<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-Q


          [X] Quarterly report pursuant to Section 13 or 15(d) of the
        Securities Exchange Act of 1934 for the quarterly period ended
                                 July 1, 2001.

                                      or

         [ ] Transition report pursuant to Section 13 or 15(d) of the
        Securities Exchange Act of 1934 for the transition period from
                  _________________ to _____________________.

                       Commission File Number: 000-30615

                          STANFORD MICRODEVICES, INC.

            (Exact name of registrant as specified in its charter)

                Delaware                                   77-0073042
    -------------------------------                   -------------------
    (State or other jurisdiction of                    (I.R.S.  Employer
     incorporation or organization)                   Identification No.)

    726 Palomar Avenue, Sunnyvale, CA                       94086
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)

                                (408) 616-5400
                                --------------

             (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) had been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

As of July 29, 2001, there were 29,403,177 of registrant's Common Stock
outstanding.

                                       1
<PAGE>

                          STANFORD MICRODEVICES, INC.
                                     INDEX

Part I.   Financial Information...........................................   3

     Item 1. Financial Statements.........................................   3

     Item 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations....................................  10

     Item 3. Qualitative and Quantitative Disclosures About Market Risk...  30

Part II.  Other Information...............................................  30

     Item 1. Legal Proceedings............................................  30

     Item 2. Changes in Securities and Use of Proceeds....................  31

     Item 3: Defaults Upon Senior Securities..............................  31

     Item 4: Submission of Matters to a Vote of Security Holders..........  31

     Item 5: Other Information............................................  32

     Item 6: Exhibits and Reports on Form 8-K.............................  32

Signatures................................................................  32

                                       2
<PAGE>

                         Part 1. Financial Information


Item 1. Financial Statements

                          Stanford Microdevices, Inc.
                     Condensed Consolidated Balance Sheets
                                (In thousands)

<TABLE>
<CAPTION>
                                                              June 30,         December 31,
                                                                2001               2000
                                                                ----               ----
                                                             (unaudited)
<S>                                                          <C>               <C>
Assets
Current assets:
     Cash and cash equivalents                               $   55,265         $  37,683
     Short-term investments                                       1,995            13,444
     Accounts receivable, net                                     1,748             3,946
     Inventories                                                  7,375             7,107
     Deferred tax assets and other                                3,869             3,464
                                                             ----------         ---------
Total current assets                                             70,252            65,644

     Property and equipment, net                                  9,395             8,388
     Long-term investments                                            -             7,204
     Other assets                                                 1,069             1,070
                                                             ----------         ---------
Total assets                                                 $   80,716         $  82,306
                                                             ============================

Liabilities and stockholders' equity
Current liabilities:
     Accounts payable                                        $    2,165         $   2,071
     Accrued expenses                                             2,081             2,912
     Deferred margin on distributor inventory                     5,091             6,942
     Capital lease obligations, current portion                     732               747
                                                             ----------         ---------
Total current liabilities                                        10,069            12,672

           Capital lease obligations                                640             1,010

Stockholders' equity
           Common Stock                                              29                27
           Additional paid-in capital                           128,042           125,286
           Deferred stock compensation                           (2,944)           (3,619)
           Accumulated deficit                                  (55,120)           (53,070)
                                                             ----------         ----------
Total stockholders' equity                                       70,007             68,624
                                                             ----------         ----------

           Total liabilities and stockholders' equity        $   80,716         $   82,306
                                                             =============================
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

                          Stanford Microdevices, Inc.
                Condensed Consolidated Statements of Operations
                     (In thousands, except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                               Three Months Ended           Six Months Ended
                                                                               ------------------           ----------------
                                                                             June 30,       June 30,     June 30,      June 30,
                                                                               2001           2000         2001          2000
                                                                               ----           ----         ----          ----
<S>                                                                          <C>            <C>          <C>          <C>
Net revenues                                                                 $  5,355       $  7,872     $ 13,155     $  15,136
Cost of revenues (exclusive of amortization of
  deferred stock compensation of $37, $74, $39 and $76
  for the three and six months ended June 30, 2001 and
  three and six months ended June 30, 2000, respectively)                       3,716          3,385        7,616         6,270
                                                                             --------       --------     --------     ---------
Gross profit                                                                    1,639          4,487        5,539         8,866

Operating expenses:
  Research and development (exclusive of amortization of
    deferred stock compensation of $68, $143, $75 and $139
    for the three and six months ended June 30, 2001 and
    three and six months ended June 30, 2000, respectively)                     1,972          1,690        4,503         3,126
  Sales and marketing (exclusive of amortization of deferred
    stock compensation of $75, $151, $75 and $148 for the
    three and six months ended June 30, 2001 and three and
    six months ended June 30, 2000, respectively)                               1,418          1,482        3,054         3,004
  General and administrative (exclusive of amortization of
    deferred stock compensation of $154, $307, $132 and $264
    for the three and six months ended June 30, 2001 and
    three and six months ended June 30, 2000, respectively)                     1,175          1,173        2,229         2,112
  Amortization of deferred stock compensation                                     334            321          675           627
                                                                             --------       --------     --------     ---------
Total operating expenses                                                        4,899          4,666       10,461         8,869
                                                                             --------       --------     --------     ---------

Loss from operations                                                           (3,260)          (179)      (4,922)           (3)

Interest expense                                                                   31             67           73           113
Interest income and other, net                                                  1,192            414        2,067           578
                                                                             --------       --------     --------     ---------

Income (loss) before taxes                                                     (2,099)           168       (2,928)          462

Provision for (benefit from) income taxes                                        (629)            50         (878)          138
                                                                             --------       --------     --------     ---------

Net income (loss)                                                              (1,470)           118       (2,050)          324

Accretion of mandatorily redeemable
  convertible preferred stock                                                       -              -            -       (25,924)
                                                                             --------       --------     --------     ---------

Net income (loss) applicable to common stockholders                          $ (1,470)      $    118     $ (2,050)    $ (25,600)
                                                                             ==================================================
Net income (loss) per share applicable to common stockholders:
    Basic                                                                    $  (0.05)      $   0.01     $  (0.07)    $   (1.46)
                                                                             ==================================================
    Diluted                                                                  $  (0.05)      $   0.00     $  (0.07)    $   (1.46)
                                                                             ==================================================

Shares used to compute net income (loss)
 applicable to common stockholders
    Basic                                                                      29,270         20,007       28,771        17,503
                                                                             ==================================================
    Diluted                                                                    29,270         28,530       28,771        17,503
                                                                             ==================================================
</TABLE>

                            See accompanying notes.

                                       4
<PAGE>

                          Stanford Microdevices, Inc.
                Condensed Consolidated Statements of Cash Flows
                                (In thousands)


<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                June 30, 2001   June 30, 2000
                                                                                -------------   -------------
                                                                                         (unaudited)
                                                                                         -----------
<S>                                                                            <C>               <C>
Operating Activities
Net  income (loss)                                                              $   (2,050)      $     324
Adjustments to reconcile net income (loss) to net
              cash used in operating activities:
              Depreciation and amortization                                          1,334             674
              Compensation expense related to stock options                              -              63
              Amortization of deferred stock  compensation                             675             627
              Changes in operating assets and liabilities:
                Accounts receivable                                                  2,198          (1,795)
                Inventories                                                           (268)         (4,005)
                Deferred tax assets and other assets                                  (404)           (370)
                Accounts payable                                                        94              95
                Accrued expenses                                                      (831)          1,181
                Deferred margin on distributor inventory                            (1,851)          2,494
                                                                                ----------       ---------
                   Net cash used in operating activities                            (1,103)           (712)
Investing Activities
Sales/maturities (purchases) of available-for-sale securities, net                  18,653         (21,222)
Purchases of property and equipment                                                 (2,341)         (2,636)
Proceeds from the sale of property and equipment                                         -             753
                                                                                ----------       ---------
Net cash provided by (used in) investing activities                                 16,312         (23,105)
Financing Activities
Proceeds from issuance of common stock, net                                              -          49,794
Principal payments on capital lease obligations                                       (385)           (464)
Proceeds from employee stock plans                                                   2,758             348
                                                                                ----------       ---------
Net cash provided by financing activities                                            2,373          49,678
Increase in cash                                                                    17,582          25,861
Cash at beginning of period                                                         37,683          10,965
Cash at end of period                                                           $   55,265       $  36,826
                                                                                ==========================
Supplemental disclosures of noncash investing and
  financing activities
Equipment acquired under capital Lease                                          $        -       $     612
Accretion of mandatorily redeemable convertible
     preferred stock                                                            $        -       $  25,924
Deferred stock compensation                                                     $        -       $     681
Net exercise of warrants                                                        $        -       $     688
Conversion of mandatorily redeemable convertible
  preferred stock into common stock                                             $        -       $  64,781
</TABLE>

                            See accompanying notes.

