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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2004.



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



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SIRENZA MICRODEVICES, INC.

(Exact name of registrant as specified in its charter)



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



|                                         |  |           
|---------------------------------------- |  | ----------
|303 S. Technology Court, Broomfield, CO  |  | 80021     
|(Address of principal executive offices) |  | (Zip Code)



(303) 327-3030

(Registrants telephone number, including area code)



N/A

(Former name, former address and former fiscal year, if changed since last report)



---



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 ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).    Yes ̈No  x



As of October 31, 2004 there were 34,920,936 shares of registrants Common Stock
outstanding.



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##### Table of Contents

SIRENZA MICRODEVICES, INC.



INDEX



|                              |  |                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                       |  | Page
|Part I. Financial Information |  | 3                                                                                    
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  | 3   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12  
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 29  
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 30  
|                              | 
|Part II. Other Information    |  | 30                                                                                   
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 30  
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 30  
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 31  
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 31  
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 31  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 31  
|                              | 
|Signatures                    |  | 32                                                                                   



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##### Table of Contents

Part I. Financial Information



Item 1. Financial Statements



SIRENZA
MICRODEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS



|                                     |  |                    |        |                  |   |       
|------------------------------------ |  | ------------------ | ------ | ---------------- | - | ------
|                                     |  | September 30, 2004 |        | December 31,2003
|                                     |  | (unaudited)        |        |                 
|Current assets:                      |  |                    |        |                  |   |       
|Cash and cash equivalents            |  | $                  | 10,522 |                  | $ | 7,468 
|Short-term investments               |  |                    |       |                  |   | 1,999 
|Accounts receivable, net             |  |                    | 8,428  |                  |   | 7,838 
|Inventories                          |  |                    | 9,831  |                  |   | 6,497 
|Other current assets                 |  |                    | 707    |                  |   | 1,093 
|                                     |  |                    |        |                  |   |       
|Total current assets                 |  |                    | 29,488 |                  |   | 24,895
|Property and equipment, net          |  |                    | 8,475  |                  |   | 9,685 
|Long-term investments                |  |                    | 6,022  |                  |   | 4,015 
|Investment in GCS                    |  |                    | 4,600  |                  |   | 4,600 
|Other assets                         |  |                    | 1,408  |                  |   | 1,189 
|Acquisition related intangibles, net |  |                    | 4,364  |                  |   | 5,529 
|Goodwill                             |  |                    | 4,219  |                  |   | 4,219 
|                                     |  |                    |        |                  |   |       
|Total assets                         |  | $                  | 58,576 |                  | $ | 54,132
|                                     |  |                    |        |                  |   |       



LIABILITIES AND
STOCKHOLDERS EQUITY



|                                                          |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | - | ------- | - |  | - | ------- | -
|Current liabilities:                                      |  |   |         |   |  |   |         |  
|Accounts payable                                          |  | $ | 4,519   |   |  | $ | 4,379   |  
|Accrued expenses                                          |  |   | 3,328   |   |  |   | 2,530   |  
|Deferred margin on distributor inventory                  |  |   | 1,301   |   |  |   | 1,042   |  
|Accrued restructuring                                     |  |   | 366     |   |  |   | 887     |  
|Capital lease obligations, current portion                |  |   | 73      |   |  |   | 65      |  
|                                                          |  |   |         |   |  |   |         |  
|Total current liabilities                                 |  |   | 9,587   |   |  |   | 8,903   |  
|Capital lease obligations and other long-term liabilities |  |   | 18      |   |  |   | 56      |  
|Commitments and contigencies                              |  |   |         |   |  |   |         |  
|Stockholders equity:                                     |  |   |         |   |  |   |         |  
|Common stock                                              |  |   | 35      |   |  |   | 34      |  
|Additional paid-in capital                                |  |   | 135,578 |   |  |   | 134,705 |  
|Deferred stock compensation                               |  |   |        |   |  |   | (3      | )
|Treasury stock, at cost                                   |  |   | (165    | ) |  |   | (165    | )
|Accumulated deficit                                       |  |   | (86,477 | ) |  |   | (89,398 | )
|                                                          |  |   |         |   |  |   |         |  
|Total stockholders equity                                |  |   | 48,971  |   |  |   | 45,173  |  
|                                                          |  |   |         |   |  |   |         |  
|Total liabilities and stockholders equity                |  | $ | 58,576  |   |  | $ | 54,132  |  
|                                                          |  |   |         |   |  |   |         |  



See accompanying notes.



3



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##### Table of Contents

SIRENZA MICRODEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                                                                                                                                                                                                      |  | Three Months Ended |        |   | Nine Months Ended |  
|                                                                                                                                                                                                                                      |  | September 30,2004  |        |   | September 30,2003 |   |        | September 30,2004 |  |   | September 30,2003 |  
|Net revenues                                                                                                                                                                                                                          |  | $                  | 16,737 |   |                   | $ | 10,358 |                   |  | $ | 46,191            |   |  | $ | 25,215 |  
|Cost of revenues:                                                                                                                                                                                                                     |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Cost of product revenues                                                                                                                                                                                                              |  |                    | 8,219  |   |                   |   | 5,728  |                   |  |   | 23,607            |   |  |   | 13,319 |  
|Amortization of deferred stock compensation                                                                                                                                                                                           |  |                    |       |   |                   |   | 22     |                   |  |   |                  |   |  |   | 68     |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Total cost of revenues                                                                                                                                                                                                                |  |                    | 8,219  |   |                   |   | 5,750  |                   |  |   | 23,607            |   |  |   | 13,387 |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Gross profit                                                                                                                                                                                                                          |  |                    | 8,518  |   |                   |   | 4,608  |                   |  |   | 22,584            |   |  |   | 11,828 |  
|Operating expenses:                                                                                                                                                                                                                   |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Research and development (exclusive of amortization of deferred stock compensation of $0, $2, $10 and $54 for the three and nine months ended
September 30, 2004 and three and nine months ended September 30, 2003, respectively)    |  |                    | 2,337  |   |                   |   | 2,348  |                   |  |   | 6,777             |   |  |   | 6,220  |  
|Sales and marketing (exclusive of amortization of deferred stock compensation of $0, $1, $43 and $130 for the three and nine months ended
September 30, 2004 and three and nine months ended September 30, 2003, respectively)        |  |                    | 1,913  |   |                   |   | 1,590  |                   |  |   | 5,883             |   |  |   | 4,572  |  
|General and administrative (exclusive of amortization of deferred stock compensation of $0, $0, $74 and $230 for the three and nine months
ended September 30, 2004 and three and nine months ended September 30, 2003, respectively) |  |                    | 2,174  |   |                   |   | 1,669  |                   |  |   | 5,938             |   |  |   | 4,694  |  
|Amortization of deferred stock compensation                                                                                                                                                                                           |  |                    |       |   |                   |   | 127    |                   |  |   | 3                 |   |  |   | 414    |  
|Amortization of acquisition related intangible assets                                                                                                                                                                                 |  |                    | 354    |   |                   |   | 431    |                   |  |   | 1,165             |   |  |   | 782    |  
|Restructuring                                                                                                                                                                                                                         |  |                    | (98    | ) |                   |   |       |                   |  |   | (98               | ) |  |   | 434    |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Total operating expenses                                                                                                                                                                                                              |  |                    | 6,680  |   |                   |   | 6,165  |                   |  |   | 19,668            |   |  |   | 17,116 |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Income (loss) from operations                                                                                                                                                                                                         |  |                    | 1,838  |   |                   |   | (1,557 | )                 |  |   | 2,916             |   |  |   | (5,288 | )
|Interest expense                                                                                                                                                                                                                      |  |                    | 4      |   |                   |   | 8      |                   |  |   | 12                |   |  |   | 31     |  
|Interest and other income, net                                                                                                                                                                                                        |  |                    | 75     |   |                   |   | 89     |                   |  |   | 152               |   |  |   | 378    |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Income (loss) before income taxes                                                                                                                                                                                                     |  |                    | 1,909  |   |                   |   | (1,476 | )                 |  |   | 3,056             |   |  |   | (4,941 | )
|Provision for income taxes                                                                                                                                                                                                            |  |                    | 86     |   |                   |   |       |                   |  |   | 135               |   |  |   |       |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Net income (loss)                                                                                                                                                                                                                     |  | $                  | 1,823  |   |                   | $ | (1,476 | )                 |  | $ | 2,921             |   |  | $ | (4,941 | )
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Basic net income (loss) per share                                                                                                                                                                                                     |  | $                  | 0.05   |   |                   | $ | (0.04  | )                 |  | $ | 0.08              |   |  | $ | (0.15  | )
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Diluted net income (loss) per share                                                                                                                                                                                                   |  | $                  | 0.05   |   |                   | $ | (0.04  | )                 |  | $ | 0.08              |   |  | $ | (0.15  | )
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Shares used to compute basic net income (loss) per share                                                                                                                                                                              |  |                    | 34,696 |   |                   |   | 33,541 |                   |  |   | 34,446            |   |  |   | 31,889 |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Shares used to compute diluted net income (loss) per share                                                                                                                                                                            |  |                    | 37,384 |   |                   |   | 33,541 |                   |  |   | 37,270            |   |  |   | 31,889 |  
|                                                                                                                                                                                                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  



See accompanying notes.



4



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SIRENZA MICRODEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                   |  |                    |        |   |                    |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------------ | - | ------ | -
|                                                                                                   |  | Nine Months Ended  |       
|                                                                                                   |  | September 30, 2004 |        |   | September 30, 2003 |  
|Operating Activities                                                                               |  |                    |        |   |                    |   |        |  
|Net income (loss)                                                                                  |  | $                  | 2,921  |   |                    | $ | (4,941 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                    |        |   |                    |   |        |  
|Depreciation and amortization                                                                      |  |                    | 4,394  |   |                    |   | 3,459  |  
|Amortization of deferred stock compensation                                                        |  |                    | 3      |   |                    |   | 482    |  
|Compensation expense related to employee equity awards                                             |  |                    | 37     |   |                    |   |       |  
|Gain on the sale of property and equipment                                                         |  |                    |       |   |                    |   | (112   | )
|Changes in operating assets and liabilities:                                                       |  |                    |        |   |                    |   |        |  
|Accounts receivable                                                                                |  |                    | (590   | ) |                    |   | (3,140 | )
|Inventories                                                                                        |  |                    | (3,334 | ) |                    |   | (2,132 | )
|Other assets                                                                                       |  |                    | 167    |   |                    |   | 55     |  
|Accounts payable                                                                                   |  |                    | 140    |   |                    |   | 1,713  |  
|Accrued expenses                                                                                   |  |                    | 816    |   |                    |   | (327   | )
|Accrued restructuring                                                                              |  |                    | (521   | ) |                    |   | (844   | )
|Deferred margin on distributor inventory                                                           |  |                    | 259    |   |                    |   | (1,032 | )
|                                                                                                   |  |                    |        |   |                    |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                    | 4,292  |   |                    |   | (6,819 | )
|Investing Activities                                                                               |  |                    |        |   |                    |   |        |  
|Sales/maturities (purchases) of available-for-sale securities, net                                 |  |                    | (8     | ) |                    |   | 12,013 |  
|Purchases of property and equipment                                                                |  |                    | (2,019 | ) |                    |   | (2,225 | )
|Proceeds from the sale of property and equipment                                                   |  |                    |       |   |                    |   | 112    |  
|Purchase of Xemod, net of cash received                                                            |  |                    |       |   |                    |   | 28     |  
|Purchase of Vari-L, net of amounts accrued                                                         |  |                    |       |   |                    |   | (7,556 | )
|Increase in restricted cash                                                                        |  |                    |       |   |                    |   | (1,100 | )
|                                                                                                   |  |                    |        |   |                    |   |        |  
|Net cash provided by (used in) investing activities                                                |  |                    | (2,027 | ) |                    |   | 1,272  |  
|Financing Activities                                                                               |  |                    |        |   |                    |   |        |  
|Principal payments on capital lease obligations                                                    |  |                    | (48    | ) |                    |   | (414   | )
|Proceeds from employee stock plans                                                                 |  |                    | 837    |   |                    |   | 472    |  
|                                                                                                   |  |                    |        |   |                    |   |        |  
|Net cash provided by financing activities                                                          |  |                    | 789    |   |                    |   | 58     |  
|Increase (decrease) in cash and cash equivalents                                                   |  |                    | 3,054  |   |                    |   | (5,489 | )
|Cash and cash equivalents at beginning of period                                                   |  |                    | 7,468  |   |                    |   | 12,874 |  
|                                                                                                   |  |                    |        |   |                    |   |        |  
|Cash and cash equivalents at end of period                                                         |  | $                  | 10,522 |   |                    | $ | 7,385  |  
|                                                                                                   |  |                    |        |   |                    |   |        |  
|Supplemental disclosures of noncash investing and financing activities                             |  |                    |        |   |                    |   |        |  
|Cost and accumulated depreciation of equipment retired                                             |  | $                  | 83     |   |                    | $ |       |  
|Forfeiture of deferred stock compensation                                                          |  | $                  |       |   |                    | $ | 138    |  
|Common stock issued in connection with Vari-L acquisition                                          |  | $                  |       |   |                    | $ | 4,654  |  
|Assumption of Vari-L loans receivable                                                              |  | $                  |       |   |                    | $ | 3,417  |  



See accompanying notes.



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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 disclosures 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 nine month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for any subsequent period or for the year as a whole.



The balance sheet at December 31, 2003 has been derived from the audited financial statements
at that date but does not include all of the disclosures 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 Sirenza Microdevices, Inc. (the Company) for the year ended December 31, 2003, which are included in the Companys Form 10-K filed with the Securities and Exchange Commission (SEC) on March 24, 2004.



The unaudited condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated.



Prior to 2004, the Company operated 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 ended on December 31. Effective
January 1, 2004, the Company changed its reporting period to a calendar year with each of the fiscal quarters now ending on the last day of the calendar quarter. The adoption of this change did not have a material impact on the Companys
financial position or results of operations for the quarter ended September 30, 2004. The Companys third quarter of fiscal year 2003 ended on September 28, 2003, however, for purposes of convenience, the quarter end date is presented as
September 30.



Stock-Based Compensation



The Company has elected to account for its employee stock plans in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25), as amended by Financial Accounting Standards Board (FASB) Interpretation No. 44 (FIN 44), Accounting for Certain
Transactions involving Stock Compensation an interpretation of APB Opinion No. 25, and to adopt the disclosure-only provisions as required under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (FAS 123). The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation, as amended by Statement
of Financial Accounting Standards No. 148 Accounting for Stock Based Compensation, Transition and Disclosures (in thousands, except per share data):



|                                                                                                               |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                               |  | Three Months Ended September 30, |        |   | Nine Months Ended September 30, |  
|                                                                                                               |  | 2004                             |        |   | 2003                            |   |        | 2004 |  |   | 2003   |  
|Net income (loss)as reported                                                                                  |  | $                                | 1,823  |   |                                 | $ | (1,476 | )    |  | $ | 2,921  |   |  | $ | (4,941 | )
|Add: Stock-based employee compensation expense, included in the determination of net income (loss) as reported |  |                                  | 32     |   |                                 |   | 149    |      |  |   | 40     |   |  |   | 482    |  
|Deduct: Stock-based employee compensation expense determined under the fair value method for all awards        |  |                                  | (1,463 | ) |                                 |   | (1,448 | )    |  |   | (4,287 | ) |  |   | (4,221 | )
|                                                                                                               |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Pro forma net income (loss)                                                                                    |  | $                                | 392    |   |                                 | $ | (2,775 | )    |  | $ | (1,326 | ) |  | $ | (8,680 | )
|                                                                                                               |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss) per share:                                                                                   |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Basic and dilutedas reported                                                                                  |  | $                                | 0.05   |   |                                 | $ | (0.04  | )    |  | $ | 0.08   |   |  | $ | (0.15  | )
|                                                                                                               |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Basic and dilutedpro forma                                                                                    |  | $                                | 0.01   |   |                                 | $ | (0.08  | )    |  | $ | (0.04  | ) |  | $ | (0.27  | )
|                                                                                                               |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  



Note
2: Amortizable acquisition-related intangible assets



Amortization of
acquisition-related intangible assets aggregated $354,000, $1.2 million, $431,000, and $782,000 in the three and nine-month periods ended September 30, 2004 and 2003, respectively.



