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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 September 30, 1996

                                       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 94-2910085
                (State or other jurisdiction of (I.R.S. Employer
              incorporation or organization) Identification Number)

                           2092 Concourse Drive 95131
                         San Jose, California (Zip Code)
                         (Address of principal executive
                                    offices)

       Registrant's telephone number, including area code: (408) 433-5200
           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 Par Value

    Indicate by check mark whether the  Registrant  (1) has filed all reports 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 [ ]

    The number of shares of the Registrant's  Common Stock  outstanding,  net of
shares held in treasury, as of September 30, 1996 was 12,310,236.


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

            Condensed Statements of Income for the three and nine months
            ended September 30, 1996 and 1995, unaudited.......................3

            Condensed Balance Sheets at September 30, 1996, unaudited
            and at December 31, 1995...........................................4

            Condensed Statements of Cash Flows for the nine months
            ended September 30, 1996 and 1995, unaudited.......................5

            Notes to Condensed Financial Statements, unaudited.................6

Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations..........................................7

PART II.    OTHER INFORMATION



Item 6.     Exhibits and Reports on Form 8-K..................................12

SIGNATURES....................................................................14


<PAGE>
                                                      
                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>
<CAPTION>

                                             MICRO LINEAR CORPORATION
                                          CONDENSED STATEMENTS OF INCOME
                                                    (Unaudited)
                                     (In thousands, except per share amounts)

                                                  Three Months Ended                       Nine Months Ended
                                          ------------------------------------   --------------------------------------
<S>                                                  <C>                <C>                 <C>                  <C>
                                           September 30,      September 30,       September 30,        September 30,
                                                1996               1995                1996                1995
                                          -----------------  -----------------   -----------------   ------------------
Net revenues......................................$11,713            $15,051             $40,671              $42,175
Cost of revenues....................................5,681              6,421              15,461               19,300
                                          -----------------  -----------------   -----------------   ------------------
   Gross profit.....................................6,032              8,630              25,210                22,875
Operating expenses:
   Research and development.........................2,648              2,714               8,519                7,932
   Selling, general and administrative..............2,745              2,433               8,580                7,179
                                          -----------------  -----------------   -----------------   ------------------
                                                    5,393              5,147              17,099               15,111
                                          -----------------  -----------------   -----------------   ------------------
   Income from operations.............................639              3,483               8,111                7,764
Interest and other income.............................352                472               1,068                1,177
Interest expense......................................(76)              (100)               (233)                (335)
                                          -----------------  -----------------   -----------------   ------------------
   Income before provision for taxes on
       income.........................................915              3,855               8,946                8,606
Provision for taxes on income.........................366                694               3,578               1 ,549
                                          -----------------  -----------------   -----------------   ------------------
   Net income......................................$..549           $  3,161              $5,368             $  7,057
                                          =================  =================   =================   ==================

Net income per share............................$....0.04          $    0.23           $    0.40            $    0.52
                                          =================  =================   =================   ==================

Shares used in computing net income
  per share amounts                                13,125             13,856              13,384               13,693
                                          =================  =================   =================   ==================
<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                            MICRO LINEAR CORPORATION
                            CONDENSED BALANCE SHEETS
                    (In thousands, except per share amounts)

<S>                                                                                                   <C>                     <C>
                                                                                            September 30,            December 31,
                                                                                                 1996                    1995
                                                                                             (Unaudited)           (See note below)
                                                                                         ---------------------   -------------------
Assets
Current assets:
   Cash and cash equivalents...........................................................                $3,058                $4,175
   Short-term investments..............................................................                23,928                26,299
   Accounts receivable, net of allowance for doubtful accounts of $288 and $240 at
     September 30, 1996 and December 31, 1995, respectively............................                 3,507                 6,571
   Inventories.........................................................................                12,132                 8,986
   Deferred tax assets.................................................................                 4,171                 3,452
   Other current assets................................................................                 1,059                   781
                                                                                         ---------------------   -------------------
     Total current assets..............................................................                47,855                50,264
Property, plant and equipment..........................................................                37,178                36,276
Less accumulated depreciation and amortization.........................................               (15,521  )            (19,470)
                                                                                         ---------------------   -------------------
                                                                                                       21,657                16,806
Other assets...........................................................................                   819                   901
                                                                                         ---------------------   -------------------
       Total assets....................................................................               $70,331               $67,971
                                                                                         =====================   ===================