                                       5
<PAGE>

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2001 are not
necessarily indicative of the results that may be expected for any later period.

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of
Stanford Microdevices, Inc. (the "Company") for the fiscal year ended December
31, 2000, which are included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission (SEC) on March 29, 2001.

The unaudited condensed consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, Stanford Microdevices, Canada
and Stanford Microdevices UK Limited. Intercompany balances and transactions
have been eliminated.

The Company operates on thirteen week fiscal quarters ending on the Sunday
closest to the end of the calendar quarter, with the exception of the fourth
quarter, which ends on December 31. The Company's second quarter of fiscal year
2001 ended on July 1, 2001. The Company's second quarter of fiscal year 2000
ended on July 2, 2000. For presentation purposes, the accompanying unaudited
condensed consolidated financial statements refer to the quarter's calendar
month end for convenience.

Note 2: Inventories

The Company plans production based on orders received and forecasted demand and
must order wafers and build inventories well in advance of product shipments.
The valuation of inventories at the lower of cost or market requires the use of
estimates regarding the amounts of current inventories that will be sold. These
estimates are dependent on the Company's assessment of current and expected
orders from its

                                       6
<PAGE>

customers, including consideration that orders are subject to cancellation with
limited advance notice prior to shipment. Because the Company's markets are
volatile, and are subject to technological risks and price changes as well as
inventory reduction programs by the Company's customers and distributors, there
is a risk that the Company will forecast incorrectly and produce excess
inventories of particular products. This inventory risk is compounded because
many of the Company's customers place orders with short lead times. As a result,
actual demand will differ from forecasts, and such a difference has in the past
and may in the future have a material adverse effect on actual results of
operations.

Inventories consist of (in thousands):


                                     June 30,      DECEMBER 31,
                                       2001             2000
                                    ----------      ------------
                                    (UNAUDITED)
               Raw materials          $3,770           $2,648
               Work-in-process         2,378            3,211
               Finished goods          1,227            1,248
                                      ------           ------
                    Total             $7,375           $7,107
                                      ======           ======

Note 3: Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128) and SEC
Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of FAS 128 and
SAB 98, basic net income (loss) per share is computed by dividing the net income
(loss) applicable to common stockholders for the period by the weighted average
number of shares of Common Stock outstanding during the period. Diluted net
income (loss) per share is computed by dividing the net income (loss) applicable
to common stockholders for the period by the weighted average number of shares
of Common Stock and potential Common Stock equivalents outstanding during the
period, if dilutive. Potential Common Stock equivalents include incremental
shares of Common Stock issuable upon the exercise of stock options and warrants
and upon conversion of Mandatorily Redeemable Convertible Preferred Stock.

The following table sets forth the computation of basic and diluted net income
(loss) per share for the periods indicated (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                   Three Months ended            Six Months ended
                                                                   ------------------            ----------------
                                                                 June 30,      June 30,        June 30,       June 30,
                                                                   2001          2000            2001           2000
                                                                   ----          ----            ----           ----
<S>                                                              <C>           <C>           <C>            <C>
Net income (Loss) applicable to common stockholders              $ (1,470)     $    118      $   (2,050)    $  (25,600)
                                                                 =====================================================

Weighted average common shares outstanding                         29,270        20,007          28,771         17,503
Effect of dilutive options outstanding                                  -         4,807               -              -
Effect of dilutive warrants and mandatorily redeemable
     convertible preferred stock                                        -         3,716               -              -
Denominator for diluted earnings per share                         29,270        28,530          28,771         17,503
                                                                 =====================================================

Net (income) loss per share applicable to common stockholders

     Basic                                                       $  (0.05)     $   0.01      $    (0.07)    $    (1.46)
     Diluted                                                     $  (0.05)     $   0.00      $    (0.07)    $    (1.46)
</TABLE>

The effect of options to purchase 3,497,493 shares of Common Stock at an average
exercise price of $10.22 for the three and six months ended June 30, 2001 has
not been included in the computation of diluted net loss per share applicable to
common stockholders as its effect is antidilutive.

                                       7
<PAGE>

The effects of options to purchase 5,263,521 shares of Common Stock at an
average exercise price of $2.12 and warrants to purchase 1,100,000 shares of
Common Stock at an average exercise price of $4.50 for the six months ended June
30, 2000 has not been included in the computation of diluted net loss per share
applicable to common stockholders as their effect is antidilutive.

The effects of conversion of 5,647,839 shares of Mandatorily Redeemable
Convertible Preferred Stock for the six months ended June 30, 2000 has not been
included in the computation of diluted net loss per share applicable to common
stockholders as the effect is antidilutive.

Note 4: Comprehensive Income (Loss)

The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FAS 130). FAS 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company's comprehensive
net income (loss) was the same as its net income (loss) for the three and six
months ended June 30, 2001 and 2000.

Note 5: Segments of an Enterprise and Related Information

The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information" (FAS 131).
FAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. FAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and major
customers.

In fiscal 2000, the Company added a Wireless Infrastructure Products business
unit that increased the number of operating segments from one to two. The
Company previously operated under one business segment, the sale of radio
frequency (RF) semiconductor components for communications network
infrastructures. The Company currently operates in two segments: (1) the
Standard Products segment and (2) the Wireless Infrastructure Products segment.
The Company's reportable segments are organized as separate functional units
with separate management teams and separate performance assessment and resource
allocation processes. The Standard Products segment produces standard
application RF components that consist of primarily integrated circuits and
discrete devices for communications network infrastructures. RF components
produced by the Standard Products segment are typically sold through
distribution. The Wireless Infrastructure Products segment is focused on
producing custom and semi-custom RF components that will consist primarily of
integrated circuits and multi-component modules for mobile wireless
infrastructure equipment manufacturers. Custom and semi-custom RF components
produced by the Mobile Wireless Products segment will be sold primarily though
our direct sales channels.

The accounting policies of the segments are the same as those described in Note
1: Organization and Summary of Significant Accounting Policies of the Notes to

                                       8
<PAGE>

Consolidated Financial Statements as reflected in the Company's Annual Report on
Form 10-K, filed with the SEC on March 29, 2001. The Company's chief operating
decision maker (CODM) evaluates performance and allocates resources based on
segment reporting operating income (loss). There are no intersegment sales.
Non-segment items include various corporate research and development expenses,
sales and marketing expenses, general and administrative expenses, amortization
of deferred stock compensation, depreciation and amortization expense, interest
income and other, net, interest expense, and the provision for (benefit from)
income taxes, as the aforementioned items are not allocated for purposes of the
CODM's review. With the exception of expenditures for long-lived assets, assets
and liabilities are not discretely reviewed by the CODM.

<TABLE>
<CAPTION>
                                                            Wireless                  Non-
(In Thousands)                               Standard    Infrastructure   Total      Segment        Total
(Unaudited)                                  Products       Products     Segments     Items        Company
                                             --------       --------     --------     -----        -------
<S>                                          <C>           <C>           <C>        <C>           <C>
For the three months
ended June 30, 2001

Net revenues from external customers         $  5,355      $      -      $  5,355   $       -     $   5,355
Operating income (loss)                         1,879          (753)        1,126      (4,386)       (3,260)
Expenditures for long-lived assets                  4            28            32       1,111         1,143

For the six months
ended June 30, 2001

Net revenues from external customers         $ 13,155      $      -      $ 13,155   $       -     $  13,155
Operating income (loss)                         4,549        (1,456)        3,093      (8,015)       (4,922)
Expenditures for long-lived assets                226           158           384       1,957         2,341

For the three months
ended June 30, 2000

Net revenues from external customers         $  7,872      $      -      $  7,872   $       -     $   7,872
Operating income (loss)                         3,436          (636)        2,800      (2,979)    $    (179)
Expenditures for long-lived assets                427           141           568         742     $   1,310

For the six months
ended June 30, 2000

Net revenues from external customers         $ 15,136      $      -      $ 15,136   $       -     $  15,136
Operating income (loss)                         6,907        (1,234)        5,673      (5,676)           (3)
Expenditures for long-lived assets                564           784         1,348       1,900         3,248
</TABLE>

Note 6: Contingency

On March 17, 2000, Stanford University filed a complaint against the Company in
the United States District Court for the Northern District of California
alleging, among other things, infringement by the Company of its trademarks by
the Company's use of the name "Stanford" and by use of a logo containing the
letter "S" and the color red. Stanford University requested preliminary and
permanent injunctions prohibiting the Company from using trademarks that
infringe or dilute its trademarks, and sought compensatory damages, exemplary
and punitive damages, costs and attorneys' fees. A hearing on Stanford
University's request for a preliminary injunction was held by the District Court

