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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the thirteen-week period ended: September 24, 2004

OR

C-COR Incorporated

(Exact Name of Registrant as Specified in Charter)

(814) 238-2461

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes x  No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.05 Par Value - 43,111,542 shares as of October 19, 2004.

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C-COR Incorporated

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Independent Accountants’ Review Report

The Board of Directors and Shareholders

C-COR Incorporated:

We have reviewed the condensed consolidated balance sheet of C-COR Incorporated and subsidiaries as of September 24, 2004, and the related condensed consolidated statements of operations and cash flows for the thirteen-week periods ended September 24, 2004 and September 26, 2003. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of C-COR Incorporated and subsidiaries as of June 25, 2004, and the related consolidated statements of operations, cash flows, and shareholders’ equity for the year then ended (not presented herein); and in our report dated August 13, 2004, except as to Note 24, which was as of September 3, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 25, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Harrisburg, Pennsylvania

November 2, 2004

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PART I FINANCIAL INFORMATION

C-COR Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

See independent accountants’ review report and notes to condensed consolidated financial statements.

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C-COR Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

See independent accountants’ review report and notes to condensed consolidated financial statements.

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C-COR Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

See independent accountants’ review report and notes to condensed consolidated financial statements

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C-COR Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands except per share data)

(Unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and, in the opinion of management, contain all adjustments (consisting only of normal, recurring adjustments except as noted) necessary to fairly present C-COR Incorporated’s (the Company) consolidated financial position as of September 24, 2004 and the consolidated results of operations for the thirteen-week periods ended September 24, 2004 and September 26, 2003. Operating results for the thirteen-week period ended September 24, 2004 are not necessarily indicative of the results that may be expected for the year ending June 24, 2005, due to the cyclical nature of the industry in which the Company operates, timing of recognizing revenues from the sale of certain operational support software systems, fluctuations in currencies related to intercompany foreign currency transactions where settlement is anticipated, and changes in overall conditions that could affect the carrying value of the Company’s assets and liabilities. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended June 25, 2004 (fiscal year 2004).

The Company designs, manufactures, and markets network distribution and transmission products and provides services and operational support systems to operators of both advanced hybrid fiber coax broadband networks and the emerging packet-based, on-demand, all digital multimedia networks of the future. The Company operates in three industry segments: Broadband Communications Products, Broadband Network Services, and Broadband Management Solutions.

The Broadband Communications Products segment is responsible for the development, management, production, support, and sales of digital video transport, fiber optic, radio frequency, and fiber-to-the-premises equipment for hybrid fiber coax networks as well as the Company’s new optical packet-ring technology solution for the all-digital networks of the future. The Broadband Network Services segment provides outsourced technical services, including network engineering and design, construction, activation, optimization, certification, maintenance, and operations. The Broadband Management Solutions segment is responsible for the development, integration, management, implementation, support, and sale of operations support systems (OSS) solutions to operate and manage reliable, high-quality multi-service networks.

A detailed description of the Company’s significant accounting policies is set forth in the Notes to Consolidated Financial Statements of the Company’s Form 10-K for fiscal year 2004.

Marketable Securities

Marketable securities at September 24, 2004 and June 25, 2004 consisted of corporate obligations, municipal securities, collateralized mortgage obligations, asset-backed securities, mutual funds, equity securities, and certificates of deposit. The Company classifies its marketable securities portfolios as either available-for-sale or trading, and records them at fair value. For the Company’s available-for-sale securities, unrealized holding gains and losses are excluded from the statement of operations and are recorded directly to shareholders’ equity in accumulated other comprehensive income (loss), net of related deferred income taxes, if applicable. For the Company’s trading securities, unrealized holding gains and losses are included in the statement of operations in the period they arise. The Company classifies marketable securities that are available for current operations as a current asset. Marketable securities which are classified as non-current assets represent investments that are available to fund certain long-term liabilities.

The Company periodically reviews its investment securities classified as available-for-sale for potential impairment and records impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” This includes a review of the fair value of each investment security in relation to its book value, the current grade of the security, and other significant events. Based on management’s review, no investment securities were determined to be other than temporarily impaired, and as a result no impairment charges were recorded during the thirteen-week period ended September 24, 2004. There were no securities as of September 24, 2004 in an unrealized-loss position for twelve or more months.

