<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

        [X]     Quarterly report pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934 for the quarterly period ended
                October 1, 2000.

                                       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: _________________

                           STANFORD MICRODEVICES, INC.
             (Exact name of registrant as specified in its charter)


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


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

                                 (408) 616-5400
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days. Yes [X]  No [ ]

As of October 29, 2000, there were 26,348,928 shares of registrant's Common
Stock outstanding.



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<PAGE>   2

                           STANFORD MICRODEVICES, INC.

                                      INDEX


<TABLE>
<S>                                                                                                 <C>
PART I. FINANCIAL INFORMATION.......................................................................

     ITEM 1. FINANCIAL STATEMENTS ..................................................................

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS .............................................................

     ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK ............................

PART II. OTHER INFORMATION .........................................................................



     ITEM 1. LEGAL PROCEEDINGS .....................................................................

     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .............................................

     ITEM 3: DEFAULTS UPON SENIOR SECURITIES .......................................................

     ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...................................

     ITEM 5: OTHER INFORMATION .....................................................................

     ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K ......................................................

SIGNATURES .........................................................................................

INDEX TO EXHIBITS FOR FORM 10-Q ....................................................................

EXHIBIT 21.1 .......................................................................................

EXHIBIT 27.1 .......................................................................................
</TABLE>



                                       2
<PAGE>   3
                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


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

<TABLE>
<CAPTION>
                                                                 September 30,   December 31,
                                                                     2000           1999
                                                                 -------------   ------------
                                                                 (unaudited)
<S>                                                              <C>             <C>
Assets
Current assets:
       Cash and cash equivalents                                  $  12,784       $  10,965
       Short-term investments                                        44,341              --
       Accounts receivable, net                                       4,228           1,681
       Inventories                                                    6,941           2,227
       Other current assets                                             527             348
                                                                  ---------       ---------
Total current assets                                                 68,821          15,221

       Property and equipment, net                                    7,451           4,271
       Deposits and other assets                                        360             227
                                                                  ---------       ---------
Total assets                                                      $  76,632       $  19,719
                                                                  =========       =========

Liabilities, mandatorily redeemable convertible preferred
  stock and stockholders' equity (Net Capital Deficiency)
Current liabilities:
       Accounts payable                                           $   3,162       $   2,493
       Accrued expenses                                               2,069             972
       Deferred margin on distributor inventory                       6,689           3,287
       Capital lease obligations, current portion                       754             723
                                                                  ---------       ---------
Total current liabilities                                            12,674           7,475

       Capital lease obligations                                      1,228           1,299

       Mandatorily redeemable convertible preferred
         stock                                                           --          38,857

Stockholders' equity (Net Capital Deficiency)
       Common Stock                                                      26              15
       Additional paid-in capital                                   121,031           5,342
       Deferred stock compensation                                   (3,963)         (4,255)
       Accumulated deficit                                          (54,364)        (29,014)
                                                                  ---------       ---------
Total stockholders' equity (Net Capital Deficiency)                  62,730         (27,912)
                                                                  ---------       ---------

       Total liabilities, mandatorily redeemable convertible
         preferred stock and stockholders' equity (Net
         Capital Deficiency)                                      $  76,632       $  19,719
                                                                  =========       =========
</TABLE>


                            See accompanying notes.


                                       3
<PAGE>   4

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

<TABLE>
<CAPTION>
                                                                            Three Months Ended          Nine Months Ended
                                                                       ---------------------------- ---------------------------
                                                                       September 30,  September 30, September 30,  September 30,
                                                                           2000           1999          2000           1999
                                                                       -------------  ------------- -------------  -------------
<S>                                                                    <C>            <C>           <C>            <C>
Net revenues                                                             $  8,857       $  4,973      $ 23,993       $ 12,358
Cost of revenues (exclusive of amortization of
  deferred stock compensation of $39, $115, $88 and $88
  for the three and nine months ended September 30, 2000 and
  three and nine months ended September 30, 1999, respectively)             3,982          2,463        10,252          6,662
                                                                         --------       --------      --------       --------
Gross profit                                                                4,875          2,510        13,741          5,696

Operating expenses:
    Research and development (exclusive of amortization of
      deferred stock compensation of $75, $214, $1 and $1
      for the three and nine months ended September 30, 2000 and
      three and nine months ended September 30, 1999, respectively)         2,458            493         5,584          1,382
    Sales and marketing (exclusive of amortization of
      deferred stock compensation of $76, $224, $15 and $15 for
      the three and nine months ended September 30, 2000 and
      three and nine months ended September 30, 1999, respectively)         1,381            710         4,385          1,896
    General and administrative (exclusive of amortization of
      deferred stock compensation of $155, $419, $7 and $7 for
      the three and nine months ended September 30, 2000 and
      three and nine months ended September 30, 1999, respectively)         1,286            514         3,398          1,170
    Amortization of deferred stock compensation                               345            111           972            111
                                                                         --------       --------      --------       --------
Total operating expenses                                                    5,470          1,828        14,339          4,559
                                                                         --------       --------      --------       --------

Income (loss) from operations                                                (595)           682          (598)         1,137

Interest expense                                                               39             44           152            115
Interest and other income, net                                                989              4         1,567             12
                                                                         --------       --------      --------       --------

Income before taxes                                                           355            642           817          1,034

Provision for income taxes                                                    105             16           243             48
                                                                         --------       --------      --------       --------

Net income                                                                    250            626           574            986

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

Net income (loss) applicable to common
 stockholders                                                            $    250       $    626      $(25,350)      $    986
                                                                         ========       ========      ========       ========

Net income (loss) per share applicable to common stockholders:
     Basic                                                               $   0.01       $   0.04      $  (1.24)      $   0.07
                                                                         ========       ========      ========       ========
     Diluted                                                             $   0.01       $   0.04      $  (1.24)      $   0.06
                                                                         ========       ========      ========       ========

Shares used to compute net income (loss)
 applicable to common stockholders
     Basic                                                                 26,342         15,000        20,450         15,000
                                                                         ========       ========      ========       ========
     Diluted                                                               31,323         16,543        20,450         15,920
                                                                         ========       ========      ========       ========
</TABLE>

                            See accompanying notes.


                                       4
<PAGE>   5

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

<TABLE>
<CAPTION>
                                                                                Nine Months Ended
                                                                     --------------------------------------
                                                                     September 30, 2000     September 30, 1999
                                                                     ------------------     ------------------
                                                                                   (unaudited)
<S>                                                                  <C>                    <C>
OPERATING ACTIVITIES
Net  income                                                                $    574             $    986
Adjustments to reconcile net income to net
      cash provided by operating activities:
            Compensation expense related to stock options                        63                  244
            Amortization of deferred stock  compensation                        972                  111
            Depreciation and amortization                                     1,136                  389
            Changes in operating assets and liabilities:
              Accounts receivable                                            (2,547)                (657)
              Inventory                                                      (4,714)              (1,176)
              Other assets                                                     (312)                 (95)
              Accounts payable                                                  669                  857
              Accrued expenses                                                1,097                  695
              Deferred margin on distributor inventory                        3,402                  546
                                                                           --------             --------
Net cash provided by operating activities                                       340                1,900

INVESTING ACTIVITIES
Purchases of available-for-sale securities                                  (47,641)                  --
Proceeds from sales/maturities of available-for-sale securities               3,300                   --
Purchases of property and equipment                                          (4,456)                (446)
Proceeds from the sale of property and equipment                                753                   --
                                                                           --------             --------
Net cash used in investing activities                                       (48,044)                (446)

FINANCING ACTIVITIES
Proceeds from issuance of Common Stock, net                                  49,794                   --
Principal payments on capital lease obligations                                (652)                (384)
Proceeds from  loan payable                                                      --                   --
Repayment of loan payable                                                        --                   --
Distribution to stockholders                                                     --                 (389)
Proceeds from exercise of stock options                                         381                   --
                                                                           --------             --------
Net cash provided by (used in) financing activities                          49,523                 (773)

Net increase in cash                                                          1,819                  681
Cash at beginning of period                                                  10,965                  217
                                                                           --------             --------
Cash at end of period                                                      $ 12,784             $    898
                                                                           ========             ========

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
Equipment acquired under capital Lease                                     $    612             $    799
Accretion of mandatorily redeemable preference shares                      $ 25,924             $     --
Deferred stock compensation                                                $    681             $    200
Net exercise of warrants                                                   $    688             $     --
Conversion of mandatorily redeemable convertible
  preferred stock into common stock                                        $ 64,781             $     --
</TABLE>

                            See accompanying notes.


