 2013 Assets Current assets: Cash and cash equivalents$20,696 $26,450Short-term investments, available-for-sale48,399 35,494Accounts receivable, net18,523 20,058Inventory10,858 10,032Prepaid expenses and other current assets2,438 1,682Total current assets100,914 93,716Property and equipment, net12,441 5,511Long-term investments, available-for-sale10,256 24,410Intangible assets10,386 749Goodwill1,201 —Other long-term assets513 543Total assets$135,711 $124,929Liabilities and stockholders’ equity Current liabilities: Accounts payable$7,509 $7,507Deferred revenue and deferred profit3,612 2,651Accrued price protection liability10,018 15,017Accrued expenses and other current liabilities5,548 4,285Accrued compensation6,559 7,698Total current liabilities33,246 37,158Other long-term liabilities3,363 1,097Commitments and contingencies Stockholders’ equity: Preferred stock, $0.0001 par value; 25,000 shares authorized, no shares issued or outstanding— —Common stock, $0.0001 par value; 550,000 shares authorized, no shares issued or outstanding— —Class A common stock, $0.0001 par value; 500,000 shares authorized, 30,927 and 27,002 shares issued andoutstanding at December 31, 2014 and 2013, respectively3 3Class B common stock, $0.0001 par value; 500,000 shares authorized, 6,984 and 8,338 shares issued andoutstanding at December 31, 2014 and 2013, respectively1 1Additional paid-in capital177,912 158,360Accumulated other comprehensive income (loss)(25) 58Accumulated deficit(78,789) (71,748)Total stockholders’ equity99,102 86,674Total liabilities and stockholders’ equity$135,711 $124,929See accompanying notes.F-3Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data) Years Ended December 31, 2014 2013 2012Net revenue$133,112 $119,646 $97,728Cost of net revenue51,154 46,683 37,082Gross profit81,958 72,963 60,646Operating expenses: Research and development56,625 53,132 46,458Selling, general and administrative34,191 32,181 27,254Total operating expenses90,816 85,313 73,712Loss from operations(8,858) (12,350) (13,066)Interest income236 222 282Interest expense(15) (4) (53)Other expense, net(108) (199) (74)Loss before income taxes(8,745) (12,331) (12,911)Provision (benefit) for income taxes(1,704) 402 341Net loss$(7,041) $(12,733) $(13,252)Net loss per share: Basic$(0.19) $(0.37) $(0.40)Diluted$(0.19) $(0.37) $(0.40)Shares used to compute net loss per share: Basic36,472 34,012 33,198Diluted36,472 34,012 33,198See accompanying notes.F-4Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in thousands) Years Ended December 31, 2014 2013 2012Net loss$(7,041) $(12,733) $(13,252)Other comprehensive income (loss), net of tax: Unrealized gain (loss) on investments, net of tax of $0, $5 and $11 in 2014, 2013 and2012(60) 8 14Foreign currency translation adjustments, net of tax of $0 in 2014, 2013 and 2012(23) 15 7Other comprehensive income (loss)(83) 23 21Total comprehensive loss$(7,124) $(12,710) $(13,231)See accompanying notes.F-5Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(in thousands) Class ACommon Stock Class BCommon Stock AdditionalPaid-InCapital AccumulatedOtherComprehensiveIncome (Loss) AccumulatedDeficit Total Stockholders’Equity Shares Amount Shares Amount Balance at December 31, 2011 19,107 $2 14,143 $1 $126,695 $14 $(33,687) $93,025Conversion of Class B common stock to Class Acommon stock 3,991 — (3,991) — — — — —Common stock issued pursuant to equity awards, net 740 — 521 — 617 — — 617Repurchases of common stock (1,152) — (1,000) — — — (12,076) (12,076)Employee stock purchase plan 495 — — — 1,914 — — 1,914Stock-based compensation — — — — 9,984 — — 9,984Other comprehensive income — — — — — 21 — 21Net loss — — — — — — (13,252) (13,252)Balance at December 31, 2012 23,181 2 9,673 1 139,210 35 (59,015) 80,233Conversion of Class B common stock to Class Acommon stock 1,377 — (1,377) — — — — —Common stock issued pursuant to equity awards, net 1,940 1 42 — 3,726 — — 3,727Employee stock purchase plan 504 — — — 2,438 — — 2,438Stock-based compensation — — — — 12,986 — — 12,986Other comprehensive income — — — — — 23 — 23Net loss — — — — — — (12,733) (12,733)Balance at December 31, 2013 27,002 3 8,338 1 158,360 58 (71,748) 86,674Conversion of Class B common stock to Class Acommon stock 1,405 — (1,405) — — — — —Common stock issued pursuant to equity awards, net 2,043 — 51 — 1,486 — — 1,486Employee stock purchase plan 477 — — — 3,058 — — 3,058Stock-based compensation — — — — 15,008 — — 15,008Other comprehensive loss — — — — — (83) — (83)Net loss — — — — — — (7,041) (7,041)Balance at December 31, 2014 30,927 $3 6,984 $1 $177,912 $(25) $(78,789) $99,102See accompanying notes.F-6Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31,2014 2013 2012Operating Activities Net loss$(7,041) $(12,733) $(13,252)Adjustments to reconcile net loss to cash provided by (used in) operating activities: Amortization and depreciation5,107 3,715 3,531Amortization of investment premiums, net724 974 1,058Stock-based compensation15,008 12,986 9,984Deferred income taxes(2,281) (166) —Gain on sale of available-for-sale securities(3) — (2)Impairment of long-lived assets29 1,231 184Changes in operating assets and liabilities: Accounts receivable1,982 (5,500) (4,137)Inventory(757) (141) (1,809)Prepaid and other assets(752) (308) (129)Accounts payable, accrued expenses and other current liabilities83 (627) 3,981Accrued compensation3,911 5,587 4,910Deferred revenue and deferred profit961 362 (1,740)Accrued price protection liability(4,999) 7,137 5,024Other long-term liabilities262 373 (59)Net cash provided by operating activities12,234 12,890 7,544Investing Activities Purchases of property and equipment(8,800) (3,162) (5,055)Purchases of intangible assets— (955) (390)Cash used in acquisition(9,136) — —Purchases of available-for-sale securities(56,702) (70,620) (87,897)Maturities of available-for-sale securities57,172 65,200 89,151Net cash used in investing activities(17,466) (9,537) (4,191)Financing Activities Payments on capital leases— (2) (32)Net proceeds from issuance of common stock3,304 2,647 2,706Minimum tax withholding paid on behalf of employees for restricted stock units(3,810) (1,375) (175)Repurchases of common stock— — (12,076)Net cash provided by (used in) financing activities(506) 1,270 (9,577)Effect of exchange rate changes on cash and cash equivalents(16) 17 8Increase (decrease) in cash and cash equivalents(5,754) 4,640 (6,216)Cash and cash equivalents at beginning of year26,450 21,810 28,026Cash and cash equivalents at end of year$20,696 $26,450 $21,810Supplemental disclosures of cash flow information: Cash paid for interest$— $1 $1Cash paid for income taxes$187 $186 $40Supplemental disclosures of non cash investing and financing information: Issuance of accrued share-based bonus plan$5,050 $4,836 $—Accrued purchases of property and equipment$849 $2 $52Lease incentive for leasehold improvements$2,008 $— $—See accompanying notes.F-7Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)1. Organization and Summary of Significant Accounting PoliciesDescription of BusinessMaxLinear, Inc. (the Company) was incorporated in Delaware in September 2003. The Company is a provider of integrated, radio-frequency andmixed-signal integrated circuits for broadband communication and data center, metro, and long-haul transport network applications whose customers includemodule makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in awide range of electronic devices including cable and terrestrial and satellite set top boxes, DOCSIS data and voice gateways, hybrid analog and digitaltelevisions, satellite low-noise blocker transponders or outdoor units and optical modules for data center, metro, and long-haul transport networkapplications. The Company is a fabless semiconductor company focusing its resources on the design, sales and marketing of its products.Basis of Presentation and Principles of ConsolidationThe consolidated financial statements include the accounts of MaxLinear, Inc. and its wholly owned subsidiaries. All intercompany transactions andinvestments have been eliminated in consolidation.The functional currency of certain foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these foreign subsidiaries aretranslated at the current exchange rate at the balance sheet date and historical rates for equity. Revenue and expense components are translated at weightedaverage exchange rates in effect during the period. Gains and losses resulting from foreign currency translation are included as a component of stockholders’equity. Foreign currency transaction gains and losses are included in the results of operations and, to date, have not been significant.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires managementto make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes of the consolidatedfinancial statements. Actual results could differ from those estimates.Cash and Cash EquivalentsThe Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents arerecorded at cost, which approximates market value.Accounts ReceivableThe Company performs ongoing credit evaluations of its customers and adjusts credit limits based on each customer's credit worthiness, as determinedby the Company’s review of current credit information. The Company monitors collections and payments from its customers and maintains an allowance fordoubtful accounts based upon its historical experience, its anticipation of uncollectible accounts receivable and any specific customer collection issues thatthe Company has identified. As of December 31, 2014 and 2013, the Company had recorded an allowance for doubtful accounts of $0.1 million.InventoryThe Company assesses the recoverability of its inventory based on assumptions about demand and market conditions. Forecasted demand isdetermined based on historical sales and expected future sales. Inventory is stated at the lower of cost or market. Cost approximates actual cost on a first-in,first-out basis and market reflects current replacement cost (e.g. net replacement value) which cannot exceed net realizable value or fall below net realizablevalue less an allowance for an approximately normal profit margin. The Company reduces its inventory to its lower of cost or market on a part-by-part basis toaccount for its obsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and its market value basedupon assumptions about future demand and market conditions. Once established, these adjustments are considered permanent and are not revised until therelated inventory is sold or disposed of.F-8Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Investments, Available-for-SaleThe Company classifies all investments as available-for-sale, as the sale of such investments may be required prior to maturity to implementmanagement strategies. These investments are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive incomeuntil realized. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, aswell as interest and dividends, are included in interest income. Realized gains and losses from the sale of available-for-sale investments, if any, aredetermined on a specific identification basis and are also included in interest income.Fair Value of Financial InstrumentsThe carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and compensation are considered tobe representative of their respective fair value because of the short-term nature of these items. Investment securities, available-for-sale, are carried at fair value.Based on the borrowing rates currently available to the Company for loans with similar terms, the Company believes the fair value of long-term capital leaseobligations approximates its carrying value.Property and EquipmentProperty and equipment is carried at cost and depreciated over the estimated useful lives of the assets, ranging from two to five years, using thestraight-line method. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful lives of the assets or the lease term.Production MasksProduction masks with alternative future uses or discernible future benefits are capitalized and amortized over their estimated useful life of two years.To determine if the production mask has alternative future uses or benefits, the Company evaluates risks associated with developing new technologies andcapabilities, and the related risks associated with entering new markets. Production masks that do not meet the criteria for capitalization are expensed asresearch and development costs.Goodwill and Intangible AssetsGoodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired nettangible and intangible assets. Intangible assets represent purchased intangible assets including developed technology and in-process research anddevelopment, or IPR&D, and technologies acquired or licensed from other companies. Purchased intangible assets with definitive lives are capitalized andamortized over their estimated useful life. Technologies acquired or licensed from other companies are capitalized and amortized over the greater of the termsof the agreement, or estimated useful life, not to exceed three years. The Company capitalizes IPR&D projects acquired as part of a business combination. Oncompletion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives.Impairment of Goodwill and Long-Lived AssetsGoodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under thepurchase method. Goodwill is not amortized but is tested for impairment using a two-step method. Step one is the identification of potential impairment. Thisinvolves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, includinggoodwill. If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second stepof the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed tomeasure the amount of impairment loss, if any. The Company tests by reporting unit, goodwill and other indefinite-lived intangible assets for impairment atOctober 31 or more frequently if it believes indicators of impairment exist.During development, IPR&D is not subject to amortization and is tested for impairment annually or more frequently if events or changes incircumstances indicate that the asset might be impaired. The Company reviews indefinite-lived intangible assets for impairment as of October 31, the date ofits annual goodwill impairment review or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability ofindefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash flows that asset is expected togenerate.F-9Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Once an IPR&D project is complete, it becomes a definite lived intangible asset and is evaluated for impairment in accordance with the Company's policy forlong-lived assets.The Company regularly reviews the carrying amount of its long-lived assets, as well as the useful lives, to determine whether indicators of impairmentmay exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would be recognized when the sum of the expectedfuture undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss would be measured based onthe excess of the carrying amount of the asset over the asset’s fair value.Revenue RecognitionRevenue is generated from sales of the Company’s integrated circuits. The Company recognizes revenue when all of the following criteria are met:1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable and 4) collectibility isreasonably assured. Title to product transfers to customers either when it is shipped to or received by the customer, based on the terms of the specificagreement with the customer.Revenue is recorded based on the facts at the time of sale. Transactions for which the Company cannot reliably estimate the amount that willultimately be collected at the time the product has shipped and title has transferred to the customer are deferred until the amount that is probable of collectioncan be determined. Items that are considered when determining the amounts that will be ultimately collected are: a customer’s overall creditworthiness andpayment history; customer rights to return unsold product; customer rights to price protection; customer payment terms conditioned on sale or use of productby the customer; or extended payment terms granted to a customer.A portion of the Company’s revenues are generated from sales made through distributors under agreements allowing for pricing credits and/or stockrotation rights of return. Revenues from sales through the Company’s distributors accounted for 28% and 29% of net revenue for the years endedDecember 31, 2014 and December 31, 2013, respectively. Pricing credits to the Company’s distributors may result from its price protection and unit rebateprovisions, among other factors. These pricing credits and/or stock rotation rights prevent the Company from being able to reliably estimate the final salesprice of the inventory sold and the amount of inventory that could be returned pursuant to these agreements. As a result, for sales through distributors, theCompany has determined that it does not meet all of the required revenue recognition criteria at the time it delivers its products to distributors as the finalsales price is not fixed or determinable.For these distributor transactions, revenue is not recognized until product is shipped to the end customer and the amount that will ultimately becollected is fixed or determinable. Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor isinvoiced, generally with 30 day terms. On shipments to the Company’s distributors where revenue is not recognized, the Company records a trade receivablefor the selling price as there is a legally enforceable right to payment, relieving the inventory for the carrying value of goods shipped since legal title haspassed to the distributor, and records the corresponding gross profit in the consolidated balance sheet as a component of deferred revenue and deferred profit,representing the difference between the receivable recorded and the cost of inventory shipped. Future pricing credits and/or stock rotation rights from theCompany’s distributors may result in the realization of a different amount of profit included in the Company’s future consolidated statements of operationsthan the amount recorded as deferred profit in the Company’s consolidated balance sheets.The Company records reductions in revenue for estimated pricing adjustments related to price protection agreements with the Company’s endcustomers in the same period that the related revenue is recorded. Price protection pricing adjustments are recorded at the time of sale as a reduction torevenue and an increase in the Company’s accrued liabilities. The amount of these reductions is based on specific criteria included in the agreements andother factors known at the time. The Company accrues 100% of potential price protection adjustments at the time of sale and does not apply a breakagefactor. The Company reverses the accrual for unclaimed price protection amounts as specific programs contractually end and when the Company believesunclaimed amounts are no longer subject to payment and will not be paid. See Note 4 for a summary of the Company's price protection activity.Stock RepurchaseThe Company records the excess of repurchase price over par value to accumulated deficit upon repurchase and retirement of shares of its Class Acommon stock and Class B common stock in accordance with the accounting standard for equity.F-10Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)WarrantyThe Company generally provides a warranty on its products for a period of one to three years. The Company makes estimates of product return ratesand expected costs to replace the products under warranty at the time revenue is recognized based on historical warranty experience and any known productwarranty issues. If actual return rates and/or replacement costs differ significantly from these estimates, adjustments to recognize additional cost of netrevenue may be required in future periods. At December 31, 2014, $0.1 million for warranty costs was recorded based on the Company’s analysis. AtDecember 2013, no accrual for warranty costs was recorded based on the Company’s analysis.Segment InformationThe Company operates in one segment as it has developed, marketed and sold primarily only one class of similar products, integrated radio frequencyanalog and mixed signal semiconductor solutions for broadband communication applications.The Company’s chief operating decision-maker is its chief executive officer, who reviews operating results on an aggregate basis and manages theCompany’s operations as a single operating segment.The Company has assessed its products on an individual basis and determined that they are similar based on the following reasons:•The Company’s portfolio of products share similar economic characteristics as they have a similar long term business model, operate at grossmargins similar to the Company’s consolidated gross margin, and have similar research and development expenses and similar selling, general andadministrative expenses;•The causes for variation within the Company’s portfolio of products are the same and include factors such as (i) life cycle and price and costfluctuations, (ii) number of competitors, (iii) extent of product differentiation relative to the Company’s competition, and (iv) the sensitivity to theoverall cyclical nature of the semiconductor industry;•The Company’s product portfolio and development roadmap is managed by a common Vice President and General Manager, and the technologyacross products within the portfolio is so similar that the Company’s engineering resources are highly fungible and commonly work across productfamilies;•The vast majority of the Company’s integrated circuits all use the same standard CMOS manufacturing processes and provide the same fundamentalfunctionality in the electronics platforms in which they reside;•The integrated circuits marketed are sold to one type of customer: manufacturers of wired and wireless communications equipment, whichincorporate the Company’s integrated circuits into their electronic products; and•All of the Company’s integrated circuits are sold through a centralized sales force and common distributors.Concentration of Credit Risk and Significant CustomersFinancial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents andaccounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. At times, such depositsmay be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.The Company markets its products and services to manufacturers of wired and wireless communications equipment throughout the world. TheCompany makes periodic evaluations of the credit worthiness of its customers and does not require collateral for credit sales.Customers greater than 10% of net revenue for each of the periods are as follows:F-11Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Years Ended December 31, 2014 2013 2012Percentage of total net revenue Arris131% 28% 28%Pace* * 10% * Represents less than 10% of the net revenue for the respective period.1Includes sales to Motorola Home, which was acquired by Arris in April 2013, for all periods presented.Products shipped to international destinations representing greater than 10% of net revenue for each of the periods are as follows: Years Ended December 31, 2014 2013 2012Percentage of total net revenue China71% 68% 58%Taiwan* * 12%Japan* * 14%The determination of which