<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark one)

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

                  For the quarterly period ended March 31, 2002

                                       OR

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

   For the transition period from ___________________ to ___________________

                       Commission file number 000-31029-40

                                 MICROTUNE, INC.

             (Exact name of registrant as specified in its charter)

               Delaware                                      75-2883117
   (State or other jurisdiction of                        (I.R.S. Employer
    Incorporation or organization)                      Identification Number)

                                2201 10th Street
                               Plano, Texas 75074
              (Address of principal executive office and zip code)

                                 (972) 673-1600
              (Registrant's telephone number, including area code)

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 filing requirements
for the past 90 days.

                                   YES [X]   NO

As of April 30, 2002, 53,344,304 shares of the Registrant's common stock were
outstanding.


                                      -1-

<PAGE>

                                 Microtune, Inc.

                                    FORM 10-Q
                                 March 31, 2002

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>

Part I Financial Information

  Item 1. Financial Statements ................................................................................  3

     Consolidated Balance Sheets at March 31, 2002 and December 31, 2001 (unaudited) ..........................  3
     Consolidated Statements of Operations for the Three Months Ended March 31, 2002 and 2001 (unaudited) .....  4
     Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 (unaudited) .....  5
     Notes to Consolidated Financial Statements (unaudited) ...................................................  6

  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............... 14

  Item 3. Qualitative and Quantitative Disclosure About Market Risk ........................................... 19

     Factors Affecting Future Operating Results and Stock Price ............................................... 20

Part II Other Information

  Item 1. Legal Proceedings ................................................................................... 38

  Item 2. Changes In Securities and Use of Proceeds ........................................................... 39

  Item 3.  Defaults Upon Senior Securities .................................................................... 39

  Item 4. Submission of Matters to a Vote of Security Holders. ................................................ 39

  Item 5. Other Information. .................................................................................. 39

  Item 6. Exhibits and Reports on Form 8-K .................................................................... 39

Signatures .................................................................................................... 40

Exhibit ....................................................................................................... 41
</TABLE>

                                      -2-

<PAGE>

                          PART I Financial Information

Item 1. Financial Statements

                                 Microtune, Inc.
                           Consolidated Balance Sheets
                      (in thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>

                                 Assets                                        March 31, 2002     December 31, 2001
                                                                               --------------     -----------------
<S>                                                                            <C>                <C>
Current assets:
      Cash and cash equivalents ...........................................     $  164,247            $   173,149
      Accounts receivable, net of allowance for doubtful accounts of
          $682 at March 31, 2002 and $592 at December 31, 2001 ............         13,853                 14,580
      Inventories .........................................................          9,498                  9,401
      Deferred income taxes ...............................................            388                    389
      Other current assets ................................................          1,103                  3,206
                                                                               -----------            -----------
          Total current assets ............................................        189,089                200,725

Property and equipment, net ...............................................         18,393                 19,269
Intangible assets, net of accumulated amortization of $6,516 at March
      31, 2002 and $3,841 at December 31, 2001 ............................         61,602                 64,136
Goodwill, net of accumulated amortization of $11,210 at March 31, 2002
      and December 31, 2001 ...............................................         51,040                 51,040
Deferred income taxes .....................................................          1,382                  1,419
Other assets and deferred charges .........................................          1,437                  1,113
                                                                               -----------            -----------
               Total assets ...............................................    $   322,943            $   337,702
                                                                               ===========            ===========

                  Liabilities and Stockholders' Equity
Current liabilities:
      Accounts payable ....................................................      $   6,187              $   7,856
      Accrued expenses ....................................................         11,858                 15,099
      Accrued compensation ................................................          2,460                  2,355
                                                                               -----------            -----------
          Total current liabilities .......................................         20,505                 25,310

Deferred income taxes .....................................................            320                    320
Other noncurrent liabilities ..............................................          2,280                  2,286
Commitments ...............................................................

Stockholders' equity:
    Preferred stock, $0.001 par value per share
      Authorized shares - 25,000 at March 31, 2002 and December 31, 2001 ..              -                      -
    Common stock, $0.001 par value per share
      Authorized shares - 150,000 at March 31, 2002 and December 31, 2001;
          issued and outstanding shares - 53,275 at March 31,
          2002 and 52,737 at December 31, 2001 ............................             53                     53
    Additional paid-in capital ............................................        449,851                450,081
    Unearned stock compensation ...........................................        (24,657)               (28,317)
    Loans receivable from stockholders ....................................           (296)                   (35)
    Accumulated other comprehensive loss ..................................           (988)                  (988)
    Accumulated deficit ...................................................       (124,125)              (111,008)
                                                                               -----------            -----------
          Total stockholders' equity ......................................        299,838                309,786
                                                                               -----------            -----------
               Total liabilities and stockholders' equity .................     $  322,943             $  337,702
                                                                                ==========            ===========
</TABLE>

See accompanying notes.

                                      -3-

<PAGE>

                                 Microtune, Inc.

                      Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                     March 31,
                                                                            ----------------------------
                                                                                2002              2001
                                                                            ------------      -----------
<S>                                                                         <C>             <C>
Net revenues ............................................................    $ 18,243         $ 17,659
Cost of revenues ........................................................      11,450           14,088
                                                                            ---------         --------
Gross margin ............................................................       6,793            3,571
Operating expenses:
     Research and development:
         Stock option compensation ......................................       2,577              340
         Other ..........................................................       8,777            3,954
                                                                            ---------         --------
                                                                               11,354            4,294
     Selling, general and administration:
         Stock option compensation ......................................         758              614
         Other ..........................................................       5,344            3,869
                                                                            ---------         --------
                                                                                6,102            4,483
     Restructuring costs ................................................          54                -
     Amortization of intangible assets and goodwill .....................       2,684            1,802
                                                                            ---------         --------
         Total operating expenses .......................................      20,194           10,579
                                                                            ---------         --------
Loss from operations ....................................................     (13,401)          (7,008)
Other income (expense):
     Interest income, net ...............................................         821            1,058
     Foreign currency translation and transaction gains (losses), net ...        (348)              55
     Other ..............................................................        (118)              44
                                                                            ---------         --------
Loss before income taxes ................................................     (13,046)          (5,851)
Income tax expense (benefit) ............................................          71             (307)
                                                                            ---------         --------
Net loss ................................................................   $ (13,117)        $ (5,544)
                                                                            =========         ========

Basic and diluted loss per common share .................................    $  (0.25)        $  (0.14)
                                                                            =========         ========
Weighted-average shares used in computing basic and diluted loss per
     common share .......................................................      52,389           38,841
                                                                            =========         ========
</TABLE>

See accompanying notes.

                                      -4-

<PAGE>

                                 Microtune, Inc.

                      Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                   Three Months Ended March 31,
                                                                                   ----------------------------
                                                                                       2002           2001
                                                                                     --------        -------
<S>                                                                                  <C>             <C>
Operating activities:
    Net loss ...................................................................     $(13,117)       $(5,544)
    Adjustments to reconcile net loss to net cash used in operating
       activities, net of effects of business combination:
       Depreciation ............................................................        1,691          1,655
       Amortization of intangible assets .......................................        2,684            392
       Amortization of goodwill ................................................            -          1,410
       Foreign currency translation and transaction gains (losses), net ........          348            (55)
       Amortization of deferred stock option compensation ......................        3,335            954
       Deferred income taxes ...................................................           39           (758)
       Changes in operating assets and liabilities:
           Accounts receivable .................................................          727          1,111
           Inventories .........................................................          (97)          (779)
           Other assets ........................................................        1,903           (402)
           Accounts payable ....................................................       (1,669)        (1,296)
           Accrued expenses ....................................................       (3,185)          (219)

           Accrued compensation ................................................          104            126
                                                                                     --------        -------
                Net cash used in operating activities ..........................       (7,237)        (3,405)
Investing activities:
    Purchases of property and equipment ........................................       (1,244)        (4,087)
    Sale of property and equipment .............................................          428             29
    Loans receivable ...........................................................         (122)             -
    Purchase of intangible assets ..............................................         (150)           (26)
                                                                                     --------        -------
                Net cash used in investing activities ..........................       (1,088)        (4,084)
Financing activities:
    Proceeds from issuance of common stock upon exercise of stock options and
       from shares purchased under Employee Stock Purchase Plan ................          571            869
    Loans receivable from stockholders .........................................         (261)           665
      Other, net ...............................................................         (539)             -
                                                                                     --------        -------
                Net cash provided by (used in) financing activities ............         (229)         1,534
Effect of foreign currency exchange rate changes on cash .......................         (348)            68
                                                                                     --------        -------
Net change in cash and cash equivalents ........................................       (8,902)        (5,887)
Cash and cash equivalents at beginning of period ...............................      173,149         77,650
                                                                                     --------        -------
Cash and cash equivalents at end of period .....................................     $164,247        $71,763
                                                                                     ========        =======
</TABLE>

See accompanying notes.

                                       -5-

<PAGE>
                                 Microtune, Inc.

                   Notes to Consolidated Financial Statements

                                 March 31, 2002

                                   (unaudited)

1. Basis of Presentation

General

The accompanying unaudited financial statements as of and for the three months
ended March 31, 2002 and 2001 have been prepared by Microtune, Inc. (the
Company), pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such
rules and regulations. These unaudited consolidated financial statements should
be read in conjunction with the audited financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001.

In the opinion of management, all adjustments which are of a normal and
recurring nature and are necessary for a fair presentation of the financial
position, results of operations, and cash flows as of and for the three months
ended March 31, 2002 have been made. Results of operations for the three months
ended March 31, 2002, are not necessarily indicative of results of operations to
be expected for the entire year.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Adoption of New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations, effective as of June 20, 2001 and No. 142, Goodwill
and Other Intangible Assets, effective for fiscal years beginning after December
15, 2001. Under the new rules, the pooling-of-interests method of accounting for
business combinations has been eliminated. Also, the criteria for recognizing
acquired intangible assets apart from goodwill has been changed, and acquired
goodwill and intangible assets deemed to have indefinite lives are no longer
amortized, but are subject to annual impairment tests in accordance with SFAS
No. 141 and SFAS No. 142. Other intangible assets will continue to be amortized
over their useful lives.

The Company has applied the new rules on accounting for goodwill and other
intangible assets beginning December 31, 2001. Intangible assets that do not
meet the criteria for recognition apart from goodwill must be reclassified. As a
result, intangible assets relating to an acquired workforce of $701,600, net of
the related accumulated amortization at December 31, 2001 of $175,400 were
reclassified to goodwill as of December 31, 2001. See Note 7 for further detail
of intangible assets.

With the application of the nonamortization provisions of SFAS No. 142, the
Company ceased amortization of goodwill as of January 1, 2002. The following
table presents the quarterly results of the Company on a comparable basis
assuming the nonamortizaton provisions of SFAS No. 142 were effective January 1,
2001 (in thousands, except per share data):

                                       -6-

<PAGE>

                                                      Three Months Ended
                                                           March 31,
                                                 ----------------------------
                                                   2002                2001
                                                 --------            --------
Net Loss:
   Reported net loss .........................   $(13,117)           $ (5,544)
   Goodwill and workforce amortization .......          -               1,432
                                                 --------            --------
   Adjusted net loss .........................   $(13,117)           $ (4,112)
                                                 ========            ========
Basic and diluted loss per common share:
   Reported net loss .........................   $  (0.25)          $   (0.14)
   Goodwill and workforce amortization .......          -                0.03
                                                ---------            --------
   Adjusted net loss .........................   $  (0.25)          $   (0.11)
                                                 ========            ========

As of January 1, 2002, the Company completed the initial goodwill impairment
test required by SFAS No. 142 and determined that no impairment existed at that
date. The assessment of goodwill impairment in the future will be impacted if
future operating cash flows of the company are not achieved, resulting in
decreases in the related estimated fair market values.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, effective for fiscal years beginning after
December 15, 2001. This statement establishes new rules for determining
impairment of certain other long-lived assets, including intangible assets
subject to amortization, property and equipment and long-term prepaid assets.
The adoption of this standard did not have an effect on the operating results or
the financial position of the Company.