                                       5
<PAGE>   6

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles 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, 2000 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000.

The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principals for complete
financial statements.

The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of
Stanford Microdevices, Inc. (the "Company") for the fiscal year ended December
31, 1999, which are included in the Company's Registration Statement on Form S-1
filed with the Securities and Exchange Commission.

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

Through December 31, 1999, the Company operated on calendar fiscal quarters and
a fiscal year ending December 31. Beginning in 2000, the Company now operates on
thirteen week fiscal quarters ending on the Sunday closest to the end of the
calendar quarter, with the exception of the fourth quarter, which will end on
December 31. The Company's third quarter of fiscal year 2000 ended on October 1,
2000. For presentation purposes, the accompanying unaudited condensed
consolidated financial statements refer to the quarter's calendar month end for
convenience.

NOTE 2: INVENTORIES

Inventories consist of (in thousands):


<TABLE>
<CAPTION>
                                  September 30,      December 31,
                                       2000              1999
                                  -------------      -----------
                                   (unaudited)
<S>                               <C>                <C>
Raw materials                        $2,059           $   914
Work-in-process                       3,648               659
Finished goods                        1,234               654
                                     ------            ------
                                     $6,941            $2,227
                                     ======            ======
</TABLE>



                                       6
<PAGE>   7

NOTE 3: NET INCOME (LOSS) PER SHARE APPLICABLE TO COMMON STOCKHOLDERS

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

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


<TABLE>
<CAPTION>
                                                                 Three Months Ended              Nine Months Ended
                                                            September 30,   September 30,   September 30,   September 30,
                                                                2000            1999            2000             1999
                                                            -------------   -------------   -------------   -------------
<S>                                                         <C>             <C>             <C>             <C>
Numerator for basic and diluted earnings per share
   Net income (loss) applicable to common stockholders        $    250        $    626        $(25,350)        $    986
                                                              =========================================================
Denominator for basic earnings per share
   Weighted average shares outstanding                          26,342          15,000          20,450           15,000
   Effect of dilutive stock options                              4,981           1,543                              920
Denominator for diluted earnings per share                      31,323          16,543          20,450           15,920
                                                              =========================================================
Net income (loss) per share applicable to common
   stockholders
   Basic                                                      $   0.01        $   0.04        $  (1.24)        $   0.07
                                                              =========================================================
   Diluted                                                    $   0.01        $   0.04        $  (1.24)        $   0.06
                                                              =========================================================
</TABLE>


The effects of options to purchase 5,318,467 shares of Common Stock at an
average exercise price of $2.87 for the nine months ended September 30, 2000
have not been included in the computation of diluted net loss per share
applicable to common stockholders as their effect would have been antidilutive.

NOTE 4: COMPREHENSIVE INCOME

The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FAS 130). FAS 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is



                                       7
<PAGE>   8

displayed with the same prominence as other financial statements. The Company's
comprehensive net income was the same as its net income for the three months
ended September 30, 2000 and 1999 and for the nine months ended September 30,
2000 and 1999.


NOTE 5: SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

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

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

The accounting policies of the segments are the same as those described in Note
1: Organization and Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements as reflected in the Company's Registration
Statement on Form S-1, declared effective by the Securities and Exchange
Commission (SEC) on May 24, 2000. The Company's chief operating decision maker
(CODM) evaluates performance and allocates resources based on segment reporting
operating income (loss). There are no intersegment sales. Non-segment items
include various corporate research and development expenses, sales and marketing
expenses, general and administrative expenses, amortization of deferred stock
compensation, depreciation and amortization expense, interest income and other,
net, interest expense, and the provision for income taxes, as the aforementioned
items are not allocated for purposes of the CODM's review. With the exception of
expenditures for long-lived assets, assets and liabilities are not discretely
reviewed by the CODM.


<TABLE>
<CAPTION>
                                                   Mobile                            Non-
(In Thousands)                     Standard        Wireless          Total          Segment           Total
                                   Products        Products         Segments         Items           Company
                                   --------        --------         --------        --------         --------
<S>                                <C>             <C>             <C>             <C>              <C>
FOR THE THREE MONTHS
  ENDED SEPTEMBER 30, 2000

Net revenues from external
  customers                        $  8,857        $     --         $  8,857        $     --         $  8,857
Operating income (loss)               3,749          (1,127)           2,622          (3,217)            (595)
Expenditures for long-lived
  assets                                763             372            1,135             686            1,821
</TABLE>



                                       8
<PAGE>   9

<TABLE>
<S>                                <C>             <C>             <C>             <C>              <C>
FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 2000

Net revenues from external
  customers                        $ 23,993        $     --         $ 23,993        $     --         $ 23,993

Operating income (loss)              10,656          (2,361)           8,295          (8,893)            (598)
Expenditures for long-lived
  assets                              1,327           1,156            2,483           2,586            5,069

FOR THE THREE MONTHS
  ENDED SEPTEMBER 30, 1999

Net revenues from external
  customers                        $  4,973        $     --         $  4,973        $     --         $  4,973

Operating income                        682              --              682              --              682
Expenditures for long-lived
  assets                                842              --              842              --              842

FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 1999

Net revenues from external
  customers                        $ 12,358        $     --         $ 12,358        $     --         $ 12,358

Operating income                      1,137              --            1,137              --            1,137
Expenditures for long-lived
  assets                              1,245              --            1,245              --            1,245
</TABLE>


Standard Products net revenues from external customers, operating income and
capital expenditures for long-lived assets for the three and nine months ended
September 30, 1999 include all non-segment items. The Company operated in one
segment during those periods and has not specifically allocated non-segment
items for 1999 interim periods because it is impracticable to do so for those
periods.


