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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(Mark One)

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

For the Quarterly Period Ended June 29, 2003

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 0-24758

Micro Linear Corporation

(Exact name of Registrant as specified in its charter)


|                                                                                  |  |                                                  
|--------------------------------------------------------------------------------- |  | -------------------------------------------------
|Delaware(State or other jurisdiction of
incorporation or organization)            |  | 94-2910085(I.R.S. Employer
Identification Number)
|                                                                                  |  |                                                  
|2050 Concourse Drive
San Jose, California(Address of principal executive offices) |  | 95131(Zip Code)                                  

Registrants telephone number, including area code:
(408) 433-5200

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

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes  [  ]  No  [X]

The number of shares of the Registrants Common Stock outstanding as of
August 11, 2003, net of shares held in treasury, was 12,250,963.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                                |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONSOLIDATED CONDENSED BALANCE SHEETS                         
|                              |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS               
|                              |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
|                              |                                                                                               | NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|INDEX TO EXHIBITS            
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 
|EXHIBIT 32.2                 



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TABLE OF CONTENTS

|           |  |                                                                                       |    |                                                                                                           |    |      |   | 
|---------- |  | ------------------------------------------------------------------------------------- | -- | --------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|           |  |                                                                                       |    |                                                                                                           |    | PAGE
|           |  |                                                                                       |    |                                                                                                           |    |     
|PART I     |  | FINANCIAL INFORMATION                                                                 |    |                                                                                                           |    |     
|Item 1.    |  | Financial Statements (Unaudited)                                                      |    |                                                                                                           | 3  |     
|           |  |                                                                                       |    | Consolidated Condensed Balance Sheets at June 30, 2003 and December 31, 2002                              |    |      | 3 | 
|           |  |                                                                                       |    | Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2003 and 2002 |    |      | 4 | 
|           |  |                                                                                       |    | Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2003 and 2002           |    |      | 5 | 
|           |  |                                                                                       |    | Notes to Consolidated Condensed Financial Statements                                                      |    |      | 6 | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |                                                                                                           | 10 |     
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |    |                                                                                                           | 23 |     
|Item 4.    |  | Controls and Procedures                                                               |    |                                                                                                           | 24 |     
|PART II    |  | OTHER INFORMATION                                                                     |    |                                                                                                           |    |     
|Item 1.    |  | Legal Proceedings                                                                     |    |                                                                                                           | 24 |     
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                           | 25 |     
|SIGNATURES |  |                                                                                       | 26 |                                                                                                          

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PART I. FINANCIAL INFORMATION




Item 1.Financial Statements




MICRO LINEAR CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)

|                                     |                                                              |                                                    |                                            |         |             |        |              |         |        |        | 
|------------------------------------ | ------------------------------------------------------------ | -------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------ | ------------ | ------- | ------ | ------ | 
|                                     |                                                              |                                                    |                                            |         | June 30,    |        | December 31,
|                                     |                                                              |                                                    |                                            |         | 2003        |        | 2002        
|                                     |                                                              |                                                    |                                            |         |             |        |             
|                                     |                                                              |                                                    |                                            |         | (Unaudited) |        |              |         |       
|Assets                               |                                                              |                                                    |                                            |         |             |        |              |        
|Current assets:                      |                                                              |                                                    |                                            |         |             |        |              |        
|                                     | Cash and cash equivalents                                    |                                                    | $                                          | 6,389   |             |        | $            | 10,801  |       
|                                     | Short-term investments                                       |                                                    |                                            | 12,605  |             |        |              | 14,704  |       
|                                     | Accounts receivable, less allowance for doubtful accounts of |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              | $108 at June 30, 2003 and $58 at December 31, 2002 |                                            |         | 2,504       |        |              |         | 1,015  |       
|                                     | Inventories                                                  |                                                    |                                            | 2,870   |             |        |              | 2,212   |       
|                                     | Other current assets                                         |                                                    |                                            | 616     |             |        |              | 2,171   |       
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              | Total current assets                               |                                            |         | 24,984      |        |              |         | 30,903 |       
|Property, plant and equipment, net   |                                                              |                                                    | 7,688                                      |         |             |        | 8,092        |        
|Other assets                         |                                                              |                                                    | 26                                         |         |             |        | 27           |        
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              |                                                    | Total assets                               |         | $           | 32,698 |              |         | $      | 39,022 | 
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|Liabilities and Stockholders Equity |                                                              |                                                    |                                            |         |             |        |              |        
|Current liabilities:                 |                                                              |                                                    |                                            |         |             |        |              |        
|                                     | Accounts payable                                             |                                                    | $                                          | 2,713   |             |        | $            | 2,076   |       
|                                     | Accrued compensation and benefits                            |                                                    |                                            | 687     |             |        |              | 834     |       
|                                     | Deferred revenue                                             |                                                    |                                            | 1,206   |             |        |              | 2,045   |       
|                                     | Accrued commissions                                          |                                                    |                                            | 97      |             |        |              | 163     |       
|                                     | Other accrued liabilities                                    |                                                    |                                            | 1,358   |             |        |              | 1,291   |       
|                                     | Current portion of long-term debt                            |                                                    |                                            | 273     |             |        |              | 239     |       
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              | Total current liabilities                          |                                            |         | 6,334       |        |              |         | 6,648  |       
|Long-term debt                       |                                                              |                                                    | 1,901                                      |         |             |        | 2,064        |        
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              |                                                    | Total liabilities                          |         |             | 8,235  |              |         |        | 8,712  | 
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|Stockholders equity:                |                                                              |                                                    |                                            |         |             |        |              |        
|                                     | Common stock                                                 |                                                    |                                            | 15      |             |        |              | 15      |       
|                                     | Additional paid-in capital                                   |                                                    |                                            | 60,468  |             |        |              | 60,352  |       
|                                     | Accumulated deficit                                          |                                                    |                                            | (15,797 | )           |        |              | (9,848  | )     
|                                     | Accumulated other comprehensive income                       |                                                    |                                            | 10      |             |        |              | 24      |       
|                                     | Treasury stock                                               |                                                    |                                            | (20,233 | )           |        |              | (20,233 | )     
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              | Total stockholders equity                         |                                            |         | 24,463      |        |              |         | 30,310 |       
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       
|                                     |                                                              |                                                    | Total liabilities and stockholders equity |         | $           | 32,698 |              |         | $      | 39,022 | 
|                                     |                                                              |                                                    |                                            |         |             |        |              |         |       

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |        |        |        | 
|-------------------------- | ----------------------------------- | --------------------------------------------------------------- | ------------------------ | ------ | ------------------ | ----- | ---------------- | ------ | ------ | ----- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | 
|                           |                                     |                                                                 |                          |        | THREE MONTHS ENDED |       | SIX MONTHS ENDED
|                           |                                     |                                                                 |                          |        | June 30,           |       | June 30,        
|                           |                                     |                                                                 |                          |        |                    |       |                 
|                           |                                     |                                                                 |                          |        | 2003               |       | 2002             |        | 2003   |       | 2002  
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |       
|Net revenue                |                                     | $                                                               | 6,342                    |        |                    | $     | 8,884            |        |        | $     | 11,034 |        |        | $      | 14,475 |       
|Cost of revenue            |                                     |                                                                 | 3,804                    |        |                    |       | 3,768            |        |        |       | 6,008  |        |        |        | 6,239  |       
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           | Gross margin                        |                                                                 |                          | 2,538  |                    |       |                  | 5,116  |        |       |        | 5,026  |        |        |        | 8,236  |       
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|Operating expenses:        |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           | Research and development            |                                                                 |                          | 2,845  |                    |       |                  | 4,094  |        |       |        | 5,765  |        |        |        | 8,268  |       
|                           | Selling, general and administrative |                                                                 |                          | 2,046  |                    |       |                  | 2,247  |        |       |        | 4,270  |        |        |        | 4,087  |       
|                           | Restructuring charges               |                                                                 |                          | 954    |                    |       |                  |       |        |       |        | 954    |        |        |        |       |       
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           |                                     |                                                                 | Total operating expenses |        |                    | 5,845 |                  |        |        | 6,341 |        |        |        | 10,989 |        |        |        | 12,355 | 
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           | Loss from operations                |                                                                 |                          | (3,307 | )                  |       |                  | (1,225 | )      |       |        | (5,963 | )      |        |        | (4,119 | )     
|Interest and other income  |                                     |                                                                 | 63                       |        |                    |       | 142              |        |        |       | 158    |        |        |        | 437    |       
|Interest and other expense |                                     |                                                                 | (35                      | )      |                    |       | (65              | )      |        |       | (94    | )      |        |        | (134   | )     
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           | Loss before income taxes            |                                                                 |                          | (3,279 | )                  |       |                  | (1,148 | )      |       |        | (5,899 | )      |        |        | (3,816 | )     
|Provision for income taxes |                                     |                                                                 | 23                       |        |                    |       | 2                |        |        |       | 50     |        |        |        | 79     |       
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           | Net loss                            |                                                                 | $                        | (3,302 | )                  |       | $                | (1,150 | )      |       | $      | (5,949 | )      |        | $      | (3,895 | )     
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|Net Loss Per Share:        |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|Basic and Diluted          |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           |                                     | Net loss per share                                              |                          | $      | (0.27              | )     |                  | $      | (0.10  | )     |        | $      | (0.49  | )      |        | $      | (0.32  | )     
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       
|                           |                                     | Weighted average number of shares
used in per share computation |                          |        | 12,213             |       |                  |        | 12,064 |       |        |        | 12,204 |        |        |        | 12,063 |       
|                           |                                     |                                                                 |                          |        |                    |       |                  |        |        |       |        |        |        |        |        |       