The Companys acquisition-related intangible assets at September 30, 2004 and December 31, 2003 were as follows (in thousands):



|                                                   |  |                          |       |                          |   |       |  |   |      
|-------------------------------------------------- |  | ------------------------ | ----- | ------------------------ | - | ----- |  | - | -----
|                                                   |  | As of September 30, 2004
|                                                   |  | Gross Carrying Amount    |       | Accumulated Amortization |   | Net  
|Amortizable acquisition-related intangible assets: |  |                          |       |                          |   |       |  |   |      
|Patented Core Technology                           |  | $                        | 700   |                          | $ | 333   |  | $ | 367  
|Internal Use Software                              |  |                          | 70    |                          |   | 47    |  |   | 23   
|Developed Product Technology                       |  |                          | 4,840 |                          |   | 1,273 |  |   | 3,567
|Customer Relationship                              |  |                          | 870   |                          |   | 463   |  |   | 407  
|Committed Customer Backlog                         |  |                          | 310   |                          |   | 310   |  |   |     
|                                                   |  |                          |       |                          |   |       |  |   |      
|                                                   |  | $                        | 6,790 |                          | $ | 2,426 |  | $ | 4,364
|                                                   |  |                          |       |                          |   |       |  |   |      



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|                                                   |  |                         |       |                          |   |       |  |   |      
|-------------------------------------------------- |  | ----------------------- | ----- | ------------------------ | - | ----- |  | - | -----
|                                                   |  | As of December 31, 2003
|                                                   |  | Gross Carrying Amount   |       | Accumulated Amortization |   | Net  
|Amortizable acquisition-related intangible assets: |  |                         |       |                          |   |       |  |   |      
|Patented Core Technology                           |  | $                       | 700   |                          | $ | 208   |  | $ | 492  
|Internal Use Software                              |  |                         | 70    |                          |   | 29    |  |   | 41   
|Developed Product Technology                       |  |                         | 4,840 |                          |   | 599   |  |   | 4,241
|Customer Relationship                              |  |                         | 870   |                          |   | 218   |  |   | 652  
|Committed Customer Backlog                         |  |                         | 310   |                          |   | 207   |  |   | 103  
|                                                   |  |                         |       |                          |   |       |  |   |      
|                                                   |  | $                       | 6,790 |                          | $ | 1,261 |  | $ | 5,529
|                                                   |  |                         |       |                          |   |       |  |   |      



As of September 30, 2004, the
Companys estimated amortization expense of acquisition-related intangible assets over the next five years is as follows (in thousands):



|                                     |  |   |      
|------------------------------------ |  | - | -----
|2004 (remaining 3 months)            |  | $ | 354  
|2005                                 |  |   | 1,392
|2006                                 |  |   | 999  
|2007                                 |  |   | 922  
|2008                                 |  |   | 697  
|                                     |  |   |      
|Total estimated amortization expense |  | $ | 4,364
|                                     |  |   |      



Note
3: Goodwill



There were no changes in the carrying amount of goodwill during
the three and nine-month periods ended September 30, 2004.



We conducted our
2004 annual goodwill impairment analysis in the third quarter of 2004 and no goodwill impairment was indicated.



Note 4: Inventories



Inventories are stated at the lower of standard cost, which approximates actual (first-in, first-out method), or market (estimated net realizable value).



The Company plans production based on orders received and forecasted demand and must order
raw material components and build inventories 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 market conditions and current and expected orders from its 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.



In 2001, the Company recorded a provision for excess inventories totaling $7.8 million. This excess inventory charge was due to the cancellation of several key customer programs and an overall decrease in forecasted
demand for the Companys products.



In the first, second and third
quarters of 2004, the Company sold previously written-down inventory products with an original cost of approximately $273,000, $192,000, $155,000, respectively. In the first, second and third quarters of 2003, the Company sold previously
written-down inventory products with an original cost of approximately $439,000, $394,000 and $340,000, respectively. As the cost basis for written-down inventories is less than the original cost basis when such products are sold, cost of revenues
associated with the sale will be lower, which results in a higher gross margin on that sale. For example, had this inventory been valued at its original cost when sold, the Companys gross margin would have decreased by 1% for the three months
ended September 30, 2004. The Company may sell previously written-down inventory products in future periods, which would have a similarly positive impact on the Companys results of operations.



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The components of inventories, net of written-down inventories and reserves, are as follows (in thousands):



|                |  |                    |       |                   |   |      
|--------------- |  | ------------------ | ----- | ----------------- | - | -----
|                |  | September 30, 2004 |       | December 31, 2003
|Inventories:    |  |                    |       |                   |   |      
|Raw materials   |  | $                  | 3,965 |                   | $ | 2,868
|Work-in-process |  |                    | 2,573 |                   |   | 2,394
|Finished goods  |  |                    | 3,293 |                   |   | 1,235
|                |  |                    |       |                   |   |      
|Total           |  | $                  | 9,831 |                   | $ | 6,497
|                |  |                    |       |                   |   |      



Note
5: Investment in GCS



The Company accounts for its investment in Global
Communication Semiconductors, Inc. (GCS), a privately held semiconductor foundry, in accordance with the cost method of accounting and has classified the investment as a non-current asset on its consolidated balance sheet. The Companys
President and CEO is a member of GCS seven-member board of directors.



On
a quarterly basis, the Company evaluates its investment in GCS to determine if an other than temporary decline in value has occurred. Factors that may cause an other than temporary decline in the value of the Companys investment in GCS would
include, but not be limited to, a degradation of the general business environment in which GCS operates, the failure of GCS to achieve certain performance milestones, a series of operating losses in excess of GCS current annual business plan,
the inability of GCS to continue as a going concern or a reduced valuation as determined by a new financing event. There is no public market for securities of GCS, and the factors mentioned above may require management to make significant judgments
about the fair value of the GCS securities. Additionally, the fair value estimated by management may not be reflective of the value in a third party financing event.



The realizability of the Companys investment in GCS is ultimately dependent on the Companys ability to sell its GCS shares, for
which there is currently no public market, and may be dependent on market conditions surrounding the wireless communications industry and the related semiconductor foundry industry, as well as public markets receptivity to liquidity events such as
initial public offerings or merger and acquisition activities. Even if the Company is able to sell its GCS shares, the sale price may be less than carrying value of the investment, which could have a material adverse effect on the Companys
consolidated results of operations.



Note 6:
Restructuring Activities



2003 Restructuring
Activities



In connection with the acquisition of Vari-L Company, Inc.
(Vari-L), the resulting new strategic focus of Sirenza and a new management structure, the Company incurred a restructuring charge of approximately $1.0 million in the second quarter of 2003, primarily related to a workforce reduction and costs of
exiting excess facilities. All excess facilities were exited prior to June 30, 2003. Management with the appropriate level of authority approved and committed the Company to a plan of employee termination and exiting of excess facilities, which
included the benefits terminated employees would receive. In addition, the termination benefits were communicated to employees in detail sufficient to enable them to determine the nature and amounts of their individual severance benefits.



The $1.0 million restructuring charge consisted almost entirely of severance
and fringe benefits. This charge is reflected on the Companys condensed consolidated statement of operations for the three and nine months ended September 30, 2003 as Restructuring and special charges and is net of a 2001
restructuring liability adjustment of $596,000 (see 2001 Restructuring Activities below).



The $1.0 million of severance and fringe benefits resulted from 50 employees that were terminated. All of these employees were terminated as of September 30, 2003. Of the 50 terminations, 22 were engaged in
manufacturing activities, 12 were engaged in research and development activities, five were engaged in sales and marketing activities and 11 were engaged in general and administrative activities. In addition, of the 50 terminations, 41 were from
sites located in the United States and nine were from the Companys Canadian design center. None of the employees terminated were required to render service until their respective dates of termination in order to receive their termination
benefits.



The workforce reductions began in the second quarter of 2003 and
were completed in the third quarter of 2003. Approximately $871,000 of severance and fringe benefits was paid in 2003. The remaining $151,000 of cash expenditures related to the severance and fringe benefits were paid in the first quarter of 2004.



Acquisition-Related Restructuring Costs
Capitalized in Fiscal 2002 as a Cost of Acquisition



During the third quarter
of 2002, in connection with the acquisition of Xemod, the Companys management approved and initiated plans to restructure the operations of the Xemod organization. The Company recorded $393,000 to eliminate certain duplicative facilities and
for employee termination costs. These costs were recognized as a liability assumed in the purchase business combination and included in the allocation of the cost to acquire Xemod and, accordingly, have been included as an increase to goodwill.



Of the restructuring cost, $28,000 related to severance, resulting from the
termination of one employee located in the United States and engaged in general and administrative activities. The employee was terminated in the third quarter of 2002.



Of the restructuring cost, $365,000 related to costs of exiting duplicative facilities related to noncancelable lease costs. The Company
estimated the cost of duplicative facilities based on the contractual terms of its noncancelable lease agreement. Given the then current and expected real estate market conditions, the Company assumed that the exited facility would not be subleased.



Subsequently, the Company began subleasing the duplicative facility. The
Company expects to receive a total of $122,000 over the remaining term of



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##### Table of Contents

the lease, which expires in February 2005, from its sublessee. Accordingly, the Company reduced its accrued restructuring
liability and goodwill by this amount as of December 31, 2002. Any further changes to the estimates of costs associated with executing the currently approved plans of restructuring for the Xemod organization will be recorded as an increase or
decrease to restructuring on the income statement.



2002 Restructuring Activities



As a result of
the continued softness in the wireless telecommunications industry, the Company revised its cost structure in the fourth quarter of 2002 and incurred a restructuring charge of $391,000 related to a workforce reduction and exiting excess facilities.
Management with the appropriate level of authority approved and committed the Company to a plan of employee termination and consolidation of excess facilities, which included the benefits terminated employees would receive. In addition, the
termination benefits were communicated to employees in detail sufficient to enable them to determine the nature and amounts of their individual severance benefits.



Of the restructuring cost, $120,000 related to severance and fringe benefits resulting from the termination of nine employees. Of the nine
terminations, seven were engaged in research and development activities and two were engaged in sales and marketing activities. All of the terminated employees were from the United States. The workforce reductions began and were concluded in the
fourth quarter of 2002 with all of the severance and fringe benefits paid in the fourth quarter of 2002.



Of the restructuring cost, $271,000 related to costs of exiting excess facilities primarily related to noncancelable lease costs. The Company estimated the cost for excess facilities based on the contractual terms of
its noncancelable lease agreements. Given the then current and expected real estate market conditions, the Company assumed none of the excess facilities would be subleased. To date, none of the facilities have been subleased.



2001 Restructuring Activities



In 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 the Companys customers and efforts to lower their component inventory levels. These actions by the Companys
customers resulted in a slowdown in shipments and a reduction in visibility regarding future sales and caused the Company to revise its cost structure given the then revised revenue levels. As a result, in the fourth quarter of 2001, the Company
incurred a restructuring charge of $2.7 million related to a worldwide workforce reduction and consolidation of excess facilities. Management with the appropriate level of authority approved and committed the Company to a plan of termination and
consolidation of excess facilities, which included the benefits terminated employees would receive. In addition, the termination benefits were communicated to employees in detail sufficient to enable them to determine the nature and amounts of their
individual severance benefits.



Of the restructuring cost, $481,000 related to
severance and fringe benefits resulting from the termination of 27 employees. Of the 27 terminations, 12 were engaged in manufacturing activities, seven were engaged in research and development activities, five were engaged in sales and marketing
activities and three were engaged in general and administrative activities. In addition, of the 27 terminations, 23 were from sites located in the United States, three were from the Companys Canadian design center and one was from the
Companys European sales office. The workforce reductions began and were concluded in the fourth quarter of 2001 with substantially all of the severance and fringe benefits paid in the fourth quarter of 2001.



Of the restructuring cost, $2.2 million related to costs of exiting excess facilities
primarily related to noncancelable lease costs. The Company estimated the cost for excess facilities based on the contractual terms of its noncancelable lease agreements. Given the then current and expected real estate market conditions, the Company
assumed none of the excess facilities would be subleased.



At each balance
sheet date, the Company evaluates its restructuring accrual for appropriateness. In the third quarter of 2002, the Company determined that $112,000 of its 2001 restructuring liability accrual was no longer appropriate as of September 30, 2002 and
adjusted its restructuring liability accordingly. Of the $112,000 restructuring liability adjustment, $95,000 related to a noncancelable, operating lease that the Company determined would not be abandoned. The remaining $17,000 related to
termination benefits that were never redeemed by terminated employees. The $112,000 restructuring liability adjustment was recorded through the same statement of operations line item that was used when the liability was initially recorded, or
Restructuring.



In addition, in the second quarter of 2003, the
Company reoccupied one of its excess facilities as a result of the acquisition of Vari-L and relocation of its Sunnyvale, California manufacturing facility to Broomfield, Colorado. As a result, the Company determined that $596,000 of its 2001
restructuring liability accrual was no longer necessary as of June 30, 2003 and adjusted its restructuring liability accordingly. The $596,000 restructuring liability adjustment was recorded through the same statement of operations line item that
was used when the liability was initially recorded, or Restructuring.



In the third quarter of 2004, the Company entered into a sublease for a portion of one of its exited facilities. The Company expects to receive net proceeds of $98,000 over the remaining term of the lease, which expires in June 2006 from
its sublessee. Accordingly, the Company reduced its accrued restructuring liability by this amount as of September 30, 2004. The $98,000 restructuring liability adjustment was recorded through the same statement of operations line item that was used
when the liability was initially recorded, or Restructuring.



The
following table summarizes the activities related to the Companys accrued restructuring balance during the third quarter of 2004 (in thousands):



|                                             |  |                                                |     |               |   |     |                              |  |   |                                                    |   |  |   |    
|-------------------------------------------- |  | ---------------------------------------------- | --- | ------------- | - | --- | ---------------------------- |  | - | -------------------------------------------------- | - |  | - | ---
|                                             |  | Accrued Restructuring Balance at June 30, 2004 |     | Cash Payments |   |     | Non-cash Charges/Adjustments |  |   | Accrued Restructuring Balance at September30, 2004
|2003 restructuring activities                |  | $                                              | 3   |               | $ | (2  | )                            |  | $ |                                                   |   |  | $ | 1  
|Acquisition related restructuring activities |  |                                                | 64  |               |   | (23 | )                            |  | $ |                                                   |   |  |   | 41 
|2002 restructuring activities                |  |                                                | 134 |               |   | (23 | )                            |  | $ |                                                   |   |  |   | 111
|2001 restructuring activites                 |  |                                                | 354 |               |   | (43 | )                            |  | $ | (98                                                | ) |  |   | 213
|                                             |  |                                                |     |               |   |     |                              |  |   |                                                    |   |  |   |    
|                                             |  | $                                              | 555 |               | $ | (91 | )                            |  | $ | (98                                                | ) |  | $ | 366
|                                             |  |                                                |     |               |   |     |                              |  |   |                                                    |   |  |   |    



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##### Table of Contents

The following table summarizes the Companys restructuring costs and activities through September 30, 2004 (in
thousands):



|                                             |  |                                             |       |                  |   |           |                              |   |                  |                                                     |  |           |        |   |                  |   |     |           |  |                   |      |   |  |   |   |  |   |    
|-------------------------------------------- |  | ------------------------------------------- | ----- | ---------------- | - | --------- | ---------------------------- | - | ---------------- | --------------------------------------------------- |  | --------- | ------ | - | ---------------- | - | --- | --------- |  | ----------------- | ---- | - |  | - | - |  | - | ---
|                                             |  | Amount Charged to Restructuring or Goodwill |       | Cash Payments    |   |           | Non-cash Charges/Adjustments |   |                  | Accrued Restructuring Balance at September 30, 2004
|                                             |  | Severance                                   |       | LeaseCommitments |   | Severance |                              |   | LeaseCommitments |                                                     |  | Severance |        |   | LeaseCommitments |   |     | Severance |  | Lease Commitments
|2003 restructuring activities                |  | $                                           | 1,022 |                  | $ | 8         |                              | $ | (1,022           | )                                                   |  | $         | (7     | ) |                  | $ |    |           |  | $                 |     |   |  | $ |  |  | $ | 1  
|Acquisition related restructuring activities |  |                                             | 28    |                  |   | 365       |                              |   | (28              | )                                                   |  |           | (202   | ) |                  |   |    |           |  |                   | (122 | ) |  |   |  |  |   | 41 
|2002 restructuring activities                |  |                                             | 120   |                  |   | 271       |                              |   | (120             | )                                                   |  |           | (160   | ) |                  |   |    |           |  |                   |     |   |  |   |  |  |   | 111
|2001 restructuring activities                |  |                                             | 481   |                  |   | 2,189     |                              |   | (464             | )                                                   |  |           | (1,187 | ) |                  |   | (17 | )         |  |                   | (789 | ) |  |   |  |  |   | 213
|                                             |  |                                             |       |                  |   |           |                              |   |                  |                                                     |  |           |        |   |                  |   |     |           |  |                   |      |   |  |   |   |  |   |    
|                                             |  | $                                           | 1,651 |                  | $ | 2,833     |                              | $ | (1,634           | )                                                   |  | $         | (1,556 | ) |                  | $ | (17 | )         |  | $                 | (911 | ) |  | $ |  |  | $ | 366
|                                             |  |                                             |       |                  |   |           |                              |   |                  |                                                     |  |           |        |   |                  |   |     |           |  |                   |      |   |  |   |   |  |   |    



The remaining cash expenditures
related to the noncancelable lease commitments are expected to be paid over the respective lease terms, the latest of which ends in 2006.