                                       9
<PAGE>

on May 8, 2000 and Stanford University was denied the preliminary injunction.
Stanford University then filed a motion with the District Court for an emergency
injunction pending appeal and on May 15, 2000 Stanford University was denied the
emergency injunction. Stanford University filed a notice of appeal to the United
States Court of Appeals for the Ninth Circuit from the denial of the preliminary
injunction and filed a motion with the Court of Appeals for an emergency
injunction pending the appeal. On May 22, 2000, the Court of Appeals denied the
motion for an emergency injunction. On June 5, 2000, Stanford University filed a
motion with the United States Court of Appeals for the Ninth Circuit for
reconsideration of its motion for an emergency injunction pending appeal. On
June 28, 2000, the United States Court of Appeals for the Ninth Circuit denied
Stanford University's motion for reconsideration. On September 21, 2000, the
Court of Appeals affirmed the District Court's denial of a preliminary
injunction, but stated that its order does not preclude Stanford University from
renewing its motion for a preliminary injunction based on only the claims of
dilution. As of December 31, 2000, Stanford University had not renewed its
motion. A trial date was set for July 10, 2001 but the trial date was vacated
and discovery was suspended pending mediation. The Company and Stanford
University entered into mediation and successfully settled their dispute,
whereby, without admitting any liability, the Company acknowledged that Stanford
University's names and marks are strong, famous, and distinctive, and agreed to
discontinue using the term "STANFORD" and a predominantly red or red and white
"S" logo by or before January 31, 2002.

Note 7: Impact of Recently Issued Accounting Standards

On July 20, 2001 the Financial Accounting Standards Board (FASB) issued
Statement No. 141 (FAS 141) "Business Combinations" and Statement No. 142 (FAS
142) "Goodwill and Other Intangible Assets".

FAS 141 requires that all business combinations be accounted for under a single
method-the "purchase" method for all business combinations initiated after June
30, 2001. The Company expects to adopt FAS 141 in the third quarter of 2001 and
expects that the adoption of this statement will not have a material effect on
the Company's financial statements.

FAS 142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets. Intangible assets the are acquired individually or
with a group of other assets (excluding those acquired in a business
combination) should be accounted for in financial statements upon their
acquisition. Goodwill and intangible assets that have indefinite useful lives
will not be amortized, but will be tested at least annually for impairment.
Intangible assets that have finite useful lives will continue to be amortized
over their useful lives. The Company expects to adopt the Statement effective
January 1, 2002. The Company has not yet determined the impact this statement
will have on its future results of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are forward-looking statements that involve
risks and uncertainties. These statements relate to future events or our future
financial performance. In some cases, forward-looking statements can be
identified by terminology such as "may," "will," "should," "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "potential," or
"continue," the negative of these terms or other comparable

                                      10
<PAGE>

terminology. These statements involve a number of risks and uncertainties.
Actual events or results may differ materially from any forward-looking
statement as a result of various factors, including those described below under
"Risk Factors."

Overview

We are a leading designer and supplier of high performance RF components for
communications equipment manufacturers. Our products are used primarily in
wireless communications equipment to enable and enhance the transmission and
reception of voice and data signals.

We derive a majority of our revenues from the sale of standard RF components,
which we develop from our own specifications and sell primarily through
distributors. In early 2000, we launched a separate business unit focused on
designing customized products for specific mobile wireless RF applications for
communications equipment manufacturers. These products are still in development
and we do not expect to generate material revenues from this business unit until
2002. We sell our products worldwide through U.S.-based distributors, through a
private label reseller who sells our products under its brand and through our
direct sales force. Our products are also sold through a worldwide network of
independent sales representatives whose orders are fulfilled either by
distributors or us. Significant portions of our distributors' end sales are made
to their customers overseas.

From 1986 to 1995, we generated revenues primarily from design services and
contract manufacturing services for RF components. Net revenues from contract
manufacturing services as a percentage of our total net revenues declined
significantly from 1996 to 2000. Contract manufacturing customers represented
less than 10% of our total net revenues in 2000, 1999 and 1998. In 1999, we made
the strategic decision to discontinue our contract manufacturing services
although we continued to fulfill our contractual obligations through March 31,
2000. There were no employee terminations, facilities charges, disposals of
assets or other costs associated with our decision to discontinue our contract
manufacturing services. This decision did not have a material impact on our
ongoing results of operations, liquidity or capital resources.

For our direct sales and private label sales, we recognize revenues when the
product has been shipped, title has transferred, and no further obligations
remain. Although we have never experienced a delay in customer acceptance of our
products, should a customer delay acceptance in the future, our policy is to
delay revenue recognition until the products are accepted by a customer.
Revenues for contract manufacturing services are recognized when the completed
assemblies are shipped and no further obligations remain. Provisions for product
returns are recorded upon shipment. Revenues from our distributors are deferred
until the distributors resell the products to their customers.

Two distributors, Avnet Electronics Marketing and Richardson Electronics
Laboratories, and a private label reseller of our products, Minicircuits
Laboratories, accounted for a substantial portion of our net revenues in the
three months ended June 30, 2001 and 2000. Sales to Minicircuits Laboratories
represented 21% of net revenues in the three months ended June 30, 2001 and 28%
of net revenues in the three months ended June 30, 2000.

                                      11
<PAGE>

Richardson Electronics Laboratories represented 39% of net revenues in the three
months ended June 30, 2001 and 38% of net revenues in the three months ended
June 30, 2000. Avnet Electronics Marketing represented 16% of net revenues in
the three months ended June 30, 2001 and 28% of net revenues in the three months
ended June 30, 2000. Richardson Electronics Laboratories and Avnet Electronics
Marketing distribute our products to a large number of end customers. We
anticipate that sales through distributors and to one or more private label
resellers will continue to account for a substantial portion of our net
revenues. In the three months ended June 30, 2001, sales to PACE Micro
Technology PLC represented 10% of our net revenues.

Three of our product lines accounted for a significant portion of our net
revenues in the three months ended June 30, 2001 and 2000. Sales of our gallium
arsenide heterojunction bipolar transistor (GaAs HBT) products accounted for 51%
of our net revenues in the three months ended June 30, 2001 and 67% of our net
revenues in the three months ended June 30, 2000. Sales of our silicon germanium
(SiGe) heterojunction bipolar transistor products accounted for 31% of our net
revenues in the three months ended June 30, 2001 and 19% of our net revenues in
the three months ended June 30, 2000. Sales of our heterojunction field effect
transistor (Hfet) discrete devices accounted for 8% of our net revenues in the
three months ended June 30, 2001 and 11% of our net revenues in the three months
ended June 30, 2000.

Cost of revenues consists primarily of the costs of wafers from our third-party
wafer fabs, costs of packaging performed by third-party vendors, costs of
testing, costs associated with procurement, production control, quality
assurance, manufacturing engineering, and provisions for excess and obsolete
inventory. We subcontract our wafer manufacturing and packaging and do only
final testing and tape and reel assembly at our facilities.

Historically, gross margins on our sales through our distributors, to private
label resellers and our direct customers have differed materially from each
other. As a result, the relative mix of these sales affects our gross margin. In
addition, we offer a broad range of products in multiple technologies that have
different gross margins. As a result, the relative mix of product sales by
technology and within each technology affects our gross margins.

We do not recognize revenue from our sales to distributors until shipment to the
distributor's customer. We record the deferred margin on distributor inventory
on our balance sheet. As a result, the level of inventory at our distributors
can affect our reported gross margin for any particular period.

The gross margin on sales to our private label reseller is traditionally lower
than that on our distributor or direct sales. We generally charge lower prices
to our private label reseller due to its commitment to higher volumes on
particular parts, its absorption of the risk of inventory obsolescence and its
agreement to incur the sales and marketing costs for the parts.

Through June 30, 2001, one packaging firm, MPI Corporation in Manila,
Philippines, packaged a majority of our products. MPI also performed
substantially all of the manufacturing that related to our contract
manufacturing services. Relatives of our founding stockholders own MPI. Although
we utilized four additional packaging

                                      12
<PAGE>

subcontractors in the three months ended June 30, 2001, we anticipate that MPI
will continue to account for a significant amount of our packaging in the near
future.

Research and development expenses consist primarily of salaries and related
expenses for personnel engaged in research and development, material costs for
prototype and test units and other expenses related to the design, development
and testing of our products and, to a lesser extent, fees paid to consultants
and outside service providers. We expense all of our research and development
costs as they are incurred.

Sales and marketing expenses consist primarily of salaries, commissions and
related expenses for personnel engaged in marketing, sales and customer support
functions, as well as costs associated with trade shows, promotional activities,
advertising and public relations. We pay and expense commissions to our
independent sales representatives when revenues from the associated sale are
recognized.