2. Business Acquisitions

On November 28, 2001, the Company acquired all of the outstanding capital stock
of Transilica Inc. (Transilica), a privately-held company based in California.
Transilica was engaged in research and development of silicon and system-on-chip
products for short-range wireless applications. The consideration in the
acquisition consisted of 7,206,187 shares of the Company's common stock. In
addition, the Company assumed 831,967 Transilica stock options. The merger
agreement also provided that approximately 15% of the total shares of the
Company's common stock be placed in escrow for the purpose of securing the
indemnification obligations of Transilica under the merger agreement. The escrow
shares are to be released periodically, subject to any escrow claims, at the end
of each of the three years following the closing. The results of operations of
Transilica are included in the results of operations of the Company from the
date of acquisition. The components of the aggregate cost of the acquisition
were as follows (in thousands, except share data):

   Fair market value of 7,206,187 shares of common stock
   (including 1,206,307 shares placed in escrow) .................. $130,072
   Fair market value of 831,967 Transilica stock options assumed ..   13,937
   Transaction costs ..............................................    2,130
                                                                    --------
   Total acquisition cost ......................................... $146,139
                                                                    ========

The fair market value of the Company's common stock was based on the closing
stock price on the date of acquisition. The fair value of the Transilica stock
options assumed was based on the Black-Scholes option valuation model.

The cost of the acquisition has been allocated to the assets and liabilities
acquired, acquired in-process research and development and deferred stock
compensation, with the remainder recorded as excess cost over net assets
acquired, based on estimates of fair values as follows (in thousands):

                                       -7-

<PAGE>

  Working capital ..................................................... $    386
  Noncurrent assets and liabilities, net ..............................    2,368
  Developed technology ................................................   36,200
  Patents .............................................................   19,300
  Employment and non-compete agreements ...............................    5,010
  Goodwill ............................................................   28,546
  Acquired in-process research and development costs charged to expense   32,400
  Unearned stock compensation .........................................   21,929
                                                                        --------
  Total acquisition cost .............................................. $146,139
                                                                        ========

Unearned stock compensation recorded in connection with the acquisition
represents the intrinsic value of Transilica's unvested stock options and
restricted common stock shares for which future service is required subsequent
to the date of the acquisition in order for the employee to vest in the stock
options and restricted common stock shares. The amount allocated to unearned
compensation has been deducted from the estimated fair value of the unvested
stock options and restricted common stock shares for purposes of the allocation
of purchase price to assets acquired. The unearned stock compensation will be
amortized to expense over the remaining vesting period of the unvested stock
options and restricted common stock shares of one to four years. The Company is
in the process of evaluating the other assets and liabilities acquired in the
Transilica acquisition. The final allocation of the purchase price, which is
expected to be complete in the third quarter of 2002, will be based on the
complete evaluation of the acquired assets and liabilities.

On October 16, 2001, the Company acquired a research and design center, located
in the Netherlands, which was subsequently renamed the Microtune Holland Design
Center (MHDC). MHDC specializes in the design of digital signal processing VLSI
chips and associated software, currently targeted at the digital television
equipment market. MHDC's products provide decoding and decompression of video
and audio that are embedded within the radio-frequency transmitted signals. The
consideration in the acquisition consisted of $3,000,000 of cash and 210,000
shares of the Company's common stock. The results of operations of MHDC are
included in the results of operations of the Company from the date of
acquisition. The components of the aggregate cost of the acquisition were as
follows (in thousands, except share data):

  Cash paid to shareholders ...........................................  $3,000
  Fair market value of 210,000 shares of common .......................   2,144
  Transaction costs ...................................................     319
                                                                         ------
  Total acquisition cost ..............................................  $5,463
                                                                         ======

The fair market value of the Company's common stock was based on the closing
price as of October 1, 2001, when the terms of the acquisition were agreed to by
the parties to the transaction.

The cost of the acquisition has been allocated to the assets and liabilities
acquired and to acquired in-process research and development, with the remainder
recorded as excess cost over net assets acquired, based on estimates of fair
values as follows (in thousands):

  Working capital (deficit) ........................................... $  (335)
  Noncurrent assets and liabilities, net ..............................  (1,003)
  Developed technology ................................................     567
  Goodwill ............................................................   4,726
  Acquired in-process research and development costs charged to expense   1,706
  Deferred income taxes ...............................................    (198)
                                                                        -------
  Total acquisition cost .............................................. $ 5,463
                                                                        =======

                                   -8-

<PAGE>

The acquisitions of Transilica and MHDC have allowed the Company to expand its
core RF silicon and systems technologies. These acquisitions provide the Company
with complementary wireless silicon solutions that, when integrated into
consumer or commercial end products, enable users to remotely access data or
voice through wireless personal or local areas networks.

The Company's management is primarily responsible for estimating the fair values
of intangible assets and acquired in-process research and development. The
estimates of the fair values of intangible assets and acquired in-process
research and development were determined based on information furnished by
management of the companies acquired.

The value of the acquired developed technology, patents, and other intangibles
was determined by discounting the estimated projected net cash flows to be
generated from the related assets. Projected net cash flows were based on
estimates of future revenues and costs related to such assets. The rate used to
discount the net cash flows to present value ranged from 17 % to 25%.

Amounts allocated to acquired in-process research and development were expensed
at the date of acquisition because the purchased research and development had no
alternative future uses, and had not reached technological feasibility based on
the status of design and development activities that required further refinement
and testing. The estimates used in valuing the research and development were
based upon assumptions regarding future events and circumstances management
believes to be reasonable, but that are inherently uncertain and unpredictable.
The relative stage of completion and projected operating cash flows of the
underlying in-process projects acquired were the most significant and uncertain
assumptions utilized in the valuation analysis of the acquired in-process
research and development. Such uncertainties could give rise to unforeseen
budget overruns and revenue shortfalls in the event that the Company is unable
to successfully complete and commercialize the projects.

The value of the acquired in-process research and development was determined by
discounting the estimated projected net cash flows related to the applicable
products of each acquisition for the amount of years as shown in the table
below, including costs to complete the development of the technology and the
future revenues to be earned upon release of the products. The rates utilized to
discount the net cash flows to present value as shown in the table below were
based on the weighted average cost of capital adjusted for the risks associated
with the estimated growth, profitability, developmental and market risks of the
acquired development projects for each acquisition. Projected net cash flows
from such products of each acquisition are based on estimates of revenues and
operating profit (loss) related to such products. Management expects that the
purchased research and development projects generally will be successfully
developed into commercially viable products and expects to essentially meet its
original cash flows and return expectations for these projects. However, there
can be no assurance that commercial viability or timely release of these
products will be achieved.
<TABLE>
<CAPTION>
                                                                     Estimated/Actual Cost/Time to
                                                                          Complete Projects               Year Cash
                                                                   ---------------------------------  Inflows Began or
Entity Acquired      Acquisition     In Process       Discount                        At March 31,      are Projected
                         Date         Projects          Rate       At Acquisition         2002            to Begin
----------------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>               <C>          <C>               <C>              <C>
Transilica Inc.       Nov. 2001      Short-range        35%        $3.2 million/     $3.0 million/          2003
                                      wireless                       Oct. 2002         Oct. 2002
                                    applications
SPaSE, B.V.           Oct. 2001      Demodulator        28%        $2.7 million/     $2.5 million/          2003
                                       design                        June 2003         June 2003
</TABLE>

                                      -9-

<PAGE>

3. Earnings Per Share

Basic earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during each period.
Diluted earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during each
period and common equivalent shares consisting of preferred stock, stock
options, warrants, restricted stock subject to repurchase rights and employee
stock purchase plan options.

The following table sets forth anti-dilutive securities that have been excluded
from diluted earnings per share (in thousands):

                                                    Three Months Ended
                                                         March 31,
                                                 ------------------------
                                                   2002           2001
                                                 ---------      ---------
   Stock options ..............................      8,347          7,779
   Restricted common stock ....................        665            180
   Employee stock purchase plan ...............         20             28
                                                 ---------      ---------
   Total anti-dilutive securities excluded ....      9,032          7,987
                                                 =========      =========
4. Cash and Cash Equivalents

The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents. Cash and cash equivalents consist
of bank deposits, money market funds and asset-backed commercial paper. The
Company's investments in asset-backed commercial paper are comprised of
high-quality securities in accordance with the Company's investment policy.

5. Inventories

Inventories consists of the following (in thousands):

                                                  March 31,     December 31,
                                                    2002           2001
                                                  ---------     ------------
    Finished goods ............................    $   722        $ 1,654
    Work-in-process ...........................      2,972          1,550
    Raw materials .............................      5,804          6,197
                                                   -------        -------
                                                   $ 9,498        $ 9,401
                                                   =======        =======

Inventories are stated at the lower of standard cost, which approximates actual
cost determined on a first-in, first-out basis, or estimated realizable value.

6. Property and Equipment

Property and equipment, at cost, consists of the following (in thousands):

                                      March 31,       December 31,
                                         2002             2001       Useful Life
                                      ---------       ------------   -----------
    Leasehold improvements .........   $  1,514         $  1,519      5 years
    Manufacturing equipment ........     14,351           14,609      3 years
    Other equipment ................      8,395            7,936      3 years
    Furniture and fixtures .........        832              885      3 years
    Computer software ..............      5,585            4,863      3 years
                                       --------         --------
    Total property and equipment ...     30,677           29,812
    Less accumulated depreciation ..     12,284           10,543
                                       --------         --------
                                       $ 18,393         $ 19,269
                                       ========         ========

                                      -10-

<PAGE>
7.   Intangible Assets

Excluding goodwill and intangible assets reclassified into goodwill as of
December 31, 2001, amortization expense on intangible assets was $2.7 million
and $0.4 million for the three months ended March 31, 2002 and 2001,
respectively.

The following table sets forth the estimated amortization expense of intangible
assets for the fiscal years ending December 31 (in thousands):

                         2002 ...............  $10,731
                         2003 ...............   10,700
                         2004 ...............   10,237
                         2005 ...............    8,789
                         2006 ...............    7,928

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

                                           March 31, 2002           December 31, 2001               Weighted Average
                                     ------------------------------------------------------  --------------------------------
                                                                                                             Remaining
                                        Gross       Accum.         Gross         Accum                      Useful Life
                                       Carrying     Amort-        Carrying       Amorti-       Useful          at
                                        Amount      zation         Amount        zation         Life       March 31,2002
                                     ------------- ---------   --------------  -----------  ------------ -----------------
<S>                                  <C>           <C>         <C>              <C>         <C>             <C>

Developed technology ..............    $ 36,767     $ 1,804        $36,767        $  463      6.9 years       6.6 years
Patents ...........................      22,032       2,241         21,891         1,424      6.7 years       6.2 years
Employment agreements .............       5,010         417          5,010           104      4.0 years       3.7 years
Other .............................       4,309       2,054          5,186         2,025      5.0 years       2.8 years
                                        -------     -------        -------        ------      ---------       ---------
                                       $ 68,118     $ 6,516        $68,854        $4,016      6.5 years       6.0 years
                                       ========     =======        =======        ======      =========       =========
</TABLE>

8.   Accrued Expenses


Accrued expenses consists of the following (in thousands):

                                                   March 31,       December 31,
                                                      2002             2001
                                                  -----------      -----------
      Deferred revenue .........................     $     -          $ 1,494
      Accrued warranty obligation ..............         416              743
      Accrued income taxes .....................       5,221            5,289
      Deferred income taxes ....................         493              492
      Other ....................................       5,748            7,081
                                                     -------          -------
                                                     $11,858          $15,099
                                                     =======          =======

9.   Income Taxes

Prior to our combination with Microtune KG, the Company had not recognized any
provision for income taxes. For U.S. federal income tax purposes, at December
31, 2001, the Company had a net operating loss carryforward of approximately
$72.6 million and an unused research and development credit carryforward of
approximately $1.4 million, which begins to expire in 2011. Due to the
uncertainty of our ability to utilize these deferred tax assets, they have been
fully reserved.