Note 7: Stockholders Equity



In the second quarter of 2004, the Company granted 100,000 shares of non-vested common stock (stock awards) to an employee under the 1998 Stock Plan. The stock awards
were granted at par value ($0.001) and vest on a cliff basis, three years from the date of grant. However, fifty percent (50%) of the stock awards will immediately vest in the event that the closing trading price of the Companys Common Stock
on The Nasdaq National Market is greater than or equal to $6.396 for five consecutive trading days.



The Company measured the fair value of the stock awards based upon the fair market value of the Companys common stock on the date of grant. Compensation cost of $382,900 will be recognized on a straight-line
basis over the vesting period of the stock awards, or sooner, to the extent vesting accelerates. The Company recorded approximately $32,000 of compensation cost in the third quarter of 2004 as general and administrative expenses.



Under the Companys 1998 Stock Plan, a total of 310,441 stock options were exercised in
the nine months ended September 30, 2004. Under the Companys 2000 Employee Stock Purchase Plan, a total of 313,391 shares of common stock were purchased in the nine months ended September 30, 2004.



Note 8: Net Income (Loss) Per Share



The Company computes basic net income (loss) per share by dividing the net income (loss) 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) 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 employee stock awards.



The shares used in the computation of the Companys basic and diluted earnings per
common share are as follows (in thousands):



|                                                              |  |                    |  |                    |  |                    |  |                   
|------------------------------------------------------------- |  | ------------------ |  | ------------------ |  | ------------------ |  | ------------------
|                                                              |  | Three Months Ended |  | Nine Months Ended 
|                                                              |  | September 30, 2004 |  | September 30, 2003 |  | September 30, 2004 |  | September 30, 2003
|Weighted average common shares outstanding                    |  | 34,696             |  | 33,541             |  | 34,446             |  | 31,889            
|Dilutive effect of employee stock options and awards          |  | 2,688              |  |                   |  | 2,824              |  |                  
|                                                              |  |                    |  |                    |  |                    |  |                   
|Weighted average common shares outstanding, assuming dilution |  | 37,384             |  | 33,541             |  | 37,270             |  | 31,889            
|                                                              |  |                    |  |                    |  |                    |  |                   



Weighted average common shares
outstanding, assuming dilution, include the incremental shares that would be issued upon the assumed exercise of stock options.



The effect of options to purchase 5,207,707 shares of Common Stock at an average exercise price of $1.76 for the three and nine months ended September 30, 2003 has not
been included in the computation of diluted net loss per share as the effect would have been antidilutive.



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Note 9: Comprehensive Income (Loss)



The Companys comprehensive net income (loss) was the same as its net income (loss) for
the three and nine months ended September 30, 2004 and September 30, 2003.



Note 10: Segments of an Enterprise and Related Information



The Company operates in two business segments. The first segment is the Amplifier Division. This business segment consists of our amplifier, power amplifier, power module and discrete product lines. The second segment
is the Signal Source Division. This business segment consists of our signal processing and aerospace and defense product lines. The Companys reportable segments are organized as separate functional units with separate management teams and
separate performance assessment. The Companys chief operating decision maker (CODM), who is the Chief Executive Officer of the Company, evaluates performance and allocates resources based on the operating income (loss) of each segment.



The accounting policies of each segment are the same as those described in
Note 1: Organization and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements as reflected in the Companys Form 10-K filed with the SEC on March 24, 2004. There are no intersegment sales. Non-segment
items include certain corporate manufacturing expenses, advanced research and development expenses, certain sales expenses, certain general and administrative expenses, amortization of deferred stock compensation, amortization of acquisition related
intangible assets, acquired in-process research and development charges, restructuring and special charges, 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 reportable segment review. Assets and liabilities are not discretely reviewed by the CODM.



|                                              |  |                    |        |   |                        |   |                |  |   |                   |   |  |               |         |   |  |   |        |  
|--------------------------------------------- |  | ------------------ | ------ | - | ---------------------- | - | -------------- |  | - | ----------------- | - |  | ------------- | ------- | - |  | - | ------ | -
|                                              |  | Amplifier Division |        |   | Signal Source Division |   | Total Segments |  |   | Non-Segment Items |   |  | Total Company |        
|For the three months ended September 30, 2004 |  |                    |        |   |                        |   |                |  |   |                   |   |  |               |         |   |  |   |        |  
|Net revenues from external customers          |  | $                  | 7,295  |   |                        | $ | 9,442          |  | $ | 16,737            |   |  | $             |        |   |  | $ | 16,737 |  
|Operating income (loss)                       |  | $                  | 2,462  |   |                        | $ | 3,443          |  | $ | 5,905             |   |  | $             | (4,067  | ) |  | $ | 1,838  |  
|                                              |  |                    |        |   |                       
|For the nine months ended September 30, 2004  |  |                    |        |   |                        |   |                |  |   |                   |   |  |               |         |   |  |   |        |  
|Net revenues from external customers          |  | $                  | 21,385 |   |                        | $ | 24,806         |  | $ | 46,191            |   |  | $             |        |   |  | $ | 46,191 |  
|Operating income (loss)                       |  | $                  | 7,686  |   |                        | $ | 7,415          |  | $ | 15,101            |   |  | $             | (12,185 | ) |  | $ | 2,916  |  
|                                              |  |                    |        |   |                       
|For the three months ended September 30, 2003 |  |                    |        |   |                        |   |                |  |   |                   |   |  |               |         |   |  |   |        |  
|Net revenues from external customers          |  | $                  | 5,402  |   |                        | $ | 4,956          |  | $ | 10,358            |   |  | $             |        |   |  | $ | 10,358 |  
|Operating income (loss)                       |  | $                  | 1,148  |   |                        | $ | 1,063          |  | $ | 2,211             |   |  | $             | (3,768  | ) |  | $ | (1,557 | )
|                                              |  |                    |        |   |                       
|For the nine months ended September 30, 2003  |  |                    |        |   |                        |   |                |  |   |                   |   |  |               |         |   |  |   |        |  
|Net revenues from external customers          |  | $                  | 17,239 |   |                        | $ | 7,976          |  | $ | 25,215            |   |  | $             |        |   |  | $ | 25,215 |  
|Operating income (loss)                       |  | $                  | (720   | ) |                        | $ | 318            |  | $ | (402              | ) |  | $             | (4,886  | ) |  | $ | (5,288 | )



Note
11: Contingencies



In November 2001, the Company, various of its officers and
certain underwriters of the Companys initial public offering of securities were named in a purported class action lawsuit filed in the United States District Court for the Southern District of New York. The suit, In re Sirenza Microdevices,
Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-10596, alleges improper and undisclosed activities related to the allocation of shares in the Companys initial public offering, including obtaining commitments from investors
to purchase shares in the aftermarket at pre-arranged prices. Similar lawsuits concerning more than 300 other companies initial public offerings were filed during 2001, and this lawsuit is being coordinated with those actions (the
coordinated litigation). Plaintiffs filed an amended complaint on or about April 19, 2002, bringing claims for violation of several provisions of the federal securities laws and seeking an unspecified amount of damages. On or about July
1, 2002, an omnibus motion to dismiss was filed in the coordinated litigation on behalf of the issuer defendants, of which the Company and its named officers and directors are a part, on common pleadings issues. On October 8, 2002, pursuant to
stipulation by the parties, the court dismissed the officer and director defendants from the action without prejudice. On February 19, 2003, the court granted in part and denied in part a motion to dismiss filed on behalf of defendants, including
the Company. The courts order dismissed all claims against the Company except for a claim brought under Section 11 of the Securities Act of 1933.



A proposal has been made for the settlement and release of claims against the issuer defendants, including the Company, in exchange for a guaranteed recovery to be paid
by the issuer defendants insurance carriers and an assignment of certain claims. The settlement is subject to a number of conditions, including approval of the proposed settling parties and the court. If the settlement does not occur, and
litigation against the Company continues, the Company believes it has meritorious defenses and intends to defend the case vigorously. In addition, the Company does not believe the ultimate outcome will have a material adverse impact on the
Companys results of operations or financial condition.



On April 16,
2003, Scientific Components Corporation d/b/a Mini-Circuits Laboratory (Mini-Circuits) filed a complaint against the Company in the United States District Court for the Eastern District of New York alleging, among other things, breach of
warranty by the Company for alleged defects in certain goods sold to Mini-Circuits. Mini-Circuits seeks compensatory damages plus interest, costs and attorneys fees. On July 30, 2003, the Company filed an answer to the complaint and asserted
counterclaims against Mini-Circuits. Even though the Company believes Mini-circuits claims to be without merit and intends to defend the case and assert its claims vigorously, if the Company ultimately loses or settles the case, it may be
liable for monetary damages and other costs of litigation. An estimate as to the possible loss or range of loss in the event of an unfavorable outcome cannot be made as of September 30, 2004. Even if the Company is entirely successful in the
lawsuit, the Company may incur significant legal expenses and the Companys management may expend significant time in the defense.



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On August 11, 2003, OneSource Financial Corp. filed a complaint against the Company and John and Susan Ocampo in the
District Court for Travis County, Texas. The Company was served with the complaint on September 15, 2003 and filed its answer on October 16, 2003. The complaint alleges breach of contract by the Company and breach of guaranty by John and Susan
Ocampo with respect to an equipment lease entered into in 1999. OneSource alleges that the terms of the lease provided for an automatic renewal of the lease upon expiration of the original term in April 2003 and seeks an additional twelve months of
monthly rental payments on the equipment in addition to a fair market value buyout of the equipment, accrued interest, liquidated damages and attorneys fees. The Company believes OneSources claims for breach of contract to be without
merit and intends to defend the case vigorously. However, if the Company ultimately loses or settles the case, it may be liable for the amounts claimed by OneSource and other costs of litigation. The Company has estimated the range of loss in the
event of an unfavorable outcome of the matter of up to $400,000. Even if the Company is entirely successful in the lawsuit, the Company may incur significant legal expenses and the Companys management may expend significant time in the
defense.



Note 12: Recent Accounting
Pronouncement



In March 2004, the Financial Accounting Standards Board (FASB)
approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The Issues objective is to provide guidance for
identifying other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF 03-1-1 that
delays the effective date of the measurement and recognition guidance in EITF 03-1 until after further deliberations by the FASB. The disclosure requirements of EITF 03-1 are effective beginning with the Companys fiscal 2004 annual report.
Once the FASB reaches a final decision on the measurement and recognition provisions, the company will evaluate the impact of the adoption of EITF 03-1.



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



Certain statements contained in this Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A), and in particular under the
heading Business Outlook below, and elsewhere in this report 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 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 under Risk Factors below. Forward-looking statements made in this MD&A, including under Business Outlook below, supersede forward-looking statements made
prior to the date of this report, and the Business Outlook section below supersedes in its entirety Business Outlook sections in prior reports.



We begin MD&A with a discussion of Sirenzas overall strategy to give the reader an overview of the goals of our business and the
direction in which our business and products are moving. We then follow this with an overview of the critical factors that affect our net revenues, cost of revenues and operating expenses. This is followed by a discussion of the critical accounting
estimates that we believe are important to understand the assumptions and judgments incorporated in our reported financial results. In the next section we discuss the results of our operations for the three-month and nine-month periods ended
September 30, 2004 compared to the three-month and nine-month periods ended September 30, 2003. We then provide an analysis of the changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled
Liquidity and Capital Resources and Contractual Obligations.



Company Overview



We are a designer and supplier of high performance radio frequency (RF) components for the commercial communications and aerospace and defense (A&D) equipment
markets. Our products are designed to optimize the reception and transmission of voice and data signals in mobile wireless communications networks and in other wireless and wireline applications. Our commercial communications applications include
components for wireless base station applications, wireless LANs, fixed wireless networks, broadband wireline applications such as coaxial cable and fiber optic networks, cable television set-top boxes, remote meter readers, Radio Frequency
Identification (RFID) readers and wireless video transmitters. Our A&D end markets include components for government, military, avionics, space and homeland security systems.



We believe a fundamental value we provide to our commercial and A&D customers is derived from our focus on the needs of infrastructure
applications, our wide array of highly engineered products in multiple technologies, and our commitment to support our customers worldwide with sales and application engineering support.



We offer a broad line of products that range in complexity from discrete components to integrated circuits (IC) and multi-component modules
(MCM). Our discrete, IC and MCM products employ a broad array of semiconductor process technologies, which we believe allows us to optimize our products for our customer applications.



A significant downturn affected our end markets beginning in 2001. Although our net revenues were significantly impacted by this downturn in
2001, our net revenues have increased in each of the last two years, driven by new product introductions, increased market share and the addition of complementary products through our strategic acquisitions of other companies and assets.



We have acquired two companies in the last two years. On September 11, 2002, we acquired
Xemod Incorporated, which allowed us to broaden our amplifier product line to include LDMOS-based amplifier modules for wireless infrastructure applications. We have had limited sales of these products to date. On May 5, 2003, we acquired
substantially all of the assets and assumed specified liabilities of Vari-L Company, Inc., (Vari-L) which enabled us to significantly broaden our product portfolio of MCM products. The acquisition of Vari-L added a significant level of net revenues
to Sirenza subsequent to the date of the transaction.



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After the acquisition of Vari-L, we relocated our corporate headquarters and consolidated our manufacturing facilities in
Broomfield, Colorado, which allowed us to achieve significant operational cost synergies, primarily in operations, general and administrative and, to a more limited degree, in sales and marketing. The achievement of these operational cost synergies
in combination with a significant increase in our net revenues subsequent to the Vari-L transaction was the primary factor that caused a decrease in the ratio of our operating expenses (i.e. research and development, sales and marketing and general
and administrative) to our net revenues from 63% in the second quarter of 2003 to under 40% in the third quarter of 2004. If we had not achieved these cost synergies, our cost of revenues, general and administrative and sales and marketing expenses
would have been higher, both in terms of dollars and as a percentage of net revenues in the third quarter of 2004.



Historically we have utilized a divisional organization structure. The divisions focused on either specific end markets and/or product types. (See Note 10: Segments
of an Enterprise and Related Information in our Notes to Condensed Consolidated Financials Statements for further information). Currently we are organized into two, product focused divisions: our Amplifier Division and our Signal Source
Division. The two divisions are generally focused on the same end markets and customers and are managed separately in order to better manage the research and development and marketing efforts for particular products. Our Amplifier Divisions
main product lines are primarily IC-based and included discrete, amplifier, low noise amplifier and power amplifier IC products and an emerging MCM product line including power amplifier modules. Our Signal Source Divisions main product lines
are MCMs that include voltage controlled oscillators (VCOs) and phase-locked loop (PLL) products, passive and active mixers and an emerging signal coupler product line. We also have a market-focused business unit focused on the A&D market that
sells products from both the Amplifier and Signal Source divisions.



