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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, 1997

                                       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  as of
September 30, 1997 was 11,744,505.


<PAGE>

<TABLE>
<CAPTION>

                                                 TABLE OF CONTENTS

                                                                                                    Page
         PART I.     FINANCIAL INFORMATION

         Item 1.     Financial Statements
                <S>                                                                                     <C> 
                      Consolidated Condensed Statements of Income for the three and nine months
                      ended September 30, 1997 and                                                    3
                      1996..........................................

                     Consolidated Condensed Balance Sheets at September 30, 1997 and December         4
                     31, 1996....................................................................

                     Consolidated Condensed Statements of Cash Flows for the nine months ended
                     September 30, 1997 and 1996.................................................     5

                     Notes to Consolidated Condensed Financial Statements........................     6

         Item 2.     Management's Discussion and Analysis of Financial Condition and Results of
                        Operations...............................................................     8

         PART II.    OTHER INFORMATION

         Item 1.     Legal Proceedings...........................................................     14

         Item 6.     Exhibits and Reports on Form 8-K............................................     14

         SIGNATURES..............................................................................     15

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                    
                                      PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                                         MICRO LINEAR CORPORATION
                               CONSOLIDATED 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,
                                                            1997               1996               1997                1996
                                                      -----------------  -----------------  -----------------   -----------------
Net revenues.......................................           $15,036            $11,713            $50,675             $40,671
Cost of revenues...................................             8,405              5,681             24,799              15,461
                                                      -----------------  -----------------  -----------------   -----------------
   Gross profit....................................             6,631              6,032             25,876              25,210
Operating expenses:
   Research and development........................             2,893              2,648              8,725               8,519
   Selling, general and administrative.............             2,863              2,745              9,469               8,580
                                                      -----------------  -----------------  -----------------   -----------------
                                                                5,756              5,393             18,194              17,099
                                                      -----------------  -----------------  -----------------   -----------------
   Income from operations..........................               875                639              7,682               8,111
Interest and other income..........................               331                352                994               1,068
Interest expense...................................               (69)               (76)              (210)               (233)
                                                      -----------------  -----------------  -----------------   -----------------
   Income before taxes.............................             1,137                915              8,466               8,946
Provision for income taxes.........................               409                366              3,048               3,578
                                                      -----------------  -----------------  -----------------   -----------------
   Net income......................................          $    728           $    549           $  5,418            $  5,368
                                                      =================  =================  =================   =================

Net income per share...............................          $   0.06           $   0.04          $    0.41            $   0.40
                                                      =================  =================  =================   =================

Shares used in computing net income per share......            12,679             13,125             13,185              13,384
                                                      =================  =================  =================   =================
<FN>
See  accompanying   notes  to  unaudited   consolidated   condensed financial statements.
</FN>
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

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

<S>                                                                                                   <C>                     <C>
                                                                                            September 30,            December 31,
                                                                                                 1997                    1996
                                                                                             (Unaudited)           (See note below)
                                                                                         ---------------------   -------------------
Assets
Current assets:
   Cash and cash equivalents...........................................................                $3,881                $4,385
   Short-term investments..............................................................                22,572                20,798
   Accounts receivable, net of allowance for doubtful accounts of $288 and $243........                 7,681                 4,372
   Inventories.........................................................................                 7,841                10,456
   Deferred tax assets.................................................................                 4,499                 4,499
   Other current assets................................................................                 1,178                 2,077
                                                                                         ---------------------   -------------------
     Total current assets..............................................................                47,652                46,587
                                                                                         ---------------------   -------------------
Property, plant and equipment..........................................................                41,941                38,095
Less accumulated depreciation and amortization.........................................               (19,763 )             (16,441)
                                                                                         ---------------------   -------------------
                                                                                                       22,178                21,654
Other assets...........................................................................                   709                   791
                                                                                         ---------------------   -------------------
       Total assets....................................................................               $70,539               $69,032
                                                                                         =====================   ===================