NOTE 6: LITIGATION

On March 17, 2000, Stanford University filed a complaint against the Company in
the United States District Court for the Northern District of California
alleging, among other things, infringement by the Company of its trademarks by
the Company's use of the name "Stanford" and by use of a logo containing the
letter "S" and the color red. Stanford University has requested preliminary and
permanent injunctions prohibiting the Company from using trademarks that
infringe or dilute its trademarks, and seeks compensatory damages, exemplary and
punitive damages, costs and attorneys' fees. A hearing on Stanford University's
request for a preliminary injunction was held by the District Court on May 8,
2000 and Stanford University was denied the preliminary injunction. Stanford
University then filed a motion with the District Court for an emergency
injunction pending appeal and on May 15, 2000 Stanford University was denied the
emergency injunction. Stanford University filed a notice of appeal to the United
States Court of Appeals for the Ninth Circuit from the denial of the preliminary
injunction and filed a motion with the Court of Appeals for an emergency
injunction pending the appeal. On May 22, 2000, the Court of Appeals denied the
motion for an emergency injunction. On June 5, 2000, Stanford University filed a
motion with the United States Court of Appeals for the Ninth Circuit for
reconsideration of its motion for an emergency injunction pending appeal. On
June 28, 2000, the United States Court of Appeals for the Ninth Circuit denied
Stanford University's motion for reconsideration. On September 21, 2000, the
Court of Appeals



                                       9
<PAGE>   10

affirmed the District Court's denial of a preliminary injunction, but stated
that its order does not preclude Stanford University from renewing its motion
for a preliminary injunction based on only the claims of dilution. As of
November 2, 2000, Stanford University had not renewed its motion. The parties
are proceeding with discovery. No trial date has been set. Although the Company
is unable to predict the outcome of the litigation at this time, management
believes the Company has meritorious defenses and intends to defend the
litigation vigorously.

NOTE 7: STOCKHOLDERS EQUITY (NET CAPITAL DEFICIENCY)

On May 31, 2000, the Company completed an initial public offering of 4,600,000
shares of common stock (including 600,000 shares pursuant to the exercise of the
underwriters' overallotment option on June 16, 2000), at a price of $12.00 per
share. Upon the completion of the initial public offering, the Company's
Certificate of Incorporation was amended to authorize 200,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock.

Upon completion of the Company's initial public offering, 5,647,839 shares of
mandatorily redeemable convertible preferred stock were converted into shares of
Common Stock. In addition, 687,500 warrants were net exercised prior to the
completion of the Company's initial public offering.

NOTE 8: 1998 STOCK PLAN

In February 2000, the Company's Board of Directors and Stockholders approved an
increase in the number of shares reserved under the 1998 Stock Plan by 1,200,000
shares. In addition, the Board approved automatic increases on the first day of
each of the Company's fiscal years beginning January 1, 2001, equal to the
lesser of 1,500,000 shares, 3% of the outstanding shares on such date, or a
lesser amount determined by the Board of Directors. The shares may be
authorized, but unissued, or reacquired Common Stock.

NOTE 9: 2000 EMPLOYEE STOCK PURCHASE PLAN

In February 2000, the Company's Board of Directors and Stockholders approved the
2000 Employee Stock Purchase Plan (the "Purchase Plan"). A total of 300,000
shares of Common Stock has been reserved for issuance under the Purchase Plan,
as well as an automatic annual increase on the first day of each of the
Company's fiscal years beginning January 1, 2001 equal to the lesser of 350,000
shares, 1% of the outstanding Common Stock on that date, or a lesser amount as
determined by the Board.

NOTE 10: IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. FAS 133 was to be effective for fiscal years beginning after
June 15, 1999. However, in July 1999, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133" (FAS 137). FAS 137 defers for one year the effective
date of FAS 133 which will now apply to all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not currently utilize derivative
financial instruments and as a result, the adoption of FAS 133 will not have an
impact on its consolidated financial position, results of operations or cash
flows.

In December of 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101),
Revenue Recognition, which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC. In March
of 2000, the SEC Staff amended SAB 101 and issued SAB 101A that delayed for one
fiscal quarter the implementation date of SAB 101 for registrants with fiscal
years beginning between December 16, 1999 and March 15, 2000. In June of 2000
the SEC Staff issued SAB 101B that further delayed the effective date of SAB 101
until no later than the fourth fiscal quarter of fiscal years beginning after
December 15, 1999. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. The Company



                                       10
<PAGE>   11

believes that its revenue recognition policy is in compliance with the
provisions of SAB 101 and that the adoption of SAB 101 will not have a material
effect on the financial position or results of operations of the Company.

In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44 (FIN 44) "Accounting for Certain Transactions involving
Stock Compensation an interpretation of APB Opinion No. 25." FIN 44 clarifies
the application of Opinion 25 for (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination.

FIN 44 is effective July 1, 2000, but certain conclusions cover specific events
that occur after either December 15, 1998 or January 12, 2000. The Company
believes that the impact of FIN 44 will not have a material effect on the
financial position or results of operations of the Company.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are forward-looking statements that involve
risks and uncertainties. These statements relate to future events or our future
financial performance. In some cases, forward-looking statements can be
identified by terminology such as "may," "will," "should," "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "potential," or
"continue," the negative of these terms or other comparable terminology. These
statements involve a number of risks and uncertainties. Actual events or results
may differ materially from any forward-looking statement as a result of various
factors, including those described below under "Risk Factors."

OVERVIEW

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

We derive a majority of our revenues from the sale of standard RF components,
which we develop from our own specifications and sell primarily through
distributors. In early 2000, we launched a separate business unit focused on
designing customized products for specific RF applications for communications
equipment manufacturers. These products are still in development and we do not
expect to generate material revenues from this business unit until the second
half of 2001.

We sell our products worldwide through U.S.-based distributors, through a
private label reseller who sells our products under its brand and through our
direct sales force. Our products are also sold through a worldwide network of
independent sales representatives whose orders are fulfilled either by
distributors or us. Significant portions of our distributors' end sales are made
to their customers overseas.

From 1986 to 1995, we generated revenues primarily from design services and
contract manufacturing services for RF components. Net revenues from contract
manufacturing services as a percentage of our total net revenues declined
significantly from 1996 to 1999. Net revenues from contract manufacturing
services accounted for 3% of our total net revenues for the three months ended
September 30, 1999. In 1999, we made the strategic decision to discontinue our
contract manufacturing services although we continued to fulfill our contractual
obligations through March 31, 2000. There were no employee terminations,
facilities charges, disposals of assets or other costs associated with our
decision to discontinue our contract manufacturing services. We do not expect
this decision to have a material impact on our ongoing results of operations,
liquidity or capital resources.



                                       11
<PAGE>   12

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

Two distributors, Avnet Electronics Marketing and Richardson Electronics, and a
private label reseller of our products, Minicircuits Laboratories, accounted for
a significant portion of our net revenues in the three months ended September
30, 1999 and 2000. Sales to Minicircuits Laboratories represented 21% of net
revenues in the three months ended September 30, 2000 and 44% in the three
months ended September 30, 1999. Richardson Electronics represented 46% of net
revenues in the three months ended September 30, 2000 and 35% in the three
months ended September 30, 1999. Avnet Electronics Marketing represented 19% of
net revenues in the three months ended September 30, 2000 and 12% in the three
months ended September 30, 1999. Richardson Electronics and Avnet Electronics
Marketing distribute our products to a large number of end customers. We
anticipate that sales through distributors and to one or more private label
resellers will continue to account for a substantial portion of our net
revenues.

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

Historically, gross margins on our sales through our distributors, to private
label resellers and direct customers have differed materially from each other.
As a result, the relative mix of these sales affects our gross margin. For
example, for the three months ended September 30, 2000 gross margin for these
three channels ranged from as low as 51% for our private label reseller to 78%
for direct sales depending on the mix of products sold. The gross margin on
sales to our private label reseller is traditionally lower than that on our
distributor sales. We generally charge lower prices to our private label
reseller due to its commitment to higher volumes on particular parts, its
absorption of the risk of inventory obsolescence and its agreement to incur the
sales and marketing costs for the parts.

