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<SEC-DOCUMENT>0000950134-09-000112.txt : 20090223
<SEC-HEADER>0000950134-09-000112.hdr.sgml : 20090223
<ACCEPTANCE-DATETIME>20090106160229
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950134-09-000112
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20090106

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PIXELWORKS, INC
		CENTRAL INDEX KEY:			0001040161
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				911761992
		STATE OF INCORPORATION:			OR
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		16760 SW UPPER BOONES FERRY RD
		STREET 2:		SUITE 101
		CITY:			PORTLAND
		STATE:			OR
		ZIP:			97224
		BUSINESS PHONE:		(503) 612-6700

	MAIL ADDRESS:	
		STREET 1:		16760 SW UPPER BOONES FERRY RD
		STREET 2:		SUITE 101
		CITY:			PORTLAND
		STATE:			OR
		ZIP:			97224

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PIXELWORKS INC
		DATE OF NAME CHANGE:	20000210
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>corresp</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">January&nbsp;6, 2009
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities and Exchange Commission<BR>
Division of Corporation Finance<BR>
100 F St. NE, Mail Stop 3030<BR>
Washington, DC 20549<BR>
Attention: Lynn Dicker

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="8%"></TD>
    <TD width="3%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="right"><B>Re:</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Pixelworks, Inc.</B><br>
<B>Form&nbsp;10-K for the Year Ended December&nbsp;31, 2007</B><br>
<B>Form&nbsp;10-Q for the Quarter Ended September&nbsp;30, 2008</B><br>
<B>File No.&nbsp;000-30269</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Ms.&nbsp;Dicker:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We refer to your letter dated December&nbsp;19, 2008, which sets forth the comments of the staff of
the Securities and Exchange Commission (the &#147;Staff&#148;) regarding the Form 10-K for the year ended
December&nbsp;31, 2007; and Form 10-Q for the quarter ended September&nbsp;30, 2008 (File No.&nbsp;000-30269) of
Pixelworks, Inc. (&#147;Pixelworks&#148;). Set forth below are our responses to the Staff&#146;s comments. We
have set forth each of the Staff&#146;s comments immediately preceding our response thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Form&nbsp;10-K for the Year Ended December&nbsp;31, 2007</U>
</DIV>

<!-- link2 "Item&nbsp;7a. Quantitative and Qualitative Disclosure about Market Risk, page 46" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;7a. Quantitative and Qualitative Disclosure about Market Risk, page 46</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosures related to your interest rate for your $140&nbsp;million convertible
subordinated debentures. However, we do not see any disclosures related to your interest rate
risk related to your investment portfolio. Please explain to us if you believe that
fluctuations in interest rates related to your investment portfolio would materially impact
your results of operations. If material, please revise your future filings to include one of
the three disclosure alternatives required by item 305(a) of Regulation&nbsp;S-K.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>Response:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With the exception of our strategic investment in a publicly traded equity security, which
we classify as long-term based on our intent to hold the investment for more than one year,
our investment portfolio is comprised entirely of high-quality, short-term investments.
The primary objective of our investment policy is preservation of capital, and our policy
does not allow for investments with maturities longer than one year. This policy dictates
a portfolio of relatively conservative securities, which in turn produce commensurately
lower yields. Accordingly, we do not consider anticipated interest income as a primary
factor when contemplating business decisions, including future expenditures.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>While we have realized significantly lower interest income during 2008 than 2007, and while
this decrease did directly impact our results of operations, the decrease was only due in
part to lower yields. A 47% decrease in our cash and investment balances also contributed
significantly to the decrease in interest income. We note further that the realized
decrease in interest income which resulted specifically from decreased interest rates did
not materially impact our results of operations, cash flows or liquidity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our results of operations have fluctuated significantly in the past, and may continue to do
so in the future. Therefore, future changes in interest rates could have a material impact
on our results of operations. Accordingly, in future filings, we will expand our
disclosure under Item&nbsp;7a to read as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest rate fluctuations impact the interest income that we earn on our
investment portfolio and the value of our investments. Factors that could cause
interest rates to fluctuate include volatility in the credit and equity markets,
such as the current uncertainty in global economic conditions; changes in the
monetary policies of the United States and other countries and inflation. We
mitigate risks associated with such fluctuations, as well as the risk of loss of
principal, by investing in high-credit quality securities and limiting
concentrations of issuers and maturity dates. Derivative financial instruments are
not part of our investment portfolio.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Additionally, in future filings we will include a sensitivity analysis disclosure that
expresses our potential loss of future earnings which may result from hypothetical decrease
in interest rates.</TD>
</TR>

</TABLE>
</DIV>
<!-- link2 "Item&nbsp;8. Financial Statements and Supplementary Data, page 46" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;8. Financial Statements and Supplementary Data, page 46</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Notes to Consolidated Financial Statements, page 52</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Note 5. Restructuring, page 63</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your disclosures here and throughout the filing related to your restructuring
activities. Please revise future filings to include a more detailed description of each of
your exit or disposal activities, including the facts and circumstances leading to the
expected activities and the expected completion date, consistent with paragraph 20(a) of SFAS
146. Within your discussion, please explain how you considered footnote 1 of SFAS 146.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>Response:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In future filings, we will include all disclosures required by paragraph 20(a) of SFAS 146,
including consideration of footnote 1 of SFAS 146.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Further to the above, please revise future filings to provide the disclosures required by
paragraph 20(b) of SFAS 146 and SAB Topic 5.P.4. for each restructuring activity for all
reporting periods presented until the activities are completed.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>Response:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In future filings, we will include all disclosures required by paragraph 20(b) of SFAS 146
and SAB Topic 4.P.4. for each restructuring activity for all reporting periods presented
until the activities are completed.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Please revise your MD&#038;A in future filings to include all of the disclosures required by SAB
Topic 5.P.4.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>Response:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In future filings, we will include all of the disclosures required by SAB Topic 5.P.4.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Form&nbsp;10-Q for the Quarterly Period Ended September&nbsp;30, 2008</U>
</DIV>