Liabilities and Stockholders' Equity Current liabilities:
   Accounts payable....................................................................              $  3,726              $  2,732
   Accrued liabilities.................................................................                 3,900                 3,580
   Deferred income on shipments to distributors........................................                 1,783                 1,270
   Current portion of long-term debt...................................................                   152                   209
                                                                                         ---------------------   -------------------
     Total current liabilities.........................................................                 9,561                 7,791
                                                                                         ---------------------   -------------------
Long-term debt.........................................................................                 2,859                 2,972
                                                                                         ---------------------   -------------------
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 13,080,505 and 12,810,080; outstanding
       shares 11,744,505 and 12,054,080 ...............................................                    13                    13
   Additional paid-in capital..........................................................                51,835                50,501
   Retained earnings...................................................................                18,854                13,435
   Treasury stock, 1,336,000 and 756,000 shares at cost................................               (12,583 )             (5,680)
                                                                                         ---------------------   -------------------
     Total stockholders' equity........................................................                58,119                58,269
                                                                                         ---------------------   -------------------
       Total liabilities and stockholders' equity......................................               $70,539               $69,032
                                                                                         =====================   ===================
<FN>
Note: The balance sheet at December 31, 1996 has been derived from the consolidated audited financial
statements at that date.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

                                                                               Nine Months Ended
                                                                    -----------------------------------------
<S>                                                                            <C>                     <C>
                                                                     September 30,           September 30,
                                                                          1997                   1996
                                                                    -----------------      ------------------
Cash provided by operating activities...........................             $10,855                  $6,912

Investing activities:
   Capital expenditures.........................................              (3,846 )                (7,116 )
   Purchases of short-term investments..........................             (32,735 )               (16,009 )
   Sales of short-term investments..............................              30,961                  18,380
                                                                    -----------------      ------------------
     Net cash used in investing activities......................              (5,620 )                (4,745 )

Financing activities:
   Principal payments under capital lease obligations and debt..                (170 )                  (414 )
   Proceeds from issuance of common stock.......................               1,334                     688
   Acquisition of treasury stock................................              (6,903 )                (3,558 )
                                                                    -----------------      ------------------
     Net cash used in financing activities......................              (5,739 )                (3,284 )
                                                                    -----------------      ------------------

Net decrease in cash and cash equivalents.......................                (504 )                (1,117 )
Cash and cash equivalents at beginning of period................               4,385                   4,175
                                                                    -----------------      ------------------
Cash and cash equivalents at end of period......................              $3,881                  $3,058
                                                                    =================      ==================

<FN>
See  accompanying   notes  to  unaudited   consolidated   condensed financial statements.
</FN>
</TABLE>

<PAGE>


                                                             
                            MICRO LINEAR CORPORATION

              NOTES TO CONSOLIDATED 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.

2)   The accompanying  interim financial  statements are unaudited and have been
     prepared by the Company in accordance  with generally  accepted  accounting
     principles  and contain all  adjustments  (consisting  of normal  recurring
     adjustments)   necessary  to  fairly  present  the  financial   information
     included.  While the Company  believes that the disclosures are adequate to
     make the information  not misleading,  it is suggested that these financial
     statements be read in conjunction  with the Company's Annual Report on Form
     10-K for the year ended  December 31, 1996.  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 or any  subsequent,  interim
     period.

3)   For financial  reporting  purposes,  the Company's  fiscal year ends on the
     Sunday closest to December 31. Fiscal year 1996 ended on December 29, 1996.
     The Company's  fiscal quarters end on the Sunday closest to the end of each
     calendar quarter.  For presentation  purposes,  the accompanying  unaudited
     consolidated condensed financial statements refer to the quarters' calendar
     month end for convenience.

     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.

4)   During the three months ended September 30, 1997, three customers accounted
     for 15%,  11% and 6% of total sales,  respectively.  During the nine months
     ended September 30, 1997, three customers accounted for 14%, 14% and 11% of
     total sales, respectively.

5)   Inventories consist of the following (in thousands):

<TABLE>
<S>                                                  <C>                  <C>
                                           September 30,         December 31,
                                                1997                 1996
                                          -----------------     ---------------
            Raw Materials..............        $  702              $ 1,688
            Work-in-process............         5,521                6,398
            Finished Goods.............         1,618                2,370
                                              -------              -------
                                               $7,841              $10,456
                                               ======              =======
</TABLE>


6)    Cash used for the nine months ended September 30, 1997 was $1,741,000 for
      incomes taxes and $233,000 for interest.

