Three Months Ended
                                                 March 31,
                                         --------------------
                                             2004       2003
                                         ---------  ---------  
                                         (unaudited)
Revenues:
  United States......................... $   4,174  $   3,140
  Asia - excluding Taiwan and Singapore.     2,315      1,299
  Europe - excluding France.............     1,721      1,147
  Taiwan................................     1,243        723
  Singapore.............................     1,191        797
  Americas - excluding United States....       585        467
  France................................       413        930
                                         ---------  ---------
Total................................... $  11,642  $   8,503
                                         =========  =========

For the three months ended March 31, 2004, approximately 12% of net revenue was derived from sales to one distributor. For the three months ended March 31, 2003, approximately 11% of net revenues was derived from sales to a different distributor. No other distributor or direct customer represented greater than 10% of net revenues.

Income tax expense of $172,000 was recorded for the three months ended March 31, 2004 compared to income tax expense of $8,000 for the three months ended March 31, 2003. Income tax expense for the three months ended March 31, 2004 is primarily due to federal alternative minimum tax, miscellaneous state income taxes and foreign income taxes. The current expense differs from the expected provision derived by applying the applicable U.S. federal statutory rate to the income from operations primarily due to nondeductible acquisition-related items.

Deferred tax assets are recognized when there is sufficient evidence that it is more likely than not that such deferred tax assets will be realized. The company has determined that such evidence does not currently exist. Therefore, a full valuation allowance has been established to reserve the Company's net deferred tax assets.

In March 2004, the Company announced a definitive agreement to acquire NetChip Technology, Inc., a privately held, fabless semiconductor supplier. NetChip is a leading supplier of chips based on Universal Serial Bus 2.0 (USB 2.0), a high-speed, mixed-signal interconnect standard, as well as the Peripheral Component Interconnect (PCI) standard. Under the terms of the agreement, the Company will issue common stock and options to purchase common stock with an aggregate value of approximately $20 million, valued at approximately $9.78 per share, which is subject to adjustment at the closing, in exchange for all outstanding securities of NetChip and options to purchase securities of NetChip. Additional consideration of common stock with a maximum aggregate value of approximately $10 million may be paid out under certain provisions approximately one year following the close of the transaction. The Company expects to close the NetChip acquisition late in the second quarter, pending the necessary vote of PLX stockholders and other customary closing conditions.

This Report on Form 10-Q contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations, hopes, intentions, beliefs or strategies regarding the future. These statements also include statements regarding the anticipated closing date of the NetChip acquisition, our ability to meet our capital requirements for the next twelve months, and our future capital requirements. Actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ include that there may be unexpected delays in closing the NetChip acquisition and that unexpected capital requirements may arise due to that acquisition or other possible acquisitions. Actual results could also differ for the reasons noted under the sub-heading "Factors That May Affect Future Operating Results" and in other sections of this report on Form 10-Q. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Report on Form 10-Q, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.

The following discussion should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

PLX was founded in 1986, and since 1994 we have focused on development of I/O interface semiconductors and related software and development tools that are used in systems incorporating the PCI standard. In 1994 and 1995, a significant portion of our revenues were derived from the sale of semiconductor devices that perform similar functions as our current products, except they were based on a variety of industry standards. Our revenues since 1996 have been derived predominantly from the sale of semiconductor devices based on the PCI standard to a large number of customers in a variety of applications including networking and telecommunications, enterprise storage, imaging, industrial and other embedded applications as well as in related adapter cards. We generate less than 1% of our revenues from sales of our software and development tools.

In May of 2003, we acquired HiNT Corp. which markets and sells PCI Bridges and PCI-X products into a variety of applications including networking and telecommunications, personal computer, peripheral, imaging, industrial and other embedded applications. Beginning with the quarter ended June 30, 2003, our operating results include results of HiNT Corp. and its products.

In March of 2004, we signed a definitive agreement to acquire NetChip Technology, a leading supplier of chips based on Universal Serial Bus 2.0 (USB 2.0), a high-speed, mixed-signal interconnect standard, as well as the Peripheral Component Interconnect (PCI) standard. We expect to close the NetChip acquisition late in the second quarter, pending the necessary vote of PLX stockholders and other customary closing conditions.

We utilize a "fabless" semiconductor business model whereby we purchase wafers and packaged and tested semiconductor devices from independent manufacturing foundries. This approach allows us to focus on defining, developing, and marketing our products and eliminates the need for us to invest large amounts of capital in manufacturing facilities and work-in- process inventory.

We rely on a combination of direct sales personnel, distributors, and manufacturers' representatives throughout the world to sell a significant portion of our products. We pay manufacturers' representatives a commission on sales while we sell products to distributors at a discount from the selling price. We generally recognize revenue at the time of title passage. Recognition of sales to distributors, including international distributors, is deferred until the product is resold by the distributors to end users. See "Certain Factors That May Affect Future Operating Results -- A Large Portion of Our Revenues Is Derived From Sales to Third-Party Distributors Who May Terminate Their Relationships with Us at Any Time."