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Accounting for Employee Stock Award Plans

The Company accounts for its stock award plans in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” If charges for the Company’s stock plans had been determined based on the fair value method at the grant dates, as prescribed in Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income (loss) and net income (loss) per share would have been as follows:

During the thirteen-week period ended September 24, 2004, the Company completed two acquisitions:

On July 16, 2004, the Company acquired all the outstanding securities of Stargus, Inc. (Stargus), a privately held company headquartered in Andover, Massachusetts. Stargus is a provider of comprehensive network and service management solutions for cable broadband operators. Stargus became part of the Company’s Broadband Management Solutions segment. The purchase price for the acquisition was $17,134, consisting of a cash payment of $17,000, subject to certain adjustments, and direct transaction costs of $134.

On September 3, 2004, the Company acquired certain assets and liabilities of Optinel Systems, Inc. (Optinel), a privately held company located in Elkridge, Maryland. Optinel is a provider of optical Ethernet transport solutions for residential and business services. Optinel became part of the Company’s Broadband Communications Products segment. The purchase price for the acquisition was $9,571 million, consisting of a cash payment of $9,500, subject to certain adjustments, and direct transaction costs of $71. Additional cash payments of up to $6,000 are required to be made to Optinel shareholders if certain sales objectives are achieved within thirteen months from the date of acquisition. Upon satisfaction of the contingency, the additional consideration will be recorded as additional cost of the acquisition and recorded as goodwill.

The acquisitions resulted in additional goodwill of $19,712, consisting of $16,130 related to Stargus and $3,582 related to Optinel. The goodwill related to the Optinel acquisition is expected to be deductible for tax purposes. None of the goodwill related to the Stargus acquisition is expected to be deductible for tax purposes; however, the Company acquired the historical net operating losses and unused general business credits of Stargus, subject to certain limitations.

Intangible assets acquired in the acquisitions included $3,500 for completed technology and $360 for customer relationships, which are being amortized over their useful lives of three to five years. In addition, one of the acquired intangible assets was in-process research and development, representing research and development projects that were commenced but not yet completed at the date of the acquisition, and which if unsuccessful, have no alternative future use in the Company’s research and development activities or otherwise. The fair value allocated to in-process research and development as of the acquisition date was $1,850 based on a third-party valuation. The amount allocated to in-process research and development was charged to expense in the condensed consolidated statement of operations for the thirteen-week period ended September 24, 2004.

The acquisitions have been accounted for as purchases and, accordingly, the results of operations have been included in the consolidated financial statements since their respective dates of acquisition. On an unaudited pro forma basis, the effects of the acquisitions were not significant to the Company’s results of operations.

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Restructuring costs relate principally to employee severance and termination benefits and lease commitment costs resulting from the closure of facilities and workforce reductions attributable to the Company’s efforts to reduce costs during prior fiscal years.

The following table provides detail on the activity and remaining restructuring accrual balance by category as of September 24, 2004.

Amounts accrued as of September 24, 2004, for both employee severance and termination benefits and contractual obligations will be paid out as of December 2004.

Inventories include material, labor and overhead and are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. Inventories as of September 24, 2004 and June 25, 2004 consisted of the following:

Goodwill was $58,071 and $38,312 as of September 24, 2004 and June 25, 2004, respectively. As of September 24, 2004 and June 25, 2004, goodwill was allocated by segment as follows:

During the thirteen-week period ended September 24, 2004, goodwill increased $19,759, of which, $19,678 related to acquisitions and $81 related to fluctuations in foreign currency exchange rates used to translate the goodwill related to foreign subsidiaries at the balance sheet date.