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

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

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

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

In recent years we have incurred substantial costs to develop our technology and
products, to recruit and train personnel for our engineering, sales and
marketing and technical support departments, and to establish an administrative
organization. Our full-time employees increased from 46 at September 30, 1999 to
116 at September 30, 2000. We expect to continue to spend significantly in these
areas as we continue to grow.



                                       12
<PAGE>   13

In connection with the grant of stock options to employees prior to our initial
public offering, we recorded deferred stock compensation within stockholders'
equity of approximately $5.2 million, representing the difference between the
deemed fair value of the common stock for accounting purposes and the exercise
price of these options at the date of grant. During the three months ended
September 30, 2000, we amortized $345,000 of this deferred stock compensation.
We will amortize the remaining deferred stock compensation over the vesting
period of the related options, generally four years. The amount of deferred
stock compensation expense to be recorded in future periods could decrease if
options for which accrued but unvested compensation has been recorded are
forfeited.

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

We began operations in 1985 and began to generate revenues in 1987. Until
October 1999, we were organized as an S corporation for federal tax reporting
purposes and were wholly owned by our founders. In October 1999, we revoked our
election to be treated as an S corporation under the Internal Revenue Code.

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30,
1999

NET REVENUES

Net revenues increased to $8.9 million for the three months ended September 30,
2000 from $5.0 million for the three months ended September 30, 1999. This
increase was the result of more effective promotion of our products by us and
our distributors, increased sales of new products, increased availability of our
products due to higher inventory levels at our distributors and at our facility
and a favorable mix of products sold through both our direct and distribution
channels. Sales through our distributors were 65% of net revenues for the three
months ended September 30, 2000 and 47% of net revenues for the three months
ended September 30, 1999. Sales to our direct customers comprised 35% of net
revenues for the three months ended September 30, 2000, of which 21% of net
revenues was to our private label reseller and 14% of net revenues was to our
factory direct customers. Sales to our direct customers comprised 53% of net
revenues for the three months ended September 30, 1999, of which 44% of net
revenues was to our private label reseller, 6% of net revenues was to our
factory direct customers and 3% of net revenues was from contract manufacturing
services. Sales to our major infrastructure original equipment manufacturers
(OEM) was approximately 7% of net revenues for the three months ended September
30, 2000 compared to approximately 6% of net revenues for the three months ended
September 30, 1999. Sales of our new Silicon germanium (SiGe) and Indium gallium
phosphide (InGaP) products were approximately 30% of our total net revenues for
the three months ended September 30, 2000 compared to 0% for the three months
ended September 30, 1999.

COST OF REVENUES

Cost of revenues increased to $4.0 million for the three months ended September
30, 2000 from $2.5 million for the three months ended September 30, 1999
primarily as a result of increased volume related material, subcontractor and
direct labor costs, which added costs of approximately $740,000. In addition, we
made the decision to withdraw from the high power laterally diffused metal oxide
semiconductor (LDMOS) market in the third quarter of 2000 and incurred charges
of approximately $300,000 associated with this decision. We also withdrew the
launch of several new standard products whose yield and performance did not meet
our



                                       13
<PAGE>   14

standards and incurred charges in the third quarter of 2000 of approximately
$240,000 related to this decision. Operations personnel increased to 37 at
September 30, 2000 from 22 at September 30, 1999.

GROSS PROFIT

Gross profit increased to $4.9 million for the three months ended September 30,
2000 from $2.5 million for the three months ended September 30, 1999. Gross
margin increased to 55% for the three months ended September 30, 2000 from 50%
for the three months ended September 30, 1999. This increase is primarily
attributable to a decrease in wafer and packaging costs from our subcontractors
due to higher volumes, better utilization of our own testing operations and
sales of higher margin products.


OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses increased to $2.5
million for the three months ended September 30, 2000 from $493,000 for the
three months ended September 30, 1999. This increase is primarily the result of
the addition of new personnel, which added costs of approximately $690,000,
increased expenses for engineering materials, which added costs of approximately
$830,000, software and equipment depreciation charges and the opening of
additional research and development design centers. Included in research and
development expenses for the three months ended September 30, 2000 was
approximately $420,000 of charges associated with the discontinuance of the
development of some of our standard products for marketing reasons. We opened a
design center in Long Beach, California in August of 1999 and in Ottawa, Canada
in December of 1999. In addition, we recently opened a design center in Boston,
Massachusetts in September of 2000, but have yet to incur significant expenses
at that facility. We anticipate that we will open additional design centers in
other locations in future periods. Research and development personnel increased
to 35 at September 30, 2000 from nine at September 30, 1999. We expect that the
absolute dollar amount of research and development expenses will continue to
increase as we make additional investments in our technology and products.

SALES AND MARKETING. Sales and marketing expenses increased to $1.4 million for
the three months ended September 30, 2000 from $710,000 for the three months
ended September 30, 1999. This increase is primarily attributable to increased
personnel, which added costs of approximately $400,000, commissions to outside
sales representatives, which added costs of approximately $150,000, and the
opening of additional facilities. We opened our Long Beach facility in August of
1999 and a second Sunnyvale, California facility in March of 2000. Sales and
marketing personnel increased to 25 at September 30, 2000 from seven at
September 30, 1999. We expect increases in sales and marketing expenses to
continue in future periods as we continue to hire additional marketing and sales
employees.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$1.3 million for the three months ended September 30, 2000 from $514,000 for the
three months ended September 30, 1999. This increase is primarily attributable
to increased personnel, which added costs of approximately $280,000,
professional fees, which added costs of approximately $130,000 and the opening
of our second Sunnyvale facility. Included in general and administrative
expenses for the three months ended September 30, 2000 was approximately
$130,000 of charges associated with Stanford University lawsuit. General and
administrative personnel increased to 19 at September 30, 2000 from eight at
September 30, 1999. We expect general and administrative expenses to increase in
absolute dollars in future periods as we expand our administrative staff to
support the growth of our operations.

AMORTIZATION OF DEFERRED STOCK COMPENSATION. In connection with the grant of
stock options to employees prior to our initial public offering, we recorded
deferred stock compensation within stockholders' equity of approximately $5.2
million, representing the difference between the deemed fair value of the common
stock for financial statement reporting purposes and the exercise price of these
options at the date of grant. We recorded amortization of deferred stock
compensation of $345,000 for the three months ended September 30, 2000.



                                       14
<PAGE>   15

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 and interest expense from capital
lease financing obligations and borrowings under our bank line of credit. We had
net interest and other income of $950,000 for the three months ended September
30, 2000 and net interest and other expense of $40,000 for the three months
ended September 30, 1999.

PROVISION FOR INCOME TAXES

We elected to be taxed as an S corporation under the Internal Revenue Code
through October 4, 1999. Consequently, our stockholders were taxed on their
proportionate share of our taxable income and no provision for federal income
taxes has been provided in the statement of operations through October 4, 1999.