Our gross margins have fluctuated in the past and are expected to fluctuate in the future due to changes in product and customer mix, write-downs and recoveries of excess or obsolete inventory, the position of our products in their respective life cycles, and specific product manufacturing costs.

The time period between initial customer evaluation and design completion can range from six to twelve months or more. Furthermore, there is typically an additional six to twelve month or greater period after design completion before a customer requests volume production of our products. Due to the variability and length of these design cycles and variable demand from customers, we may experience significant fluctuations in new orders from month to month. In addition, we typically make inventory purchases prior to receiving customer orders. Consequently, if anticipated sales and shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our results for that quarter and potentially future quarters would be materially and adversely affected.

Our long-term success will depend on our ability to introduce new products. While new products typically generate little or no revenues during the first twelve months following their introduction, our revenues in subsequent periods depend upon these new products. Due to the lengthy sales cycle and additional time before our customers request volume production, significant revenues from our new products typically occur twelve to twenty-four months after product introduction. As a result, revenues from newly introduced products have, in the past, produced a small percentage of our total revenues in the year the product was introduced. See "Certain Factors That May Affect Future Operating Results -- Our Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected Revenues."

The following table summarizes historical results of operations as a percentage of net revenues for the periods shown.

                                                     Three Months Ended
                                                           March 31,
                                                   --------------------
                                                       2004       2003
                                                   ---------  --------- 
Net revenues.....................................     100.0 %    100.0 %%
Cost of revenues.................................      27.7       29.6
                                                   ---------  ---------
Gross margin.....................................      72.3       70.4
                                                   ---------  ---------
Operating expenses:
  Research and development.......................      34.8       43.7
  Selling, general and administrative............      31.6       36.0
  In-process research and development............        --         --
  Amortization of purchased intangible assets....       2.6        1.6
                                                   ---------  ---------
Total operating expenses.........................      69.0       81.3
                                                   ---------  ---------
Income (loss) from operations....................       3.3      (10.9)
Interest income and other, net...................       0.6        1.3
                                                   ---------  ---------
Income (loss) before provision for income taxes..       3.9       (9.6)
Provision for income taxes.......................       1.5        0.1
                                                   ---------  ---------
Net income (loss)................................       2.4 %     (9.7)%%
                                                   =========  =========

Net revenues consist of product revenues generated principally by sales of our semiconductor devices. Net revenues for the three months ended March 31, 2004 were $11.6 million, an increase of 36.9% from $8.5 million for the three months ended March 31, 2003. The increase was primarily due to higher unit shipments as well as revenues generated from the PCI bridge product acquired as part of the HiNT Corp. acquisition. The HiNT Corp. acquisition was in May 2003 and revenues for the quarter ended March 31, 2003 do not include any revenues generated from the PCI bridge products. For the three months ended March 31, 2004, approximately 12% of net revenue was derived from sales to one distributor. For the three months ended March 31, 2003, approximately 11% of net revenues was derived from sales to a different distributor. No other distributor or direct customer represented greater than 10% of net revenues.

Gross margin represents net revenues less the cost of revenues. Cost of revenues includes the cost of (1) purchasing semiconductor devices from our independent foundries, (2) package, assembly and test services from our independent foundries and assembly and test contractors and (3) our operating costs associated with the procurement, storage, and shipment of products.

Gross margin for the three months ended March 31, 2004 was 72.3%, an increase of 1.9% from 70.4% for the same period in 2003. Excluding benefits from selling previously written-down inventory of approximately $0.1 million and $0.2 million for the three months ended March 31, 2004 and 2003, respectively, gross margin increased to 71.5% for the three months ended March 31, 2004, from 68.0% for the same period in 2003. The increase in gross margin was primarily due to shifts in our product and customer mix.

Research and development (R&D) expenses consist primarily of salaries and related costs of employees engaged in research, design, and development activities. In addition, expenses for outside engineering consultants and non-recurring engineering at our independent foundries and deferred compensation are included in research and development expenses.

R&D as a percent of net revenues decreased to 34.8% for the three months ended March 31, 2004, as compared to 43.7% for the same period in 2003. The percentage decrease is due primarily to an increase in revenues. In absolute dollars, R&D expenses increased to $4.1 million for the three months ended March 31, 2004 from $3.7 million for the same period in 2003. Excluding deferred compensation amortization of $18,000 and $0.5 million for the three months ended March 31, 2004 and 2003, respectively, R&D increased by $0.9 million to $4.1 million for the three months ended March 31, 2004 from $3.2 million for the same period in 2003. The increase in R&D was primarily due to (1) an increase of approximately $0.5 million in compensation and benefit expenses due mainly to the HiNT Corp. acquisition in May 2003, (2) an increase of approximately $0.1 million in consulting expenses and (3) an increase of approximately $0.1 million in engineering tools expense associated with the development of new products and enhancement of existing products.

Selling, general and administrative (SG&A) expenses consist primarily of employee-related expenses, professional fees, trade show and other promotional expenses, and sales commissions to manufacturers' representatives.