The provision for the three months ended March 31, 2002 and the benefit for the
three months ended March 31, 2001 consists of foreign income taxes and U.S.
state taxes. Effective January 1, 2001, the German government reduced tax rates
of retained earnings, previously 40%, and earnings distributed as a dividend,
previously 30%, to a flat rate of 25%. The impact of this change on deferred
income taxes was recorded in the third quarter of 2000 when the law was enacted.

                                      -11-

<PAGE>
10. Notes Payable

At March 31, 2002, Microtune KG has a credit agreement with a bank that provides
for borrowings of up to $0.9 million. The agreement is cancelable upon
notification by the bank. Borrowings under this agreement bear interest at a
rate determined from time to time by the bank (6.75% at March 31, 2002). At
March 31, 2002, no borrowings were outstanding under this credit agreement.

11. Commitments and Contingencies

From time to time, we may be involved in litigation relating to claims arising
out of our ordinary course of business. We are not currently a party to any
material litigation, except as described below.

On January 24, 2001, the Company filed a lawsuit alleging patent infringement in
the United States Court for the Eastern District of Texas, Sherman Division,
against Broadcom Corporation. The lawsuit alleges that Broadcom Corporation's
BCM3415 microchip infringes on the Company's U.S. patent no. 5,737,035. The
Company's complaint is seeking monetary damages resulting from the alleged
infringement as well as injunctive relief precluding Broadcom Corporation from
taking any further action which infringes the Company's 5,737,035 patent. On May
7, 2002 Broadcom Corporation filed a Motion for Leave to Supplement its
counterclaim asking the court's permission to add a counterclaim asserting
infringement by Microtune of Broadcom's U.S. patent no. 6,377,315. We are unable
at this time to determine whether the outcome of the litigation will have a
material impact on our results of operations or financial condition in any
future period. No hearing date has been set for the motion.

Starting on July 11, 2001, multiple purported securities fraud class action
complaints were filed in the United States District Court for the Southern
District of New York. The Company is aware of at least three such complaints:
Berger v. Goldman, Sachs & Co., Inc. et al.; Atlas v. Microtune et al.; and
Ellis Investments Ltd. v. Goldman Sachs & Co., Inc. et al. The complaints are
brought purportedly on behalf of all persons who purchased the Company's common
stock from August 4, 2000 through December 6, 2000. The Atlas complaint names as
defendants Microtune, Douglas J. Bartek, the Company's Chairman and Chief
Executive Officer, Everett Rogers, the Company's Chief Financial Officer and
Vice President of Finance and Administration, and several investment banking
firms that served as underwriters of our initial public offering. Microtune, Mr.
Bartek and Mr. Rogers were served with notice on the Atlas complaint on August
22, 2001, however, they have not been served regarding the other referenced
complaints. The Berger and Ellis Investment Ltd. Complaints assert claims
against the underwriters only. Among other things, the complaints allege
liability under Sections 11 and 15 of the Securities Act of 1933 and Section
10(b) and 20(a) of the Securities Exchange Act of 1934, on the grounds that the
registration statement for our initial public offering did not disclose that (1)
the underwriters had agreed to allow certain of their customers to purchase
shares in the offering in exchange for excess commissions paid to the
underwriters and (2) the underwriters had arranged for certain of their
customers to purchase additional shares in the aftermarket at pre-determined
prices. We are aware that similar allegations have been made in lawsuits
challenging over 180 other initial public offerings conducted in 1998, 1999, and
2000. No specific amount of damages is claimed in the three complaints involving
our initial public offering. These cases are subject to the Private Securities
Litigation Reform Act of 1995 and we expect that the cases will be consolidated
into a single action. These cases and all of the other lawsuits filed in the
Southern District of New York making similar allegations have been coordinated
before the Honorable Shira A. Scheindlin who is expected to set a brief schedule
for motions to dismiss. We believe that the allegations against Microtune, Inc.,
Mr. Bartek and Mr. Rogers are without merit. We intend to contest them
vigorously, including by filing a motion to dismiss these cases. We are unable
at this time to determine whether the outcome of the litigation will have a
material impact on our results of operations or financial condition in any
future period. Furthermore, there can be no assurances regarding the outcome of
the litigation or any related claim for indemnification or contribution between
or among any of the underwriters and us.

                                      -12-

<PAGE>

12. Stock Plans

In 2001 and 2000, the Company recorded approximately $17.8 million and $16.5
million, respectively, of deferred stock option compensation as a result of
granting stock options with deemed exercise prices below the estimated fair
value per share of the Company's common stock at the date of grant and as a
result of the Transilica acquisition. Deferred stock option compensation is
being amortized and charged to operations over the vesting period of the
applicable options. As of March 31, 2002 and December 31, 2001, unamortized
deferred stock compensation was $24.7 million and $28.3 million, respectively.
The weighted-average remaining vesting period of outstanding compensatory stock
options was 1.7 years at December 31, 2001.

13. Restructuring Costs

In the fourth quarter of 2001 the Company recorded a $3.0 million charge related
to restructuring actions, primarily related to the consolidation of the
Company's manufacturing operations in the Philippines from two factories into a
single factory. Of the $3.0 million charge, $0.8 million related to severance
for 477 employees that had been paid out by year end, $1.3 million related to
write-offs of equipment to be disposed of, $0.4 million related to write-offs of
VAT receivables which will not be collectable and the remaining $0.5 million
related to the write-down of other assets and accrual of costs related to the
restructuring. The equipment which was written-off will no longer be used at the
Philippines factory and is expected to be completely disposed of during the
first half of 2002. At March 31, 2002 accrued restructuring costs totaled $0.7
million. Such costs are expected to be paid in cash during the first half of
2002.

14. Geographic Information and Significant Customers

The Company's headquarters and main design center are located in Plano, Texas.
The Company has other sales offices and design centers in the United States. The
Company also has significant design centers in Germany, the Netherlands and
Singapore and a manufacturing facility in the Philippines. Revenues by
geographical area are summarized below (in thousands):

                                       Three Months Ended March 31,
                                       ----------------------------
                                          2002              2001
                                       ----------        ----------
   North America                        $  5,045          $ 10,003
   Europe                                  4,647             3,678
   Asia Pacific                            8,551             3,896
   Other                                       -                82
                                        --------          --------
                                        $ 18,243          $ 17,659
                                        ========          ========

Sales to DaimlerChrysler, Askey and Terayon (through their subcontractor
Cal-Comp Electronic) accounted for approximately 21%, 14% and 10%, respectively,
of consolidated net revenues for the three months ended March 31, 2002. Sales to
DaimlerChrysler, Com21 and Ericsson accounted for approximately 20%, 15% and
10%, respectively, of consolidated net revenues for the three months ended March
31, 2001

Property and equipment are summarized below (in thousands):

                                       March 31,        December 31,
                                          2002             2001
                                       ---------        ------------
   North America                        $  7,556          $  7,131
   Europe                                  7,962             8,943
   Philippines                             2,080             2,336
   Asia Pacific                              795               859
                                        --------          --------
                                        $ 18,393          $ 19,269
                                        ========          ========

                                      -13-

<PAGE>

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

     Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements in the discussion and analysis below
contain forward looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
that involve risks and uncertainties, such as statements for the plans,
objectives, expectations and intentions of Microtune. Such forward looking
statements often contain the words "plan", "could", "would", "may", "believe",
"anticipates", "estimates", "expects", and words of similar import, and may
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are referred to the
disclosures under the caption "Factors Affecting Future Operating Results and
Stock Price" in this report, which describes factors that could cause actual
events to differ materially from those contained in the forward looking
statements.

Overview

     We are a silicon and systems company that designs, manufactures, and
markets radio frequency (RF) based solutions for the global broadband
communications, automotive electronics, and wireless connectivity markets.

     History

     We were incorporated in Texas in May 1996 and began operations in August
1996. In June 2000, we reincorporated in Delaware. From inception until December
31, 1999, our primary activities consisted of raising capital, recruiting radio
frequency and analog engineers, developing our silicon integrated circuit tuner
for broadband radio frequencies and initiating relationships with potential
customers and suppliers.

     In January 2000, we combined with Temic Telefunken Hochfrequenztechnik GmbH
(GmbH) and its affiliated companies (collectively, referred to as Temic). Temic
was founded in the early 1900's in Germany. In the late 1940's, Temic began
developing mechanical radio frequency tuners, and in the late 1960's, it was the
first company to develop an electronic radio frequency tuner. The two companies
have been operating as one company since the combination in January 2000. In
addition, GmbH converted to a KG and changed its name to Microtune GmbH & Co. KG
(Microtune KG), in August 2000.

     In October 2001, we acquired a design center located in the Netherlands.
This design center was founded in the mid-1980's in the Netherlands and is
focused on the development of digital VLSI chips and associated software,
targeted at the digital television equipment market.

     In November 2001, we consummated our acquisition of Transilica Inc.
(Transilica). Transilica was founded in 1998 and designs system-on-chip silicon
products for next-generation short-range wireless applications. The products
Transilica is developing consist of highly integrated solutions incorporating
radio transceivers, digital baseband and software on a single chip, which offer
customers low-power consumption and small form factors. Transilica's initial
products are targeted at the Bluetooth and 802.11 standards, which are
communication protocols for short-range wireless applications. To date,
Transilica's activities have consisted primarily of product research and
development. The first production revenues have been earned from the sale of
Transilica's Bluetooth products during the three months ended March 31, 2002.
Transilica is also capable of designing customized system-on-chip solutions to
meet a customer's specific application requirements.

     See Note 2 of our Notes to Consolidated Financial Statements for additional
information on our business acquisitions.

                                      -14-

<PAGE>

     Financial Information

     Since inception we have incurred significant losses, and as of March 31,
2002, we had an accumulated deficit of approximately $124.1 million. With the
acquisition of Transilica, our activities have expanded into the wireless
connectivity market with Bluetooth technology and 802.11 technology. We have not
previously designed, manufactured, or marketed in this area. Our limited
combined operating history combined with business risks, including those risks
set forth under the caption "Factors Affecting Future Operating Results and
Stock Price" in this Form 10-Q, make the prediction of future results of
operations difficult, and as a result there can be no assurance that we will
achieve or sustain revenue growth or profitability.

     The time lag between product availability and volume shipment can be
significant due to a sales process that includes customer qualification of our
products, and can take as long as two years during which we continue to evolve
our technology.

     We have invested heavily in research and development of our RF integrated
circuits and systems technology. We expect to increase our investment in these
areas in absolute dollars to further develop our RF products. This investment
will include the continued recruitment of RF and analog integrated circuit
designers and systems engineers, acquisition of test, development and production
equipment and expansion of facilities for research and manufacturing. As a
result, we may continue to incur substantial losses from operations for the
foreseeable future.

     We use IBM, TSMC and X-FAB to manufacture our wafers and Amkor and Carsem
to assemble our integrated circuits. We perform final testing, packaging and
shipping of our integrated circuits at our facility in Plano, Texas, and
overseas at Amkor, Carsem and United Test & Assembly Center. With respect to our
tuner modules, we perform most of our assembly and calibration functions in our
factory in Manila, Philippines. Test functions of our tuner modules are
performed in our factory in Manila, Philippines, at our facility in Huntsville,
Alabama and at AMB Electric in Landshut, Germany.

                                      -15-

<PAGE>

Results of Operations

     The following table sets forth, for the periods presented, certain data
from our consolidated statements of operations expressed as a percentage of net
revenues:

                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                       2002              2001
                                                    ---------         ---------
Net revenues .....................................     100 %             100 %
Cost of revenues .................................      63                80
                                                    ---------         ---------
Gross margin .....................................      37                20
Operating expenses:
  Research and development:
    Stock option compensation ....................      14                 2
    Other ........................................      48                22
                                                    ---------         ---------
                                                        62                24
  Selling, general and administration:
    Stock option compensation ....................       4                 3
    Other ........................................      30                22
                                                    ---------         ---------
                                                        34                25
  Restructuring costs ............................       -                 -
  Amortization of intangible assets and goodwill .      15                10
                                                    ---------         ---------
    Total operating expenses .....................     111                59
                                                    ---------         ---------
Loss from operations .............................     (74)              (39)
Other income (expense) ...........................       2                 6
                                                    ---------         ---------
Loss before income taxes .........................     (72)              (33)
Income tax expense (benefit) .....................       -                 2
                                                    ---------         ---------
Net loss .........................................     (72)%             (31)%
                                                    =========         =========

Comparison of the Three Months Ended March 31, 2002 and 2001

Net Revenues

     Our net revenues increased $0.6 million, or 3%, to $18.2 million in the
three months ended March 31, 2002, from $17.7 million in the three months ended
March 31, 2001. This increase is primarily due to growth experienced in the
broadband communications sector, as well as sales from the initial production in
the Bluetooth(TM) wireless connectivity products during the first quarter of
2002. Sales to DaimlerChrysler, Askey and Terayon (through their subcontractor
Cal-Comp Electronic) accounted for approximately 21%, 14% and 10%, respectively,
of consolidated net revenues for the three months ended March 31, 2002. Sales to
DaimlerChrysler, Com21 and Ericsson accounted for approximately 20%, 15% and
10%, respectively, of consolidated net revenues for the three months ended March
31, 2001. Sales to our twenty largest customers, including sales to their
respective manufacturing subcontractors, accounted for approximately 94% and 91%
of our revenues for the three months ended March 31, 2002 and 2001,
respectively. We could experience pricing pressures at any point in the future
for our products.

Cost of Revenues

     Cost of revenues includes the cost of purchases for subcontracted
materials, integrated circuit assembly, factory labor and overhead and warranty
costs. In addition, we perform final testing of our products and incur cost for
the depreciation of our test and handling equipment, labor, quality assurance
and logistics. Our subcontracted materials experience cyclical trends in pricing
due to fluctuations in demand. Our costs of revenues in the three months ended
March 31, 2002 were $11.5 million, or 63% of net revenues, compared to $14.1
million, or 80% of net revenues, in the three months ended March 31,

                                      -16-

<PAGE>

2001. Our gross margins in the three months ended March 31, 2002 increased
compared to the same period for 2001 as a result of the consolidation of our
factories in Manila in the fourth quarter 2001 and strength in silicon sales. In
the near future, we believe gross margins may continue to improve due to
increased efficiencies in our factories and increasing levels of our silicon in
our product mix partially offset by increased selling price pressures. However,
we do not expect gross margins to consistently increase each quarter. As we add
new products to our manufacturing lines, we will incur higher cost of revenues,
which may be offset over time as we negotiate volume discounts with our
suppliers and become more efficient in manufacturing each new product.

Research and Development

     Research and development expenses consist of personnel-related expenses,
lab supplies, training and prototype subcontract materials. We expense all of
our research and development costs in the period incurred. Research and
development efforts are currently focused primarily on development of the next
generation of RF products. Research and development expenses for the three
months ended March 31, 2002 were $11.4 million, or 62% of net revenues, compared
to $4.3 million, or 24% of net revenues, in the three months ended March 31,
2001. The increase in research and development expenses primarily reflects the
acquisitions of SPaSE in October 2001 and Transilica in November 2001, as well
as continued recruiting of engineers and increased prototype activity in the
silicon design process. We expect that research and development expenses will
increase in absolute dollars in future periods, and may fluctuate significantly
as a percentage of total revenues from period to period. Stock option
compensation related to research and development was $2.6 million in the three
months ended March 31, 2002 and $0.3 million in the three months ended March 31,
2001, but does not affect our total stockholders' equity or cash flows. The
increase in stock option compensation is due to the Transilica acquisition. See
Note 2 to the financial statements for a discussion on the status of the
Company's acquired in-process research and development projects.

Selling, General and Administration

     Selling, general and administration expenses include our personnel-related
expenses for administration, finance, human resources, marketing and sales, and
information technology departments, and include expenditures related to legal,
public relations and financial advisors. In addition, these expenses include
promotional and marketing costs, sales commissions, shipping costs to customers
and reserves for bad debts. Selling, general and administration expenses for the
three months ended March 31, 2002 were $6.1 million, or 34% of net revenues,
compared to $4.5 million, or 25% of net revenues, in the three months ended
March 31, 2001. The increase relates to significant increases in legal expenses
due to the lawsuit we filed alleging patent infringement in the United Sates
Court for the Eastern District of Texas, Sherman Division, against Broadcom
Corporation and the additional selling and general administrative costs
associated with the ongoing expenses resulting from the acquisitions of SPaSE in
October 2001 and Transilica in November 2001. Stock option compensation related
to selling, general and administration was $0.8 million and $0.6 million in the
three months ended March 31, 2002 and 2001, respectively, but does not affect
our total stockholders' equity or cash flows.

Amortization of Intangible Assets and Goodwill

     Amortization of intangible assets for the three months ended March 31, 2002
was $2.7 million compared to amortization of intangible assets and goodwill of
$1.8 million for the three months ended March 31, 2001. Amortization of
intangible assets and goodwill results principally from our combinations with
Microtune KG, SPaSE and Transilica. All combinations were accounted for using
the purchase method of accounting. Effective January 1, 2002 acquired goodwill
and intangible assets with indefinite lives are no longer amortized, but are
subject to annual impairment tests in accordance with SFAS No. 142, Goodwill and
Other Intangible Assets. Application of the non-amortization provisions of SFAS
No. 142 decreased amortization of intangible assets and goodwill by $1.4 million
in the first quarter of 2002.

                                      -17-

<PAGE>

However, amortization of recorded intangible assets increased by $2.3 million in
the first quarter of 2002 as the result of the acquisitions of Transilica and
SPaSE.

Other Income and Expense

     Other income consists of interest income from investment of cash and cash
equivalents, foreign currency gains and losses and other non-operating income
and expenses.

     Interest income for the three months ended March 31, 2002 was $0.8 million
compared to $1.1 million for the three months ended March 31, 2001. The decrease
is mainly due the significant decrease in interest rates averaging approximately
3.75% to 4.00% from first quarter 2001 to first quarter 2002.

     Our functional currency is the U.S. Dollar. The impact from the
remeasurement of financial statements of the Subsidiaries not denominated in
U.S. Dollars is recognized currently in our results of operations as a component
of foreign currency gains and losses.

Income Taxes

     Prior to our combination with Microtune KG, we had not recognized any
provision for income taxes. For U.S. federal income tax purposes, at December
31, 2001, the Company had a net operating loss carryforward of approximately
$72.6 million and an unused research and development credit carryforward of
approximately $1.4 million, which begins to expire in 2011. Due to the
uncertainty of our ability to utilize these deferred tax assets, they have been
fully reserved.

     The provision for the three months ended March 31, 2002 and the benefit for
the three months ended March 31, 2001 consists of foreign income taxes and U.S.
state taxes. Effective January 1, 2001, the German government reduced tax rates
of retained earnings, previously 40%, and earnings distributed as a dividend,
previously 30%, to a flat rate of 25%. The impact of this change on deferred
income taxes was recorded in the third quarter of 2000 when the law was enacted.

Liquidity and Capital Resources

     As of March 31, 2002, we had net working capital of $168.6 million,
including $164.2 million of cash and cash equivalents compared to net working
capital of $175.4 million, including $173.1 million of cash and cash equivalents
at December 31, 2001. Highly liquid investments with original maturities of
three months or less are considered to be cash equivalents. Cash and cash
equivalents consist of bank deposits, money market funds and asset-backed
commercial paper. Our investments in asset-backed commercial paper are comprised
of high-quality securities in accordance with the Company's investment policy.

     Operating activities used $7.2 million in cash during the three months
ended March 31, 2002 which was $3.8 million more than the $3.4 million used in
operating activities for the three months ended March 31, 2001. The increase in
cash used is primarily due to increased expenses due to the growth of the
company primarily from the Transilica acquisition on November 28, 2001 and a
comparably smaller increase in revenue due to emerging products. Cash was used
to decrease current liabilities by $4.8 million which was partially offset by an
increase of $2.5 million in operating assets.

     Investing activities used $1.1 million in cash during the three months
ended March 31, 2002, which was $3.0 million less than the $4.1 million used in
investing activities for the three months ended March 31, 2001. Investments in
property and equipment were $1.2 million and $4.1 million in the three months
ended March 31, 2002 and 2001, respectively. We expect capital expenditures to
range from $1.0 million to $4.0 million per quarter through 2002.

                                      -18-

<PAGE>

     Financing activities used $0.2 million in cash during the three months
ended March 31, 2002, which was a change of $1.7 million compared to the $1.5
million provided by financing activities for the three months ended March 31,
2001. We received cash of approximately $0.6 million and $0.9 million from the
sale of common stock upon the exercise of options and from shares purchased
under our Employee Stock Purchase Plan during the three months ended March 31,
2002 and 2001, respectively. We also incurred $0.5 million for the remainder of
costs from our December 18, 2001 follow-on public public offering when we issued
5 million shares of common stock resulting in net proceeds of approximately $109
million to us.

     At March 31, 2002, Microtune KG had a credit agreement with a bank that
provides for borrowings of up to $0.9 million. The agreement is cancelable upon
notification by the bank. Borrowings under this agreement bear interest at a
rate determined from time to time by the bank. The rate was 6.75% at March 31,
2002. At March 31, 2002, no borrowings were outstanding under this credit
agreement.

     We believe that our current cash balance will provide adequate liquidity to
fund our operations and meet our other cash requirements through 2002. However,
we may find it necessary or we may choose to seek additional financing if our
investment plans change, or if industry or market conditions are favorable for a
particular type of financing. If we raise additional funds through the issuance
of equity or convertible debt securities, the percentage ownership of our
stockholders will be reduced.

Item 3. Qualitative and Quantitative Disclosures About Market Risk

     The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the "Factors Affecting Future Operating
Results and Stock Price" section. Following our combination with Temic, we now
transact both sales and purchases in multiple foreign currencies, including the
Euro and Philippine Peso. Due to the volatile nature of the currency markets,
there is a potential risk of foreign currency translation losses, as well as
gains.

     A significant portion of our operations consists of manufacturing and sales
activities in foreign jurisdictions. Our products are manufactured in the United
States, Germany, the Philippines, Taiwan, and Malaysia. We also have sales
offices and design centers located throughout other parts of the world. We also
incur operating costs in currencies other than the U.S. dollar, in particular
the Euro and the Philippine Peso. As a result, our financial results could be
significantly affected by factors such as changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which we produce and
distribute our products. Our operating results are exposed to changes in the
exchange rates between the U.S. dollar and the Philippine Peso and the Euro.
When the U.S. dollar strengthens against the Euro, the value of nonfunctional
currency sales decreases and the value of nonfunctional currency operating costs
increase. When the U.S. dollar weakens, the value of nonfunctional currency
sales increases and the value of nonfunctional currency operating costs
decreases.

     We currently do not use derivative financial instruments to hedge our
balance sheet exposures against future movements in exchange rates. However, we
are currently evaluating our exchange risk management strategy, including
changes in our organizational structure and other capital structuring techniques
to manage our currency risk. Our net investment in foreign subsidiaries,
translated into U.S. Dollars using exchange rates at March 31, 2002, was $54.7
million. A potential loss in the value of this net investment resulting from a
hypothetical 10% adverse change in foreign exchange rates would be approximately
$5.5 million.

     Currently, our cash and cash equivalents are invested in bank deposits,
money market funds and asset-backed commercial paper. Our investments in
asset-backed commercial paper are comprised of high-quality securities in
accordance with our investment policy. The carrying value of these cash

                                      -19-

<PAGE>

equivalents approximates fair market value. Our investments are subject to
interest rate risk, the risk that our financial condition and results of
operations could be adversely effected due to movements in interest rates. If
interest rates were to decrease by 100 basis points, our investment income would
be impaired by approximately $1.6 million based on our cash and cash equivalents
as of March 31, 2002.