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Other intangible assets as of September 24, 2004 and June 25, 2004 consisted of the following:

The Company has a two-year secured revolving credit financing agreement with a commercial lender. Borrowings under the financing agreement may be used for working capital and general corporate purposes. The financing agreement provides a commitment of up to an aggregate amount of $20,000. The financing agreement allows for the issuance of letters of credit and cash borrowings. Letters of credit outstanding are limited to no more than $6,000. Cash borrowings are limited by certain availability reserves and a borrowing base, primarily a percentage of eligible domestic trade accounts receivable, up to the facility’s maximum availability less letters of credit outstanding.

As security for the financing agreement, the Company has pledged the following collateral: trade accounts receivable, inventory, general intangibles, real estate, equipment, life insurance policies, and a portion of the stock of a wholly owned foreign subsidiary. The financing agreement contains a number of restrictive covenants, including covenants limiting incurrence of subordinated debt, disposal of collateral, and the payment of dividends (except stock dividends). The financing agreement does not contain any financial covenants.

The financing agreement is committed through November 6, 2004. Borrowings under the financing agreement bear interest at an applicable bank rate or LIBOR plus two and three-quarters percent (2.75%) per annum, payable monthly. The financing agreement required the payment of a facility fee of $150 at execution of the agreement, and requires a fee on the unused commitment of 0.375% per annum payable monthly and an administrative fee of $36 per annum. As of September 24, 2004, the Company had no borrowings outstanding under the financing agreement and letters of credit had been issued for $2,200 related to facility lease obligations and requirements under the Company’s workers compensation policies. Based upon the eligible borrowing base at September 24, 2004, available borrowings under the financing agreement were $5,755.

As a condition to closing on the financing agreement, the Company terminated its prior credit agreement with a bank, except that the Company continues to maintain letters of credit provided by the bank related to the Company’s workers compensation program, customer obligations, and equipment lease obligations. As of September 24, 2004, the aggregate amount of the letters of credit was $1,110. A cash compensating balance of $1,132 is maintained to secure the letters of credit, which has been classified as a current asset, as the terms for the letters of credit expire in less than one year.

The Company has issued a notice terminating the financing agreement effective November 8, 2004 and is negotiating a replacement facility with another commercial lender. The replacement facility would be in the amount of $10,000 to be used solely for the issuance of letters of credit which would be fully cash collateralized at the time of issuance. The Company anticipates signing the replacement facility during the second quarter of fiscal year 2005.

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Accrued liabilities as of September 24, 2004 and June 25, 2004 consisted of the following:

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus the dilutive effect of options and warrants. The dilutive effect of options and warrants is calculated under the treasury stock method using the average market price for the period. Net income (loss) per share is calculated as follows:

For the thirteen-week periods ended September 24, 2004 and September 26, 2003, stock options and warrants representing 5,442 and 5,155 common shares, respectively, were excluded from the diluted net income (loss) per share calculation because they were antidilutive.

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The components of accumulated other comprehensive income, net of tax if applicable, are as follows:

The components of comprehensive income (loss) for the thirteen-week week periods ended September 24, 2004 and September 26, 2003 are as follows:

The Company accounts for certain intercompany loans that are denominated in various foreign currencies as being permanent in nature, as settlement is not planned or anticipated in the foreseeable future. As such, foreign currency translation gains and losses related to these loans are excluded from net income (loss) and reported as a component of other comprehensive income (loss).

The Company estimates income taxes for each of the jurisdictions in which it operates. This involves estimating the Company’s actual current income tax payable and assessing temporary differences resulting from differing treatment of items, such as reserves and accruals, for tax and accounting purposes. Earnings of foreign operations are reinvested in the business and no provision for domestic income tax or foreign withholding tax is made on such earnings until distributed. Deferred taxes arise due to temporary differences in the bases of assets and liabilities and from net operating losses and tax credit carryforwards. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s statement of operations become deductible expenses under applicable income tax laws or net operating loss or tax credit carryforwards are utilized. Accordingly, realization of deferred tax assets is dependent on future taxable income against which these deductions, net operating losses and tax credits can be utilized. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Historical operating losses, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies are considered in making this assessment.