country a particular sale is allocated to is based on the destination of the product shipment.Balances greater than 10% of accounts receivable are as follows: December 31, 2014 2013Percentage of gross accounts receivable: Pegatron Corporation141% 38%Sernet Technologies Corporation11% *Kinpo International Limited* 19%Moly Tech Limited* 14% * Represents less than 10% of the gross accounts receivable for the respective period end.1Includes sales to Unihan, which was acquired by Pegatron in November 2013, for all periods presented.Stock-based CompensationThe Company measures the cost of employee services received in exchange for equity incentive awards, including stock options, employee stockpurchase rights, restricted stock units and restricted stock awards based on the grant date fair value of the award. The Company uses the Black-Scholesvaluation model to calculate the fair value of stock options and employee stock purchase rights granted to employees. The Company calculates the fair valueof restricted stock units and restricted stock awards based on the fair market value of its Class A common stock on the grant date. Stock-based compensationexpense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vestingperiod. The Company recognizes compensation expense over the vesting period using the straight-line method and classifies these amounts in the statementsof operations based on the department to which the related employee reports.The Company accounts for stock options issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value determined using the Black-Scholes option-pricing model.The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during theperiod the related services areF-12Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)rendered. The Company calculates the fair value of restricted stock units issued to non-employees based on the fair market value of our Class A commonstock on the grant date and the resulting stock-based compensation expense is recognized over the period during which the non-employee is required toprovide services in exchange for the award, which is usually the vesting period.Research and DevelopmentCosts incurred in connection with the development of the Company’s technology and future products are charged to research and developmentexpense as incurred.Income TaxesThe Company provides for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxesrepresent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for incometaxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from thedifferences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes areenacted. Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that is considered more likely than not that a tax benefitwill not be realized. A decision to record a valuation allowance results in an increase in income tax expense or a decrease in income tax benefit. If thevaluation allowance is released in a future period, income tax expense will be reduced accordingly.The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertainincome tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. Anuncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be lessthan the ultimate assessment, a further charge to expense would result.In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible. The Company will continue to assess the need for a valuation allowance on the deferred tax asset byevaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in theincome statement for the period that the adjustment is determined to be required.Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity (net assets) of a business entity during a period from transactions and other events andcircumstances from nonowner sources. Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss), suchas unrealized holding gains and losses on available-for-sale investments, net of tax, and translation gains and losses.Net Income (Loss) per ShareBasic net income (loss) per share is computed by dividing net income (loss) attributable to the Company by the weighted average number of shares ofClass A and Class B common stock outstanding during the period. For diluted net income (loss) per share, net income attributable to the Company is dividedby the sum of the weighted average number of shares of Class A and Class B common stock outstanding and the potential number of shares of dilutive ClassA and Class B common stock outstanding during the period.Litigation and Settlement CostsLegal costs are expensed as incurred. The Company is involved in disputes, litigation and other legal actions in the ordinary course of business. TheCompany continually evaluates uncertainties associated with litigation and records a charge equal to at least the minimum estimated liability for a losscontingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probablethat an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the loss or range of loss can be reasonablyestimated.F-13Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Recent Accounting PronouncementsIn May 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAPguidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when andhow revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customersin an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effectivefor the Company beginning in the first quarter of fiscal year 2017 and can be applied either retrospectively to each period presented or as a cumulative-effectadjustment as of the date of adoption. The Company is evaluating the impact of adopting this new accounting standard on its financial statements.In August 2014, the FASB issued new accounting guidance related to the disclosures around going concern. The new standard provides guidancearound management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to providerelated footnote disclosures. This guidance will be effective for the Company beginning in the first quarter of fiscal year 2017. Early adoption is permitted.The Company does not expect the adoption of this standard to significantly impact its financial statements.In November 2014, the FASB issued new accounting guidance related to business combinations. The new standard provides companies with theoption to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquiredentity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. Ifthe election is made in a subsequent period, it would be considered a change in accounting principle and treated in accordance with the guidance related toaccounting changes and error corrections. This guidance is effective for the Company as of November 18, 2014. The adoption of this standard did notsignificantly impact the Company's financial statements.2. Net Loss Per ShareNet loss per share is computed as required by the accounting standard for earnings per share, or EPS. Basic EPS is calculated by dividing net loss bythe weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computedby dividing net loss by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive commonstock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock options, restrictedstock units and restricted stock awards are considered to be common stock equivalents and are only included in the calculation of diluted EPS when theireffect is dilutive.The Company has two classes of stock outstanding, Class A common stock and Class B common stock. The economic rights of the Class A commonstock and Class B common stock, including rights in connection with dividends and payments upon a liquidation or merger are identical, and the Class Acommon stock and Class B common stock will be treated equally, identically and ratably, unless differential treatment is approved by the Class A commonstock and Class B common stock, each voting separately as a class. The Company computes basic earnings per share by dividing net loss by the weightedaverage number of shares of Class A and Class B common stock outstanding during the period. For diluted earnings per share, the Company divides net lossby the sum of the weighted average number of shares of Class A and Class B common stock outstanding and the potential number of shares of dilutiveClass A and Class B common stock outstanding during the period.F-14Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Years Ended December 31, 2014 2013 2012Numerator: Net loss$(7,041) $(12,733) $(13,252)Denominator: Weighted average common shares outstanding—basic36,472 34,012 33,198Dilutive common stock equivalents— — —Weighted average common shares outstanding—diluted36,472 34,012 33,198Net loss per share: Basic$(0.19) $(0.37) $(0.40)Diluted$(0.19) $(0.37) $(0.40)The Company excluded 3.1 million, 3.5 million and 4.4 million common stock equivalents for the years ended 2014, 2013 and 2012, respectively,resulting from outstanding equity awards for the calculation of diluted net loss per share due to their anti-dilutive nature.3. Business CombinationOn October 31, 2014, the Company acquired 100% of the outstanding common shares of Physpeed Co., Ltd. (“Physpeed”), a privately held developerof high-speed physical layer interconnect products addressing enterprise and telecommunications infrastructure market applications. The Company paid $9.3million in cash in exchange for all outstanding shares of capital stock and equity of Physpeed. $1.1 million of the consideration payable to the formershareholders of Physpeed was placed into escrow pursuant to the terms of the definitive merger agreement. The escrow release date is twelve monthsfollowing the closing date of October 31, 2014. In addition, the definitive merger agreement provided for potential consideration of $1.7 million of held backmerger proceeds for the owners of Physpeed which will be paid over a two year period contingent upon continued employment and potential earn-outconsideration of up to $0.75 million to the former shareholders of Physpeed for the achievement of certain 2015 and 2016 revenue milestones. The Companyhad also entered into retention and performance-based agreements with Physpeed employees for up to $3.25 million to be paid in cash or shares ofMaxLinear Class A common stock based on the achievement of certain 2015 and 2016 revenue milestones.As a result of the acquisition, the Company expects to reduce costs through economies of scale. The acquisition of Physpeed significantly acceleratesthe Company's total addressable market expansion efforts into infrastructure for data center, as well as metro and long-haul telecommunications operators.Physpeed’s expertise in high-speed analog design, combined with the Company's proven low-power digital CMOS mixed signal-integration and DSPcapabilities, is expected to bring to market solutions that will uniquely enable the data traffic growth generated from smartphones and tablets, and over-the-top, or OTT, streaming video, in addition to cloud computing and data analytics in hyper-scale data centers. The goodwill of $1.2 million arising from theacquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Physpeed. None of thegoodwill recognized is expected to be deductible for income tax purposes.In accordance with accounting principles generally accepted in the United States, the Company accounted for the merger using the acquisition methodof accounting for business combinations. Under this method of accounting, the Company recorded the acquisition based on the fair value of theconsideration given and the cash consideration paid in the merger at the time of the merger. The Company allocated the purchase price to the identifiableassets acquired and liabilities assumed based on their respective fair values at the date of the completion of the merger. Any