Euro Conversion

     Twelve European Union member states (Germany, France, the Netherlands,
Austria, Italy, Spain, Finland, Ireland, Belgium, Greece, Portugal and
Luxembourg) have adopted the Euro as their common national currency. On January
1, 2002, Euro-denominated bills and coins were issued, and by July 1, 2002, only
the Euro will be accepted as legal tender in these countries. We do not expect
future balance sheets, statements of operations or statements of cash flows to
be significantly impacted by the Euro conversion.

FACTORS AFFECTING FUTURE OPERATING RESULTS AND STOCK PRICE

     This report contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward looking statements as a result of certain factors, including
those set forth below and elsewhere in this report.

     If we are unable to migrate our customers over time from our modules using
discrete components to our radio frequency silicon products or our modules that
incorporate our radio frequency silicon products, our operating results could be
harmed.

     Our future success will depend on our ability to continue the successful
migration of our customers from our modules that use discrete components to our
radio frequency silicon products, or to MicroModules containing the MicroTuner
and our other silicon products, by convincing leading equipment manufacturers to
select these products for design into their own products. If we are not able to
convince these manufacturers to incorporate our silicon products our operating
results could be harmed.

     We are just beginning our transition to the Oracle ERP system and we may be
unable to complete the transition efficiently or effectively.

     We began the process of moving all of our ERP systems to Oracle in late
2001. We plan to begin the move of our accounting functions and financial
statement reporting systems to Oracle in 2002. Manufacturing forecasting,
purchasing, and planning will be transitioned to Oracle later. We may not be
able to complete the transition on a timely and cost-effective basis. In
addition, we could experience a disruption in our manufacturing, invoicing our
customers, or other functions during the transition to Oracle.

     We may be unable to effectively integrate operations related to the
Transilica Acquisition and any acquisition that we may complete in the future.

     We acquired Transilica on November 28, 2001, and we are still in the
process of integrating Transilica's operations with ours. Integrating operations
of two ongoing businesses can be difficult, especially when they are located in
different countries. In addition to integrating the operational aspects of our
two companies, we will also face challenges coordinating and consolidating our
financial reporting

                                      -20-

<PAGE>

functions. For example, our accounting functions utilize different software
programs. We may not be able to complete this integration on a timely and
cost-effective basis.

     The Transilica acquisition and future acquisitions may require significant
capital infusions and typically involve a number of special risks, including the
inability to obtain, or meet conditions imposed for governmental approvals for
the acquisition, the diversion of management's attention to the assimilation of
the operations and personnel of acquired businesses, the unpredictability of
costs related to the acquisition and the difficulty of integration of acquired
businesses, products, technologies and employees into our business and product
offerings. Achieving the anticipated benefits of any acquisition will depend, in
part, upon whether integration of the acquired business, products, technology,
or employees is accomplished in an efficient and effective manner, and there can
be no assurance that this will occur. The difficulties of such integration may
be increased by the necessity of coordinating geographically disparate
organizations, the complexity of the technologies being integrated, and the
necessity of integrating personnel with disparate business backgrounds and
combining different corporate cultures. For example, Transilica has operations
in Japan, Taiwan and Singapore and has a corporate culture that may differ in
certain respects from our own. Accordingly, there can be no assurance that we
can successfully integrate the business and personnel of Transilica or any
future acquisitions into our own.

     The inability of management to successfully integrate any acquisition that
we may pursue, and any related diversion of management's attention, could have a
material adverse effect on our business, operating results and financial
position. Moreover, there can be no assurance that any products acquired will
gain acceptance in our markets, that we will be able to penetrate new markets
successfully or that we will obtain the anticipated or desired benefits of such
acquisitions. We plan to acquire Transilica in part to incorporate its
wireless/LAN product offerings into our product offerings. Despite our belief
that Transilica's products will be accretive and synergistic to our business,
there can be no assurance that Transilica's products will gain acceptance by our
current customers or that they will enable us to penetrate new markets. Also,
acquired products may contain defects of which we are unaware which may result
in increased and unanticipated development costs. In addition, acquisitions may
materially and adversely affect our results of operations because they may
result in significant one-time accounting charges or could result in increased
debt or contingent liabilities, adverse tax consequences, substantial
depreciation or deferred compensation charges, acquired in-process research and
development expenses, or the amortization of amounts related to deferred
compensation, and intangible assets. Any acquisition that we pursue or
consummate could result in the incurrence of debt and contingent liabilities,
goodwill and other intangibles, other acquisition-related expenses, and the loss
of key employees. Moreover, we cannot predict accounting regulations,
conventions, interpretations and related issues that may emerge in the future
which could have a material adverse effect on our business, operating results or
financial position.

     We cannot assure you that we will be able to consummate any pending or
future acquisitions or that we will realize the benefits anticipated from these
acquisitions. We have limited organizational experience in acquiring and
integrating businesses, and we will need to develop the relevant skills if we
are to be successful in realizing the benefits of any future acquisitions. In
the future, we may not be able to find other suitable acquisition opportunities
that are available at attractive valuations, if at all. Even if we do

                                      -21-

<PAGE>

find suitable acquisition opportunities, we may not be able to consummate the
acquisitions on commercially acceptable terms. In addition, we may need to issue
equity securities that could be dilutive to our existing stockholders in order
to consummate such acquisitions.

     The intensive capital and cash requirements of Transilica could have a
material adverse effect on our business, operating results, financial position
or future prospects and could cause a substantial decline in the trading price
of Microtune's common stock.

     Transilica is a capital-intensive business and we anticipate that
Transilica will require significant cash to fund its operations. The intensive
capital and cash requirements of Transilica could cause a drain on our cash
reserves, or could require us to access the capital markets or pursue private
equity or debt investment by outside third parties to further fund the operation
of Transilica's business. There can be no assurances that our funding of
Transilica's cash requirements will enable Transilica to meet its product
development and sales objectives. Furthermore, the intensive capital and cash
requirements of Transilica could have material adverse effect on Microtune's
business, operating results, financial position or future prospects and could
cause a substantial decline in the trading price of Microtune's common stock.

     Transilica is currently in the research and development phase of its
product development and it does not currently generate significant revenue from
the sales of its products.

     There can be no assurance that if Transilica's products achieve commercial
viability, they will be accepted by our current customers or that such products
will enable us to penetrate new markets. The inability of Transilica's products
to gain acceptance with our current and potential customers could have a
material adverse effect on Microtune's business, operating results, financial
position or future prospects.

     As a result of the Transilica Acquisition and any significant future
acquisitions that we complete in which a substantial amount of equity securities
of Microtune are issued, the holders of Microtune common stock will experience
immediate and substantial dilution to their percentage stockholdings of
Microtune.

     Upon closing of the Transilica Acquisition, Microtune issued shares
equivalent to 19.99% of its outstanding common stock to the shareholders of
Transilica. Upon the issuance of this stock, the holdings of the current
stockholders of Microtune were substantially diluted. The issuance and
registration by Microtune of shares of its common stock in any acquisition may
cause the price of our common stock to decline. A decline in the price of our
common stock could also negatively affect our ability to pursue future
acquisitions, or cause future acquisitions to be more dilutive.

     We are dependent upon third parties, some of whom compete with us, for the
supply of components for our module manufacturing. Our failure to obtain
components for our module manufacturing would seriously harm our ability to ship
modules to our customers in a timely manner.

     Many of the components for our modules are sole-sourced, meaning that we
depend upon one supplier for a specific component. At times we have experienced
significant difficulties in obtaining an adequate supply of components necessary
for our manufacturing operations, which have on occasion prevented us from
delivering radio frequency products to our customers in a timely manner. For
example, in 2000, we

                                      -22-

<PAGE>

did not receive our expected allocation of components from several significant
sole-source suppliers which constrained our ability to meet customer demand.
Failure to meet customer demand can result in customers selecting competitor
products. We are not able to quantify the amount of lost revenues due to our
failure to satisfy customer demand, but we believe the loss of revenue may have
been material in 2000, and may be material in the future. We may experience
similar shortages of components in the future.

     We usually do not have long-term supply agreements with our suppliers and
instead obtain components on a purchase order basis. Our suppliers typically
have no obligation to supply products to us for any specific period, in any
specific quantity or at any specific price, except as set forth in a particular
purchase order. Our requirements often represent a small portion of the total
production capacity of our suppliers, and our suppliers may reallocate capacity
to other customers even during periods of high demand for our radio frequency
products. In addition, some of our suppliers offer or may offer products that
compete with our radio frequency products. As a result, these suppliers may
preferentially allocate their components to in-house or third party
manufacturers, rather than us.

     If our suppliers were to become unable or unwilling to continue
manufacturing or supplying the components that we utilize in our radio frequency
products, our business would be seriously harmed. As a result, we would have to
identify and qualify substitute suppliers or design around the component. This
would be time-consuming and difficult, and may result in unforeseen
manufacturing and operations problems. This may also require our customers to
requalify our parts for their products, which may be a lengthy process. The loss
of a significant supplier or the inability of a supplier to meet performance and
quality specifications or delivery schedules could impede our ability to meet
customer demand for timeliness, performance and quality, which could harm our
reputation and our business.

     If we are unable to develop and introduce new radio frequency products
successfully and in a cost-effective and timely manner or to achieve market
acceptance of our new products, our operating results would be substantially
harmed.

     Our future success depends on our ability to develop new radio frequency
products for existing and new markets, introduce these products in a
cost-effective and timely manner, meet customer specifications and convince
leading equipment manufacturers to select these products for design into their
own new products. Our quarterly results in the past have been, and are expected
in the future to continue to be, dependent on the introduction and market
acceptance of a relatively small number of new products and the timely
completion and delivery of those products to our customers. For example, we
believe that market acceptance of our radio frequency integrated circuits for
the cable modem market were limited until the time that we introduced radio
frequency integrated circuits with the power requirements that conformed to the
evolving specifications of some cable modem manufacturers.

     The development of new radio frequency products is highly complex, and from
time to time we have experienced delays in completing the development and
introduction of new products. In addition, some of our new product development
efforts are focused on producing silicon products utilizing architectures and
technologies with which we have no experience and delivering performance
characteristics such as low

                                      -23-

<PAGE>

power consumption at levels that we have not previously achieved. If we are not
able to develop and introduce these new products successfully and in a
cost-effective and timely manner, we will not be able to penetrate our target
markets successfully and our operating results would be substantially harmed.

     We face intense competition in the broadband communications and radio
frequency tuner markets, which could reduce our market share in existing markets
and affect our ability to enter new markets.

     The broadband communications and radio frequency tuner markets are
intensely competitive. We expect competition to continue to increase as industry
standards become well known and as other competitors enter our target markets.
We compete with, or may in the future compete with, a number of major domestic
and international suppliers of integrated circuit and system modules in the
cable modem, PC/TV, set-top box, cable telephony, digital TV and automotive
markets. We compete primarily with tuner manufacturers such as Alps, Panasonic,
Philips Electronics, Samsung and Thomson, with semiconductor companies such as
Anadigics, Analog Devices, Broadcom and Maxim, and potentially with companies
such as Conexant and Silicon Wave. Conexant, Broadcom and Silicon Wave have
announced silicon tuner products that compete with our tuner products. Among
other things, several of our competitors have broader product and service
offerings and could bundle their competitive tuner products with other products
and services they offer. This competition has resulted and may continue to
result in declining average selling prices for our radio frequency products.

     Many of our current and potential competitors have advantages over us,
     including:

     .   longer operating histories and presence in key markets;

     .   greater name recognition;

     .   access to larger customer bases;

     .   significantly greater financial, sales and marketing, manufacturing,
         distribution, technical and other resources;

     .   relationships with potential customers as a result of the sales of
         other components, which relationships our competitors can leverage into
         sales of products competitive with our radio frequency products; and

     .   broader product and service offerings that may allow them to compete
         effectively by bundling their products.

     As a result, our competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements and may be able to
devote greater resources to the development, promotion and sale of their
products.

     Consolidation by industry participants, including in some cases,
acquisitions of some of our customers or suppliers by our competitors, or
acquisitions of our competitors by our customers or suppliers, could

                                      -24-

<PAGE>

create entities with increased market share, customer base, technology and
marketing expertise in markets in which we compete. In fact, some of our
suppliers offer or may offer products that compete with our radio frequency
products. These developments may significantly and adversely affect our current
markets, the markets we are seeking to serve and our ability to compete
successfully in those markets, thereby harming our results of operations.

     The average selling price of our products will likely decrease over time.
If the selling price reductions are greater than we expect, our operating
results will be harmed.

     Historically, the average selling price of our products has decreased over
the products' lives. In addition, as the markets for radio frequency integrated
circuit products and transceivers mature, we believe that it is likely that the
average unit prices of our radio frequency products will decrease in response to
competitive pricing pressures, increased sales discounts, new product
introductions and product bundling. To offset these decreases, we rely primarily
on achieving yield improvements and other cost reductions for existing products
and on introducing new products that can often be sold at higher average selling
prices.

     Although we will seek to increase the sales of our higher margin products,
our sales, product and process development efforts may not be successful. Our
new products or processes may not achieve market acceptance. To the extent we
are unable to reduce costs or sell our higher margin products, our results of
operations would suffer.

     We expect our quarterly operating results to continue to fluctuate.

     Our quarterly results of operations have fluctuated significantly in the
past and may fluctuate significantly in the future due to a number of factors,
many of which are not in our control. These factors include:

     .   timing, cancellation and rescheduling of significant customer orders,
         which result in revenues being shifted from one quarter to another;

     .   the ability of our customers to procure the necessary components for
         their end-products that utilize our radio frequency tuners to conduct
         their operations as planned for any quarter;

     .   pricing concessions on volume sales to particular customers for
         established time frames;

     .   slowdowns in customer demand and related industry-wide increases in
         inventories;

     .   our inability to predict our customers' demand for our products;

     .   changes in our product and customer mix between quarters;

     .   labor disputes at our manufacturing facility in the Philippines, which
         may cause temporary slowdowns or shutdowns of operations;

     .   quality problems with our radio frequency tuners that result in
         significant returns; and

                                      -25-

<PAGE>

     .   allocation of wafer capacity for our silicon products and/or allocation
         of components used in our module products.

     Our manufacturing operations could be adversely impacted and our financial
performance harmed if we fail to successfully transition manufacturing
operations from our union facility to our newer facility.

     Microtune previously operated two manufacturing facilities in Manila,
Philippines the assembly, calibration, and testing of its module products. In
December 2001, we closed the older of the two facilities, and began
transitioning all manufacturing and testing requirements to the newer facility.
We believe the newer manufacturing facility has the equipment and labor capacity
to handle the manufacturing and testing previously performed in our older
facility, however, we are still in the process of training personnel in
sufficient number to fully utilize the new facility and have been unable to
achieve linearity in our production in the newer facility. Failure to achieve
linearity in production can result in delayed shipments and have adverse
accounting consequences such as an increase in our accounts receivable balance
at quarter end. If we are unable to successfully transition the manufacturing
operations of our older facility to our newer facility, we may not meet our
manufacturing and testing requirements which could cause a significant delay in
our ability to deliver our products. Any delay caused by such a disruption could
require us to seek an alternative manufacturer at increased expense and cost. As
a result, a disruption or delay in the transition from our older facility to our
newer facility could have a material negative impact on our business operations
and our financial results.

     Our dependence on a single manufacturing facility could jeopardize our
operations.

     Upon closing of our older manufacturing facility in Manila, Philippines,
our manufacturing operations will be conducted at a single, newer facility in
Manila, Philippines. Our reliance on a single manufacturing facility exposes us
to higher manufacturing risks, which may include risks caused by labor disputes,
terrorism, political unrest, war, process abnormalities, human error, theft,
government intervention, or a natural disaster such as a fire, earthquake, or
flood. As a result of our dependence on a single manufacturing facility, and if
we encounter any significant delays or disruptions, we may not be able to meet
our manufacturing and testing requirements which could cause a significant delay
in our ability to deliver our products. Any delay caused by such a disruption
could require us to seek an alternative manufacturer at increased expense and
cost. As a result, any disruption or delay in procuring an alternative
manufacturing facility could have a negative impact on our business operations
and our financial results.

     Our QS9000 Certification is subject to periodic re-evaluation.

     We are currently QS9000 certified in both our Manila manufacturing facility
and our design center in Ingolstadt, Germany. This certification is subject to
recertification on a periodic basis. Failure to achieve recertification could
substantially reduce our revenue from automobile customers which could have
material and adverse effects on our operating results, financial condition, and
business prospects in the automotive electronics market.

     Some of our automobile customers require us to sign "line down" clauses.

                                      -26-

<PAGE>

     We are currently subject to "line down" clauses in some contracts with our
automobile customers. Such clauses require us to pay financial penalties if our
failure to supply product in a timely manner causes the customer to slow down or
stop their production. Such a penalty could be large and if incurred, could
severely harm our financial results.

     Product recall by a major customer could damage our business.

     Module manufacturing involves the assembly and testing of our components,
including our semiconductors into subsystem level solutions designed by our
engineers for specific applications. We consolidated our module manufacturing
facilities in Manila into one plant during 2001 for better efficiency and cost,
and in the process, we have achieved a number of benefits, including reduced
indirect head count, efficient production-floor layout, and optimized product
flow. We have complete on-site power generation for full electrical back up in
the Manila manufacturing facility and it is located in a secure industrial park.
The facility is both ISO 9001 and QS 9000 certified

     We guarantee quality of our products for a period of one year. If a
customer experiences a problem with our product and subsequently returns our
products to us in large quantities for rework, replacement, or refund, the cost
to us could be significant and severely impact our financial results.

     We believe that transitioning our silicon products to higher performance
process technologies will be important to our future competitive position. If we
fail to make this transition efficiently, our competitive position could be
seriously harmed.

     We continually evaluate the benefits, on a product-by-product basis, of
migrating to higher performance process technologies in order to produce more
efficient and higher performance integrated circuits. We believe this migration
is required to remain competitive. Other companies in the industry have
experienced difficulty in migrating to new process technologies and,
consequently, have suffered reduced yields, delays in product deliveries and
increased expense levels. We may experience similar difficulties.

     Moreover, we are dependent on our relationships with foundries to
successfully migrate to higher performance processes. Our foundry suppliers may
not make higher performance process technologies available to us on a timely or
cost-effective basis, if at all. If our foundry suppliers do not make higher
performance process technologies available to us on a timely or cost-effective
basis or if we experience difficulties in migrating to these advanced processes,
our competitive position and business prospects could be seriously harmed.

     Because we depend on a few significant customers for a substantial portion
of our revenues, the loss of a key customer could seriously harm our business.

     We have derived a substantial portion of our revenues from sales to a
relatively small number of customers. As a result, the loss of any significant
customer could significantly harm our revenues. Sales to DaimlerChrysler, Askey
and Terayon (through their subcontractor Cal-Comp Electronic) accounted for
approximately 21%, 14% and 10%, respectively, of consolidated net revenues for
the three months ended March 31, 2002. Sales to DaimlerChrysler, Com21 and
Ericsson accounted for approximately 20%, 15% and 10%, respectively, of
consolidated net revenues for the three months ended March 31, 2001. We

                                      -27-

<PAGE>

believe that our future operating results will continue to depend on the success
of our largest customers and on our ability to sell existing and new products to
these customers in significant quantities. The loss of a key customer or a
reduction in our sales to any key customer could harm our revenues and
consequently our financial condition.

     If we are unable to continue to sell existing and new products to our key
customers in significant quantities or to attract new significant customers, our
future operating results could be harmed.

     We may not be able to maintain or increase sales to our key customers or to
attract new significant customers for a variety of reasons, including the
following:

     .   most of our customers can stop purchasing our radio frequency products
         with limited notice to us without incurring any significant contractual
         penalty;

     .   most of our customers typically buy our radio frequency products
         through a purchase order, which does not require them to purchase a
         minimum amount of our radio frequency products;

     .   many of our customers and potential customers have pre-existing
         relationships with our current or potential competitors, which may
         affect their decision to purchase our radio frequency products;

     .   some of our customers or potential customers offer or may offer
         products that compete with our radio frequency products; and

     .   our longstanding relationships with some of our larger customers may
         also deter other potential customers who compete with these customers
         from buying our radio frequency products.

     If we do not maintain or increase sales to existing customers or attract
significant new customers, our revenues would diminish and consequently our
business would be harmed.

     The sales cycle for our radio frequency products is long, and we may incur
substantial non-recoverable expenses and devote significant resources to sales
that may not occur when anticipated or at all.

     Our customers typically conduct significant evaluation, testing,
implementation and acceptance procedures before they purchase our radio
frequency products. As a result, we may expend significant financial and other
resources to develop customer relationships before we recognize any revenues
from these relationships, and we may never recognize any revenues from these
efforts. Our customers' evaluation processes are frequently lengthy and may
range from three months to one year or more. In many situations, our customers
design their products to specifically incorporate our radio frequency products,
and our radio frequency products must be designed to meet their stringent
specifications. This process can be complex and may require significant
engineering, sales, marketing and management efforts on our part. This process
may also require significant engineering and testing on the part of our
customers and if our customers do not have sufficient capabilities to complete
the process, our revenues could be negatively impacted.

                                      -28-

<PAGE>

     Uncertainties involving the ordering and shipment of our radio frequency
products could harm our business.

     Our sales are typically made pursuant to individual purchase orders, and we
generally do not have long-term supply arrangements with our customers,
including our most significant customers in terms of volume of sales. Our sales
orders typically provide that our customers may cancel orders until 90 days
prior to the shipping date and may reschedule shipments up to 30 days prior to
the shipping date; however, in the past, we have permitted customers to cancel
orders less than 90 days before the expected date of shipment, in many cases
with little or no penalty. Moreover, we routinely manufacture or purchase
inventory based on estimates of customer demand for our radio frequency
products, which demand is difficult to predict. The cancellation or deferral of
product orders, the return of previously sold products or overproduction due to
the failure of anticipated orders to materialize could result in our holding
excess or obsolete inventory that could substantially harm our business,
financial condition and results of operations. In addition, our inability to
produce and ship radio frequency products to our customers in a timely manner
could harm our reputation and damage our relationships with our customers.

     We customize a substantial portion of our radio frequency products to
address our customers' specific radio frequency needs. If we do not sell our
customer-specific products in large volumes, we may be unable to cover our fixed
costs or may be left with substantial unsaleable inventory.

     We manufacture a substantial portion of our radio frequency products to
address the needs of individual customers. Frequent product introductions by
systems manufacturers make our future success dependent on our ability to select
development projects that will result in sufficient volumes to enable us to
achieve manufacturing efficiencies. Because customer-specific radio frequency
products are developed for unique applications, we expect that some of our
current and future customer-specific radio frequency products may never be
produced in volume and may impair our ability to cover our fixed manufacturing
costs. In addition, if our customers fail to purchase these customized radio
frequency products from us, we risk having substantial unsaleable inventory. If
we have substantial unsaleable inventory, our financial condition would be
harmed.

     We depend on third-party wafer foundries to manufacture all of our
integrated circuit products, which reduces our control over the integrated
circuit manufacturing process and could increase costs and decrease availability
of our integrated circuit products.

     We do not own or operate a semiconductor fabrication facility. We primarily
rely on IBM, TSMC and X-FAB, outside foundries, to produce most of our
integrated circuit radio frequency products. We do not have a long-term supply
agreement with our foundries and instead obtain manufacturing services on a
purchase order basis. Our foundries have no obligation to supply products to us
for any specific period, in any specific quantity or at any specific price,
except as set forth in a particular purchase order. Our requirements represent a
small portion of the total production capacity of these foundries, and they may
reallocate capacity to other customers even during periods of high demand for
our integrated circuits. If our foundries were to become unable or unwilling to
continue manufacturing our integrated circuits, our business would be seriously
harmed. As a result, we would have to identify and qualify substitute

                                      -29-

<PAGE>

foundries, which would be time consuming and difficult, resulting in unforeseen
manufacturing and operations problems. In addition, if competition for foundry
capacity increases, our product costs may increase, and we may be required to
pay significant amounts to secure access to manufacturing services. If we do not
qualify or receive supplies from additional foundries we may be exposed to
increased risk of capacity shortages due to our dependence on IBM, TSMC and
X-FAB.

     We depend on third-party subcontractors for integrated circuit packaging
and testing, which reduces our control over the integrated circuit packaging
process and testing and could increase costs and decrease availability of our
integrated circuit products.

     Our integrated circuit products are packaged and tested by independent
subcontractors, including Amkor and Carsem, using facilities located in South
Korea,Philippines and Malaysia. We do not have long-term agreements with Amkor
or Carsem and typically obtain services from them on a purchase order basis. Our
reliance on Amkor and Carsem involves risks such as reduced control over
delivery schedules, quality assurance and costs. These risks could result in
product shortages or increase our costs of packaging our products. If Amkor or
Carsem are unable or unwilling to continue to provide packaging and testing
services of acceptable quality, at acceptable costs and in a timely manner, our
business would be seriously harmed. We would also have to identify and qualify
substitute subcontractors, which could be time consuming and difficult and may
result in unforeseen operations problems.

     Our inability to maintain or grow revenues from international sales could
harm our financial results.

     For the three months ended March 31, 2002, 72% of our net revenues were
from sales outside of North America. We plan to increase our international sales
activities by hiring additional international sales personnel. Our international
sales will be limited if we cannot do so. Even if we are able to expand our
international operations, we may not succeed in maintaining or increasing
international market demand for our products.

     Currency fluctuations related to our international operations could harm
our financial results.

     A significant portion of our international revenues and expenses are
denominated in foreign currencies. Accordingly, in the past, we have experienced
significant fluctuations in our financial results due to changing exchange rates
rather than operational changes. For example, in the three months ended March
31, 2002, we recognized a foreign currency exchange loss of approximately $0.3
million or approximately 3% of the net loss for the period. We expect currency
fluctuations to continue, which may significantly impact our financial results
in the future. We may choose to engage in currency hedging activities to reduce
these fluctuations.

     Our international operations, including our operations in Germany, the
Philippines, the Netherlands, Singapore, Japan, Hong Kong, Taiwan and Korea, may
be negatively affected by actions taken or events that occur in these countries.

                                      -30-

<PAGE>

     We currently have facilities and suppliers located outside of the U.S.,
including research and development operations in Germany, the Netherlands, and
Singapore, a manufacturing facility in Manila, Philippines, and sales offices in
Japan, Hong Kong, Taiwan and Korea. Substantially all of our suppliers are
located outside the U.S., and substantially all of our products are manufactured
outside the U.S. As a result, our operations are affected by the local
conditions in those countries, as well as actions taken by the governments of
those countries. For example, if the Philippines government enacts restrictive
laws or regulations, or increases taxes paid by manufacturing operations in that
country, the cost of manufacturing our products in Manila could increase
substantially, causing a decrease in our gross margins and profitability. In
addition, if the U.S. imposes significant import restrictions on our products,
our ability to import our products into the U.S. from our international
manufacturing and packaging facilities could be diminished or eliminated. Local
economic and political instability in areas in the Far East, in particular in
the Philippines where there has been political instability in the past, could
result in unpleasant or intolerable conditions for our workers, and ultimately
could result in a shutdown of our facilities.

     International operations that we may develop or acquire in the future may
subject us to additional business risks, including political instability, and
changing or conflicting laws, regulations and tax systems.

     We may develop or acquire additional international operations in Europe and
the Pacific Rim region. International expansion or acquisitions, and any
subsequent international operations, could be affected by the local conditions
in those countries, as well as actions taken by the governments of those
countries. To expand our operations internationally, we will have to comply with
the laws and regulations of each country in which we conduct business. For
example, if a foreign government enacts restrictive laws or regulations, or
increases taxes paid by manufacturing operations in that country, the cost of
manufacturing our products in that country could increase substantially, causing
a decrease in our gross margins and profitability. We cannot assure you that we
will be successful in obtaining any necessary regulatory approvals, or in
complying with applicable regulations in those countries. Furthermore, even if
such approvals are obtained or such regulations are complied with, we cannot
assure you that we will be able to continue to comply with these regulations.

     Our success could be jeopardized if key personnel leave.

     Our future success depends largely upon the continued service of our
executive officers and other key management and technical personnel. Our success
also depends on our ability to continue to attract, retain and motivate
qualified personnel. Our personnel represent a significant asset as the source
of our technological and product innovations. The competition for qualified
personnel is intense in the radio frequency silicon and radio frequency systems
industries. We cannot assure you that we will be able to continue to attract and
retain qualified management, technical and other personnel necessary for the
design, development, manufacture and sale of our radio frequency products. We
may have difficulty attracting and retaining key personnel particularly during
periods of poor operating performance. The loss of the services of one or more
of our key employees or our inability to attract, retain and motivate qualified
personnel could harm our business.

                                      -31-

<PAGE>

     We must manage our growth.

     If we fail to manage our growth, our reputation and results of operations
could be harmed. Our total number of employees has grown from 171 as of March
31, 2001 to 352 as of March 31, 2002, excluding manufacturing personnel in
Manila, Philippines. In addition, as of March 31, 2002, we had 1,815
manufacturing personnel in the Philippines. The growth has placed, and is
expected to continue to place, significant demands on our personnel, management
and other resources. We must continue to improve our operational, financial and
management information systems to keep pace with the growth of our business.

     Our business may be harmed if we fail to protect our proprietary
technology.

     We rely on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have patents issued and pending in
the U.S. and in foreign countries. We intend to seek further U.S and
international patents on our technology. We cannot be certain that patents will
be issued from any of our pending applications, that patents will be issued in
all countries where our products can be sold or that any claims will be allowed
from pending applications or will be of sufficient scope or strength to provide
meaningful protection or any commercial advantage. Our competitors may also be
able to design around our patents. The laws of some countries in which our
products are or may be developed, manufactured or sold, including various
countries in Asia, may not protect our products or intellectual property rights
to the same extent as do the laws of the U.S., increasing the possibility of
piracy of our technology and products. Although we intend to vigorously defend
our intellectual property rights, we may not be able to prevent misappropriation
of our technology. Our competitors may also independently develop technologies
that are substantially equivalent or superior to our technology.

     Despite our efforts and procedures to protect our intellectual property
through the prosecution of patents, trademarks, copyrights and trade secrets and
other methods, we cannot assure you that our current intellectual property or
any intellectual property we may acquire through acquisitions or by other means
will be free from third party claims which may be valid. In connection with
recent acquisitions, including the Transilica acquisition, we conducted due
diligence investigations of the intellectual property of these targeted
companies for the purpose of assessing the protection efforts by these companies
on their respective intellectual property. We cannot assure you that our
investigatory efforts uncovered all or any defects related to the protection of
intellectual property we acquired. As a result, intellectual property we
acquire, including the intellectual property we acquired in the Transilica
acquisition or in other acquisitions, may not be free from third party claims.
Any third party claims may lead to costly and time consuming litigation which
could harm our business and financial position.

     Our efforts to protect our intellectual property may cause us to become
involved in costly and lengthy litigation which could seriously harm our
business.

     We may become involved in litigation in the future to protect our
intellectual property or defend allegations of infringement asserted by others.
Legal proceedings could subject us to significant liability for damages or
invalidate our proprietary rights. Any litigation, regardless of its outcome,
would likely be

                                      -32-

<PAGE>

time consuming and expensive to resolve and would divert management's time and
attention. Any potential intellectual property litigation also could force us to
take specific actions, including:

     .    ceasing the sale of our products that use the challenged intellectual
          property;

     .    obtaining from the owner of the infringed intellectual property right
          a license to sell or use the relevant technology, which license may
          not be available on reasonable terms, or at all; or

     .    redesigning those products that use infringing intellectual property.

     As a result, the expense associated with intellectual property litigation
or management's diversion from daily operations of our business caused by any
intellectual property litigation may have a negative impact on our business and
our financial results.

     Furthermore, we have initiated, and may initiate in the future, claims or
litigation against third parties for infringement of our proprietary rights or
to establish the validity of our proprietary rights. On January 24, 2001, we
filed a lawsuit alleging patent infringement in the United States Court for the
Eastern District of Texas, Sherman Division, against Broadcom Corporation. The
lawsuit is in the initial phases of discovery and its outcome is uncertain. If
we are unsuccessful in this litigation or other similar claims, then Broadcom
and others will be able to compete directly against us, which would materially
adversely effect our ability to sell our products and grow our business. Any
current or future litigation by or against us or one of our customers could
result in significant expense and divert the efforts of our technical personnel
and management, whether or not the litigation results in a favorable
determination.

     We are the target of several securities fraud class action complaints and
are at risk of securities class action litigation. This could result in
substantial costs to us, drain our resources and divert our management's
attention.

     Beginning July 11, 2001, multiple securities fraud class action complaints
were filed in the United States District Court for the Southern District of New
York. We are aware of at least three such complaints: Berger v. Goldman, Sachs &
Co., Inc. et al (S.D.N.Y. July 25, 2001), Atlas v. Microtune et al (S.D.N.Y.
Aug. 7, 2001) and Ellis Investment Ltd. v. Goldman Sachs & Co., Inc. et al
(S.D.N.Y. August 7, 2001). Purportedly, the complaints are brought on behalf of
all persons who purchased our common stock from August 4, 2000 through December
6, 2000. The Atlas complaint names as defendants Microtune, Douglas J. Bartek,
our Chairman and Chief Executive Officer, Everett ("Buddy") Rogers, our Chief
Financial Officer and Vice President of Finance and Administration, and several
investment banking firms that served as underwriters of our initial public
offering. Microtune, Mr. Bartek and Mr. Rogers were served with notice on the
Atlas complaint on August 22, 2001, however, they have not been served on the
other referenced complaints. The Berger and Ellis Investment Ltd. complaints
assert claims against the underwriters only. More such lawsuits may be filed.
Among other things, the complaints allege liability under the federal securities
laws on the grounds that the registration statement for the initial public
offering did not disclose that: (1) the underwriters had agreed to allow certain
customers to purchase shares in the offering in exchange for excess commissions
paid to the underwriters; and (2) the underwriters had


                                      -33-

<PAGE>

arranged for certain customers to purchase additional shares in the aftermarket
at pre-determined prices. We are aware that similar allegations have been made
in lawsuits challenging over 180 other initial public offerings conducted in
1998, 1999 and 2000. No specific amount of damages is claimed in the three
complaints involving our initial public offering. These cases are subject to the
Private Securities Litigation Reform Act of 1995 and we expect that the cases
will be consolidated into a single action. These cases and all of the other
lawsuits filed in the Southern District of New York making similar allegations
have been coordinated before the Honorable Shira A. Scheindlin who is expected
to set a briefing schedule for motions to dismiss. We believe that the
allegations against Microtune. Mr. Bartek and Mr. Rogers are without merit. We
intend to contest them vigorously, including by filing a motion to dismiss these
cases. We are unable at this time to determine whether the outcome of the
litigation will have a material impact on our results of operations or financial
condition in any future period. Furthermore, there can be no assurances
regarding the outcome of the litigation or any related claim for indemnification
or contribution between or among any of the underwriters and us.

     Our ability to sell our radio frequency products may suffer if any
outstanding claims of intellectual property infringement against us or one of
our customers is valid, if any other third party claims that we or our customers
infringe on their intellectual property or if any of our issued patents are
proven to be invalid.

     The electronics industry is characterized by vigorous protection and
pursuit of intellectual property rights and positions, which have resulted in
significant and often protracted and expensive litigation. In addition, our
customers may be subject to infringement claims for products incorporating our
radio frequency products. If any claims of infringement are made against any of
our customers, our customers may seek to involve us in the infringement claim
and request indemnification from us. For example, we could be notified of a
claim against one of our customers for which the customer would make a claim for
indemnification from us. If the claim resulted in an adverse result for our
customer, it may reduce or completely eliminate marketing of its infringing
product, which would decrease sales of our radio frequency products to this
customer. Further, if our customer prevailed in its claim for indemnification
against us, or if we were found to infringe on any other third- party
intellectual property, we could be required to:

     .    pay substantial damages such as royalties on our historical and future
          product sales;

     .    indemnify our customers for their legal fees and damages paid;

     .    stop manufacturing, using and selling the infringing products;

     .    expend significant resources to develop non-infringing technology;

     .    discontinue the use of some of our processes; or

     .    obtain licenses to the technology.