7)   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.  The Company's  effective tax rate for the third quarter
     of 1997  was  36%  compared  to 40% for the  third  quarter  of  1996.  The
     effective  tax rate for the third  quarter of 1997 and the third quarter of
     1996 differs from the federal  statutory  income tax rate  primarily due to
     state income  taxes,  net of federal  research  credits and, for 1997,  the
     benefit from a foreign sales corporation.



<PAGE>


       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
                                   (Unaudited)

8)   From  January  1996  through  the end of the  third  quarter  of 1997,  the
     Company's  Board of Directors  approved the  repurchase  of an aggregate of
     $13.5 million of the Company's Common Stock in stock  repurchase  programs,
     of which the Company had repurchased  1,336,000 shares at an aggregate cost
     of $12.6  million  through  September  30,  1997.  The Company  repurchased
     195,000  shares at a cost of $1.8 million  during the third quarter of 1997
     and 580,000  shares at a cost of $6.9 million  during the first nine months
     of 1997.  Subsequent to the end of the third quarter of 1997, the Company's
     Board of Directors  approved an additional $1.5 million to be for the stock
     repurchase program.

9)   Statement of Financial  Accounting  Standards No. 128 (FAS 128),  "Earnings
     Per Share (EPS)",  was issued in February 1997.  Under FAS 128, the Company
     will be required to disclose  basic EPS and diluted EPS for all periods for
     which an income  statement  is  presented,  which will  replace  disclosure
     currently  being  made  for  primary  EPS and  fully-diluted  EPS.  FAS 128
     requires  adoption for fiscal  periods  ending after December 15, 1997. Pro
     forma disclosure of basic EPS and diluted EPS for the current reporting and
     comparable period in the prior year is as follows:

<TABLE>
<CAPTION>
                               Three Months Ended             Nine Months Ended
<S>                                          <C>                           <C>
                                   September 30,                 September 30,
                              ------------------------      -------------------------
Earnings Per Share:             1997           1996           1997            1996
                              ---------      ---------      ---------       ---------

Basic.....................    $   0.06       $   0.04       $   0.46        $   0.43
                              =========      =========      =========       =========
Diluted...................    $   0.06       $   0.04       $   0.41        $   0.40
                              =========      =========      =========       =========
</TABLE>


10)  In June  1997,  the FASB  issued  Statement  No.  130 (FAS 130)  "Reporting
     Comprehensive  Income".  FAS 130  establishes  standards  for reporting and
     display of comprehensive income and its components in a financial statement
     that is displayed  with a same  prominence as other  financial  statements.
     Comprehensive income as defined includes all changes in equity (net assets)
     during a period from nonowner sources. An example of an item to be included
     in comprehensive income which is excluded in net income would be unrealized
     gains  and  losses  on  available  for  sale  securities.  The  disclosures
     prescribed by FAS 130 must be made beginning with the first period of 1998.

11)  A discussion of certain pending legal  proceedings is included in Item 1 of
     Part II of the Company's Form 10-Q for the fiscal  quarter ended  September
     30, 1997.  The Company  continues to believe that the final outcome of such
     matters  discussed will not have a material adverse effect on the Company's
     consolidated financial position or results of operations.  No assurance can
     be given,  however, that these matters will be resolved without the Company
     becoming  obligated to make  payments or to pay other costs to the opposing
     party,  with the  potential  for having an adverse  effect on the Company's
     financial position or its results of operations.



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Result
         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  $15.0  million  for the third  quarter  of 1997,  a 28%
increase  over net revenues of $11.7 million for the third quarter of 1996 and a
23% decrease over net revenues of $19.5 million for the second  quarter of 1997.
Net  revenues  were  $50.7  million  for the first  nine  months of 1997,  a 25%
increase  over net revenues of $40.7  million for the first nine months of 1996.
Net revenues for the third quarter of 1997 compared to the third quarter of 1996
increased 36% in the  communications  market,  123% in the industrial market and
decreased 49% in the computer market. Net revenues for the third quarter of 1997
compared to the second quarter of 1997  increased 21% in the  industrial  market
and  decreased  29%  and  50%  in  the   communications  and  computer  markets,
respectively.  Net  revenues  for the first nine months of 1997  compared to the
first nine months of 1996 increased 32% in the communications market, 39% in the
industrial market and decreased 9% in the computer market.