excess of the value ofconsideration paid over the aggregate fair value of those net assets has been recorded as goodwill.The following table summarizes the consideration paid for Physpeed and the amounts of the assets acquired and liabilities assumed recognized at theacquisition date at October 31, 2014:The composition of financial instruments is as follows:Consideration:F-15Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Cash$9,250Fair value of total consideration transferred$9,250The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date. The Company completed thepurchase price allocation for its acquisition of Physpeed as of December 31, 2014.Financial assets$114Accounts receivable447Prepaid expenses28Inventory69Fixed assets56Identifiable intangible assets10,000Financial liabilities(65)Liability arising from potential earn-out consideration(265)Net deferred tax liability(2,335)Total identifiable net assets8,049Goodwill1,201 $9,250Acquisition-related costs of $0.3 million were included in selling, general, and administrative expenses in the Company's statement of operations forthe year ended December 31, 2014.The fair value of the acquired identifiable intangible assets of $10.0 million consists of developed technology of $2.7 million and IPR&D of $7.3million. Both the developed technology and IPR&D are related to optical interconnect interface physical layers products and their estimated useful liveshave been assessed to be seven years. Developed technology will be amortized immediately and IPR&D will begin amortization upon the completion of eachproject. If any of the projects are abandoned, the Company will be required to impair the related IPR&D asset. The fair value of the developed technology andIPR&D was determined using the multi-period excess earnings method (“MPEEM”). The MPEEM is an income approach to fair value measurementattributable to specific intangible asset being valued from the asset grouping’s overall cash-flow stream. MPEEM isolates the expected future discountedcash-flow stream to their net present value. Significant factors considered in the calculation were the risks inherent in the development process, including thelikelihood of achieving technological success and market acceptance. Each project was analyzed to determine the unique technological innovations, theexistence and reliance on core technology, the existence of any alternative future use or current technological feasibility and the complexity, cost, and timeto complete the remaining development. Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account theexpected product life cycles, market penetration, and growth rates.Compensation ArrangementsIn connection with the acquisition of Physpeed, the Company has agreed to pay additional consideration in future periods. There was a holdback ofthe merger proceeds whereby the owners of Physpeed will be paid a quarterly amount of $0.2 million beginning on January 31, 2015 and ending on October31, 2016 for a total of $1.7 million. Certain employees of Physpeed will be paid a total of $0.1 million of which $0.07 million will be paid in 2015 and $0.05million will be paid in 2016. These payments are accounted for as transactions separate from the business combination as the payments are contingent uponcontinued employment and will be recorded as post-combination compensation expense in the Company's financial statements during the service period.The Company also agreed to a working capital adjustment of $0.04 million that was settled by December 31, 2014.Earn-OutThe contingent earn-out consideration has an estimated fair value of $0.3 million at the date of acquisition. The earn-out is payable up to $0.75million to the former shareholders of Physpeed. The 2015 earn-out is based on $0.375 million multiplied by the 2015 revenue percentage as defined in thedefinitive merger agreement. The 2016 earn-out is based on $0.375 million multipliedF-16Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)by the 2016 revenue percentage as defined in the definitive merger agreement. Subsequent changes to the fair value will be recorded through earnings. Therewas no change in the fair value of the earn-out between October 31, 2014 and December 31, 2014.RSU AwardsThe Company will grant restricted stock units (“RSUs”) under its equity incentive plan to Physpeed continuing employees if certain 2015 and 2016revenue targets are met contingent upon continued employment. The total maximum amounts of these RSUs are $3.25 million. These participants will beeligible to receive $1.625 million of the RSUs in 2015 and $1.625 million in 2016.The RSUs granted in 2015 will be based on the calculation of the 2015 maximum revenue RSU amount multiplied by the 2015 revenue percentage asdefined in the definitive merger agreement. The 2015 maximum revenue RSU amount is 50% of the aggregate maximum RSU award value divided by the2015 average company share price (the average closing sales prices of stock trading on the New York Stock exchange over five consecutive trading daysending on the trade date that is third trading date prior to the 2015 determination date (no later than ten business days after filing the Form 10-K for the 2015fiscal year)). Qualifying revenues are the net revenues recognized in the 2015 fiscal year directly attributable sales of Physpeed products or the Company’sprovision of non-recurring engineering services exclusively with respect to the Physpeed products in accordance with U.S. GAAP reflected in the Company’saudited financial statements.The RSUs granted in 2016 will be based on the calculation of the 2016 maximum revenue RSU amount multiplied by the 2016 revenue percentage asdefined in the definitive merger agreement. The 2016 maximum revenue RSU amount is 50% of the aggregate maximum RSU award value divided by the2016 average company share price (the average closing sales prices of stock trading on the New York Stock exchange over five consecutive trading daysending on the trade date that is third trading date prior to the 2016 determination date (no later than ten business days after filing the Form 10-K for the 2016fiscal year)). Qualifying revenues are the net revenues recognized in the 2016 fiscal year directly attributable sales of Physpeed products or the Company’sprovision of non-recurring engineering services exclusively with respect to the Physpeed products in accordance with U.S. GAAP reflected in the Company’saudited financial statements.The Company will record compensation expense for the 2015 RSUs over a 14 month service period from October 31, 2014 through December 31,2015. The Company will record compensation expense for the 2016 RSUs over a 26 month service period from October 31, 2014 through December 31,2016. The Company recorded $0.3 million of compensation expense for the 2015 and 2016 RSUs for the year ended December 31, 2014.4. Financial InstrumentsThe composition of financial instruments is as follows: December 31, 2014AmortizedCost Gross Unrealized FairValueGains Losses Assets Money market funds$1,858 $— $— $1,858Government debt securities27,154 5 (8) 27,151Corporate debt securities31,543 3 (42) 31,504 60,555 8 (50) 60,513Less amounts included in cash and cash equivalents(1,858) — — (1,858) $58,697 $8 $(50) $58,655 Fair Value atDecember 31, 2014Liabilities Contingent Consideration$265Total$265F-17Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) December 31, 2013AmortizedCost Gross Unrealized FairValueGains Losses Money market funds$406 $— $— $406Government debt securities26,532 10 (5) 26,537Corporate debt securities33,355 17 (4) 33,368 60,293 27 (9) 60,311Less amounts included in cash and cash equivalents(406) — — (406) $59,887 $27 $(9) $59,905As of December 31, 2014, the Company held 23 corporate and government debt securities with an aggregate fair value of $35.8 million that were in anunrealized loss position for less than 12 months. The gross unrealized losses of $0.1 million at December 31, 2014 represent temporary impairments oncorporate and government debt securities related to multiple issuers, and were primarily caused by fluctuations in U.S. interest rates. The Company hasdetermined that the gross unrealized losses on these securities at December 31, 2014 are temporary in nature. The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending onthe situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the security in order to allow for an anticipated recovery in fair value.All of the Company’s long-term available-for-sale securities were due between 1 and 2 years as of December 31, 2014.The fair values of the Company’s financial instruments are the amounts that would be received in an asset sale or paid to transfer a liability in anorderly transaction between unaffiliated market participants and are recorded using a hierarchal disclosure framework based upon the level of subjectivity ofthe inputs used in measuring assets and liabilities. The levels are described below:Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.Level 3: Unobservable inputs are used when little or no market data is available.The Company classifies its financial instruments within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted marketprices or alternate pricing sources and models utilizing market observable inputs, respectively. The Company’s money market funds were valued based onquoted prices for the specific securities in an active market and were therefore classified as Level 1. The government and corporate debt securities have beenvalued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. The pricing services may use aconsensus price which is a weighted average price based on multiple sources or mathematical calculations to determine the valuation for a security, and havebeen classified as Level 2. The Company reviews Level 2 inputs and fair value for reasonableness and the values may be further validated by comparison toindependent pricing sources. In addition, the Company reviews third-party pricing provider models, key inputs and assumptions and understands the pricingprocesses at its third-party providers in determining the overall reasonableness of the fair value of its Level 2 financial instruments. As of December 31, 2014and 2013, the Company has not made any adjustments to the prices obtained from its third party pricing providers. The contingent liability is classified asLevel 3 as of December 31, 2014 and is valued using an internal rate of return model. The assumptions used in preparing the internal rate of return modelinclude estimates for future revenues related to Physpeed products and services and a discount factor of 0.54% to 0.33%. The assumptions used in preparingthe internal rate of return model include estimates for outcome if milestone goals are achieved, the probability of achieving each outcome and discount rates.Significant changes in any of the unobservable inputs used in the fair value measurement of contingent consideration in isolation could result in asignificantly lower or higher fair value. A change in estimated future revenues would be accompanied by a directionally similar change in fair value. TheCompany held no Level 3 financial instruments as of December 31, 2013.F-18Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)The following table presents a summary of the Company’s financial instruments that are measured on a recurring basis: Fair Value Measurements at December 31, 2014 Balance atDecember 31,2014 Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Assets Money market funds$1,858 $1,858 $— $—Government debt securities27,151 — 27,151 —Corporate debt securities31,504 — 31,504 — $60,513 $1,858 $58,655 $—Liabilities Contingent consideration$265 $— $— $265 $265 $— $— $265 Fair Value Measurements at December 31, 2013 Balance atDecember 31,2013 Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3)Money market funds$406 $406 $— $—Government debt securities26,537 — 26,537 —Corporate debt securities33,368 — 33,368 — $60,311 $406 $59,905 $—There were no transfers between Level 1, Level 2 or Level 3 securities in the year ended December 31, 2014.5. Balance Sheet DetailsCash and cash equivalents and investments consist of the following: December 31, 2014 2013Cash and cash equivalents$20,696 $26,450Short-term investments48,399 35,494Long-term investments10,256 24,410 $79,351 $86,354Inventory consists of the following: December 31, 2014 2013Work-in-process$4,169 $4,384Finished goods6,689 5,648 $10,858 $10,032F-19Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Property and equipment consist of the following: December 31, Useful Life(in Years) 2014 2013Furniture and fixtures5 $735 $346Machinery and equipment3 -5 12,695 9,488Masks and production equipment (1)2 8,672 4,764Software3 905 743Leasehold improvements (2)4 -5 4,451 924Construction in progressN/A 276 82 27,734 16,347Less accumulated depreciation and amortization (15,293) (10,836) $12,441 $5,511(1) In the year ended December 31, 2013, the Company recorded an impairment charge of $1.1 million, reflected in cost of net revenue, related to theremaining net book value of production masks that were previously capitalized, but for which future use is no longer expected.