Liabilities and Stockholders' Equity Current liabilities:
   Accounts payable....................................................................              $  3,785              $  3,576
   Accrued compensation and benefits...................................................                 1,555                 1,382
   Deferred income on shipments to distributors........................................                 1,320                 1,517
   Income tax payable..................................................................                     -                   507
   Other accrued liabilities...........................................................                 1,964                 1,494
   Current portion of long-term debt...................................................                   290                   467
                                                                                         ---------------------   -------------------
     Total current liabilities.........................................................                 8,914                 8,943
Long-term debt.........................................................................                 3,011                 3,181
Commitments and contingencies
Stockholders' equity:
   Preferred stock, $.001 par value
     Authorized shares 5,000,000
     None issued and outstanding.......................................................                     -                     -
   Common stock, $.001 par value
     Authorized shares 30,000,000
     Issued shares 12,743,236 and 12,455,519 at September 30, 1996 and December 31,
       1995, respectively
     Outstanding shares 12,310,236 and 12,455,519 at September 30, 1996 and December
       31, 1995, respectively..........................................................                    13                    12
   Additional paid-in capital..........................................................                49,851                49,103
   Retained earnings...................................................................                12,100                 6,732
   Treasury stock, 433,000 shares at cost at September 30, 1996........................                (3,558 )                   -
                                                                                         ---------------------   -------------------
     Total stockholders' equity........................................................                58,406                55,847
                                                                                         ---------------------   -------------------
       Total liabilities and stockholders' equity......................................              $70, 331               $67,971
                                                                                         =====================   ===================

<FN>
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at
that date.

See accompanying notes.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                         MICRO LINEAR CORPORATION
                                    CONDENSED STATEMENTS OF CASH FLOWS
                                               (Unaudited)
                                              (In thousands)

                                                                                          Nine Months Ended
                                                                                ---------------------------------------
<S>                                                                                        <C>                    <C>
                                                                                 September 30,          September 30,
                                                                                      1996                  1995
                                                                                -----------------      ----------------
Cash provided by operating activities.........................................          $  6,912              $  7,084

Investing activities:
   Capital expenditures.......................................................            (7,116 )              (3,416 )
   Purchases of short-term investments........................................           (16,009 )             (22,103 )
   Sales of short-term investments............................................            18,380                12,196
                                                                                -----------------      ----------------
     Net cash used in investing activities....................................            (4,745 )             (13,323 )

Financing activities:
   Principal payments under capital lease obligations and debt................              (414 )                (964 )
   Proceeds from issuance of common stock.....................................               688                   731
   Acquisition of treasury stock..............................................            (3,558 )                   -
                                                                                -----------------      ----------------
     Net cash used in financing activities....................................            (3,284 )                (233 )
                                                                                -----------------      ----------------

Net decrease in cash and cash equivalents.....................................            (1,117 )              (6,472 )
Cash and cash equivalents at beginning of period..............................             4,175                23,216
                                                                                -----------------      ----------------
Cash and cash equivalents at end of period....................................            $3,058               $16,744
                                                                                =================      ================
<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>

                            MICRO LINEAR CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1)  Micro Linear Corporation (the "Company") designs,  develops and markets high
    performance analog and mixed signal integrated circuits for a broad range of
    applications within the communications,  computer and industrial markets for
    sale primarily in North America,  Asia and Europe. The accompanying  interim
    financial  statements are unaudited and have been prepared by the Company in
    accordance with generally accepted accounting principles and pursuant to the
    rules and  regulations  of the Securities  and Exchange  Commission.  In the
    opinion of  management,  all  adjustments  (consisting  of normal  recurring
    accruals)  have been made to present a fair  statement  of  results  for the
    interim periods presented. The results of operations for the interim periods
    shown  in this  report  are not  necessarily  indicative  of  results  to be
    expected for the fiscal  year.  All  information  reported in this Form 10-Q
    should be read in conjunction with the Company's annual financial statements
    on Form 10-K for the year ended December 31, 1995.