    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  would be  materially  and
adversely  affected  in  the  event  of a  market  slowdown,  especially  in the
networking segment of the communications market.

    Sales of networking products have constituted a substantial  majority of the
Company's  net  revenues  since the second  half of 1995.  Net  revenues  in the
networking  segment  were $8.9  million  for the third  quarter  of 1997,  a 47%
increase  over net  revenues of $6.1 million in the  networking  segment for the
third  quarter of 1996 and a 30% decrease  over net revenues of $12.7 million in
the networking  segment for the second  quarter of 1997.  Sales of the Company's
networking  products  accounted for approximately 64% and 57% of net revenues in
the nine months of 1997 and 1996. The  networking  segment is  characterized  by
intense   competition,   relatively   short   product   life  cycles  and  rapid
technological change. In addition, the networking segment has undergone a period
of rapid growth,  price erosion 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 near
future. 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 segment.

International  net revenues were $7.8 million,  or 52% of net revenues,  for the
third quarter of 1997, compared to $3.6 million, or 31% of net revenues, for the
third quarter of 1996 and $11.6 million, or 60% of net revenues,  for the second
quarter  of 1997.  International  revenues  were  $27.5  million,  or 54% of net
revenues,  for the first nine months of 1997,  compared to $14.7 million, or 36%
of  net  revenues,   for  the  first  nine  months  of  1996.  The  increase  in
international  revenues  for the third  quarter  of 1997  compared  to the third
quarter of 1996 and the first  nine  months of 1997  compared  to the first nine
months of 1996 was due to the  combination of stronger  demand for the Company's
products in Asia and Europe and more Asia Pacific  subcontract work for domestic
customers.  The decrease in international revenues for the third quarter of 1997
compared to the second quarter of 1997 was due to reduced  subcontract work from
domestic customers.

    Domestic  distributor  revenues were  approximately  17% of net revenues for
each of the  third  quarters  of 1997 and 1996 and 13% of net  revenues  for the
second quarter of 1997. Domestic  distributor revenues were approximately 16% of
net  revenues  for both the first nine  months of 1997 and first nine  months of
1996,  respectively.  The Company  currently  expects  net  revenues to domestic
distributors  as a percentage  of total net revenues to remain at  approximately
the same level as the third quarter of 1997. The Company  defers  recognition of
revenue  derived  from sales to domestic  distributors  until such  distributors
resell the products to their  customers;  however,  revenue is recognized by the
Company upon shipment to international representatives.

    During the three months ended September 30, 1997, three customers  accounted
for 15%, 11% and 6% of total sales,  respectively.  During the nine months ended
September  30, 1997,  three  customers  accounted  for 14%, 14% and 11% of total
sales, respectively.

    The Company's bookings rate was $13.4 million for the third quarter of 1997,
a 16% decrease  compared to net bookings of $16.0 million for the second quarter
of 1997. The bookings in the third quarter of 1997 in the communications  market
segment  decreased  approximately  14%  compared  to the second  quarter of 1997
primarily due to lower orders for both domestic and Taiwan networking customers.
The  bookings  in the  third  quarter  of 1997 in the  computer  market  segment
decreased approximately 34% compared to the second quarter of 1997 mainly due to
lower orders for bus and octal transceiver  products.  The bookings in the third
quarter of 1997 in the industrial  market  segment  decreased  approximately  9%
compared to the second  quarter of 1997 primarily due to lower orders in battery
management  products.  The Company's  revenues and results of operations will be
materially  and  adversely  affected in the fourth  quarter of 1997 due to these
reduced bookings and would be materially adversely affected in future periods if
reduced bookings continue.

   Gross Margin

    The  Company's  gross margin  decreased to 44% in the third  quarter of 1997
from 52% in the third  quarter of 1996 and  decreased  to 51% for the first nine
months of 1997 from 62% for the first  nine  months of 1996  primarily  due to a
change in  product  mix,  higher  inventory  charges  and  higher per unit costs
resulting   from  lower   manufacturing   utilization.   The   Company's   newer
communications  products, which generally carry a higher gross margin than other
products, have also experienced pricing pressures resulting in a negative impact
to gross margin.

