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 May 31, 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 May 31, 2005,  there were  20,739,000  shares of the  registrant's  common
stock outstanding.


<PAGE>
                        Standard Microsystems Corporation

                                    Form 10-Q
                       For the Quarter Ended May 31, 2005

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



Part I    Financial Information

Item 1    Financial Statements (unaudited):
          Condensed  Consolidated Balance Sheets as of May 31, 2005 and February
          28, 2005
          Condensed  Consolidated  Statements of Operations for the  Three-Month
          Periods Ended May 31, 2005 and 2004
          Condensed  Consolidated  Statements of Cash Flows for the  Three-Month
          Periods Ended May 31, 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)



                                              May 31,          February 28,
                                               2005                2005
                                           ------------       --------------
Assets
Current assets:
 Cash and cash equivalents                 $     19,674       $     116,126
 Short-term investments                         101,279              56,519
 Accounts receivable, net                        29,881              23,788
 Inventories                                     42,303              33,310
 Deferred income taxes                           16,252              17,701
 Other current assets                             5,753               4,295
----------------------------------------------------------------------------

   Total current assets                         215,142             251,739
----------------------------------------------------------------------------

Property, plant and equipment, net               25,959              22,630
Goodwill                                         78,912              29,435
Intangible assets, net                           49,671               3,584
Deferred income taxes                             7,728               7,163
Other assets                                      3,549               4,708
----------------------------------------------------------------------------

                                           $    380,961       $     319,259
============================================================================

Liabilities and shareholders' equity
Current liabilities:
 Accounts payable                          $     21,097       $      15,995
 Deferred income on shipments to
 distributors                                    11,126               7,689
 Accrued expenses, income taxes
 and other liabilities                           17,772              13,400
----------------------------------------------------------------------------

   Total current liabilities                     49,995              37,084
----------------------------------------------------------------------------

Deferred income taxes                            16,658                 -
Other liabilities                                12,215              12,326

Shareholders' equity:
 Preferred stock                                    -                   -
 Common stock                                     2,273               2,053
 Additional paid-in capital                     225,515             187,854
 Retained earnings                              103,639             100,612
 Treasury stock, at cost                        (25,961)            (23,799)
 Deferred stock-based compensation               (3,642)             (1,925)
 Accumulated other comprehensive income             269               5,054
----------------------------------------------------------------------------

   Total shareholders' equity                   302,093             269,849
----------------------------------------------------------------------------

                                           $    380,961       $     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)



                                                        Three Months Ended
                                                              May 31,
                                                 -------------------------------
                                                      2005              2004
                                                 ------------       ------------

Revenues                                        $     68,807       $     53,053

Costs and expenses:
  Cost of goods sold                                  36,492             26,385
  Research and development                            12,966             10,862
  Selling, general and administrative                 13,591             11,852
  Amortization of intangible assets                    1,153                317
  In-process research and development                    895                -
--------------------------------------------------------------------------------

Income from operations                                 3,710              3,637

Interest income                                          723                466
Other expense, net                                       (47)               (32)
--------------------------------------------------------------------------------

Income before provision for income taxes               4,386              4,071

Provision for income taxes                             1,359              1,159
--------------------------------------------------------------------------------

Net income                                      $      3,027       $      2,912
================================================================================


Basic net income per share:                     $       0.15       $       0.16
================================================================================

Diluted net income per share:                   $       0.15       $       0.15
================================================================================

Weighted average common shares outstanding:
  Basic                                               20,066             18,246
  Diluted                                             20,476             19,790


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

                                                     Three Months Ended
                                                           May 31,
                                              ----------------------------------
                                                   2005               2004
                                              --------------     ---------------

Cash flows from operating activities:
 Cash received from customers and licensees   $      73,735      $       50,938
 Cash paid to suppliers and employees               (57,941)            (52,240)
 Interest received                                      588                 421
 Interest paid                                          (21)                (39)
 Income taxes paid                                   (1,181)                (44)
--------------------------------------------------------------------------------

  Net cash provided by (used for) operating
  activities                                         15,180                (964)
--------------------------------------------------------------------------------

Cash flows from investing activities:
 Capital expenditures                                (3,162)             (2,902)
 Acquisition of Oasis SiliconSystems Holding
 AG, net of cash acquired                           (60,349)                -
 Sales of long-term investments                         -                 4,000
 Purchases of short-term investments               (179,886)           (134,016)
 Sales of short-term investments                    135,172             132,238
 Other                                                   21                   5
--------------------------------------------------------------------------------

  Net cash used for investing activities           (108,204)               (675)
--------------------------------------------------------------------------------

Cash flows from financing activities:
 Proceeds from issuance of common stock                  21                 210
 Purchases of treasury stock                         (2,162)                -
 Repayments of obligations under capital
 leases and notes payable                              (659)               (506)
--------------------------------------------------------------------------------

  Net cash used for financing activities             (2,800)               (296)
--------------------------------------------------------------------------------

Effect of foreign exchange rate changes
on cash and cash equivalents                           (628)                (25)
--------------------------------------------------------------------------------

Net decrease in cash and cash equivalents           (96,452)             (1,960)

Cash and cash equivalents at beginning of
period                                              116,126              14,050
--------------------------------------------------------------------------------

Cash and cash equivalents at end of period    $      19,674      $       12,090
================================================================================

Reconciliation of net income to
net cash provided by (used for) operating
activities:

Net income                                    $       3,027      $        2,912
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
 Depreciation and amortization                        3,893               2,756
 In-process research and development charge             895                 -
 Stock-based compensation                               232                 212
 Other adjustments, net                                   9                  44
 Changes in operating assets and liabilities,
 net of business acquisition impact:
   Accounts receivable                                 (732)             (7,960)
   Inventories                                        3,221                 (48)
   Accounts payable, deferred income, accrued
   expenses and other liabilities                     4,336                 425
   Current and deferred income taxes                    174               1,067
   Other changes, net                                   125                (372)
--------------------------------------------------------------------------------

Net cash provided by (used for) operating
activities                                    $      15,180      $         (964)
================================================================================

See Notes to Condensed Consolidated Financial Statements.

<PAGE>
                STANDARD MICROSYSTEMS CORPORATIONAND 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  generally  accepted
accounting  principles  and the  rules and  regulations  of the  Securities  and
Exchange  Commission  (SEC),  and reflects all  adjustments,  consisting only of
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 sales and  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 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-month period ended May 31, 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 are granted to employees and directors.  All stock
options  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  and net  income  per share  would have been the pro forma
amounts indicated below (in thousands, except per share data):


                                                      Three Months Ended
                                                            May 31,
                                                ------------------------------
                                                      2005           2004
------------------------------------------------------------------------------

Net income - as reported                           $   3,027      $   2,912
Stock-based compensation expense
included in net income, net of taxes -
as reported                                              145            141
Stock-based compensation expense
determined using the fair
value method for all awards, net of taxes             (2,315)        (2,421)
------------------------------------------------------------------------------
Net income - pro forma                             $     857      $     632
==============================================================================

Basic net income per share - as reported           $    0.15      $    0.16
==============================================================================
Diluted net income per share - as reported         $    0.15      $    0.15
==============================================================================
Basic net income per share - pro forma             $    0.04      $    0.03
==============================================================================
Diluted net income per share - pro forma           $    0.04      $    0.03
==============================================================================


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 average of the stock's market value for 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  future  performance  goals.  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 issued                              35.8
Transaction costs                                      3.4
-----------------------------------------------------------

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


The  following  table  summarizes  the  allocation  of the  purchase  price  (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                                            51.9
  Deferred income tax benefits                         0.6
  Accounts payable                                    (1.7)
  Accrued expenses and income taxes                   (6.9)
  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, is 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 has been valued at estimated selling prices less the costs of disposal
and  a   reasonable   profit   allowance   for  the  related   selling   effort;
work-in-process  inventory  has been 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 have
been valued at current  replacement  costs. These values initially exceed 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 is  being  recorded  as a  component  of  cost of  goods  sold as the
underlying  inventory is sold,  $0.6 million of which was recognized  during the
quarter ended May 31, 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 automotive infotainment 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.  This  acquisition  significantly  expands
SMSC's  presence in the automotive  infotainment  market,  and is also providing
opportunities for expanded presence in other market segments, including consumer
networking.  It also added an assembled  workforce of about 150  employees  into
SMSC's operations.  These factors  contributed to recognition of goodwill in 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 is reflected  within Costs and expenses for
the quarter 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-month  periods  ended  May 31,  2005  and 2004 is as
follows (in millions, except per share data):

                                              Three Months Ended
                                                   May 31,
                                         -----------------------------
                                               2005          2004
----------------------------------------------------------------------

Revenues                                      $ 73.0        $ 65.0
Net income                                    $  2.5        $  1.8
Basic net income per share                    $ 0.13        $ 0.09
Diluted net income per share                  $ 0.12        $ 0.08


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 May 31, 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
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, reflecting their highly liquid nature. Effective
at February 28, 2005, auction rate securities are being classified as short-term
investments on the Company's consolidated balance sheet for all dates presented,
reflecting recently converging  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,  it 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 three months ended May 31, 2004,  auction rate and other  securities  at
May 31, 2004 were changed in classification as follows (in thousands):


                                            Cash and Cash         Short-Term
                                             Equivalents         Investments
-----------------------------------------------------------------------------
 As previously classified                  $    130,855         $     27,260
 Change in classification - auction
 rate securities                               (118,505)             118,505
 Change in classification - other
 securities                                        (260)                 260
-----------------------------------------------------------------------------

 As currently classified                   $     12,090         $    146,025
=============================================================================


For the three-month period ended May 31, 2004, $2.3 million of net cash provided
by investing  activities,  related to activity in auction rate  securities,  was
previously  included  in the  decrease  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):

                                           May 31, 2005         Feb. 28, 2005
-------------------------------------------------------------------------------

Raw materials                             $        1,667       $       1,143
Work in process                                   21,088              16,626
Finished goods                                    19,548              15,541
-------------------------------------------------------------------------------

                                          $       42,303       $      33,310
===============================================================================

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

                                           May 31, 2005         Feb. 28, 2005
-------------------------------------------------------------------------------

Land                                      $          578       $         578
Buildings and improvements                        12,236              12,064
Machinery and equipment                           71,381              68,190
Construction in progress                           4,232               1,601
-------------------------------------------------------------------------------
                                                  88,427              82,433
Less: accumulated depreciation                    62,468              59,803
-------------------------------------------------------------------------------

                                          $       25,959       $      22,630
===============================================================================


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):

                                                         Three Months Ended
                                                               May 31,
                                                         2005          2004
                                                     -------------------------

Average shares outstanding for
 basic net income per share                              20,066       18,246
Dilutive effect of stock options
 and unvested restricted stock awards                       410        1,544
------------------------------------------------------------------------------

Average shares outstanding for
 diluted net income per share                            20,476       19,790
==============================================================================

Options covering 3.1 million and 0.2 million shares for the three-month  periods
ended May 31, 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-month  periods ended May 31, 2005 and 2004 were as follows
(in thousands):

                                                          Three Months Ended
                                                               May 31,
                                                          2005          2004
                                                     ---------------------------

Net income                                               $  3,027      $  2,912
Other comprehensive income (loss):
Change in foreign currency translation adjustments         (4,819)          (53)
Change in unrealized gain (loss) on marketable
 equity securities, net of taxes                               34            (4)
--------------------------------------------------------------------------------

Total comprehensive income (loss)                        $ (1,758)     $  2,855
================================================================================


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 May 31,  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 $51.9  million.  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 May 31, 2005 and February  28, 2005,  the
Company's  identifiable   intangible  assets  consisted  of  the  following  (in
thousands):

                                May 31, 2005                 February 28, 2005
--------------------------------------------------------------------------------
                                      Accumulated                  Accumulated
                           Cost      Amortization         Cost     Amortization
--------------------------------------------------------------------------------

Purchased technologies   $ 37,759       $   3,747       $  6,179       $   2,832

Customer relationships
 and contracts             10,330             306            326              89
--------------------------------------------------------------------------------
  Total - finite-lived
   intangible assets       48,089           4,053          6,505           2,921
--------------------------------------------------------------------------------
Trademark and other         5,635             -              -               -
--------------------------------------------------------------------------------

                         $ 53,724       $   4,053       $  6,505       $   2,921
================================================================================

Total amortization expense recorded for finite-lived  intangible assets was $1.1
million and $0.3  million  for the  three-month  periods  ended May 31, 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                  $  5,128
Fiscal 2007                                  6,261
Fiscal 2008                                  6,261
Fiscal 2009                                  5,488
Fiscal 2010                                  5,231
Fiscal 2011 and thereafter                  15,667
===================================================


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
are based upon various  service and  compensation  factors.  The following table
sets forth the components of the  consolidated  net periodic pension expense for
the  three-month  periods  ended  May  31,  2005  and  2004,   respectively  (in
thousands):


                                                        Three Months Ended
                                                             May 31,
                                                    -------------------------
                                                       2005            2004
-----------------------------------------------------------------------------

 Service cost - benefits earned                      $   86          $   72
 Interest cost on projected benefit obligations          98             106
 Net amortization and deferral                           67              72
-----------------------------------------------------------------------------

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

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 first quarter of fiscal 2005.
The Company currently holds repurchased  shares as treasury stock. As of May 31,
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.  Industry Segment Information

The Company's  operating  segments conform to aggregation  criteria set forth in
SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,"  and their  operating  results are therefore  aggregated  into one
reportable  operating  segment  -  the  design,  development  and  marketing  of
semiconductor integrated circuits.


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 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
and results of operations.

In  December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Nonmonetary
Assets,"  an  amendment  of APB  Opinion  No.  29.  SFAS No. 153  addresses  the
measurement  of  exchanges  of  nonmonetary  assets and  redefines  the scope of
transactions  that  should be  measured  based on the fair  value of the  assets
exchanged.  SFAS No. 153 is effective for nonmonetary  asset exchanges in fiscal
periods  beginning after June 15, 2005. The Company does not expect the adoption
of  SFAS  No.  153 to  have a  material  impact  on its  consolidated  financial
position, results of operations and 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.



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.  Such 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  information  is subject to  change,  and the  Company  may not
inform, or be required to inform, investors of such changes.

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.
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 go-to
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 leadership positions in
its  select  markets  by  providing   application  specific  solutions  such  as
mixed-signal PC system controllers, non-PCI Ethernet, ARCNET, MOST, Hi-Speed USB
and other high-speed serial communications.

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,  sales and revenues,  gross profit 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 sales and 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 May 31,  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 future performance goals.


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

Revenues

Effective in fiscal 2006, SMSC is tracking  revenues shipped into three vertical
markets.  For  the  first  quarter  of  fiscal  2006,  total  revenues  included
approximately 53%, or $36.4 million,  from mobile and desktop PCs; 28%, or $19.2
million,  from consumer  electronics & infotainment;  and 19%, or $13.2 million,
from  industrial and other sources.  It was not  practicable to develop  revenue
data for shipments into these three vertical  markets for the three months ended
May 31, 2004. Therefore, the following year-over-year comparisons are structured
based on our historical discussion of PC I/O and non-PC I/O revenues.

Revenues for the three months ended May 31, 2005 were $68.8 million, compared to
revenues  of  $53.1  million  for  the  year  earlier  period,  an  increase  of
approximately  30%. Included in the current quarter's  revenues are $9.3 million
of revenues  associated  with the acquisition of OASIS.  These revenues  reflect
shipments subsequent to March 30, 2005, representing approximately two months of
activity, in the current quarter.

The Company achieved growth in revenues from both PC I/O and non-PC I/O products
(exclusive  of OASIS  revenues)  in the  current-year  quarter,  compared to the
prior-year quarter,  with increases of approximately 11% and 16%,  respectively.
The increase in PC I/O  revenues  was driven by a 31% increase in revenues  from
mobile  I/O  products,  reflecting  strong  market  demand in  mobile  computing
applications,  partially  offset by a 6% decline in  revenues  from  desktop I/O
products.  The  increase in non-PC I/O  revenues was the result of growth in the
Company's  connectivity and  environmental  monitoring and control (EMC) product
lines,   both  of  which  benefited  from  broader  product   offerings  in  the
current-year  quarter.  Revenues from networking  products remained level in the
current-year quarter, compared to the prior-year quarter.

The Company's  revenues for the three-month  periods ended May 31, 2005 and 2004
are summarized in the following table (in millions):

                                                  Three Months Ended
                                                         May 31,
                                                   2005         2004
----------------------------------------------------------------------

PC I/O products                                  $  33.4      $  30.2
Non-PC I/O products *                               23.5         20.2
AIS products and services                            9.3         -
I.P revenues and other                               2.6          2.7
----------------------------------------------------------------------

                                                 $  68.8      $  53.1
======================================================================

*  Includes networking, connectivity, EMC products and other non-PC I/O products

Revenues from customers outside of North America accounted for approximately 85%
and 83% of the Company's consolidated revenues for the three-month periods ended
May 31, 2005 and 2004, respectively.  While the largest portion of the Company's
revenues  continues to be derived from the Asia region, the acquisition of OASIS
has  significantly  increased  the Company's  revenues in Europe.  The Company's
revenues in Europe,  including  the impact of OASIS,  were about $9.5 million in
the  current-year  quarter,  compared to just under $3 million in the prior-year
quarter. The Company expects that international  shipments,  particularly to the
Asia region, will continue to represent a significant portion of its revenues.

Cost of Goods Sold

Cost of goods sold for the quarter ended May 31, 2005 was $36.5  million,  which
resulted in a gross profit at 47.0% of revenues,  compared to $26.4 million, and
gross profit at 50.3% of revenues,  for the three months ended May 31, 2004. For
purposes of this  discussion,  gross profit is defined as revenues minus cost of
goods sold,  before  amortization  of  intangibles.  The decline in gross profit
percentage  in the  current-year  period,  compared  to the  prior-year  period,
results from a combination  of (1) a lower gross profit  percentage  realized on
desktop  I/O  products,  driven by higher unit costs and lower  average  selling
prices on certain  devices;  (2) a $0.6 million charge  associated with sales of
inventory that was acquired from OASIS and valued in the  acquisition  above its
historical cost; and (3) a higher  proportion of intellectual  property revenues
in the  prior-year  quarter.  The higher unit costs reflect the impact of higher
wafer costs on inventory built in the latter part of fiscal 2005 and sold during
the first quarter of fiscal 2006.

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 $13.0 million, or approximately 19% of revenues, for the three
months ended May 31, 2005,  compared to $10.9 million,  or approximately  20% of
revenues,  for the three months ended May 31, 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 R&D expenses  associated with the operations of
OASIS,  which impacted two months of the current  quarter's  operating  results.
OASIS' staff includes approximately 90 engineers and technicians.  The remainder
of the increase  resulted  from higher  depreciation  expenses  associated  with
investments in advanced  semiconductor  design tools and higher device prototype
expenses.

Selling, General and Administrative Expenses

Selling,   general  and   administrative   expenses  were  $13.6   million,   or
approximately 20% of revenues,  for the quarter ended May 31, 2005,  compared to
$11.9 million,  or approximately 22% of revenues,  for the quarter ended May 31,
2004. The increase in the current  year's first  quarter,  compared to the prior
year's first  quarter,  is primarily due to the addition of expenses  associated
with the  operations  of OASIS,  with the  remainder of the  increase  primarily
reflecting   higher  direct  selling   expenses,   including  sales  commissions
associated with the higher current quarter revenues.

Amortization of Intangible Assets

For the three-month period ended May 31, 2005, the Company recorded $0.9 million
of  amortization  expenses for  finite-lived  intangible  assets acquired in the
OASIS  transaction,  as well as $0.3 million of  amortization  for  finite-lived
intangible assets associated with the acquisition of Gain Technology Corporation
(Gain)  during  fiscal 2003.  Amortization  expense of $0.3 million for the Gain
intangible assets was recorded in the prior-year's first quarter.

In-Process Research and Development

The $0.9 million  in-process  research and development  expense  recorded in the
first quarter of fiscal 2006 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 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 increase in interest  income,  from $0.5 million in the  three-month  period
ended May 31,  2004,  to $0.7  million in the  three-month  period ended May 31,
2005, primarily reflects the impact of higher average interest rates,  partially
offset by a lower average level of investments, during the current-year period.

Provision For Income Taxes

The Company's  effective income tax rate reflects statutory  federal,  state and
foreign tax rates, the impact of certain 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 $1.4 million provision for income taxes for the three-month period
ended May 31,  2005  reflects  an expected  fiscal  2006  effective  tax rate of
approximately  31%. The  provision for income taxes for the first quarter of the
prior fiscal year was $1.2 million,  which  resulted in an effective  income tax
rate of approximately  28%. The higher  projected  effective tax rate for fiscal
2006,  compared to the  effective tax rate for the first quarter of fiscal 2005,
reflects the lower proportionate effective tax rate impact of income tax credits
and tax-exempt interest income which results from a higher current-year  pre-tax
income expectation.


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 liquid  investments were $121.0 million
at May 31, 2005,  compared to $172.6 million at February 28, 2005, a decrease of
$51.6 million.

Operating  activities  generated  $15.2  million of cash  during the first three
months of fiscal 2006,  compared to a  consumption  of $1.0  million  during the
first three months of fiscal 2005.  Operating cash flows during the current-year
period  reflect a decrease  in  inventories  (excluding  the impact of the OASIS
acquisition),  and an increase in accrued  liabilities,  while the prior  year's
operating  cash flows were  burdened  by an $8.0  million  increase  in accounts
receivable.  The current-year period's operating activities include $5.0 million
of non-cash charges, including depreciation,  amortization,  in-process research
and development and  stock-based  compensation,  compared to $3.0 million in the
prior-year period.

Investing activities consumed $108.2 million of cash during the first quarter of
fiscal 2006, due principally to $60.3 million used for the acquisition of OASIS,
a net increase of $44.7 million in short-term  investments,  and $3.2 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 prior to the current-year quarter),  partially offset
by $22.4 million of cash acquired from OASIS. Investing activities consumed $0.7
million of cash during the first quarter of fiscal 2005, due principally to $2.9
million of capital  expenditures,  partially  offset by a net  increase  of $2.2
million in short-term and long-term investments.

Net cash of $2.8 million used for financing  activities during the first quarter
of fiscal 2006  included  $2.2  million of  treasury  stock  purchases  and $0.7
million of debt repayments.  Financing  activities consumed $0.3 million of cash
during  the first  quarter  of  fiscal  2005,  including  $0.5  million  of debt
repayments, partially offset by $0.2 million of proceeds from exercises of stock
options.

The Company's  inventories were $42.3 million at May 31, 2005, compared to $33.3
million at February 28, 2005.  This  increase  includes  $11.5  million of OASIS
product  inventories  at May 31, 2005,  partially  offset by a net decline in PC
I/O, networking and connectivity device inventories.

Accounts  receivable  increased from $23.8 million at February 28, 2005 to $29.9
million at May 31, 2005, an increase of $6.1  million.  Of this  increase,  $5.7
million reflects the accounts receivable of OASIS.