2)  The Company's  fiscal year ends on the Sunday closest to December 31. Fiscal
    year 1995 ended on December  31, 1995.  The third  quarter of 1996 and third
    quarter  of  1995  ended  on  September   29,  1996  and  October  1,  1995,
    respectively.   For  ease  of  presentation,   the  accompanying   financial
    statements have shown the third quarter of 1996 and 1995 as ending September
    30.

    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
    disclosure of contingent assets and liabilities at the date of the financial
    statements  and the reported  amounts of revenues  and  expenses  during the
    reporting period. Actual results could differ from those estimates.

3)  The accounting  policies  followed by the Company are set forth in Note 1 of
    Notes to Financial  Statements  included in the  Company's  Annual Report on
    Form 10-K for the year ended December 31, 1995.

4)  Net income per share is computed using the weighted average number of shares
    of common  stock and from stock  options and  warrants  (using the  treasury
    stock method). Dual presentation of primary and fully diluted net income per
    share is not shown because the differences are not significant.

5)  Inventory is stated at the lower of standard cost (which approximates actual
    cost on a first-in,  first-out  basis) or market  (estimated  net realizable
    value).

    Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

<S>                                                            <C>                <C>
                                                     September 30,       December 31,
                                                         1996                1995
                                                    ----------------    ----------------
            Raw Materials........................       $ 1,964             $1,434
            Work-in-process......................         6,648               3,926
            Finished Goods.......................         3,520               3,626
                                                        -------             -------
                                                        $12,132             $8,986
                                                        =======             ======
</TABLE>

6)   The  Company's  provision  for taxes on income is based on estimates of the
     levels of income and certain deductions  expected for the year which may be
     subject to change.


<PAGE>



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

    This  report on Form 10-Q  contains  forward-looking  statements  within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities Exchange Act of 1934. The forward-looking statements contained herein
are  subject  to  certain  factors  that could  cause  actual  results to differ
materially from those projected in the forward-looking  statements. Such factors
include,  but are not limited to, the factors set forth below and  elsewhere  in
this Form 10-Q.

Results of Operations

   Net Revenues

    Net  revenues  were  $11.7  million  for the third  quarter  of 1996,  a 22%
decrease  from net revenues of $15.1 million for the third quarter of 1995 and a
14% decrease from net revenues of $13.6 million for the second  quarter of 1996.
Net revenues were $40.7 million for the first nine months of 1996, a 4% decrease
from net  revenues  of $42.2  million  for the first  nine  months of 1995.  Net
revenues  for the third  quarter of 1996  compared to the third  quarter of 1995
decreased 18% in the communications market, 40% in the industrial market and 19%
in the computer  market.  Net revenues for the third quarter of 1996 compared to
the second quarter of 1996 decreased 17% in the communications market, decreased
30% in the  industrial  market and  increased  17% in the computer  market.  Net
revenues for the first nine months of 1996  compared to the first nine months of
1995 increased 19% in the communications market, decreased 30% in the industrial
market and decreased 29% in the computer  market.  The computer  market includes
the Winchester hard disk drive ("HDD") applications segment. Net revenues in the
HDD segment were $925,000 for the third quarter of 1996, a 55% decrease from net
revenues of $2.1 million in the HDD segment for the third  quarter of 1995 and a
3% increase  over net revenues of $900,000 for the second  quarter of 1996.  HDD
segment revenues  decreased to 8% of total net revenues for the third quarter of
1996 from 14% of total net revenues for the third  quarter of 1995.  HDD segment
revenues  were 7% of total net  revenues  for the second  quarter  of 1996.  Net
revenues in the HDD  segment  for the first nine months of 1996  compared to the
first nine months of 1995 decreased 57%. The Company's markets are characterized
by  intense  competition,   relatively  short  product  life  cycles  and  rapid
technological  changes.  In addition,  these markets have undergone rapid growth
and  consolidation in the last few years. The Company's net revenues and results
of  operations  have been and will be materially  and adversely  affected in the
event of a continued market slowdown.