General and administrative expenses consist primarily of salaries and related
expenses for executive, finance, accounting, information technology, and human
resources personnel and professional fees.

In recent years we have incurred substantial costs to develop our technology and
products, to recruit and train personnel for our engineering, sales and
marketing and technical support departments, and to establish an administrative
organization. Our full-time employees increased to 126 at June 30, 2001 from 107
at June 30, 2000.

In October 1999, we issued 5,647,839 shares of mandatorily redeemable
convertible preferred stock at $3.01 per share for net proceeds of approximately
$17.0 million. The holders of the mandatorily redeemable convertible preferred
stock had various rights and preferences, including, but not limited to,
redemption rights. In the first quarter of 2000 and the fourth quarter of 1999,
we recorded an increase to our accumulated deficit of $25.9 million and $21.9
million, respectively, related to the accretion of the mandatorily redeemable
convertible preferred stock to our estimate of its fair value to reflect its
redemption value. As a result, net income available to common stockholders was
reduced. Upon the completion of our initial public offering, the mandatorily
redeemable convertible preferred stock was converted into shares of common stock
and, accordingly, we did not incur any additional accretion charges. We believe
the mandatorily redeemable convertible preferred stock is presented at
redemption value as of December 31, 1999.

Comparison of the Three Months Ended June 30, 2001 and June 30, 2000

Net Revenues

Net revenues decreased to $5.4 million for the three months ended June 30, 2001
from $7.9 million for the three months ended June 30, 2000. This decrease was
the result of the general economic slowdown, the resulting softness in the
wireless infrastructure markets, changes in buying patterns by equipment
manufacturers worldwide and delays in the next generation wireless
infrastructure build-out. Sales through our distributors were 55% of net
revenues for the three months ended June 30, 2001 and 66% of net revenues for
the three months ended June 30, 2000. Sales to our direct customers comprised
45% of net

                                      13
<PAGE>

revenues for the three months ended June 30, 2001, of which 21% of net revenues
was to our private label reseller and 24% of net revenues was to our factory
direct customers. Sales to our direct customers comprised 34% of net revenues
for the three months ended June 30, 2000, of which 28% of net revenues was to
our private label reseller. Sales to our major infrastructure original equipment
manufacturers (OEM) was approximately 11% of net revenues for the three months
ended June 30, 2001 compared to approximately 4% of net revenues for the three
months ended June 30, 2000. Sales of our SiGe products were approximately 31% of
our total net revenues for the three months ended June 30, 2001 compared to 19%
for the three months ended June 30, 2000.

Cost of Revenues

Cost of revenues increased to $3.7 million for the three months ended June 30,
2001 from $3.4 million for the three months ended June 30, 2000, primarily as a
result of increased provisions for excess inventories, which added costs of
approximately $266,000, and increased direct labor and manufacturing overhead
spending. This increase was partially offset by lower variable costs as a result
of our decrease in unit shipments in the three months ended June 30, 2001
compared to the three months ended June 30, 2000. Operations personnel increased
to 42 at June 30, 2001 from 34 at June 30, 2000.

Gross Profit

Gross profit decreased to $1.6 million for the three months ended June 30, 2001
from $4.5 million for the three months ended June 30, 2000. Gross margin
decreased to 31% for the three months ended June 30, 2001 from 57% for the three
months ended June 30, 2000. This decrease is primarily attributable to the
increase in inventory reserves and lower production volumes.

Operating Expenses

Research and Development. Research and development expenses increased to $2.0
million for the three months ended June 30, 2001 from $1.7 million for the three
months ended June 30, 2000. This increase is primarily the result of salaries
and salary related expenses, which added costs of approximately $267,000.
Research and development personnel increased to 43 at June 30, 2001 from 32 at
June 30, 2000.

Sales and Marketing. Sales and marketing expenses decreased to $1.4 million for
the three months ended June 30, 2001 from $1.5 million for the three months
ended June 30, 2000. This decrease is primarily attributable to a decrease in
commissions to outside sales representatives as a result of our lower net
revenues. Sales and marketing personnel totaled 22 at both June 30, 2001 and
June 30, 2000.

General and Administrative. General and administrative expenses totaled $1.2
million for the three months ended June 30, 2001 and the three months ended June
30, 2000. General and administrative personnel totaled 19 at both June 30, 2001
and June 30, 2000.

Amortization of Deferred Stock Compensation. In connection with the grant of
stock options to employees prior to our initial public offering, we recorded
deferred stock compensation within stockholders' equity of approximately
$681,000 in 2000 and $4.5

                                      14
<PAGE>

million in 1999, representing the difference between the deemed fair value of
the common stock for accounting purposes and the exercise price of these options
at the date of grant. During the three months ended June 30, 2001 and 2000, we
amortized $334,000 and $321,000, respectively, of this deferred stock
compensation. We will amortize the remaining deferred stock compensation over
the vesting period of the related options, generally four years. The amount of
deferred stock compensation expense to be recorded in future periods could
decrease if options for which accrued but unvested compensation has been
recorded are forfeited.

Interest and Other Income (Expense), Net

Interest and other income (expense), net includes income from our cash and cash
equivalents and available-for-sale securities, interest expense from capital
lease financing obligations and other miscellaneous items. We had net interest
and other income of $1.2 million for the three months ended June 30, 2001 and
$347,000 for the three months ended June 30, 2000. The increase in net interest
and other income for the three months ended June 30, 2001 compared to June 30,
2000 is attributable to proceeds from the settlement of a trademark dispute and
higher cash and cash equivalents and available-for-sale securities, resulting
from proceeds received upon completion of our initial public offering.

Provision for (Benefit from) Income Taxes

Our benefit from income taxes was $629,000 for the three months ended June 30,
2001 and our provision for income taxes was $50,000 for the three months ended
June 30, 2000. We continued to benefit our pre-tax loss for the three months
ended June 30, 2001 based on our projected ability to generate future taxable
income.


Results of Operations - Six Months Ended June 30, 2001 and June 30, 2000

Net Revenues

Net revenues decreased to $13.2 million for the six months ended June 30, 2001
from $15.1 million for the six months ended June 30, 2000. This decrease was the
result of the general economic slowdown, the resulting softness in the wireless
infrastructure markets, changes in buying patterns by equipment manufacturers
worldwide and delays in the next generation wireless infrastructure build-out.
Sales through our distributors were 54% of net revenues for the six months ended
June 30, 2001 and 65% of net revenues for the six months ended June 30, 2000.
Sales to our direct customers (excluding contract manufacturing) comprised 46%
of net revenues for the six months ended June 30, 2001, of which 26% of net
revenues was to our private label reseller and 20% was to our factory direct
customers. Sales to our direct customers (excluding contract manufacturing)
comprised 35% of net revenues for the six months ended June 30, 2000, of which
29% of net revenues was to our private label reseller. Sales of our SiGe
products were approximately 22% of our total net revenues for the six months
ended June 30, 2001 compared to approximately 13% for the six months ended June
30, 2000.

                                      15
<PAGE>

Cost of Revenues

Cost of revenues increased to $7.6 million for the six months ended June 30,
2001 from $6.3 million for the six months ended June 30, 2000 primarily as a
result of increased provisions for excess inventories, which added costs of
approximately $1.8 million and increased direct labor and manufacturing overhead
spending. This increase was partially offset by lower variable costs as a result
of our decrease in unit shipments in the six months ended June 30, 2001 compared
to the six months ended June 30, 2000.

Gross Profit

Gross profit decreased to $5.5 million for the six months ended June 30, 2001
from $8.9 million for the six months ended June 30, 2000. Gross margin decreased
to 42% for the six months ended June 30, 2001 from 59% for the six months ended
June 30, 2000. This decrease is primarily attributable to the increase in
inventory reserves and lower production volumes.


Operating Expenses

Research and Development. Research and development expenses increased to $4.5
million for the six months ended June 30, 2001 from $3.1 million for the six
months ended June 30, 2000. This increase is primarily the result of salaries
and salary related expenses, which added costs of approximately $895,000 and
increased expenses for engineering materials, which added costs of approximately
$266,000.

Sales and Marketing. Sales and marketing expenses increased to $3.1 million for
the six months ended June 30, 2001 from $3.0 million for the six months ended
June 30, 2000. This increase is primarily attributable to increased advertising
and marketing communications expenses.

General and Administrative. General and administrative expenses increased to
$2.2 million for the six months ended June 30, 2001 from $2.1 million for the
six months ended June 30, 2000. This increase is primarily attributable to
higher insurance costs.