Total current  liabilities  increased from $37.1 million at February 28, 2005 to
$50.0  million at May 31, 2005,  including  $9.0 million of current  liabilities
associated with the operations of OASIS,  as well as a $3.4 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 second quarter ending August 31, 2005.

Capital  expenditures  for the  three-month  period ended May 31, 2005 were $3.2
million,  and  were  predominantly  for  facility  expansion,   production  test
equipment,  advanced  semiconductor design tools and investments in intellectual
property.  Capital  expenditures  were $2.9 million for the  three-month  period
ended May 31, 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 primary  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.  The  Company  currently  expects  the cost of this
building  expansion to be approximately  $20 million,  of which $4.2 million has
been expended,  and is classified as construction in progress,  at May 31, 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 May 31, 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 first  quarter of fiscal 2005.  The Company
currently  holds  repurchased  shares as treasury stock. As of May 31, 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 OASIS' former  shareholders  during fiscal 2007 upon  satisfaction of certain
future performance goals.

The Company has considered in the past,  and will continue to consider,  various
possible  transactions  to  secure  necessary  foundry  manufacturing  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 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 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
and results of operations.

In December 2004, the FASB issued  Statement No. 153,  "Exchanges of Nonmonetary
Assets,"  an  amendment  of APB  Opinion  No.  29.  SFAS No. 153  addresses  the
measurement  of  exchanges  of  nonmonetary  assets and  redefines  the scope of
transactions  that  should be  measured  based on the fair  value of the  assets
exchanged.  SFAS No. 153 is effective for nonmonetary  asset exchanges in fiscal
periods  beginning after June 15, 2005. The Company does not expect the adoption
of  SFAS  No.  153 to  have a  material  impact  on its  consolidated  financial
position, results of operations and 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 Financial  Accounting  Standards Board 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.

<PAGE>



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 May 31, 2005,  the  Company's  $101.3  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 May 31, 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 May 31, 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 three  months of fiscal
2006, and there are no obligations  under any such contracts as of May 31, 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 May 31, 2005, OASIS has foreign currency  contracts to
convert an  aggregate  of $3.2  million  into euros in varying  monthly  amounts
through December 31, 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 significant  during the three months ended May
31, 2005.


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 May 31, 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.

SMSC  completed  the  acquisition  of OASIS on March  30,  2005,  as more  fully
described in Note 3 to the Financial Statements in this Form 10Q. As part of its
ongoing  integration  activities,  SMSC is in the process of  incorporating  its
controls and procedures into OASIS.



<PAGE>
PART II - OTHER INFORMATION


ITEM 1.   Legal Proceedings

As of May 31,  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

The disclosures  regarding  unregistered  sales of equity  securities are hereby
incorporated by reference to the information appearing within Item 3.02 included
in the Company's report on Form 8-K filed on April 5, 2005.

Purchases of Equity Securities by the Issuer

In October 1998, the Company's  Board of Directors  approved a plan  authorizing
the  repurchase 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.

Activity under this plan during the period covered by this report was as follows
(shares in thousands):

               Total Number  Average    Total Number of      Maximum Number of
                of Shares     Price     Shares Purchased    Shares that May Yet
                Purchased    Paid per  as Part of Publicly   Be Purchased Under
 Period                       Share     Announced Plans    the Plans or Programs
--------------------------------------------------------------------------------

 March 2005         -                -        -                      1,158
 April 2005        100        $  14.32       100                     1,058
 May 2005           50        $  14.53        50                     1,008
---------------------------------------------------------
 First Quarter,
 Fiscal 2006       150        $  14.39       150
=========================================================

All purchases during this period were open market transactions.


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:  July 11, 2005                     By: /s/ Andrew M. Caggia
                                         -------------------------
                                                (Signature)

                                         Andrew M. Caggia
                                         Senior Vice President (duly
                                         authorized officer) and
                                         Chief Financial Officer
                                         (principal financial officer)