    International  net revenues were $3.6 million,  or 31% of net revenues,  for
the third quarter of 1996, compared to $4.3 million, or 28% of net revenues, for
the third  quarter of 1995 and $6.1  million,  or 45% of net  revenues,  for the
second quarter of 1996. The decrease in international net revenues for the third
quarter of 1996 compared to the second quarter of 1996 is primarily attributable
to soft  demand  from  networking  customers  mainly  in  Taiwan.  International
revenues were $14.7 million,  or 36% of net revenues,  for the first nine months
of 1996, compared to $13.2 million,  or 31% of net revenues,  for the first nine
months of 1995. The increase in international revenues for the first nine months
of 1996 compared to the first nine months of 1995 was due to the  combination of
stronger  demand in Asia Pacific  revenues  and  softness in domestic  revenues.
International revenues exclude shipments to Amtron International  ("Amtron"),  a
domestic  distributor.  A significant  portion of Amtron's purchases are sold to
Samsung  Electronics and other Korean customers.  Sales to Amtron were 1% of net
revenues  in the first nine months of 1996,  compared to 15% of net  revenues in
the first nine  months of 1995.  The  decline in sales to Amtron as a percent of
net revenues in 1996 compared to 1995 was a result of the Company's HDD products
that were being sold to Samsung  reaching the end of their  production  lives in
the fourth quarter of 1995.  Although the Company has received  orders for other
HDD products, the net revenue from the sale of these products did not offset the
decline in net revenues of the Samsung HDD products.

    Domestic distributor revenues were approximately 17% of net revenues for the
third quarter of 1996, 19% of net revenues for the third quarter of 1995 and 17%
for the second quarter of 1996. Domestic distributor revenues were approximately
16% and 15% of net revenues for the first nine months of 1996 and the first nine
months  of 1995,  respectively.  The  Company  expects  revenues  from  domestic
distributors to increase in the future as a percentage of total net revenues due
to anticipated  shifts in the sales channel mix. In this regard,  several of the
Company's  OEM  (Original  Equipment  Manufacturer)  customers  have moved their
manufacturing  operations to subcontractors and in turn are placing their orders
through  distribution.  The Company defers  recognition of revenue  derived from
sales to domestic  distributors  until such distributors  resell the products to
their end customers; however, revenue is recognized by the Company upon shipment
to international representatives.


<PAGE>



   Gross Margin

    Gross margin is affected by the volume of product sales, price, product mix,
manufacturing utilization, product yields, inventory obsolescence and the mix of
sales to OEM's and to  distributors.  Gross margin has been and will continue to
be periodically affected by expenses incurred in connection with start-up of new
products and installation of new process  technologies at outside  manufacturing
foundries.

    The  Company's  gross margin  decreased to 52% in the third  quarter of 1996
from 57% in the third quarter of 1995 primarily due to continued higher per unit
manufacturing  costs  resulting  from  lower  manufacturing   utilization.   The
Company's  product mix also  shifted  away from the high  margin  communications
market segment and shifted to the lower margin  computer and  industrial  market
segments due to soft market conditions in the communications market segment. The
Company's gross margin decreased to 52% in the third quarter of 1996 from 66% in
the  second  quarter  of  1996  primarily  due  to  continued  higher  per  unit
manufacturing   costs  resulting  from  lower   manufacturing   utilization,   a
manufacturing ramp up for new communications  products, and a change in shipment
to lower margin  products in the computer and industrial  market  segments.  The
Company's  gross  margin  improved to 62% for the first nine months of 1996 from
54% for the first nine months of 1995. The product mix for the first nine months
of 1996  contained a greater  percentage of sales to the  communications  market
segment  compared to the first nine  months of 1995  thereby  contributing  to a
higher gross margin.  The Company  anticipates lower gross margins will continue
as long as soft market conditions in the communications market segment persist.