Revenue Overview



We present our revenue
results as net revenues. Net revenues are defined as our revenues less sales discounts, rebates, returns and other pricing adjustments. Historically, these revenue related adjustments have not represented a significant percentage of our
revenues.



We sell our products worldwide through a direct sales channel and a
distribution sales channel. Our distribution channel consists of all sales made by our four distribution channel partners (Avnet, Acal, Nu Horizons and RFMW). We defer the recognition of revenue and the related costs of revenue until our
distribution partners sell our products to their end customers. Our distribution partners are based in the United States and Europe. Our direct channel consists of all sales made by us in which we recognize revenue when the product has shipped,
title has transferred and no further obligations remain.



Although we have
typically not 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 a customer accepts the products.



Historically, a significant percentage of our net revenues have been derived from a limited
number of customers, including our distributors. From 2001 to 2003, our customer base shifted significantly. Significant sales and marketing efforts by us have contributed to a majority of our 2003 and 2004 net revenues being derived from a specific
set of large wireless infrastructure original equipment manufacturer customers (OEMs) including Andrew, Ericsson, Lucent and their contract manufacturers. This trend was strengthened in 2003 by the acquisition of Vari-L whose customers were also
large infrastructure OEMs, including Nokia, Siemens and Motorola. We believe that these OEMs and other global OEM suppliers will continue to account for a majority of our net revenues for the foreseeable future.



We have grown our net revenues through the introduction of new products, increasing our
market share and by adding complementary products through strategic acquisitions. Our strategy is to continue to grow our net revenues by the same means.



In addition to these strategies, we continue to focus on growing sales to customers in the other wireless, wireline and A&D end-markets, through both our direct and
distribution channels.



Our sales have also shifted in their geographic
location. From 2001 through 2003 we broadened our geographic reach so that as we exited 2003, our net revenues were evenly split between Asia, North America and Europe. Sales into Asia increased during 2004 as a result of OEMs outsourcing their
manufacturing to contract manufactures, primarily in China. As a result of the increase in shipments to OEM contract manufacturers, we anticipate that a higher percentage of our sales will be in the Asia region.



Since 2001, we have had essentially the same group of competitors. For our amplifier
products, we most often compete with Agilent, WJ Communications, M/A-COM and NEC. The main competitors in our signal source products are Alps, M/A-COM and Mini-circuits. We also compete with communications equipment manufacturers, some of who are
our customers, who design RF components internally such as Ericsson, Lucent, Motorola and Nortel Networks.



Another continuing trend is that our OEM customers started to outsource the manufacturing of their equipment to large contract manufacturers (CMs), including Celestica, Flextronics and Solectron. As a result, our
sales are now to both these CM and OEM customers. However, our OEM customers dictate the design and the pricing of the products sold to their CMs. When we report customer net revenues in our public announcements, we attribute all net revenues to the
ultimate OEM customer and not the respective CMs.



Cost of Revenues Overview



Cost of revenues consists primarily of
costs associated with:



1. Wafers from third-party wafer fabs
for our IC products,



2. Raw material components from
third-party vendors, for both our IC and MCM products,



3.
Packaging for our IC products performed by third-party vendors,



4. Assembling and testing of our MCM products in our facility,



5. Testing of our IC products in our facility, and



6.
Costs associated with procurement, production control, quality assurance, reliability and manufacturing engineering.



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For our IC products, we outsource our wafer manufacturing and packaging and then perform final testing and tape and reel
assembly at our Colorado manufacturing facility. For the majority of our MCMs, we manufacture, assemble and test most of our products at our manufacturing facility in Colorado.



Historically, we have depended upon a limited number of foundries for semiconductor wafers for our IC products. Most, but not all, of these
vendors are on multi-year contracts on which pricing is set based on volume. For the packaging of our IC products, we have depended on a small number of packaging vendors for a significant majority of our products. We anticipate that we will
continue to depend on a limited number of vendors for our wafer and packaging requirements.



We have a wider selection of component vendors to choose from in the manufacture of our MCMs. These suppliers are competitive and we expect that to the extent our volumes increase, we may be able to reduce costs by
obtaining better volume pricing and delivery terms.



We continue to explore the
outsourcing of a larger portion of our manufacturing operations. We intend to increase the level of outsourcing of our manufacturing operations if unit volumes increase to a level that makes outsourcing economically attractive.



Gross Profit and Margin Overview



Our gross profit and gross margin percent can be influenced by a number of factors,
including, but not limited to:



1. Product features



Historically, customers are willing to pay a premium for new
or different features or functionality. Therefore, increased net revenues of such products in a given period will have a positive effect on our gross margin percent.



2. Product type



In the markets in which we operate, IC products have historically yielded a higher gross margin percent than MCMs. Generally, this means in periods in
which net revenues of IC products represent a higher percentage of our total net revenues, our gross margin percentages are likely to be higher. Therefore, increased net revenues of IC products in a given period will have a positive effect on our
gross margin percent.



3. Market



Our products are sold into a wide variety of markets and each of these
markets has a pricing structure that is dictated by the economics of that particular market. Therefore, the gross margin percent on our products can vary by the markets into which they are sold. Therefore, increased sales into higher margin markets
in a given period will have a positive effect on our gross margin percent.



4. Sales Channel



Historically, the gross margin percent on sales to our large OEM customers has been lower than the gross margin percent on sales through our distribution channel or sales to some of our smaller direct customers. This is primarily due to the
bargaining power of the large OEM customers and their higher product volumes. Therefore, increased sales to our large OEM customers in a given period will likely have a negative effect on our gross margin percent.



5. Level of integration of the product



Our customers generally are seeking more integrated products with enhanced
functionality, which enables them to procure fewer products from fewer suppliers. These integrated products typically command a higher average selling price than our stand-alone components. However, the manufacturing costs of these integrated
products are higher, which generally results in a lower gross margin percent on initial sales of our integrated products in comparison to our stand-alone components. Therefore, increased sales of our more integrated products in a given period will
generally have a positive impact on our average selling prices and a negative effect on our gross margin percent.



6. The efficiency and effectiveness of our manufacturing operations



Our gross margin percent is generally lower in periods with less volume and higher in periods with increased volume. In
periods in which volumes are low, our fixed manufacturing overhead costs are allocated to fewer units, thereby decreasing our gross margin percent when those products are sold. Likewise, in periods in which volumes are high, our fixed manufacturing
overhead costs are allocated to more units, thereby increasing gross margin percent when those products are sold.



7. Provision for excess inventories



As discussed in more detail in Critical Accounting Policies and Estimates, our cost of revenues and gross margin percent may be negatively
influenced by provisions for excess inventories and positively influenced by the sale of previously written-down inventory. These actions can have material impacts on cost of revenues, gross profit and gross margin percent.



We believe that each of the above factors will continue to affect our cost of revenues, gross
profit and gross margin percentage for the foreseeable future. In addition, the interaction of the factors listed above could have a significant period-to-period effect on our cost of revenues, gross profit and gross margin percent.



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Operating Expense Overview



Research and development expenses consist primarily of salaries and salary-related expenses
for personnel engaged in R&D activities, 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 R&D costs as they are incurred. Our R&D costs can vary significantly from quarter to quarter depending on the timing and quantities of materials bought for prototype and test units. We believe one of our key
competitive advantages is our ability to offer a broad range of highly engineered products designed to meet the needs of our customers. Our strategy is to continue to invest in R&D at sufficient levels in order to maintain our competitive
advantage.



We historically have done our R&D in multiple, geographically
dispersed sites in North America rather than concentrating it in one location. We believe that locating product development at multiple sites allows us to attract key personnel we might not otherwise be able to hire. In addition, we believe that
having stand-alone R&D centers allows the personnel there to better concentrate on their development tasks. We plan to continue our strategy of conducting our R&D activities in multiple locations.



Sales and marketing expenses consist primarily of salaries, commissions and salary-related
expenses for personnel engaged in marketing, sales and application engineering functions, as well as costs associated with trade shows, promotional activities, advertising and public relations. We record as an expense, commissions to our external,
independent sales representatives when revenues from the associated sale are recognized. We record as an expense, quarterly commissions to internal sales employees based on the achievement of targeted net revenue goals.



The nature of our sales and marketing expenditures has changed significantly over time. In
2001 we invested in increasing the number of direct sales personnel and application engineering support for our customers. In particular, to support our customers, we placed both sales personnel and application engineers in various time zones around
the world. We believe that our sales force and application engineers provide us with a key competitive advantage in our markets. We intend to maintain our investment in the sales and marketing functions in order to sustain our advantage in this
area.



General and administrative expenses consist primarily of salaries and
salary-related expenses for executive, finance, accounting, information technology, and human resources personnel, as well as insurance and professional fees. We intend to increase our general and administrative expenses as the need arises.



Critical Accounting Policies and Estimates



The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate these estimates on an ongoing basis. Actual results may differ
from these estimates under different assumptions or conditions.



Management
believes the following critical accounting policies require the most significant judgments and estimates to be made in the preparation of our consolidated financial statements. We also have other policies that we consider key accounting policies,
such as our policies for revenue recognition, in particular the deferral of revenue on sales to distributors, the valuation of our net deferred tax assets, and amortization of acquisition-related intangible assets. However, these policies currently
do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective.



Non-Marketable Equity Securities: In 2002, we acquired 12.5 million shares of Global Communication Semiconductors, Inc. (GCS), a privately
held semiconductor foundry. The acquired shares represented 14% of the shares outstanding at the time. The investment strengthened our supply chain for InGaP and InP semiconductor technologies. In connection with the investment, our President and
CEO joined GCSs seven member board.



On a quarterly basis we evaluate our
investment in GCS to determine if an other than temporary decline in value has occurred. Factors that may cause an other than temporary decline in the value of our investment in GCS would include, but not be limited to, a degradation of the general
business environment in which GCS operates, the failure of GCS to achieve certain performance milestones, a series of operating losses in excess of GCS current annual business plan, the inability of GCS to continue as a going concern or a
reduced valuation as determined by a new financing event. Evaluating each of these factors involves a significant amount of judgment on managements part. If we determine that an other than temporary decline in value has occurred, we will
write-down our investment in GCS to fair value. Such a write-down could have a material adverse impact on our consolidated results of operations in the period in which it occurs. For example, in the fourth quarter of 2002, we wrote down the value of
our investment in GCS by $2.9 million after determining that GCS value had experienced an other than temporary decline. Our ultimate ability to realize our investment in GCS in the future may be dependent on the market conditions surrounding
the wireless communications industry and the related semiconductor foundry industry, as well as public markets receptivity to liquidity events such as initial public offerings or mergers and acquisition activities.



Valuation of Goodwill: Goodwill is initially recorded when the purchase price paid for an
acquisition exceeds the fair value of the net identifiable tangible and intangible assets acquired. We perform an annual review in the third quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the
recorded goodwill is impaired. Our impairment review process compares the fair value of the reporting unit to its carrying value, including the goodwill related to that reporting unit.



Our fair value approach uses two methods, a discounted future cash flow approach and market value approach. The discounted future cash flow
model uses estimates of revenue for the business unit, based on estimates of market segment growth rates, estimated costs, and an estimated appropriate discount rate. These estimates are based on historical data, various internal estimates, various
external market sources of information, and managements expectations of future trends.



Our market value approach considers our market capitalization and market multiples of revenue for comparable companies in our industry, as determined by management. This information is derived from publicly available
sources.



All of these estimates, and to a lesser degree, the selection of
comparable publicly traded companies, involve a significant amount of judgment. If the



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fair value of the reporting unit exceeds the carrying value of the assets assigned to that unit, goodwill is not impaired
and no further testing is performed. If the carrying value of the assets assigned to the reporting unit exceeds the fair value of the reporting unit, then a second step must be performed, and the implied fair value of the reporting units
goodwill must be determined and compared to the carrying value of the reporting units goodwill. If the carrying value of a reporting units goodwill exceeds its implied fair value, then an impairment loss equal to the difference will be
recorded.



Our expectations are that the most important factors in the accuracy
of our estimation will be the overall strength of the market for telecommunication components in our segments of the market, and the demand for the particular products acquired in the Vari-L transaction.



We conducted our annual goodwill impairment analysis in the third quarter of 2004. The
estimates that we used assumed that the reporting units would participate in a gradually improving market for radio frequency components in the wireless and wireline infrastructure markets, that our share of those markets would increase, and the
profitability of the reporting units would increase over time. We concluded that we did not have any impairment of goodwill based on our then forecasted discounted cash flows, our market capitalization and market multiples of revenue of comparable
companies in our industry.



Excess and Obsolete Inventories: Our provision for
excess inventories is based on levels of inventory exceeding the forecasted demand of such products within specific time horizons. We forecast demand for specific products based on the number of products we expect to sell, with such assumptions
dependent on our assessment of market conditions and current and expected orders from our customers, considering that orders are subject to cancellation with limited advance notice prior to shipment. The estimation of future demand used in the
valuation of inventory is the basis for our announced revenue outlook and our factory loading factors. If forecasted demand decreases or if inventory levels increase disproportionately to forecasted demand, inventory write-downs may be required.
Likewise, if we ultimately sell inventories that were previously written-down, we would reduce the previously recorded excess inventory provisions which would have a positive impact on our cost of revenues, gross margin percent and operating
results.



In 2001, we recorded a provision for excess inventories of $7.8
million. We subsequently began selling certain products that were previously written-down. For example, we sold approximately $620,000 of previously written-down inventory products in the first nine months of 2004. Sales of previously written-down
inventories had less than a one percent positive impact on our gross margin in the third quarter of 2004.



The following table illustrates the impact on cost of revenues of additions to written-down inventories and sales of previously written-down inventory products for historical Sirenza amplifier products and also
provides a schedule of the activity of Sirenzas written-down inventories (in thousands):



|                                |  |                                                                   |     |                                                                        |   |        |                                                             |  |   |                                           |   |  |   |      
|------------------------------- |  | ----------------------------------------------------------------- | --- | ---------------------------------------------------------------------- | - | ------ | ----------------------------------------------------------- |  | - | ----------------------------------------- | - |  | - | -----
|Nine Months Ended September 30, |  | Additions to Written- Down Inventories Charged to Cost ofRevenues |     | Sales of Written- Down Inventories with no Associated Cost of
Revenues |   |        | Dispositions of Written-DownInventories Via Scrap and Other |  |   | Written-Down Inventories at End of Period
|2004                            |  | $                                                                 |    |                                                                        | $ | (620   | )                                                           |  | $ | (236                                      | ) |  | $ | 3,251
|2003                            |  | $                                                                 | 168 |                                                                        | $ | (1,173 | )                                                           |  | $ | 9                                         |   |  | $ | 4,840



The demand for our products was
extremely volatile from late 2001 to late 2002. As our customers were very unsure of their end demand, they could not provide us with a reliable forecast of their demand for our products. Since late 2002, the forecasts from our customers have become
more reliable.



The single largest factor affecting the accuracy of our
provisions for excess inventories will be the accuracy of our end customers forecasts. Affecting these forecasts will be the strength of the recovery in the demand for communications components in our market segments. Also impacting it will be
the speed at which our products are designed in or out of our customers products.



We will ultimately dispose of written-down inventories by either selling such products or scrapping them. We currently expect sales of written-down inventory products in 2004 to be lower than in 2003. Similarly, we anticipate that we will
scrap additional written-down inventories in the near term.