(2) The Company has capitalized leasehold improvements and recognized a corresponding lease incentive obligation of $2.0 million related to thecorporate headquarters in Carlsbad, California. The lease incentive obligation is being amortized over the remaining lease term as an offset to rent expense.Normal leasehold improvements related to the facility are recorded in leasehold improvements in the table above.On October 31, 2014, the Company acquired Physpeed and recognized $1.2 million of goodwill in connection with the acquisition.Intangible assets consist of the following: WeightedAverageAmortization December 31, Period(in Years) 2014 2013Licensed technology3 $2,821 $2,821Developed technology7 2,700 —Less accumulated amortization (2,435) (2,072) 3,086 749In-process research and development 7,300 — $10,386 $749F-20Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)The following table presents future amortization of the Company’s intangible assets at December 31, 2014: Amortization2015$5892016382201727020182702019270Thereafter1,305Total$3,086Deferred revenue and deferred profit consist of the following: December 31, 2014 2013Deferred revenue—rebates$21 $110Deferred revenue—distributor transactions5,585 3,922Deferred cost of net revenue—distributor transactions(1,994) (1,381) $3,612 $2,651Accrued price protection liability consists of the following activity: Years Ended December 2014 2013Beginning balance$15,017 $7,880Charged as a reduction of revenue22,466 22,388Reversal of unclaimed rebates(413) (50)Payments(27,052) (15,201)Ending Balance$10,018 $15,017Accrued expenses and other current liabilities consist of the following: December 31, 2014 2013Accrued technology license payments$3,000 $3,000Accrued professional fees422 390Accrued litigation costs560 —Other1,566 895 $5,548 $4,2856. Commitments and ContingenciesLease Commitments and Other Contractual ObligationsDuring May 2009, the Company entered into two lease agreements for office facilities in Carlsbad, CA. One lease commenced on June 1, 2009 andexpired on January 22, 2014. The second lease commenced on September 1, 2009 and expiredF-21Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)on March 31, 2014. The terms of these leases provide for rental payments on a monthly basis with periodic rent escalations over the term of the lease. DuringDecember 2013, the Company entered into a lease for approximately 45,000 square feet of office space in Carlsbad, California. The lease is subject to rentincreases and has a term of five years, six months, commencing on May 21, 2014, with an option to extend the lease for an additional five years. TheCompany was granted a tenant incentive of $2.0 million which was capitalized as leasehold improvements with a corresponding lease incentive obligation.The Company is recognizing rent expense, net of the tenant incentives, on a straight-line basis over a lease term of six years. Leasehold improvements arebeing depreciated on a straight-line basis over the estimated useful life of five years. The Company relocated its current operations in Carlsbad, California tothe new facility in the second quarter of 2014. During January 2010, the Company entered into a five-year noncancelable operating lease agreement for aresearch and development facility in Irvine, CA. The lease is subject to rent holidays and rent increases and commenced in April 2010 with an option toextend the lease for an additional five years. During February and August 2011 and October 2012, the Company entered into amendments to its existingoperating lease agreement for a research and development facility in Irvine, CA. The amended operating lease calls for an expansion in the amount of spaceoccupied and an extension to May 2016. The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rentexpense incurred but not paid. In addition, incentives were granted, including discounted rental payments and inducements. As such, these allowances havebeen recorded as deferred rent and these items are being recognized as reductions to rental expense on a straight-line basis over the term of the lease.At December 31, 2014, future minimum annual payments under the non-cancelable operating leases, other obligations and inventory purchaseobligations are as follows: Operating Leases Other Obligations Inventory PurchaseObligations2015 $1,679 $3,250 $10,1392016 1,381 908 —2017 1,348 — —2018 1,017 — —2019 702 — —Total minimum annual payments $6,127 $4,158 $10,139Total rent expense for 2014, 2013 and 2012, was $1.7 million, $1.4 million and $1.2 million, respectively.Other obligations represent purchase commitments for software licensing arrangements, information systems infrastructure and other commitmentsmade in the ordinary course of business.CrestaTech LitigationOn January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against the Company in theUnited States District Court of Delaware (the “District Court Litigation”). In its complaint, CrestaTech alleges that the Company infringes U.S. Patent Nos.7,075,585 and 7,265,792. In addition to asking for compensatory damages, CrestaTech alleges willful infringement and seeks a permanent injunction.CrestaTech also names Sharp Corporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged use of the Company's televisiontuners. On January 28, 2014, CrestaTech filed a complaint with the U.S. International Trade Commission, or ITC, alleging that the Company, Sharp, SharpElectronics, and VIZIO, infringe the same patents asserted in the Delaware action. On May 16, 2014 the ITC granted CrestaTech’s motion to file an amendedcomplaint adding six OEM Respondents, namely, SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron InfocommTechnology (America) Corp., Top Victory Investments Ltd. and TPV International (USA), Inc. CrestaTech filed the amended complaint on June 12, 2014,alleging that the Company’s accused products are imported into and sold within the United States by, or on behalf of, the Company, Sharp, Sharp Electronics,VIZIO and the six OEM Respondents. Through its ITC complaints, CrestaTech seeks an exclusion order preventing entry into the United States of certain ofthe Company's television tuners and televisions containing such tuners from Sharp, Sharp Electronics, and VIZIO. CrestaTech also seeks a cease and desistorder prohibiting these defendants from engaging in the importation into, sale for importation into, the sale after importation of, or otherwise transferringwithin the United States certain of the Company's television tuners or televisions containing such tuners. The target date for completing the ITCinvestigation is June 29, 2015. The District Court litigation is currently stayed.F-22Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Notwithstanding the completion of the ITC trial and post-trial briefing, the Company's overall litigation with CrestaTech is still in the early stages, andit has not recorded an accrual for loss contingencies associated with the litigation; determined that an unfavorable outcome is probable or reasonablypossible; or determined that the amount or range of any possible loss is reasonably estimable.Silicon Labs LitigationAs disclosed in the Company's Current Report on Form 8-K, as filed with the SEC on October 4, 2013, the Company entered into a settlementagreement with Silicon Labs, that resolved all currently outstanding patent litigation between the Company and Silicon Labs that is described above. Underthe terms of the settlement agreement, each party agreed to dismiss all currently outstanding litigation against the other party with prejudice. In connectionwith the settlement agreement, each party granted the other party a worldwide, non-exclusive, royalty-free, and fully paid-up license to its patent portfolio.The scope of the patent licenses is limited to existing products that were subject to the litigation. The settlement agreement releases each party and theirrespective direct and indirect customers from past infringement liability with respect to the products subject to the litigation. Each party agreed not to bringany patent infringement lawsuit against the other party for a period of three years from the date of the settlement agreement. The parties agreed that neitherthe execution and delivery of the settlement agreement nor any provision of the settlement agreement constituted an admission by either the Company orSilicon Labs of liability, infringement, or validity of any licensed patents.The Company evaluated the settlement agreement as a multiple element arrangement which required the payment consideration to be allocated to theidentifiable elements based on relative fair value. As a result, the Company determined that the $1.25 million payment to Silicon Labs should be expensedand recorded in selling, general and administrative expense in the year ended December 31, 2013. The Company had not previously recorded an accrual forloss contingencies associated with Silicon Labs litigation as it was not able to determine that an unfavorable outcome was probable or reasonably possible ordetermine that the amount or range of any possible loss was reasonably estimable given the early stage of the discovery process in prior quarters.Export Compliance MatterIn the first quarter of 2012, the Company determined that it may have taken actions that could constitute facilitation (within the meaning of applicablesanctions and export control laws) of shipments of foreign produced products to Iran or taken other actions that may be in violation of U.S. export control andeconomic sanctions laws. Specifically, certain of the Company’s tuner products, which are foreign produced and not subject to U.S. export controls, wereincluded in set-top converter boxes produced by set-top box manufacturers in Asia to permit conversion of digital television signals to analog signals ininternational markets, including Iran, using the DVB-T, or Digital Video Broadcasting – Terrestrial, broadcast standard. The DVB-T standard is used in mostof Europe, Asia (excluding China), Australia, and Africa as well as in parts of the Middle East, including Iran. While the underlying shipment