The provision for income taxes for the third quarter of fiscal 2000 is based on
our estimated tax rate for the year of 30%. The provision for income taxes for
the third quarter of 1999 consists solely of state franchise taxes.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30,
1999

NET REVENUES

Net revenues increased to $24.0 million for the nine months ended September 30,
2000 from $12.4 million for the nine months ended September 30, 1999. This
increase was primarily the result of more effective promotion of our products by
us and our distributors, increased sales of new products, increased availability
of our products due to higher inventory levels at our distributors and at our
facility and a favorable mix of products sold through both our direct and
distribution channels. Sales through our distributors were 65% of net revenues
for the nine months ended September 30, 2000 and 49% of net revenues for the
nine months ended September 30, 1999. Sales to our direct customers comprised
35% of net revenues for the nine months ended September 30, 2000, of which 26%
of net revenues was to our private label reseller, 8% of net revenues was to our
factory direct customers and 1% of net revenues was from contract manufacturing
services. Sales to our direct customers comprised 51% of net revenues for the
nine months ended September 30, 1999, of which 41% of net revenues was to our
private label reseller, 5% of net revenues was to our factory direct customers
and 5% of net revenues was from contract manufacturing services. Sales to our
major infrastructure OEMs were approximately 6% of net revenues for the three
months ended September 30, 2000 and for the three months ended September 30,
1999. Sales of our new SiGe and InGaP products were approximately 21% of our
total net revenues for the nine months ended September 30, 2000 compared to
approximately 0% for the nine months ended September 30, 1999.

COST OF REVENUES

Cost of revenues increased to $10.3 million for the nine months ended September
30, 2000 from $6.7 million for the nine months ended September 30, 1999
primarily as a result of increased volume related material, subcontractor and
direct labor costs, which added costs of approximately $2.5 million and charges
of approximately $300,000 associated with our decision to withdraw from the high
power LDMOS market. We also canceled the launch of several new standard products
whose yield and performance did not meet our standards and incurred charges of
approximately $240,000 related to this decision for the nine months ended
September 30, 2000.

GROSS PROFIT

Gross profit increased to $13.7 million for the nine months ended September 30,
2000 from $5.7 million for the nine months ended September 30, 1999. Gross
margin increased to 57% for the nine months ended September 30, 2000 from 46%
for the nine months ended September 30, 1999. This increase is primarily



                                       15
<PAGE>   16

attributable to a decrease in wafer and packaging costs from our subcontractors
due to higher volumes, better utilization of our own testing operations and
sales of higher margin products.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses increased to $5.6
million for the nine months ended September 30, 2000 from $1.4 million for the
nine months ended September 30, 1999. This increase is primarily the result of
the addition of new personnel, which added costs of approximately $1.9 million,
increased expenses for engineering materials, which added costs of approximately
$1.1 million, software and equipment depreciation charges and the opening of
additional research and development design centers. Included in research and
development expenses for the nine months ended September 30, 2000 was
approximately $400,000 of charges associated with the discontinuance of the
development of some of our standard products for marketing reasons.

SALES AND MARKETING. Sales and marketing expenses increased to $4.4 million for
the nine months ended September 30, 2000 from $1.9 million for the nine months
ended September 30, 1999. This increase is primarily attributable to increased
personnel, which added costs of approximately $1.2 million, commissions to
outside sales representatives, which added costs of approximately $580,000,
advertising expenses and the opening of additional facilities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$3.4 million for the nine months ended September 30, 2000 from $1.2 million for
the nine months ended September 30, 1999. This increase is primarily
attributable to increased personnel, which added costs of approximately $1.0
million, professional fees, which added costs of approximately $540,000 and the
opening of an additional facility. Included in general and administrative
expenses for the nine months ended September 30, 2000 was approximately $420,000
of charges associated with the Stanford University lawsuit.

AMORTIZATION OF DEFERRED STOCK COMPENSATION. In connection with the grant of
stock options to employees prior to our initial public offering, we recorded
deferred stock compensation within stockholders' equity of approximately $5.2
million, representing the difference between the deemed fair value of the common
stock for financial statement reporting purposes and the exercise price of these
options at the date of grant. We recorded amortization of deferred stock
compensation of $972,000 for the nine months ended September 30, 2000.


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 and interest expense from capital
lease financing obligations and borrowings under our bank line of credit. We had
net interest and other income of $1.4 million for the nine months ended
September 30, 2000 and net interest and other expense of $103,000 for the nine
months ended September 30, 1999.

PROVISION FOR INCOME TAXES

We elected to be taxed as an S corporation under the Internal Revenue Code
through October 4, 1999. Consequently, our stockholders were taxed on their
proportionate share of our taxable income and no provision for federal income
taxes has been provided in the statement of operations through October 4, 1999.

The provision for income taxes for the first nine months of fiscal 2000 is based
on our estimated tax rate for the year of 30%. The provision for income taxes
for the first nine months of 1999 consists solely of state franchise taxes.

LIQUIDITY AND CAPITAL RESOURCES



                                       16
<PAGE>   17

We have financed our operations primarily through cash generated from
operations, equipment lease financing, through the private sale of mandatorily
redeemable convertible preferred stock and from the net proceeds received upon
completion of our initial public offering in May 2000. As of September 30, 2000,
we had cash and cash equivalents of $12.8 million and working capital of $56.1
million.

Our operating activities provided cash of $340,000 in the nine months ended
September 30, 2000 and provided cash of $1.9 million in the nine months ended
September 30, 1999. In the nine months ended September 30, 2000, cash provided
by operating activities was primarily attributable to increases in deferred
margin on distributor inventory of $3.4 million and accrued expenses of $1.1
million and depreciation and amortization of $1.1 million. These were partially
offset by increases in inventory of $4.7 million and accounts receivable of $2.5
million. In the nine months ended September 30, 1999, cash provided by operating
activities was primarily attributable to net income of $986,000, increases in
accounts payable of $857,000, accrued expenses of $695,000 and deferred margin
on distributor inventory of $546,000. These were partially offset by increases
in accounts receivable of $657,000 and inventory of $1.2 million.

Our investing activities used cash of $48.0 million in the nine months ended
September 30, 2000 and $446,000 in the nine months ended September 30, 1999. Our
investing activities reflect purchases, sales and maturities of
available-for-sale securities and purchases and sales of manufacturing equipment
and other fixed assets.

Our financing activities provided cash of $49.5 million in the nine months ended
September 30, 2000 and used cash of $773,000 in the nine months ended September
30, 1999. In the nine months ended September 30, 2000, cash provided by
financing activities was primarily attributable to net proceeds from the
issuance of common stock in our initial public offering of $49.8 million. In the
nine months ended September 30, 1999 cash used in investing activities consisted
of principal payments on capital lease obligations of $384,000 and distributions
to stockholders of $389,000. Our nine months ended September 30, 2000 net loss
applicable to common stockholders includes $25.9 million of accretion charges to
increase the carrying amount of our mandatorily redeemable convertible preferred
stock to the amount we would be required to pay if this preferred stock were to
be redeemed. As the mandatorily redeemable convertible preferred stock was
converted to common stock upon the completion of our initial public offering, we
do not expect to incur additional accretion charges in the future.

We maintain an unsecured credit facility with a financial institution that
includes a $10.0 million line of credit that expires in June of 2001. Borrowings
under the revolving credit line may be made and repaid from time to time and
bear interest at the base rate, as announced by the lender, minus 0.5%, or at
LIBOR plus 2.25%. At September 30, 2000, there were no outstanding amounts under
this credit facility.

RISK FACTORS

WE MAY NOT MEET QUARTERLY FINANCIAL EXPECTATIONS, WHICH COULD CAUSE OUR STOCK
PRICE TO DECLINE.

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

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

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



                                       17
<PAGE>   18

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

        -   changes in our product mix;

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

        -   market acceptance of our products; and

        -   changes in customer purchasing cycles.