Results of Operations



The following table
shows selected consolidated statement of operations data expressed as a percentage of net revenues for the periods indicated:



|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|------------------------------------------------------------------------------------- |  | ------------------------------- | -- |  | ------------------------------ | -- |  | ---- | - |  | ---- | --
|                                                                                      |  | Three Months EndedSeptember, 30 |    |  | Nine Months EndedSeptember 30, |   
|                                                                                      |  | 2004                            |    |  | 2003                           |    |  | 2004 |   |  | 2003 |   
|Net revenues:                                                                         |  | 100                             | %  |  | 100                            | %  |  | 100  | % |  | 100  | % 
|Cost of revenues:                                                                     |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Cost of product revenues                                                              |  | 49                              | %  |  | 55                             | %  |  | 51   | % |  | 53   | % 
|Amortization of deferred stock compensation                                           |  | 0                               | %  |  | 0                              | %  |  | 0    | % |  | 0    | % 
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Total cost of revenues                                                                |  | 49                              | %  |  | 55                             | %  |  | 51   | % |  | 53   | % 
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Gross profit                                                                          |  | 51                              | %  |  | 45                             | %  |  | 49   | % |  | 47   | % 
|Operating expenses:                                                                   |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Research and development (exclusive of amortization of deferred stock compensation)   |  | 14                              | %  |  | 23                             | %  |  | 15   | % |  | 25   | % 
|Sales and marketing (exclusive of amortization of deferred stock compensation)        |  | 12                              | %  |  | 16                             | %  |  | 13   | % |  | 18   | % 
|General and administrative (exclusive of amortization of deferred stock compensation) |  | 13                              | %  |  | 16                             | %  |  | 13   | % |  | 19   | % 
|Amortization of deferred stock compensation                                           |  | 0                               | %  |  | 1                              | %  |  | 0    | % |  | 1    | % 
|Amortization of acquisition related intangible assets                                 |  | 2                               | %  |  | 4                              | %  |  | 2    | % |  | 3    | % 
|Restructuring                                                                         |  | (1                              | %) |  | 0                              | %  |  | 0    | % |  | 2    | % 
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Total operating expenses                                                              |  | 40                              | %  |  | 60                             | %  |  | 43   | % |  | 68   | % 
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Income (loss) from operations                                                         |  | 11                              | %  |  | (15                            | %) |  | 6    | % |  | (21  | %)
|Interest and other income (expense), net                                              |  | 0                               | %  |  | 1                              | %  |  | 0    | % |  | 1    | % 
|Provision for income taxes                                                            |  | 0                               | %  |  | 0                              | %  |  | 0    | % |  | 0    | % 
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   
|Net income (loss)                                                                     |  | 11                              | %  |  | (14                            | %) |  | 6    | % |  | (20  | %)
|                                                                                      |  |                                 |    |  |                                |    |  |      |   |  |      |   



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Comparison of the Three and Nine Months Ended September 30, 2004 and September 30, 2003



Net Revenues



The following table sets forth information pertaining to our sales channel and geographic
net revenue composition expressed as a percentage of net revenues for the periods indicated. Our sales channel structure is explained above in the Revenue Overview section. Our geographic sales composition is based upon the location to
which we ship our products.



|              |  |                                  |   |  |                                 |   |  |      |   |  |      |  
|------------- |  | -------------------------------- | - |  | ------------------------------- | - |  | ---- | - |  | ---- | -
|              |  | Three Months Ended September 30, |   |  | Nine Months Ended September 30, |  
|              |  | 2004                             |   |  | 2003                            |   |  | 2004 |   |  | 2003 |  
|Direct        |  | 88                               | % |  | 81                              | % |  | 87   | % |  | 70   | %
|Distribution  |  | 12                               | % |  | 19                              | % |  | 13   | % |  | 30   | %
|              |  |                                  |   |  |                                 |   |  |      |   |  |      |  
|Total         |  | 100                              | % |  | 100                             | % |  | 100  | % |  | 100  | %
|              |  |                                  |   |  |                                 |   |  |      |   |  |      |  
|United States |  | 22                               | % |  | 39                              | % |  | 23   | % |  | 44   | %
|Asia          |  | 50                               | % |  | 31                              | % |  | 43   | % |  | 24   | %
|Europe        |  | 26                               | % |  | 29                              | % |  | 30   | % |  | 28   | %
|Other         |  | 2                                | % |  | 1                               | % |  | 4    | % |  | 4    | %
|              |  |                                  |   |  |                                 |   |  |      |   |  |      |  
|Total         |  | 100                              | % |  | 100                             | % |  | 100  | % |  | 100  | %
|              |  |                                  |   |  |                                 |   |  |      |   |  |      |  



Net revenues increased to $16.7
million in the third quarter of 2004 from $10.4 million in the third quarter of 2003. Of this increase, approximately $4.5 million was the result of additional sales of our signal source products, largely driven by the transition from our VCO
products to our more integrated, recently released PLL products, which have higher average selling prices. Increases in sales of our amplifier products comprised the rest of the increase. This increase in sales of amplifier products was attributable
to a strengthening of customers end markets, increased market share and penetration of new market segments. Net revenues increased to $46.2 million for the nine months ended September 30, 2004 from $25.2 million for the nine months ended
September 30, 2003. Of this increase, approximately $16.8 million was the result of additional sales of our signal source products acquired as part of the Vari-L asset purchase on May 5, 2003. Increases in sales of our amplifier products comprised
the rest of the increase.



Net revenues to the Asia-Pacific and European
regions increased in absolute dollars, primarily as a result of the increases in sales of our signal source products. Also contributing to the increases were our successful marketing efforts within these regions of our amplifier products and an
increase in shipments to contract manufacturers for our large OEM customers, particularly in the Asia-Pacific region.



The increases in direct net revenues as a percentage of net revenues and in absolute dollars is primarily the result of an increase in sales of our signal source
products, which are predominantly sold through our direct sales channel. Other contributory factors included a strengthening of our direct customers end markets, increased market share at direct customers and penetration of new market segments
at direct customers.



The decrease in our distribution net revenues as a
percentage of net revenues was primarily the result of the increases in our direct net revenues as explained above.



Cost of Revenues



Cost of revenues increased to $8.2 million in the third quarter of 2004 from $5.8 million in the third quarter of 2003 primarily as a result of additional costs
associated with increased sales of our signal source products. Costs of revenues attributable to our signal source products totaled $5.1 million in the third quarter of 2004 compared to approximately $3.1 million in the third quarter of 2003. In
addition, in the third quarter of 2004, we sold inventory products that were previously written-down of approximately $155,000 compared to $340,000 in the third quarter of 2003. Operations personnel increased to 157 at September 30, 2004 from 130 at
September 30, 2003 primarily as a result of the personnel added in connection with the Vari-L transaction.



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Cost of revenues increased to $23.6 million for the nine months ended September 30, 2004 from $13.4 million for the nine
months ended September 30, 2003 primarily as a result of costs associated with the manufacturing our signal source products. Costs of revenues attributable to our signal source products totaled $14.6 million for the nine months ended September 30,
2004 compared to approximately $5.0 million for the nine months ended September 30, 2003. In addition, for the nine months ended September 30, 2004, we sold inventory products that were previously written-down of approximately $620,000 compared to
$1.2 million for the same period in 2003.



Gross Profit



Gross profit increased to $8.5 million in the third
quarter of 2004 from $4.6 million in the third quarter of 2003. The increase in gross profit was primarily attributable to additional gross profit resulting from the sales of our signal source products as discussed above. Gross margin percent
increased to 51% in the third quarter of 2004 from 44% in the third quarter of 2003. The increase in gross margin percent is primarily attributable to the achievement of operational cost synergies as a result of the consolidation of our
manufacturing facilities in Broomfield, Colorado, subsequent to the Vari-L transaction. Also, we incurred relocation and related expenses of approximately $461,000 in the third quarter of 2003 to move operations personnel and the Sunnyvale and Tempe
manufacturing facilities to Broomfield, Colorado. We did not incur any relocation and related expenses in the third quarter of 2004. Partially offsetting the increase in gross margin percent were fewer sales of previously written-down inventories in
the third quarter of 2004 compared to the third quarter of 2003. Sales of previously written-down inventories had slightly less than a 100 basis point positive impact on our gross margin in the third quarter of 2004 compared to a 329 basis point
positive impact on our gross margin in the third quarter of 2003.



Gross profit
increased to $22.6 million for the nine months ended September 30, 2004 from $11.8 million for the nine months ended September 30, 2003. The increase in gross profit was primarily attributable to additional gross profit resulting from the sales of
our signal source products. Gross margin percent increased to 49% for the nine months ended September 30, 2004 from 47% for the nine months ended September 30, 2003. The increase in gross margin percent is primarily attributable to the achievement
of operational cost synergies as a result of the consolidation of our manufacturing facilities in Broomfield, Colorado, subsequent to the Vari-L transaction. Also, we incurred relocation and related expenses of approximately $950,000 in the nine
months ended September 30, 2003 to move operations personnel and the Sunnyvale and Tempe manufacturing facilities to Broomfield, Colorado. We did not incur any significant relocation and related expenses in the nine months ended September 30, 2004.
Partially offsetting the increase in gross margin percent were fewer sales of previously written-down inventories in the nine months ended September 30, 2004 compared to the same period in 2003. Sales of previously written-down inventories had a 134
basis point positive impact on our gross margin in the nine months ended September 30, 2004 compared to a 465 basis point positive impact on our gross margin for the same period in 2003.



Operating Expenses:



Research and Development. Research and development expenses totaled $2.3 million in the third quarters of 2004 and 2003. Higher salaries and
salary related expenses resulted in an increase in research and development expenses of approximately $130,0000 in third quarter of 2004 compared to the third quarter of 2003. This increase was largely offset by a reduction in research and
development material expenditures of approximately $69,000 and lower depreciation of approximately $21,000. Research and development personnel decreased to 51 at September 30, 2004 from 56 at September 30, 2003.



Research and development expenses increased to $6.8 million for the nine months ended
September 30, 2004 from $6.2 million for the nine months ended September 30, 2003. This increase is primarily attributable to the costs of additional personnel and facilities relating to research and development activities for our new signal source
products. Salaries and salary related expenses increased by approximately $277,000 and facility costs for research and development increased by approximately $227,000 for the nine months ended September 30, 2004 compared to the nine months ended
September 30, 2003. Other contributory factors to the increase in research and development expenses included additional costs associated with software maintenance, depreciation and equipment calibration.



Sales and Marketing. Sales and marketing expenses increased to $1.9 million in the third
quarter of 2004 from $1.6 million in the third quarter of 2003. This increase was primarily attributable to costs of additional personnel and higher salaries and salary related expenses, which added costs of approximately $227,000. Additionally,
inside and outside sales representative commissions increased by approximately $68,000 as a result of higher sales. Sales, marketing and applications engineering personnel increased to 37 at September 30, 2004 from 31 at September 30, 2003 primarily
as a result of the personnel added in connection with our expansion after the Vari-L transaction.



Sales and marketing expenses increased to $5.9 million for the nine months ended September 30, 2004 from $4.6 million for the nine months ended September 30, 2003. This increase was primarily attributable to the costs
of additional personnel, services, inside and outside sales representative commissions and facilities relating to the expansion of our sales and marketing functions after the Vari-L transaction. Salaries and salary related expenses increased by
approximately $518,000 and inside and outside sales representative commissions increased by approximately $455,000 for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003. Additionally, facility costs for
sales and marketing activities increased by approximately $135,000 and travel costs increased by approximately $121,000 during that same time period.



General and Administrative. General and administrative expenses increased to $2.2 million in the third quarter of 2004 from $1.7 million in the third quarter of 2003.
This increase was primarily attributable to costs of additional personnel and higher salaries and salary related expenses, which added costs of approximately $320,000. Additionally, professional fees (i.e. legal, accounting, financial printing and
Section 404 Sarbanes-Oxley Act implementation) increased by approximately $150,000. General and administrative personnel increased to 32 at September 30, 2004 from 28 at September 30, 2003.



General and administrative expenses increased to $5.9 million for the nine months ended
September 30, 2004 from $4.7 million for the nine months ended September 30, 2003. This increase was primarily attributable to a larger general and administrative infrastructure necessary to support the larger company after the Vari-L transaction.
Salaries and salary related expenses increased by approximately $494,000, professional fees (i.e. legal, accounting, financial printing and Section 404 Sarbanes-Oxley Act implementation) increased by approximately $451,000 and general and
administrative facility costs increased by approximately $235,000 for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003.



Amortization of Deferred Stock Compensation. During the three months ended September 30, 2003, we recorded $149,000 of amortization of
deferred stock compensation. During the nine months ended September 30, 2004 and September 30, 2003 we recorded $3,000 and $482,000 of amortization of deferred stock compensation. The deferred stock compensation was fully amortized in the first
quarter of 2004.



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Amortization of Acquisition Related Intangible Assets. The acquisition of Vari-L included approximately $6.0 million of
amortizable intangible assets, including developed product technology of $4.8 million, customer relationships of $870,000 and committed customer backlog of $310,000. We are amortizing the fair value of developed product technology on a straight-line
basis over a period of 44 to 68 months, which represents the estimated useful life of the developed product technology. The weighted average amortization period for developed product technology is approximately 65 months. We are amortizing the fair
value of customer relationships on a straight-line basis over a period of 32 months and are amortizing the fair value of committed customer backlog on a straight-line basis over a period of 12 months, which represents the useful life of each
acquired intangible asset.



The acquisition of Xemod included approximately
$770,000 of amortizable intangible assets including patented core technologies of $700,000 and internal-use software of $70,000. We are amortizing the patented core technologies on a straight-line basis over a period of three to five years and the
internal-use software on a straight-line basis over a period of three years, which represents the useful life of each acquired intangible asset.



In the three months ended September 30, 2004 and September 30, 2003 we recorded amortization of $354,000 and $431,000, respectively, related to our acquired intangible
assets. In the nine months ended September 30, 2004 and September 30, 2003 we recorded amortization of $1.2 million and $782,000, respectively, related to our acquired intangible assets.



Restructuring. See Note 6 Restructuring Activities in our Notes to Condensed Consolidated Financials Statements for further
information.



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 $71,000 for the three months ended September 30, 2004
and $81,000 for the three months ended September 30, 2003. We had net interest and other income of $140,000 for the nine months ended September 30, 2004 and $347,000 for the nine months ended September 30, 2003. The decrease in net interest and
other income for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003 is primarily attributable to a lower average cash and cash equivalents and available-for-sale securities balance.



Provision for Income Taxes



Sirenzas provision for income taxes of $86,000 and $135,000 for the three and nine
months ended September 30, 2004, respectively, represents federal alternative minimum taxes and various state income taxes. This provision is based upon our estimated 2004 net income before income taxes and takes into consideration the utilization
of our net operating loss carry forwards. To the extent our estimate of fiscal year 2004 net income before income tax changes, our provision for income taxes will change as well. Historically, we have not recorded a provision for income tax expense
because we had been generating net losses. Furthermore, we have not recorded an income tax benefit for the years 2003 and 2002 primarily due to continued substantial uncertainty regarding our ability to realize our deferred tax assets. Based upon
available objective evidence, there has been sufficient uncertainty regarding the ability to realize our deferred tax assets, which warrants a full valuation allowance in our financial statements. The factors considered included prior losses,
inconsistent profits, and lack of carry-back potential to realize our deferred tax assets. Based on our estimates for 2004 and beyond, we believe the uncertainty regarding the ability to realize our deferred tax assets may diminish to the point
where it is more likely than not that our deferred tax assets will be realized. At such point, we would reverse all or a portion of our valuation allowance which will result in an income tax benefit.



Liquidity and Capital Resources



We have financed our operations primarily through the private sale in 1999 of mandatorily
redeemable convertible preferred stock (which was subsequently converted to common stock) and from the net proceeds received upon completion of our initial public offering in May 2000. As of September 30, 2004, we had cash and cash equivalents and
long-term investments of $16.5 million. At September 30, 2004, our working capital approximated $19.9 million.



Operating activities provided cash of $4.3 million for the nine months ended September 30, 2004. Working capital uses of cash for the nine months ended September 30, 2004 included increases in accounts receivable and
inventories and decreases in accrued restructuring. Our accounts receivable and inventories increased, in reaction to, and in support of, our revenue increase in the first nine months of 2004.



Accounts receivable, net increased from $7.8 million at December 31, 2003 to $8.4 million at
September 30, 2004, an increase of $590,000, or approximately 8%. The increase in accounts receivable is the result of an increase in sales. However, as a result of more linear shipments and improved cash collections in the third quarter of 2004,
our days sales outstanding (DSO) decreased to 45 days from 53 days in the fourth quarter of 2003.