SG&A as a percent of net revenues decreased to 31.6% for the three months ended March 31, 2004, as compared to 36.0% for the same period in 2003. The decrease is due primarily to an increase in revenues. In absolute dollars, SG&A expenses increased by $0.6 million to $3.7 million for the three months ended March 31, 2004 from $3.1 million for the same period in 2003. The increase was primarily due to an increase of approximately $0.3 million in compensation and benefit expenses due mainly to the HiNT Corp. acquisition in May 2003 and an increase of approximately $0.1 million in sales commissions to manufacturer's representatives as a result of higher revenues.

Interest income reflects interest earned on cash, cash equivalents and short-term and long-term marketable securities balances. Interest income and other remained relatively flat at $0.1 million for the three months ended March 31, 2004 and 2003.

Income tax expense of $172,000 was recorded for the three months ended March 31, 2004 compared to income tax expense of $8,000 for the three months ended March 31, 2003. Income tax expense for the three months ended March 31, 2004 is primarily due to federal alternative minimum tax, miscellaneous state income taxes, and foreign income taxes. The current expense differs from the expected provision derived by applying the applicable U.S. federal statutory rate to the income from operations primarily due to nondeductible acquisition-related items.

Deferred tax assets are recognized when there is sufficient evidence that it is more likely than not that such deferred tax assets will be realized. The Company has determined that such evidence does not currently exist. Therefore, a full valuation allowance has been established to reserve the Company's net deferred tax asset.

Cash and cash equivalents and short and long-term marketable securities were $25.1 million at March 31, 2004, an increase of $2.0 million from $23.1 million at December 31, 2003. The increase was primarily due to $2.0 million of cash provided by operating activities, which included (1) net income of $0.3 million adjusted for non-cash expenses of $0.9 million, (2) increases in accounts payable and accrued expenses of $0.9 million and $0.3 million, respectively, and (3) a decrease in inventories of $0.5 million. This was partially offset by an increase in accounts receivable of $1.0 million.

In September 2002, our Board of Directors authorized the repurchase of up to 2,000,000 shares of common stock.  The Company, at the discretion of the management, can repurchase the shares from time to time in the open market or in privately negotiated transactions.  As of March 31, 2004, approximately 774,000 shares had been repurchased at approximately $1,867,000. The Company did not repurchase any shares for the three month period ended March 31, 2004.

Additional consideration of the Company's common stock and cash with a maximum aggregate value of approximately $2.3 million is expected to be paid out in the event PCI bridge product sales acquired as part of the HiNT Corp. acquisition meet certain performance milestones by June 30, 2004.

As of March 31, 2004, inventory purchase commitments were $4.5 million. There were no other significant changes in contractual obligations or commercial commitments outstanding.

We believe that our existing resources, together with cash generated from our operations will be sufficient to meet our capital requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including the inventory levels we maintain, the level of investment we make in new technologies and improvements to existing technologies and the levels of monthly expenses required to launch new products. From time to time, we may also evaluate potential acquisitions and equity investments complementary to our technologies and market strategies. To the extent that existing resources and future earnings are insufficient to fund our future activities, we may need to raise additional funds through public or private financings. Additional funds may not be available or, if available, we may not be able to obtain them on terms favorable to us and our stockholders.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies which involve the use of estimates, judgments and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Inventory Write-downs. We evaluate the write-downs for inventory based on a combination of factors. Based on the life of the product, sales history, obsolescence, and sales forecast, we record write-downs ranging from 0% to 100%. Any adverse changes to our future product demand may result in increased write-downs, resulting in decreased gross margin. In addition, future sales on any of our previously written down inventory may result in increased gross margin in the period of sale.

Allowance for Doubtful Accounts. We evaluate the collectibility of our accounts receivable based on length of time the receivables are past due and our historical bad debt experience. We record reserves for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. We have certain customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customer's credit worthiness or other matters affecting the collectibility of amounts due from such customers could have a material affect on our results of operations in the period in which such changes or events occur.

Taxes. We account for income taxes using the liability method. Deferred taxes are determined based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. As of March 31, 2004, we carried a valuation allowance for the entire deferred tax asset as a result of uncertainties regarding the realization of the asset balance. Future taxable income and/or tax planning strategies may eliminate all or a portion of the need for the valuation allowance. In the event we determine we are able to realize our deferred tax asset, an adjustment to the valuation allowance may increase income in the period such determination is made.

This quarterly report on Form 10-Q contains forward- looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking statements as a result of certain factors, including those set forth below.

Our quarterly operating results have fluctuated significantly in the past and are expected to fluctuate significantly in the future based on a number of factors, many of which are not under our control. Our operating expenses, which include product development costs and selling, general and administrative expenses, are relatively fixed in the short-term. If our revenues are lower than we expect because we sell fewer semiconductor devices, delay the release of new products or the announcement of new features, or for other reasons, we may not be able to quickly reduce our spending in response.

Other circumstances that can affect our operating results include: