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

            --------------------------------------------------------

                                    FORM 10-Q

            --------------------------------------------------------

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

                For the quarterly period ended November 30, 2005

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission file number 0-7422

           --------------------------------------------------------

                        STANDARD MICROSYSTEMS CORPORATION

           --------------------------------------------------------

             (Exact name of registrant as specified in its charter)

                DELAWARE                             11-2234952

           --------------------------------------------------------

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

                    80 Arkay Drive, Hauppauge, New York 11788

           --------------------------------------------------------

               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: 631-435-6000

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

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

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of November 30, 2005, there were 21,428,000 shares of the registrant's common
stock outstanding.

<PAGE>
                        Standard Microsystems Corporation

                                    Form 10-Q
                     For the Quarter Ended November 30, 2005

                                Table of Contents
                                -----------------



Part I       Financial Information

Item 1    Financial Statements (unaudited):
          Condensed  Consolidated  Balance  Sheets as of  November  30, 2005 and
          February 28, 2005
          Condensed Consolidated  Statements  of  Operations  for the  Three and
          Nine-Month Periods Ended November 30, 2005 and 2004
          Condensed Consolidated  Statements  of Cash  Flows for the  Nine-Month
          Periods Ended November 30, 2005 and 2004
          Notes to Condensed Consolidated Financial Statements
Item 2    Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations
Item 3    Quantitative and Qualitative Disclosures About Market Risk
Item 4    Controls and Procedures


Part II      Other Information

Item 1    Legal Proceedings
Item 2    Unregistered Sales of Equity Securities and Use of Proceeds
Item 3    Defaults Upon Senior Securities
Item 4    Submission of Matters to a Vote of Security Holders
Item 5    Other Information
Item 6    Exhibits


Signature
<PAGE>

PART I - FINANCIAL INFORMATION


ITEM 1.   Financial Statements


               STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                                 (in thousands)



                                                    November 30,    February 28,
                                                       2005             2005
                                                   -------------   -------------
Assets
Current assets:
 Cash and cash equivalents                         $     31,731    $   116,126
 Short-term investments                                 109,982         56,519
 Accounts receivable, net                                36,686         23,499
 Inventories                                             40,663         33,310
 Deferred income taxes                                   18,313         17,701
 Other current assets                                     5,660          4,584
--------------------------------------------------------------------------------

   Total current assets                                 243,035        251,739
--------------------------------------------------------------------------------

Property, plant and equipment, net                       33,828         22,630
Goodwill                                                 76,630         29,435
Intangible assets, net                                   45,311          3,584
Deferred income taxes                                     9,765          7,163
Other assets                                              3,777          4,708
--------------------------------------------------------------------------------

                                                   $    412,346    $   319,259
================================================================================

Liabilities and shareholders' equity
Current liabilities:
 Accounts payable                                  $     26,387    $    15,995
 Deferred income on shipments to distributors            11,534          7,689
 Accrued expenses, income taxes and other
 liabilities                                             27,985         13,400
--------------------------------------------------------------------------------

   Total current liabilities                             65,906         37,084
--------------------------------------------------------------------------------

Deferred income taxes                                    15,070            -
Other liabilities                                        15,051         12,326

Shareholders' equity:
 Preferred stock                                            -              -
 Common stock                                             2,342          2,053
 Additional paid-in capital                             238,696        187,854
 Retained earnings                                      109,049        100,612
 Treasury stock, at cost                                (25,961)       (23,799)
 Deferred stock-based compensation                       (3,799)        (1,925)
 Accumulated other comprehensive income (loss)           (4,008)         5,054
--------------------------------------------------------------------------------

   Total shareholders' equity                           316,319        269,849
--------------------------------------------------------------------------------

                                                   $    412,346    $   319,259
================================================================================

See Notes to Condensed Consolidated Financial Statements.
<PAGE>
               STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                      Three Months Ended                      Nine Months Ended
                                                         November 30,                           November 30,
                                             --------------------------------         ----------------------------------
                                                 2005                2004                 2005                 2004
                                             ------------        ------------         ------------        --------------
<S>                                          <C>                 <C>                  <C>                 <C>

Revenues                                     $    86,623         $    50,755          $   234,490         $   153,965

Costs and expenses:
 Cost of goods sold                               45,697              27,483              126,561              80,128
 Research and development                         14,907              10,390               42,558              32,472
 Selling, general and administrative              17,742              12,989               49,887              36,693
 Amortization of intangible assets                 1,547                 265                4,257                 848
 In-process research and development                 -                   -                    895                 -
-----------------------------------------------------------------------------         ----------------------------------

Income (loss) from operations                      6,730                (372)              10,332               3,824

Interest income                                      900                 704                2,272               1,726
Other expense, net                                   (21)                (20)                 (73)                (58)
-----------------------------------------------------------------------------         ----------------------------------

Income before provision for income taxes           7,609                 312               12,531               5,492

Provision for (benefit from) income taxes          2,218                (301)               4,094               1,072
-----------------------------------------------------------------------------         ----------------------------------
Net income                                   $     5,391         $       613          $     8,437         $     4,420
=============================================================================         ==================================


Basic net income per share:                  $      0.26         $      0.03          $      0.41         $      0.24
=============================================================================         ==================================

Diluted net income per share:                $      0.24         $      0.03          $      0.39         $      0.23
=============================================================================         ==================================

Weighted average common shares outstanding:
 Basic                                            20,983              18,395               20,548              18,321
 Diluted                                          22,543              19,035               21,558              19,375
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
<PAGE>
              STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                              Nine Months Ended
                                                                                                 November 30,
                                                                                 ----------------------------------------
                                                                                        2005                   2004
                                                                                 -----------------      -----------------
Cash flows from operating activities:
<S>                                                                              <C>                    <C>
  Cash received from customers and licensees                                     $       231,685        $       158,732
  Cash paid to suppliers and employees                                                  (188,843)              (156,309)
  Interest received                                                                        1,781                  1,486
  Interest paid                                                                              (54)                  (108)
  Income taxes refunded (paid)                                                            (2,809)                 6,703
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by operating activities                                             41,760                 10,504
------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Capital expenditures                                                                   (15,988)                (7,335)
  Acquisition of Oasis SiliconSystems Holding AG, net of cash acquired                   (60,349)                   -
  Sales of property, plant and equipment                                                     -                    1,677
  Sales of long-term investments                                                             -                    4,000
  Purchases of short-term investments                                                   (375,601)              (320,439)
  Sales and maturities of short-term investments                                         322,170                336,626
  Other                                                                                     (296)                    24
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) investing activities                                (130,064)                14,553
-------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from issuance of common stock                                                   9,416                  3,618
  Purchases of treasury stock                                                             (2,162)                  (344)
  Repayments of obligations under capital leases and notes payable                        (1,890)                (1,575)
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by financing activities                                              5,364                  1,699
-------------------------------------------------------------------------------------------------------------------------

Effect of foreign exchange rate changes on cash and cash equivalents                      (1,455)                   414
-------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                                     (84,395)                27,170

Cash and cash equivalents at beginning of period                                         116,126                 14,050
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                       $        31,731        $        41,220
=========================================================================================================================

Reconciliation of net income to
net cash provided by operating activities:

Net income                                                                       $         8,437        $         4,420
Adjustments to reconcile net income to
net cash provided by operating activities:
  Depreciation and amortization                                                           12,415                  8,586
  Tax benefits from employee stock plans                                                   2,852                    759
  In-process research and development charge                                                 895                    -
  Non-cash stock-based compensation                                                       10,240                  1,545
  Other adjustments, net                                                                       1                    (32)
  Changes in operating assets and liabilities,
  net of business acquisition impact:
      Accounts receivable                                                                 (9,088)                (4,576)
      Inventories                                                                          4,311                (14,713)
      Accounts payable, deferred income, accrued expenses and other liabilities           12,544                  8,873
      Current and deferred income taxes                                                   (1,548)                 7,018
      Other changes, net                                                                     701                 (1,376)
-------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                        $        41,760        $        10,504
=========================================================================================================================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

<PAGE>
               STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation

The  accompanying  unaudited  condensed  consolidated  financial  information of
Standard Microsystems Corporation and subsidiaries, referred to herein as "SMSC"
or "the  Company," has been prepared in accordance  with  accounting  principles
generally  accepted in the United  States and the rules and  regulations  of the
Securities  and Exchange  Commission  (SEC),  and reflects all normal  recurring
adjustments  which, in management's  opinion,  are necessary to state fairly the
Company's  financial  position,  results  of  operations  and cash flows for all
periods presented.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and liabilities at the date of the financial  statements,  as
well as the  reported  amounts of revenues  and  expenses  during the  reporting
period. Actual results may differ from those estimates, and such differences may
be material to the financial statements.  These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements for the fiscal year ended February 28, 2005 included in the Company's
annual  report on Form 10-K,  as filed on May 16, 2005 with the SEC. The results
of operations for the three and  nine-month  periods ended November 30, 2005 are
not necessarily indicative of the results to be expected for any future periods.


2.   Stock-Based Compensation

The Company has in effect  several  stock-based  compensation  plans under which
incentive stock options,  non-qualified  stock options,  restricted stock awards
and stock appreciation rights (SARs) are granted to employees and directors. All
stock options and SARs are granted with exercise  prices equal to the fair value
of the underlying  shares on the date of grant.  The Company  accounts for stock
option grants in accordance with Accounting  Principles  Board (APB) Opinion No.
25,  "Accounting  for Stock Issued to Employees" and  accordingly  recognizes no
compensation  expense  for  the  stock  option  grants.   Additional  pro  forma
disclosures as required under Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based  Compensation," as amended by SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  - Transition and  Disclosure,"  are
detailed below.

For  purposes  of the pro  forma  disclosures  required  by SFAS  No.  123,  the
estimated fair market value of the Company's  options is amortized as an expense
over the  options'  vesting  periods.  The fair value of each option  grant,  as
defined  by  SFAS  No.  123,  is  estimated  on the  date  of  grant  using  the
Black-Scholes  option-pricing  model. The Black-Scholes  model, as well as other
currently  accepted option valuation models,  was developed to estimate the fair
value  of  freely   tradable,   fully   transferable   options  without  vesting
restrictions,  that significantly differ from the Company's stock option awards.
Because the Company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate,  in the opinion
of management,  the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.

Had compensation expense been recorded under the provisions of SFAS No. 123, the
Company's  net income (loss) and net income (loss) per share would have been the
pro forma amounts indicated below (in thousands, except per share data):


<TABLE>
<CAPTION>

                                                                Three Months Ended           Nine Months Ended
                                                                   November 30,                November 30,
                                                            ----------------------------------------------------
                                                               2005          2004           2005         2004
----------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>          <C>

Net income - as reported                                      $  5,391      $    613       $  8,437     $ 4,420
Stock-based compensation expense included in net
income, net of taxes - as reported                               2,904           724          6,893       1,055
Stock-based compensation expense determined using the
fair value method for all awards, net of taxes                  (2,873)       (1,877)       (10,604)     (6,398)
----------------------------------------------------------------------------------------------------------------
Net income (loss) - pro forma                                   $5,422      $   (540)      $  4,726     $  (923)
================================================================================================================

Basic net income per share - as reported                      $   0.26      $   0.03       $   0.41     $  0.24
================================================================================================================
Diluted net income per share - as reported                    $   0.24      $   0.03       $   0.39     $  0.23
================================================================================================================
Basic net income (loss) per share - pro forma                 $   0.26      $  (0.03)      $   0.23     $ (0.05)
================================================================================================================
Diluted net income (loss) per share - pro forma               $   0.25      $  (0.03)      $   0.22     $ (0.05)
================================================================================================================
</TABLE>



3.   Acquisition of OASIS SiliconSystems Holding AG

On March 30, 2005,  SMSC announced the completion that day of its acquisition of
OASIS SiliconSystems Holding AG (OASIS).  Based in Karlsruhe,  Germany, OASIS is
engaged in the  development  and  marketing of  integrated  circuits that enable
networking of multimedia devices for automotive infotainment applications.

The  transaction  was accounted for as a purchase  under  accounting  principles
generally  accepted in the United States of America,  whereby the purchase price
for OASIS has been allocated to the net tangible and intangible assets acquired,
based upon their fair  values as of March 30,  2005,  and the  results of OASIS'
operations  subsequent  to March 30, 2005 have been  included  in the  Company's
consolidated results of operations.

SMSC acquired all of OASIS' outstanding  capital stock in exchange for aggregate
consideration of $118.7 million,  including  approximately 2.1 million shares of
SMSC common stock valued for accounting purposes at $35.8 million, $79.5 million
of cash, and approximately $3.4 million of direct  acquisition costs,  including
legal,  banking,  accounting and valuation fees. The tangible assets of OASIS at
March  30,  2005  included   approximately   $22.4  million  of  cash  and  cash
equivalents,  resulting  in a net cash outlay of  approximately  $60.5  million.
SMSC's  existing  cash  balances  were  the  source  of  the  cash  used  in the
transaction.  For  accounting  purposes,  the value of the SMSC common stock was
determined using the stock's market value for the average of the two days before
and after the date the terms of the acquisition were announced.  Under the terms
of the Share  Purchase  Agreement,  approximately  1.2 million of the shares and
$1.8  million of the cash  issued to the former  shareholders  of OASIS is being
held in an escrow  account as security  for  certain  indemnity  obligations  of
OASIS' former  shareholders.  Up to $20.0  million of additional  consideration,
payable  in  cash  and  SMSC  common  stock,  may be  issued  to  OASIS'  former
shareholders  during  fiscal  2007 upon  satisfaction  of  certain  fiscal  2006
performance goals. Actual additional  consideration earned, if any, is currently
indeterminable. Any additional consideration earned and paid will be recorded as
goodwill.

The  following  table  summarizes  the  components  of the  purchase  price  (in
millions):


Cash                                         $         79.5
SMSC common stock (2.1 million shares)                 35.8
Transaction costs                                       3.4
------------------------------------------------------------

                                             $        118.7
============================================================


The following table  summarizes the allocation of the purchase price,  including
the  impact of an  adjustment  recorded  during  the  three-month  period  ended
November 30, 2005,  which reduced both Accrued  expenses and income  taxes,  and
Goodwill, by approximately $0.4 million (in millions):

  Cash and cash equivalents                  $          22.4
  Accounts receivable                                    5.8
  Inventory                                             12.9
  Other current assets                                   0.5
  Identifiable intangible assets:
     Purchased technology                               32.4
     Customer relationships                             10.5
     Trademark                                           5.4
     Other                                               0.6
  Property and equipment                                 2.7
  Goodwill                                              51.5
  Deferred income tax benefits                           0.6
  Accounts payable                                      (1.7)
  Accrued expenses and income taxes                     (6.5)
  Deferred income tax liabilities                      (19.3)
  In-process research and development                    0.9
--------------------------------------------------------------------------------

                                             $         118.7
================================================================================



The  majority  of  OASIS'  net  assets,   including  goodwill  and  identifiable
intangible assets, are located in Europe, and the functional  currency of OASIS'
operations in Europe is the euro. Accordingly, these euro-denominated net assets
are  translated  into U.S.  dollars at  period-end  exchange  rates and gains or
losses arising from translation are included as a component of accumulated other
comprehensive income within shareholders' equity.

In  accordance  with the  provisions  of SFAS No.  141,  OASIS'  finished  goods
inventory was valued at estimated  selling prices less the costs of disposal and
a reasonable  profit  allowance for the related selling effort;  work-in-process
inventory  was valued at estimated  selling  prices of the  finished  goods less
costs to complete,  costs of disposal, and a reasonable profit allowance for the
completing  and  selling  efforts;  and raw  materials  were  valued at  current
replacement costs.  These values initially exceeded OASIS' historical  inventory
cost by  approximately  $1.7 million.  This value was included  within the $12.9
million of fair value  assigned to OASIS'  inventory at March 30, 2005,  and was
recorded as a component of cost of goods sold as the  underlying  inventory  was
sold between April 2005 and September 2005, $0.1 million of which was recognized
during the three-month period ended November 30, 2005.

The estimated fair value attributed to purchased technology was determined based
upon a  discounted  forecast  of the  estimated  net  future  cash  flows  to be
generated  from the  technologies,  using a discount  rate of 25%. The estimated
fair value of purchased  technology is being  amortized over a period of 8 years
on a straight-line  basis,  which approximates the pattern in which the economic
benefits of the technology are expected to be realized.

The estimated  fair value  attributed to customer  relationships  was determined
based on a  discounted  forecast  of the  estimated  net future cash flows to be
generated  from the  relationships,  discounted  at a rate of 23%. The estimated
fair value of the customer  relationships  is being amortized over a period of 8
years on a  straight-line  basis,  which  approximates  the pattern in which the
economic benefits of the customer relationships are expected to be realized.

OASIS owns certain trademarks related to its multimedia  networking  technology.
The  estimated  fair value  attributed  to these  trademarks  was  determined by
calculating  the present value of the royalty  savings related to the trademarks
using  an  assumed  royalty  rate  of 1.5%  and a  discount  rate of 23%.  These
trademarks have  indefinite  lives and are therefore not being  amortized.  They
will be subject to an impairment  test on an annual  basis,  or when an event or
circumstance occurs indicating a possible impairment in value.

Goodwill represents the excess of the purchase price over the fair values of the
net tangible and intangible  assets  acquired.  This  acquisition  significantly
expands  SMSC's  sales  of  integrated  circuits  into  automotive  infotainment
applications,  and is also providing  opportunities  for expanded  revenues into
other applications,  including consumer  networking.  It also added an assembled
workforce of approximately 150 employees into SMSC's  operations.  These factors
contributed to recognition of goodwill as a component of the purchase  price. In
accordance  with SFAS No. 142,  goodwill is not amortized but will be tested for
impairment at least annually.

The $0.9 million allocated to in-process research and development represents the
fair value of purchased in-process  technology for research projects that, as of
the  March  30,  2005  closing  date  of  the   acquisition,   had  not  reached
technological  feasibility  and had no alternative  future uses.  This value was
based upon discounted  cash flows  attributable to the projects using a discount
rate of 28%, the estimated time to complete the projects and the levels of risks
involved.  These  projects  are  primarily  focused  on  deployment  of  certain
technology into consumer applications.  The $0.9 million estimated fair value of
in-process  research and development was reflected within Costs and expenses for
the three-month period ended May 31, 2005.

The following  unaudited pro forma financial  information  presents the combined
operating results of SMSC and OASIS as if the acquisition had occurred as of the
beginning  of each  period  presented.  Pro forma  data is  subject  to  various
assumptions  and estimates,  and is presented for  informational  purposes only.
This pro forma  data does not  purport  to  represent  or be  indicative  of the
consolidated operating results that would have been reported had the transaction
been  completed  as  described  herein,  and the  data  should  not be  taken as
indicative  of  future  consolidated  operating  results.  Pro  forma  financial
information  for the three and  nine-month  periods ended  November 30, 2005 and
November 30, 2004, is presented in the following table (in millions,  except per
share data):


                                       Three Months Ended    Nine Months Ended
                                          November 30,         November 30,
                                    --------------------------------------------
                                       2005        2004      2005       2004
 -------------------------------------------------------------------------------

 Revenues                              $  86.6     $  63.6   $ 238.6    $ 192.0
 Net income (loss)                     $   4.8     $  (1.0)  $   7.9    $   2.1
 Basic net income (loss) per share     $  0.23     $ (0.05)  $  0.38    $  0.10
 Diluted net income (loss) per share   $  0.21     $ (0.05)  $  0.36    $  0.10


4.   Short-Term Investments

Short-term  investments consist of investments in obligations with maturities of
between three and twelve months, at acquisition, and investments in auction rate
securities.  All of these investments are classified as available-for-sale.  The
costs of these  short-term  investments  approximate  their market  values as of
February 28, 2005 and November 30, 2005.

The Company invests excess cash in a variety of marketable securities, including
auction rate  securities.  Auction rate  securities  have  long-term  underlying
maturities,  but have  interest  rates that are reset every 90 days or less,  at
which time the  securities  can typically be purchased or sold,  which creates a
highly liquid market for these  securities.  The Company's intent is not to hold
these securities to maturity,  but rather to use the interest rate reset feature
to provide liquidity as necessary.  The Company's investment in these securities
generally  provides  higher  yields than money market and other cash  equivalent
investments.  For all periods through November 30, 2004, the Company  classified
auction rate  securities  as cash  equivalents.  Effective at February 28, 2005,
auction rate  securities  were  reclassified  as short-term  investments  on the
Company's consolidated balance sheet for all dates presented, reflecting current
interpretations of the accounting  treatment for these securities.  In addition,
consistent  with  this  change in  classification,  all  purchases  and sales of
auction rate securities are reflected in the investing activities section of the
Company's Consolidated  Statements of Cash Flows for all periods presented.  The
Company does not consider  this change in  classification  to be material to its
financial  condition or cash flows. In addition,  this  reclassification  has no
effect on the Company's total current assets,  working capital, total assets, or
operating  cash  flows,  and the change in  classification  in no way revises or
restates the Company's  Consolidated  Statements of Operations.  For purposes of
the  Condensed  Consolidated  Statement  of Cash Flows for the nine months ended
November 30, 2004,  auction rate and other  securities at November 30, 2004 were
changed in classification as follows (in thousands):


                                                   Cash and Cash    Short-Term
                                                    Equivalents     Investments
--------------------------------------------------------------------------------
As previously classified                             $  119,767      $   61,113
Change in classification - auction rate securities      (78,270)         78,270
Change in classification - other securities                (277)            277
--------------------------------------------------------------------------------

As currently classified                              $   41,220      $  139,660
================================================================================


For the  nine-month  period ended  November 30, 2004,  $42.6 million of net cash
used by investing  activities,  related to activity in auction rate  securities,
was  previously  included in the net change in cash and cash  equivalents in the
Consolidated Statements of Cash Flows.


5.   Balance Sheet Data

Inventories  are valued at the lower of first-in,  first-out  cost or market and
consist of the following (in thousands):

                                      November 30,           February 28,
                                         2005                   2005
------------------------------------------------------------------------------

Raw materials                        $       1,309          $       1,143
Work in process                             22,440                 16,626
Finished goods                              16,914                 15,541
------------------------------------------------------------------------------

                                     $      40,663          $      33,310
==============================================================================

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

                                      November 30,           February 28,
                                         2005                   2005
------------------------------------------------------------------------------

Land                                 $         803          $         578
Buildings and improvements                  15,100                 12,064
Machinery and equipment                     74,324                 68,190
Construction in progress                    11,442                  1,601
------------------------------------------------------------------------------
                                           101,669                 82,433
Less: accumulated depreciation              67,841                 59,803
------------------------------------------------------------------------------

                                     $      33,828          $      22,630
==============================================================================

The  increase in  construction  in progress  reflects  expenditures  incurred to
expand  the  Company's  facility  in  Hauppauge,  New  York,  which  will  allow
consolidation  of the Company's  Hauppauge  operations  into a single  facility,
currently  expected to occur  during  fiscal  2007.  Portions  of the  Company's
Hauppauge  operations currently occur in a separate 50,000 square foot facility,
the lease for which will expire  during  fiscal  2007.  This  expansion  project
includes  the  construction  of an expanded  warehouse  for  inventory  storage,
shipping,  receiving and other  logistics  activities,  which was completed at a
cost of  approximately  $3.1  million  and placed in service  during the quarter
ended November 30, 2005. The Company currently expects the cost of this building
expansion,  including the new warehouse and inventory  storage  facility,  to be
between $22 million and $24 million.  The majority of the  expenditures for this
project are expected to occur during fiscal 2006.


6.   Net Income Per Share

Basic net income per share is calculated  using the  weighted-average  number of
common  shares  outstanding  during the period.  Diluted net income per share is
calculated using the weighted-average number of common shares outstanding during
the period,  plus the dilutive  effect of unvested  restricted  stock awards and
shares issuable through stock options.

The shares  used in  calculating  basic and diluted net income per share for the
Condensed Consolidated  Statements of Operations included within this report are
reconciled as follows (in thousands):

<TABLE>
<CAPTION>

                                         Three Months Ended   Nine Months Ended
                                            November 30,        November 30,
                                          2005        2004     2005      2004
 ---------------------------------------------------------------------------------
 <S>                                        <C>         <C>      <C>       <C>

 Average shares outstanding
  for basic net income per share            20,983      18,395   20,548    18,321
 Dilutive effect of stock options
  and unvested restricted stock awards       1,560         640    1,010     1,054
 ---------------------------------------------------------------------------------

 Average shares outstanding for diluted
  net income per share                      22,543      19,035   21,558    19,375
 ---------------------------------------------------------------------------------
</TABLE>

Options covering 0.3 million and 1.8 million shares for the three-month  periods
ended November 30, 2005 and 2004, respectively,  and 1.5 million and 1.0 million
shares  for  the   nine-month   periods  ended   November  30,  2005  and  2004,
respectively,  were excluded from the computation of average shares  outstanding
for diluted net income per share because their effect was antidilutive.


7.   Comprehensive Income

The  Company's  other   comprehensive   income  consists  of  foreign   currency
translation  adjustments  from those  subsidiaries  not using the U.S. dollar as
their functional currency, and unrealized gains and losses on equity investments
classified as available-for-sale.  The components of the Company's comprehensive
income for the three and  nine-month  periods  ended  November 30, 2005 and 2004
were as follows (in thousands):

                                     Three Months Ended      Nine Months Ended
                                        November 30,            November 30,
                                      2005        2004        2005        2004
 -------------------------------------------------------------------------------

 Net income                         $   5,391   $    613   $  8,437   $   4,420
 Other comprehensive income (loss):
 Change in foreign currency
   translation adjustments             (4,459)       568     (9,102)        558
 Change in unrealized gain (loss)
   on marketable equity securities,
   net of taxes                           (12)         8         40         (11)
 -------------------------------------------------------------------------------

 Total comprehensive income (loss)  $     920   $  1,189   $   (625)  $   4,967
 ===============================================================================


8.   Business Restructuring

In December 2001, the Company  announced a restructuring  plan for its exit from
the PC chipset business.

The Company's reserve related to this  restructuring  declined from $0.5 million
at February 28, 2005 to $0.4 million at November 30, 2005,  reflecting  payments
against  previously  reserved  non-cancelable  lease  obligations,   which  will
continue through their respective lease terms through August 2008.


9.   Goodwill and Intangible Assets

The Company's March 2005  acquisition of OASIS included the acquisition of $42.9
million of finite-lived intangible assets, an indefinite-lived trademark of $5.4
million,  and goodwill of $51.5 million,  as adjusted.  Some of these intangible
assets are denominated in currencies other than the U.S. dollar, and these March
2005  values  reflect  foreign  exchange  rates  in  effect  on the  date of the
transaction.  The June 2002 acquisition of Tucson, Arizona-based Gain Technology
Corporation included the acquisition of $7.1 million of finite-lived  intangible
assets and $29.4 million of goodwill, after adjustments.

All finite-lived intangible assets are being amortized on a straight-line basis,
which  approximates the pattern in which the estimated  economic benefits of the
assets are realized,  over their estimated useful lives.  Existing  technologies
have been assigned estimated useful lives of between six and eight years, with a
weighted-average   useful   life  of   approximately   eight   years.   Customer
relationships  and contracts have been assigned  useful lives of between one and
ten years, with a weighted-average useful life of approximately eight years.

Intangible  assets that are denominated in a functional  currency other than the
U.S. dollar have been  translated  into U.S.  dollars using the exchange rate in
effect on the reporting date. As of November 30, 2005 and February 28, 2005, the
Company's  identifiable   intangible  assets  consisted  of  the  following  (in
thousands):


                              November 30, 2005            February 28, 2005
-------------------------------------------------------------------------------
                                      Accumulated                 Accumulated
                             Cost     Amortization       Cost     Amortization
-------------------------------------------------------------------------------

Purchased technologies    $ 37,117       $  6,183     $  6,179       $  2,832
Customer relationships
  and contracts              9,941            915          326             89
-------------------------------------------------------------------------------
   Total - finite-lived
     intangible assets      47,058          7,098        6,505          2,921
-------------------------------------------------------------------------------
Trademark and other          5,351            -            -              -
-------------------------------------------------------------------------------

                          $ 52,409       $  7,098     $  6,505       $  2,921
===============================================================================

Total amortization expense recorded for finite-lived  intangible assets was $1.5
million and $0.3 million for the three-month periods ended November 30, 2005 and
2004, respectively, and $4.3 million and $0.8 million for the nine-month periods
ended November 30, 2005 and 2004, respectively.

Estimated  future  finite-lived  intangible asset  amortization  expense for the
remainder of fiscal 2006 and thereafter is as follows (in thousands):

Period                                      Amount
---------------------------------------------------

Remainder of fiscal 2006                  $  1,533
Fiscal 2007                                  6,132
Fiscal 2008                                  6,131
Fiscal 2009                                  5,359
Fiscal 2010                                  5,102
Fiscal 2011 and thereafter                  15,703
===================================================


10.  Retirement Plans

The Company  maintains an unfunded  Supplemental  Executive  Retirement  Plan to
provide senior  management with retirement,  disability and death benefits.  The
Company's  subsidiary,  SMSC Japan, also maintains an unfunded  retirement plan,
which provides its employees and directors with separation benefits,  consistent
with customary  practices in Japan.  Benefits under these defined benefit plans,
both  of  which  are  non-contributory,  are  based  upon  various  service  and
compensation  factors.  The  following  table sets forth the  components  of the
consolidated  net  periodic  pension  expense  for these plans for the three and
nine-month   periods  ended  November  30,  2005  and  2004,   respectively  (in
thousands):


                                     Three Months Ended      Nine Months Ended
                                        November 30,            November 30,
                                   ---------------------------------------------
                                     2005         2004        2005       2004
--------------------------------------------------------------------------------

Service cost - benefits earned       $  86        $  71       $ 257      $ 214
Interest cost on projected benefit
  obligations                           98          107         296        320
Net amortization and deferral           67           72         200        217
--------------------------------------------------------------------------------

Net periodic pension expense         $ 251        $ 250       $ 753      $ 751
================================================================================

Additionally,  the Company is the  beneficiary of life  insurance  policies that
have  been  purchased  as a method of  partially  financing  benefits  under the
Supplemental Executive Retirement Plan.


11.  Common Stock Repurchase Program

The Company  maintains a common  stock  repurchase  program,  as approved by its
Board of  Directors,  which  authorizes  the Company to  repurchase  up to three
million   shares  of  its  common  stock  on  the  open  market  or  in  private
transactions.  Under this program, the Company repurchased approximately 150,000
shares of its common stock at a cost of $2.2 million during the first quarter of
fiscal 2006. No shares were  repurchased  during the second or third quarters of
fiscal 2006. The Company  repurchased  approximately  22,000 shares at a cost of
$0.3 million  during the second  quarter of fiscal 2005.  The Company  currently
holds repurchased shares as treasury stock. As of November 30, 2005, the Company
has repurchased a total of approximately 2.0 million shares of its common stock,
at a cost of $26.0 million, under this program.


12.  Operating Segment Information

Because  of  the  impact  marketplace  technology  convergence  has  had  on the
management of the Company's business and internal reporting,  beginning with the
quarter  ending  November  30, 2005 the Company now  operates in and reports one
business  segment - the design,  development,  and  marketing  of  semiconductor
integrated circuits. This change will have no impact on the Company's disclosure
because it  previously  aggregated  the results of operating  segments  into one
reportable  segment  under the  aggregation  criteria set forth in SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."


13.  Recent Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
No. 151,  "Inventory Costs, an amendment of ARB No. 43, Chapter 4." SFAS No. 151
clarifies that abnormal inventory costs such as costs of idle facilities, excess
freight and handling costs, and wasted  materials  (spoilage) are required to be
recognized  as  current  period  charges.  The  provisions  of SFAS No.  151 are
effective  for fiscal  years  beginning  after  June 15,  2005.  The  Company is
currently evaluating the provisions of SFAS No. 151 and does not expect that its
adoption will have a material impact on its  consolidated  financial  condition,
results of operations and cash flows.

In December  2004,  the FASB issued SFAS No. 123R (Revised  2004),  "Share-Based
Payment."  The  scope of SFAS No.  123R  includes  a wide  range of  share-based
compensation  arrangements  including  stock  options,  restricted  stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS  No.  123R  replaces  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  SFAS No.  123, as  originally  issued in 1995,  established  as
preferable a  fair-value-based  method of  accounting  for  share-based  payment
transactions  with employees.  However,  that statement  permitted the option of
continuing  to apply the  guidance  in APB  Opinion  No. 25,  provided  that the
footnotes  to the  consolidated  financial  statements  disclosed  pro forma net
income and net income per share,  as if the preferable  fair-value-based  method
had been applied.  SFAS No. 123R requires that  compensation  costs  relating to
share-based  payment  transactions be recognized in the  consolidated  financial
statements.  Compensation  costs will be measured based on the fair value of the
equity or liability instruments issued. SFAS No. 123R is effective for the first
annual  reporting  period  that  begins  after  June 15,  2005.  The  Company is
currently  evaluating the impact of SFAS No. 123R and believes that the adoption
of this statement  could have a material  impact on its  consolidated  financial
position, results of operations and reporting of cash flows.

In  December  2004,  the FASB  issued  FASB  Staff  Position  (FSP)  No.  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American  Jobs  Creation  Act of 2004." The American  Jobs
Creation Act introduces a special one-time  dividends  received deduction on the
repatriation of certain foreign  earnings to U.S.  companies,  provided  certain
criteria are met. FSP No. 109-2 provides  accounting and disclosure  guidance on
the impact of the  repatriation  provision on a company's income tax expense and
deferred  tax  liability.  The Company is  currently  studying the impact of the
one-time  favorable  foreign  dividend  provision  and intends to  complete  the
analysis by the end of fiscal  2006.  Accordingly,  the Company has not recorded
any  adjustments  to its income tax expense or deferred  income taxes to reflect
the tax impact of any repatriation of non-U.S. earnings it may make.

In  March  2005,  the  FASB  issued   Interpretation  No.  47,  "Accounting  for
Conditional Asset Retirement Obligations."  Interpretation No. 47 clarifies that
an  entity  must  record  a  liability  for  a  "conditional"  asset  retirement
obligation  if the fair value of the  obligation  can be  reasonably  estimated.
Interpretation  No. 47 also  clarifies  when an  entity  would  have  sufficient
information  to  reasonably  estimate  the fair  value  of an  asset  retirement
obligation.  Interpretation  No. 47 is  effective  no later  than the end of the
fiscal year ending  after  December  15,  2005.  The Company does not expect the
adoption of Interpretation  No. 47 to have a material impact on its consolidated
financial position, results of operations and cash flows.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections",  which  supersedes  APB Opinion No. 20,  "Accounting  Changes" and
"SFAS No. 3, "Reporting  Accounting  Changes in Interim  Financial  Statements."
SFAS No. 154 provides guidance on the accounting for and reporting of accounting
changes and error  corrections.  APB Opinion No. 20 had required that changes in
accounting  principles be recognized by including the  cumulative  effect of the
change in the period in which the new accounting principle was adopted. SFAS No.
154 requires retrospective application of the change to prior periods' financial
statements,  unless it is impracticable to determine the period-specific effects
of the change.  The  Statement is effective  for fiscal  years  beginning  after
December  15,  2005.  The  adoption of this  statement is not expected to have a
material effect on the Company's financial statements.



ITEM 2.   Management's   Discussion  and  Analysis of Financial  Conditions  and
          Results of Operations

The  following  discussion  should  be read in  conjunction  with the  Company's
Consolidated Financial Statements and notes thereto contained in this report.

Portions of this report may contain  forward-looking  statements  about expected
future  events and  financial  and  operating  results  that  involve  risks and
uncertainties.  Words such as  "believe,"  "expect,"  "anticipate"  and  similar
expressions identify forward-looking  statements.  These uncertainties may cause
the  Company's  actual  future  results to be  materially  different  from those
discussed in forward-looking  statements.  The Company's risks and uncertainties
include the timely development and market acceptance of new products; the impact
of competitive  products and pricing;  the Company's ability to procure capacity
from suppliers and the timely performance of their  obligations,  the effects of
changing  economic  conditions  domestically  and  internationally  and  on  its
customers; changes in customer order patterns, relationships with and dependence
on customers and growth rates in the personal computer, consumer electronics and
embedded and automotive markets and with the Company's sales channel; changes in
customer order patterns,  including order cancellations or reduced bookings; the
effects  of  tariff,  import  and  currency  regulation;   potential  or  actual
litigation; and  excess  or  obsolete  inventory  and  variations  in  inventory
valuation,  among  others.  In  addition,  SMSC  competes  in the  semiconductor
industry,  which has historically  been  characterized  by intense  competition,
rapid technological change, cyclical market patterns,  price erosion and periods
of mismatched supply and demand.

The Company's forward looking  statements are qualified in their entirety by the
inherent risks and  uncertainties  surrounding  future  expectations and may not
reflect  the   potential   impact  of  any  future   acquisitions,   mergers  or
divestitures.  All  forward-looking  statements speak only as of the date hereof
and are  based  upon  the  information  available  to SMSC  at this  time.  Such
statements  are subject to change,  and the Company does not undertake to update
such  statements,  except  to the  extent  required  under  applicable  law  and
regulation.  These  and  other  risks  and  uncertainties,  including  potential
liability resulting from pending or future litigation, are detailed from time to
time in the Company's reports filed with the SEC.  Investors are advised to read
the  Company's  Annual  Report on Form 10-K and  quarterly  reports on Form 10-Q
filed with the SEC, particularly those sections entitled "Other Factors That May
Affect Future  Operating  Results" for a more  complete  discussion of these and
other  risks  and  uncertainties.  Other  cautionary  statements  and  risks and
uncertainties may also appear elsewhere in this report.


Overview
--------

Description of Business

Many of the world's global technology companies rely upon SMSC as a resource for
semiconductor  system  solutions  that span  analog,  digital  and  mixed-signal
technologies.  Leveraging  intellectual  property,  integration  expertise and a
comprehensive global infrastructure,  SMSC solves design challenges and delivers
performance,  space, cost and time-to-market advantages to its customers. SMSC's
application focus targets key vertical markets including mobile and desktop PCs,
consumer electronics,  automotive infotainment and industrial applications.  The
Company    has    developed    leading    technology    positions,     providing
application-specific  solutions  such as  mixed-signal  PC  system  controllers,
non-PCI Ethernet,  ARCNET,  MOST and Hi-Speed USB. Each of these technologies is
increasingly  sold into  multiple end markets,  and the  underlying  technology,
intellectual   property  and  processes  are  increasingly   being  re-used  and
re-combined  into new solutions.  The Company has made certain  internal changes
that address this, and accordingly,  for accounting purposes,  SMSC now operates
in a single segment.

SMSC is headquartered  in Hauppauge,  New York with operations in North America,
Taiwan,  Japan, Korea, China and Europe.  Engineering design centers are located
in Arizona, New York, Texas and Karlsruhe,  Germany.  Additional  information is
available at www.smsc.com.


Key Indicators

Management  measures the condition and performance of the Company's  business in
numerous  ways.  Among the key  quantitative  indicators  generally used in this
regard  are  bookings,  revenues,  cost of  goods  sold and  operating  expenses
relative to revenues.  The Company also  carefully  monitors the progress of its
product development efforts.


Critical Accounting Policies and Estimates
------------------------------------------

This discussion and analysis of the Company's financial condition and results of
operations  is  based  upon  the  unaudited  condensed   consolidated  financial
statements included in this report,  which have been prepared in accordance with
accounting principles for interim financial statements generally accepted in the
United  States.  The  preparation  of financial  statements in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amount of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period.

The Company believes that the critical  accounting policies and estimates listed
below are important to the portrayal of the  Company's  financial  condition and
operating results, and require critical management judgments and estimates about
matters that are inherently  uncertain.  Although  management  believes that its
judgments and estimates are appropriate  and  reasonable,  actual future results
may differ from these  estimates,  and to the extent that such  differences  are
material, future reported operating results may be affected.

  o    Revenue recognition
  o    Inventory valuation
  o    Determination of the allowance for doubtful accounts receivable
  o    Valuation of long-lived assets
  o    Accounting for deferred income taxes
  o    Legal contingencies

Further  information  regarding these policies appears within the  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included in the  Company's  annual report on Form 10-K for the fiscal year ended
February  28, 2005 filed with the SEC on May 16,  2005.  During the  three-month
period  ended  November  30,  2005,  there  were no  significant  changes to any
critical  accounting policies or to the related estimates and judgments involved
in applying these policies.


Business Acquisition
--------------------

On March 30, 2005,  SMSC announced the completion that day of its acquisition of
OASIS SiliconSystems Holding AG (OASIS).  Based in Karlsruhe,  Germany, OASIS is
engaged in the  development  and  marketing of  integrated  circuits that enable
networking of multimedia devices for automotive infotainment applications. OASIS
is a leading provider of Media Oriented Systems Transport (MOST(R))  technology,
which enables the seamless  transport of digital audio,  video, and packet-based
data, along with control information, within automobiles.

SMSC acquired all of OASIS' outstanding  capital stock in exchange for aggregate
consideration of $118.7 million,  including  approximately 2.1 million shares of
SMSC common stock valued for accounting purposes at $35.8 million, $79.5 million
of cash, and approximately $3.4 million of direct  acquisition costs,  including
legal,  banking,  accounting and valuation fees. The tangible assets of OASIS at
March  30,  2005  included   approximately   $22.4  million  of  cash  and  cash
equivalents,  resulting  in a net cash outlay of  approximately  $60.5  million.
SMSC's  existing  cash  balances  were  the  source  of  the  cash  used  in the
transaction.

The results of OASIS' operations subsequent to March 30, 2005 have been included
in the Company's consolidated results of operations.

Up to $20.0 million of additional consideration, payable in cash and SMSC common
stock,  may be issued to OASIS'  former  shareholders  during  fiscal  2007 upon
satisfaction  of  certain  fiscal  2006  performance  goals.  Actual  additional
consideration  earned,  if any,  is  currently  indeterminable.  Any  additional
consideration earned and paid will be recorded as goodwill.


Stock Appreciation Rights
-------------------------

The Company  maintains a Stock  Appreciation  Rights (SAR) Plan,  the purpose of
which is to  attract,  retain,  reward and  motivate  employees,  directors  and
consultants  to promote the Company's  best interests and to share in its future
success.  Each SAR award, when granted,  provides the participant with the right
to receive payment in cash, upon exercise,  for the appreciation in market value
of a share of SMSC common stock over the award's  exercise  price.  The exercise
price of a SAR is equal to the closing market price of SMSC stock on the date of
grant. SAR awards generally vest over four or five-year  periods,  and expire no
later than ten years from the date of grant.

As of November 30, 2005, there were  approximately 1.6 million SARs outstanding,
of which 0.3 million were vested,  and the  remainder of which are  scheduled to
vest at various dates through October 2010.  Recognition of compensation expense
for  unexercised  SARs is based upon the market  price of the  Company's  common
stock at the end of the  reporting  period  and the  vesting  period of the SAR.
Based upon the $29.90  closing price of the  Company's  common stock on November
30, 2005, the Company recorded non-cash compensation expense of $3.5 million for
unexercised  SARs during the quarter  ended as of that date.  In  addition,  the
Company incurred  approximately  $0.5 million of cash expense for SARs that were
exercised  during the third  quarter.  Of the $4.0 million of combined  cash and
non-cash SAR expense  recorded  during the three months ended November 30, 2005,
$0.3  million is  reflected  within  cost of goods  sold,  $0.9  million  within
research  and  development,   and  $2.8  million  within  selling,  general  and
administrative  expenses.  For the current nine-month period,  total SAR expense
was $9.5 million, including $0.6 million within cost of goods sold, $2.3 million
within research and  development,  and $6.6 million within selling,  general and
administrative expenses.

Based upon SARs  outstanding  at November 30, 2005,  if the market price of SMSC
common stock  remained at $29.90 on February 28, 2006,  an expense  provision of
approximately  $1.3 million  would be required in the fourth  quarter due to the
passage of  additional  SARs vesting  time.  Each $1.00 change in the  Company's
stock  price  above or below  $29.90 at  February  28,  2006 would  result in an
additional  expense  provision  or credit of  approximately  $0.8 million in the
fourth quarter, with any credit limited to a maximum of $9.5 million.



Results of Operations
---------------------

Revenues

SMSC's  revenues  are  derived  from  sales  of  products  into  three  vertical
end-markets,  as presented in the following  tables for the three and nine-month
periods ended November 30, 2005 and 2004 (dollars in millions):


                                             Three Months Ended November 30,
                                                2005                2004
                                           Amount   Percent    Amount  Percent
 -------------------------------------------------------------------------------

 Mobile and desktop PC                      $ 40.4      47%     $ 28.1     55%
 Consumer electronics and infotainment        31.8      37%        9.7     19%
 Industrial and other                         14.4      16%       13.0     26%
 -------------------------------------------------------------------------------

                                            $ 86.6     100%     $ 50.8    100%
 ===============================================================================


                                             Nine Months Ended November 30,
                                                2005               2004
                                           Amount   Percent    Amount  Percent
 -------------------------------------------------------------------------------

 Mobile and desktop PC                      $ 115.8     49%     $  87.2     57%
 Consumer electronics and infotainment         77.1     33%        24.7     16%
 Industrial and other                          41.6     18%        42.1     27%
 -------------------------------------------------------------------------------

                                            $ 234.5    100%     $ 154.0    100%
 ===============================================================================

Revenues  for the three  months  ended  November  30,  2005 were $86.6  million,
compared to revenues of $50.8 million for the year earlier  period,  an increase
of  approximately  71%.  Included in the current  quarter's  revenues  are $15.4
million of revenues from products associated with the acquisition of OASIS.

Revenues  for the nine months  ended  November  30,  2005 were  $234.5  million,
compared to revenues of $154.0 million for the year-earlier  period, an increase
of approximately 52%. Included in the current  nine-month  period's revenues are
$39.2  million of revenues  associated  with products  acquired from OASIS.  The
OASIS  revenues  reflect  shipments  subsequent to March 30, 2005,  representing
approximately  eight  months of  activity  within the  current  year  nine-month
period.

The  increase  in  mobile  and  desktop  PC  revenues,  for both the  three  and
nine-month periods,  was driven by an increase in revenues from mobile products,
reflecting  strong market demand in mobile  computing  applications,  as well as
increased  revenues from  environmental  monitoring and control (EMC)  products,
which  benefited  from broader  product  offerings in the current year  periods.
Revenues from mobile PC products also include $1.1 million of revenue recognized
in the second quarter of fiscal 2006 associated with a prior accounts receivable
collectibility  issue,  as more fully  described  in the  subsequent  paragraph.
Revenues from desktop PC products are down  modestly in the current  fiscal year
periods, compared to the corresponding prior year periods,  reflecting softening
market demand for desktop PCs and lower average selling prices.

During  the  second  half of fiscal  2005,  mobile PC  revenues  were  adversely
impacted  by an  accounts  receivable  collectibility  issue  with  one  of  the
Company's Taiwan-based component distributors,  which prevented the Company from
recognizing   approximately   $5.4  million  of  revenues  during  that  period.
Approximately  $2.7 million of inventory  underlying  those revenues,  which had
already been shipped to and resold by the distributor prior to identification of
the  collectibility  issue,  was  charged  to cost of goods  sold in the  fourth
quarter of fiscal 2005.  During the second  quarter of fiscal 2006,  the Company
received a payment of $1.1 million from this customer, which recovered a portion
of the  distributor's  obligation to the Company.  This $1.1 million payment was
recognized  within  revenues for the second quarter of fiscal 2006,  without any
associated cost of goods sold, because, as noted above, the underlying inventory
was charged to cost of goods sold during the fourth  quarter of fiscal 2005.  No
payments  were  received  from this  distributor  during the three  months ended
November  30,  2005.  Any  future  collections  from this  distributor  would be
recognized  as revenue when  received,  but the  likelihood of any such payments
remains uncertain.

The increase in revenues from consumer  electronics  and  infotainment  products
includes revenues associated with the March 2005 acquisition of OASIS,  totaling
$15.4  million and $39.2  million  for the three and  nine-month  periods  ended
November 30, 2005, respectively.  These OASIS product revenues are from products
serving  automotive  infotainment   applications.   Revenues  from  connectivity
products  for  consumer  electronics  applications,  which have  benefited  from
broader product offerings during fiscal 2006, also increased in the current year
periods, compared to the prior year periods.

Industrial and other revenues  primarily  represent  revenues from products used
within  industrial  information  networking  applications  in various  business,
service, factory, transportation and telecommunications  environments.  Revenues
from these  products  increased  by $1.4  million in the current  year  quarter,
compared to the prior year  quarter.  For the current  year  nine-month  period,
industrial  and other  revenues  were  approximately  neutral  to the prior year
nine-month  period,  exclusive of intellectual  property  revenues that are also
included in this category.

Revenues from customers outside of North America accounted for approximately 90%
and 88% of the  Company's  consolidated  revenues  for the three and  nine-month
periods ended November 30, 2005,  respectively.  The comparable  percentages for
the three and  nine-month  periods  in the prior  fiscal  year were 79% and 81%,
respectively.  While the largest portion of the Company's  revenues continues to
be derived from Asia, the acquisition of OASIS has  significantly  increased the
Company's  revenues  in Europe,  which  accounts  for the  general  increase  in
revenues outside of North America in fiscal 2006 periods, compared to the fiscal
2005 periods.  The Company's revenues in Europe,  including the impact of OASIS,
were about $16.1 million in the current year  quarter,  compared to $2.8 million
in the prior year quarter.  For the current year nine-month period,  revenues in
Europe were $39.7 million, compared to $8.4 million in the prior year nine-month
period. The Company expects that international shipments,  particularly to Asia,
will continue to represent a significant portion of its revenues.

Cost of Goods Sold

Cost of goods sold for the quarter ended November 30, 2005 was $45.7 million, or
52.8% of revenues,  compared to $27.5  million,  or 54.1% of  revenues,  for the
three  months ended  November 30, 2004.  The decrease in cost of goods sold as a
percentage of revenues in the current year  quarter,  compared to the prior year
quarter,  results  from a product mix shift  towards  consumer  electronics  and
infotainment  products,  which  generally  carry higher  margins than desktop PC
products.  New consumer  electronics  product  introductions,  carrying improved
margins compared to older products,  particularly for connectivity applications,
also  contributed  to  the  lower  cost  of  goods  sold  percentage.  Partially
offsetting this was a higher proportion of intellectual property revenues in the
prior year  quarter.  Intellectual  property  revenues  were $2.6 million in the
current year quarter, compared to $2.7 million in the prior year quarter.

For the nine  months  ended  November  30,  2005,  cost of goods sold was $126.6
million, or 54.0% of revenues,  compared to $80.1 million, or 52.0% of revenues,
for the nine-month period ended November 30, 2004. The increase in cost of goods
sold as a percentage of revenues in the current year nine-month period, compared
to the prior year nine-month period,  results from a combination of (1) declines
in average  selling  prices on certain  desktop  I/O  products,  which  outpaced
reductions in unit costs; (2) production yield losses aggregating  approximately
$1.5 million  incurred  during the second  quarter of fiscal 2006 resulting from
certain  atypical  production  issues;  (3) $0.4  million of higher  charges for
inventory   obsolescence;   (4)  $0.5  million  of  higher  provisions  for  SAR
compensation  expense in the current year period; and (5) a higher proportion of
intellectual  property revenues in the prior year period.  Intellectual property
revenues were $7.9 million in the current year  nine-month  period,  compared to
$8.4 million in the prior year nine-month  period.  Partially  offsetting  these
factors was $1.1  million of revenue  recognized  during the current year period
without any  associated  cost of goods sold,  as  discussed  earlier  within the
"Revenues" analysis.  The yield losses noted in item (2) were related to certain
device-specific  supplier  production issues.  These issues have been corrected,
and production yields have now returned to normal levels.

Research and Development Expenses

Research  and  development  (R&D)  expenses  consist  primarily  of salaries and
related  costs  of  employees  engaged  in  research,   design  and  development
activities,  costs related to  engineering  design tools and computer  hardware,
subcontractor  costs and device  prototyping costs. The Company's R&D activities
are performed by highly-skilled and experienced  engineers and technicians,  and
are primarily  directed  towards the design of new  integrated  circuits and the
development  of new  software  drivers,  firmware and design tools and blocks of
logic,  as well as ongoing  cost  reductions  and  performance  improvements  in
existing products.

The Company  intends to continue its efforts to develop  innovative new products
and technologies and believes that an ongoing  commitment to R&D is essential in
order to maintain product  leadership and compete  effectively.  Therefore,  the
Company expects to continue to make significant R&D investments in the future.

R&D expenses were $14.9 million, or approximately 17% of revenues, for the three
months ended November 30, 2005,  compared to $10.4 million, or approximately 20%
of revenues,  for the three months ended  November 30, 2004. The increase in the
current  year's  three-month  period,  compared to the prior year's  three-month
period,  is primarily due to the addition of  approximately  $2.4 million of R&D
expenses   associated  with  the  operations  of  OASIS,  whose  staff  includes
approximately  90  engineers  and  technicians.  The current  year  quarter also
includes a charge of $0.9 million for SAR compensation expense, compared to $0.2
million in the year-ago quarter. $1.0 million of higher compensation and benefit
costs,  driven  by  higher  staff  levels,  merit  increases  and  benefit  cost
increases, also contributed to the increase.

For the nine months ended November 30, 2005, R&D expenses were $42.6 million, or
approximately 18% of revenues,  compared to $32.5 million,  or approximately 21%
of revenues,  for the nine months ended  November 30, 2004.  The increase in the
current  year's  nine-month  period,  compared  to the prior  year's  nine-month
period,  is primarily due to the addition of  approximately  $6.5 million of R&D
expenses associated with the operations of OASIS, which impacted eight months of
the current nine-month period's operating results. The remainder of the increase
resulted primarily from $2.1 million of higher SAR expense,  and $1.3 million of
higher compensation and benefit costs, exclusive of the impact of OASIS.

Selling, General and Administrative Expenses

Selling,   general  and   administrative   expenses  were  $17.7   million,   or
approximately 20% of revenues, for the quarter ended November 30, 2005, compared
to $13.0  million,  or  approximately  26% of  revenues,  for the quarter  ended
November  30,  2004.  The  increase in the current  year's  three-month  period,
compared  to the prior  year's  three-month  period,  reflects  $1.8  million of
expenses  associated  with the  operations of OASIS,  $2.2 million of higher SAR
expense,  $0.3 million of higher employee  recruitment and relocation costs, and
$1.1 million of higher  compensation  and benefit costs (exclusive of the impact
of OASIS), partially offset by $1.1 million of lower legal, accounting and other
professional fees, due in part to lower costs associated with litigation.

For the  nine-month  period  ended  November  30,  2005,  selling,  general  and
administrative  expenses were $49.9 million,  or approximately  21% of revenues,
compared to $36.7 million, or approximately 24% of revenues,  for the nine-month
period ended November 30, 2004. This  period-over-period  increase reflects $5.5
million of expenses  associated  with the  operations of OASIS,  $6.1 million of
higher SAR expense,  $0.7 million of higher employee  recruitment and relocation
costs,  and $1.7 million of higher  compensation and benefit costs (exclusive of
the  impact  of  OASIS),  partially  offset  by $1.9  million  of  lower  legal,
accounting and other  professional  fees, due in part to lower costs  associated
with litigation.

Amortization of Intangible Assets

For the three and  nine-month  periods  ended  November  30,  2005,  the Company
recorded $1.3 million and $3.5 million,  respectively,  of amortization  expense
for finite-lived intangible assets acquired in the OASIS transaction, as well as
$0.2  million  and $0.8  million,  respectively,  of  amortization  expense  for
finite-lived   intangible   assets  associated  with  the  acquisition  of  Gain
Technology  Corporation (Gain) during fiscal 2003.  Amortization expense of $0.3
million and $0.8  million  for the Gain  intangible  assets was  recorded in the
prior year's three and nine-month periods, respectively.

In-Process Research and Development

The $0.9 million  in-process  research and development  expense  recorded in the
fiscal 2006 nine-month period represents the fair value of in-process technology
for OASIS  research  projects that, as of the March 30, 2005 closing date of the
OASIS  acquisition,  had  not  reached  technological  feasibility  and  had  no
alternative  future uses. These projects are primarily  focused on deployment of
certain technology into consumer  electronics  applications.  The estimated fair
value of this in-process  research and development was recorded as an expense in
the quarter ended May 31, 2005.

Other Income and Expense

The  increases  in  interest  income in the  current  year three and  nine-month
periods,  compared to the corresponding  prior year periods,  primarily reflects
the impact of higher average interest rates, partially offset by a lower average
level of investments, during the current year periods.

Provision For Income Taxes

The Company's  effective income tax rate reflects statutory  federal,  state and
foreign tax rates, the impact of permanent  differences between the book and tax
treatment of certain  expenses,  and the impact of tax-exempt income and various
income tax credits.

The Company's $4.1 million  provision for income taxes for the nine-month period
ended November 30, 2005,  reflects an expected fiscal 2006 effective tax rate of
approximately  29%,  and  also  includes  $0.35  million  of  incremental  taxes
resulting from internal corporate restructuring  activities completed during the
second  quarter of fiscal 2006 and a provision of $0.1  million for  adjustments
related to differences  between the Company's  fiscal 2005 income tax return and
the  provision  for income  taxes  recorded at the end of fiscal  2005.  The 29%
effective tax rate expected for fiscal 2006 is lower than the 31% effective rate
that was  expected  as of August 31,  2005,  reflecting  a higher  proportionate
impact of income tax credits and  tax-exempt  interest  income against a reduced
pre-tax  income  projection.  The reduced  pre-tax  income  projection  resulted
primarily from provisions for SAR expenses  recorded  through November 30, 2005,
as a result of increases in the market price of the Company's  common stock. The
$2.2  million  provision  for income  taxes  recorded for the three months ended
November 30, 2005 reflects the cumulative impact of the lower expected effective
income  tax rate,  as well as the $0.1  million  tax  adjustment  related to the
fiscal 2005 income tax return.

The Company's $1.1 million  provision for income taxes for the nine-month period
ended November 30, 2004 reflected an expected  fiscal 2005 effective tax rate of
24.5%,  as well as a $0.3  million tax benefit  related to prior  fiscal  years,
primarily due to better than expected  settlements of open tax audits. The 24.5%
effective  tax rate  expected  for fiscal 2005 was lower than a 26.5%  effective
rate that was expected as of August 31, 2004,  reflecting a higher proportionate
impact of income tax credits and  tax-exempt  interest  income against a reduced
pre-tax income projection.  The $0.3 million income tax benefit recorded for the
three months ended  November 30, 2004  reflected  the  cumulative  impact of the
lower  expected  effective  income  tax rate,  as well as the $0.3  million  tax
benefit related to prior fiscal years.



Liquidity and Capital Resources
-------------------------------

The Company currently  finances its operations through a combination of existing
resources and cash generated by operations.

The Company's cash,  cash  equivalents  and short-term  investments  were $141.7
million at November 30, 2005, compared to $172.6 million at February 28, 2005, a
decrease of $30.9 million.

Operating  activities  generated  $41.8  million  of cash  during the first nine
months of fiscal 2006, compared to $10.5 million during the first nine months of
fiscal 2005.  Operating cash flows during the current year period reflect a $4.8
million combined increase in accounts receivable and inventories  (excluding the
impact of the OASIS  acquisition),  while the prior year's nine-month  operating
cash flows were  burdened  by a $19.3  million  combined  increase  in  accounts
receivable  and  inventory.  Discussions  of accounts  receivable  and inventory
activity appear later within this section.  The current year nine-month period's
operating  activities  include  $23.6  million of  non-cash  charges,  including
depreciation,  amortization, in-process research and development and stock-based
compensation, compared to $10.1 million in the prior year nine-month period.

Investing  activities  consumed  $130.1  million  of cash  during the first nine
months of fiscal 2006, due principally to $60.3 million used for the acquisition
of OASIS, a net increase of $53.4 million in short-term  investments,  and $16.0
million  of  capital  expenditures.  The  $60.3  million  of cash  used  for the
acquisition  of OASIS  includes  $79.5  million of cash paid to the former OASIS
shareholders  as  part  of the  transaction's  consideration,  $3.4  million  of
transaction costs ($0.2 million of which were paid in the previous fiscal year),
partially  offset  by $22.4  million  of cash  acquired  from  OASIS.  Investing
activities provided $14.6 million of cash during the first nine months of fiscal
2005,  due  principally  to a net decrease of $20.2  million in  short-term  and
long-term investments, partially offset by $7.3 million of capital expenditures.

Financing  activities provided $5.4 million of cash during the first nine months
of fiscal  2006,  reflecting  $9.4 million of proceeds  from  exercises of stock
options,  partially  offset by $2.2 million of treasury stock purchases and $1.9
million of debt repayments.  Financing  activities provided $1.7 million of cash
during  the first  nine  months of fiscal  2005,  comprised  of $3.6  million of
proceeds  from  exercises of stock  options,  offset by $1.9 million of treasury
stock purchases and debt repayments.

The Company's  inventories were $40.7 million at November 30, 2005,  compared to
$33.3 million at February 28, 2005. This increase includes $7.3 million of OASIS
product inventories at November 30, 2005.

Accounts  receivable  increased from $23.5 million at February 28, 2005 to $36.7
million at  November  30,  2005,  an increase of $13.2  million.  This  increase
generally  reflects the impact of an increase in revenues from $54.9 million for
the three months ended  February 28, 2005, to $86.6 million for the three months
ended November 30, 2005, and includes $6.3 million of accounts  receivable  from
shipments of OASIS products at November 30, 2005.

Total current  liabilities  increased from $37.1 million at February 28, 2005 to
$65.9  million  at  November  30,  2005,   including  $9.6  million  of  current
liabilities associated with the operations of OASIS, and a $3.8 million increase
in deferred income on shipments to distributors. The increase in deferred income
reflects  an  increase  in  distributor  inventories  in advance of  anticipated
product demand during the Company's fourth quarter ending February 28, 2006. The
increase  in current  liabilities  also  reflects a $10.4  million  increase  in
accounts payable,  driven by higher inventory  purchases and payables related to
the Company's  facility  expansion.  The facility  expansion is discussed in the
following two paragraphs.

Capital  expenditures  for the  nine-month  period ended  November 30, 2005 were
$16.0 million,  and were predominantly for facility  expansion,  production test
equipment,  advanced  semiconductor design tools and investments in intellectual
property. Capital expenditures were $7.3 million for the nine-month period ended
November 30, 2004.

The Company  anticipates  that capital  expenditures  in fiscal 2006 will exceed
those  incurred  during fiscal 2005,  due in part to the  Company's  in-progress
construction of an addition to its facility in Hauppauge,  New York,  which will
expand the facility from its current 80,000 square feet to approximately 200,000
square  feet,  and which will allow  consolidation  of the  Company's  Hauppauge
operations  into a single  facility,  currently  expected to occur during fiscal
2007.  Portions  of the  Company's  Hauppauge  operations  currently  occur in a
separate  50,000  square foot  facility,  the lease for which will expire during
fiscal 2007.  This expansion  project  includes the  construction of an expanded
warehouse  for  inventory  storage,  shipping,  receiving  and  other  logistics
activities,  which was  completed  at a cost of  approximately  $3.1 million and
placed in service  during the  three-month  period ended  November 30, 2005. The
Company currently expects the cost of this building expansion, including the new
warehouse  and  inventory  storage  facility,  to be between $22 million and $24
million, of which $14.5 million has been expended through November 30, 2005. The
majority  of the  expenditures  for this  project are  expected to occur  during
fiscal 2006. There were no other material  commitments for capital  expenditures
as of November 30, 2005.

SMSC maintains a common stock  repurchase  program,  as approved by its Board of
Directors, which authorizes the Company to repurchase up to three million shares
of its common  stock on the open market or in private  transactions.  Under this
program,  the Company  repurchased  approximately  150,000  shares of its common
stock at a cost of $2.2  million  during the first  quarter of fiscal  2006.  No
shares were repurchased  during the second or third quarters of fiscal 2006. The
Company repurchased approximately 22,000 shares at a cost of $0.3 million during
the second  quarter of fiscal  2005.  The Company  currently  holds  repurchased
shares as treasury stock. As of November 30, 2005, the Company has repurchased a
total of  approximately  2.0 million  shares of its common  stock,  at a cost of
$26.0 million, under this program.

In connection  with the March 2005  acquisition of OASIS, up to $20.0 million of
additional  consideration,  payable in cash and SMSC common stock, may be issued
to the former  shareholders  of OASIS during  fiscal 2007 upon  satisfaction  of
certain performance goals.

The Company has from time to time considered and executed,  and will continue to
consider,  various  transactions to secure  necessary wafer foundry and assembly
capacity,  including  equity  investments  in,  prepayments to, or deposits with
foundries,  in exchange for  guaranteed  capacity or other  arrangements,  which
address the Company's manufacturing requirements.  The Company may also consider
utilizing cash to acquire or invest in  complementary  businesses or products or
to obtain the right to use complementary technologies. From time to time, in the
ordinary course of business,  the Company may evaluate potential acquisitions of
or  investments  in such  businesses,  products or  technologies  owned by third
parties.

The Company expects that its cash,  cash  equivalents,  short-term  investments,
cash flows from  operations  and its  borrowing  capacity  will be sufficient to
finance the Company's  operating and capital  requirements for at least the next
twelve months and for the foreseeable future thereafter.



Recent Accounting Pronouncements
--------------------------------

In November  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs, an
amendment  of ARB No. 43,  Chapter  4." SFAS No.  151  clarifies  that  abnormal
inventory  costs such as costs of idle  facilities,  excess freight and handling
costs, and wasted materials  (spoilage) are required to be recognized as current
period  charges.  The  provisions of SFAS No. 151 are effective for fiscal years
beginning  after  June  15,  2005.  The  Company  is  currently  evaluating  the
provisions  of SFAS No. 151 and does not expect  that its  adoption  will have a
material impact on its consolidated  financial condition,  results of operations
and cash flows.

In December  2004,  the FASB issued SFAS No. 123R (Revised  2004),  "Share-Based
Payment."  The  scope of SFAS No.  123R  includes  a wide  range of  share-based
compensation  arrangements  including  stock  options,  restricted  stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS  No.  123R  replaces  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  SFAS No.  123, as  originally  issued in 1995,  established  as
preferable a  fair-value-based  method of  accounting  for  share-based  payment
transactions  with employees.  However,  that statement  permitted the option of
continuing  to apply the  guidance  in APB  Opinion  No. 25,  provided  that the
footnotes  to the  consolidated  financial  statements  disclosed  pro forma net
income and net income per share,  as if the preferable  fair-value-based  method
had been applied.  SFAS No. 123R requires that  compensation  costs  relating to
share-based  payment  transactions be recognized in the  consolidated  financial
statements.  Compensation  costs will be measured based on the fair value of the
equity or liability instruments issued. SFAS No. 123R is effective for the first
annual  reporting  period  that  begins  after  June 15,  2005.  The  Company is
currently  evaluating the impact of SFAS No. 123R and believes that the adoption
of this statement  could have a material  impact on its  consolidated  financial
position, results of operations and reporting of cash flows.

In  December  2004,  the FASB  issued  FASB  Staff  Position  (FSP)  No.  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American  Jobs  Creation  Act of 2004." The American  Jobs
Creation Act introduces a special one-time  dividends  received deduction on the
repatriation of certain foreign  earnings to U.S.  companies,  provided  certain
criteria are met. FSP No. 109-2 provides  accounting and disclosure  guidance on
the impact of the  repatriation  provision on a company's income tax expense and
deferred  tax  liability.  The Company is  currently  studying the impact of the
one-time  favorable  foreign  dividend  provision  and intends to  complete  the
analysis by the end of fiscal  2006.  Accordingly,  the Company has not recorded
any  adjustments  to its income tax expense or deferred  income taxes to reflect
the tax impact of any repatriation of non-U.S. earnings it may make.

In  March  2005,  the  FASB  issued   Interpretation  No.  47,  "Accounting  for
Conditional Asset Retirement Obligations."  Interpretation No. 47 clarifies that
an  entity  must  record  a  liability  for  a  "conditional"  asset  retirement
obligation  if the fair value of the  obligation  can be  reasonably  estimated.
Interpretation  No. 47 also  clarifies  when an  entity  would  have  sufficient
information  to  reasonably  estimate  the fair  value  of an  asset  retirement
obligation.  Interpretation  No. 47 is  effective  no later  than the end of the
fiscal year ending  after  December  15,  2005.  The Company does not expect the
adoption of Interpretation  No. 47 to have a material impact on its consolidated
financial position, results of operations and cash flows.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections",  which  supersedes  APB Opinion No. 20,  "Accounting  Changes" and
"SFAS No. 3, "Reporting  Accounting  Changes in Interim  Financial  Statements."
SFAS No. 154 provides guidance on the accounting for and reporting of accounting
changes and error  corrections.  APB Opinion No. 20 had required that changes in
accounting  principles be recognized by including the  cumulative  effect of the
change in the period in which the new accounting principle was adopted. SFAS No.
154 requires retrospective application of the change to prior periods' financial
statements,  unless it is impracticable to determine the period-specific effects
of the change.  The  Statement is effective  for fiscal  years  beginning  after
December  15,  2005.  The  adoption of this  statement is not expected to have a
material effect on the Company's financial statements.



ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company's exposure to interest rate risk relates primarily to its investment
portfolio. The primary objective of SMSC's investment portfolio management is to
invest available cash while preserving principal and meeting liquidity needs. In
accordance  with the Company's  investment  policy,  investments are placed with
high credit-quality  issuers and the amount of credit exposure to any one issuer
is limited.

As of November 30, 2005, the Company's $110.0 million of short-term  investments
consisted  primarily of investments in auction rate securities,  and investments
in corporate,  government and municipal  obligations  with maturities of between
three and twelve months at  acquisition.  Auction rate securities have long-term
underlying  maturities,  but have interest rates that are reset every 90 days or
less, at which time the securities can typically be purchased or sold.

As with all fixed-income  instruments,  these securities are subject to interest
rate risk and would  likely  decline in market  value if market  interest  rates
increase. If market interest rates were to increase immediately and uniformly by
10% from levels at November 30, 2005, the Company estimates that the fair values
of  these  investments  would  decline  by an  immaterial  amount,  due  to  the
portfolio's relatively short-term overall maturity. Furthermore, the Company has
the option to hold its fixed-income  investments until maturity and,  therefore,
would not expect to realize any  material  adverse  impact to its  results  from
operations or cash flows from such a decline.  Declines in market interest rates
would, over time, reduce the Company's interest income.

Equity Price Risk

The Company has no material  investments in equity securities of other companies
on its Consolidated Balance Sheet as of November 30, 2005.

Foreign Currency Risk

The Company has international sales and expenditures and is, therefore,  subject
to certain foreign  currency rate exposures.  The Company conducts a significant
amount of its business in Asia. In order to reduce the risk from  fluctuation in
foreign  exchange  rates,  most of the  Company's  product  sales and all of its
arrangements with its foundry, test and assembly vendors are denominated in U.S.
dollars.  Most  transactions  in the  Japanese  market  made  by  the  Company's
subsidiary,  SMSC Japan, are denominated in Japanese yen. SMSC Japan purchases a
significant  amount of its  products for resale from SMSC in U.S.  dollars,  and
from time to time has entered into forward  exchange  contracts to hedge against
currency fluctuations associated with these product purchases. No such contracts
were executed during either fiscal 2005 or the first nine months of fiscal 2006,
and there are no  obligations  under any such contracts as of November 30, 2005.
The Company has never received a cash dividend  (repatriation of cash) from SMSC
Japan.

OASIS'  operating  activities in Europe include  transactions  conducted in both
euros  and U.S.  dollars.  The euro has been  designated  as  OASIS'  functional
currency for its European operations.  From time to time, OASIS has entered into
foreign  currency   contracts  to  minimize  the  exposure  of  its  U.S  dollar
denominated transactions, assets and liabilities to currency exchange rate risk.
Gains or losses on these  contracts  are  intended to offset the gains or losses
recorded from the  remeasurement  of certain  assets and  liabilities  from U.S.
dollars  into  euros.  As of  November  30,  2005,  OASIS has  foreign  currency
contracts to convert an  aggregate of $0.5 million into euros in December  2005.
Gains and losses on these  contracts,  as well as gains and losses recorded from
the remeasurement of U.S. dollar  denominated assets and liabilities into euros,
were not material  during the three or  nine-month  periods  ended  November 30,
2005.

<PAGE>
Other Factors That May Affect Future Operating Results
------------------------------------------------------

As a supplier of semiconductors,  the Company competes in a challenging business
environment,  which is characterized by intense competition, rapid technological
changes and cyclical business  patterns.  Except for the historical  information
contained  herein,  the matters  discussed  in this  report are  forward-looking
statements. The Company faces a variety of risks and uncertainties in conducting
its business,  some of which are out of its control, and any of which, were they
to occur, could impair the Company's operating performance.  For a more detailed
discussion of risk factors,  please refer to the Company's annual report on Form
10-K for the fiscal year ended  February  28, 2005 filed with the SEC on May 16,
2005.



ITEM 4.   Controls and Procedures

The Company has carried out an  evaluation  under the  supervision  and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. There are inherent limitations
to the  effectiveness  of any  system of  disclosure  controls  and  procedures,
including the possibility of human error and the  circumvention or overriding of
the controls and procedures. Accordingly, even effective disclosure controls and
procedures  can only provide  reasonable  assurance of achieving  their  control
objectives. Based upon the Company's evaluation, the Chief Executive Officer and
Chief  Financial  Officer have  concluded  that,  as of November  30, 2005,  the
disclosure controls and procedures are effective to provide reasonable assurance
that information required to be disclosed in the reports the Company files under
the Exchange Act is recorded,  processed,  summarized,  and reported as and when
required.

There have been no changes in the  Company's  internal  control  over  financial
reporting  during the Company's  fiscal quarter covered by this report that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

The Company  completed the acquisition of OASIS on March 30, 2005, as more fully
described in Note 3 to the Condensed  Consolidated Financial Statements included
within  Part I of this report on Form 10-Q.  As part of its ongoing  integration
activities,  the Company is in the process of  incorporating  its  controls  and
procedures into OASIS' operating activities.

<PAGE>
PART II - OTHER INFORMATION


ITEM 1.   Legal Proceedings

As of November 30, 2005, SMSC was not a party to any legal proceedings,  claims,
disputes or litigation  that are expected to have a material  adverse  effect on
the Company's results of operations or financial condition.


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

Unregistered Sales of Equity Securities

None.

Purchases of Equity Securities by the Issuer

In October 1998, the Company's  Board of Directors  approved a plan  authorizing
the repurchase of up to one million shares of the Company's  common stock in the
open market or in private  transactions.  The Board of Directors  increased  the
authorization  from one million  shares to two million  shares in July 2000, and
from two million  shares to three million  shares in July 2002.  The plan has no
specified  expiration  date.  Shares of common stock  purchased  pursuant to the
repurchase plan are held as treasury stock.

There was no activity  under this plan during the current period covered by this
report.


ITEM 3.   Defaults Upon Senior Securities

None.


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

None.


ITEM 5.   Other Information

None.


ITEM 6.   Exhibits

31.1 - Certification  of Chief Executive  Officer pursuant to Rule 13a-14(a) (17
CFR 240.13a-14(a)), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.

31.2 - Certification  of Chief Financial  Officer pursuant to Rule 13a-14(a) (17
CFR 240.13a-14(a)), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.

32.1 -  Certifications  of Chief Executive  Officer and Chief Financial  Officer
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
<PAGE>


                                    SIGNATURE



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.


                                        STANDARD MICROSYSTEMS CORPORATION


DATE:  January 9, 2006                       By: /s/ David S. Smith
                                             ----------------------------
                                                    (Signature)

                                             David S. Smith
                                             Senior Vice President (duly
                                             authorized officer) and
                                             Chief Financial Officer
                                             (principal financial officer)