Amortization of Deferred Stock Compensation. In connection with the grant of
stock options to employees prior to our initial public offering, we recorded
deferred stock compensation within stockholders' equity of approximately
$681,000 in 2000 and $4.5 million in 1999, representing the difference between
the deemed fair value of the common stock for accounting purposes and the
exercise price of these options at the date of grant. During the six months
ended June 30, 2001 and 2000, we amortized $675,000 and $627,000, respectively,
of this deferred stock compensation. We will amortize the remaining deferred
stock compensation over the vesting period of the related options, generally
four years. The amount of deferred stock compensation expense to be recorded in
future periods could decrease if options for which accrued but unvested
compensation has been recorded are forfeited.

                                      16
<PAGE>

Interest and Other Income (Expense), Net

Interest and other income (expense), net includes income from our
cash and cash equivalents and available-for-sale securities, interest expense
from capital lease financing obligations and borrowings under our bank line of
credit and other miscellaneous items. We had net interest and other income of
$2.0 million for the six months ended June 30, 2001 and $465,000 for the six
months ended June 30, 2000. The increase in net interest and other income for
the six months ended June 30, 2001 compared to June 30, 2000 is attributable to
proceeds from the settlement of a trademark dispute and higher cash and cash
equivalents and available-for-sale securities, resulting from proceeds received
upon completion of our initial public offering.

Provision for (Benefit from) Income Taxes

Our benefit from income taxes was $878,000 for the six months ended June 30,
2001 and our provision for income taxes was $138,000 for the six months ended
June 30, 2000. We continued to benefit our pre-tax loss for the six months ended
June 30, 2001 based on our projected ability to generate future taxable income.

Liquidity and Capital Resources

We have financed our operations primarily through cash generated from
operations, equipment lease financing, the private sale of mandatorily
redeemable convertible preferred stock and from the net proceeds received upon
completion of our initial public offering in May 2000. As of June 30, 2001, we
had cash and cash equivalents of $55.3 million and working capital of $60.2
million.

Our operating activities used cash of $1.1 million in the six months ended June
30, 2001 and $712,000 in the six months ended June 30, 2000. In the six months
ended June 30, 2001, cash used in operating activities was primarily
attributable to our net loss of $2.1 million and a decrease in deferred margin
on distributor inventory of $1.9 million. These were partially offset by
depreciation and amortization of $1.3 million and a decrease in accounts
receivable of $2.2 million. In the six months ended June 30, 2000, cash used in
operating activities was primarily attributable to increases in inventories of
$4.0 million and accounts receivable of $1.8 million. These were partially
offset by increases in accrued expenses of $1.2 million and deferred margin on
distributor inventory of $2.5 million and depreciation and amortization of
$674,000.

Our investing activities provided cash of $16.3 million in the six months ended
June 30, 2001 and used cash of $23.1 million in the six months ended June 30,
2000. Our investing activities reflect purchases and sales of available-for-sale
securities and fixed assets.

Our financing activities provided cash of $2.4 million in the six months ended
June 30, 2001 and $49.7 million in the six months ended June 30, 2000. In the
six months ended June 30, 2001, cash provided by financing activities was the
result of proceeds from employee stock plans partially offset by principal
payments on capital lease obligations. In the six months ended June 30, 2000,
cash provided by financing activities was primarily attributable to net proceeds
from the issuance of common stock in our initial public offering of $49.8
million.

                                      17
<PAGE>

Our net loss applicable to common stockholders for the six months ended June 30,
2000 includes $25.9 million of accretion charges to increase the carrying amount
of our mandatorily redeemable convertible preferred stock to the amount we would
be required to pay if this preferred stock were to be redeemed. Upon the
completion of our initial public offering, the mandatorily redeemable
convertible preferred stock was converted into shares of common stock and,
accordingly, we did not incur any additional accretion charges.

We currently anticipate that our current available cash and cash equivalents
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures for at least the next 12 months, although no assurance can
be given in this regard. If we require additional capital resources to grow our
business, execute our operating plans, or acquire complimentary technologies or
businesses at any time in the future, we may seek to sell additional equity or
debt securities, which may result in additional dilution to our stockholders, or
secure lines of credit.

Industry Trends and Market Conditions

In the first and second quarters of 2001, companies throughout the worldwide
telecommunication industry announced slowdowns or delays in the build out of new
wireless and wireline infrastructure. This resulted in lower equipment
production volumes by our customers and efforts to lower their component
inventory levels. These actions by our customers have resulted in a slowdown in
our current shipment levels and reduced our visibility regarding forecasted
shipments for the remainder of 2001. The revenue decline appears to be having an
effect across our channels, customer categories, products and technologies. If
the macro-industry trends described above were to continue or worsen, it would
likely result in lower sales for our products, increased provisions for excess
inventories, as was the case in the first and second quarters of 2001, an
increase in our tax rate, potential write-offs of deferred tax assets and
further actions to reduce our operating expenses, all of which could have a
material adverse effect on our results of operations and the market price of our
common stock.

RISK FACTORS

Set forth below and elsewhere in this quarterly report on Form 10-Q and in other
documents we file with the SEC are risks and uncertainties that could cause
actual results to differ materially from the results contemplated by the
forward-looking statements contained in this quarterly report on Form 10-Q.

We may not meet quarterly financial expectations, which could cause our stock
price to decline.

Our quarterly operating results have varied in the past and are likely to vary
significantly in the future based upon a number of factors related to our
industry and the markets for our products, over many of which we have little or
no control. We operate in a highly dynamic industry and future results could be
subject to significant fluctuations, particularly on a quarterly basis. These
fluctuations could cause us to fail to meet quarterly financial expectations,
which could cause our stock price to decline rapidly and

                                      18
<PAGE>

significantly. For example, on March 12, 2001, we publicly announced our revised
expectations of financial results for the quarter ending March 31, 2001, and the
fiscal year ending December 31, 2001. Subsequently, the trading price of our
common stock declined rapidly and significantly, which had a substantial
negative effect on the value of any investment in such stock.

Factors contributing to the volatility of our stock price include:

- wireless and wireline industry growth generally and demand for products
containing RF components specifically;

- changes in customer purchasing cycles and component inventory levels

- the timing and success of new product and technology introductions by us or
our competitors;

- general economic growth or decline;

- availability of raw materials, semiconductor wafers and manufacturing capacity
or fluctuations in our manufacturing yields;

- changes in selling prices for our integrated circuits due to competitive or
currency exchange rate pressures;

- changes in our product mix;

- changes in the relative percentage of products sold through distributors as
compared to direct sales; and

- market acceptance of our products.

Due to the factors discussed above, investors should not rely on quarter-to-
quarter comparisons of our results of operations as indicators of future
performance.

Our stock price may be extremely volatile.

Our stock price has been highly volatile since our initial public offering. We
expect that this volatility will continue in the future due to factors such as:

- general market and economic conditions;

- actual or anticipated variations in operating results;

- announcements of technological innovations, new products or new services by us
or by our competitors or customers;

- changes in financial estimates or recommendations by stock market analysts
regarding us or our competitors;

- announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;

                                      19
<PAGE>

- additions or departures of key personnel; and

- future equity or debt offerings or our announcements of these offerings.

In addition, in recent years, the stock market in general, and the Nasdaq
National Market and the securities of technology companies in particular, have
experienced extreme price and volume fluctuations. These fluctuations have often
been unrelated or disproportionate to the operating performance of individual
companies. These broad market fluctuations have in the past and may in the
future materially adversely affect our stock price, regardless of our operating
results.

Our growth depends on the growth of the infrastructure for wireless and wireline
communications. If this market does not continue to grow, or if it grows at a
slow rate, demand for our products will diminish.

Our success will depend in large part on the continued growth of the
telecommunications industry in general and, in particular, the market for
wireless and wireline infrastructure components. We cannot assure you that the
market for these infrastructure products will continue to grow at historical
rates or at all. We have recently observed continued softness of the wireless
infrastructure markets related to a general economic slowdown, which has
impacted our entire segment. There have been announcements throughout the
worldwide telecommunications industry of current and planned reductions in
component inventory levels and equipment production volumes, and of delays in
the build-out of new wireless infrastructure. These trends have had an adverse
effect on our operations and caused us on March 12, 2001 to lower our previously
announced expectations for our financial results in the quarter ending March 31,
2001, and for the fiscal year ending December 31, 2001. Subsequently, the market
price of our common stock decreased. Any of these trends, if continued, could
result in lower than expected demand for our products, increased provisions for
excess inventories, as was the case in the first and second quarters of 2001, an
increase in our tax rate and potential write-offs of deferred tax asset, any of
which could have a material adverse effect on our revenues and results of
operations generally, and cause the market price of our common stock to further
decline. In addition, even if the demand for infrastructure grows, we will need
to complete new product designs that meet the needs of our customers at a rate
consistent with the growth of the market. Our product and process development
efforts may not be successful in this regard.