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

OUR 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. Three of these third-party wafer fabs are our sole source
for wafers manufactured using a particular process technology. A majority of our
products sold during the first nine months of 2000 were manufactured in gallium
arsenide by TRW and silicon germanium by Atmel Wireless. The supply agreement
with TRW provides us with a guaranteed supply of wafers through December 31,
2000. We are currently in the process of renegotiating the supply agreement with
TRW and are hopeful we will be able to reach an agreement. However, we may not
be able to negotiate an extension to this agreement on favorable terms, if at
all. We also may not be successful in forming an alternative supply arrangement
that provides us with a sufficient supply of gallium arsenide wafers. In
addition, we have only recently begun working with two of our five principal
third-party wafer fabs. The loss of one of our third-party wafer fabs, in
particular TRW and Atmel Wireless, or any delay or reduction in wafer supply
will impact our ability to fulfill customer orders, perhaps materially, and
could damage our relationships with our customers, either of which would
significantly harm our business and operating results. Because there are limited
numbers of third-party wafer fabs that use the particular process technologies
we select for our products and that have sufficient capacity to meet our needs,
using alternative or additional third-party wafer fabs would require an
extensive qualification process that could prevent or delay product shipments.
We have entered into negotiations with several other foundries.

Our reliance on these third-party wafer fabs involves several additional risks,
including reduced control over the manufacturing costs, delivery times,
reliability and quality of our components produced from these wafers. The
fabrication of semiconductor wafers is a highly complex and precise process.
Minute impurities, difficulties in the fabrication process, defects in the masks
used to print circuits on a wafer, wafer breakage or other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
be nonfunctional. We expect that our customers will continue to establish
demanding specifications for quality, performance and reliability that must be
met by our products. Our third-party wafer fabs may not be able to achieve and
maintain acceptable production yields in the future. These risks are heightened
with respect to Global Communication Semiconductor, Inc. (GCS) our newest
third-party wafer fab which has not yet produced wafers in volume for us. To the
extent our third-party wafer fabs suffer failures or defects, we could
experience lost revenues, increased costs, and delays in, cancellations or
rescheduling of orders or shipments, any of which would harm our business.

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



                                       18
<PAGE>   19

OUR RELIANCE ON SUBCONTRACTORS TO PACKAGE OUR PRODUCTS COULD CAUSE A DELAY IN
OUR ABILITY TO FULFILL ORDERS OR COULD INCREASE OUR COST OF REVENUES.

We do not package the RF components that we sell but rather rely on
subcontractors to package our products. Packaging is the procedure of
electrically bonding and encapsulating the integrated circuit into its final
protective plastic or ceramic casing. We provide the wafers containing the
integrated circuits and, in some cases, packaging materials to third-party
packagers. Although we currently work with five packagers, a significant amount
of our net revenues in the first nine months of 2000 were attributable to
products packaged by one subcontractor, MPI Corporation of Manila, Philippines.
A relative of one of our principal stockholders controls MPI. We do not have
long-term contracts with our third-party packagers stipulating fixed prices or
packaging volumes. Therefore, in the future we may be unable to obtain
sufficient high quality or timely packaging of our products. The loss or
reduction in packaging capacity of any of our current packagers, particularly
MPI, would significantly damage our business. In addition, increased packaging
costs will adversely affect our profitability.

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

WE DEPEND ON TWO DISTRIBUTORS FOR A SIGNIFICANT PORTION OF OUR SALES, THE LOSS
OF ANY ONE OF WHICH WOULD LIMIT OUR ABILITY TO SUSTAIN AND GROW OUR REVENUES.

Historically, two distributors, Avnet Electronics Marketing and Richardson
Electronics, have accounted for a significant portion of our sales. In the three
months ended September 30, 2000, sales through Richardson Electronics
represented 46% of our net revenues and sales through Avnet Electronics
Marketing represented 19% of our net revenues. These distributors principally
purchase our standard components for resale to their customers. Our contracts
with these distributors do not require them to purchase our products and may be
terminated by them at any time without penalty. If our distributors fail to
successfully market and sell our products, our revenues could be materially
adversely affected. The loss of either of our current distributors and our
failure to develop new and viable distribution relationships would limit our
ability to sustain and grow our revenues.

WE DEPEND ON MINICIRCUITS LABORATORIES FOR A SUBSTANTIAL PORTION OF OUR REVENUES
AND THE LOSS OF MINICIRCUITS AS A CUSTOMER OR A DECREASE IN PURCHASES BY
MINICIRCUITS WOULD ADVERSELY AFFECT OUR REVENUES.

Sales to Minicircuits Laboratories, a private label reseller of our products,
account for a significant portion of our revenues. For example, 21% of our net
revenues in the three months ended September 30, 2000 and 44% of our net
revenues in the three months ended September 30, 1999 were attributable to sales
to Minicircuits. We expect that we will continue to rely on sales to
Minicircuits for a significant portion of our future revenues. In addition to
reselling products of Stanford Microdevices and other RF component suppliers,
Minicircuits also designs and supplies their own RF components. Our current
contract with Minicircuits does not require Minicircuits to purchase our
products in the future. If we were to lose Minicircuits as a customer, or if
Minicircuits substantially reduced its purchases, our business and operating
results would be adversely affected.

STANFORD UNIVERSITY HAS FILED A LAWSUIT AGAINST US ALLEGING TRADEMARK
INFRINGEMENT. IF THIS LAWSUIT IS DECIDED AGAINST US, WE COULD BE FORCED TO
CHANGE OUR CORPORATE NAME, LOSE BRAND RECOGNITION, PAY DAMAGES AND INCUR
SIGNIFICANT LITIGATION COSTS.



                                       19
<PAGE>   20

On March 17, 2000, Stanford University filed a complaint against us in the
United States District Court for the Northern District of California alleging,
among other things, infringement by us of its trademarks by our use of the name
"Stanford" and by use of a logo containing the letter "S" and the color red.
Stanford University has requested preliminary and permanent injunctions
prohibiting us from using trademarks that infringe or dilute its trademarks, and
seeks compensatory damages, exemplary and punitive damages, costs and attorneys'
fees. A hearing on Stanford University's request for a preliminary injunction
was held by the District Court on May 8, 2000 and Stanford University was denied
the preliminary injunction. Stanford University then filed a motion with the
District Court for an emergency injunction pending appeal and on May 15, 2000
Stanford University was denied the emergency injunction. Stanford University
filed a notice of appeal to the United States Court of Appeals for the Ninth
Circuit from the denial of the preliminary injunction and filed a motion with
the Court of Appeals for an emergency injunction pending the appeal. On May 22,
2000 the Court of Appeals denied the motion for an emergency injunction. On June
5, 2000, Stanford University filed a motion with the United States Court of
Appeals for the Ninth Circuit for reconsideration of its motion for an emergency
injunction pending appeal. On June 28, 2000 the United States Court of Appeals
for the Ninth Circuit denied Stanford University's motion for reconsideration.
On September 21, 2000, the Court of Appeals affirmed the District Court's denial
of a preliminary injunction, but stated that its order does not preclude
Stanford University from renewing its motion for a preliminary injunction based
on only the claims of dilution. As of November 2, 2000, Stanford University had
not renewed its motion. Even though we have thus far successfully defeated
requests for injunctions, if Stanford University is successful in any further
motions for preliminary injunction or if we lose the lawsuit, we may be
prohibited from using our "S" logo and/or the "Stanford Microdevices" trademark
and trade name. If we are prohibited from using our name or logo, our brand
recognition that we have built over several years could be significantly
impaired, which could severely damage our business and operating results. We
would also need to invest significant capital in rebranding our products and, in
general, our company. In addition, we may be liable for monetary damages and
other costs of litigation. Even if we are entirely successful in defending the
lawsuit, we may incur significant legal expenses and our management may expend
significant time in the defense. See Part II, item 1 for discussion of this
litigation.