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

|                                      |                                                  |                                            |        |                  |       |      |        |        |        |  
|------------------------------------- | ------------------------------------------------ | ------------------------------------------ | ------ | ---------------- | ----- | ---- | ------ | ------ | ------ | -
|                                      |                                                  |                                            |        | SIX MONTHS ENDED
|                                      |                                                  |                                            |        | June 30,        
|                                      |                                                  |                                            |        |                 
|                                      |                                                  |                                            |        | 2003             |       | 2002
|                                      |                                                  |                                            |        |                  |       |     
|Net cash used in operating activities |                                                  | $                                          | (6,011 | )                |       | $    | (3,722 | )     
|Cash flows from investing activities: |                                                  |                                            |        |                  |       |      |        |       
|                                      | Purchase of capital equipment                    |                                            |        | (471             | )     |      |        | (95    | )     
|                                      | Purchases of short-term investments              |                                            |        | (6,973           | )     |      |        | (4,549 | )     
|                                      | Sales of short-term investments                  |                                            |        | 9,058            |       |      |        | 7,091  |       
|                                      |                                                  |                                            |        |                  |       |      |        |       
|                                      |                                                  | Net cash provided by investing activities  |        |                  | 1,614 |      |        |        | 2,447  |  
|Cash flows from financing activities: |                                                  |                                            |        |                  |       |      |        |       
|                                      | Principal payments on debt                       |                                            |        | (129             | )     |      |        | (120   | )     
|                                      | Proceeds from issuance of common stock           |                                            |        | 114              |       |      |        | 36     |       
|                                      |                                                  |                                            |        |                  |       |      |        |       
|                                      |                                                  | Net cash used in financing activities      |        |                  | (15   | )    |        |        | (84    | )
|                                      |                                                  |                                            |        |                  |       |      |        |       
|                                      | Net decrease in cash and cash equivalents        |                                            |        | (4,412           | )     |      |        | (1,359 | )     
|                                      | Cash and cash equivalents at beginning of period |                                            |        | 10,801           |       |      |        | 14,888 |       
|                                      |                                                  |                                            |        |                  |       |      |        |       
|                                      |                                                  | Cash and cash equivalents at end of period |        | $                | 6,389 |      |        | $      | 13,529 |  
|                                      |                                                  |                                            |        |                  |       |      |        |       

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION




NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



|1. |  | Organization and Summary of Significant Accounting Policies
|-- |  | -----------------------------------------------------------

Organization

Micro Linear develops integrated circuits and modules that enable cost
effective, high performance digital wireless communications and connectivity
for a broad range of voice and data applications.

We were founded in 1983 and until 2000, we were a supplier of advanced
analog and mixed signal integrated circuits to the computer, communications,
telecommunications, consumer and industrial markets. During 2000, we divested
our manufacturing test operation and our non-communication product lines and
focused our marketing, engineering and product development on new
communications products. Product emphasis is the wireless sector, focusing on
total ISM (Industrial, Scientific and Medical - 900 MHz, 2.4 GHz and 5.8 GHz)
band solutions for applications including digital cordless telephones, wireless
headsets, wireless game controllers, and industrial wireless products. Micro
Linear is headquartered in San Jose, CA with sales offices around the world.

Fiscal Year

We report results of operations on the basis of fifty-two or fifty-three
week periods, ending on the Sunday closest to December 31. Fiscal year 2002
ended on December 29, 2002. The second quarter of 2002 ended on June 30, 2002.
The second quarter of 2003 ended on June 29, 2003. For presentation purposes,
the accompanying financial statements refer to the calendar year end and month
end of each respective period.

Principles of Consolidation

The consolidated financial statements include the accounts of Micro Linear
Corporation and our subsidiary in the United Kingdom. All significant
inter-company accounts and transactions have been eliminated.

The Company has designated the U.S. dollar as the functional currency for
its United Kingdom subsidiary since that subsidiary is dependent on the parent
companys economic environment. The gains and losses resulting from the
translation of the United Kingdom subsidiary are recorded as other income and
expense. For the first and second quarters of 2002 and 2003, translation gains
and losses were not significant.

Basis of Presentation

The consolidated financial statements included herein have been prepared
by us in accordance with accounting principles generally accepted in the United
States of America and reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary to state fairly
our financial position, results of operations, and cash flows for the periods
presented.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q, and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. The unaudited consolidated condensed
financial statements and notes should be read in conjunction with the
consolidated financial statements and notes in the Annual Report on Form 10-K
for the year ended December 29, 2002, filed with the Securities and Exchange
Commission on March 27, 2003.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates, and such
differences may be material to the financial statements.

Net Income (Loss) Per Share

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Basic earnings (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share
excludes potential common stock if the effect is anti-dilutive. Diluted net
earnings (loss) per share includes the effect of all potentially dilutive
common stock outstanding during the period. We compute diluted earnings (loss)
per share using the treasury stock method for stock options outstanding.

A total of 3,271,103 and 4,388,018 shares of potential common stock were
not included in the dilutive net loss per share calculations for the periods
ending June 30, 2003 and 2002, because to include them would be anti-dilutive.

Following is a reconciliation of the basic and diluted loss per share
computations (in thousands, except per share amounts):

|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|-------- | ------------------------------------------ |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|         |                                            |  | Three Months Ended |        | Six Months Ended
|         |                                            |  | June 30            |        | June 30         
|         |                                            |  |                    |        |                 
|         |                                            |  | 2003               |        | 2002             |  | 2003 |        | 2002
|         |                                            |  |                    |        |                  |  |      |        |     
|Basic:   |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Net loss                                   |  | $                  | (3,302 | )                |  | $    | (1,150 | )    |  | $ | (5,949 | ) |  | $ | (3,895 | )
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Weighted average common shares outstanding |  |                    | 12,213 |                  |  |      | 12,064 |      |  |   | 12,204 |   |  |   | 12,063 |  
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Basic loss per share                       |  | $                  | (0.27  | )                |  | $    | (0.10  | )    |  | $ | (0.49  | ) |  | $ | (0.32  | )
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|Diluted: |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Net loss                                   |  | $                  | (3,302 | )                |  | $    | (1,150 | )    |  | $ | (5,949 | ) |  | $ | (3,895 | )
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Weighted average common shares outstanding |  |                    | 12,213 |                  |  |      | 12,064 |      |  |   | 12,204 |   |  |   | 12,063 |  
|         | Dilutive stock options                     |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Weighted average common shares outstanding |  |                    | 12,213 |                  |  |      | 12,064 |      |  |   | 12,204 |   |  |   | 12,063 |  
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       
|         | Diluted loss per share                     |  | $                  | (0.27  | )                |  | $    | (0.10  | )    |  | $ | (0.49  | ) |  | $ | (0.32  | )
|         |                                            |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |       

Stock-Based Compensation

We account for our employee stock option plans in accordance with
Accounting Principles Board No. (APB) 25, Accounting for Stock Issued to
Employees. Under APB No. 25, compensation cost is measured as the excess, if
any, of the quoted market price of our stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. We provide additional pro
forma disclosures as required under Statement of Financial Accounting Standards
(SFAS)  No. 123, Accounting for Stock-Based Compensation and SFAS No. 148,
Accounting for Stock-Based Compensation, Transition and Disclosure in Note 1:
Pro Forma Net Income (Loss) Per Share.

We account for stock issued to non-employees in accordance with the
provisions of SFAS No. 123. Stock option awards issued to non-employees are
accounted for at fair value using the Black-Scholes option pricing model. The
fair value of each non-employee stock award is re-measured at each period end
until a commitment date is reached, which is generally the vesting date.

Pro Forma Net Income (Loss) Per Share

As required by SFAS No. 123, we disclose our pro forma net income (loss)
as if we had accounted for our employee stock purchase plan, employee stock
options and director stock options subsequent to December 31, 1994 under the
fair value method as prescribed in SFAS No. 123. We estimate the fair value for
these options at the date of grant using the Black-Scholes option pricing model
and the multiple option approach with the following weighted-average
assumptions:

|                         |  |                  |      |                    |  |                  |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |  
|------------------------ |  | ---------------- | ---- | ------------------ |  | ---------------- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|                         |  | Employee Stock   |      |                    |  |                  |      |      |  |      |      |      |  |  |      |   |  | 
|                         |  | Purchase Plan    |      | Stock Option Plans
|                         |  |                  |      |                   
|                         |  | Six Months Ended |      | Three Months Ended |  | Six Months Ended
|                         |  | June 30,         |      | June 30,           |  | June 30,        
|                         |  |                  |      |                    |  |                 
|                         |  | 2003             |      | 2002               |  | 2003             |      | 2002 |  | 2003 |      | 2002
|                         |  |                  |      |                    |  |                  |      |      |  |      |      |     
|Expected life (in
years) |  |                  | 0.5  |                    |  |                  | 0.5  |      |  |      | 2.5  |      |  |  | 2.3  |   |  |  | 2.5  |   |  |  | 2.3  |  
|Risk-free interest rate  |  |                  | 1.19 | %                  |  |                  | 1.74 | %    |  |      | 2.68 | %    |  |  | 3.21 | % |  |  | 2.61 | % |  |  | 3.19 | %
|Volatility               |  |                  | 0.74 |                    |  |                  | 0.86 |      |  |      | 0.79 |      |  |  | 0.85 |   |  |  | 0.79 |   |  |  | 0.85 |  
|Dividend yield           |  |                  |     |                    |  |                  |     |      |  |      |     |      |  |  |     |   |  |  |     |   |  |  |     |  

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The Black-Scholes option valuation model was intended for use in
estimating the fair value of publicly traded options that have no vesting
restrictions and are fully transferable, which differs significantly from the
terms of our stock option awards. In addition, option valuation models require
the input of highly subjective assumptions, including the expected stock price
volatility and the expected life of the options before exercise, which greatly
affect the calculated grant date fair value. There were no shares granted under
the Employee Stock Purchase Plan during the three months ended June 30, 2003
and 2002. The weighted average estimated fair values of shares at the date of
grant that were issued under the Employee Stock Purchase Plan during the six
months ended June 30, 2003 and 2002 were $1.09 and $1.10, respectively. The
weighted average fair values at the date of grant of options which were granted
under the employee and directors stock option plans during the three months
ended June 30, 2003 and 2002 were $1.66 and $1.28 respectively. The weighted
average fair values at the date of grant of options that were granted under the
employee and director stock option plans during the six months ended June 30,
2003 and 2002 were $1.75 and $1.29, respectively.