    The  Company's  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.  The Company's
gross margin has been and will continue to be periodically  affected by expenses
incurred  in  connection   with  start-up  and   installation   of  new  process
technologies at outside manufacturing foundries.

    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.  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.  The Company
currently purchases its wafers from six wafer suppliers.  A substantial majority
of the  Company's  wafer  supply is  obtained  from three wafer  suppliers.  The
Company's  products are assembled and packaged by four vendors.  The majority of
the Company's  products are assembled and packaged by one vendor.  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.  The Company purchases nearly 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 anticipate that
this pricing  agreement will have a material effect on the Company's  results of
operations;  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  fluctuations  in  currency  values  will not have a  material
adverse  effect  on  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. 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 $2.9 million, or 19% of net revenues,
for the third quarter of 1997, compared to $2.6 million, or 23% of net revenues,
for the third quarter of 1996 and $3.3 million, or 17% of net revenues,  for the
second quarter of 1997. Research and development  expenses were $8.7 million, or
17% of net  revenues,  for the  first  nine  months  of 1997,  compared  to $8.5
million,  or 21% of net revenues,  in the first nine months of 1996.  The slight
increase in research and development  expenses in absolute  dollars in the third
quarter of 1997 compared to the third quarter of 1996 is primarily  attributable
to an increase in staffing levels and mask expenses offset by fewer purchases of
expensed inventory.  The slight increase in research and development expenses in
absolute  dollars in the first nine  months of 1997  compared  to the first nine
months of 1996 is  primarily  attributable  to an increase  in  staffing  levels
offset by fewer  purchases  of  expensed  inventory.  The  decrease  in absolute
dollars in the third quarter of 1997  compared to the second  quarter of 1997 is
primarily attributable to a decrease in staffing,  mask and travel costs. In the
fourth  quarter of 1996,  the Company  announced the  establishment  of a design
center in  Cambridge,  England.  Since  December  1996,  the Company has hired a
managing  director  and three  design  engineers.  The  Company  expects  to add
additional  design  engineers in Cambridge  throughout the remainder of 1997 and
1998. The Company believes that the development and introduction of new products
is critical to its future  success and expects  that  research  and  development
expenses will increase in the future in absolute dollars.

   Selling, General and Administrative

    Selling,  general and administrative  expenses were $2.9 million,  or 19% of
net revenues, for the third quarter of 1997, compared to $2.7 million, or 23% of
net  revenues,  for the third  quarter of 1996 and $3.3  million,  or 16% of net
revenues,  for the second quarter of 1997.  Selling,  general and administrative
expenses were $9.5 million, or 19% of net revenues, for the first nine months of
1997 compared to $8.6 million, or 21% of net revenues, for the first nine months
of 1996. The increase in absolute  dollars in the third quarter of 1997 compared
to the  third  quarter  of 1996 is  primarily  attributable  to an  increase  in
commissions  due to higher  revenues,  as well as  increased  bonus and staffing
costs partially  offset by a decrease in travel costs.  The increase in absolute
dollars in the first nine  months of 1997  compared  to the first nine months of
1996 is primarily  attributable  to an increase in staffing levels and increased
commissions  due to higher  revenues.  The  decrease in absolute  dollars in the
third  quarter  of 1997  compared  to the second  quarter  of 1997 is  primarily
attributable  to a decrease in staffing and travel  costs.  The Company  expects
selling,  general and administrative spending to remain relatively constant as a
percentage of sales revenues from quarter to quarter.

   Interest and Other Income and Interest Expense

    Interest  and other  income  was $0.3  million  for each of the first  three
quarters  of  1997  and  the  third  quarter  of  1996.   Interest  expense  was
insignificant  for the first  three  quarters  of 1997 and the third  quarter of
1996.

    New Accounting Pronouncements

    In February 1997, the FASB issued  statement No. 128 (FAS 128) "Earnings Per
Share".  In June 1997,  the FASB issued  statement No. 130 (FAS 130)  "Reporting
Comprehensive  Income". For a description of these statements see notes 9 and 10
of the notes to the unaudited Consolidated  Condensed Financial Statements.  FAS
128 requires  adoption for fiscal  periods  ending after  December 15, 1997. The
disclosures  prescribed by FAS 130 must be made beginning with the first quarter
of 1998.