    The Company's gross margins are adversely  impacted by the costs  associated
with  installing  new  processes  at its  foundries.  Although  the  Company has
recently  been able to mitigate the adverse  impact on gross  margin  associated
with new wafer manufacturing  process costs by relying upon process technologies
existing at its outside  wafer  foundries,  there can be no  assurance  that the
Company  will not be  required  to incur  significant  expenses in the future to
develop, or obtain access to, advanced process  technologies and to transfer and
install such  technologies  at one or more of its foundries,  which could have a
material adverse affect on the Company's gross margin in the future. The Company
purchases  all of its BiCMOS  wafers from two wafer  foundries,  the majority of
which are supplied by one wafer foundry in Taiwan. Although both wafer foundries
are qualified to supply the Company with BiCMOS wafers, the Company's short term
BiCMOS wafer  supply could be  materially  and  adversely  affected if the wafer
foundry in Taiwan is unable to meet the  Company's  wafer  supply  requirements.
Approximately  one-third of the Company's  bipolar  wafers are purchased  from a
wafer  foundry in Japan and have  pricing  contracts  that are tied to  currency
fluctuations  of the yen.  Wafer  pricing for this  foundry is adjusted  every 6
months,  either up or down,  depending  on the  movement of the yen. The Company
does not expect to be significantly impacted by this pricing agreement, however,
due to the  uncertainty of the currency  markets and the recent  fluctuations of
the yen versus  the U.S.  dollar,  there can be no  assurance  that  significant
swings in  currency  will not have a material  adverse  effect on the  Company's
gross  margin  in the  future  due to the  impact of such  fluctuations  on this
contract or other contracts the Company has with foundries in Japan.

    The Company  currently  purchases its wafers from ten wafer  suppliers.  The
vast  majority  of the  Company's  wafer  supply is  obtained  from three  wafer
suppliers.  The  Company's  products are assembled and packaged by four vendors.
Any delays or  interruptions  due to such  factors  as  inadequate  capacity  or
unavailable raw materials in the Company's  wafer suppliers or assembly  vendors
could materially and adversely affect product  shipments and operating  results.
See "Other Factors Affecting Operating Results".

   Research and Development Expenses

    Research  and  development   expenses  include  costs  associated  with  the
definition,  design and development of standard and semi-standard products, tile
arrays  and  standard  cells.  The  Company  expenses  prototype  wafers and new
production mask sets related to new products as research and  development  costs
until products based on new designs are fully  characterized  by the Company and
are demonstrated to support published data sheets and satisfy reliability tests.
The Company  believes that the development  and  introduction of new products is
critical to its future success.  Research and development  expenses such as mask
and  silicon  costs that are  related to the  development  of new  products  can
fluctuate  from  quarter to  quarter  due to the  timing of the  product  design
process.

    Research and development expenses were $2.7 million, or 23% of net revenues,
for the third quarter of 1996, compared to $2.7 million, or 18% of net revenues,
for the third quarter of 1995 and $3.2 million, or 24% of net revenues,  for the
second quarter of 1996. Research and development  expenses were $8.5 million, or
21% of net  revenues,  for the  first  nine  months  of 1996,  compared  to $7.9
million, or 19% of net revenues, in the first nine months of 1995. For the third
quarter of 1996  compared to the third  quarter of 1995, an increase in absolute
dollars attributable to higher prototype inventory costs was offset by lower new
product  development  and mask costs.  The increase in research and  development
expenses  in absolute  dollars in the first nine months of 1996  compared to the
first nine  months of 1995 is  primarily  attributable  to  increased  prototype
inventory  costs  partially  offset by lower new  product  development  and mask
costs. The Company expects that research and development  expenses will continue
to increase in absolute dollars over the near term.

   Selling, General and Administrative

    Selling,  general and administrative  expenses were $2.8 million,  or 23% of
net revenues, for the third quarter of 1996, compared to $2.4 million, or 16% of
net  revenues,  for the third  quarter of 1995 and $3.0  million,  or 22% of net
revenues,  for the second quarter of 1996.  Selling,  general and administrative
expenses were $8.6 million, or 21% of net revenues, for the first nine months of
1996 compared to $7.2 million, or 17% of net revenues, for the first nine months
of 1995. The increase in absolute  dollars in the third quarter of 1996 compared
to the third  quarter  of 1995 is  primarily  attributable  to  higher  staffing
levels,  legal  fees,  travel,  contributions  and general  taxes and fees.  The
increases in absolute  dollars in the first nine months of 1996  compared to the
first nine months of 1995 is  primarily  attributable  higher  staffing  levels,
travel,  legal fees, manuals,  general taxes and fees, product sales support and
demonstration  boards.  The Company expects selling,  general and administrative
spending as a percent of net  revenues to remain  relatively  constant  over the
near term.