SFAS No. 148 amended SFAS No. 123 in December 2002 to require that
disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. The following table illustrates the effect on our net
income (loss) and net income (loss) per share if we had recorded compensation
costs based on the estimated grant date fair value as defined by SFAS No. 123
for all granted stock-based awards.

|                                                                                                             |         |   |                            |       |                          |   |        |       |      |   |        |       |   |   |        |       |  
|------------------------------------------------------------------------------------------------------------ | ------- | - | -------------------------- | ----- | ------------------------ | - | ------ | ----- | ---- | - | ------ | ----- | - | - | ------ | ----- | -
|                                                                                                             |         |   | Three Months Ended June 30 |       | Six Months Ended June 30
|                                                                                                             |         |   |                            |       |                         
|                                                                                                             |         |   | 2003                       |       | 2002                     |   | 2003   |       | 2002
|                                                                                                             |         |   |                            |       |                          |   |        |       |     
|Net loss, as reported                                                                                        |         | $ | (3,302                     | )     |                          | $ | (1,150 | )     |      | $ | (5,949 | )     |   | $ | (3,895 | )    
|Add: Stock-based employee
compensation expense
included in reported net
loss, net of tax                     |         |   | 1                          |       |                          |   | 33     |       |      |   | 2      |       |   |   | 112    |      
|Deduct: Stock-based
compensation expense
determined under fair
value based method for
all awards, net of tax |         | $ | 8                          |       |                          | $ | (909   | )     |      | $ | (365   | )     |   | $ | (1,595 | )    
|                                                                                                             |         |   |                            |       |                          |   |        |       |      |   |        |       |   |   |        |      
|Pro forma net loss                                                                                           |         | $ | (3,293                     | )     |                          | $ | (2,026 | )     |      | $ | (6,312 | )     |   | $ | (5,378 | )    
|                                                                                                             |         |   |                            |       |                          |   |        |       |      |   |        |       |   |   |        |      
|Pro forma net loss per share:                                                                                |         |   |                            |       |                          |   |        |       |      |   |        |       |   |   |        |      
|                                                                                                             | Basic   |   | $                          | (0.27 | )                        |   | $      | (0.17 | )    |   | $      | (0.52 | ) |   | $      | (0.45 | )
|                                                                                                             | Diluted |   | $                          | (0.27 | )                        |   | $      | (0.17 | )    |   | $      | (0.52 | ) |   | $      | (0.45 | )
|Reported net loss per share:                                                                                 |         |   |                            |       |                          |   |        |       |      |   |        |       |   |   |        |      
|                                                                                                             | Basic   |   | $                          | (0.27 | )                        |   | $      | (0.10 | )    |   | $      | (0.49 | ) |   | $      | (0.32 | )
|                                                                                                             | Diluted |   | $                          | (0.27 | )                        |   | $      | (0.10 | )    |   | $      | (0.49 | ) |   | $      | (0.32 | )



|2. |  | Financial Statement Details
|-- |  | ---------------------------

Inventories consist of the following (in thousands):

|                               |  |          |       |              |  |   |       | 
|------------------------------ |  | -------- | ----- | ------------ |  | - | ----- | 
|                               |  | June 30, |       | December 31,
|                               |  | 2003     |       | 2002        
|                               |  |          |       |             
|Work-in-process                |  | $        | 1,244 |              |  | $ | 755   | 
|Finished goods                 |  |          | 1,307 |              |  |   | 933   | 
|Inventory held by distributors |  |          | 319   |              |  |   | 524   | 
|                               |  |          |       |              |  |   |       | 
|Total inventories              |  | $        | 2,870 |              |  | $ | 2,212 | 
|                               |  |          |       |              |  |   |       | 

Property, plant and equipment consist of the following (in thousands):

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|                                          |  |          |         |              |  |   |         |  
|----------------------------------------- |  | -------- | ------- | ------------ |  | - | ------- | -
|                                          |  | June 30, |         | December 31,
|                                          |  | 2003     |         | 2002        
|                                          |  |          |         |             
|Land                                      |  | $        | 2,850   |              |  | $ | 2,850   |  
|Buildings and improvements                |  |          | 5,519   |              |  |   | 5,519   |  
|Machinery and equipment                   |  |          | 12,242  |              |  |   | 11,771  |  
|Assets held for sale                      |  |          | 3,414   |              |  |   | 3,414   |  
|                                          |  |          |         |              |  |   |         |  
|Property, plant and equipment             |  |          | 24,025  |              |  |   | 23,554  |  
|Accumulated depreciation and amortization |  |          | (16,337 | )            |  |   | (15,462 | )
|                                          |  |          |         |              |  |   |         |  
|Net property, plant and equipment         |  | $        | 7,688   |              |  | $ | 8,092   |  
|                                          |  |          |         |              |  |   |         |  

Provision for Income Taxes

The provision for income taxes for the three months and six months ended
June 30, 2003 and three and six months ended June 30, 2002 consists of taxes incurred by our subsidiary in the United
Kingdom. We did not record a benefit for income taxes related to our net losses
in the U.S., as we believe that the available objective evidence creates
sufficient uncertainty regarding the realization of the deferred tax assets
such that we have recorded a full valuation allowance against our deferred tax
assets. The effective tax rate for the three months and six months ended June
30, 2003 was 1%. The effective tax rate for the three months ended
June 30, 2002 was 1% and for the six months ended June 30,
2002 was 2%.

Comprehensive Loss

For the three and six months ended June 30, 2003 and 2002, comprehensive
loss, which consists of the net loss for the periods and unrealized gain or
loss on short-term marketable securities, is as follows (in thousands):

|                                      |                                               |   |                    |    |                  |   |        |    |      |   |        |     |   |   |        |     |  
|------------------------------------- | --------------------------------------------- | - | ------------------ | -- | ---------------- | - | ------ | -- | ---- | - | ------ | --- | - | - | ------ | --- | -
|                                      |                                               |   | Three Months Ended |    | Six Months Ended
|                                      |                                               |   | June 30,           |    | June 30,        
|                                      |                                               |   |                    |    |                 
|                                      |                                               |   | 2003               |    | 2002             |   | 2003   |    | 2002
|                                      |                                               |   |                    |    |                  |   |        |    |     
|Net loss                              |                                               | $ | (3,302             | )  |                  | $ | (1,150 | )  |      | $ | (5,949 | )   |   | $ | (3,895 | )  
|Accumulated Other Comprehensive Loss: |                                               |   |                    |    |                  |   |        |    |      |   |        |     |   |   |        |    
|                                      | Unrealized loss on marketable securities, net |   |                    | (2 | )                |   |        | (5 | )    |   |        | (14 | ) |   |        | (60 | )
|                                      |                                               |   |                    |    |                  |   |        |    |      |   |        |     |   |   |        |    
|Comprehensive Loss                    |                                               | $ | (3,304             | )  |                  | $ | (1,155 | )  |      | $ | (5,963 | )   |   | $ | (3,955 | )  
|                                      |                                               |   |                    |    |                  |   |        |    |      |   |        |     |   |   |        |    



|3. |  | Recent Accounting Pronouncements
|-- |  | --------------------------------

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires that a
liability be recorded at fair value in the guarantors balance sheet upon
issuance of a guarantee. In addition, FIN No. 45 requires disclosures about the
guarantees that an entity has issued, including a reconciliation of changes in
the entitys product warranty liabilities. The initial recognition and initial
measurement provisions of FIN No. 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. We did not have significant warranty expense for
the three months and six months ended June 30, 2003.

In November 2002 the EITF reached a consensus on EITF Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables (EITF Issue
No. 00-21). EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. We do not anticipate that adoption of this statement will
have a material impact on our financial position or results of operations.



|4. |  | Operations by Geographic Regions
|-- |  | --------------------------------

The following is a summary of operations by geographical regions (in
thousands):

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|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|------------------------------ | ------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                               |               |   | Three Months Ended |        | Six Months Ended
|                               |               |   | June 30,           |        | June 30,        
|                               |               |   |                    |        |                 
|                               |               |   | 2003               |        | 2002             |   | 2003   |        | 2002
|                               |               |   |                    |        |                  |   |        |        |     
|Net revenue:                   |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |       
|                               | United States |   | $                  | 561    |                  |   | $      | 1,116  |      |   | $      | 961    |   |   | $      | 2,021  |  
|                               | Asia          |   |                    | 4,878  |                  |   |        | 6,910  |      |   |        | 8,178  |   |   |        | 10,775 |  
|                               | Europe        |   |                    | 832    |                  |   |        | 783    |      |   |        | 1,812  |   |   |        | 1,555  |  
|                               | Other         |   |                    | 71     |                  |   |        | 75     |      |   |        | 83     |   |   |        | 124    |  
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Consolidated                   |               | $ | 6,342              |        |                  | $ | 8,884  |        |      | $ | 11,034 |        |   | $ | 14,475 |       
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Loss from operations:          |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |       
|                               | United States |   | $                  | (163   | )                |   | $      | 17     |      |   | $      | (335   | ) |   | $      | (344   | )
|                               | Asia          |   |                    | (2,881 | )                |   |        | (1,255 | )    |   |        | (4,940 | ) |   |        | (3,460 | )
|                               | Europe        |   |                    | (242   | )                |   |        | 12     |      |   |        | (662   | ) |   |        | (296   | )
|                               | Other         |   |                    | (21    | )                |   |        | 1      |      |   |        | (26    | ) |   |        | (19    | )
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Consolidated                   |               | $ | (3,307             | )      |                  | $ | (1,225 | )      |      | $ | (5,963 | )      |   | $ | (4,119 | )     
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Capital expenditures:          |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |       
|                               | United States |   | $                  | 356    |                  |   | $      |       |      |   | $      | 471    |   |   | $      | 72     |  
|                               | Europe        |   |                    |       |                  |   |        | 8      |      |   |        |       |   |   |        | 23     |  
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Consolidated                   |               | $ | 356                |        |                  | $ | 8      |        |      | $ | 471    |        |   | $ | 95     |       
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Depreciation and amortization: |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |       
|                               | United States |   | $                  | 598    |                  |   | $      | 506    |      |   | $      | 829    |   |   | $      | 1,025  |  
|                               | Europe        |   |                    | 10     |                  |   |        | 24     |      |   |        | 46     |   |   |        | 52     |  
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  
|Consolidated                   |               | $ | 608                |        |                  | $ | 530    |        |      | $ | 875    |        |   | $ | 1,077  |       
|                               |               |   |                    |        |                  |   |        |        |      |   |        |        |   |   |        |        |  

Identifiable assets by geographic region are as follows (in thousands):

|                     |               |   |          |        |              |   |        |        | 
|-------------------- | ------------- | - | -------- | ------ | ------------ | - | ------ | ------ | 
|                     |               |   | June 30, |        | December 31,
|                     |               |   | 2003     |        | 2002        
|                     |               |   |          |        |             
|Identifiable assets: |               |   |          |        |              |   |        |       
|                     | United States |   | $        | 32,511 |              |   |        | 38,865 | 
|                     | Asia          |   |          | 47     |              |   |        | 41     | 
|                     | Europe        |   |          | 140    |              |   |        | 116    | 
|                     |               |   |          |        |              |   |        |       
|Consolidated         |               | $ | 32,698   |        |              | $ | 39,022 |       
|                     |               |   |          |        |              |   |        |        | 



|5. |  | Restructuring and Other Special Charges
|-- |  | ---------------------------------------

On May 19, 2003, we announced a restructuring plan to better align our
organizational structure with current business conditions. This realignment
process included workforce reductions across all functions of the Companys
operations and a consolidation of our design centers into our San Jose
facility. The restructuring charge in the second quarter of 2003 was $1.0
million, consisting primarily of employee severance and related termination
costs of $0.6 million and a fixed asset impairment charge of
$0.4 million for assets to be disposed of due to headcount
reductions and vacating facilities. Additional charges in the third
quarter of 2003 are estimated to be in the range of $1.0 to $1.5 million,
consisting primarily of operating lease termination costs for our Salt Lake
City facility and employee severance and relocation costs.