                                      -34-

<PAGE>

     We may be unsuccessful in developing noninfringing products or negotiating
licenses upon reasonable terms. These problems might not be resolved in time to
avoid harming our results of operations.

     Our customers' products are subject to governmental regulation.

     Governmental regulation could place constraints on our customers and
consequently minimize their demand for our radio frequency products. The Federal
Communications Commission, or FCC, has broad jurisdiction over several of our
target markets in the U.S. Similar governmental agencies regulate our target
markets in other countries. Although our products are not directly subject to
current regulations of the FCC or any other federal or state communications
regulatory agency, much of the equipment into which our products are
incorporated is subject to direct government regulation. Accordingly, the
effects of regulation on our customers or the industries in which they operate
may, in turn, impede sales of our products. For example, demand for our radio
frequency products will decrease if equipment incorporating our products fails
to comply with FCC emissions specifications.

     We may be unable to obtain the capital required to grow our business.

     From time to time, we may need to raise funds to meet our working capital
and capital expenditure needs through the sale of securities under this
prospectus or through other financing alternatives. We cannot be certain that we
would be able to obtain additional financing on favorable terms, if at all. Our
capital requirements depend upon several factors, including the rate of market
acceptance of our products, our ability to expand our customer base, our level
of expenditures for sales and marketing, the cost of product and service
upgrades and other factors. If our capital requirements vary materially from
those currently planned, we may require additional financing sooner than
anticipated. Further, if we issue equity securities, stockholders will
experience additional dilution and the new equity securities may have rights,
preferences or privileges senior to those of existing holders of common stock.
If we issue debt securities, the debt securities will have rights senior to
those of existing holders of equity securities generally. If we cannot raise
funds, if needed, on acceptable terms, we may not be able to develop our
products and services, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements, any of which could harm our
ability to grow our business.

     Future sales of our securities or the expectation of or uncertainty about
those sales may cause our stock price to decline.

     The market price of our common stock or any other securities that we issue
could decline as a result of the registration or sale of substantial amounts of
our securities, including common stock, in the public market or to private
investors, or the expectation or uncertainty that those sales could occur. These
sales or the possibility that they may occur also could also make it more
difficult for us to raise funds through future offerings of securities.

     Provisions in our charter documents, Delaware law and our Shareholder
Rights Plan may deter takeover efforts that you may feel would be beneficial to
you.

                                      -35-

<PAGE>

     Several provisions of our amended and restated certificate of incorporation
and Bylaws may discourage, delay or prevent a merger or acquisition that you may
consider favorable and therefore may harm our stock price. Those provisions
include:

     .   authorizing the issuance of "blank check" preferred stock;

     .   providing for a classified board of directors with staggered,
         three-year terms;

     .   prohibiting cumulative voting in the election of directors;

     .   limiting the persons who may call special meetings of the board or the
         stockholders;

     .   prohibiting stockholder action by written consent;

     .   establishing advance notice requirements for nominations for election
         to the board of directors or for proposing matters that can be acted on
         by stockholders at stockholder meetings; and

     .   establishing super-majority voting requirements in some instances.

     Management will have broad discretion in using the proceeds of any offering
of our securities.

     We need to retain flexibility to respond to factors affecting our business.
Accordingly, our management will retain broad discretion as to the allocation of
the proceeds of any offering of our securities and may use the proceeds in a
manner with which you may not agree. If our management does not effectively use
the proceeds from any offering of our securities, we may not be able to operate
and grow our business successfully.

     If we do not anticipate and adapt to evolving industry standards in the
radio frequency tuner and broadband communications and wireless connectivity
markets, or if industry standards develop more slowly than expected, our
products could become obsolete and we could lose market share.

     Products for broadband communications and wireless connectivity
applications generally are based on industry standards that are continuously
evolving. In some cases, the development of these standards takes longer than
originally anticipated. We have directed our development toward producing radio
frequency products that comply with the evolving standards. The delayed
development of a standard in our target markets has resulted in slower
deployment of new technologies, which may harm our ability to sell our radio
frequency products, or frustrate the continued use of our proprietary
technologies. The continued delay in the development of these industry standards
could result in fewer manufacturers purchasing our radio frequency products in
favor of continuing to use the proprietary technologies designed by our
competitors. Such delayed development of industry standards and the resulting
slower deployment of new technologies would result in diminished and/or delayed
revenues and consequently harm our business. Further, if new industry standards
emerge, our products or our customers' products could become unmarketable or
obsolete. In addition, we may incur substantial unanticipated costs to comply
with these evolving standards.

                                      -36-

<PAGE>

     Our ability to adapt to changes and to anticipate future standards and the
rate of adoption and acceptance of those standards is a significant factor in
maintaining or improving our competitive position and prospects for growth. Our
inability to anticipate the evolving standards in the broadband communications
and wireless connectivity markets and, in particular, in the radio frequency
market, or to develop and introduce new products successfully into these
markets, could result in diminished revenues and consequently harm our business.

     Other technologies for the broadband communications market will compete
with some of our target markets. If these technologies prove to be more
reliable, faster or less expensive or become more popular, the demand for our
radio frequency products and our revenues may decrease.

     Some of our target markets, such as cable modem and cable telephony
services, are competing with a variety of non-radio frequency based broadband
communications technologies, including digital subscriber line technology. Many
of these technologies may compete effectively with cable modem and cable
telephony services. If any of these competing technologies are more reliable,
faster or less expensive, reach more customers or have other advantages over
radio frequency based broadband technology, the demand for our radio frequency
products and our revenues may decrease.

     Our success depends on the continued growth of the broadband communications
markets generally and the radio frequency product markets specifically.

     We derive a substantial portion of our revenues from sales of radio
frequency products into markets related to broadband communication applications,
in particular, the cable modem market. These markets are characterized by:

     .   intense competition;

     .   rapid technological change; and

     .   short product life cycles, especially in the consumer electronics
         markets.

     Although the broadband communications markets generally have grown rapidly
in the last few years, these markets may not continue to grow or a significant
slowdown in these markets may occur. In particular, the set-top box, cable modem
and cable telephony markets may not grow at a rate sufficient for us to achieve
profitability. Because of the intense competition in the broadband
communications markets, the unproven technology of many products addressing
these markets and the short life cycles of many consumer products, it is
difficult to predict the potential size and future growth rate of the radio
frequency product markets. In addition, the broadband communications markets are
transitioning from analog to digital, as well as expanding to new services,
including internet access, cable telephony and interactive television. The
future growth of the radio frequency product markets are partially dependent
upon the market acceptance of products and technologies addressing the broadband
communications markets, and we cannot assure you that the radio frequency
technologies upon which our products are based will be

                                      -37-

<PAGE>

accepted by any of these markets. If the demand for radio frequency products is
not as great as we expect, we may not be able to generate sufficient revenues to
become successful.

     Our success depends on the adoption of our wireless connectivity products
in markets such as cordless phones, wireless headsets, and PC peripherals.

     We expect to derive a substantial portion of our revenue from sales of
wireless connectivity products into markets currently served by alternative
wired products. These alternative wired products may compete effectively with
our wireless connectivity products and could be more reliable, less expensive,
or have other advantages.

     The semiconductor industry is cyclical. If there is a sustained upturn in
the semiconductor market, there could be a resulting increased demand for
foundry services, significantly reducing product availability and increasing our
costs.

     The semiconductor industry periodically experiences increased demand and
production capacity constraints. An increased demand for semiconductors could
substantially increase the cost of producing our radio frequency products,
particularly our integrated circuit products, and consequently reduce our profit
margins. As a result, we may experience substantial period-to-period
fluctuations in future results of operations due to general semiconductor
industry conditions.

                            Part II Other Information

Item 1. Legal Proceedings

     From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. We are not currently a party to
any material litigation, except as described below.

     On January 24, 2001, we filed a lawsuit alleging patent infringement in the
United States Court for the Eastern District of Texas, Sherman Division, against
Broadcom Corporation. The lawsuit alleges that Broadcom Corporation's BCM3415
microchip infringes on our U.S. patent no. 5,737,035. In our complaint, we are
seeking monetary damages resulting from the alleged infringement as well as
injunctive relief precluding Broadcom Corporation from taking any further action
which infringes our 5,737,035 patent. On May 7, 2002 Broadcom Corporation filed
a Motion for Leave to Supplement its counterclaim asking the court's permission
to add a counterclaim asserting infringement by Microtune of Broadcom's U.S.
patent no. 6,377,315. We are unable at this time to determine whether the
outcome of the litigation will have a material impact on our results of
operations or financial condition in any future period. No hearing date has been
set for the motion.

     Starting on July 11, 2001, multiple purported securities fraud class action
complaints were filed in the United States District Court for the Southern
District of New York. We are aware of at least three such complaints: Berger v.
Goldman, Sachs & Co., Inc. et al.; Atlas v. Microtune et al.; and Ellis
Investments Ltd. v. Goldman Sachs & Co., Inc. et al. The complaints are brought
purportedly on behalf of all persons who purchased our common stock from August
4, 2000 through December 6, 2000. The Atlas complaint names as defendants
Microtune, Douglas J. Bartek, our Chairman and Chief Executive Officer, Everett
Rogers, our Chief Financial Officer and Vice President of Finance and
Administration, and several investment banking firms that served as underwriters
of our initial public offering. Microtune, Mr. Bartek and Mr. Rogers were served
with notice on the Atlas complaint on August 22, 2001, however, they have not
been served regarding the other referenced complaints. The Berger and Ellis
Investment Ltd. Complaints assert claims against the underwriters only. Among
other things, the complaints allege liability under Sections 11 and 15 of the
Securities Act of 1933 and Section 10(b) and 20(a) of the Securities Exchange
Act of 1934, on the grounds that the registration statement for our initial
public

                                      -38-

<PAGE>

offering did not disclose that (1) the underwriters had agreed to allow certain
of their customers to purchase shares in the offering in exchange for excess
commissions paid to the underwriters and (2) the underwriters had arranged for
certain of their customers to purchase additional shares in the aftermarket at
pre-determined prices. We are aware that similar allegations have been made in
lawsuits challenging over 180 other initial public offerings conducted in 1998,
1999, and 2000. No specific amount of damages is claimed in the three complaints
involving our initial public offering. These cases are subject to the Private
Securities Litigation Reform Act of 1995 and we expect that the cases will be
consolidated into a single action. These cases and all of the other lawsuits
filed in the Southern District of New York making similar allegations have been
coordinated before the Honorable Shira A. Scheindlin who is expected to set a
brief schedule for motions to dismiss. We believe that the allegations against
Microtune, Inc., Mr. Bartek and Mr. Rogers are without merit. We intend to
contest them vigorously, including by filing a motion to dismiss these cases. We
are unable at this time to determine whether the outcome of the litigation will
have a material impact on our results of operations or financial condition in
any future period. Furthermore, there can be no assurances regarding the outcome
of the litigation or any related claim for indemnification or contribution
between or among any of the underwriters and us.

Item 2. Changes In Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults Upon Senior Securities

     Not applicable.

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

     No matters were submitted to a vote of security holders during the quarter
ended March 31, 2002.

Item 5. Other Information

     Not applicable

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

          12.  Computation of Ratio of Earnings to Fixed Charges

     (b)  Reports on Form 8-K

          An 8-K was filed by the Registrant on March 18, 2002 regarding the
          adoption of a Shareholders Rights Plan and certain amendments to the
          Registrant's bylaws.

                                      -39-

<PAGE>

                                   Signatures

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

     Date: May 15, 2002

                                  /s/ Everett (Buddy) Rogers
                                  ----------------------------------------------
                                  Everett (Buddy) Rogers
                                  Chief Financial Officer and Vice President of
                                  Finance and Administration (Principal
                                  Financial and Accounting Officer)