   Interest and Other Income and Interest Expense

    Interest  and other  income  was  $352,000  for the third  quarter  of 1996,
$472,000 for the third  quarter of 1995 and  $358,000 for the second  quarter of
1996.  Interest  income is affected by changes in the Company's  cash balance as
well as the  prevailing  interest  rates.  Interest  expense was $76,000 for the
third  quarter of 1996,  $100,000 for the third  quarter of 1995 and $78,000 for
the second quarter of 1996.

   Provision for Income Taxes

    The  Company's  effective tax rate for the first nine months of 1996 was 40%
compared to 18% for the first nine months of 1995. The higher effective tax rate
projected  for 1996 was a result of the full  utilization  of all  remaining net
operating loss and tax credit  carryforwards  in fiscal year 1995. The Company's
provision  for taxes on income is based on estimates of the levels of income and
certain deductions expected for the year which may be subject to change.

Liquidity and Capital Resources

    Since 1992, the Company has financed its operations and capital requirements
principally  through cash flow from operations and the proceeds from its initial
public  offering in October 1994.  Operations  provided $6.9 million of net cash
during the first nine months of 1996,  a decrease of $.2 million  from the first
nine  months of 1995.  In the first  nine  months of 1996,  lower net income and
accounts  payable  and  increased  inventories  were  partially  offset by lower
accounts receivables, causing a net decrease in operating cash flow.

    Cash  used in  investing  activities  for the first  nine  months of 1996 is
attributable to capital  expenditures of $7.1 million and cash proceeds received
from net sales of short-term investments of $2.4 million.

    Financing  activities for the first nine months of 1996 consisted  primarily
of the repurchase of the Company's  common stock.  In January 1996, the Board of
Directors  approved a stock repurchase  program in which up to $3 million of the
Company's Common Stock would be purchased by the Company on the open market from
time to time,  depending upon market conditions,  share price and other factors.
In July 1996, the Board of Directors  approved an additional  $2.7 million to be
used for the stock  purchase  program.  As of November 11, 1996, the Company had
repurchased a total of 613,000 shares of its Common Stock for $4.8 million.

    Working  capital was $38.9  million as of September  30,  1996,  compared to
$41.3 million as of December 31, 1995. Cash and cash equivalents of $3.1 million
and short-term investments of $23.9 million as of September 30, 1996 compares to
cash equivalents of $4.1 million and short-term  investments of $26.3 million as
of December 31, 1996.

    The  Company's  liquidity  is affected  by many  factors,  including,  among
others,  the extent to which the Company pursues  additional  wafer  fabrication
capacity from existing foundry suppliers or new suppliers, capital expenditures,
and the level of the Company's product  development  efforts,  and other factors
related to the uncertainties of the industry and global economies.  Although the
Company's cash  requirements  will  fluctuate  based on the timing and extent of
these factors, the Company anticipates that its existing cash resources and cash
generated from operations will fund necessary purchases of capital equipment and
provide adequate  working capital for at least the next twelve months.  However,
there can be no assurance that events in the future will not require the Company
to seek additional capital sooner or, if so required,  that such capital will be
available on terms acceptable to the Company.

Other Factors Affecting Future Operating Results

    The Company's  quarterly and annual operating results are affected by a wide
variety of factors  that could  materially  and  adversely  affect  revenues and
profitability,  including the Company's access to advanced process technologies,
the timing and extent of process  development  costs,  the Company's  ability to
introduce  new  products  on a timely  basis,  the  volume  and timing of orders
received,  market acceptance of the Company's and its customers'  products,  the
timing of new  product  announcements  and  introductions  by the Company or its
competitors,  changes  in the mix of  products  sold,  the  timing and extent of
research and  development  expenses,  the  availability  and cost of wafers from
outside  foundries,  fluctuations in manufacturing  yields,  fluctuations in the
relative  exchange  rate of the yen and the  U.S.  dollar,  competitive  pricing
pressures  and cyclical  semiconductor  industry  conditions.  A majority of the
Company's  net revenues are derived from sales of a limited  number of products.
Historically,   average  selling  prices  in  the  semiconductor  industry  have
decreased over the life of any particular product.  Although the Company has not
generally  experienced  material  decreases in its average  selling  prices over
time, there can be no assurance that the average selling prices of the Company's
products will not be subject to significant pricing pressures in the future. The
Company's business is characterized by short-term orders and shipment schedules,
and customer orders typically can be canceled or rescheduled without significant
penalty  to the  customer.  Due to the  absence  of  substantial  non-cancelable
backlog,  the Company  typically plans its production and inventory levels based
on internal forecasts of customer demand, which are highly unpredictable and can
fluctuate  substantially.  In addition, the Company is limited in its ability to
reduce costs quickly in response to any revenue  shortfalls.  As a result of the
foregoing or other factors,  there can be no assurance that the Company will not
experience  material  fluctuations in future operating results on a quarterly or
annual basis which would materially and adversely affect the Company's business,
financial condition and results of operations.