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

The statements in this report or incorporated by reference which are not
historical are forward-looking statements and include, without limitation,
statements under the caption, Managements Discussion and Analysis of
Financial Condition and Results of Operations. Terms such as may, will,
could, should, project, believe, anticipate, expect, plan,
estimate, forecast, potential, intend, continue and variations of
these words or similar expressions are intended to identify forward-looking
statements.

These forward-looking statements include, but are not limited to,
statements regarding: anticipated revenue from our wireless and networking
products, our beliefs regarding future research and development and selling,
general and administrative expenses and the impact of our recent corporate
restructuring, our beliefs regarding our accounting policies, our estimates and
estimated range of the additional restructuring charge to be taken in the third
quarter of 2003, our beliefs regarding deferred tax assets, our expectation
that international revenue will account for a significant percentage of our
revenue for the next 12 months,

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our belief that existing
cash resources are sufficient to fund any anticipated operating losses and
purchases of capital equipment, provide adequate working capital for the next
12 months, and fund our patent and intellectual property costs.

Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. These
risks and uncertainties include, but are not limited, to our dependence on key
products and customers, changes in the demand for our products and seasonal
factors affecting certain of our products, our ability to attract and retain
customers and distribution partners for existing and new products, our ability
to develop and introduce new and enhanced products in a timely manner, our
dependence on international sales and risks associated with international
operations, our dependence on outside foundries and test subcontractors in the
manufacturing process and other outside suppliers, our ability to recruit and
retain qualified employees, and the strength of competitive offerings and the
prices being charged by those competitors, and the risks set forth below under
Factors that May Affect Future Operating Results.

These forward-looking statements are made only as of the date of this
report. We do not undertake to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise. We caution
you not to give undue weight to any of the forward-looking statements. You
should not regard the inclusion of forward-looking information as a
representation by us or any other person that we will achieve our objectives or
plans.

Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results of
Operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. Management bases its estimates on historical
experience and other assumptions that are believed to be reasonable under the
circumstances. These results form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Senior management has discussed the development, selection and
disclosure of these estimates with the Audit Committee of Micro Linears Board
of Directors. Actual results may differ from these estimates under different
assumptions or conditions. Management believes the following critical
accounting policies reflect its more significant estimates and assumptions used
in the preparation of its consolidated financial statements. They include those
regarding (1) revenue recognition, (2) estimating accrued liabilities and
allowance for doubtful accounts, (3) inventory and related allowance for
obsolete and excess inventory, (4) accounting for income taxes, and (5)
valuation of long-lived and intangible assets.

The critical accounting policies are described in Item 7, Management
Discussion and Analysis of Financial Condition and Results of Operations, of
our Annual Report on Form 10-K for the year ended December 29, 2002.

Overview

Micro Linear develops integrated circuits and modules that enable cost
effective, high performance digital wireless communications and connectivity
for a broad range of voice and data applications.

We were founded in 1983 and until 2000, we were a supplier of advanced
analog and mixed signal integrated circuits to the computer, communications,
telecommunications, consumer and industrial markets. During 2000, we divested
our manufacturing test operation and our non-communication product lines and
focused our marketing, engineering and product development on new
communications products, including some wired networking products, but most
notably wireless integrated circuits. During 2001, we established ourselves as
a volume supplier of RF transceivers to the digital cordless telephone segment
of the communications market. Wireless product revenue represented 71% of net
revenue for the second quarter of 2003 compared to 66% of net revenue for the
second quarter of 2002. We expect the revenue contribution from wireless
products to continue to increase as a percentage of total revenue.

On May 19, 2003, we announced a restructuring plan to better align our
organizational structure with current business conditions. This realignment
process included workforce reductions across all functions of the Companys
operations and a consolidation of our design centers into our San Jose
facility. The restructuring charge in the second quarter of 2003 was $1.0
million, consisting primarily of employee severance and related termination
costs of $0.6 million and a fixed asset impairment charge of
$0.4 million for assets to be disposed of due to headcount
reductions and vacating facilities. Additional charges in the third
quarter of 2003

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are estimated to be in the range of $1.0 to $1.5 million, consisting
primarily of operating lease termination costs for our Salt Lake City facility
and employee severance and relocation costs.

Results of Operations

Three Months Ended and Six Months Ended June 30, 2003 Compared with Three
Months and Six Months Ended June 30, 2002

Net Revenue

Net revenue for the second quarter of 2003 decreased 29% to $6.3 million
from $8.9 million for the second quarter of 2002. Net revenue for the first six
months of 2003 decreased 24% to $11.0 from $14.5 million for the first six
months of 2002. The decrease in net revenue from the comparable second quarter
of 2002 was primarily due to a combination of lower revenue from older
networking products and decreasing selling prices of our wireless
transceivers. Although volume shipments of our wireless products increased 16%
and 27% for the first three and six months of 2003 compared to the first three
and six months of 2002, the average selling price decreased 34% and 65% for
those comparative periods.

Revenue from RF transceivers totaled $4.5 million, or 71% of net revenue
for the second quarter of 2003, compared to $5.9 million, or 66% of net revenue
for the second quarter of 2002. Revenue from the sales of RF transceivers
totaled $7.1 million, or 65% of net revenue for the first six months of 2003
compared to $8.6 million, or 59% of net revenue for the first six months of
2002. Revenue from networking products for the second quarter of 2003 totaled
$1.8 million, or 29% of net revenue compared to $3.0 million, or 34% of net
revenue for the second quarter of 2002. Revenue from sales of networking
products for the first six months of 2003 totaled $3.9 million, or 35% of net
revenue compared to $5.9 million, or 41% of net revenue for the first six
months of 2002.

In the second quarter of 2003 and 2002, Uniden Corporation accounted for
more than 10% of our net revenue. Similarly, for the first six months of 2003
and 2002, Uniden Corporation accounted for more than 10% of net revenue.

International revenue for the second quarter of 2003 totaled $5.8 million,
or 92% of net revenue compared to $7.8 million, or 88% of net revenue for the
second quarter of 2002. International revenue for the first six months of 2003
totaled $10.1 million, or 92% of net revenue compared to $12.5 million, or 86%
of net revenue for the first six months of 2002. Domestic revenue was
approximately 8% of net revenue for the second quarter of 2003 compared to 12%
for the second quarter of 2002. Domestic revenue was approximately 8% of net
revenue for the first six months of 2003 compared to 14% for the first six
months of 2002.

Gross Margin

Gross margin is affected by the volume of product shipments, selling
prices, product mix, manufacturing subcontract costs, manufacturing
utilization, and product yields. It is also periodically affected by costs
incurred in connection with start-up and installation of new process
technologies at outside manufacturing foundries.

Gross margin as a percentage of net revenue for the second quarter of 2003
was 40% compared to 57% in the second quarter of 2002. Gross margin percentage
for the first six months of 2003 was 45% compared to 57% for the first six
months of 2002. The decrease in gross margin for both the three and six months
ended June 30, 2003 was primarily due to low yields from the introduction of a
new wireless transceiver that began shipping in high volumes during the second
quarter of 2003, a decrease in selling prices on our wireless transceivers, an
increased weighting of wireless revenue in our product sales mix and a decrease
in our legacy networking products. Average gross margin on our wireless
products are lower than our networking products.

Research and Development Expenses

Research and development expenses include costs associated with the
definition, design and development of new products. In addition, research and
development expenses include test development and prototype costs associated
with new product development.

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We expense wafers and production mask sets related to new products as
research and development costs until products based on new designs are fully
characterized, support published data sheets and satisfy reliability tests.

Research and development expenses for the second quarter of 2003 decreased
32% to $2.8 million from $4.1 million for the second quarter of 2002. Research
and development expenses for the first six months of 2003 decreased 30% to $5.8
million from $8.3 million in the first six months of 2002. The decrease in
research and development expenses for both the three and six months ended June
30, 2003 was primarily due to the cancellation of our 802.11a broadband
wireless product development effort in October 2002. We believe that research
and development expenses will continue to decrease as a result of this
quarters restructuring.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the second quarter
of 2003 decreased 9% to $2.0 million from $2.2 million for the second quarter
of 2002. SG&A expenses for the first six months of 2003 increased slightly to
$4.3 million from $4.1 million in the first six months of 2002. The decrease
in spending in the second quarter of 2003 compared to the second quarter of
2002 was primarily due to the workforce reduction in the fourth quarter of
2002. The increase in expenses for the first six months of 2003 compared with
the first six months of 2002 was primarily due to increases in consulting
expenses, as well as increases in marketing prototype expenses associated with
the introduction of new products, offset by a reduction in payroll related
spending. We believe that SG&A expenses will decrease in the future as a
result of this quarters restructuring.