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Management concluded during the third quarter of fiscal year 2003 that a valuation allowance against net deferred tax assets was appropriate, primarily as a result of the cumulative losses during fiscal years 2001, 2002 and 2003 and recorded a valuation allowance as of that date. As of September 24, 2004, a valuation allowance on the net deferred tax assets has been recorded, except in foreign jurisdictions where the Company is profitable. In addition, the Company expects to provide a valuation allowance on any net deferred tax assets until the Company can sustain a level of profitability that demonstrates its ability to utilize these assets. Income tax expense for the thirteen-week period ended September 24, 2004 includes current taxes paid or payable in certain foreign jurisdictions.

As of September 24, 2004, the Company did not have any outstanding guarantees, except for product warranties. The Company warrants its products against defects in materials and workmanship, generally for two-to-five years, depending upon product lines and geographic regions. A provision for estimated future costs related to warranty activities is recorded when the product is shipped, based upon historical experience of product failure rates and historical costs incurred in correcting product failures. In addition, from time to time, the recorded amount is adjusted for specifically identified warranty exposures where unforeseen technical problems arise.

Changes in the Company’s warranty liability during the thirteen week period ended September 24, 2004 are as follows:

The Company operates in three industry segments: Broadband Communication Products, Broadband Network Services, and Broadband Management Solutions. Due to changes in the structure of the Company’s internal organizations affecting the composition of its reportable segments, the Company has restated the segment information for the thirteen-week week period ended September 26, 2003, to conform to the current year presentation.

The “management approach” required under SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” has been used to present the following segment information. This approach is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance.

The following costs and asset categories are not allocated to segments, and are reflected in the table as “unallocated items”:

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Information about industry segments for the thirteen-week periods ended September 24, 2004 and September 26, 2003 is as follows:

The Company and its subsidiaries operate in various geographic areas. The table below presents the Company’s operations in the following geographic areas:

Property, plant, and equipment, net by geographic region is as follows:

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On October 20, 2004, the Company announced that it has entered into an agreement to acquire the business of nCUBE Corporation (nCUBE), a privately held company headquartered in Beaverton, Oregon. nCUBE is a worldwide provider of On Demand media and digital advertising systems. The acquisition is expected to close in the second or third quarter of the Company’s fiscal year 2005. Upon the completion of the purchase, nCUBE will become part of the Company’s Broadband Management Solutions segment. Consideration for the acquisition consists of 4,500 shares of the Company’s common stock, $35,000 of the Company’s senior unsecured 5-year convertible notes, $20,000 in cash, and the assumption of certain liabilities. The aggregate purchase consideration will be partially based upon the Company’s common stock price on the date of closing on the acquisition. Based upon the closing price of the Company’s common stock on October 20, 2004, the aggregate purchase consideration would be approximately $89,500. The consideration is subject to certain adjustments at closing. As part of the acquisition, the Company anticipates using a third-party appraisal firm to perform a valuation of identifiable intangible assets, including in-process research and development that was commenced but is not expected to be completed at the date of acquisition, and which if unsuccessful, would have no alternative use to the Company. The fair value (if any) ascribed to in-process research and development will be charged to expense in the quarter that the acquisition closes. The fair value ascribed to other identifiable intangibles could result in higher amortization expense in future periods, in amounts unknown at this time. Any excess of the purchase price and related costs over the fair value of the acquired net assets will be recorded as goodwill.

During the first quarter of fiscal year 2005, the Company identified commissions paid for business development efforts in certain foreign countries and began an investigation into the nature of the payments to determine if there were any violations of law related to the payments or any other such payments. The Company has completed a review of commissions paid for business development efforts in certain foreign countries and has determined that there is no evidence of violations of law related to these payments.

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General

The following discussion addresses the financial condition of C-COR Incorporated as of September 24, 2004, and the results of our operations for the thirteen-week period ended September 24, 2004, compared with the same period of the prior fiscal year. This discussion should be read in conjunction with the Management’s Discussion and Analysis section for the fiscal year ended June 25, 2004, included in the Company’s Annual Report on Form 10-K.