Inventories increased from $6.5 million at December 31, 2003 to $9.8 million at September 30, 2004, an increase of $3.3 million, or approximately 51%. At the same time, our inventory turns fell from 4.9 to 3.3. The
increase in the dollar amount of inventory and the fall in inventory turns in the third quarter were primarily the result of an increase in inventory to support anticipated product shipments in the fourth quarter of 2004 and early 2005. This
increase in inventory was particularly evident within finished goods, which increased from $1.2 million at December 31, 2003 to $3.3 million at September 30, 2004.



The decrease in accrued restructuring was primarily related to severance payments made to terminated employees and lease commitment
payments. Please refer to Note 6 of our Notes to Condensed Consolidated Financial Statements for more information.



Working capital sources of cash included an increase in deferred margin on distributor inventory in anticipation of increased distributor end market demand and an
increase in accrued liabilities.



Net cash used in investing activities totaled
$2.0 million for the nine months ended September 30, 2004. Cash used in investing activities in the nine months ended September 30, 2004 was primarily attributable to capital expenditures.



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Cash provided by financing activities totaled $789,000 for the nine months ended September 30, 2004. The major financing
inflow of cash for the nine months ended September 30, 2004 was related to proceeds from employee stock plans. The major financing use of cash for the nine months ended September 30, 2004 was for principal payments on capital lease obligations.



Under the current economic and telecommunications market conditions and the
current company structure, and outlook for 2004, we expect that we will be able to fund our working capital and capital expenditure needs from the cash generated from operations for the foreseeable future. Other sources of liquidity that may be
available to us are the leasing of capital equipment, a line of credit at a commercial bank, or the sale of Company securities. On January 30, 2004, we filed a shelf registration for the sale of Company securities with the Securities and Exchange
Commission. If we draw on these additional sources of liquidity and capital resources to grow our business, execute our operating plans, or acquire complementary technologies or businesses, it could result in lower profitability and/or additional
dilution to our stockholders.



Contractual
Obligations



As of September 30, 2004, our contractual obligations, including
payments due by period, were as follows (in thousands):



|                                   |  |                        |       |                  |   |           |  |           |       |                   |   |     |  |   |  
|---------------------------------- |  | ---------------------- | ----- | ---------------- | - | --------- |  | --------- | ----- | ----------------- | - | --- |  | - | -
|                                   |  | Payments due by Period
|                                   |  | Total                  |       | Less than 1 year |   | 1-3 years |  | 3-5 years |       | More than 5 years
|Operating lease commitments        |  | $                      | 3,457 |                  | $ | 1,372     |  | $         | 1,736 |                   | $ | 349 |  | $ | 
|Capital lease commitments          |  | $                      | 79    |                  | $ | 79        |  | $         |      |                   | $ |    |  | $ | 
|Unconditional purchase obligations |  | $                      | 830   |                  | $ | 830       |  | $         |      |                   | $ |    |  | $ | 
|                                   |  |                        |       |                  |   |           |  |           |       |                   |   |     |  |   |  
|Total (1)                          |  | $                      | 4,366 |                  | $ | 2,281     |  | $         | 1,736 |                   | $ | 349 |  | $ | 

---

|(1) | Total does not include certain purchase obligations as discussed below.
|--- | -----------------------------------------------------------------------



Purchase commitments are defined as agreements to purchase goods
or services that are enforceable and legally binding and that specify all significant terms, including open purchase orders. We include in purchase commitments contractual obligations we have with our vendors who supply us with our wafer
requirements for IC-based products. Because the wafers we purchase are unique to these suppliers and involve significant expense, our agreements with these suppliers prohibit cancellation subsequent to the production release of the products in our
suppliers manufacturing facilities, regardless of whether our end customers cancel orders with us or our requirements are reduced. Purchase orders or contracts for the purchase of raw materials, other than wafer requirements for IC-based
products, and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase
rather than binding agreements. Our purchase orders are based on our current manufacturing needs and are generally fulfilled by our vendors within short time horizons. Except for wafers for our IC-based products, we do not have significant
agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements for three months. We also enter into contracts for outsourced services; however, the obligations under
these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty.



We expect to fund these commitments with cash flows from operations. The expected timing of payments of the obligations discussed above is based upon current information.
Timing and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.



Off-Balance-Sheet Arrangements



As of September 30, 2004, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.



Business Outlook



This business outlook represents the view of management at this time under the current
economic and telecommunications market conditions, and the current Company structure and outlook and contains many forward-looking statements. Actual events or results may differ materially from any forward-looking statement as a result of various
factors, including those described under Risk Factors below.



Our
expectations for the remainder of fiscal year 2004 remain cautiously optimistic. Starting in the third quarter of 2003, we have seen an increase in the demand for our products across a broad spectrum of customers and applications and for a wide
variety of our products. At this time, it is uncertain whether this increase in sales represents a significant long-term upturn in demand from our end customers, or a short-term upturn, which is a critical factor in assessing our financial outlook.



We believe that the primary factors affecting our revenue outlook for the
remainder of 2004 will be the extent of the continued recovery of the overall communications market, the demand from our customers for new products being introduced by both our Amplifier and Signal Source divisions, and the growth of sales in our
A&D business unit. In addition to these key factors, we expect the trend towards the large wireless OEMs outsourcing their manufacturing to CMs will continue. We continue to focus on our goals for the year of growing net revenues through the
introduction of new products, increasing our market share and by adding complementary products.



We believe the most significant influences on our outlook for gross margin percent for the remainder of the year will be the factors mentioned under Gross Profit and Margin Overview, including product
features, product type, market, sales channel, level of integration of the product, the efficiency and effectiveness of our manufacturing operations, and the provision for excess inventory. Increasing our gross profit and maintaining our gross
margin percent are key goals for 2004.



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With respect to operating expenses, we believe that the single largest factor affecting our overall operating expenses
will be the extent of the recovery in our customers end markets and the resulting impact on our net revenues. If the increase in sales we saw in the latter part of 2003 and through the first three quarters of 2004 fails to continue during the
remainder of 2004, we anticipate taking actions to adjust operating expenses accordingly.



As mentioned earlier in this MD&A, we believe our continued success is dependent on technological advancement, including developing new technologies and strategic products for our various market segments. This
will be driven by our research and development spending during the remainder of 2004. Our research and development expenses could vary significantly from quarter to quarter depending on the timing of wafer purchases and mask sets.



Regarding general and administrative expense, we believe the most significant factor that
might impact our estimates will be the amount and timing of the cost for complying with Sarbanes-Oxley regulations, particularly the implementation of Section 404 requirements for auditor attestation regarding our internal controls over financial
reporting.



We believe the most significant factors influencing our cash flow
for the remainder of the year will be our net income, the length of time it takes our key customers to pay our accounts receivable, the amount of inventory we will have to buy to support our customers orders, our capital expenditures, and finally
the amount of cash received from employee stock plans. Under the current economic and telecommunications market conditions, and the current Company structure, and outlook for 2004, we expect that we will be able to fund our working capital and
capital expenditure needs for the foreseeable future from the cash generated from operations.



The key factors influencing our net income are outlined above.



We believe the most important items affecting our accounts receivable management will be the linearity of our shipments and the percentage of total net revenue to our large OEM customers and their CMs. Our large OEMs
and their CMs generally pay more slowly than our other customers thereby slowing our cash collection from our account receivables. With the visibility we have now into this mix, our goal for 2004 is to keep our DSO reasonably consistent with our
recent experience.



We believe that the two largest factors affecting our cash
usage in inventory will be the order pattern of our customers and the amount of inventory required to support our forecasted demand. As a result of our expectations regarding our future sales, we may have to increase the amount of inventory we
carry. With the visibility we now have into these factors, our goal is to keep our inventory turns reasonably consistent with our recent experience.



We believe the largest factors influencing cash usage for capital expenditures will be the order patterns of our customers. To the extent the order and sales patterns
experienced in 2003 and the first, second and third quarters of 2004 continue, we will continue to purchase a limited amount of capital equipment in response to these orders.



Factors that may influence the level of proceeds we receive from employee stock plans include our stock price level and employee cash needs
for personal reasons.



Risk Factors



We have a history of significant operating losses. If we are unable to increase our
revenues sufficiently to offset our operating expenses, we may not maintain or increase our profitability.



Although income from our operations approximated $1.8 million for the three months ended September 30, 2004, we have incurred significant losses from operations in each
of the last three fiscal years. Losses from operations approximated $20.7 million, $11.4 million and $6.7 million for the fiscal years ended December 31, 2001, 2002 and 2003, respectively. As of September 30, 2004, our accumulated deficit was
approximately $86.5 million. If we are unable to increase our revenues sufficiently to offset our operating expenses, we will not maintain our profitability, and our history of operating losses will continue.



Our operating results will fluctuate and we may not meet quarterly financial
expectations, which could cause our stock price to decline.



Our
quarterly operating results have varied significantly 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. Factors that could cause our operating results to fluctuate include:



| |  | general economic growth or decline;
| | - | -----------------------------------



| |  | telecommunications and A&D industry conditions generally and demand for products containing RF components specifically;
| | - | -----------------------------------------------------------------------------------------------------------------------



| |  | the reduction, rescheduling or cancellation of orders by customers, whether as a result of slowing demand for our products or our customers products, over-ordering of our
products or otherwise;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  | our ability to introduce and deliver new products on a timely basis;
| | - | --------------------------------------------------------------------



| |  | market acceptance of our products;
| | - | ----------------------------------



| |  | availability of raw materials, semiconductor wafers and manufacturing capacity;
| | - | -------------------------------------------------------------------------------



| |  | increase in the costs or discontinuance of products obtained from suppliers;
| | - | ----------------------------------------------------------------------------



| |  | changes in customer purchasing cycles and component inventory levels;
| | - | ---------------------------------------------------------------------



| |  | fluctuations in manufacturing output, yields, or other potential problems or delays in the fabrication, assembly, testing or delivery of our products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | changes in selling prices for our RF components due to competitive or currency exchange rate pressures;
| | - | -------------------------------------------------------------------------------------------------------



| |  | the gain or loss of a key customer or significant changes in the financial condition of one or more key customers;
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | amounts and timing of investments in R&D;
| | - | -----------------------------------------



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| |  | costs associated with acquisitions and the integration of acquired companies;
| | - | -----------------------------------------------------------------------------



| |  | the effects of changes in accounting standards, including rules regarding recognition of expense for employee stock options; and
| | - | --------------------------------------------------------------------------------------------------------------------------------



| |  | the effects of war, acts of terrorism or global threats, such as disruption in general economic activity, and the effects on the economy and our business due to increasing oil
prices.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The occurrence of these and other factors could cause us
to fail to meet quarterly financial expectations, which could cause our stock price to decline.



Our gross margin will fluctuate from period to period.



Numerous factors will cause our gross margin to fluctuate from period to period. For example, the gross margin on sales to our large OEM customers has historically been lower than on sales through our distribution
channel or sales to some of our smaller direct customers, primarily due to the bargaining power attendant with large OEM customers and their higher product volumes. If, as we expect, these larger equipment OEMs and other global OEM suppliers
continue to account for a majority of our net revenues for the foreseeable future, the continuance of this trend will have a negative impact on our gross margins in future periods. In addition, sales of our IC products have historically yielded a
higher gross margin than our MCM products. Therefore, increased sales of MCM products in a given period will likely have a negative effect on our gross margin. Other factors that could cause our gross margin to fluctuate include the features of the
products we sell, the markets into which we sell our products, the level of integration of our products, the efficiency and effectiveness of our manufacturing operations, provisions for excess inventories and sales of previously written-down
inventory. As a result of these or other factors, we may be unable to maintain or increase our gross margin in future periods.



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



Our growth will depend
on the 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 products will grow at all. If the market does not grow or
experiences a downturn, we may be unable to expand our business. In the past, there have been announcements throughout the worldwide telecommunications industry of reductions in component inventory levels and equipment production volumes, and of
delays in the build-out of new wireless and wireline infrastructure. These events have had an adverse effect on our operations and caused us, in the past, to lower our previously announced expectations for our financial results, which caused the
market price of our common stock to decrease. The occurrence of the events described above could result in lower or erratic sales for our products and could 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 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;
| | - | -------------------------------------------------------



| |  | gain market acceptance of our products;
| | - | ---------------------------------------



| |  | improve our existing products to meet customer requirements;
| | - | ------------------------------------------------------------



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



| |  | adapt our products to support evolving wireless equipment architectures; and
| | - | ----------------------------------------------------------------------------



| |  | access new process and product technologies.
| | - | --------------------------------------------



We estimate that the development cycles of some of our products from concept to production could last more than 12 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 and results of
operations.



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. 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 have in the past, and may in the future occur relating to our product quality, performance and
reliability, despite testing by us, our suppliers or our customers. If these failures or defects occur or become significant, we could experience:



| |  | loss of net revenues;
| | - | ---------------------



| |  | delays in, or cancellations or rescheduling of, orders or shipments;
| | - | --------------------------------------------------------------------



| |  | loss of, or delays in, market acceptance of our products;
| | - | ---------------------------------------------------------



| |  | significant expenditures of capital and resources to resolve such problems;
| | - | ---------------------------------------------------------------------------



| |  | other costs including inventory write-offs and costs associated with customer support;
| | - | --------------------------------------------------------------------------------------



| |  | product returns or discounts;
| | - | -----------------------------



| |  | diversion of technical and other resources from our other development efforts;
| | - | ------------------------------------------------------------------------------



| |  | warranty claims, lawsuits and liability for damages caused by such defects; and
| | - | -------------------------------------------------------------------------------



| |  | loss of credibility with our current and prospective customers.
| | - | ---------------------------------------------------------------



We depend on a relatively small number of customers, many of which are concentrated in the wireless communications market, for a significant portion of our sales.
The loss of sales to any of these customers, or a downturn in that market, could adversely affect our revenues.



A relatively small number of customers account for a significant portion of our net revenues in any particular period. For example, in the third quarter of 2004, sales to
Solectron, a contract manufacturer for several of our large wireless infrastructure OEM customers, primarily Motorola, represented



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29% of net revenues; sales through Acal plc (Acal), one of our distributors and sales representatives, represented 12% of
net revenues; and sales through Avnet Electronics Marketing (Avnet), another of our distributors and sales representatives, represented 12% of net revenues. In addition, wireless infrastructure OEMs, such as Ericsson and Motorola, account for a
significant amount of our sales, either directly or through sales to their contract manufacturers such as Solectron. For example, during the three months ended September 30, 2004, Motorola and Ericsson accounted for, directly or indirectly, in
excess of 10% of our net revenues. The loss of any one of these customers could limit our ability to sustain and grow our revenues.



In addition, a substantial portion of our revenues are currently derived from sales of components for wireless base station applications. As a result, downturns in the
wireless communications market, such as the significant downturn that began in 2001, could have a material adverse effect on our business, financial condition and results of operations.



Sales to our large OEM customers have been affected by a pattern of product price decline, which can harm our business.



The market for our wireless communications products is characterized
by rapid technological change, evolving industry standards, product obsolescence, and significant price competition, and, as a result, is subject to decreases in selling prices. We are unable to predict future prices for our products, but we expect
that prices for products that we sell to our large wireless infrastructure OEM customers, who we expect to continue to account for a majority of our net revenues for the foreseeable future, will continue to be subject to significant downward
pressure. The recent economic contraction and shifts in the wireless services market have significantly increased the pressure on wireless infrastructure OEMs to deliver products with improved performance at lower prices. As a result, these OEMs are
requiring components from their suppliers, including us, to achieve similar performance/price improvement. In recent years, OEMs have also sought to lower costs by using contract manufacturers to build their products. As these contract manufacturers
are rewarded on their ability to achieve operational cost reductions, we are likely to see further pricing pressure as a result of this outsourcing trend. Accordingly, our ability to maintain or increase revenues will be dependent on our ability to
increase unit sales volumes of existing products and to successfully develop, introduce and sell new products with higher prices into both the wireless infrastructure and other markets. We are also devoting significant effort into developing new
sales channels and customer bases in which price competition will not be as significant as it is in selling to large wireless infrastructure OEMs. There can be no assurance that we will be able to develop significant new customers outside the
wireless infrastructure market, increase unit sales volumes of existing products, or develop, introduce and/or sell new products.