Restructuring Charge

On May 19, 2003, we announced a restructuring plan to better align our
organizational structure with current business conditions. This realignment
process included workforce reductions across all functions of the Companys
operations and a consolidation of our design centers into our San Jose
facility. The restructuring charge in the second quarter of 2003 was $1.0
million, consisting primarily of employee severance and related termination
costs of $0.6 million and a fixed asset impairment charge of
$0.4 million for assets to be disposed of due to headcount
reductions and vacating facilities. Additional charges in the third
quarter of 2003 are estimated to be in the range of $1.0 to $1.5 million,
consisting primarily of operating lease termination costs for our Salt Lake
City facility and employee severance and relocation costs.

Interest and Other Income and Interest and Other Expense

Interest and other income was $0.1 million for the second quarter of 2003
and 2002. Interest and other income was $0.2 million and $0.4 million in the
first six months of 2003 and 2002, respectively. The decrease in interest and
other income for the first six months of 2003 was primarily due to the changes
in cash balances as well as lower prevailing interest rates.

Interest and other expense, primarily attributable to a mortgage on our
facilities, was less than $0.1 million in the second quarter of 2003 and $0.1
million in the second quarter of 2002. Interest and other expense was $0.1
million in the first six months of 2003 and 2002.

Provision for Income Taxes

The provision for income taxes for the three months and six months ended
June 30, 2003 and three and six months ended June 30, 2002 consists of taxes incurred by our subsidiary in the United
Kingdom. We did not record a benefit for income taxes related to our net losses
in the U.S., as we believe that the available objective evidence creates
sufficient uncertainty regarding the realization of the deferred tax assets
such that we have recorded a full valuation allowance against our deferred tax
assets. The effective tax rate for the three months and six months ended June
30, 2003 was 1%. The effective tax rate for the three months ended
June 30, 2002 was 1% and for the six months ended June 30,
2002
was 2%.

Liquidity and Capital Resources

Net cash used in operating activities was $6.0 million for the first six
months of 2003 and $3.7 million in the first six months of 2002. Net cash used
in operating activities during the first six months of 2003 was due primarily
to a net operating loss of $5.9 million, an increase in accounts receivable of
$1.5 million, an increase in inventories of $0.7 million and a decrease in
deferred revenue of $0.8 million. These were offset by collection of a tax
refund of $1.4 million and non-cash charges for depreciation and amortization
of $0.9 million.

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Net cash provided by investing activities was $1.6 million in the first
six months of 2003 and $2.4 million in the comparable period of 2002. Investing
activities during these periods consisted primarily of net sales of short-term
investments, which totaled $2.1 million for the first six months of 2003, and
$2.5 million for the first six months of 2002. Capital expenditures were $0.5
million for the first six months of 2003 and $0.1 million in the comparable
period of 2002.

Cash used in financing activities, consisting of principal payments on our
long-term debt, was $0.1 million in the first six months of both 2003 and 2002.
These principal payments were largely offset by proceeds from the issuance of
common stock.

Working capital amounted to $18.7 million as of June 30, 2003, compared to
$24.3 million as of December 31, 2002. Working capital at June 30, 2003
includes cash and cash equivalents of $6.4 million and short-term investments
of $12.6 million.

We anticipate that existing cash resources are sufficient to fund any
anticipated operating losses, purchases of capital equipment, and provide
adequate working capital for at least the next 12 months. Our liquidity is
affected by many factors, including, among others, the extent to which we
pursue additional wafer fabrication capacity from existing foundry suppliers or
new suppliers, capital expenditures, the level of our product development
efforts, and other factors related to the uncertainties of the industry and
global economies. Accordingly, there can be no assurance that events in the
future will not require us to seek additional capital sooner or, if so
required, that such capital will be available on terms acceptable to us.

Recent Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires that a
liability be recorded at fair value in the guarantors balance sheet upon
issuance of a guarantee. In addition, FIN No. 45 requires disclosures about the
guarantees that an entity has issued, including a reconciliation of changes in
the entitys product warranty liabilities. The initial recognition and initial
measurement provisions of FIN No. 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. We did not have significant warranty expense for
the three months and six months ended June 30, 2003.

In November 2002 the EITF reached a consensus on EITF Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables (EITF Issue
No. 00-21). EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. We do not anticipate that adoption of this statement will
have a material impact on our financial position or results of operations.

Factors That May Affect Future Operating Results

The risks and uncertainties described below are not the only ones we face.
If any of the following risks actually occurs, our business, financial
condition or results of operations could be materially and adversely affected:

Our operating results are difficult to predict and are likely to fluctuate
significantly. They may fail to meet or exceed the expectations of securities
analysts or investors, causing our stock price to decline.

Our operating results are difficult to predict and have fluctuated
significantly in the past. They are likely to continue to fluctuate in the
future as a result of many factors, some of which are outside of our control.
Some of the factors that may cause these fluctuations include, but are not
limited to, those listed below and those identified throughout this Factors
That May Affect Future Operating Results section:



| |  | the level and timing of spending by our customers, both in the U.S.
and in foreign markets;
|- |  | -------------------------------------------------------------------------------------------
| 
| |  | changes in market demand, including seasonal and cyclical
fluctuations;                    
| 
| |  | timing, amount, cancellation or rescheduling of customer orders;                           
| 
| |  | the gain or loss of a key customer, design win or order;                                   
| 
| |  | fluctuations in manufacturing yields;                                                      

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| |  | timing of revenue from contracts, which may span several quarters;                                                         
|- |  | ---------------------------------------------------------------------------------------------------------------------------
| 
| |  | competitive market conditions;                                                                                             
| 
| |  | new product introductions;                                                                                                 
| 
| |  | market acceptance of new or existing products;                                                                             
| 
| |  | the timely development, introduction, marketing, and transition to
volume production of new products and technologies;     
| 
| |  | mix of products sold;                                                                                                      
| 
| |  | economic conditions specific to the networking and wireless
industries and markets, as well as general economic conditions;
| 
| |  | ability to hire and retain qualified technical and other personnel;                                                        
| 
| |  | development of new industry standard communication protocols;                                                              
| 
| |  | availability and performance of advanced silicon process technologies
from foundry sources;                                
| 
| |  | international conflicts and acts of terrorism and economic and
political conditions worldwide; and                         
| 
| |  | major health concerns, such as the spread of severe acute respiratory
syndrome (SARS).                                   

We believe that period-to-period comparisons of our operating results will
not necessarily be meaningful. You should not rely on these comparisons as an
indication of our future performance. If our operating results in one or more
future periods fail to meet or exceed the expectations of securities analysts
or investors, the trading price of our common stock may decline, possibly by a
significant amount.

The markets in which we operate are intensely competitive, and many competitors
are larger and more established. If we do not compete successfully, we will be
unable to gain market share or enter into new markets.

Intense international and domestic competition, decreasing selling prices,
rapid technological change, short product life cycles and cyclical patterns
characterize the markets for our products. Competitors include significantly
larger corporations. New entrants in these markets could provide additional
competition. Most of our competitors are substantially larger and have greater
financial, technical, marketing and other resources than we do. Many of these
large organizations are in a better position to withstand any significant
reduction in spending by customers in these markets. They often have broader
product lines and market focus, and will therefore not be as susceptible to
downturns in a particular market. These competitors may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements.
In addition, many competitors have focused on the wireless market for longer
than we have, and therefore have more long-standing and established
relationships with domestic and foreign customers. If we fail to compete
successfully, we will be unable to gain market share or enter into new markets.

The computer networking equipment and wireless markets have undergone a
period of rapid growth and consolidation in recent years. We expect our
dependence on sales to network equipment manufacturers to continue. Our
business and results of operations would be materially and adversely affected
in the event of a significant slowdown in the computer networking equipment
market. In addition, as a result of competitive pricing pressures, we have
experienced lower gross margin in some of our products. Such pricing pressures
will continue to have an adverse effect on our results of operations, and our
business could suffer unless they can be offset by higher gross margin on other
products or lower operating expenses.

We do not currently manufacture our own semiconductor wafers. As a result,
we are vulnerable to process technology advances competitors use to manufacture
products offering higher performance and lower cost. Larger companies with
wafer manufacturing facilities, broader product lines, greater technical and
financial resources and greater service and support capabilities have an
advantage in this market.

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In addition, our products are generally sole-sourced to our customers. If
our customers were to develop other sources for our products, our operating
results would suffer.

The market for wireless applications is characterized by rapid technological
change. Our future success depends on our ability to respond to these changes.

Rapidly changing technology, frequent product introductions and evolving
industry standards make it difficult to accurately predict the markets future
growth rate, size or technological direction. In view of the evolving nature of
this market, suppliers of wireless products may decide to adopt alternative
standards or technologies that are incompatible with our products. If we are
unable to design, develop, manufacture and sell products that are compatible
with these new standards or technologies, our business and operating results
will suffer. We have, in the past, invested substantial resources in emerging
technologies that did not achieve the market acceptance that we had expected.
If new markets do not develop as we anticipate, or if our products do not gain
acceptance in these markets, our business and operating results will suffer.

If we are unable to develop and introduce new products successfully, and in a
cost-effective and timely manner, or achieve market acceptance of new products,
our business and operating results could suffer.

Continuing technological advancement, changes in customer requirements and
evolving industry standards characterize the wireless and computer equipment
networking markets. To compete successfully, we must design, develop,
manufacture and sell new or enhanced products that:



| |  | provide increasingly higher levels of performance and reliability; 
|- |  | -------------------------------------------------------------------
| 
| |  | meet performance or other objective specified parameters;          
| 
| |  | are cost effective;                                                
| 
| |  | are brought to market in a timely manner;                          
| 
| |  | are in accordance with existing or evolving industry standards; and
| 
| |  | achieve market acceptance.                                         

The development of these new circuits is highly complex. We have sometimes
experienced delays in completing the development and introduction of new
products. Successful product development and introduction depends on many
factors, including:



| |  | ability to predict market requirements and evolving industry
standards;
|- |  | -----------------------------------------------------------------------
| 
| |  | proper new product definition;                                         
| 
| |  | timely completion and introduction of new product designs;             
| 
| |  | availability of foundry capacity;                                      
| 
| |  | acceptable manufacturing yields; and                                   
| 
| |  | market acceptance of our products and our customers products.         