INTENSE COMPETITION IN OUR INDUSTRY COULD PREVENT US FROM INCREASING REVENUES
AND SUSTAINING PROFITABILITY.

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

        -   rapid technological change;

        -   rapid product obsolescence;

        -   shortages in wafer fabrication capacity;

        -   price erosion; and

        -   unforeseen manufacturing yield problems.

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



                                       20
<PAGE>   21

OUR BUSINESS STRATEGY IS DEPENDENT ON SUCCESSFUL MARKETING AND SALES OF RF
COMPONENTS PRODUCED USING THREE PROCESS TECHNOLOGIES WITH WHICH WE HAVE LIMITED
EXPERIENCE.

We shipped our first products using silicon germanium and indium gallium
phosphide in the fourth quarter of 1999. In addition, although we plan to act as
a reseller of products manufactured using the laterally diffused metal oxide
semiconductor process, we have not yet generated any revenues from resale of
these products. As a result, investors have a limited basis upon which to
evaluate the demand for, and market acceptance of, our products manufactured
using these technologies. If our products using these technologies do not meet
customer expectations or if the market for these products fails to develop or
develops more slowly than we expect, our business would be harmed.

IF WE FAIL TO INTRODUCE NEW PRODUCTS IN A TIMELY AND COST-EFFECTIVE MANNER, OUR
ABILITY TO SUSTAIN AND INCREASE OUR REVENUES COULD SUFFER.

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

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

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

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

        -   market acceptance of our products.

We estimate that the development cycles of our products from concept to
production could last up to 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.

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

SOURCES FOR CERTAIN COMPONENTS AND MATERIALS ARE LIMITED, WHICH COULD RESULT IN
DELAYS OR REDUCTIONS IN PRODUCT SHIPMENTS.

The semiconductor industry from time to time is affected by limited supplies of
certain key components and materials. For example, we rely on limited sources
for certain packaging materials. If we, or our packaging subcontractors, are
unable to obtain these or other materials in the required quantity and quality,
we could experience delays or reductions in product shipments, which would
materially and adversely affect our profitability. Although we have not
experienced any significant difficulty to date in obtaining



                                       21
<PAGE>   22

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

IF COMMUNICATIONS EQUIPMENT MANUFACTURERS INCREASE THEIR INTERNAL PRODUCTION OF
RF COMPONENTS, OUR REVENUES WOULD DECREASE AND OUR BUSINESS WOULD BE HARMED.

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

WE HAVE RECENTLY ESTABLISHED A BUSINESS UNIT FOCUSED ON DESIGNING RF COMPONENTS
FOR SPECIFIC EQUIPMENT MANUFACTURERS. OUR FAILURE TO GROW THIS BUSINESS UNIT
WOULD IMPAIR OUR ABILITY TO SUSTAIN AND INCREASE OUR REVENUES.

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

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

THIRD-PARTY WAFER FABS WHO MANUFACTURE THE SEMICONDUCTOR WAFERS FOR OUR PRODUCTS
MAY COMPETE WITH US IN THE FUTURE.

Several third-party wafer fabs independently produce and sell RF components
directly to communications equipment manufacturers. We currently rely on certain
of these third-party wafer fabs to produce the semiconductor wafers for our
products and, in the case of UltraRF, for the production of the RF components
which we plan to resell to communications equipment manufacturers. These
third-party wafer fabs possess confidential information concerning our products
and product release schedules. We cannot guarantee that they would not use our
confidential information to compete with us. Competition from these third-party
wafer fabs may result in reduced demand for our products and could damage our
relationships with these third-party wafer fabs, thereby harming our business.

PERCEIVED RISKS RELATING TO PROCESS TECHNOLOGIES WE MAY ADOPT IN THE FUTURE TO
MANUFACTURE OUR PRODUCTS COULD CAUSE RELUCTANCE AMONG POTENTIAL CUSTOMERS TO
PURCHASE OUR PRODUCTS.

We may adopt new process technologies in the future to manufacture our products.
Prospective customers of these products may be reluctant to purchase these
products based on perceived risks of these new technologies. These risks could
include concerns related to manufacturing costs and yields and



                                       22
<PAGE>   23

uncertainties about the relative cost-effectiveness of products produced using
these new technologies. If our products fail to achieve market acceptance, our
business, financial condition and results of operations would be materially
adversely affected.

WE MAY ENCOUNTER DIFFICULTIES IN MANAGING OUR GROWTH.

We are experiencing a period of rapid growth and expansion that will continue to
place a significant strain on our management and other resources. The number of
our employees has increased from 46 at September 30, 1999 to 116 at September
30, 2000. To accommodate this growth, we must implement a variety of new and
upgraded operational and financial systems, procedures and controls, including
the improvement of the accounting and other internal management systems. This
may require substantial managerial and financial effort, and our efforts in this
regard may not be successful. Our current systems, procedures and controls may
not be adequate to support our operations. If we fail to improve our
operational, financial and management information systems, or fail to
effectively motivate or manage our new and future employees, our business could
be harmed.

IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL,
WE MAY BE UNABLE TO PURSUE BUSINESS OPPORTUNITIES OR DEVELOP OUR PRODUCTS.

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

OUR LIMITED ABILITY TO PROTECT OUR PROPRIETARY INFORMATION AND TECHNOLOGY MAY
ADVERSELY AFFECT OUR ABILITY TO COMPETE.

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

OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, AND
RESULTING CLAIMS AGAINST US COULD BE COSTLY AND REQUIRE US TO ENTER INTO
DISADVANTAGEOUS LICENSE OR ROYALTY ARRANGEMENTS.

The semiconductor industry is characterized by the existence of a large number
of patents and frequent litigation based on allegations of patent infringement
and the violation of intellectual property rights. Although we attempt to avoid
infringing known proprietary rights of third parties in our product development
efforts, we expect that we may be subject to legal proceedings and claims for
alleged infringement by us or our licensees of third-party proprietary rights,
such as patents, trade secrets, trademarks or copyrights, from time to time in
the ordinary course of business. Any claims relating to the



                                       23
<PAGE>   24

infringement of third-party proprietary rights, even if not meritorious, could
result in costly litigation, divert management's attention and resources, or
require us to enter into royalty or license agreements which are not
advantageous to us. In addition, parties making these claims may be able to
obtain an injunction, which could prevent us from selling our products in the
United States or abroad. We may increasingly be subject to infringement claims
as the number of our products grows.

OUR RELIANCE ON FOREIGN SUPPLIERS AND MANUFACTURERS EXPOSES US TO THE ECONOMIC
AND POLITICAL RISKS OF THE COUNTRIES IN WHICH THEY ARE LOCATED.

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

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

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

        -   tariffs and other trade barriers and restrictions;

        -   political, social and economic instability; and

        -   potential hostilities and changes in diplomatic and trade
            relationships.