Disclosure Regarding Forward-Looking Statements

Some of the information presented in this report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, our ability to develop and expand our product offerings, our continued investment in research and product development, fluctuations in network upgrade activity and the level of future network upgrade activity, the trend toward more fiber in the network, fluctuations in the global demand for our products, services and software, potential charges resulting from start-up and integration costs associated with acquisitions, our anticipated switch in the future to the percentage of completion method of accounting for certain software arrangements, anticipated software sales and associated gross margins in future quarters, the effect of revenue levels in general, sales mix, competitive pricing, the timing of new product introductions and the timing of deployments of our operational support software systems on our future overall gross margin, our expectation to maintain valuation allowances related to net tax benefits arising from temporary differences and operating loss carryforwards, our intention to continue our initiatives to achieve cost-effective operations, including the possibility of undertaking additional restructuring initiatives, the anticipation of receiving additional funds held in escrow, pending certain contingencies, related to the sale of our trade claims against Adelphia Communications (Adelphia) and affiliates, and statements relating to our business strategy. Forward-looking statements represent our judgment regarding future events. Although we believe we have a reasonable basis for these forward-looking statements, we cannot guarantee their accuracy and actual results may differ materially from those anticipated due to a number of known and unknown uncertainties. Factors that could cause actual results to differ from expectations include, among others, capital spending patterns of the communications industry, our ability to develop new and enhanced products, continued industry consolidation, the development of competing technologies, changes in the credit profiles of major customers that would lead us to restrict new product shipments or record an increase in the allowance for doubtful accounts, timing of recognizing software revenues, changes in our sales mix, the effect of competitive pricing, the success of our initiatives to achieve cost-effective operations, our ability to integrate in our operations, the operations of Stargus, Optinel, and the pending acquisition of nCUBE Corporation, and our ability to achieve our strategic objectives. For additional information concerning these and other important factors that may cause our actual results to differ materially from expectations and underlying assumptions, please refer to the reports filed by us with the Securities and Exchange Commission.

Business Overview

We design, manufacture, and market network distribution and transmission products and provide services and operational support systems to operators of both advanced hybrid fiber coax broadband networks and the emerging packet-based, on-demand, all digital multimedia networks. We operate in three industry segments: Broadband Communications Products, Broadband Network Services, and Broadband Management Solutions.

Our Broadband Communications Products segment is responsible for research, development, management, production, support, and sales of digital video transport, fiber optic, radio frequency, and fiber-to-the-premises equipment for hybrid fiber coax networks as well as the Company’s new optical packet-ring technology solution for all-digital networks.

Our Broadband Network Services segment provides outsourced technical services, including network engineering and design, construction, activation, optimization, certification, maintenance, and operations.

Our Broadband Management Solutions segment is responsible for the development, integration, management, implementation, support, and sale of operations support systems (OSS) solutions to operate and manage reliable, high-quality multi-service networks.

Net sales in the thirteen week period ended September 24, 2004 were $62.1 million, an increase of 9% over the $56.8 million recorded in the same period a year earlier, reflecting higher revenues from the sales of technical services being provided to Adelphia Communications (Adelphia) and increased software revenues during the period, which were partially offset by lower sales of fiber optic equipment. Our largest customers during the quarter were Adelphia and Time Warner Cable, accounting for 20% and 14%, respectively, of net sales. Bookings were $53.1 million for a book-to-bill ratio of .86, resulting from lower new orders for products and technical services during the quarter. Both selling and administrative expense and research and product development expense increased during the quarter, primarily as a result of acquisitions.

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Since the beginning of calendar 2004, we have completed four acquisitions, including the completion of two acquisitions in the first quarter of fiscal year 2005, described below. We have also agreed to a significant acquisition that we expect to complete in the second or third quarter of fiscal year 2005. These acquisitions further our strategic plan to provide products, services and software solutions to support the anticipated migration of today’s hybrid fiber coax networks to networks based on all-digital, Internet Protocol (IP) packet technology. Our acquisitions have significantly increased our goodwill and other intangible assets. At September 24, 2004, we had recorded $58.1 million of goodwill and $13.5 million of other intangible assets. At this time, we are unable to determine the amount of additional goodwill and other intangible assets that will be added related to the pending acquisition of nCUBE, but believe it will be substantial. The increase in other intangible assets will increase amortization expense in future periods. While goodwill is no longer amortized, we are required to assess whether goodwill is impaired at least annually and more frequently if circumstances warrant. Any impairment of goodwill could result in a substantial charge to earnings, which would have a material adverse effect on our results of operation and financial position in the period in which such impairment is recorded.