We must be able to adjust to changing market conditions quickly and
cost-effectively to compete successfully. Furthermore, we must introduce new
products in a timely manner, and achieve market acceptance for these products.
In the fourth quarter of 2002 we discontinued product development activities
for our 802.11a products because of competitive pressures in the 802.11a
product market. In connection with the discontinuance, we redirected certain
engineering activities to focus on a variety of wireless products. If we are
unable to successfully compete in the wireless product market, our business and
operating results will suffer. In addition, our customers products which
incorporate our products must be introduced in a timely manner and achieve
market acceptance. If we, or our customers, fail to develop and introduce new
products successfully, our business and operating results will suffer.

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To successfully develop and market certain of our planned products, we may
need to enter into technology development or licensing agreements with third
parties. If we cannot enter into such agreements on acceptable terms, our
ability to develop and market new products could suffer, and our business and
operating results could be harmed.

Customers typically take a long time to evaluate our new products. It
takes 3 to 6 months or more for customers to test new products, and at least an
additional 3 to 12 months until customers begin significant production of
products incorporating our products.

We may, therefore, experience a lengthy delay between product development
and the generation of revenue from new products. Delays inherent in such a long
sales cycle raise additional risks of customer decisions to cancel or change
their product plans. Such changes could result in the loss of anticipated
sales. Our business, financial condition, and results of operations would
suffer if customers reduce or delay orders, or choose not to release products
incorporating our products.

We have a history of losses and, because of continued investment in product
development, expect to incur losses in the future. We may not become
profitable.

We have incurred quarterly net losses from June 2000 through June 2003,
except for a profit in the third quarter of 2002 which was attributable to an
income tax refund. Because of those losses, we had an accumulated deficit of
approximately $15,797,000 as of June 30, 2003.

Successful engineering development and market penetration in the product
areas we have chosen require high levels of engineering and product development
expense. We intend to continue to spend significant amounts on new product and
technology development. If revenue does not correspondingly increase, our
operating results and financial condition could be harmed. Our networking
products are reaching maturity, and revenue from this product line has declined
and is expected to decline further over the next twelve months. We anticipate
that our existing cash will fund any anticipated operating losses, purchases of
capital equipment, and provide adequate working capital for at least the next
12 months. We expect to incur losses in the future and may not achieve our
additional goals of positive net income and cash flow. As a result, we may not
be able to retain employees, or new product and technology development or sales
and marketing programs to successfully compete against our competitors. For
example, in the fourth quarter of 2002 and in the second quarter of 2003, we
consolidated certain business operations and completed a reduction in our work
force to balance the size of our employee base with our anticipated revenue
levels. There can be no assurance that we will not be required to further
reduce our work force. If we do not achieve or increase profitability in the
future at a level expected by securities analysts or investors, the market
price of our common stock will likely decline.

We recently announced two restructurings of our operations which included
discontinuing certain of our product lines and reductions in force, which could
harm our operating results

In October 2002, we announced the discontinuation of development of our
802.11a products in order to better align our product development activities.
As a part of the restructuring, we reduced our workforce by approximately 39
employees and redirected certain of our engineering activities and reorganized
our sales, marketing and applications functions. In addition, in May 2003, we
announced a corporate restructuring which included the consolidation of some
functions at our headquarters in San Jose, California and included a workforce
reduction of approximately 37 employees. Many factors, such as the
reallocation of responsibilities among remaining personnel, the planned
consolidation of our facilities and employee morale issues, may adversely
impact our ability to deliver our products in accordance with our current plans
or customer expectations, cause delays in the delivery of our products, or lead
us to change our product plans, which in turn may have a negative impact on our
revenues and customer relationships. In addition, the implementation of the
restructurings may itself result in customer concerns regarding our future
performance and our ability to meet their expectations for our products, the
diversion of efforts of our executive management team and other key employees,
and higher than anticipated costs, any of which may harm our operating results.

To the extent that our existing resources and cash generated from operations
are insufficient to fund our future activities, we may need to raise additional
capital. If funds are not available on acceptable terms, we may not be able to
hire and retain employees, fund our operations or compete effectively.

We believe that our existing capital resources and cash generated from
operations will enable us to maintain our operations for at least the next 12
months. However, if our capital requirements vary materially from those
currently planned, we may require additional financing sooner than anticipated.
If additional funds are raised through the issuance of debt securities, these
securities could have rights, preferences and privileges senior to holders of
common stock, and the terms of this debt could impose restrictions on our
operations. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders.

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We cannot be certain that additional financing will be available in
amounts or on terms acceptable to us, if at all. If adequate funds are not
available, or are not available on acceptable terms, our ability to hire, train
or retain employees, to fund our operations and sales and marketing efforts,
take advantage of unanticipated opportunities, develop or enhance services or
products, or respond to competitive pressures would be significantly limited,
which could harm our business, financial condition and operating results.

We depend on networking, wireless, and telecommunications spending for our
revenue. Any decrease or delay in spending in these industries would negatively
impact future operating results and financial condition.

Demand for our products in the future will depend on the amount and timing
of spending by network providers, manufacturers of wireless consumer products,
and telecommunications equipment suppliers. Spending in these areas depends
upon a variety of factors, including competitive pressures, discretionary
consumer spending patterns, and general economic conditions.

During 2002 and in the first six months of 2003, new orders slowed,
customers cancelled or placed holds on existing orders, and orders dropped from
prior periods, due to developments in the general economy and capital markets.
This situation could recur in the future. Because the majority of our revenue
comes from sales to a few customers, a delay in orders from one customer could
have a significant negative effect on future revenue.

Relatively short product life cycles characterize the computer network
equipment and digital cordless telephone markets. If one or more of our
significant customers were to select circuits manufactured by a competitor for
future products, our business will suffer. The loss of one or more of our
current customers, failure to attract new customers, or disruption of our sales
and distribution channels would adversely affect our business and operating
results.

We have relied and expect to continue to rely on a limited number of customers
for a significant portion of our revenue. Our revenue could decline due to the
delay of customer orders or if we are unable to maintain or develop
relationships with current or new customers.

A significant majority of our revenue comes from sales to relatively few
customers. Sales to our ten largest customers, excluding domestic distributors,
accounted for approximately 89% and 83% of net revenue for the three months and
six months ended June 30, 2003 and approximately 85% and 84% of net revenue for
the three and six months ended June 30, 2002, respectively. One
customer, Uniden Corporation, accounted for 67% of our net revenue
for the second quarter of 2003. Sales to domestic
distributors for the three months and six months ended June 30, 2003 accounted
for approximately 8% for both periods and 8% and 9% of net revenue for the
three and six months ended June 30, 2002, respectively. We anticipate that a
limited number of key customers, including Uniden Corporation, and distributors will continue to provide a
significant portion of our net revenue for the foreseeable future. Our future
success depends on our ability to retain our current customers and attract new
customers. A reduction, delay or cancellation of orders from one or more
significant customers could materially and adversely affect our operating
results. In addition, our operating results could be adversely affected if one
or more of our major customers were to develop other sources for the products
we now supply them.

Because many of our current competitors have pre-existing relationships
with our current and potential new customers, we might not be able to achieve
sufficient market penetration to achieve or sustain profitability. Many of our
competitors have established relationships with our current and potential
customers and can devote substantial resources aimed at preventing us from
establishing or enhancing our customer relationships. If we are unable to gain
additional market share or enter new markets due to these pre-existing
relationships with potential customers, our operating results could be harmed.

Customers may generally cancel or reschedule orders to purchase standard
products without significant penalty until 30 days prior to shipping. Customers
frequently revise delivery schedules, and the quantities of products to be
delivered, to reflect changes in their needs. Since backlog can be canceled or
rescheduled, our backlog at any time is not necessarily indicative of future
revenue.

We depend on international sales and are subject to the risks associated with
international operations, which may negatively affect our business.

Sales to customers outside of the United States represented approximately
92% for both the three months and six month ended June 30, 2003 and 88% and 86%
of net revenue for the three and six months ended June 30, 2002, respectively.
We expect that international sales will continue to generate a substantial
proportion of net revenue for the foreseeable future. Our international
operations are subject to a number of risks, including:



| |  | changes in foreign government regulations and telecommunications
standards;
|- |  | ---------------------------------------------------------------------------

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| |  | import and export legislation and license requirements, tariffs,
taxes, quotas and other trade barriers;                                                               
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | compliance with foreign laws, treaties and technical standards;                                                                                                        
| 
| |  | delays resulting from difficulty in obtaining export licenses for
certain technology;                                                                                  
| 
| |  | fluctuations in currency exchange rates;                                                                                                                               
| 
| |  | difficulty in collecting accounts receivable;                                                                                                                          
| 
| |  | difficulty in staffing and managing foreign operations;                                                                                                                
| 
| |  | loss of one or more international distributors;                                                                                                                        
| 
| |  | geopolitical risks, changes in diplomatic and trade relationships and
economic instability;                                                                            
| 
| |  | the effects of the terrorist attacks on the United States, the
United States war on international terrorism and any related conflicts or
similar events worldwide; and
| 
| |  | major health concerns, such as the spread of SARS.                                                                                                                     

Substantially all of our international sales must be licensed by the
Office of Export Administration of the U.S. Department of Commerce. To date, we
have not experienced any material difficulties in obtaining export licenses.

Our international sales are typically denominated in U.S. dollars.
Fluctuations in currency exchange rates could cause our products to become
relatively more expensive to customers in a particular country, while
competitors products denominated in local currencies become less expensive.
This may lead to a reduction in sales or profitability in that country, which
could adversely affect our business.

Gains and losses on the conversion to U.S. dollars of accounts receivable,
accounts payable and other international assets and liabilities may contribute
to fluctuations in operating results. In addition, international customers
typically take longer to pay for purchases than customers in the United States.
If foreign markets do not continue to develop, or foreign sales cycles prove
unpredictable, our revenue and business may be adversely affected.

Selling prices for networking and wireless products typically decrease, which
could lead to lower operating results.

Average selling prices for products in the networking and wireless markets
have rapidly declined due to many factors, including:



| |  | rapidly changing technologies;                
|- |  | ----------------------------------------------
| 
| |  | price-performance enhancements;               
| 
| |  | product introductions by competitors;         
| 
| |  | price pressure from significant customers; and
| 
| |  | product maturity and obsolescence.            