The declining selling prices we have experienced in the past and the pricing pressure we continue to face in the wireless infrastructure market have also negatively
affected and may in the future negatively affect our gross margins. To maintain or increase our margins, we must continue to meet our customers design and performance needs while reducing our costs through efficient raw material procurement
and process and product improvements. There can be no assurance that even if we were able to increase unit sales volumes and reduce our costs per unit, that we would be able to maintain or increase revenues or gross margins.



We may experience difficulties in managing any future growth.



Our ability to successfully manage our business plan in a rapidly evolving market requires
us to effectively plan and manage any future growth. Our ability to manage future growth will be dependent in large part on a number of factors, including:



| |  | maintaining access to sufficient manufacturing capacity to meet customer demands;
| | - | ---------------------------------------------------------------------------------



| |  | arranging for sufficient supply of key components to avoid shortages of components that are critical to our products;
| | - | ---------------------------------------------------------------------------------------------------------------------



| |  | retaining and/or hiring additional skilled technical, marketing and managerial personnel;
| | - | -----------------------------------------------------------------------------------------



| |  | adhering to our high quality and process execution standards, particularly as we hire and train new employees;
| | - | --------------------------------------------------------------------------------------------------------------



| |  | upgrading our operational and financial systems, procedures and controls, including possible improvement of our accounting and internal management systems; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | maintaining high levels of customer satisfaction.
| | - | -------------------------------------------------



In the second half of 2003, we experienced a significant increase in demand for our signal source products, which strained our resources. If we are unable to effectively
manage any future growth, our operations may be impacted and we may experience delays in delivering products to our customers. Any such delays could affect our customers ability to deliver products in accordance with their planned
manufacturing schedules, which could adversely affect our customer relationships. We may also be required to build additional component inventory in order to offset expected future component shortages. If we do not manage any future growth properly,
our business, financial condition and results of operations could be materially adversely affected.



We may encounter difficulties managing our business if there is a decreased demand for our products in future periods.



The world economy in general and the telecommunications industry in particular experienced a significant slowdown that began in 2001.
Economic downturns may cause us to experience difficulties maintaining employee morale, retaining employees, completing research and development initiatives, maintaining relationships with our customers and vendors and obtaining financing on
favorable terms or at all. Significantly lower sales would likely lead to further provisions for excess inventories and further actions to restructure our operations. These actions could include, but would not be limited to, further abandonment or
obsolescence of equipment, further consolidation of facilities and a further workforce reduction. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.



We expect to make future acquisitions, which involve numerous risks.



We have in the past and will continue to evaluate potential
acquisitions of, and investments in, complementary businesses, technologies, services or products, and expect to pursue such acquisitions and investments if appropriate opportunities arise. However, we may not be able to identify suitable
acquisition or investment candidates in the future, or if we do identify suitable candidates, may not be able to make such acquisitions or investments on commercially acceptable terms, or at all. In the event we pursue acquisitions, we will face
numerous risks including:



| |  | difficulties in integrating the personnel, operations, technology or products and service offerings of the acquired company;
| | - | ----------------------------------------------------------------------------------------------------------------------------



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| |  | diversion of managements attention from normal daily operations of the business;
| | - | ---------------------------------------------------------------------------------



| |  | difficulties in entering markets where competitors in such markets have stronger market positions;
| | - | --------------------------------------------------------------------------------------------------



| |  | difficulties in managing and integrating operations in geographically dispersed locations;
| | - | ------------------------------------------------------------------------------------------



| |  | the loss of any key personnel of the acquired company;
| | - | ------------------------------------------------------



| |  | maintaining customer, supplier or other favorable business relationships of acquired operations;
| | - | ------------------------------------------------------------------------------------------------



| |  | insufficient revenues to offset increased expenses associated with acquisitions; and
| | - | ------------------------------------------------------------------------------------



| |  | additional expense associated with amortization or depreciation of acquired assets.
| | - | -----------------------------------------------------------------------------------



Even if an acquisition or alliance is successfully integrated, we may not receive the expected benefits or synergies of the transaction.
Past transactions have resulted, and future transactions may result, in significant costs and expenses and charges to earnings. The accounting treatment for any acquisition may result in significant goodwill, which, if impaired, will negatively
affect our consolidated results of operations. In addition, any completed, pending or future transactions may contribute to financial results of the combined company that may result in unanticipated expenses or liabilities associated with the
acquired assets or businesses. Furthermore, we may incur indebtedness or issue equity securities to pay for any future acquisitions. The incurrence of indebtedness could be detrimental to our results of operations, and the issuance of equity
securities could be dilutive to our existing stockholders. Any or all of the above factors may differ from the investment communitys expectations in a given quarter, which could negatively affect our stock price.



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. These fabs include Northrup Grumman (formerly TRW) and RF Micro Devices, or RFMD, for gallium arsenide, or GaAs, Atmel for silicon germanium, or SiGe, TriQuint Semiconductors for our discrete devices and Global Communication Semiconductors,
Inc., or GCS, for our indium gallium phosphide heterojunction bipolar, or InGaP HBT, devices. A significant amount of our Amplifier Division products sold in 2002 and 2003 were manufactured in GaAs by Northrup Grumman and SiGe by Atmel. The supply
agreement with Northrup Grumman provides us with a commitment for a supply of wafers through December 31, 2005. Atmel is currently our sole source supplier for SiGe wafers. GCS is now our sole source for wafers using the InGaP HBT process
technology. GCS is a privately held company with limited operating history. The loss of one of our third-party wafer fabs, in particular Northrup Grumman, Atmel or GCS, or any reduction of capacity, manufacturing disruption, or delay or reduction in
wafer supply, would negatively impact our ability to fulfill customer orders, perhaps materially, and could damage our relationships with our customers, either of which could 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, it would be extremely difficult to find an alternative source of supply. Even if
we were able to find an alternative source, using alternative or additional third-party wafer fabs would require an extensive qualification process that could prevent or delay product shipments, which could have a material adverse effect on our
business, financial condition and results of operations.



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. 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. 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 could have a material adverse effect on our business, financial condition and results of operations.



In the past, we have experienced delays in product shipments, quality issues and poor manufacturing yields from our third-party wafer fabs, which in turn delayed product shipments to our customers and resulted in
higher costs of production and lower gross margins. 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 semiconductor 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, substantially all of our Amplifier Division net revenues in 2002, 2003 and the first nine months of 2004 were attributable to
products packaged by two subcontractors. 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 sufficiently high quality or timely
packaging of our products. The loss or reduction in packaging capacity of any of our current packagers, particularly Circuit Electronic Industries Public Co., Ltd. (CEI), would significantly damage our business. In addition, increased packaging
costs would adversely affect our margins and 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 could have a
material adverse effect on our business, financial condition and results of operations.



We are investigating and evaluating additional opportunities to outsource the manufacture and test of some of our products, particularly our MCM products. We may not be able to outsource these functions on favorable terms, or at all.



We are investigating and evaluating additional opportunities to
outsource the manufacture and test of some of our products, particularly our MCM products. We intend to begin outsourcing a portion of our MCM manufacturing and testing function once a third party provider has been identified and qualified and it
becomes economically viable for both the vendor and us. However, we may be unable to successfully outsource this function in the near term, or at all. The selection and ultimate qualification of a subcontractor to manufacture and test our products
could be costly and increase our



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cost of revenues. In addition, we also do not know if we will be able to negotiate a long-term contract with a
subcontractor to manufacture and production test our products at acceptable prices or volumes. Because our components require sophisticated testing techniques, we may also be unable to obtain sufficient high quality or timely manufacture and testing
of our products. If a potential subcontractor to manufacture and test RF components is not successful in adopting such techniques, 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 could have a material adverse effect on our business, financial condition and results of operations.



A significant portion of our products are sold to international customers, which
exposes us to numerous risks.



A significant portion of our direct
sales and sales through our distributors are to foreign purchasers, particularly in China, Germany, Sweden, and Finland. International sales approximated 60% of our net revenues in 2003 and 78% of our net revenues in the third quarter of 2004.
Demand for our products in foreign markets could decrease, which could have a material adverse effect on our business, financial condition and results of operations. Moreover, sales to international customers may be subject to numerous risks,
including:



| |  | changes in trade policy and regulatory requirements;
| | - | ----------------------------------------------------



| |  | fluctuations in foreign currency rates;
| | - | ---------------------------------------



| |  | duties, tariffs and other trade barriers and restrictions;
| | - | ----------------------------------------------------------



| |  | timing and availability of export licenses;
| | - | -------------------------------------------



| |  | delays in placing orders;
| | - | -------------------------



| |  | difficulties in managing distributors sales to foreign countries;
| | - | ------------------------------------------------------------------



| |  | the complexity and necessity of using foreign representatives;
| | - | --------------------------------------------------------------



| |  | compliance with a variety of foreign and U.S. laws affecting activities abroad;
| | - | -------------------------------------------------------------------------------



| |  | potentially adverse tax consequences;
| | - | -------------------------------------



| |  | trade disputes; and
| | - | -------------------



| |  | political, social and economic instability.
| | - | -------------------------------------------



We are also subject to risks associated with the imposition of legislation and regulations relating to the import or export of high technology products. We cannot predict
whether quotas, duties, taxes or other charges or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries. Because sales of our products have been denominated to date in United
States dollars, increases in the value of the United States dollar could increase the price of our products so that they become relatively more expensive to customers in the local currency of a particular country, leading to a reduction in sales and
profitability in that country. Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from United States laws; therefore, we may be limited in our ability to enforce our rights under such
agreements and to collect damages, if awarded.



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, primarily in Thailand and Malaysia, package substantially all of our semiconductor products and two suppliers in Hong Kong
provide the majority of the packaging materials used in the production of our semiconductor components. In addition, we obtain some of our semiconductor wafers from one supplier located in Germany. 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
| | - | -----------------------------------------------



| |  | 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 semiconductor wafers, packaging materials and services, and other materials, which could have a material adverse effect on our business, financial
condition and results of operations.



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 profitability. Although we have not
experienced any significant difficulty to date in obtaining these materials, shortages may arise in the future. If key components or materials are unavailable, our revenues could decline.



We face several risks associated with our Aerospace and Defense business unit.



In 2003 we announced the creation of our A&D business unit that targets customers in the
military, defense, avionics, space and homeland security market segments. We can make no assurance that we will be able to successfully serve the needs of potential customers in these markets or realize any significant net revenues from this
business. Through our participation in this market, we may make sales to companies doing business with the U.S. government as prime contractors or subcontractors. Although unlikely, we may also do business directly with the U.S. government. In
addition to normal business risks, we face several unique risks, largely beyond our control, associated with doing business, directly or indirectly, with the U.S. government, including:



| |  | the reliance of our customers and us on the availability of government funding and their and our ability to obtain future government contractor awards;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | the intense competition for future government contractor awards;
| | - | ----------------------------------------------------------------



| |  | changes in government or customer priorities due to program reviews or revisions to strategic objectives;
| | - | ---------------------------------------------------------------------------------------------------------



| |  | difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work;
| | - | --------------------------------------------------------------------------------------------------------------------



| |  | the ability of the U.S. government to terminate, without prior notice, partially completed government programs that were previously authorized, resulting in possible termination of
our customer contracts;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | significant changes in contract scheduling; and
| | - | -----------------------------------------------



| |  | government import and export policies and other government regulations.
| | - | -----------------------------------------------------------------------



The termination of funding for a government program for which we serve as a contractor or subcontractor or supplier would result in a loss of anticipated future net
revenues attributable to that program. Our government business is also subject to specific procurement regulations and a variety of socio-economic and other requirements, including necessary security clearances. These requirements, although
customary in government contracts, increase our performance and compliance costs and could result in delays in fulfilling customer orders or our inability to meet customer demand for products. For example, in the third quarter of 2003, we were
temporarily unable to accept orders and manufacture products for certain government contractors due to a delay in our obtaining the necessary government clearances relating to required documentation changes following our acquisition of Vari-L.
Government contract performance and compliance costs might increase in the future, which could reduce our margins and have a material adverse effect on our business, financial condition and results of operations.



We depend on Avnet and Acal, distributors and sales representatives for our products,
for a significant portion of our sales. The loss of Avnet or Acal as a distributor or sales representative, or the failure to develop new and viable distribution relationships, may adversely affect our revenues.



Although sales through distribution have significantly decreased since 2003, two
distributors who also serve as sales representatives for our products, Acal and Avnet, accounted for a substantial portion of our net revenues in recent periods. Sales through Acal, including sales to our Acal sales representatives, represented 12%
of net revenues in the three months ended September 30, 2004 and in the year ended December 31, 2003, respectively. Sales to Avnet, including sales to our Avnet Asia sales representatives, represented 12% and 16% of net revenues in the three months
ended September 30, 2004 and in the year ended December 31, 2003, respectively. Acal and Avnet distribute our products to a large number of end customers. We anticipate that sales through Acal and Avnet will continue to account for a substantial
portion of our net revenues in the near term. The loss of Avnet or Acal and our failure to develop new and viable distribution relationships could materially harm our ability to sustain and grow our revenues. Moreover, any transition involving our
distribution partners could also have a negative impact on our operating results. For example, in the second quarter of 2003, we realigned our worldwide sales channels to enhance geographic market reach, customer service and technical support. As
part of this realignment, we terminated our existing distribution agreement with Richardson Electronics and entered into new distribution agreements. The transition in distributors had a slightly negative effect on our distribution channel sales in
the first nine months of 2004.



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



The
RF component industry is intensely competitive in each of the markets we serve and is characterized by the following:



| |  | rapid technological change;
| | - | ---------------------------



| |  | rapid product obsolescence;
| | - | ---------------------------



| |  | limited number of wafer fabs for particular process technologies;
| | - | -----------------------------------------------------------------



| |  | price erosion; and
| | - | ------------------



| |  | unforeseen manufacturing yield problems.
| | - | ----------------------------------------



With respect to products sold in our Amplifier Division, we compete primarily with other suppliers of high-performance RF components used in the infrastructure of
communications networks such as Agilent, M/A-COM and NEC. We also compete with communications equipment manufacturers, some of whom are our customers, who design RF components internally such as Ericsson, Lucent, Motorola and Nortel Networks. With
respect to our Signal Source Division products, our primary competitors are Alps, M/A-COM and Minicircuits. We expect continuing competition both from existing competitors and from a number of companies that may enter the RF component market, and we
may see future competition from companies that may offer new or emerging technologies. In addition, future competition may come from component suppliers based in countries with lower production costs that could translate into pricing pressures;
companies that provide a more comprehensive active and passive RF component portfolio that would provide our customers with an attractive supply alternative; and IC manufacturers as they add additional functionality at the chip level to compete with
our products. In addition, many of our current and potential competitors have significantly greater financial, technical, manufacturing and marketing resources than we have. As a result, prospective customers may 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 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 RF components from third-party suppliers. We have historically generated a majority of our
revenues through sales of components to these manufacturers through our distributors and direct sales force. If communications equipment manufacturers increase their internal production of RF components and reduce purchases of RF components from
third parties, our revenues could decrease and our business, financial condition and results of operations could be materially adversely affected.



Our results may suffer if we are not able to accurately forecast demand for our products.



Our business is characterized by short-term orders and shipment schedules. Customer orders can typically be cancelled or rescheduled without
significant penalty to the customer. Because we do not have substantial non-cancelable backlog, we typically plan our production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate
substantially.



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During periods of industry downturn, such as we have recently experienced, customers do not generally order products as
far in advance of the scheduled shipment date as they do during periods when our industry is not in a downturn. We therefore experienced lower levels of backlog during the last downturn, making it more difficult for us to forecast production levels,
capacity and revenues. We are currently in a period where it is difficult to predict future growth in the markets we serve, making it more difficult to estimate requirements for production capacity. If we are unable to plan inventory and production
levels effectively, our business, financial condition and results of operations could be materially adversely affected.



From time to time, in response to anticipated long lead times to obtain inventory and materials from our outside suppliers and foundries, we may order materials in
advance of customer demand. This advance ordering has in the past and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less
saleable. Accordingly, our business, financial condition and results of operations could be materially adversely affected.



We have a material amount of goodwill and long-lived assets, including finite-lived acquired intangible assets, which, if impaired, could materially and adversely
affect our results of operations.