   Provision for Income Taxes

    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.  The  Company's  effective tax rate for third quarter of 1997
was 36% compared to 40% for the third  quarter of 1996.  The  effective tax rate
for the third  quarter of 1997 and the third  quarter of 1996  differs  from the
federal  statutory  income tax rate primarily due to state income taxes,  net of
federal  research  credits  and,  for 1997,  the  benefit  from a foreign  sales
corporation.


<PAGE>



Liquidity and Capital Resources

    During the last several  years,  the Company has financed its operations and
capital requirements  principally through cash flow from operations.  Operations
provided  $10.9  million of net cash  during the first nine  months of 1997,  an
increase of $3.9 million  over the first nine months of 1996.  In the first nine
months of 1997,  additional  net income,  lower  inventories  and higher current
liabilities were partially offset by increased  accounts  receivables  causing a
net increase in operating cash flow.

    Cash used in  investing  activities  for the first nine months of 1997 is  
attributable  to capital  expenditures  of $3.8 million and net purchases of 
short-term investments of $1.8 million.

    Financing  activities for the first nine months of 1997 consisted  primarily
of the  repurchase  of the  Company's  Common  Stock  for an  aggregate  of $6.9
million.  From January 1996  through the end of the third  quarter of 1997,  the
Company's  Board of Directors  approved the  repurchase of an aggregate of $13.5
million of the Company's Common Stock in stock repurchase programs, of which the
Company had repurchased  1,336,000  shares at an aggregate cost of $12.6 million
through September 30, 1997. The Company  repurchased 195,000 shares at a cost of
$1.8 million  during the third  quarter of 1997 and 580,000  shares at a cost of
$6.9 million during the first nine months of 1997.  Subsequent to the end of the
third quarter of 1997, the Company's  Board of Directors  approved an additional
$1.5 million to be for the stock repurchase program.

    Working  capital was $38.1  million as of September  30,  1997,  compared to
$38.9 million as of December 31, 1996 and includes cash and cash  equivalents of
$3.9 million and short-term investments of $22.6 million as of June 30, 1997.

    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,  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 market conditions in the overall  semiconductor  industry
and in the communications,  industrial and computer segments of such industry in
which the Company sells its  products.  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,  the  Company's  products,
especially those in the computer  networking  equipment market, have encountered
significant  pricing pressures that have adversely  affected the Company's gross
margins  in  recent  quarters.   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.

    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 64% of
the  Company's net revenues in the first nine months of 1997 and accounted for 8
of the 10 top  selling  products  for the first  nine  months  of 1997.  These 8
products  constituted  46% of the  Company's  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 experienced  consolidation  among the competitors in the market-place
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 1997 and into 1998. 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.
In  addition,  as a result of  competitive  pricing  pressures,  the Company has
experienced  lower  margins in certain of its existing  and recently  introduced
products for computer networking  applications.  There can be no assurance as to
when or if such pricing pressures will lessen.  Such pricing pressures will have
an adverse  affect on the  Company's  results of  operations  unless they can be
offset by higher margins on other products or reduced operating expenses.

    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.

    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 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 the Company's  integrated circuits violate a Pioneer patent.  Pioneer
is seeking  monetary  damages and an  injunction  against  such  alleged  patent
violation.  The Company has denied any  infringement  and filed a  counter-claim
seeking  invalidity of the patent. The Company's motion for summary judgment was
denied. The Company is now responding to the Plaintiff's offer for a settlement.


    On February 24, 1997, a former employee of Micro Linear filed a complaint in
the Superior  Court of  California,  County of Santa Clara,  alleging  breach of
contract and employment discrimination.  On June 5, 1997, the case was dismissed
and the parties agreed to submit the dispute to arbitration.  The Company denies
all liability and intends to vigorously defend its actions in the arbitration.

    Although the Company  believes that the resolution of these actions will not
have a material adverse effect on the Company's  financial  condition or results
of  operations,  there can be no assurance that such actions will be resolved in
the  Company's  favor or that an  unfavorable  resolution  would not  materially
adversely effect the Company's financial condition or results of operations.


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>








                                   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 7, 1997              By:  /s/ J. PHILIP RUSSELL
                                    ---------------------
                                    J. Philip Russell
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


<PAGE>