The decline in the average selling prices of our products may cause
substantial fluctuations in our operating results. We continue to develop and
market new products that incorporate valued new features and sell at higher
prices. Failure to deliver new products offering increased value would result
in a decline in both revenue and gross margin, harming our business, financial
condition, and results of operations.

Defects in our products, product returns and product liability could result in
a decrease in customers and revenue, unexpected expenses and loss of market
share.

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Complex products such as ours frequently contain errors, defects, and bugs
upon release. Despite thorough testing by Micro Linear, our test houses and
customers, these errors, defects and bugs are sometimes discovered after we
begin to ship products. We expend significant resources to remedy these
problems, but occasionally have faced legal claims by customers and others.
Product defects can also cause interruptions, delays or cancellations of sales
to customers, in addition to claims against us, all of which could adversely
affect our operating results.

We depend on the health of the semiconductor industry, which is highly
cyclical. The decline in demand in the semiconductor industry could affect our
financial condition and results of operations.

The semiconductor industry experiences significant downturns and wide
fluctuations in supply and demand. The industry also experiences significant
fluctuations in anticipation of changes in general economic conditions. This
causes significant variances in product demand and production capacity, and
aggravates selling price fluctuations. These cyclical patterns, which we expect
to continue, may substantially harm our business, financial condition, and
results of operations.

If we fail to adequately forecast demand for our products, we may incur product
shortages or excess product inventory.

We regularly request indications from customers as to their future plans
and requirements, to ensure that we will be prepared to meet production demand
for our products. However, we may not receive anticipated purchase orders for
our products. We must be able to effectively manage the expenses and inventory
risks associated with meeting potential demand. If we fail to meet customers
supply expectations, we may lose business from such customers. If we expend
resources and purchase materials, or enter into commitments to acquire
materials and manufacture products, and customers do not purchase these
products, our business and operating results will suffer.

Design wins, which require significant expenditures, often precede the
generation of volume sales by a year or more. The value of any design win will
largely depend upon the commercial success of the customers product, and on
the extent to which the design of the customers product accommodates
components manufactured by our competitors. We cannot assure that we will
achieve design wins, or that any design win will result in significant future
revenue.

We depend on a limited number of outside foundries and test subcontractors in
the manufacturing process, and any failure to obtain sufficient foundry or
testing capacity could significantly delay our ability to ship our products,
damage our customer relationships, and result in reduced revenue.

We utilize outside foundries for all wafer production. We believe that
utilizing outside foundries enable us to focus on our design strengths,
minimize fixed costs and capital expenditures and access diverse manufacturing
technologies. We currently intend to continue to rely exclusively upon our
outside foundries for our wafer fabrication requirements. However, there are
significant risks associated with the reliance on outside foundries, including
the lack of assured wafer supply and control over delivery schedules, delays in
obtaining access to key process technologies, and limited control over
manufacturing yields and production costs.

The manufacture of integrated circuits is a highly complex and technically
demanding process. We have diversified our sources of wafer supply and have
worked closely with our foundries to minimize the likelihood of reduced
manufacturing yields. However, our foundries have sometimes experienced lower
than anticipated manufacturing yields, particularly in connection with the
introduction of new products and the installation and start-up of new
processes. Reduced yields have, at times, negatively affected our operating
results, a situation which may recur in the future.

Dependence on foundries located outside of the United States subjects us
to numerous risks, including exchange rate fluctuations, export and import
restrictions, trade sanctions, political and labor instability and tariff
increases. Our main foundries are located in Singapore and Hong Kong, which
presents specific risks,including political instability and health concerns
related to the recent outbreak of cases of SARS.

We purchase wafers from outside foundries pursuant to customers purchase
orders. We generally do not have a guaranteed level of wafer capacity or wafer
costs at our foundries. Our wafer suppliers could prioritize capacity for other
uses, or reduce or eliminate deliveries to us on short notice. In addition, we
depend upon a limited number of foundries for our wafer requirements. Any
sudden demand for an increased amount of wafers, or sudden reduction or
elimination of any source of wafers, could result in a material delay in the
shipment of products. Disruptions in supply, which have occurred in the past,
may occur in the future. If such a disruption occurred, and we were unable to
qualify alternative manufacturing sources for our products in a timely manner,
or if such sources were unable to produce wafers with acceptable manufacturing
yields, our business and operating results could be materially harmed.

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We rely on two outside test service subcontractors to test our products.
The same risks described in the paragraphs above, concerning guaranteed
capacity, dependence upon a limited number of test service subcontractors, and
disruptions in service, also apply to our test and assembly subcontractors.

Rapid technological change and frequent new product introductions
characterize the markets for our products. To remain competitive, we must
develop or obtain access to new semiconductor process technologies in order to
reduce die size, increase die performance and functional complexity, and
improve manufacturing yields. If we are unable to obtain access to advanced
wafer processing technologies, limiting our ability to introduce competitive
products on a timely basis, our future operating results may suffer.

Minute levels of contaminants in the semiconductor manufacturing
environment, defects in the masks used to print circuits on a wafer,
difficulties in the fabrication process and other factors can cause a
substantial percentage of wafers to be rejected or a significant number of die
on each wafer to be nonfunctional. Many of these manufacturing problems are
difficult to diagnose and time consuming and expensive to remedy. Our foundries
have, at times, experienced lower than anticipated yields, which have adversely
affected production and operating results.

The manufacturing processes utilized by our foundries are continuously
being improved in order to increase yield and product performance. Process
changes can, however, result in interruptions in production or significantly
reduced yields. New process technologies or new products are especially
susceptible to wide variations in manufacturing yields and efficiency.
Irregularities, adverse yield fluctuations or other manufacturing problems at
our foundries could result in production interruption or delivery delays,
harming our business and results of operations.

We have granted nontransferable, limited process licenses to some of our
foundries to utilize our processes to manufacture and sell wafers to other
customers. We protect our proprietary technology, particularly our design
methodology, but may not be able to prevent its misappropriation by our
foundries or others.

We and the independent foundries and subcontractors we use to manufacture and
test our products are subject to environmental laws. Failure to comply with
these laws could delay manufacturing of our products and result in unexpected
expenses.

Our wafer suppliers and test and assembly subcontractors are subject to a
variety of U.S. and foreign government regulations related to the discharge or
disposal of toxic, volatile or otherwise hazardous chemicals used in their
manufacturing processes. Failure by our suppliers or subcontractors to comply
with environmental regulations could result in fines, suspension of production
or cessation of operations. Environmental regulations could also require our
suppliers or subcontractors to acquire equipment or incur other expenses to
comply with environmental regulations. If our suppliers or subcontractors incur
substantial additional expenses, product costs could significantly increase,
harming our results of operations.

We are also subject to a variety of environmental regulations relating to
our operations. If we fail to comply with present and future regulations, the
government could impose fines on us, or compel us to suspend or cease
operations. If we or our suppliers or subcontractors fail to control the use or
discharge of hazardous substances, we could be subject to civil or criminal
liabilities, which harm our business and operating results.

Because competition for qualified personnel is intense, we may not be
successful in attracting and retaining personnel, which could have an impact
upon the development or sales of our products.

Our future success will depend to a significant extent on our ability to
attract, retain and motivate personnel, especially those with engineering
design experience and expertise. We may not be successful in attracting and
retaining such personnel.In the fourth quarter of 2002 and in the second
quarter of 2003, we consolidated certain business operations and completed a
reduction in our work force to balance the size of our employee base with our
anticipated revenue levels. Reductions in our workforce could make it difficult
to motivate and retain remaining employees or attract needed new employees, and
provide distractions affecting our ability to develop new products and
technologies and deliver products in a timely fashion.

Competitors may attempt to recruit our employees. While employees are
required to sign standard agreements concerning confidentiality and ownership
of inventions, we do not have employment contracts or non-competition
agreements with most of our personnel. The loss of the services of key
employees, the inability to attract or retain qualified personnel, or delays in
hiring personnel,

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particularly engineers and other technical personnel, could negatively
affect our business and prevent us from achieving our business goals.

Our success depends on our ability to protect our intellectual property and
proprietary rights.

We own 12 U.S. patents, and have 5 U.S. patent applications and 10 foreign
patent applications pending. Through a sale of a portion of our assets, we
maintain a royalty-free license to 45 U.S. patents, 3 foreign patents, 7 U.S.
patent applications, and 3 foreign patent applications.

We attempt to protect our intellectual property rights through patents,
trademarks, copyrights, licensing arrangements, maintaining certain technology
as trade secrets and other measures. However, any patent, trademark, copyright
or other intellectual property rights we own may be invalidated, circumvented
or challenged. We cannot be certain that our intellectual property rights will
provide competitive advantages, or that any pending or future patent
applications will be issued with the scope of the claims sought by us.
Competitors may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents that we own.
In addition, effective patent, copyright and trade secret protection may be
unavailable or limited in certain foreign countries in which we do business.

We believe that the future success of our business will depend on our
ability to translate technological expertise and innovation into new and
enhanced products. We enter into confidentiality or license agreements with our
employees, consultants, vendors and customers, and limit access to and
distribution of our proprietary information. Nevertheless, we may not be able
to prevent misappropriation of our technology.

In addition, we have taken legal action to enforce our patents and other
intellectual property rights, protect our trade secrets, determine the validity
and scope of the proprietary rights of others, and defend against claims of
infringement or invalidity. If a third party makes a valid claim, and we cannot
obtain a license to the technology on reasonable terms, our operations could be
harmed.

We may be subject to legal proceedings and claims from time to time in the
ordinary course of our business, including claims of alleged infringement of
the proprietary rights and other intellectual property rights of third parties.
Intellectual property litigation is expensive and time-consuming, and could
divert our managements attention away from running our business.

We have in the past, and may in the future, be parties to legal proceedings
that could have a negative financial impact on us.

In December 1995, Pioneer Magnetics, Inc. (Pioneer) filed a complaint in
the Federal District Court for the Central District of California alleging that
certain of our integrated circuits violate a Pioneer patent. Pioneer sought
monetary damages and an injunction against the alleged patent violation. The
District Court concluded that Micro Linear did not infringe on Pioneers
patent. Pioneer then appealed the District Courts decision to the Court of
Appeals for the Federal Circuit, which affirmed the District Courts Judgment.
In May 2001, Pioneer filed a petition for appeal with the Supreme Court. On
June 3, 2002, the Supreme Court granted the petition, vacated the judgment, and
remanded the case to the Court of Appeals for further consideration, in light
of the recently decided case of Festo Corp. v. Shoketsu Kinzoku Kogyo
Kabushiki. On June 2, 2003, the Court of Appeals for the Federal Circuit
affirmed the District Courts judgment. Within 90 days of the Federal
Circuits decision, Pioneer may petition the Supreme Court for a writ of
certiorari to review the Federal Circuits judgment.