    The  markets  for  the  Company's   products  are   characterized  by  rapid
technological  change  and  frequent  new  product   introductions.   To  remain
competitive, the Company must develop or obtain access to advanced semiconductor
process  technologies in order to reduce die size,  increase die performance and
functional  complexity,  and improve  yields.  Semiconductor  design and process
methodologies  are  subject  to  rapid  technological  change,  requiring  large
expenditures for research and  development.  If the Company is unable to develop
or obtain  access to  advanced  wafer  processing  technologies  as they  become
needed, or is unable to define,  design,  develop and introduce  competitive new
products on a timely basis, its future operating  results will be materially and
adversely  affected.  In  addition,  if the  Company is unable to  transfer  and
install  such new  process  technologies  to one or more of its  foundries  in a
timely  manner,  its business and results of operations  could be materially and
adversely affected.

    The Company does not own or operate a full wafer fabrication  facility,  and
all of the  Company's  wafer  requirements  are  currently  supplied  by outside
foundries. In particular,  a substantial portion of the Company's bipolar wafers
are  manufactured  by one  foundry  in Japan and a  substantial  portion  of the
Company's  BiCMOS wafers are  manufactured  by one foundry in Taiwan.  There are
certain  significant  risks  associated  with the Company's  reliance on outside
foundries,  including the lack of assured wafer supply and control over delivery
schedules,  the  unavailability  of or delays in obtaining access to key process
technologies and limited control over manufacturing yields and production costs.
Although the Company has  undertaken  measures to diversify its sources of wafer
supply and works  closely  with its  foundries  to minimize  the  likelihood  of
reduced  manufacturing  yields,  the Company's  foundries have from time to time
experienced  lower  than  anticipated  manufacturing  yields,   particularly  in
connection  with the  introduction  of new  products  and the  installation  and
start-up  of new  process  technologies.  Such  reduced  yields  have  at  times
materially and adversely affected the Company's  operating results. In addition,
the Company's  reliance upon offshore foundries subjects the Company to risks of
exchange rate  fluctuations,  export and import  restrictions,  trade sanctions,
tariff increases and political instability.

    The Company purchases wafers from its outside foundries pursuant to purchase
orders  and does not have a  guaranteed  level of wafer  capacity  at any of its
foundries.  Therefore,  the Company's wafer suppliers could choose to prioritize
capacity  for other uses or reduce or  eliminate  deliveries  to the  Company on
short notice.  Accordingly,  there is no assurance that the Company's  foundries
will allocate  sufficient wafer capacity to satisfy the Company's  requirements.
Any  sudden  demand for an  increased  amount of wafers or sudden  reduction  or
elimination  of any  existing  source or  sources  of wafers  could  result in a
material  delay in the  shipment  of the  Company's  products.  There  can be no
assurance that material disruptions in supply, which have occurred  periodically
in the past, will not occur in the future.  Any such disruption could materially
and adversely affect the Company's  operating results.  In the event of any such
disruption,  if the  Company  were unable to qualify  alternative  manufacturing
sources for existing or new products in a timely  manner or if such sources were
unable to produce wafers with  acceptable  manufacturing  yields,  the Company's
business and operating results would be materially and adversely affected.