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

A SIGNIFICANT PORTION OF OUR PRODUCTS ARE SOLD TO INTERNATIONAL CUSTOMERS EITHER
THROUGH OUR DISTRIBUTORS OR DIRECTLY BY US, WHICH EXPOSES US TO RISKS THAT MAY
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

A significant portion of our direct sales and sales through our distributors
were to foreign purchasers, particularly in countries located in Asia.
International direct sales approximated 33% of our total direct sales for the
three months ended September 30, 2000. Based on information available from our
distributors, products representing approximately 35% of our total distribution
revenues, representing approximately 23% of our net revenues, were sold by our
distributors to international customers in the three months ended September 30,
2000. Demand for our products in foreign markets could decrease, which could
have a materially adverse effect on our results of operations. Therefore, our
future operating results may depend on several economic conditions in foreign
markets, including:

        -   changes in trade policy and regulatory requirements;

        -   fluctuations in currency;

        -   duties, tariffs and other trade barriers and restrictions;

        -   trade disputes; and

        -   political instability.



                                       24
<PAGE>   25

ANY FUTURE ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISTRACTION
OF OUR MANAGEMENT AND DISRUPTIONS TO OUR BUSINESS.

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

OUR GROWTH DEPENDS ON THE GROWTH OF THE INFRASTRUCTURE FOR WIRELESS AND WIRELINE
COMMUNICATIONS. IF THIS MARKET DOES NOT CONTINUE TO GROW, OR IF IT GROWS AT A
SLOW RATE, DEMAND FOR OUR PRODUCTS WILL DIMINISH.

Our success will depend in large part on the continued growth of the
telecommunications industry in general and, in particular, the market for
wireless and wireline infrastructure components. We cannot assure you that the
market for these infrastructure products will continue to grow at historical
rates or at all. Even if the demand for infrastructure grows, we will need to
complete new product designs that meet the needs of our customers at a rate
consistent with the growth of the market. Our product and process development
efforts may not be successful in this regard.

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 our or our
customers' products become obsolete or fail to gain widespread commercial
acceptance, our business will be significantly damaged. In addition, the
increasing demand for wireless and wireline communications has exerted pressure
on standards bodies worldwide to adopt new standards for these products,
generally following extensive investigation of, and deliberation over, competing
technologies. The delays inherent in the standards approval process may in the
future cause the cancellation, postponement or rescheduling of the installation
of communications systems by our customers. These delays may in the future have
a material adverse effect on the sale of products by us and on our business
financial condition and results of operations.

INDUSTRY-WIDE FLUCTUATIONS IN SUPPLY AND DEMAND FOR SEMICONDUCTOR PRODUCTS COULD
ADVERSELY IMPACT OUR BUSINESS.

The semiconductor industry has historically been characterized by wide
fluctuations in supply and demand for semiconductor products. From time to time,
demand for semiconductor products has decreased, often in connection with, or in
anticipation of, major additions of wafer fabrication capacity or maturing
product cycles or due to general economic conditions. In the past, diminished
product demand, production overcapacity and subsequent accelerated price erosion
have lasted for extended periods of time. These fluctuations may occur in the
future and could materially and adversely impact our business.

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE.

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



                                       25
<PAGE>   26

        -   actual or anticipated variations in operating results;

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

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

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

        -   additions or departures of key personnel;

        -   future equity or debt offerings or our announcements of these
            offerings; and

        -   general market and economic conditions.

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

INFORMATION THAT WE MAY PROVIDE TO INVESTORS FROM TIME TO TIME IS ACCURATE ONLY
AS OF THE DATE WE DISSEMINATE IT AND WE UNDERTAKE NO OBLIGATION TO UPDATE THE
INFORMATION.

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

SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US, AND THEY MAY NOT
MAKE DECISIONS THAT REFLECT THE INTERESTS OF STANFORD MICRODEVICES OR OTHER
STOCKHOLDERS.

Our officers, directors and principal stockholders (greater than 5%
stockholders) together control approximately 75.1% of our outstanding common
stock and our two founding stockholders control 53.2% of our outstanding common
stock. As a result, these stockholders, if they act together, and our founding
stockholders acting alone, will be able to exert a significant degree of
influence over our management and affairs and control matters requiring
stockholder approval, including the election of all of our directors and
approval of significant corporate transactions. In addition, this concentration
of ownership may delay or prevent a change in control of Stanford Microdevices
and might affect the market price of our common stock. In addition, the
interests of these stockholders may not always coincide with the interests of
Stanford Microdevices or the interests of other stockholders.


ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Our sales to both domestic and international customers are 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. In future periods we expect to
continue 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.



                                       26
<PAGE>   27

At September 30, 2000, our cash and cash equivalents consisted primarily of
money market funds and commercial paper and our short term investments consisted
of commercial paper and Federal Agency debt securities. We did not hold any
derivative financial instruments or long-term investments. 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.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On March 17, 2000, Stanford University filed a complaint against us in the
United States District Court for the Northern District of California alleging,
among other things, infringement by us of its trademarks by our use of the name
"Stanford" and by use of a logo containing the letter "S" and the color red.
Stanford University has requested preliminary and permanent injunctions
prohibiting us from using trademarks that infringe or dilute its trademarks, and
seeks compensatory damages, exemplary and punitive damages, costs and attorneys'
fees. A hearing on Stanford University's request for a preliminary injunction
was held by the District Court on May 8, 2000 and Stanford University was denied
the preliminary injunction. Stanford University then filed a motion with the
District Court for an emergency injunction pending appeal and on May 15, 2000
Stanford University was denied the emergency injunction. Stanford University
filed a notice of appeal to the United States Court of Appeals for the Ninth
Circuit from the denial of the preliminary injunction and filed a motion with
the Court of Appeals for an emergency injunction pending the appeal. On May 22,
2000 the Court of Appeals denied the motion for an emergency injunction. On June
5, 2000, Stanford University filed a motion with the United States Court of
Appeals for the Ninth Circuit for reconsideration of its motion for an emergency
injunction pending appeal. On June 28, 2000 the United States Court of Appeals
for the Ninth Circuit denied Stanford University's motion for reconsideration.
On September 21, 2000, the Court of Appeals affirmed the District Court's denial
of a preliminary injunction, but stated that its order does not preclude
Stanford University from renewing its motion for a preliminary injunction based
on only the claims of dilution. As of November 2, 2000, Stanford University had
not renewed its motion. Although the Company is unable to predict the outcome of
the litigation at this time, management believes the Company has meritorious
defenses and intends to defend the litigation vigorously.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In July, 2000 the Company issued 36,304 shares upon exercise of outstanding
stock options to one employee at an exercise price of $0.92 per share pursuant
to Rule 701 promulgated under the Securities Act of 1933, as amended.

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 AND REPORTS ON FORM 8-K

        (a) Exhibits:

            21.1 Subsidiaries of the Registrant
            27.1 Financial Data Schedule

        (b) Reports on Form 8-K.

            No reports on Form 8-K were filed during the three months ended
            September 30, 2000.



                                       27
<PAGE>   28

                           STANFORD MICRODEVICES, INC.

                                   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 15, 2000                STANFORD MICRODEVICES, INC.



                                       /s/ Robert Van Buskirk
                                       -----------------------------------------
                                       ROBERT VAN BUSKIRK
                                       President, Chief Executive Officer and
                                       Director

                                       /s/ Thomas Scannell
                                       -----------------------------------------
                                       THOMAS SCANNELL
                                       Vice President, Finance and
                                       Administration  and Chief Financial
                                       Officer



                                       28
<PAGE>   29

                           STANFORD MICRODEVICES, INC.

                         INDEX TO EXHIBITS FOR FORM 10-Q

                      FOR QUARTER ENDED SEPTEMBER 30, 2000


<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION
<S>            <C>
21.1           SUBSIDIARIES OF REGISTRANT

27.1           Financial Data Schedule
</TABLE>




                                       29