1050776--12/14/2006--VIRAGE_LOGIC

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{product, market, service}

{regulation, change, law}

{property, intellectual, protect}

{stock, price, operating}

{stock, price, share}

{operation, international, foreign}

{personnel, key, retain}

{provision, law, control}

{control, financial, internal}

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{cost, operation, labor}

{system, service, information}

{acquisition, growth, future}

Our quarterly operating results may fluctuate significantly and any failure to meet financial expectations for any fiscal quarter may cause our stock price to decline. If we are unable to continue establishing relationships on favorable contractual terms with semiconductor companies to license our IP, our business will be harmed. If we are unable to maintain existing relationships and/or develop new relationships with third-party semiconductor manufacturers or foundries, we will be unable to verify our technologies on their processes and license our IP to them or their customers and our business will be harmed. We may be unable to deliver our customized memory, logic and I/O products in the time-frame demanded by our customers, which could damage our reputation and future sales. If we are unsuccessful in increasing our royalty revenues, our revenues and profitability may not be as large as we anticipate. It is difficult for us to verify royalty amounts owed to us under our licensing arrangements, and this may cause us to lose revenues or inaccurately report revenues. Products that do not meet customer specifications or contain defects that harm our customers could damage our reputation and cause us to lose customers and revenue. As advanced process nodes become more complex we may have difficulty in delivering product specifications in similar timeframes and at comparable costs to older process nodes. Our international operations may be adversely affected by instability in the countries in which we operate. Problems associated with international business operations could affect our ability to license our IP. We have a long and unpredictable sales cycle, which can result in uncertainty and delays in generating additional revenues. We rely on a small number of customers for a substantial portion of our revenues and our accounts receivables are concentrated among a small number of customers. We may have difficulty sustaining profitability and may experience additional losses in the future. We may be unable to attract and retain key personnel who are critical to the success of our business. We may need additional capital that may not be available to us and, if raised, may dilute our stockholders ownership interest in us. If we are unable to effectively manage our growth, our business may be harmed. New financial accounting standards related to equity compensation will cause us to recognize an additional expense and we expect the adoption of such standards will have a significant effect on our consolidated statements of operations. We have received assessment orders from the Government of India, Income Tax Department, Office of the Director of Income Tax (Indian Tax Authorities) proposing a tax deficiency in certain of our tax returns, and the outcome of the assessment or any future assessment involving similar claims may have an adverse effect on our consolidated statements of operations. Risk Related to Our Industry If demand for products incorporating complex semiconductors and semiconductor IP platforms does not increase, our business may be harmed. The market for semiconductor IP platforms can be highly competitive and dynamic. We may experience loss in market share to larger competitors with greater resources and/or our customer base may choose to develop semiconductor IP platforms using their own internal design teams. The technology used in the semiconductor industry is rapidly changing and if we are unable to develop new technologies and adapt our existing IP to new processes, we will be unable to attract or retain customers. General economic conditions and future terrorist attacks may reduce our revenues and harm our business. Risk Related to Our Intellectual Property Rights We rely on our proprietary technologies and we cannot assure you that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such proprietary technologies from third parties. Third parties may claim we are infringing or assisting others to infringe their IP rights, and we could suffer significant litigation or licensing expenses or be prevented from licensing our technology. Risk Related to Our Stock Our stock price may be volatile and could decline substantially. A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. We determined that we had material weaknesses in our internal control over financial reporting as of September 30, 2005, and upon such determination we have implemented supplemental procedures to remediate identified material weaknesses and to ensure that our financial statements are fairly stated in all material respects. Such material weaknesses could adversely affect investor confidence in our financial reports and the market price of our common stock. Our certificate of incorporation and bylaws as well as Delaware law contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

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1050776--12/14/2006--VIRAGE_LOGIC_CORP