of theCompany’s tuners into Iran by foreign manufacturers of these set-top boxes may have been lawful, the Company may have violated applicable sanctions andexport control laws without the proper U.S. Government authorization.The Company initially identified these potential violations internally, rather than as a result of a third-party audit or government investigation, andupon learning of these potential violations, the Company’s audit committee promptly retained outside counsel to conduct a review of the Company’ssanctions and export control compliance. On February 7, 2012, the Company made voluntary initial filings with the Office of Foreign Assets Control of theUnited States Department of the Treasury, or OFAC, and with the Bureau of Industry and Security of the United States Department of Commerce, or BIS,notifying these regulatory agencies that the Company was conducting a review of export control matters and that the Company would submit anysupplemental voluntary self-disclosures once the Company’s internal review was complete. The initial stage of the review was concluded in March 2012.Subsequently, the Company also learned that the Company was not in full compliance with BIS’s deemed export rule which requires, in some circumstances,that the companies obtain a deemed export license from BIS for employment of certain foreign nationals even if, as was the Company’s situation, theCompany had obtained an H1-B visa prior to employing the individual. The Company has now applied for such license with respect to the subject employee.In connection with its March 2012 review, the Company’s audit committee determined that the Company’s management team lacked sufficientfamiliarity with and understanding of export control and sanctions laws and their applicability to theF-23Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Company’s products and services. The Company’s audit committee concluded that the Company’s management team did not intentionally or knowinglyviolate applicable sanctions and export control laws.The Company submitted final voluntary disclosures to OFAC on June 1, 2012 and BIS on June 15, 2012 and July 11, 2012. On September 27, 2012,OFAC closed out the Company’s Voluntary Self Disclosure with the issuance of a cautionary letter, and no monetary or other penalty was imposed againstthe Company. On November 6, 2012, BIS closed out the Company’s Voluntary Self Disclosure with the issuance of a warning letter, which means that nomonetary or other penalty was imposed against the Company.In the year ended December 31, 2012, the Company reduced its previously recorded estimates of OFAC and BIS penalties and fines by $0.9 million. AtDecember 31, 2012, the Company had no liability recorded for this matter. As a result of increased awareness relative to U.S. export control and economicsanction laws relating to the sale of its products, the Company has implemented additional export control compliance management oversight and hasundertaken remedial measures to reduce the risk of similar events occurring in the future.Warranties and IndemnificationsIn connection with the sale of products in the ordinary course of business, the Company often makes representations affirming, among other things,that its products do not infringe on the intellectual property rights of others, and agree to indemnify customers against third-party claims for suchinfringement. Further, the Company’s certificate of incorporation and bylaws require the Company to indemnify its officers and directors against any actionthat may arise out of their services in that capacity, and the Company has also entered into indemnification agreements with respect to all of its directors andcertain controlling persons. As of December 31, 2014 and 2013, no expenses were incurred under such provisions. As of December 31, 2012, the Companyincurred expenses of $0.3 million under such provisions related to a previously disclosed export compliance matter.Other MattersIn addition, from time to time, the Company is subject to threats of litigation or actual litigation in the ordinary course of business, some of which maybe material. Other than the CrestaTech litigation described above, the Company believes that there are no other currently pending matters that, if determinedadversely to the Company, would have a material effect on its business or that would not be covered by its existing liability insurance maintained by theCompany.7. Stock-Based Compensation and Employee Benefit PlansCommon StockAt December 31, 2014, the Company had 500 million authorized shares of Class A common stock and 500 million authorized shares of Class Bcommon stock. Holders of the Company’s Class A and Class B common stock have identical voting rights, except that holders of Class A common stock areentitled to one vote per share and holders of Class B common stock are entitled to ten votes per share with respect to transactions that would result in achange of control of the Company or that relate to the Company’s equity incentive plans. In addition, holders of Class B common stock have the exclusiveright to elect two members of the Company’s Board of Directors, each referred to as a Class B Director. The shares of Class B common stock are not publiclytraded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and in mostinstances automatically converts upon sale or other transfer.Stock RepurchaseIn the year ended December 31, 2012, the Company’s board of directors and the audit committee of the Company’s board of directors approved therepurchase and retirement of 1.2 million shares of the Company’s Class A common stock and the repurchase and retirement of 1.0 million shares of theCompany’s Class B common stock. The Company effected the repurchases pursuant to a stock repurchase agreement. The per share repurchase price for bothClass A and Class B shares repurchased was the closing price of the Company’s Class A common stock in trading on the New York Stock Exchange on thedate of the agreement. The aggregate repurchase price was $12.1 million. There were no stock repurchases in the year ended December 31, 2014 and 2013.F-24Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Other than the transactions disclosed above, the Company’s board of directors has not authorized any stock repurchase program, and the Company hasno current plans to effect any open-market purchases of its Class A common stock or other repurchases of its Class B common stock from two of itsshareholders.Exchange OfferIn May 2012, the Company completed an offer to exchange (the “Exchange Offer”) for restricted stock units (RSUs), certain outstanding options topurchase shares of the Company’s Class A common stock and shares of the Company’s Class B common stock. Pursuant to the terms and conditions of theExchange Offer, the Company accepted for exchange options to purchase 1.3 million shares of the Company’s Class A common stock and 0.6 million sharesof the Company’s Class B common stock. All surrendered options were cancelled, and immediately thereafter, the Company issued a total of 1.0 millionrestricted stock units in exchange therefor, pursuant to the terms of the Exchange Offer. The Company accounted for the Exchange Offer as a modification ofthe original options as required by the accounting standard for stock-based compensation. The total Exchange Offer stock-based compensation is $7.3million, including the incremental value attributed to the modified options of $1.8 million, which will be recognized over the vesting period of the newRSUs.Employee Benefit PlansAt December 31, 2014, the Company had stock-based compensation awards outstanding under the following plans: the 2004 Stock Plan, the 2010Equity Incentive Plan and the 2010 Employee Stock Purchase Plan. Upon the closing of the initial public offering in March 2010, all stock awards are issuedunder the 2010 Equity Incentive Plan and are no longer issued under the 2004 Stock Plan.2010 Equity Incentive PlanThe 2010 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stockappreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards. The aggregate number of sharesof Class A common stock that may be issued pursuant to stock awards under the 2010 Plan will increase by any shares subject to stock options or otherawards granted under the 2004 Stock Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awardsgranted under the 2004 Stock Plan that are forfeited to or repurchased by the Company. In addition, the number of shares of common stock reserved forissuance will automatically increase on the first day of each fiscal year, equal to the lesser of: 2.6 million shares of the Company’s Class A common stock;four percent (4%) of the outstanding shares of the Company’s Class A common stock and Class B common stock on the last day of the immediately precedingfiscal year; or such lesser amount as the Company’s board of directors may determine. Options granted will generally vest over a four year period and the termcan be from seven to ten years.2010 Employee Stock Purchase PlanThe ESPP authorizes the issuance of shares of the Company’s Class A common stock pursuant to purchase rights granted to the Company’s employees.The number of shares of the Company’s common stock reserved for issuance will automatically increase on the first day of each fiscal year, equal to the leastof: 1.0 million shares of the Company’s Class A common stock; one and a quarter percent (1.25%) of the outstanding shares of the Company’s Class Acommon stock and Class B common stock on the first day of the fiscal year; or such lesser amount as may be determined by our board of directors or acommittee appointed by our board of directors to administer the ESPP. The ESPP is implemented through a series of offerings of purchase rights to eligibleemployees. Under the ESPP, the Company may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods withineach offering. Each offering will have one or more purchase dates on which shares of the Company’s common stock will be purchased for employeesparticipating in the offering. An offering may be terminated under certain circumstances. Generally, all regular employees, including executive officers,employed by the Company may participate in the ESPP and may contribute up to 15% of their earnings for the purchase of the Company’s common stockunder the ESPP. Unless otherwise determined by the Company’s board of directors, Class A common stock will be purchased for accounts of employeesparticipating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company’s Class A common stock on thefirst date of an offering or (b) 85% of the fair market value of a share of the Company’s Class A common stock on the date of purchase.Equity Incentive Bonus PlanF-25Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)In April 2012, the Company's compensation committee amended its Executive Incentive Bonus Plan to, among other things, permit the settlement ofawards under the plan in the form of shares of its Class A common stock. In May 2013, the Company's compensation committee amended its ExecutiveIncentive Bonus Plan to permit the settlement of awards under the plan in any combination of cash or shares of its Class A common stock. For the 2013 and2012 performance period, actual awards under the Executive Incentive Bonus Plan were settled in Class A common stock issued under its 2010 EquityIncentive Plan with the number of shares issuable to plan participants determined based on the closing sales price of the Company's Class A common stock asdetermined in trading on the New York Stock Exchange on May 9, 2014 and May 3, 2013, respectively. Additionally, the Company