Industry-wide fluctuations in supply and demand for semiconductor products could
adversely impact our business.

The semiconductor industry has historically been characterized by wide
fluctuations in supply and demand for semiconductor products. From time to time,
demand for semiconductor products has decreased, often in connection with, or in
anticipation of, major additions of wafer fabrication capacity or maturing
product cycles or due to general economic conditions. These fluctuations can and
have in the past resulted in increased inventory levels and increased provisions
for excess inventories. In the past, diminished product demand, production
overcapacity and subsequent accelerated price erosion have lasted for extended
periods of time. If the current trend of decreased demand for semiconductor
products continues, we may again increase our provisions for excess

                                      20
<PAGE>

inventories or write-off inventories, increase our tax rate and write-off
deferred tax assets, all of which would harm our results of operations and may
cause our stock price to decline.

The timing of the adoption of industry standards may negatively impact
widespread market acceptance of our products.

The markets in which we and our customers compete are characterized by rapidly
changing technology, evolving industry standards and continuous improvements in
products and services. If technologies or standards supported by us or our
customers' products, such as 2.5G and 3G, fail to gain widespread commercial
acceptance, our business will be significantly damaged. In addition, the
increasing demand for wireless and wireline communications has exerted pressure
on standards bodies worldwide to adopt new standards for these products,
generally following extensive investigation of, and deliberation over, competing
technologies. The delays inherent in the standards approval process have in the
past and may in the future cause the cancellation, postponement or rescheduling
of the installation of communications systems by our customers. These delays
have in the past and may in the future negatively impact the sale of products by
us, result in increased inventory levels and possibly write-offs or additional
provisions for excess inventories, as well as possible write-offs of our
deferred tax assets and increase our tax rate any of which would have a material
adverse effect on our business, financial condition and results of operations.

Our reliance on third-party wafer fabs to manufacture our semiconductor wafers
may cause a significant delay in our ability to fill orders and limits our
ability to assure product quality and to control costs.

We do not own or operate a semiconductor fabrication facility. We currently rely
on five third-party wafer fabs to manufacture substantially all of our
semiconductor wafers. A majority of our products sold in the second quarter of
2001 were manufactured in GaAs by TRW and SiGe by Atmel (Temic), our sole source
supplier. The supply agreement with TRW provides us with a guaranteed supply of
wafers through December 31, 2001. We may not be able to negotiate an extension
of this agreement on favorable terms, if at all. Despite the recent addition of
a second source supplier, we may not be successful in obtaining a sufficient
supply of GaAs wafers in the event that we do not negotiate an extension with
TRW. In addition, we have only recently begun working with one of our five
principal third-party wafer fabs. The loss of one of our third-party wafer fabs,
in particular TRW or Atmel (Temic), or any delay or reduction in wafer supply,
will impact our ability to fulfill customer orders, perhaps materially, and
could damage our relationships with our customers, either of which would
significantly harm our business and operating results. Because there are limited
numbers of third-party wafer fabs that use the particular process technologies
we select for our products and that have sufficient capacity to meet our needs,
using alternative or additional third-party wafer fabs would require an
extensive qualification process that could prevent or delay product shipments.

Our reliance on these third-party wafer fabs involves several additional risks,
including reduced control over the manufacturing costs, delivery times,
reliability and quality of our components produced from these wafers. The
fabrication of semiconductor wafers is a highly complex and precise process.
Minute impurities, difficulties in the fabrication

                                      21
<PAGE>

process, defects in the masks used to print circuits on a wafer, wafer breakage
or other factors can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be nonfunctional. We expect that our customers
will continue to establish demanding specifications for quality, performance and
reliability that must be met by our products. Our third-party wafer fabs may not
be able to achieve and maintain acceptable production yields in the future.
These risks are heightened with respect to RF Micro Devices and GCS, our newest
third-party wafer fabs, which have not yet produced wafers in volume for us. To
the extent our third-party wafer fabs suffer failures or defects, we could
experience lost revenues, increased costs, and delays in, cancellations or
rescheduling of orders or shipments, any of which would harm our business.

In the past, we have experienced delays in product shipments from our third-
party wafer fabs, quality issues and poor manufacturing yields, which in turn
delayed product shipments to our customers. We may in the future experience
similar delays or other problems, such as inadequate wafer supply.

Our reliance on subcontractors to package our products could cause a delay in
our ability to fulfill orders or could increase our cost of revenues.

We do not package the RF components that we sell but rather rely on
subcontractors to package our products. Packaging is the procedure of
electrically bonding and encapsulating the integrated circuit into its final
protective plastic or ceramic casing. We provide the wafers containing the
integrated circuits and, in some cases, packaging materials to third-party
packagers. Although we currently work with five packagers, a majority of our
products were packaged by one subcontractor, MPI Corporation of Manila,
Philippines, in the second quarter of 2001. A relative of one of our founding
stockholders controls MPI. We do not have long-term contracts with our third-
party packagers stipulating fixed prices or packaging volumes. Therefore, in the
future we may be unable to obtain sufficient high quality or timely packaging of
our products. The loss or reduction in packaging capacity of any of our current
packagers, particularly MPI, would significantly damage our business. In
addition, increased packaging costs will adversely affect our profitability.

The fragile nature of the semiconductor wafers that we use in our components
requires sophisticated packaging techniques and can result in low packaging
yields. If our packaging subcontractors fail to achieve and maintain acceptable
production yields in the future, we could experience increased costs, including
warranty expense and costs associated with customer support, delays in or
cancellations or rescheduling of orders or shipments, product returns or
discounts and lost revenues, any of which would harm our business.

We depend on two distributors for a significant portion of our sales, the loss
of any one of which would limit our ability to sustain and grow our revenues.

Historically, two distributors, Avnet Electronics Marketing and Richardson
Electronics Laboratories, have accounted for a significant portion of our sales.
In the second quarter of 2001, sales through Richardson Electronics Laboratories
represented 39% of our net revenues and sales through Avnet Electronics
Marketing represented 16% of our net

                                      22
<PAGE>

revenues. These distributors principally purchase our standard components for
resale to their customers. Our contracts with these distributors do not require
them to purchase our products and may be terminated by them at any time without
penalty. If our distributors fail to successfully market and sell our products,
our revenues could be materially adversely affected. The loss of either of our
current distributors and our failure to develop new and viable distribution
relationships would limit our ability to sustain and grow our revenues.

We depend on Minicircuits Laboratories for a substantial portion of our revenues
and the loss of Minicircuits as a customer or a decrease in purchases by
Minicircuits would adversely affect our revenues.

Sales to Minicircuits Laboratories, a private label reseller of our products,
account for a significant portion of our revenues. For example, 21% of our net
revenues in the second quarter of 2001 were attributable to sales to
Minicircuits. We expect that we will continue to rely on sales to Minicircuits
for a significant portion of our future revenues. In addition to reselling our
products and those of other RF component suppliers, Minicircuits also designs
and supplies their own RF components. Our current contract with Minicircuits
does not require Minicircuits to purchase our products in the future. If we were
to lose Minicircuits as a customer, or if Minicircuits substantially reduced its
purchases, our business and operating results would be adversely affected.

Intense competition in our industry could prevent us from increasing revenues
and sustaining profitability.

The RF semiconductor industry is intensely competitive and is characterized by
the following:

- rapid technological change;

- rapid product obsolescence;

- shortages in wafer fabrication capacity;

- price erosion; and

- unforeseen manufacturing yield problems.

We compete primarily with other suppliers of high-performance RF components used
in the infrastructure of communications networks such as Agilent, Alpha
Industries, Anadigics, Conexant, Infineon, M/A-COM, Minicircuits Laboratories,
NEC, RF Micro Devices, TriQuint Semiconductor and WJ Communications. We also
compete with communications equipment manufacturers who manufacture RF
components internally such as Ericsson, Lucent, Motorola and Nortel Networks. We
expect increased competition both from existing competitors and from a number of
companies that may enter the RF component market, as well as future competition
from companies that may offer new or emerging technologies. In addition, many of
our current and potential competitors have significantly greater financial,
technical, manufacturing and marketing resources than we have. As a result,
communications equipment manufacturers may

                                      23
<PAGE>

decide not to buy from us due to their concerns about our size, financial
stability or ability to interact with their logistics systems. Our failure to
successfully compete in our markets would have a material adverse effect on our
business, financial condition and results of operations.

If we fail to introduce new products in a timely and cost-effective manner, our
ability to sustain and increase our revenues could suffer.

The markets for our products are characterized by frequent new product
introductions, evolving industry standards and changes in product and process
technologies. Because of this, our future success will in large part depend on:

- our ability to continue to introduce new products in a timely fashion;

- our ability to improve our products and to adapt to new process technologies
in a timely manner;

- our ability to adapt our products to support emerging and established industry
standards; and

- market acceptance of our products.

