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

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

Delaware

94-2683643

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)

3120 Scott Boulevard, Santa Clara, California

95054

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (408)986-4300

Yes

x

No

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Page No.

PART I.   FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed consolidated balance sheets— September 30, 2002 (Unaudited) and December 31, 2001 (Audited)

3

Unaudited condensed consolidated statements of income— three and nine months ended September 30, 2002 and 2001

4

Unaudited condensed consolidated statements of cash flows— Nine months ended September 30, 2002 and 2001

5

Unaudited condensed consolidated statements of stockholders’ equity— three and nine months ended September 30, 2002 and 2001

6

Notes to condensed consolidated financial statements— September 30, 2002

7

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4

Control and procedures

25

PART II.   OTHER INFORMATION

Item 6.

Exhibits and Reports on Form 8-K

26

SIGNATURES

27

CERTIFICATIONS

28-29

September 30, 2002

December 31, 2001

(Unaudited)

(Audited)

Assets

Current assets:

Cash and cash equivalents

$

21,361

$

39,146

Cash designated for combination

40,759

—  

Marketable securities and short term bank deposits

46,903

70,893

Trade receivables, net

7,558

6,315

Deferred income taxes

2,098

2,098

Other accounts receivable and prepaid expenses

1,149

1,547

Inventories

9,347

2,048

Assets of discontinued operation

15,322

12,197

Total current assets:

144,497

134,244

Property and equipment, at cost

19,301

18,037

Less accumulated depreciation and amortization

(14,729

)

(12,647

)

Property and equipment, net

4,572

5,390

Long term assets:

Long term marketable securities

158,026

139,752

Other investments

8,627

25,536

Other assets, net

6,114

6,229

Severance pay fund

1,302

1,228

Total long term assets

174,069

172,745

Total assets

$

323,138

$

312,379

Liabilities and stockholders’ equity

Current liabilities:

Trade payables

$

7,225

$

5,123

Other current liabilities

19,308

11,592

Liabilities of discontinued operation

5,454

7,852

Total current liabilities

31,987

24,567

Long term liabilities

Accrued severance pay

1,365

1,294

Deferred income taxes

1,200

7,541

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.001 par value; Authorized shares — 5,000,000; Issued and outstanding shares — none

Common stock, $0.001 par value; Authorized shares — 50,000,000; Issued and outstanding shares — 27,120,700 and 26,625,557

27

27

Additional paid-in capital

155,969

155,969

Treasury stock

(2,744

)

(8,623

)

Accumulated other comprehensive income (loss)

(2,057

)

2,652

Retained earnings

137,391

128,952

Total stockholders’ equity

288,586

278,977

Total liabilities and stockholders’ equity

$

323,138

$

312,379

Three Months Ended
September 30,

Nine  Months Ended
September 30,

2002

2001

2002

2001

Revenues:

Product revenues and other

$

44,005

$

27,143

$

97,029

$

64,687

Cost of product revenues and other

26,433

17,300

58,199

38,458

Gross profit

17,572

9,843

38,830

26,229

Operating expenses:

Research and development

5,245

5,273

15,124

15,259

Sales and marketing

3,501

2,411

7,978

6,844

General and administrative

1,608

1,391

3,524

3,627

Aborted spin-off expenses and other

—  

—  

865

—  

Total operating expenses

10,354

9,075

27,491

25,730

Operating income

7,218

768

11,339

499

Other income :

Interest and other income, net

2,416

3,022

7,566

9,637

Equity in earnings of affiliates

—  

—  

—  

105

Minority interest in losses of subsidiary

—  

—  

—  

173

Income after financial and other

9,634

3,790

18,905

10,414

Impairment of available-for-sale marketable securities

—  

—  

9,815

—  

Income before provision for income tax

9,634

3,790

9,090

10,414

Provision for  income taxes

1,843

96

44

1,825

Net income  from continued operations

7,791

3,694

9,046

8,589

Net income from discontinued operations

981

3,160

2,492

9,284

Net income

$

8,772

$

6,854

$

11,538

$

17,873

Net earnings per share for continued operations:

Basic

$

0.29

$

0.14

$

0.34

$

0.32

Diluted

$

0.29

$

0.14

$

0.32

$

0.31

Net earnings per share for discontinued operations:

Basic

$

0.03

$

0.12

$

0.09

$

0.35

Diluted

$

0.03

$

0.11

$

0.09

$

0.34

Net earnings per share (combined):

Basic

$

0.32

$

0.26

$

0.43

$

0.67

Diluted

$

0.32

$

0.25

$

0.41

$

0.65

Weighted average number of shares of Common Stock used in computing of:

Basic

27,104

26,732

27,030

26,576

Diluted

27,707

27,790

27,848

27,539

Nine months Ended
September 30,

2002

2001

Net cash provided by operating activities

$

23,702

$

18,230

Investing activities:

Purchase of held-to-maturity marketable securities and bank deposits

(94,454

)

(115,373

)

Proceeds from sales and maturity of held-to-maturity marketable securities and bank deposits

98,264

94,595

Purchases of property and equipment

(1,309

)

(2,364

)

Proceeds from sale of property and equipment

11

97

Investment in available-for-sale marketable securities

(2,000

)

—  

Proceeds from sale of available-for-sale marketable securities

1,504

—  

Cash contributed to discontinued operation, net

(5,523

)

(3,506

)

Net cash used in investing activities

(3,507

)

(26,551

)

Financial activities

Purchase of treasury stock