settled all bonus awardsfor all other employees for the 2013 and 2012 performance period in shares of its Class A common stock. The Company issued 0.6 million shares of its ClassA common stock for the 2013 performance period upon settlement of the bonus awards on May 9, 2014. The Company issued 0.8 million shares of its Class Acommon stock for the 2012 performance period upon settlement of the bonus awards on May 3, 2013.At December 31, 2014, an accrual of $3.1 million was recorded for bonus awards for employees for the 2014 performance period, which the Companyintends to settle in shares of its Class A common stock issued under its 2010 Equity Incentive Plan, as amended, with the number of shares issuable to planparticipants determined based on the closing sales price of the Company’s Class A common stock as determined in trading on the New York Stock Exchangeat a date to be determined. The Company's compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.Stock-Based CompensationStock-based compensation expense is classified in the consolidated statements of operations based on the department to which the related employeereports. The Company recognized stock-based compensation in the statements of operations as follows: Years Ended December 31, 2014 2013 2012Cost of net revenue$131 $108 $85Research and development9,686 8,258 6,382Selling, general and administrative5,191 4,620 3,517 $15,008 $12,986 $9,984The total unrecognized compensation cost related to unvested stock options as of December 31, 2014 was $3.1 million, and the weighted averageperiod over which these equity awards are expected to vest is 2.14 years. The total unrecognized compensation cost related to unvested restricted stock unitsand restricted stock awards as of December 31, 2014 was $18.1 million, and the weighted average period over which these equity awards are expected to vestis 2.21 years.The Company records equity instruments issued to non-employees as expense at their fair value over the related service period as determined inaccordance with the authoritative guidance and periodically revalues the equity instruments as they vest. Stock-based compensation expense related to non-employee consultants totaled $0.1 million, $0.2 million and $0.8 million for 2014, 2013 and 2012, respectively.Stock OptionsThe Company uses the Black-Scholes valuation model to calculate the fair value of stock options and employee stock purchase rights granted toemployees. Stock-based compensation expense is recognized over the vesting period using the straight-line method and is classified in the consolidatedstatements of operations based on the department to which the related employee reports.The fair values of stock options and employee stock purchase rights were estimated at their respective grant date using the following assumptions:F-26Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Stock Options Years Ended December 31, 2014 2013 2012Weighted-average grant date fair value per share$4.03 $3.24 $2.37Risk-free interest rate1.70% 0.71% 0.88%Dividend yield— — —Expected life (years)4.56 4.75 4.84Volatility51.00% 56.00% 56.00%Employee Stock Purchase Rights Years Ended December 31, 2014 2013 2012Weighted-average grant date fair value per share$ 2.03 - $2.47 $ 1.85 - $2.09 $ 1.28 - $1.42Risk-free interest rate 0.05 - 0.07% 0.09 - 0.10% 0.14 - 0.15%Dividend yield— — —Expected life (years)0.50 0.50 0.50Volatility 47.75 - 46.82% 39.24 - 41.58% 46.60 - 55.74%The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar tothose of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in theforeseeable future. The weighted-average expected life of options was calculated using the simplified method as prescribed by guidance provided by theSEC. This decision was based on the lack of historical data due to the Company’s limited number of stock option exercises under the 2010 Equity IncentivePlan. In addition, due to the Company’s limited historical data, the estimated volatility incorporates the historical volatility of comparable companies whoseshare prices are publicly available as well as the historical volatility of the Company. Effective for the year ended December 31, 2014, the Company is nolonger incorporating the historical volatility of comparable companies in determining estimated volatility.A summary of the Company’s stock option activity is as follows: Number ofOptions Weighted-Average ExercisePrice Weighted-AverageContractualTerm (in Years) AggregateIntrinsic ValueOutstanding at December 31, 20133,704 $5.23 Granted419 9.23 Exercised(96) 2.76 Canceled(64) 6.64 Outstanding at December 31, 20143,963 $5.69 4.59 $8,315Vested and expected to vest at December 31, 20143,930 $5.68 4.59 $8,286Exercisable at December 31, 20142,567 $5.10 4.21 $6,718The intrinsic value of stock options exercised during 2014, 2013 and 2012 was $0.6 million, $0.3 million and $2.1 million, respectively.Restricted Stock Units and Restricted Stock AwardsThe Company calculates the fair value of restricted stock units and restricted stock awards based on the fair market value of the Company’s Class Acommon stock on the grant date. Stock-based compensation expense is recognized over the vestingF-27Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)period using the straight-line method and is classified in the consolidated statements of operations based on the department to which the related employeereports.A summary of the Company’s restricted stock unit and restricted stock award activity is as follows: Number of Shares Weighted-AverageGrant-Date FairValue per ShareOutstanding at December 31, 20134,484 $6.40Granted1,786 8.85Vested(2,467) 7.30Canceled(291) 6.57Outstanding at December 31, 20143,512 $7.00The intrinsic value of restricted stock units and restricted stock awards vested during 2014, 2013 and 2012 was $21.9 million, $14.9 million, and $3.2million, respectively. The intrinsic value of restricted stock units and restricted stock awards outstanding at December 31, 2014 was $26.0 million.Shares Reserved for Future IssuanceCommon stock reserved for future issuance is as follows: December 31, 2014Stock options outstanding3,963Restricted stock units and restricted stock awards outstanding3,512Authorized for future grants under 2010 Equity Incentive Plan5,090Authorized for future issuance under 2010 Employee Stock Purchase Plan511Total13,0768. Income TaxesThe domestic and international components of loss before provision (benefit) from income taxes are presented as follows: Years Ended December 31, 2014 2013 2012Domestic$(9,631) $(12,770) $(11,918)Foreign886 439 (993)Loss before income taxes$(8,745) $(12,331) $(12,911)F-28Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)Income tax provision (benefit) consists of the following: Years Ended December 31, 2014 2013 2012Current: Federal$— $— $—State1 — —Foreign577 574 351Total current578 574 351Deferred: Federal(3,341) (5,217) (4,162)State253 (1,174) (2,062)Foreign54 (166) —Valuation allowance release due to acquisition(2,335) — —Change in valuation allowance3,087 6,385 6,214Total deferred(2,282) (172) (10)Total income tax provision (benefit)$(1,704) $402 $341The actual income tax provision (benefit) differs from the amount computed using the federal statutory rate as follows: Years Ended December 31, 2014 2013 2012Benefit at statutory rate$(2,973) $(4,191) $(4,390)State income taxes (net of federal benefit)(391) 1 (1,247)Research and development credits(66) (3,630) (858)Foreign rate differential(31) (80) 445Stock compensation609 460 278Foreign deemed dividend— 835 —Estimated export compliance fines and penalties— — (255)Uncertain tax positions304 266 199Permanent and other92 356 (45)Valuation allowance release due to acquisition(2,335) — —Valuation allowance3,087 6,385 6,214Total provision (benefit) for income taxes$(1,704) $402 $341F-29Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)The components of the deferred income tax assets are as follows: December 31, 2014 2013Deferred tax assets: Net operating loss carryforwards$9,924 $8,545Research and development credits12,783 12,718Accrued expenses and other1,044 476Accrued compensation994 1,686Stock-based compensation4,516 2,732Depreciation and amortization250 2,637 29,511 28,794Less valuation allowance(29,399) (28,628)Net deferred tax assets$112 $166At December 31, 2014, the Company had federal and state tax net operating loss carryforwards of approximately $36.2 million and $31.0 million,respectively. Included in the federal loss carryover is approximately $3.9 million of net operating loss carryover acquired in the Physpeed acquisition. Theseamounts include share-based compensation for federal and state of $11.7 million and $3.8 million, that will be recorded to contributed capital when realized.The federal and state tax loss carryforwards will begin to expire in 2026 and 2018, respectively, unless previously utilized.At December 31, 2014, the Company had federal and state tax credit carryforwards of approximately $10.4 million and $11.0 million, respectively.The federal tax credit carryforward will begin to expire in 2024, unless previously utilized. The state tax credits do not expire. In addition, the Company hasfederal alternative minimum tax credit carryforwards of $0.2 million that can be carried forward indefinitely.Pursuant to Internal Revenue Code Section 382 and 383, use of the Company’s net operating loss and creditcarryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period.A future change of ownership may cause a limitation on the utilization of net operating loss or credit carryforwards.The Company evaluated its net deferred income taxes, which included an assessment of the cumulative income or loss over the prior three-year periodand future periods, to determine if a valuation allowance is required. After considering its recent history of losses and management’s expectations ofadditional near-term losses, the Company recorded a valuation allowance on its net federal deferred tax assets, with a corresponding charge to its income taxprovision of approximately $6.7 million during 2011. During 2014, 2013 and 2012, the Company maintained a valuation allowance against all of its federaland state deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines. TheCompany will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating positive and negative evidence that may exist.The change in valuation allowance during 2014 related to operations was $3.1 million. Additionally, the Company completed the acquisition of Physpeed inthe fourth quarter. As a result of the acquisition, there was a valuation allowance release resulting in a tax benefit of $2.3 million due to the purchaseaccounting adjustment for the net deferred tax liability acquired, which can be used as a future source of income to offset the existing deferred tax assets. Theacquired deferred tax liability will reverse within the net operating loss carryover period.At December 31, 2014, the Company’s unrecognized tax benefits totaled $10.8 million, $8.9 million of which, if recognized at a time when thevaluation allowance no longer exists, would affect the effective tax rate. The Company will recognize interest and penalties related to unrecognized taxbenefits as a component of income tax expense. At December 31, 2014, the Company had accrued approximately $0.1 million of interest and penalties. TheCompany does not expect any significant increases or decreases to its unrecognized tax benefits within twelve months.F-30Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)The following table summarizes the changes to the unrecognized tax benefits during 2014, 2013 and 2012:Balance as of December 31, 