We estimate that the development cycles of our products from concept to
production could last up to 18 months. We have in the past experienced delays in
the release of new products. We may not be able to introduce new products in a
timely and cost-effective manner which would impair our ability to sustain and
increase our revenues.

Product quality, performance and reliability problems could disrupt our business
and harm our financial condition.

Our customers demand that our products meet stringent quality, performance and
reliability standards. RF components such as those we produce may contain
undetected defects or flaws when first introduced or after commencement of
commercial shipments. We have from time to time experienced product quality,
performance or reliability problems. In addition, some of our products are
manufactured using process technologies that are relatively new and for which
long-term field performance data are not available. As a result, defects or
failures may occur in the future relating to our product quality, performance
and reliability. If these failures or defects occur, we could experience lost
revenues, increased costs, including inventory write-offs, warranty expense and
costs associated with customer support, delays in or cancellations or
rescheduling of orders or shipments and product returns or discounts, any of
which would harm our business.

Sources for certain components and materials are limited, which could result in
delays or reductions in product shipments.

The semiconductor industry from time to time is affected by limited supplies of
certain key components and materials. For example, we rely on limited sources
for certain packaging materials. If we, or our packaging subcontractors, are
unable to obtain these or other materials in the required quantity and quality,
we could experience delays or reductions in product shipments, which would
materially and adversely affect our

                                      24
<PAGE>

profitability. Although we have not experienced any significant difficulty to
date in obtaining these materials, these shortages may arise in the future. We
cannot guarantee that we would not lose potential sales if key components or
materials are unavailable, and as a result, we are unable to maintain or
increase our production levels.

If communications equipment manufacturers increase their internal production of
RF components, our revenues would decrease and our business would be harmed.

Currently, communications equipment manufacturers obtain their RF components by
either developing them internally or by buying widely available standard RF
components from third-party distributors. We have historically generated a
majority of our revenues through sales of standard components to these
manufacturers through our distributors. If communications equipment
manufacturers increase their internal production of RF components and reduce
purchases of RF components from third parties, our revenues would decrease and
our business would be harmed.

We have recently established a business unit focused on designing RF components
for wireless equipment manufacturers. Our failure to grow this business unit
would impair our ability to sustain and increase our revenues.

Communications equipment manufacturers have begun to work directly with
component suppliers such as us to design and build customized products for
specific needs. In fiscal 2000, we established a business unit focused on
designing RF components to meet these needs. Our business strategy is dependent
in part on this business unit to sustain and increase our revenues. This
business unit has not yet shipped any products and we cannot guarantee that we
will be successful in developing this business unit. Development of this
business unit will require us to expand our internal sales force and
successfully install logistic and supply chain software and processes to manage
this business unit. Each of these tasks will require significant management
attention and expenditure of resources. Even with this attention and these
expenditures, we may be unsuccessful in operating this business unit and this
business unit may not generate any revenues.

We may spend considerable sums developing components for a particular
application or a potential customer. We do not expect that these customers will
have any contractual obligation to purchase these products and we many never
realize any revenues from sales of these products. In addition, if the recent
trend of outsourcing the design and manufacture of customized components to
third parties is reversed, we would not be able to execute this element of our
business strategy.

Third-party wafer fabs who manufacture the semiconductor wafers for our products
may compete with us in the future.

Several third-party wafer fabs independently produce and sell RF components
directly to communications equipment manufacturers. We currently rely on certain
of these third-party wafer fabs to produce the semiconductor wafers for our
products. These third-party wafer fabs possess confidential information
concerning our products and product release schedules. We cannot guarantee that
they would not use our confidential information to compete with us. Competition
from these third-party wafer fabs may result in reduced

                                      25
<PAGE>

demand for our products and could damage our relationships with these third-
party wafer fabs, thereby harming our business.

Perceived risks relating to process technologies we may adopt in the future to
manufacture our products could cause reluctance among potential customers to
purchase our products.

We may adopt new process technologies in the future to manufacture our products.
Prospective customers of these products may be reluctant to purchase these
products based on perceived risks of these new technologies. These risks could
include concerns related to manufacturing costs and yields and uncertainties
about the relative cost-effectiveness of products produced using these new
technologies. If our products fail to achieve market acceptance, our business,
financial condition and results of operations would be materially adversely
affected.

We may encounter difficulties in managing our growth.

We have experienced rapid growth and expansion in the past that placed a
significant strain on our management and other resources, and we expect this to
be a recurring issue in the future. The number of our employees has increased to
126 at June 30, 2001 from 107 at June 30, 2000. To accommodate this growth, we
must implement a variety of new and upgraded operational and financial systems,
procedures and controls, including the improvement of the accounting and other
internal management systems. This may require substantial managerial and
financial effort, and our efforts in this regard may not be successful. Our
current systems, procedures and controls may not be adequate to support our
operations. If we fail to improve our operational, financial and management
information systems, or fail to effectively motivate or manage our new and
future employees, our business could be harmed.

If we lose our key personnel or are unable to attract and retain key personnel,
we may be unable to pursue business opportunities or develop our products.

We believe that our future success will depend in large part upon our continued
ability to recruit, hire, retain and motivate highly skilled technical,
marketing and managerial personnel, who are in great demand. Competition for
these employees, particularly RF integrated circuit design engineers, is
intense. Our failure to hire additional qualified personnel in a timely manner
and on reasonable terms could adversely affect our business and profitability.
In addition, from time to time we may recruit and hire employees from our
customers, suppliers and distributors, which could damage our business
relationship with these parties. Our success also depends on the continuing
contributions of our senior management and technical personnel, all of whom
would be difficult to replace. The loss of key personnel could adversely affect
our ability to execute our business strategy, which could cause our results of
operations and financial condition to suffer. We may not be successful in
retaining these key personnel.

Our limited ability to protect our proprietary information and technology may
adversely affect our ability to compete.

                                      26
<PAGE>

Our future success and ability to compete is dependent in part upon our
proprietary information and technology. None of our technology is currently
patented, however, we do have current patent applications pending. Instead, we
rely on a combination of contractual rights and copyright, trademark and trade
secret laws and practices to establish and protect our proprietary technology.
We generally enter into confidentiality agreements with our employees,
consultants, resellers, wafer suppliers, customers and potential customers, and
strictly limit the disclosure and use of other proprietary information. The
steps taken by us in this regard may not be adequate to prevent misappropriation
of our technology. Additionally, our competitors may independently develop
technologies that are substantially equivalent or superior to our technology.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain or use our products or technology. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States.

Our products could infringe the intellectual property rights of others, and
resulting claims against us could be costly and require us to enter into
disadvantageous license or royalty arrangements.

The semiconductor industry is characterized by the existence of a large number
of patents and frequent litigation based on allegations of patent infringement
and the violation of intellectual property rights. Although we attempt to avoid
infringing known proprietary rights of third parties in our product development
efforts, we expect that we may be subject to legal proceedings and claims for
alleged infringement by us or our licensees of third-party proprietary rights,
such as patents, trade secrets, trademarks or copyrights, from time to time in
the ordinary course of business. Any claims relating to the infringement of
third-party proprietary rights, even if not meritorious, could result in costly
litigation, divert management's attention and resources, or require us to enter
into royalty or license agreements which are not advantageous to us. In
addition, parties making these claims may be able to obtain an injunction, which
could prevent us from selling our products in the United States or abroad. We
may increasingly be subject to infringement claims as the number of our products
grows.

Our reliance on foreign suppliers and manufacturers exposes us to the economic
and political risks of the countries in which they are located.

Independent third parties in other countries package all of our products and
supply some of our wafers and substantially all of the packaging materials used
in the production of our components. Due to our reliance on foreign suppliers
and packagers, we are subject to the risks of conducting business outside the
United States. These risks include:

- unexpected changes in, or impositions of, legislative or regulatory
requirements;

- shipment delays, including delays resulting from difficulty in obtaining
export licenses;

- tariffs and other trade barriers and restrictions;

- political, social and economic instability; and

                                      27
<PAGE>

- potential hostilities and changes in diplomatic and trade relationships.

In addition, we currently transact business with our foreign suppliers and
packagers in U.S. dollars. Consequently, if the currencies of our suppliers'
countries were to increase in value against the U.S. dollar, our suppliers may
attempt to raise the cost of our wafers, packaging materials, and packaging
services, which could have an adverse effect on our profitability.

A significant portion of our products are sold to international customers either
through our distributors or directly by us, which exposes us to risks that may
adversely affect our results of operations.