We have a material amount of
goodwill, which is the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired. Goodwill is subject to a periodic impairment evaluation based on the fair value of the
reporting unit. We also have a material amount of long-lived assets, including finite-lived acquired intangible assets recorded on our balance sheet. These assets are evaluated for impairment whenever events or changes in circumstances indicate the
carrying value of the related assets may not be recoverable. Any impairment of our goodwill, long-lived assets, including finite-lived acquired intangible assets, could have a material adverse effect on our business, financial condition and results
of operations.



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. Competition for these
employees is significant. Our failure to retain our present employees and hire additional qualified personnel in a timely manner and on reasonable terms could materially adversely affect our business, financial condition and results of operations.
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 have a material adverse effect on our business, financial
condition and results of operations. We may not be successful in retaining these key personnel.



The outcome of litigation in which we have been named as a defendant is unpredictable and an adverse decision in any such matter could have a material adverse affect on our financial position and results of
operations.



We are defendants in litigation matters that are
described under the heading Legal Proceedings in this quarterly report on Form 10-Q. These claims may divert financial and management resources that would otherwise be used to benefit our operations. Although we believe that we have
meritorious defenses to the claims made in each and all of the litigation matters to which we have been named a party, and intend to contest each lawsuit vigorously, no assurances can be given that the results of these matters will be favorable to
us. An adverse resolution of any of these lawsuits could have a material adverse effect on our business, financial condition and results of operations.



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.



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 impacted. For example, in 2001 and 2002 the installation of 2.5G and 3G equipment occurred at a much slower rate than was initially
expected. In addition, while historically the demand for wireless and wireline communications has exerted pressure on standards bodies worldwide to adopt new standards for these products, such adoption generally only occurs 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. If further delays in adoption of industry standards were to occur, it could result in lower sales for our products.



Recent changes in environmental laws and regulations applicable to manufacturers of electrical and electronic equipment have required us to redesign some of our
products, and may increase our costs and expose us to liability.



The
implementation of new technological or legal requirements, such as recycling requirements and lead-free initiatives, has impacted our products and solutions and manufacturing processes, and could affect the timing of product introductions, the cost
of our production or products as well as their commercial success. For example, a recent directive in the European Union bans the use of lead, other heavy metals and certain flame retardants in electrical and electronic equipment beginning in 2006.
As a result, in advance of this deadline, some of our customers selling products in Europe have begun demanding products from component manufacturers that do not contain these banned substances and have indicated that they will not design in



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non-compliant components beginning in 2005. Because most of our existing IC products utilize a tin-lead alloy as a
soldering material in the manufacturing process, our MCM products contain circuit boards plated with a tin-lead surface and certain molded active components in our MCM products are molded with a banned substance, we must redesign our products and
obtain compliant raw materials from our suppliers to respond to the new legislation and to meet customer demand. Although we began this process in the first quarter of 2004 and have released several compliant products to date, we have numerous
products that remain noncompliant. In addition, our industry has no long term data to assess the effectiveness, shelf-life, moisture sensitivity, and thermal tolerance of alternative materials. Accordingly, the products we produce to comply with the
new regulatory standards may not perform as well as our current products. In addition, this redesign is resulting in increased research and development and manufacturing and quality control costs. Moreover, if we are unable to successfully and
timely redesign existing products and introduce new products that meet the standards set by environmental regulation and our customers, sales of our products could decline, which could materially adversely affect our business, financial condition
and results of operations.



Another recent directive in the European Union
imposes a take-back obligation on manufacturers of electrical and electronic equipment. This obligation requires manufacturers of electrical or electronic equipment to finance the collection, recovery and disposal of the electrical or
electronic equipment that they produce. At this time, member states in the European Union have not adopted legislation implementing this directive. In addition, methods of complying with these potential take-back obligations have not been developed
by our industry. Even if the specific legislation does not directly apply to us or our products and solutions, our customers could potentially shift some of their costs to us through contractual provisions. We are unable to assess the impact of this
proposed legislation on us at this time but it could result in increased costs to us, which could materially adversely affect our business, financial condition and results of operations.



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



Our future success and ability to compete is dependent in part upon
our proprietary information and technology. Although we have patented technology and have patent applications pending, we primarily 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, vendors, customers and potential customers, and strictly limit the disclosure and use of our
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. Our ability to enforce our patents, copyrights, software licenses and other intellectual property is limited by our financial resources and is subject to
general litigation risks, as well as uncertainty as to the enforceability of various intellectual property rights in various countries. If we seek to enforce our rights, we may be subject to claims that the intellectual property right is invalid, is
otherwise not enforceable or is licensed to the party against whom we are asserting a claim. In addition, our assertion of intellectual property rights could result in the other party seeking to assert alleged intellectual property rights of its own
against us.



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.



Our industry is characterized by the existence of a large number of patents and 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 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. In addition, our sales agreements often contain intellectual property indemnities, such as patent and copyright
indemnities, and our customers may assert claims against us for indemnification if they receive claims alleging that their products infringe others intellectual property rights.



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 or pay material amounts of damages. In addition, parties making these claims may be able to obtain an
injunction, which could prevent us from selling our products. We may increasingly be subject to infringement claims as the number of our products grows.



Our strategic investment in GCS, a privately held semiconductor foundry, could be further impaired or never redeemed, which could have a material adverse impact on
our results of operations.



In the first quarter of 2002, we invested
$7.5 million in GCS, a privately held semiconductor foundry. We periodically evaluate our investment in GCS to determine if an other than temporary decline in value has occurred. Factors that may cause an other than temporary decline in the value of
our investment in GCS would include, but not be limited to, a degradation of the general business environment in which GCS operates, the failure of GCS to achieve certain performance milestones, a series of operating losses in excess of GCS
current annual business plan, the inability of GCS to continue as a going concern or a reduced valuation as determined by a new financing event. If we determine that an other than temporary decline in value has occurred, we will write-down our
investment in GCS to fair value. Such a write-down could have a material adverse impact on our consolidated results of operations in the period in which it occurs. For example, in the fourth quarter of 2002, we wrote down the value of our investment
in GCS by $2.9 million after determining that GCS had experienced an other than temporary decline in value.



Our investment in GCS is also at risk to the extent that we cannot ultimately sell our shares of GCS stock, for which there is currently no public market. Even if we are able to sell these shares, the sale price may
be less than the price paid.



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



Our founding stockholders control a significant amount of our outstanding common stock. As a result, these stockholders are able to exert a significant degree of influence over our management and affairs and control
matters requiring stockholder approval, including the election of our directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of us and might affect the
market price of our securities. In addition, the interests of these stockholders may not always coincide with our interests or the interests of other stockholders.



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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 our securities. 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 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. Quantitative and Qualitative Disclosures About Market Risk



Although 78% of our sales were to non-U.S. based customers and distributors in the third quarter of 2004, all sales continue to be denominated 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 September 30, 2004, our cash and cash equivalents consisted primarily of bank deposits, federal agency and related securities and money market funds issued or managed by large financial institutions in the United States. 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, short-term
investments and long-term investments. For example, a one percent increase or decrease in interest rates would increase or decrease Sirenzas annual interest income by approximately $165,000.



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Item 4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file
or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.



Changes in Internal Control Over Financial Reporting



There was no change in our internal control over financial reporting that occurred during
the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting



Part II. Other Information



Item 1. Legal Proceedings



In November 2001, we,
various officers and certain underwriters of the Companys initial public offering of securities were named in a purported class action lawsuit filed in the United States District Court for the Southern District of New York. The suit, In re
Sirenza Microdevices, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV- 10596, alleges improper and undisclosed activities related to the allocation of shares in our initial public offering, including obtaining commitments from
investors to purchase shares in the aftermarket at pre-arranged prices. Similar lawsuits concerning more than 300 other companies initial public offerings were filed during 2001, and this lawsuit is being coordinated with those actions (the
coordinated litigation). Plaintiffs filed an amended complaint on or about April 19, 2002, bringing claims for violation of several provisions of the federal securities laws and seeking an unspecified amount of damages. On or about July
1, 2002, an omnibus motion to dismiss was filed in the coordinated litigation on behalf of the issuer defendants, of which we and our named officers and directors are a part, on common pleadings issues. On October 8, 2002, pursuant to stipulation by
the parties, the court dismissed the officer and director defendants from the action without prejudice. On February 19, 2003, the court granted in part and denied in part a motion to dismiss filed on behalf of defendants, including us. The
courts order dismissed all claims against us except for a claim brought under Section 11 of the Securities Act of 1933.



A proposal has been made for the settlement and release of claims against the issuer defendants, including us, in exchange for a guaranteed recovery to be paid by the
issuer defendants insurance carriers and an assignment of certain claims. The settlement is subject to a number of conditions, including approval of the proposed settling parties and the court. If the settlement does not occur, and litigation
against us continues, we believe we have meritorious defenses and intend to defend the case vigorously.



On April 16, 2003, Scientific Components Corporation d/b/a Mini-Circuits Laboratory (Mini-Circuits) filed a complaint against us in the United States District Court for the Eastern District of New York
alleging, among other things, breach of warranty by us for alleged defects in certain goods sold to Mini-Circuits. Mini-Circuits seeks compensatory damages plus interest, costs and attorneys fees. On July 30, 2003, we filed an answer to the
complaint and asserted counterclaims against Mini-Circuits. Even though we believe Mini-circuits claims to be without merit and we intend to defend the case and assert our claims vigorously, if we ultimately lose or settle the case, we may be
liable for monetary damages and other costs of litigation. Even if we are entirely successful in the lawsuit, we may incur significant legal expenses and our management may expend significant time in the defense.



On August 11, 2003, OneSource Financial Corp. filed a complaint against us and John and Susan
Ocampo in the District Court for Travis County, Texas. Sirenza was served with the complaint on September 15, 2003 and filed its answer on October 16, 2003. The complaint alleges breach of contract by Sirenza and breach of guaranty by John and Susan
Ocampo with respect to an equipment lease entered into in 1999. OneSource alleges that the terms of the lease provided for an automatic renewal of the lease upon expiration of the original term in April 2003 and seeks an additional twelve months of
monthly rental payments on the equipment in addition to a fair market value buyout of the equipment, accrued interest, liquidated damages and attorneys fees. Sirenza believes OneSources claims for breach of contract to be without merit
and we intend to defend the case vigorously. However, if we ultimately lose or settle the case, we may be liable for the amounts claimed by OneSource and other costs of litigation. Even if we are entirely successful in the lawsuit, we may incur
significant legal expenses and our management may expend significant time in the defense.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



The effective date of our Registration Statement filed on Form S-1 under the Securities Act of 1933 (File No. 333-31382), relating to our initial public offering of our common stock was May 24, 2000. Public trading
commenced on May 25, 2000. The offering closed on May 31, 2000. The managing underwriters of the public offering were Deutsche Banc Alex. Brown, Banc of America Securities LLC, CIBC World Markets and Robertson Stephens. In the offering (including
the exercise of the underwriters overallotment option on June 16, 2000), we sold an aggregate of 4,600,000 shares of our common stock for an initial price of $12.00 per share.



The aggregate proceeds from the offering were $55.2 million. We paid expenses of approximately $5.4 million, of which approximately $3.9
million represented underwriting discounts and commissions and approximately $1.5 million represented expenses related to the offering. Net proceeds from the offering were approximately $49.8 million. As of September 30, 2004 approximately $45.1
million of the net proceeds have been used to purchase property and equipment, make capital lease payments, fund our operating activities, and fund our acquisitions of Xemod and Vari-L and investment in GCS. The remaining $4.7 million of net
proceeds have been invested in interest bearing cash equivalents, short-term investments and long-term investments.



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Item 3. Defaults Upon Senior Securities



None



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



None



Item 5. Other Information



None



Item 6. Exhibits



|               |  |                                                                                                                                                                            
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                
|3.1            |  | Restated Certificate of Incorporation of Registrant. (1)                                                                                                                   
|               | 
|3.2            |  | Certificate of Ownership and Merger of SMDI Sub, Inc. into Stanford Microdevices, Inc. (effecting corporate name change of Registrant to Sirenza Microdevices, Inc.).
(2)
|               | 
|3.3            |  | Bylaws of Registrant, as amended, as currently in effect.(3)                                                                                                               
|               | 
|4.1            |  | Form of Registrants Common Stock certificate. (4)                                                                                                                         
|               | 
|4.2            |  | Registration Rights Agreement, by and among Registrant and the parties named therein, dated as of January 30, 2004.(4)                                                     
|               | 
|10.1           |  | Employee Stock Purchase Plan, as amended October 14, 2004.                                                                                                                 
|               | 
|10.2           |  | Form of Notice of Stock Purchase Right and related agreements pursuant to the Companys Amended and Restated 1998 Stock Plan.                                              
|               | 
|11.1           |  | Statement regarding computation of per share earnings. (5)                                                                                                                 
|               | 
|31.1           |  | CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                               
|               | 
|31.2           |  | CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                               
|               | 
|32.1           |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                   

---

|(1) | This exhibit is incorporated by reference to the Registrants Registration Statement on Form S-1 and all amendments thereto, Registration No. 333-31382, initially filed with
the Securities and Exchange Commission on March 1, 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This exhibit is incorporated by reference to the Registrants Annual Report on Form 10-K for its fiscal year ended December 31, 2001, filed with the Securities and Exchange
Commission on March 27, 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This exhibit is incorporated by reference to the Registrants Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange
Commission on March 29, 2001.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This exhibit is incorporated by reference to the Registrants Registration Statement on Form S-3 and all amendments thereto, Registration No. 333-112382, initially filed with
the Securities and Exchange Commission on January 30, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | This exhibit has been omitted because the information is shown in the Consolidated Financial Statements or Notes thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------



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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.



|                        |  |                                                                                            
|----------------------- |  | -------------------------------------------------------------------------------------------
|DATE: November 12, 2004 |  | SIRENZA MICRODEVICES, INC.                                                                 
|                        | 
|                        |  | /s/ Robert Van Buskirk                                                                     
|                        |  | ROBERT VAN BUSKIRK President, Chief Executive Officer and Director                         
|                        | 
|DATE: November 12, 2004 |  | /s/ Thomas J. Scannell                                                                     
|                        |  | THOMAS J. SCANNELL Vice President, Finance, Chief Financial Officer and Assistant Treasurer



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EXHIBIT INDEX



|               |  |                                                                                                                                                                            
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                
|3.1            |  | Restated Certificate of Incorporation of Registrant. (1)                                                                                                                   
|               | 
|3.2            |  | Certificate of Ownership and Merger of SMDI Sub, Inc. into Stanford Microdevices, Inc. (effecting corporate name change of Registrant to Sirenza Microdevices, Inc.).
(2)
|               | 
|3.3            |  | Bylaws of Registrant, as amended, as currently in effect.(3)                                                                                                               
|               | 
|4.1            |  | Form of Registrants Common Stock certificate. (4)                                                                                                                         
|               | 
|4.2            |  | Registration Rights Agreement, by and among Registrant and the parties named therein, dated as of January 30, 2004.(4)                                                     
|               | 
|10.1           |  | Employee Stock Purchase Plan, as amended October 14, 2004.                                                                                                                 
|               | 
|10.2           |  | Form of Notice of Stock Purchase Right and related agreements pursuant to the Companys Amended and Restated 1998 Stock Plan.                                              
|               | 
|11.1           |  | Statement regarding computation of per share earnings. (5)                                                                                                                 
|               | 
|31.1           |  | CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                               
|               | 
|31.2           |  | CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                               
|               | 
|32.1           |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                   

---

|(1) | This exhibit is incorporated by reference to the Registrants Registration Statement on Form S-1 and all amendments thereto, Registration No. 333-31382, initially filed with
the Securities and Exchange Commission on March 1, 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This exhibit is incorporated by reference to the Registrants Annual Report on Form 10-K for its fiscal year ended December 31, 2001, filed with the Securities and Exchange
Commission on March 27, 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This exhibit is incorporated by reference to the Registrants Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange
Commission on March 29, 2001.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This exhibit is incorporated by reference to the Registrants Registration Statement on Form S-3 and all amendments thereto, Registration No. 333-112382, initially filed with
the Securities and Exchange Commission on January 30, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | This exhibit has been omitted because the information is shown in the Consolidated Financial Statements or Notes thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------



33