Business Combinations

On July 16, 2004, we acquired all the outstanding securities of Stargus, Inc. (Stargus), a privately held company headquartered in Andover, Massachusetts. Stargus is a provider of comprehensive network and service management solutions for cable broadband operators. Stargus became part of the Company’s Broadband Management Solutions segment. The purchase price for the acquisition was $17.1 million, consisting of a cash payment of $17.0 million and direct transaction costs of approximately $134,000, subject to certain adjustments.

On September 3, 2004, we acquired certain assets and liabilities of Optinel Systems, Inc. (Optinel), a privately held company located in Elkridge, Maryland. Optinel is a provider of optical Ethernet transport solutions for residential and business services. Optinel became part of the Company’s Broadband Communications Products segment. The purchase price for the acquisition was $9.6 million, consisting of a cash payment of $9.5 million and direct transaction costs of approximately $71,000, subject to certain adjustments. Additional cash payments of up to $6.0 million are required to be made to Optinel shareholders if certain sales objectives are achieved within thirteen months from the date of acquisition. Upon satisfaction of the contingency, the additional consideration will be recorded as additional cost of the acquisition and recorded as goodwill.

The acquisitions resulted in additional goodwill and other identifiable intangible assets being recorded during the quarter. We used a third-party appraisal firm to perform a valuation of identifiable intangible assets, including in-process research and development that was commenced but not yet completed at the date of these acquisitions, and which if unsuccessful, would have no alternative use. The fair value ascribed to in-process research and development related to both acquisitions was $1.9 million, which was recorded as an acquired in-process technology charge in the condensed consolidated statement of operations during the thirteen-week period ended September 24, 2004. The fair values ascribed to other identifiable intangibles related to both acquisitions were $360,000 for customer relationships and $3.5 million for completed technology, which are being amortized over their useful lives of three to five years. The excess of the purchase price and related costs over the fair value of the acquired net assets of the businesses resulted in additional goodwill of $19.7 million being recorded during the quarter.

Subsequent Event

On October 20, 2004, we announced we had entered into an agreement to acquire the business of nCUBE Corporation (nCUBE), a privately held company headquartered in Beaverton, Oregon. nCUBE is a worldwide provider of On Demand media and digital advertising systems. The acquisition is expected to close in the second or third quarter of our fiscal year 2005. Upon the completion of the purchase, nCUBE will become part of our Broadband Management Solutions segment. Consideration for the acquisition consists of 4.5 million shares of the Company’s common stock, $35.0 million of the Company’s senior unsecured 5-year convertible notes, $20.0 million in cash, and the assumption of certain liabilities. The aggregate purchase consideration will be partially based upon the Company’s common stock price on the date of closing on the acquisition. Based upon the closing price of our common stock on October 20, 2004, the aggregate purchase consideration would be approximately $89.5 million. The consideration is subject to certain adjustments at closing. As part of the acquisition, we anticipate using a third-party appraisal firm to perform a valuation of identifiable intangible assets, including in-process research and development that was commenced but not expected to be completed at the date of acquisition, and which if unsuccessful, would have no alternative use to the Company. The fair value (if any) ascribed to in-process research and development will be charged to expense in the quarter that the acquisition closes. The fair value ascribed to other identifiable intangibles could result in higher amortization expense in future periods, in amounts unknown at this time. Any excess of the purchase price and related costs over the fair value of the acquired net assets will be recorded as goodwill.

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Results of Operations

The following table contains information regarding the percentage of net sales of our condensed consolidated statements of operations for the thirteen-week periods ended September 24, 2004 and September 26, 2003.

The table below sets forth our net sales for the thirteen-week periods ended September 24, 2004 and September 26, 2003, for each of our reportable segments.

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The table below sets forth our net sales for the thirteen-week periods ended September 24, 2004 and September 26, 2003, by geographic region.