A significant portion of our direct sales and sales through our distributors
were to foreign purchasers, particularly in countries located in Asia and
Europe. International direct sales approximated 51% of our total direct sales in
the second quarter of 2001. Based on information available from our
distributors, products representing approximately 57% of our total distribution
revenues, representing approximately 30% of our net revenues, were sold by our
distributors to international customers in the second quarter of 2001. Demand
for our products in foreign markets could decrease, which could have a
materially adverse effect on our results of operations. Therefore, our future
operating results may depend on several economic conditions in foreign markets,
including:

- changes in trade policy and regulatory requirements;

- fluctuations in currency;

- duties, tariffs and other trade barriers and restrictions;

- trade disputes; and

- political instability.

Any future acquisitions of companies or technologies may result in distraction
of our management and disruptions to our business.

We may acquire or make investments in complementary businesses, technologies,
services or products if appropriate opportunities arise. From time to time, we
may engage in discussions and negotiations with companies regarding our
acquiring or investing in their businesses, products, services or technologies.
We may not be able to identify suitable acquisition or investment candidates in
the future, or if we do identify suitable candidates, we may not be able to make
such acquisitions or investments on commercially acceptable terms or at all. If
we acquire or invest in another company, we could have difficulty assimilating
that company's personnel, operations, technology or products and service
offerings. In addition, the key personnel of the acquired company may decide not
to work for us. These difficulties could disrupt our ongoing business, distract
our management and employees, increase our expenses and adversely affect our
results of operations. Furthermore, we may incur indebtedness or issue equity
securities to pay for any future acquisitions. The issuance of equity securities
could be dilutive to our existing stockholders. In addition, the accounting
treatment for any acquisition

                                      28
<PAGE>

transaction may result in significant goodwill, which, if impaired, will
negatively affect our net income.

Information that we may provide to investors from time to time is accurate only
as of the date we disseminate it and we undertake no obligation to update the
information.

From time to time we may publicly disseminate forward-looking information or
guidance in compliance with Regulation FD promulgated by the SEC. This
information or guidance represents our outlook only as of the date that we
disseminated it, and we undertake no obligation to provide updates to this
information or guidance in our filings with the SEC or otherwise.

Some of our existing stockholders can exert control over us, and they may not
make decisions that reflect the interests of Stanford Microdevices or other
stockholders.

Our officers, directors and principal stockholders (greater than 5%
stockholders) together have historically controlled a majority of our
outstanding common stock and our two founding stockholders have historically
controlled a significant amount of our outstanding common stock. As a result,
these stockholders, if they act together, and our founding stockholders acting
alone, will be able to exert a significant degree of influence over our
management and affairs and control matters requiring stockholder approval,
including the election of all of our directors and approval of significant
corporate transactions. In addition, this concentration of ownership may delay
or prevent a change in control of Stanford Microdevices and might affect the
market price of our common stock. In addition, the interests of these
stockholders may not always coincide with the interests of Stanford Microdevices
or the interests of other stockholders.

Our charter and bylaws and Delaware law contain provisions that may delay or
prevent a change of control.

Provisions of our charter and bylaws may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of us. These provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock. These provisions include:

- division of the board of directors into three separate classes;

- elimination of cumulative voting in the election of directors;

- prohibitions on our stockholders from acting by written consent and calling
special meetings;

- procedures for advance notification of stockholder nominations and proposals;
and

- the ability of the board of directors to alter our bylaws without stockholder
approval.

In addition, our board of directors has the authority to issue up to 5,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the

                                      29
<PAGE>

stockholders. The issuance of preferred stock, while providing flexibility in
connection with possible financings or acquisitions or other corporate purposes,
could have the effect of making it more difficult for a third party to acquire a
majority of our outstanding voting stock. We are also subject to Section 203 of
the Delaware General Corporation Law that, subject to exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that this
stockholder became an interested stockholder. The preceding provisions of our
charter and bylaws, as well as Section 203 of the Delaware General Corporation
Law, could discourage potential acquisition proposals, delay or prevent a change
of control and prevent changes in our management.

Item 3. Qualitative and Quantitative Disclosures About Market Risk

Our sales have been made to predominantly U.S.-based customers and distributors
in U.S. dollars. As a result, we have not had any material exposure to factors
such as changes in foreign currency exchange rates. However, we continue to and
expect in future periods to expand selling into foreign markets, including
Europe and Asia. Because our sales are denominated in U.S. dollars, a
strengthening of the U.S. dollar could make our products less competitive in
foreign markets.

At June 30, 2001, our cash and cash equivalents consisted primarily of bank
deposits, commercial paper and money market funds and our short-term investments
consisted of federal agency and related securities. We did not hold any
derivative financial instruments. Our interest income and expense are sensitive
to changes in the general level of interest rates. In this regard, changes in
interest rates can affect the interest earned on our cash equivalents and short-
term investments. However, due to the short-term nature of our cash equivalents
and short-term investments, a 1% increase or decrease in interest rates would
not have a material impact on our future interest income.


Part II - Other Information

Item 1. Legal Proceedings

On March 17, 2000, Stanford University filed a complaint against us in the
United States District Court for the Northern District of California alleging,
among other things, infringement by us of its trademarks by our use of the name
"Stanford" and by use of a logo containing the letter "S" and the color red.
Stanford University requested preliminary and permanent injunctions prohibiting
us from using trademarks that infringe or dilute its trademarks, and sought
compensatory damages, exemplary and punitive damages, costs and attorneys' fees.
A hearing on Stanford University's request for a preliminary injunction was held
by the District Court on May 8, 2000 and Stanford University was denied the
preliminary injunction. Stanford University then filed a motion with the
District Court for an emergency injunction pending appeal and on May 15, 2000
Stanford University was denied the emergency injunction. Stanford University
filed a notice of appeal to the United States Court of Appeals for the Ninth
Circuit from the denial of the preliminary injunction and filed a motion with
the Court of Appeals for an

                                      30
<PAGE>

emergency injunction pending the appeal. On May 22, 2000 the Court of Appeals
denied the motion for an emergency injunction. On June 5, 2000, Stanford
University filed a motion with the United States Court of Appeals for the Ninth
Circuit for reconsideration of its motion for an emergency injunction pending
appeal. On June 28, 2000 the United States Court of Appeals for the Ninth
Circuit denied Stanford University's motion for reconsideration. On September
21, 2000, the Court of Appeals affirmed the District Court's denial of a
preliminary injunction, but stated that its order does not preclude Stanford
University from renewing its motion for a preliminary injunction based on only
the claims of dilution. As of February 15, 2000, Stanford University had not
renewed its motion. A trial date was set for July 10, 2001, but the trial date
was vacated and discovery was suspended pending mediation. We entered into
mediation and successfully settled our dispute with Stanford University in the
second quarter of 2001, whereby, without admitting any liability, we
acknowledged that Stanford University's names and marks are strong, famous, and
distinctive, and we agreed to discontinue using the term ``STANFORD'' and a
predominantly red or red and white "S" logo by or before January 31, 2002.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4: Submission of Matters to a Vote of Security Holders

(a) The Company held its Annual Meeting of Stockholders (the "Annual Meeting")
on May 30, 2001.

(b) At the Annual Meeting, the stockholders elected Peter Chung and Robert Van
Buskirk as Class I Directors to serve for terms of three years.  The terms of
office of the Class II Directors, John Bumgarner and Casimir Skrzypczak, and the
Class III Director, John Ocampo, continued following the Annual Meeting as well.

(c) The stockholders of the Company voted on the following matters at the Annual
Meeting:

     1. the election of two Class I directors to serve for terms of three years;
and

     2. ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 2001.

Votes were cast for the election of Peter Chung and Robert Van Buskirk as Class
I Directors as follows:

                                      31
<PAGE>

                             VOTES FOR      VOTES WITHHELD
                             ---------      --------------
Peter Chung                  26,889,032         69,302
Robert Van Buskirk           25,789,917      1,168,417

     The appointment of Ernst & Young LLP as auditors for fiscal year ending
     December 31, 2001 was approved as follows:
     26,951,744 votes for approval;
     5,133 votes against;
     1,457 abstentions; and
     1,732,648 broker non-votes.



Item 5: Other Information

None


Item 6: Exhibits and Reports on Form 8-K

(a) Exhibits:

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the three months ended June 30, 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                      STANFORD MICRODEVICES, INC.


           DATE: August 15, 2001      /s/  Robert Van Buskirk
                                      ----------------------------------
                                      ROBERT VAN BUSKIRK
                                      President, Chief Executive Officer and
                                      Director

           DATE: August 15, 2001      /s/ Thomas Scannell
                                      -------------------------------
                                      THOMAS SCANNELL
                                      Vice President, Finance and
                                      Administration, Chief Financial
                                      Officer and Assistant Treasurer

                                      32