From time to time we have received correspondence from vendors,
distributors, customers or end-users of our products regarding disputes with
respect to contract rights, product performance or other matters that occur in
the ordinary course of business. Some of these disputes may involve us in
costly litigation or other actions, the outcome of which cannot be determined
in advance and may harm our business. The defense of lawsuits or other actions
could divert our managements attention away from running our business. In
addition, negative developments with respect to litigation could cause the
price of our common stock to decline significantly.

Recently enacted and proposed regulatory changes may cause us to incur
increased costs.

Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules adopted and proposed by the SEC and the Nasdaq Stock Market
could cause us to incur increased costs as we evaluate the implications of new
rules and respond to new requirements. The new rules could make it more
difficult for us to obtain certain types of insurance, including director and
officer liability insurance, and we may be forced to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. The impact of these events could also make it more difficult
for us to attract and retain qualified persons to serve on our board of
directors, or as executive

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officers. We are presently evaluating and monitoring developments with
respect to these new and proposed rules, and we cannot predict or estimate the
amount of additional costs we may incur or the timing of such costs.

Our stock price has been and will likely continue to be volatile because of
stock market fluctuations that affect the price of technology stocks. A decline
in our stock price could result in securities class action litigation against
us, which could divert managements attention and harm our business.

Our stock price has been and is likely to continue to be highly volatile.
Between January 1, 2003 and June 30, 2003, our stock price has traded as high
as $4.00 on February 20, 2003, and as low as $2.47 on June 9, 2003. Our stock
price could fluctuate significantly due to a number of factors, including:



| |  | variations in our actual or anticipated operating results;                                                        
|- |  | ------------------------------------------------------------------------------------------------------------------
| 
| |  | sales of substantial amounts of our stock;                                                                        
| 
| |  | announcements about us or about our competitors, including
technological innovation or new products;              
| 
| |  | litigation and other developments relating to our patents or other
proprietary rights or those of our competitors;
| 
| |  | conditions in the computer networking equipment and wireless markets;                                             
| 
| |  | governmental regulation and legislation; and                                                                      
| 
| |  | changes in securities analysts estimates of our performance, or
our failure to meet analysts expectations.      

Many of these factors are beyond our control. In addition, the stock
markets in general, and the Nasdaq National Market and the market for
technology companies in particular, have experienced extreme price and volume
fluctuations recently. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies. These broad
market and industry factors may decrease the market price of our common stock,
regardless of our actual operating performance. In the past, companies that
have experienced volatility in the market prices of their stock have been the
object of securities class action litigation. If we were the object of
securities class action litigation, it could result in substantial costs and a
diversion of managements attention and resources, which could harm our
business.

Our Certificate of Incorporation and Bylaws, Stockholder Rights Plan and
Delaware law contain provisions that could discourage a change in control, even
if the change in control would be beneficial to our stockholders.

Provisions of our Amended and Restated Certificate of Incorporation,
Bylaws, the 1998 Shareholder Rights Plan, our stock option plans and Delaware
law could make it more difficult for a third party to acquire us, even if doing
so would be beneficial to our stockholders. These provisions could limit the
price that investors might be willing to pay in the future for shares of our
common stock.

Under the Shareholder Rights Plan, adopted in August 1998, each share of
our outstanding common stock carries one Right to purchase 1/1000 of a share of
Series A Participating Preferred Stock at an exercise price of $30.00 per
Right. If someone acquires 15% or more of our common stock, each Right not
owned by a holder of 15% or more of our common stock entitles the holder, upon
payment of the $30.00 exercise price, to receive common stock having a current
market value of $60.00. This issuance of additional common stock would
significantly reduce the percentage of common stock held by a potential
acquirer. The Rights expire in August 2008.

In addition, Section 203 of the Delaware General Corporation Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of Micro Linear. Specifically, Section 203 prohibits a Delaware
corporation from engaging in any business combination with an interested
stockholder for three years after the date the stockholder became an interested
stockholder unless specific conditions are met. Also, in the event outstanding
options granted pursuant to certain of our stock option plans are not assumed
by an acquiring corporation, the unvested portion of such options may be
accelerated upon a change of control. In addition, some individual stock option
grants provide for the partial or complete acceleration of vesting upon a
change of control.




Item 3.Quantitative and Qualitative Disclosures about Market Risk

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Interest Rate Risk

As of June 30, 2003, our investment portfolio consisted of U.S. government
obligations, commercial paper and money market funds, typically with maturities
of less than 12 months. Some of these securities are subject to interest rate
risk, and will decline in value if market interest rates increase. We intend to
hold our fixed income investments until maturity and, therefore, do not expect
to recognize an adverse impact from interest rate changes on income or cash
flows. If market interest rates were to increase immediately and uniformly by
10% as of June 30, 2003 and June 30, 2002, the decline in the fair value of the
portfolio would not be material.

Foreign Currency Exchange Risk

We have international sales and research and development facilities and
are, therefore, subject to foreign currency rate exposure. We limit our foreign
currency risks principally by maintaining minimal foreign currency balances.
Since our exposure related to exchange rate volatility has not been
significant, we do not currently hedge this exposure.




Item 4.Controls and Procedures

(a)  Evaluation of disclosure controls and procedures.We maintain
disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act), that are
designed to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and
procedures, management recognized that disclosure controls and procedures, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the disclosure controls and
procedures are met. Additionally, in designing disclosure controls and
procedures, our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures also is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this
Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial
Officer have concluded that, subject to the limitations noted above, our
disclosure controls and procedures were effective to ensure that material
information relating to us, including our consolidated subsidiaries, is made
known to them by others within those entities, particularly during the period
in which this Quarterly Report on Form 10-Q was being prepared.

(b)  Changes in internal control over financial reporting.There was no
change in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) identified in connection with the evaluation
described in Item 4(a) above that occurred during our last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.




PART II. OTHER INFORMATION




Item 1.Legal Proceedings

In December 1995, Pioneer Magnetics, Inc. (Pioneer) filed a complaint in the
Federal District Court for the Central District of California alleging that
certain of our integrated circuits violate a Pioneer patent. Pioneer sought
monetary damages and an injunction against the alleged patent violation. The
District Court concluded that Micro Linear did not infringe on Pioneers
patent. Pioneer then appealed the District Courts decision to the Court of
Appeals for the Federal Circuit, which affirmed the District Court judgment. In
May 2001, Pioneer filed a petition for appeal with the Supreme Court. On June
3, 2002, the Supreme Court granted the petition, vacated the judgment, and
remanded the case to the Court of Appeals for further consideration, in light
of the recently decided case of Festo Corp. v. Shoketsu Kinzoku Kogyo
Kabushiki. On June 2, 2003, the Court of Appeals for the Federal Circuit
affirmed the District Courts judgment. Within 90 days of the Federal
Circuits decision, Pioneer may petition the Supreme Court for a writ of
certiorari to review the Federal Circuits judgment.

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From time to time we receive correspondence from vendors, distributors,
customers or end-users of our products regarding disputes with respect to
contract rights, product performance or other matters that occur in the
ordinary course of business. Some of these disputes may involve us in costly
litigation or other actions, the outcome of which cannot be determined in
advance and may adversely affect our business. The defense of lawsuits or other
actions could divert our managements attention away from running our business.
In addition, negative developments with respect to litigation could cause the
price of our common stock to decline significantly.




Item 6.Exhibits and Reports on Form 8-K

(a) Exhibits:

|        |  |                                                            
|------- |  | -----------------------------------------------------------
|Exhibit |  |                                                            
|Number  |  | Description of Document                                    
|        |  |                                                            
|31.1    |  | Rule 13a-14(a) Certification by the Chief Executive Officer
|        |  |                                                            
|31.2    |  | Rule 13a-14(a) Certification by the Chief Financial Officer
|        |  |                                                            
|32.1    |  | Section 1350 Certification by the Chief Executive Officer  
|        |  |                                                            
|32.2    |  | Section 1350 Certification by the Chief Financial Officer. 

(b) Reports on Form 8-K

On May 19, 2003, the Company filed a current report on Form 8-K, reporting
under Item 5 that on May 19, 2003 it announced a corporate restructuring, which
included the elimination of approximately 37 positions and a consolidation of
some functions at the Companys San Jose facility.

On April 24, 2003, the Company filed a Current Report on Form 8-K
furnishing under item 12 the Companys press release relating to its financial
results for the quarter ended March 31, 2003.

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SIGNATURES

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

|                      |  |                          |  |                                                                                         
|--------------------- |  | ------------------------ |  | ----------------------------------------------------------------------------------------
|                      |  | MICRO LINEAR CORPORATION
|                      |  |                          |  |                                                                                         
|Date: August 13, 2003 |  | By                       |  | /s/ TIMOTHY A. RICHARDSON                                                               
|                      |  |                          |  |                                                                                         
|                      |  |                          |  | Timothy A. RichardsonPresident and Chief Executive Officer
(Principal Executive Officer)
|                      |  |                          |  |                                                                                         
|Date: August 13, 2003 |  | By                       |  | /s/ MICHAEL W. SCHRADLE                                                                 
|                      |  |                          |  |                                                                                         
|                      |  |                          |  | Michael W. SchradleChief Financial Officer
(Principal Financial and Accounting Officer) 

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INDEX TO EXHIBITS

|        |  |                                                            
|------- |  | -----------------------------------------------------------
|Exhibit |  |                                                            
|Number  |  | Description of Document                                    
|        |  |                                                            
|31.1    |  | Rule 13a-14(a) Certification by the Chief Executive Officer
|        |  |                                                            
|31.2    |  | Rule 13a-14(a) Certification by the Chief Financial Officer
|        |  |                                                            
|32.1    |  | Section 1350 Certification by the Chief Executive Officer  
|        |  |                                                            
|32.2    |  | Section 1350 Certification by the Chief Financial Officer. 

27