<!-- link2 "Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, page 17" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,
page 17</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>-Liquidity and Capital Resources, page 24</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In light of the current market conditions and your significant investment portfolio at
September&nbsp;30, 2008, please expand your discussion and analysis to provide your investors with
information necessary for an understanding of your financial condition related to these
investments. Refer to Item 303(a) of Regulation&nbsp;S-K. For example, please identify the
specific nature of your marketable securities, indicate what factors may affect the value of
those securities, the sensitivity of the value of the securities to those factors, and
disclose any material risks.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>Response:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We have drafted the following updated disclosure in response to this comment:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>$ change</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>change</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">74,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(31,792</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,021</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,314</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total cash and marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">118,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(56,127</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash and marketable securities decreased 47% during the first nine months of
2008. The decrease resulted primarily from $58.6&nbsp;million used for
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">the repurchase of
long-term debt, $3.9&nbsp;million used for payments on property and equipment and other asset
financings, $2.1&nbsp;million used for the repurchase of our common stock, and $1.5&nbsp;million
used for purchases of property and equipment and other long-term assets. These uses were
partially offset by $13.2&nbsp;million of cash flow generated from operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At September&nbsp;30, 2008, cash equivalents and short-term marketable securities
included $29.0&nbsp;million in money market funds, $7.8&nbsp;million in commercial paper, $5.6
million in U.S. government agencies debt securities, and $5.2&nbsp;million in corporate debt
securities. At September&nbsp;30, 2008, we also held a $1.5&nbsp;million long-term strategic
equity investment in a publicly traded corporation. All of our investments were
denominated in U.S. dollars, and our portfolio did not contain direct exposure to
subprime mortgages or structured vehicles that derive their value from subprime
collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quality of our short-term investment portfolio remains high during this
difficult credit environment. Our investment policy requires at least 25% of our
portfolio to mature within 90&nbsp;days. Additionally, no maturities can extend beyond one
year and concentrations with individual securities are limited. Investments must be
rated at least A-1 / P-1 by Standard &#038; Poor&#146;s / Moody&#146;s, and our investment policy is
reviewed at least annually by our Audit Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When available, we use quoted prices in active markets for identical assets or
liabilities to determine the fair value of our cash equivalents and marketable
securities. If quoted prices in active markets for identical assets or liabilities are
not available, we use quoted prices for similar assets or liabilities, or use observable
inputs other than the quoted prices, to determine fair value. We have no investments
which are fair valued based on unobservable inputs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The valuations of our short-term marketable securities are affected by a variety of
factors, including changes in interest rates and the actual or perceived financial
stability of the issuer. However, due to the high quality of our investments and their
short-term nature, there has not been, and we do not expect there to be, a significant
fluctuation in the valuation of these investments. Accordingly, we do not expect a
materially negative impact on our financial condition from fluctuations in the value of
our short-term investments. As of September&nbsp;30, 2008, we had a total unrealized gain of
$78,000 on these investments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The valuation of our long-term equity investment has fluctuated significantly, and
could continue to fluctuate significantly, due to a variety of factors including changes
in the global economy and changes in the actual or expected performance of the issuing
company. In the first quarter of 2008, we recorded an other-than-temporary impairment of
$6.5&nbsp;million related to this investment. We may record additional impairment charges in the future if we
determine that further declines in value of the investment are other-than-
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">temporary.
Such an impairment would negatively impact our results of operations, but would not
materially impact our financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that our existing cash and investment balances will be adequate to
fund our operating and investing needs for the next twelve months and the foreseeable
future. From time to time, we may evaluate acquisitions of businesses, products or
technologies that complement our business. We may also repurchase additional amounts of
our long-term debt or repurchase additional shares of our common stock, as authorized
under our share repurchase program. Any such transactions, if consummated, may consume a
material portion of our working capital or require the issuance of equity securities that
may result in dilution to existing shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As the disclosure drafted above includes information substantially presented elsewhere in our
Form 10-Q for the Quarterly Period Ended September&nbsp;30, 2008, including Item&nbsp;1, Financial
Statements, Note 3: Fair Value Measurement (page 11) and Item&nbsp;2. Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations, Interest and other income, net
(page 23), we respectfully request that we be permitted to revise our future filings to
reflect the form of the disclosure shown above, rather than amending the 10-Q as filed.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">*&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;*
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pixelworks, as specifically requested by the Commission, acknowledges that:
</DIV>


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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the company is responsible for the adequacy and accuracy of the disclosure in the
filing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After you have reviewed the foregoing, please call me at 408-200-9221 so that we can resolve
any open issues and bring these matters to conclusion. Thank you.
</DIV>

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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Very truly yours,
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Steven Moore</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Steven Moore</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Vice President and Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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