    A  substantial  portion of the Company's net revenues are derived from sales
of  products  for  computer  networking  applications.  Sales  of the  Company's
products to network equipment  manufacturers  accounted for approximately 52% of
the  Company's net revenues in the first nine months of 1996 and accounted for 8
of the 10 top  selling  products  for the first  nine  months  of 1996.  These 8
products  contributed  43%  of  revenues  for  the  same  period.  The  computer
networking equipment market is characterized by intense competition,  relatively
short  product life cycles and rapid  technological  change.  In  addition,  the
computer  network  equipment  market has  undergone a period of rapid growth and
consolidation in recent years. Although the Company has expanded its product mix
and  customer  base,  the  Company  expects its  dependency  on sales to network
equipment manufacturers to continue for the remainder of 1996 and into 1997. The
Company's  business and results of operations  would be materially and adversely
affected  in the event of a  significant  slowdown  in the  computer  networking
equipment market.

    The Company's market diversification and product development activities have
placed,  and could  continue to place,  a  significant  strain on the  Company's
limited  personnel  and other  resources.  The  Company's  ability to manage any
future growth  effectively  will require it to integrate its new employees  into
its overall  operations,  to continue to improve its operational,  financial and
management  systems and to attract,  train,  motivate  and manage its  employees
successfully.   If  the   Company's   management  is  unable  to  manage  growth
effectively,   the  Company's  business  and  results  of  operations  could  be
materially and adversely affected.

    The semiconductor  industry is characterized by rapid technological  change,
cyclical market patterns,  significant  price erosion,  periods of over-capacity
and  production  shortages,  variations  in  manufacturing  costs and yields and
significant  expenditures  for capital  equipment and product  development.  The
industry has from time to time experienced  depressed  business  conditions.  In
this regard, since early 1996, the industry has experienced significant softness
in demand  for many types of  products.  The  Company  expects  to  continue  to
experience substantial period-to-period fluctuations in future operating results
due to general semiconductor industry conditions,  variations in product mix, or
other factors.



<PAGE>



                           PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

    (a) Exhibits


             11.1  Statement Regarding Computation of Earnings Per Share.

        27.1     Financial Data Schedule

    (b)  Reports on Form 8-K

        None



<PAGE>
<TABLE>
<CAPTION>

                                                   Micro Linear Corporation
                                        Statement Re Computation of Earnings Per Share
                                                         (Unaudited)
                                            (In thousands, except per share data)

                                                                Three Months                      Nine Months
                                                                    Ended                            Ended
                                                                September 30,                    September 30,
                                                        ------------------------------    -----------------------------
<S>                                                        <C>              <C>              <C>              <C> 
                                                           1996             1995             1996             1995
                                                        ------------    --------------    ------------    -------------

    Net income......................................           $549            $3,161          $5,368           $7,057
                                                        ============    ==============    ============    =============

    PRIMARY:
    Weighted average common shares outstanding......         12,430            12,203          12,401           12,079

    Common equivalents attributable to:
         Options and warrants.......................            695             1,653             984            1,614
                                                        ------------    --------------    ------------    -------------
    Total weighted average common and common
         equivalent shares outstanding..............         13,125            13,856          13,384           13,693
                                                        ============    ==============    ============    =============

    Net income per share............................       $   0.04         $    0.23        $   0.40        $    0.52
                                                        ============    ==============    ============    =============


    FULLY DILUTED:
    Weighted average common shares outstanding......         12,430            12,203          12,401           12,079

    Common equivalents attributable to:
         Options and warrants - using quarter-end
              market price..........................            808             1,653           1,024            1,660
                                                        ------------    --------------    ------------    -------------
    Total weighted average common and common
         equivalent shares outstanding..............         13,239            13,856          13,384           13,750
                                                        ============    ==============    ============    =============

    Net income per share............................      $    0.04         $    0.23       $    0.40        $    0.51
                                                        ============    ==============    ============    =============
</TABLE>


<PAGE>








                                   SIGNATURES

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
































                                                        MICRO LINEAR CORPORATION

Date: November 14, 1996                            By:  /s/ J. PHILIP RUSSELL
                                                        ---------------------
                                                        J. Philip Russell
                                                        Chief Financial Officer
                                                        (Principal Financial 
                                                        and Accounting Officer)