2011$3,020Additions based on tax positions related to the current year725Additions based on tax positions of prior year132Decreases based on tax positions of prior year(127)Balance as of December 31, 20123,750Additions based on tax positions related to the current year1,689Additions based on tax positions of prior years23Balance as of December 31, 20135,462Additions based on tax positions related to the current year3,158Additions based on tax positions of prior years2,188Balance as of December 31, 2014$10,808The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions.At December 31, 2014, the Company is no longer subject to federal, state or foreign income tax examinations for the years before 2011, 2010, and 2007,respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax creditswere generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward amount.At December 31, 2013, the Company was under examination by the federal tax authorities for the tax years 2010 and 2011. This examination closed inJanuary 2014. The impact of any adjustments has been reflected in 2013. At December 31, 2012, the Company was under examination by the California taxauthorities for the tax years 2008 and 2009. This examination closed during the three months ended March 31, 2013 with no adjustment to taxable income.On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. The Act included several provisions related to corporate income taxincluding the reinstatement of the credit for qualified research and development. The credit was reinstated for years beginning after January 1, 2012. OnDecember 19, 2014, the Tax Increase Prevention Act was enacted. The Act included several business tax provisions including the extension of the credit forqualified research and development through 2014.9. Employee Retirement PlanThe Company has a 401(k) defined contribution retirement plan (the 401(k) Plan) covering all eligible employees. Participants may voluntarilycontribute on a pre-tax basis an amount not to exceed a maximum contribution amount pursuant to Section 401(k) of the Internal Revenue Code. TheCompany is not required to contribute, nor has it contributed, to the 401(k) Plan for any of the periods presented.10. Selected Quarterly Financial Data (Unaudited)The following table presents the Company’s unaudited quarterly financial data for each of the eight quarters in the period ended December 31, 2014.In management’s opinion, this information has been presented on the same basis as the audited consolidated financial statements included in a separatesection of this report, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts below to presentfairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes. The operating results forany quarter should not be relied upon as necessarily indicative of results for any future period.F-31Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Year Ended December 31, 2014 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands)Net revenue$32,501 $35,592 $32,541 $32,478Gross profit$20,053 $22,246 $19,909 $19,750Net income (loss)$(862) $(612) $(3,205) $(2,362)Net income (loss) per share: Basic$(0.02) $(0.02) $(0.09) $(0.06)Diluted$(0.02) $(0.02) $(0.09) $(0.06) Year Ended December 31, 2013 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands)Net revenue$26,534 $29,773 $31,765 $31,574Gross profit$16,712 $17,296 $19,831 $19,124Net income (loss)$(2,300) $ (2,904)1 $ (4,882)2 $(2,647)Net income (loss) per share: Basic$(0.07) $(0.09) $(0.14) $(0.08)Diluted$(0.07) $(0.09) $(0.14) $(0.08) 1 Includes an impairment charge of $1.1 million related to the remaining net book value of production masks that were previously capitalized, but forwhich future use is no longer expected.2 Includes a one-time payment of $1.25 million to Silicon Labs in connection with the settlement agreement.11. Subsequent EventsAcquisition of Entropic Communications, Inc.On February 3, 2015, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with EntropicCommunications, Inc., a Delaware corporation (“Entropic”), Excalibur Acquisition Corporation, a Delaware corporation (“Excalibur”), and ExcaliburSubsidiary, LLC, a Delaware limited liability corporation (“ESLLC”). Pursuant to the Merger Agreement, Excalibur will merge with and into Entropic withEntropic continuing as the surviving corporation and as the Company's wholly-owned subsidiary. As soon as practicable after such merger, the survivingcorporation in the first merger will merge with and into ESLLC with ESLLC continuing as the surviving company and as the Company's wholly-ownedsubsidiary. Under the terms of the Merger Agreement, at the effective time of the merger (as defined in the Merger Agreement), each outstanding share ofEntropic common stock will be converted into the right to receive 0.2200 of a share of the Company's Class A common stock, $0.001 par value, and $1.20 incash, without interest. The merger transactions are subject to the separate approvals of the stockholders of the Company and Entropic, regulatory approvals,and other customary closing conditions.Entropic Communications Merger LitigationThe Delaware ActionsBeginning on February 9, 2015, a number of stockholder class action complaints were filed in the Court of Chancery of the State of Delaware on behalfof a putative class of Entropic Communications, Inc. (“Entropic”) stockholders and naming as defendants Entropic, the board of directors of Entropic,MaxLinear, Excalibur Acquisition Corporation, and Excalibur Subsidiary, LLC. Langholz v. Entropic Communications, Inc., et al., C.A. No. 10631-VCP(Del. Ch. filed Feb. 9, 2015); Tomblin v. Entropic Communications, Inc., et al., C.A. No. 10632-VCP (Del. Ch. filed Feb. 9, 2015); Crill v. EntropicCommunications, Inc., et al., C.A. No. 10640-VCP (Del. Ch. filed Feb. 11, 2015); Wohl v. Entropic Communications, Inc., etF-32Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data)al., C.A. No. 10644-VCP (Del. Ch. filed Feb. 11, 2015); Parshall v. Entropic Communications, Inc., et al., C.A. No. 10652-VCP (Del. Ch. filed Feb. 12, 2015);Saggar v. Padval, et al., C.A. No. 10661-VCP (Del. Ch. filed Feb. 13, 2015); Respler v. Entropic Communications, Inc., et al., C.A. No. 10669-VCP (Del. Ch.filed Feb. 17, 2015); Gal v. Entropic Communications, Inc., et al., C.A. No. 10671-VCP (Del. Ch. filed Feb. 17, 2015); Werbowsky v. Padval, et al., C.A. No.10673-VCP (Del. Ch. filed Feb. 18, 2015); and Agosti v. Entropic Communications, Inc., C.A. No. 10676-VCP (Del. Ch. filed Feb. 18, 2015). The complaintsgenerally allege that, in connection with the proposed acquisition of Entropic by MaxLinear, the individual defendants breached their fiduciary duties toEntropic stockholders by, among other things, purportedly failing to take steps to maximize the value of Entropic to its stockholders and agreeing toallegedly preclusive deal protection devices in the merger agreement. The complaints further allege that Entropic, MaxLinear, and/or the merger subsidiariesaided and abetted the individual defendants in the alleged breaches of their fiduciary duties. The complaints seek, among other things, an order enjoiningthe defendants from consummating the proposed transaction, an order declaring the merger agreement unlawful and unenforceable; in the event that theproposed transaction is consummated, an order rescinding it and setting it aside or awarding rescissory damages to the class, imposition of a constructivetrust; damages; and/or attorneys’ fees and costs. The California ActionsBeginning on February 10, 2015, two stockholder class action complaints were filed in the Superior Court of the State of California County of SanDiego on behalf of a putative class of Entropic stockholders and naming as defendants Entropic, the board of directors of Entropic, MaxLinear, ExcaliburAcquisition Corporation, and Excalibur Subsidiary, LLC. Krasinski v. Entropic Communications, Inc., et al., Case No. 37-2015-00004613-CU-SL-CTL (Cal.Super. Ct. San Diego Cnty. filed Feb. 9, 2015); and Khoury v. Entropic Communications, Inc., et al., Case No. 37-2015-00004737-CU-SL-CTL (Cal. Super.Ct. San Diego Cnty. filed Feb. 11, 2015). The complaints generally allege that, in connection with the proposed acquisition of Entropic by MaxLinear, theindividual defendants breached their fiduciary duties to Entropic stockholders by, among other things, purportedly failing to take steps to maximize thevalue of Entropic to its stockholders and agreeing to allegedly preclusive deal protection devices in the merger agreement. The complaints further allege thatMaxLinear and the merger subsidiaries aided and abetted the individual defendants in the alleged breaches of their fiduciary duties. The complaints seek,among other things, an order enjoining the defendants from consummating the proposed transaction, an order rescinding, to the extent already implemented,the proposed transaction or any of its terms, or granting the class rescissory damages, damages, and attorneys’ fees and costs.F-33EXHIBIT 21.1 SUBSIDIARIES OF MAXLINEAR, INC. NameJurisdiction of IncorporationMaxLinear Shanghai LimitedChinaMaxLinear LimitedBermudaMaxLinear Asia LimitedMalaysiaMxL Taiwan Holdings, LLCDelawareMaxLinear Technologies Private LimitedIndiaMaxLinear Japan GKJapanMaxLinear Asia LimitedKoreaPhyspeed, LLCCaliforniaEXHIBIT 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1) Registration Statement (Form S-8 No. 333-165770) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(2) Registration Statement (Form S-8 No. 333-172418) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(3) Registration Statement (Form S-8 No. 333-180666) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(4) Registration Statement (Form S-8 No. 333-187395) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.(5) Registration Statement (Form S-8 No. 333-194856) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.of our reports dated February 23, 2015, with respect to the consolidated financial statements and schedule of MaxLinear, Inc., and the effectiveness ofinternal control over financial reporting of MaxLinear, Inc., included in this Annual Report (Form 10-K) of MaxLinear, Inc., for the year ended December 31,2014./s/ Ernst & Young LLPIrvine, CaliforniaFebruary 23, 2015EXHIBIT 31.1Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Kishore Seendripu, Ph.D., certify that: 1.I have reviewed this Form 10-K of MaxLinear, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: February 23, 2015 /s/ Kishore Seendripu, Ph.D. Kishore Seendripu, Ph.D. President and Chief Executive Officer (Principal Executive Officer)EXHIBIT 31.2Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Adam C. Spice, certify that: 1.I have reviewed this Form 10-K of MaxLinear, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date: February 23, 2015 /s/ Adam C. Spice Adam C. Spice Chief Financial Officer (Principal Financial Officer)EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002I, Kishore Seendripu, Ph.D., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Reportof MaxLinear, Inc. on Form 10-K for the fiscal year ended December 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of MaxLinear, Inc. Date: February 23, 2015 By: /s/ Kishore Seendripu, Ph.D. Name: Kishore Seendripu, Ph.D. Title: President and Chief Executive OfficerI, Adam C. Spice, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report ofMaxLinear, Inc. on Form 10-K for the fiscal year ended December 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of MaxLinear, Inc. Date: February 23, 2015 By: /s/ Adam C. Spice Name: Adam C. Spice Title: Chief Financial Officer

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